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[2016] ZAGPJHC 377
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Firstrand Bank Limited t/a First National Bank v Sentio Building (Pty) Limited (36162/13) [2016] ZAGPJHC 377 (1 April 2016)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
Case
No. 36162/13
Not
reportable
Not
of interest to other judges
Revised.
In
the matter between:
FIRSTRAND
BANK LIMITED t/a FIRST NATIONAL
BANK
Applicant
and
SENTIO
BUILDING (PTY)
LIMITED
Respondnet
JUDGMENT
MEYER,
J
[1]
The applicant, Firstrand Bank Limited, applies for the final
winding-up of the respondent, Sentio Building (Pty) Limited, on
the
ground that it is unable to pay its debts as contemplated in s 344(f)
and described in s 345 of the Companies Act 61 of 1973
(‘the
old Act’) and read with the provisions of s 9 of Schedule 5 of
the Companies Act 71 of 2008 (the new Act).
The application is
opposed by the respondent.
[2]
It is common cause that the applicant is a creditor of the
respondent. As at 20 September 2013 the respondent’s
indebtedness to the applicant amounted to R10 587 660,02
and interest thereon at the applicant’s prime lending
rate plus
5%. The indebtedness arose as a result of monies lent and
advanced to the respondent by the applicant pursuant
to the
conclusion of a written loan agreement on 8 February 2013. The
respondent was obliged to repay the loan amount in
monthly
instalments and as at 20 September 2013 it was in arrears in the sum
of R394 702,11. The respondent’s
default in the due
payment of the instalments due in terms of the loan agreement,
amongst others, entitled the applicant to withdraw
from the
agreement, which it elected to do by notice of termination of the
loan agreement dated 24 July 2013. The moneys
borrowed from the
applicant were secured by a covering mortgage bond registered over an
immovable property owned by the respondent,
three suretyships and two
cessions.
[3]
The respondent failed to heed to the applicant’s written
statutory demand dated 16 August 2013 in terms of which the
respondent was required to pay the sum R10 484 424, 27 and
interest thereon that was then due to the applicant.
The
respondent has for three weeks thereafter neglected to pay the sum
due or to secure or compound for it to the reasonable satisfaction
of
the applicant.
[4]
On 27 September 2013 the applicant launched the present application
in which it seeks the winding-up of the respondent.
On 16
October 2013 the respondent gave notice of its intention to oppose
the application, but it did not file an answering affidavit.
The matter was later settled between the parties, and their written
agreement of settlement was made an order of court by Wepener
J on 14
May 2014. The agreement of settlement reads as follows:
‘
WHEREAS the Applicant has
launched an application for the winding up of the Respondent under
the aforesaid case number;
WHEREAS the Respondent has opposed the
application
AND WHEREAS the parties are now
desirous of settling the various disputes between them in respect of
the application.
NOW THEREFORE THESE PRESENTS
WITNESSETH THAT:
1.
The Respondent acknowledges
that it is indebted to the Applicant in the amount of R10 587 660,02
(TEN MILLION FIVE HUNDRED
AND EIGHTY SEVEN THOUSAND SIX HUNDRED AND
SIXTY RAND AND TWO CENTS) together with interest thereon at the rate
of 5% per annum
above the Applicant’s prime bank lending rate
of 9% per annum calculated from 20 September 2013 to date of final
payment
and costs on the attorney and client scale (“the
indebtedness”).
2.
It is recorded that on or about
12 March 2014 the Respondent made payment of an amount of R800 000,00
to the applicant in respect
of the indebtedness. It is
furthermore recorded that the Respondent made a further payment of
R142 000,00 to the Applicant
on 11 April 2014 in respect of the
indebtedness.
3.
The respondent undertakes to
settle the balance of the indebtedness as follows:
3.1
the Respondent undertakes to
make a payment of an amount of R142 000,00 to the Applicant
within 7 (SEVEN) days from the date
of signing of this agreement of
settlement by both parties hereto;
3.2
the Respondent thereafter
undertakes to make monthly payments in the amount of R142 000,00
to the Applicant as from 7 June
2014 and thereafter on the same day
of each succeeding month, until such time as the indebtedness has
been settled in full;
3.3
in addition to the aforegoing,
the Respondent undertakes to make a payment of R500 000,00 to
the Applicant by no later than
11 October 2014.
4.
All payments are to be made
directly by the Respondent to the Applicant into the following bank
account . . . .
5.
Should the Respondent fail to
make payment of any of the aforesaid amounts on due date, the
Applicant shall be entitled to an order
placing the Respondent under
final winding up in the hands of the Master of the above Honourable
Court and the costs thereof shall
be costs in the final winding up.
6.
This agreement of settlement is
in full and settlement of all and any disputes which either party may
have against the other, arising
out of the application launched under
the aforesaid case number.
