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[2012] ZAGPJHC 145
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Pro-Med Construction CC v Botha (A5052/2011, 2005/22436) [2012] ZAGPJHC 145 (24 August 2012)
REPORTABLE
IN THE SOUTH GAUTENG HIGH
COURT
JOHANNESBURG
APPEAL
CASE NO : A5052/2011
SGHC
CASE NO : 2005/22436
DATE:24/08/2012
In
the matter of the appeal between:
PRO-MED
CONSTRUCTION CC
(IN LIQUIDATION)
Appellant
(Plaintiff in Court a quo)
and
BOTHA,
WAYNE ADRIAN
Respondent
(Defendant
in Court a quo)
JUDGMENT
WILLIS
J:
[1]
This is an appeal against the judgment of our brother Makume,
delivered on 2 December, 2010, in which he dismissed the appellant’s
claim in a trial action with costs. The appellant was the plaintiff
in the court below. For the sake of convenience I shall refer
to the
appellant as ‘the plaintiff’ and the respondent as ‘the
defendant’. The plaintiff appeals with
the leave of the court
below.
[2]
The plaintiff, which is in liquidation, was represented by its joint
liquidators in the action the plaintiff claimed payment
of the sum of
R349 900,00 from the defendant. The plaintiff’s case was that
an agreement relating to Stand 245 in the development
known as
Pinehaven Country Estate (hereinafter referred to as ‘the
Pinehaven property’) amounted to a disposition without
value in
terms of the provisions of section 26 (1) (b) the
Insolvency Act, No.
24 of 1936
and, accordingly, stood to be set aside.
[3]
It is common cause that on 18 June 2003 AD Master Parts (Pty) Limited
(hereinafter referred to as ‘AD Master Parts’)
sold the
immovable property, a farm, described as Portion 4 of the Farm
Boschfontein 445, Registration Division, KQ, Northern Province
(commonly known as ‘Enkeldoorn’), together with certain
movable items to Superfecta Trading CC (hereinafter referred
to as
“superfecta Trading’) for R2 950 000- and that the
transfer was registered with the Registrar of Deeds in Pretoria
on 26
August 2003. The immovable property was originally sold for R1 950
000 and the movables for R1 million. The defendant’s
father, Mr
Adrian Botha (‘Mr Botha senior’) had been the managing
director of AD Master Parts at the time.
[4]
This agreement relating to the purchase and sale of the farm,
Enkeldoorn was varied so that the payment of the total of R2
950 000
would be paid for by the payment of R2 374 000 and the balance of
R576 000- by transfer to Botha senior or his nominee
of the Pinehaven
property and another immovable property, also in the Pinehaven
estate, the value of these two properties being
R299 900,00 and R274
900, 00 respectively. Mr Botha senior was not the author of the
variation agreement but accepted it as a
bona fide agreement that
would facilitate the sale of Enkeldoorn. The Pinehaven property was,
at the time of this agreement, owned
by the plaintiff.
[5]
Hendrik Peter Lubbe, who had been the sole member of the plaintiff in
2003, had expressed the interest in acquiring this property
from AD
Master Parts during 2003. The property was to have been bought by the
plaintiff, which Botha senior had understood to be
vehicle through
which Mr Lubbe make the purchase. When the documentation came to be
signed the purchaser was recorded was being
Superfecta Trading 58 CC.
One Ignatius Michel Robbertse Victor Victor and Mr Lubbe were the
members of Superfecta Trading at the
time. Superfecta Trading’s
name has since been changed to Enkeldoorn Lodge CC. Mr Victor is an
attorney.
[6]
Mr Botha senior nominated each his two sons as the persons to take
transfer of the properties which were to be given in part
payment of
the purchase price for Enkeldoorn. The Pinehaven property in question
was transferred to the defendant but transfer
of the other property
in the Pinehaven estate did not occur.
