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[2016] ZAGPJHC 110
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Hyprop Investments Limited and Another v NSC Carriers And Fowarding CC (29277/2015) [2016] ZAGPJHC 110 (13 May 2016)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
GAUTENG LOCAL
DIVISION, JOHANNESBURG
CASE NO:
29277/2015
DATE: 13 MAY 2016
In the matter
between:
Hyprop
Investments Limited
(Registration
number
1987/005248/06)
..........................................................................
First
Applicant
Abland (Pty) Ltd
(Registration
number
1996/012517/07)
......................................................................
Second
Applicant
And
NSC Carriers and
Fowarding
CC
........................................................................................
Respondent
JUDGMENT
Van der Linde, J:
Introduction: the
issues
[1]
This is an application for the liquidation
of the respondent close corporation. A final order alternatively a
provisional order
is sought. The applicants’ unpaid claims
against the respondent are comprised of two judgments for capital
amounts and four
taxed bills of costs. The six dates concerned range
from 13 January 2009 to 27 July 2011.
[2]
These claims follow on a successful
cancellation of lease and eviction orders that the applicants
obtained against the respondent
on 12 April 2010. The respondent had
leased two business premises from the respondent in terms of two
lease agreements. The respondent’s
member, Mr Costa, was a
surety in respect of both lease agreements. Money judgments were also
granted against the respondent and
Mr Costa.
[3]
The resistance against relief sought, which
is shored up by a counter-application for a stay of the liquidation
application pending
the final determination of the respondent’s
damages action (referred to below), falls into three parts. The first
part is
that the respondent has taxed and allowed bills of costs in
its favour against the applicants, and these should be set off
against
the applicants’ claims. Since the asserted set-off
still leaves, on the respondent’s version, an amount of
R1 447 377,95
owing by the respondent to the applicants,
nothing more need be said about this defence.
[4]
The second part of the resistance is that
there is an action pending in this division under case number
13612/2011 by the respondent,
by Mr Costa (whose sequestration is
sought in a parallel application), and by two other close
corporations against the applicants
and F Gouws and N Greenstone, for
damages amounting to some R4million arising from alleged fraudulent
misrepresentations which
had induced the two lease agreements. The
argument is that if successful, the judgment will extinguish any
indebtedness owed to
the applicants. The respondent thus submits that
equity and the interests of justice demand that the liquidation
application be
stayed pending the trial action.
[5]
The third part of the resistance is that
not all the respondent’s goods and movables that were present
on the leased premises
and were attached by the sheriff have been
accounted for. These goods and movables have a value of some
R6,5million. It is
alleged that the value of the missing goods and
movables exceeds the debts of the respondent to the applicants.
[6]
No action has been instituted by the
respondent against the applicants for any asserted culpable damages
on the part of the latter,
or for any appropriate declaration
concerning the sheriff’s attachment and subsequent execution,
and this defence too may
be set aside for present purposes. In
particular, there is no claim in the pending fraud action for any
relief related to this
asserted conduct. An action, if one avails,
may be pursued by the respondent’s liquidators.
[7]
The real issue of substance raised by the
respondent is the impact of the pending trial action on the
applicants’ application
for liquidation. On this score Mr
Kairinos, SC who appeared for the respondents in both the liquidation
and the sequestration application
under case number 15/29278 (they
were heard together), advanced certain factors that weighed, he
submitted, in favour of a stay
of the liquidation and sequestration
applications. I deal with those that were pertinent.
The
procedural inequity of the fraud cause having to be by way of trial
action
[8]
The argument here was that the trial action
was instituted in 2011. The applicants’ eviction case was
brought on motion. It
was followed by the respondent’s
unsuccessful applications for leave to appeal to both the court a quo
and the Supreme Court
of Appeal. The latter refusal only came in
2011. The submission was that although the respondent’s fraud
action could have
been instituted earlier, it waited for the SCA
outcome. No other reasons or handicap was advanced.
[9]
But the argument was that if the
applicants’ had proceeded by trial action, the respondent would
have been entitled under
rule 22(4) to obtain a stay of the main
action, pending the determination of the trial action. Also, if the
applicants had brought
their liquidation application by trial action,
the same procedural entitlement was there to be availed by the
respondent. It is
thus being prejudiced by dint of the procedural
quirk that operates against it.
