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[2017] ZAGPJHC 188
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Melamed Finance (Pty) Ltd (In Liquidation) v Harris (2016/A5028, 2015/13206) [2017] ZAGPJHC 188 (26 June 2017)
REPUBLIC
OF SOUTH AFRICA
THE
HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO 2016/A5028
A
QUO 2015/13206
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: YES
In
the matter between:
A
MELAMED FINANCE (PTY) LTD (IN LIQUIDATION )
APPELLANT
and
HARRIS
JEFFREY
RESPONDENT
Draft JUDGMENT
Headnote
Appeal
against a dismissal of summary judgment
Appellant
a company in liquidation and the creditor of the respondent to who it
lent money – appellant brought an application
to recovery
a loan based on the evidence given by respondent in a section 417
enquiry into the affairs of the appellant - respondent
in evidence
admitting loan and quantum – sufficient basis upon which to
prove claim.
In
affidavit in summary judgment proceedings respondent making several
claim mas to why not liable – court a quo errered in
approach
to the evaluation of the matter – making probability findings
not proper - the several defences unsustainable
–
Plascon
Evans Paints v Van Riebeeck Paints
applied
Appeal
upheld – order of court a quo set aside and summary judgment
ordered
Sutherland
J:
Introduction
[1]
The appellant (a company in liquidation and represented by its
liquidators) was the applicant
a
quo
in
application proceedings in which it sought to recover money alleged
to be owed to it by the respondent. The claim was dismissed.
The
Court a quo refused leave to appeal, and this appeal is by the leave
of the Supreme Court of Appeal.
[2]
Shortly before the hearing of the appeal, the respondent’s
attorneys of record withdrew. No heads of argument on behalf
of the
respondent were filed. The respondent appeared in person. He invited
the court to have regard to the heads of argument drawn
by Adv Subel
SC and put before the Court a quo. We have done so.
[3]
The evidential material adduced comprised the usual three affidavits
from the respective parties, some correspondence and a
transcript of
the enquiry held into the affairs of the appellant as contemplated by
section 417 of the Companies Act 61 of 1973,
at which enquiry the
respondent testified.
[4]
The appellant claimed a loan agreement existed between the appellant
and the respondent, and that the sum of R8,004,697.96 was
due and
repayable. To substantiate that claim the appellant relied wholly on
the respondent’s admissions in the section 417
enquiry.
[5]
The judgment a quo falls into two parts.
5.1.
One part
deals with the admissibility of the section 417 enquiry evidence but
did not conclude that the evidence was inadmissible.
Indeed, no
challenge to its admissibility was raised by the parties and both
cited extensively from that body of evidence. No
objective
grounds exist upon which to question the accuracy or reliability of
the transcript. That part of the judgment is a tangent
which does not
require further attention. The sole remaining consequence of the
exploration of that issue by the court
a
quo
seems to have been the notion that the ‘weight’ of that
evidence had to be assessed carefully. It is not obvious precisely
what point is sought to be made, as such an approach would apply to
all evidence, regardless of source. There is no special cautionary
rule about testimony garnered in a section 417 enquiry. The
‘careful assessment’ was also said, in the judgment,
to
require examination of the implications of ‘
lacunae’
in the transcript. It is not apparent to me that any
lacunae
exist and the judgment does not describe what supposedly was omitted.
It is true that certain documents alluded to in the
evidence
were not also presented to the court, but the materiality thereof is
not evident, given the statements made by the respondent
in his
testimony. But in any event, insofar as the parties willingly
addressed the record of the testimony of the respondent, if
any
material remarks were omitted, it was for them to address it and
amplify the record if needs be. They did not. The respondent
was invited to address us on the failure or need to amplify or
correct the ‘record’ in the subsequent answering
affidavit
filed, but offered only the empty answer that he felt that
he had not told the full story. Axiomatically, the opportunity
existed
in the answering affidavit to do exactly that and a failure
to seize the opportunity does not assist his case.
5.2.
The second
part of the judgment deals with the merits of the appellant’s
money claim.
5.2.1.
The
judgment addresses only one of several defences raised by the
respondent. The dismissal of the application was premised on the
conclusion that the appellant had failed to prove the cause of action
upon which the claim was based, for want of evidence to substantiate
it. The judgment specifically mentions the ‘limited evidential
value’ of the evidence, ie the section 417 enquiry record
as a
factor in reaching that conclusion. Why it had limited value is not
explained, nor is it objectively apparent.
5.2.2.
A
throwaway remark is made that the other defences are not farfetched
and are a source from which the credibility of the appellant
can be
questioned, but, so the judgment states, in the light of the
dismissal of the application on the cause of action point,
these
aspects of the respondent’s case required no attention from
that Court. Beyond this declaration, no rationale is offered.