[7]
The payment of the cash portion of the purchase price was made as
follows:
payment
in favour of a certain Mr Spykerman in the sum of R500 000,00 by
virtue of a cheque appearing on page 360 of the Record;
R490 000,00
by virtue of a cheque made out in favour of Botha senior; payment of
a cheque made out in favour of AD Master Parts
in the sum of R700
000,00; a cheque in favour of AD Master Parts in the sum of R337
000,00; and a further cheque in the sum of
R337 000,00 made out in
favour of AD Master Parts .
[8]
All the cheques and payments made in respect of the purchase price
were forthcoming from the plaintiff, which was controlled
by Mr Lubbe
who was also one of the members of Superfecta Trading. Mr Botha
senior signed the transaction relating to the Pinehaven
property
being used as a part payment. The defendant had no knowledge of the
machinations of the transaction at the time but was
merely informed
that the transfer of the Pinehaven property to him was a donation in
his favour. While the challenged agreement
records the purchase price
of the Pinehaven property as R100,00 it does not according to the
evidence of the defendant, his father
(Botha senior) and Mr Victor
reflect the actual intention of the parties that the Pinehaven
property be given as part-payment of
the purchase price in respect of
the farm Enkeldoorn.
[9]
In his plea the defendant averred, before the trial commenced, as
follows:
5.2.15
In these circumstances the disposition did not take place without
value and in the overall scheme of the transactions between
the
parties, the plaintiff transferred the property to the defendant for
R350 000-00 in part payment of the obligations of Superfecta
to AD
Master, in terms of the agreement between the parties.
5.2.16
In these circumstances the plaintiff’s claim lies against
Superfecta for repayment of the R350 000-00 which it loaned
to
Superfecta to enable Superfecta to comply with its obligations to AD
Master.
[10]
About a year later, the Pinehaven property was on-sold to one James
Bertram Gibson for R350 000,00. At the time the defendant
was unaware
on this ‘on-selling’ transaction of the Pinehaven
property. The defendant did not receive any proceeds
of the sale. Mr
Gibson was a bona fide purchaser.
[11]
Mr Botha senior made it clear in his evidence that, in his assessment
of the situation, the controlling mind behind the agreements
to
purchase Enkeldoorn was Mr Lubbe and that Mr Lubbe and the plaintiff
were the alter egos of each other.
[12]
Mr Victor testified that the other member of Superfecta Trading at
the relevant time was Mr Lubbe, who was also the sole member
of the
plaintiff. Mr Victor he was aware of the fact that an agreement had
been entered into in terms whereof AD Master Parts would
sell to
Superfecta Trading the farm Enkeldoorn together with the movable
assets thereon for a purchase price of R2.95 million which
was to be
paid as R1.95 million in respect of the immovable property and R1
million in respect of the movables. He was also aware
of the
following:
(i)
payment for the purchase of the farm Enkeldoorn was to be made by way
of certain payments which Mr Lubbe was to make and which
Mr Lubbe
made out of the plaintiff;
(ii)
part-payment for the farm Enkeldoorn was to be effected by way of
transfer of two properties from the plaintiff to AD Master
Parts or
Botha senior’s nominee;
(iii)
Mr Botha senior had nominated his two sons to take transfer of the
properties which was the purchase consideration for the
farm
Enkeldoorn;
(iv)
the original agreement between Superfecta Trading and AD Master Parts
had been incorrectly drafted as reflecting the aggregate
purchase
price as R1.95 million, when this had been the sum agreed to in
respect of the immovable property;
(v)
after the valuation of the farm Enkeldoorn, Mr Lubbe approached Botha
Senior and requested that the agreements be amended so
as to reflect
the purchase price in respect of the immovable property of R950
000,00 whilst the overall purchase price remained
the same and to
give effect thereto only page 2 of the first agreement was amended;
(vi)
Superfecta Trading did not have a loan account in favour of the
plaintiff but did have a loan account in favour of Mr Lubbe;
(vii)
the loan account in favour of Mr Lubbe amounted to R3 329 033,00 as
at 2005 as can be seen from the balance sheet of Enkeldoorn
Lodge CC
(previously Superfecta Trading CC);
(viii)
whilst there was no agreement by Superfecta Trading to repay the
plaintiff, there was an agreement by Superfecta Trading
to repay Mr
Lubbe the amounts in respect of the sale, most of which were amounts
as reflected in his loan account;
(ix)
Mr Lubbe had used the plaintiff as the vehicle through which to make
payment and to make transfer of the properties, which
formed part of
the purchase price in respect of the farm Enkeldoorn, and Mr Lubbe
believed that he could do so as the plaintiff
owed him a substantial
amount of money, which would be reduced by these payments, i.e. his
loan account in the plaintiff would
be reduced thereby;
(x)
the members’ interest in Superfecta Trading had subsequently
been sold by him (Mr Victor) and Mr Lubbe to a certain Mr
Van Staden
in terms of an agreement of sale of members’ interest;
(xi)
the sale of members’ interest agreement reflects that the sale
included both the members’ interest and claims in
Superfecta
Trading;
(xii)
when Mr Lubbe lent the money in question to Superfecta Trading, Mr
Lubbe was in fact making use of the plaintiff’s money.