7.
No amendment, deletion,
addition, variation or cancellation of this agreement of settlement
shall be of any force or effect unless
reduced to writing and signed
by both parties hereto.
8.
No relaxation, indulgence,
extension, condonation or any act or omission afforded by the
Applicant to the Respondent shall be regarded
as a waiver of the
Applicant’s rights in terms of this agreement of settlement.
9.
The parties agree to make this
agreement of settlement an order of court.’
[5]
The respondent also breached the payment terms of the settlement
agreement which had been made an order of court. It only
made
payment of the instalment amounts of R142 000,00 to the
applicant on 21 May, on 5 June and on 8 July 2014. Relying
on
clause 5 of the agreement of settlement the applicant adopted the
stance that it was entitled to proceed with its initial application
for the winding-up of the respondent. It filed a supplementary
affidavit on 9 July 2015 in which it referred to the events
that
occurred subsequent to the filing of the founding affidavit.
The respondent persisted in its opposition of the applications
and
its answering affidavit was filed on 14 July 2015 whereafter the
applicant’s replying affidavit was filed on 4 August
2015.
[6]
Relying on clause 6 which provides that the ‘agreement of
settlement is in full and final settlement of all and any disputes
which either party may have against the other arising out of the
application’ in question, the respondent contends that the
winding-up application was settled between the parties
in toto
and the settlement agreement constitutes a
novatio necessaria
which created an independent cause of action that is enforceable
as such. The applicant, so the respondent argues, was enjoined
to launch new proceedings instead of proceeding with its original
application for the winding-up of the respondent. The applicant
contends that in terms of clause 5 of the agreement of settlement it
expressly reserved its right to proceed with the initial application
for the winding-up of the respondent in the event of the agreement of
settlement being breached. The respondent joins issue
with the
interpretation of clause 5 contended for by the applicant. The
respondent also raised an argument that concerns
a second application
for the winding-up of the respondent, which was launched by the
applicant, but I do not deem it necessary
to deal with this argument
since the applicant had withdrawn the that application.
[7]
Counsel are
ad idem
that whether the applicant is entitled to
a final winding-up order of the respondent in terms of its initial
winding-up application
depends on a proper construction of clause 5
of the agreement of settlement. Another alternative argument
raised by the respondent
in its answering affidavit is that clause 5
of the agreement of settlement amounts to a ‘consent’ to
a winding-up order,
which, so the respondent contends, is contrary to
public policy. The respondent confined its opposition to the
winding-up
application to these questions.
[8]
The respondent’s indebtedness to the applicant is admitted.
The respondent is deemed unable to pay its debts within
the meaning
of s 345(1)(a) as read with s 344(f) of the old Act. The
respondent did not provide an iota of evidence to show
that it is not
commercially insolvent in order to rebut the deeming provision of s
345(1)(a). Furthermore, the fact that
the respondent
indisputably so dismally failed to comply with its payment
obligations in terms of the agreement of settlement provides
further
proof of its commercial insolvency within the meaning of s 345(1)(c)
as read with s 344(f). Furthermore, counsel
agreed that the
formal requisites for a final winding-up order have been met. I
am satisfied that the formal and substantive
requisites for a final
winding-up order have been established.
[9]
I now turn to consider the proper interpretation of clause 5 of the
agreement of settlement which was made an order of court.
It
must be interpreted in accordance with the established principles of
interpretation. ‘The “inevitable point
of departure
is the language of the provision itself”, read in context and
having regard to the purpose of the provision
and the background to
the preparation and production of the document.’ (
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA
593
(SCA) paras 18-19.) Interpretation is no longer a process
that occurs in stages but is ‘essentially one unitary
exercise’.
(
Bothma-Batho Transport (Edms) Bpk v S
Bothma & Seun Transport (Edms) Bpk
2014 (2) SA 494
(SCA) para
12.) Regarding the interpretation of court orders following on
settlement agreements, the Constitutional Court
in
Eke v Parsons
(CCT214/14)
[2015] ZACC 30
, paras 29-30, held as follows:
‘
[29] Once a settlement
agreement has been made an order of court, it is an order like any
other. It will be interpreted like
all court orders. Here
is the well-established test on the interpretation of court orders:
“
The starting point is to
determine the manifest purpose of the order. In interpreting a
judgment or order, the court’s
intention is to be ascertained
primarily from the language of the judgment or order in accordance
with the usual well-known rules
relating to the interpretation of
documents. As in the case of a document, the judgment or order
and the court’s reasons
for giving it must be read as a whole
in order to ascertain its intention.