[10]The
rule of course says that the defendant “
may”
refer to the claim in reconvention, and may then “
request”
that judgment in convention be postponed. The rule then also goes on
to say: “
Judgement on the claim
shall … thereupon be so postponed unless the court, upon the
application of any person interested,
otherwise orders…”.
[11]
It seems fair to recognise that there is certainly
some procedural advance, because had these proceedings been by way of
action,
and had this rule been invoked, the applicants, not the
respondent, would have had to make the running. The applicants
would
have had to bring the application not to stay the main claim
for liquidation.
[12]I
am not persuaded, nor did Mr Kairinos so argue, that this would have
changed the onus, if this is a relevant consideration
in a mater in
which the court has a discretion. It seems to me that the respondent,
who has an unliquidated damages fraud claim,
would still bear the
onus of showing why the matter should be stayed.
[13]But
even if this is wrong, the point remains that the court still has a
discretion, whether or not the procedure is by way of
trial action or
on motion. And that is the central issue to be decided in the present
matter.
[14]
What does weigh with me in this regard, is the
absence of an acceptable explanation for having waited until 2011
before the fraud
action was instituted. Of course, the respondent is
entitled to wait until just before its claim is extinguished by
prescription.
But the concomitant concern is that justice
delayed is justice denied.
[15]If
such an action, delayed for a substantial period of time, is then
later invoked further to delay execution of a money judgment,
the
respondent’s delay must carry with it the risk of not procuring
a delay in the execution of the judgment. After all,
the respondent’s
case still has to be proved; the applicants’ case has been
proved and pronounced.
The
stay application is a substantive application
[16]
The central point advanced here was that the court
was not faced just with a liquidation application in respect of which
a provisional
order could be granted. The stay application, if
successful, was a substantive barrier to a provisional order.
Put
differently, the liquidation application could not be decided on
a provisional basis without deciding the stay application on a
substantive, final basis.
[17]In
addition, the point was made, in the context of the sequestration
application of Mr Costa, that if the respondent’s
resistance in
the liquidation application was good, it would follow that the
surety’s resistance ought also to be good.
[18]
I
don’t agree, with respect. It seems to me that this court is
quite entitled and able to issue a provisional order and postpone
the
stay application for the return day. I also don’t accept that
the surety’s fortunes (or misfortunes) necessarily
follow those
of the creditor. But as it happens in this matter they probably
do.
[1]
The
real reason for the applications is to stifle the fraud action
[19]
This is an attractive argument, because a court
will instinctively resist any conduct that seeks to cover up fraud.
But that proposition
is only valid as far as it goes. Here the
applicants have money judgments. They are entitled to execute them.
The respondent
is offering to pay them.
[20]The
real difficulty with the argument is that it is really quite
incapable of being assessed finally, one way or the other.
The
applicants are equally able to assert that the pot is calling the
kettle black; that the real reason for the fraud action is
to
suppress execution of the money judgments.
Irregularity
in the execution process
[21]
This is the argument concerning the goods and
movables that have been attached. It has been dealt with above and
nothing more need
be said about it here.
The
question of security
[22]
Here the argument was that the applicants’
in fact had security; this took the form of the goods and movables
that were attached
by way of the landlord’s hypothec. Had the
execution process and the sale in execution not gone awry, the
applicants’
judgment would have been satisfied.
[23]
I am afraid that this argument really revisits the
points already made concerning the alleged flawed execution process.
Kalil
v Decotex (Pty) Ltd
[2]
and
Clipsal Australia (Pty) Ltd and Others v Gap Distributors and
Others
[3]
[24]
Of the judgments relied on by Mr Kairinos, these
two were pertinent. The first one concerns the nature of the
respondent’s
resistance in liquidation proceedings. It holds
that the respondent need only dispute the creditor’s claim on
bona fide and
reasonable grounds.
[25]
Its application to the present matter is more
problematic for the respondent. The respondent in fact, in the
present matter, does
not dispute the applicants’ claim at all.
It merely says that it has a claim which, if successful, will
extinguish the applicants’
claim. But that contingency has not
been established.
[26]
Indeed, the respondent seeks to invoke the fact of
the contingency to avoid the payment of an admitted debt. This is a
power which
a court has; and that brings one to Clipsal.
[27]
Clipsal
is a judgment in which the Supreme Court of Appeal set aside a narrow
discretion exercised by Joffe, J in the court a quo
in which the
learned judge stayed a contempt of court application. A narrow
discretion is one with which a court of appeal can
interfere: “…
only
if the court below exercised its discretion capriciously or upon a
wrong principle, or has not brought its unbiased judgment
to bear on
the question, or has not acted for substantial reasons, or materially
misdirected itself.”