[13]
During the evidence-in-chief of Mr Victor the following appears:
Q:
So what benefit would Pro-Med have received in relation to this?
A:
M’Lord, Mr Lubbe and we had a discussion on various occasions
about his membership with Pro-Med, and his opinion and attitude
was
that Pro-Med owes him a lot of money so he can use the money as he
likes.
Q:
So there would have been a reduction of the loan account of Mr Lubbe
is that correct?
A:
Yes.
Under
cross-examination, Mr Victor conceded that there appeared not to have
been a loan account in Superfecta Trading (now Enkeldoorn
Lodge) in
favour of the plaintiff.
Counsel
for the plaintiff pressed the point and questioned Mr Victor as
follows:
Q:
Enkeldoring Lodge was not indebted to Pro-Med in any way?
A:
Enkeldoring Lodge was not indebted to Pro-Med. Mr Lubbe took the
money M’Lord, from Pro-Med account and paid.
Q:
And what money are we talking about?
A:
M’Lord, I am talking about the money that Peter-Lubbe paid from
Pro-Med for the purchasing of the farm.
Q:
Which will include the value of the stands no doubt?
A:
That is correct, M’Lord.
Later,
as the cross-examination progresses, the questioning reveals the
following:
Q:
So you are saying that Superfecta has no loan account for Pro-Med?
A:
Yes, but for Peter Lubbe.
And
later:
Q:
So let us just get this straight Sir, In June 2003 Superfecta is a
shelf company, you agree?
A:
Yes
Q:
It was bought solely for the purpose of acquiring this farm
(Enkeldoorn) from AD Master Parts?
A;
That is correct, M’Lord
Q:
It had no assets?
A:
At that stage it did not have any assets, M’Lord.
Q:
Yet it requires for all its funding, some third party assistance. Do
you agree with that?
A:
M’Lord, Mr Lubbe paid the money.
Q:
In paying money Sir, he did not use Superfecta’s money? No,
M’Lord, he used Pro-Med’ss money.
And
later:
Q:
Is there any benefit that Pro-Med would have derived by paying
Superfecta’s debt, that you can think of?
A:
M’Lord, from Mr Lubbe’s opinion, and he said it to me on
several occasions that he had got a big loan against Pro-Med
and that
is why he can use the money of Pro-Med as he likes.
The
audited financial statements of Superfecta Trading (later Enkeldoorn
Lodge) show that as at 28 February 2004 and 2005, it did
indeed owe
Mr Lubbe in excess of R3,3 million on loan account.
[14]
During the hearing of this appeal, counsel for the plaintiff
protested that these answers by Mr Victor regarding the Plaintiff’s
indebtedness to Mr Lubbe and the loan accounts in favour of Mr Lubbe
in the books of Superfecta Trading were ‘hearsay’.