[30]
This is equally true of court orders following on settlement
agreements, of course with a slant that is specific to orders
of this
nature:
“
The Court order in this case
records an agreement of settlement and the basic principles of the
interpretation of contracts need
therefore be applied to ascertain
the meaning of the agreement. . . . The intention of the parties is
ascertained from the language
used read in its contextual setting and
in the light of admissible evidence. . . . ‘
[10]
The meaning to be attributed to clause 5 as contended for by the
respondent is not sensible and has no basis in its language,
in
context or in its manifest purpose. The settlement agreement
was a compromise of the application for the winding-up of
the
respondent. The terms of the settlement agreement created clear
payment obligations with which the respondent had to
comply.
Clause 5 spells out a consequence for non-compliance with those
obligations: the applicant shall be entitled
to an order
placing the respondent under final winding-up. The applicant,
therefore, conditionally abandoned the right to
seek an order for the
final winding-up of the respondent.; the condition was that the
respondent should strictly perform
the payment obligations assumed by
it in terms of clause 3. (Compare:
Standard Bank of SA
Ltd v Essop
1997 (4) SA 569
(D&CLD) at 574B-C.) Clause
5 was clearly intended to have contractual effect. It is not
merely an incidental provision
as the respondent would have it.
(See:
ABSA Bank Ltd v Swanepoel
(246/03)
[2004] ZASCA
60
, paras 6-7) Reference to the context supports this
contractual intent.
[11]
An agreement of settlement excludes proceedings on the original cause
of action unless the agreement expressly or by clear
implications
provides that a party may revert to its original cause of action in
the event of non-compliance with the terms of
the settlement
agreement. (See:
Van Zyl v Niemann
1964 (4) SA 661
(A), at 669-670.) The manifest purpose of clause 5 is to
reserve to the applicant the right to persist with its application
for the final winding-up of the respondent in the event of the
respondent not strictly complying with its payment obligations which
it assumed in terms of clause 3 of the agreement of settlement.
[12]
The interpretation contended for by the respondent renders clause 5
superfluous and without purpose. In the event of
non-compliance
by the respondent with its payment obligations in terms of the
settlement agreement the applicant would in any event
as creditor of
the respondent pursuant to the settlement agreement be entitled to
make an application to court for the winding-up
of the respondent.
But clause 5 preserves the applicant’s right to proceed with
its original application for the winding-up
of the respondent
qua
creditor of the respondent pursuant to the conclusion of the loan
agreement between the parties.
[13]
Nothing in the language used requires the applicant to make yet
another application to court for the winding-up of the respondent
in
the event of the respondent’s non-compliance with its payment
obligations. Clause 5 refers to the applicant’s
entitlement ‘to an order placing the Respondent under final
winding up’ in such event. The agreement of settlement
also does not provide for the withdrawal of the winding-up
application. On a proper construction of clause 5 of the
settlement
agreement the applicant abandoned the right to seek an
order for the final winding-up of the respondent upon the basis as
set out
in its original application for the final winding-up of the
respondent on condition that the respondent should strictly perform
the payment obligations assumed by it in terms of clause 3 of the
settlement agreement.
[14]
The applicant’s contractual entitlement to a winding-up order
in the event of the respondent’s non-compliance with
the its
payment obligations in terms of the settlement agreement is by
necessary implication subject to the court being satisfied
that a
final winding-up order should in all the circumstances be granted.
Corbett JA, in Rennie NO v Gordon & another
1988 (1) SA 1
(A),
said that ‘[w]ords cannot be read into a statute by implication
unless the implication is a necessary one in the sense
that without
it effect cannot be given to the statute as it stands’. I
am of the view that effect cannot be given to
clause 5 ‘as it
stands’ without by necessary implication importing that
condition. The applicant’s entitlement
to a final
winding-up order must be competent and proper. The court to
decide on the appropriateness and competency of a
final winding-up
order is not the court which made the settlement agreement an order
of court, but the court before which the final
winding-up order is
sought. A court is not bound to accept anything agreed to by
the parties and to make it an order of court.
As was held by
the Constitutional Court in
Eke
(supra), para 25, ‘[t]he
order can only be one that is competent and proper.’
Thus, the contention that clause
5 is against public policy since it
permits a company to consent to a liquidation order without the need
for a proper case to be
made out, has no merit.
[15]
In the result the following order is made:
(a)
The
respondent is placed under final winding-up in the hands of the
Master.
(b)
The
applicant’s costs are included in the costs of liquidation.
P.A.
MEYER
JUDGE
OF THE HIGH COURT
Date
of hearing: 26 January 2016
Date
of judgment: 1 April 2016
Applicant’s
counsel: FJ Becker SC
Instructed
by: Smit Jones & Pratt, Parktown, Johannesburg
Respondent’s
counsel: CE Thompson
Instructed
by: Martin van Vuuren Attorneys, Northcliff, Johannesburg