[4]
[28]
It
is instructive to consider the reasons why Streicher, ADP (then) came
to the conclusion to which he did:
[5]
“
[20]
The court below held that 'eise van geregtigheid' indicated that the
contempt application should be stayed pending the outcome
of the
review application because if the contempt application 'were to be
determined prior to the review application, enforcement
of a court
order could be ordered in circumstances where the enforcer of the
court order was not entitled to the court order in
the first
instance'. The court would, according to Joffe J, in the
circumstances 'knowingly compound the problem'. He added that
the
determination of the review was important insofar as issues of mala
fides and wilfulness were concerned.
[21]
However, the outcome of the review application is irrelevant to the
question whether the respondents were acting in contempt
of court. In
terms of the court order Gap Distributors and Trust Electrical
Wholesalers are interdicted from infringing registered
design
A96/0687. That court order is a final order and has to be obeyed even
if it is wrong as is alleged by the respondents. Should
the review
application be successful and the registration of the design be set
aside, the interdict would come to an end as there
would no longer be
a registered design, but until that happens the interdict stands and
has to be obeyed. As was said by Herbstein
J in Kotze v Kotze
1953
(2) SA 184
(C) at 187F - G:
'The
matter is one of public policy which requires that there shall be
obedience to orders of Court and that people should not be
allowed to
take the law into their own hands.'
[22]
In its judgment the court below itself refers to Culverwell v
Beira
1992 (4) SA 490
(W) at 494A - E where Goldstein J said
that orders of court have to be obeyed until set aside and that chaos
may result if people
were allowed to defy court orders with impunity.
It also refers to the judgment of Froneman J in Bezuidenhout v
Patensie
Sitrus Beherend Bpk
2001 (2) SA 224
(E) at 228F - 230A
where, relying on Culverwell and Kotze, Froneman J said that an order
of a court of law stands and must be obeyed
until set aside by a
court of competent jurisdiction. Having done so with apparent
approval and having stated that it is obliged
to apply the judgment
of this court, it is inexplicable how it could then, on the basis
that the judgment could be wrong, have
considered the outcome of the
review application to be of any relevance to the contempt
application.”
[29]
In this matter the money judgments in favour of
the applicants against the respondent as well as Mr Costa is beyond
challenge. That
is a factor that, in my view, weighs more heavily
against a stay, and in favour of both a liquidation and a
sequestration order,
than the factors advanced in favour of a stay;
quite apart from the responses that have been put up against those
above.
[30]In
my view the application for a stay should be dismissed, and
provisional orders of winding-up and of sequestration should
follow.
In the result I make the following order:
(a)
The respondent’s counter-application
for a stay of the main application is dismissed with costs.
(b)
A provisional winding-up order hereby
issues in the usual form of a rule nisi, returnable on a date to be
arranged with the registrar,
calling upon all interested parties to
show cause before this court why a final winding-up order should not
be granted; and why
it should not be ordered that the costs of the
opposed winding-up application should be costs in the insolvent
estate.
(c)
This order is to be served:
(i)
On the respondent at its registered
address;
(ii)
Publication in the Government Gazette;
(iii)
Publication in The Star newspaper;
(iv)
On SARS;
(v)
On all known trade unions representing the
respondent’s employees.
WHG van der Linde
Judge, High Court
Johannesburg
For the
applicant: Adv. M. Nowitz (083 444 9716)
Instructed by:
Nowitz Attorneys
5
th
Floor, Hyde Park Corner
Cnr Jan Smuts
Avenue & William Nicol Drive
Johannesburg
Tel: 011 325
5300
Ref:
Mr. L. Nowitz/aa H248
For
the respondents: Adv. G Kairinos, SC (082 565 6695)
Instructed
by: E. DA C. Luiz Attorneys
1
st
Floor, 5 Grays Terrace Road
Kensington
Johannesburg
Tel:
011 616 2664
Ref:
Mrs E. Luiz/PL/N133/3009(5)
Date
of hearing: 5 May 2016
Date
of judgment: 13 May 2016
[1]
Mr
Kairinos’ heads of argument for the surety came to one
substantive page.
[2]
1988
(1) SA 943 (AD)
[3]
2010
(2) SA 289
(SCA)
[4]
Clipsal
at paragraph [19].
[5]
At
paragraph [20], [21], and [22].