Apart
from the fact that the plaintiff, as a juristic person, would have
spoken through Mr Lubbe as its sole member and director
and that
Superfecta Trading would have spoken through both Mr Lubbe and Mr
Victor as its members and directors, there was no objection
to this
evidence when it was led in chief. Besides, since the case of R v
Perkins
1
it has been trite that, in civil proceedings, a party cannot object
to answers which it has elicited under-cross-examination.
2
The now contested evidence is admissible against the plaintiff.
[15]
The learned trial judge records in his judgment that he allowed the
defendant, after the close of his case, to amend the value
of the
Pinehaven property from R350 000,00 to R299,900,00 and that he
allowed the defendant to amend his plea to read as follows:
In
these circumstances, the plaintiff’s claim lies against
Superfecta alternatively Lubbe for payment of the R350 000,00 which
it loaned to Superfecta to enable Superfecta to comply with its
obligations towards AD Master Parts.
The
plaintiff has protested that the amendment was not properly sought by
the defendant and was wrongly granted, because it was
not properly
sought, and even if it was properly sought, should not have been
allowed. Even if these points, relating to the amendment
were to be
good, they would have no bearing on the outcome of the case. The case
turns on whether there was ‘value’
for the disposition in
question.
[16]
The plaintiff presented no evidence. It put up no version which
contradicted the evidence presented by the defendant and the
defendant’s witnesses. The defendant and his witnesses were
subjected to rigorous cross-examination and stood up well.
[17]
The parties agreed, before the trial, that the plaintiff bore the
overall onus to establish that the disposition was a disposition
not
made for value; that the defendant had a burden of rebuttal; and
that the defendant had the duty to begin. Against this background
of
events, Makume J cannot be faulted for accepting the defendant’s
version of events.
[18]
The evidence is that the Pinehaven property was used, together with
other assets of the plaintiff, to discharge a debt of Superfecta
Trading to AD Master Parts that arose from Superfecta Trading’s
purchase of the farm, Enkeldoorn from AD Master Parts. Ex
lege, that
would have given rise to a corresponding claim by the plaintiff
against Superfecta Trading (now Enkeldoorn Lodge). That
disposition
would have been matched by a corresponding legal obligation arising
ex lege: the indebtedness of Superfecta Trading
to the plaintiff.
3
[19]
Counsel for the plaintiff submitted that, because the evidence was
that no loan appeared in the books of Superfecta Trading
in terms of
which it owed a debt to the plaintiff that corresponded with the
purchase of the farm Enkeldoorn, this meant that
there was no value
for the disposition. As appears from the evidence referred to in
paragraph [13] above, the fact that there was
no such debt appearing
in the books of Superfecta Trading was explained by Mr Victor in the
following manner:
(i)
Mr Lubbe was owed money by the plaintiff;
(ii)
Mr Lubbe used assets of the plaintiff, including the Pinehaven
property, to discharge the debt of Superfecta Trading to AD
Master
Parts for the purchase of the farm Enkeldoorn;
(iii)
By so doing, Mr Lubbe reduced the indebtedness of the plaintiff to
himself (Mr Lubbe);
(iv)
The corresponding book entry (according to sound principles of
double entry accounting) was that Superfecta Trading owed Mr
Lubbe
for the amount by which the indebtedness of the plaintiff to him was
reduced in paying the debt of Superfecta Trading for
the purchase of
the farm Enkeldoorn.
[20]
Section 26
of the
Insolvency Act provides
that ‘every
disposition of property not made for value may be set aside by the
court’, provided certain other provisions
of the section are
also met. In Estate Jager v Whittaker
4
the highest court in the land made it clear that one of the critical
tests to determine whether a disposition was made for value
or not
was whether there was a quid pro quo. In Goode v Durrant and Murray
Limited v Hewitt and Cornell NNO
5
Fannin J held that value need not be monetary or even tangible. As
Selikowitz J observed in Terblanche Nov Baxtrans CC and Another,
6
after referring to the Goode v Durrant case ‘some
ascertainable commercial advantage will suffice’. In Hurley v
Seymour
NO v WH Muller & Company
7
the court held that the provision enabling the setting aside of
dispositions without value was ‘intended to strike at
dispositions
of property made by a bankrupt to the prejudice of his
creditors without any value in exchange for it’.
8
[21]
This statement by Tatham J in the Hurley v Seymour case was approved
by the court not only in the Goode v Durrant case but
also in the
case of United Building Society Limited and Another NNO v Du
Plessis.
9
In United Building Society v Du Plessis the learned judge referred
with approval to Mars’ The Law of Insolvency in South
Africa
10
where the learned author said; ‘A disposition may be for value
even though the recipient thereof has not himself given such
value’.
11
[22]
In the particular matter before us on appeal, the agreement giving
rise to the disposition was one between Mr Botha senior,
acting for
AD Master Parts and Mr Lubbe, acting for both Superfecta Trading and
the plaintiff. That agreement was certainly not
one without
commercial advantage or without any quid pro quo to AD Master Parts,
Mr Botha senior or Superfecta Trading (now Enkeldoorn
Lodge).
[23]
Both the defendant and the new owner of the Pinehaven property, Mr
Gibson were entirely innocent. Besides, the defendant is
now legally
incapable of transferring the property back to the plaintiff. Mr
Gibson has not been a party to the action. If anyone
acted to the
prejudice of the creditors of the plaintiff, it was Mr Lubbe who was
also not cited as a party to the action. Although
Mr Lubbe did not
give evidence in the trial action, it is clear from the insolvency
enquiry of the plaintiff, at which Mr Lubbe
testified, that he had
not known the defendant at the relevant times.
[24]
In any event, it is clear from the evidence that the ‘value’
for the plaintiff in transferring the Pinehaven property
was the
reduction of its indebtedness to Mr Lubbe which was matched, in
effect, by Superfecta Trading owing Mr Lubbe the money
instead.
Counsel for the plaintiff has contended that there was no evidence
put before the court as to the amount of the plaintiff’s
indebtedness to Mr Lubbe at the time of the disposition. That
evidence would have been peculiarly within the knowledge of the
plaintiff. There is no requirement in law that the value must be
‘fair’. The agreement by the defendant as to his
evidentiary
burdens did not go so far as to require such evidence by
the defendant as to the plaintiff’s indebtedness to Mr Lubbe.
Besides,
the plaintiff elicited evidence from Mr Victor under
cross-examination that the plaintiff owed Mr Lubbe a substantial
amount of
money. It cannot be said that the disposition of the
Pinehaven property was not for value.
[25] Accordingly, the
learned trial correctly dismissed the plaintiff’s claim with
costs. The order of this court is as follows:
The
appeal is dismissed with costs.
DATED
AT JOHANNESBURG THIS 24TH DAY OF AUGUST, 2012
______________________
N.P.
WILLIS
JUDGE
OF THE HIGH COURT
I
agree.
______________________
J.P.
HORN
JUDGE
OF THE HIGH COURT
I
agree.
______________________
A.
BAVA
ACTING
JUDGE OF THE HIGH COURT
Counsel
for the Plaintiff: Adv. G.D Wickins
Counsel
for the Defendant: Adv. J.G Dobie
Attorney
for the Plaintiff: Brooks and Brand Incorporated
Attorney
for the Defendant: Lloyd Kieser & Associates
Dates
of hearing: 16th August, 2012
Date
of judgment: 24th August, 2012
1
1920 AD 307
2
At 210
3
See in this regard,
Froman v Robertson
1971 (1) SA 115
(A) at
125A-B where Corbett AJA (as he then was) refers to Voet XII.6.9.
4
1944 AD 246
at 250
5
1961 (4) SA 286
(N) at 291F-G
6
1998 (3) SA 912
(C) at 915G
7
1924 NPD 121
8
At p133
9
1990 (3) SA 75
(W) at 91B
10
1998, Eighth Edition by E. De la Rey, Juta’s: Cape Town
11
At p211 in Mars’ book. In
United
Building Society Limited and Another NNO v Du Plessis
(
supra
)
at 91B..