5.2.3.
It is plain
that the approach of the court
a
quo
to
deciding a matter on affidavit was misconceived. The Court
a
quo
seems to have thought it was appropriate to speculate on whether the
allegations in the answering affidavit were more probable
than those
in the founding affidavit. The proper approach is set out in
Plascon
-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(AD) at 634F- 635A.
Also, the subsequent caution issued by Harms JA in
NDPP
v Zuma
2009 (2) SA 227
(SCA)
is apposite:
‘
[26]
Motion proceedings, unless concerned with interim relief, are all
about the resolution of legal issues based on common cause
facts.
Unless the circumstances are special they cannot be used to resolve
factual issues because they are not designed to determine
probabilities. It is well established under the Plascon-Evans rule
that where in motion proceedings disputes of fact arise on the
affidavits, a final order can be granted only if the facts averred in
the applicant's (Mr Zuma's) affidavits, which have been admitted
by
the respondent (the NDPP), together with the facts alleged by the
latter, justify such order. It may be different if the respondent's
version consists of bald or uncreditworthy denials, raises fictitious
disputes of fact, is palpably implausible, far-fetched or
so clearly
untenable that the court is justified in rejecting them merely on the
papers. The court below did not have regard to
these propositions and
instead decided the case on probabilities without rejecting the
NDPP's version.’
The
relevant facts
[6]
It is common cause that a relationship of long standing existed
between the parties in terms of which the appellant lent money
to the
respondent which was repayable with interest.
[7]
The claim was for payment of R8,004,697.96. The appellant presented a
case in its founding affidavit that this sum was a total
of several
amounts lent prior to the grant on 15 April 2014 of the provisional
order of winding up of the appellant.
[8]
In support of that claim, the transcript of the section 417 enquiry
was annexed to the papers, in which proceedings the respondent
had
testified. Reliance was placed by the appellant on certain passages
of the respondent’s evidence in which he agreed with
the
examiner that he owed money to the appellant in an undisputed sum of
R8,004,697.00 to substantiate its claim as set out in
the notice of
motion.
[9]
On several occasions during the section 417 proceedings the admission
by the respondent of indebtedness in that sum was made.
[1]
The
respondent apparently needed financing for his business ASD Hosiery
(Pty) Ltd. ‘Avron’ [Melamed] supposedly encouraged
him to
use his (or his Business’s) cash for operational needs and then
borrow, from time to time, from the appellant what
additional working
capital he might need. As a result, so said the respondent:
“
…
.I borrowed in my personal
capacity because we I had a relationship with them and they knew who
I was and it was just on a handshake
and we took the money – I
took the money to pay for the containers.”
[10]
On the issue of repayment, by contrast to the indebtedness
per
se
, the
respondent’s testimony was equivocal about his obligations. He
alluded to various aspects of the circumstances which
he believed
were relevant.
10.1.
First, he
made mention of Avron Melamed and of Michael Wainbergass and of
dealings among the three of them. When asked if
the sum owed to
the appellant was repayable, his answer was:
“
It
is repayable ….Yes, but not the full amount because its in the
wrong context of the R8m. We had a personal agreement between
the
three of us on how we were going to settle our debt.”
He
amplified this remark by claiming that that if ever he could not pay-
“…
.the
money that Michael [Wainbergass] was holding would automatically go
to pay what I owed Melfin [ie, the appellant]”
Following
on this statement, he expressed the belief that he was entitled to
set-off money owed to him by Wainbergass to settle
at least part of
what he owed to the appellant. He thereupon, when pressed for a time
by which he would pay, said:
“
I
will pay what I am due to pay with the offset (sic) between Melamed,
Michael Wainbergass.”
10.2.
Second, in
relation to the interest due in order to discharge any indebtedness
to the appellant, he alleged that:
“…
we
would come to an arrangement on the interest, like we have done in
the past where we’ve made early settlements and when
they
needed money earlier, we would get a figure. They would reduce the
interest rate and we would get a figure and pay them.”
10.3.
Third, he
initially stated that he ‘regarded’ Avron Melamed and
Michael Wainbergass as “one and the same…”.
He
said that he “regarded” both “Avron” and
“Mike” as his creditor; albeit that “Avron”
lent the money. Moreover, he was ignorant of any legal distinction
between “Avron” and “Michael”. When
invited
to accept that there was such a distinction, he confirmed that he had
invested with “Michael” because “Avron”
asked
him to put his money with “Michael” instead of with the
appellant. This ‘investment’ bore a 0% interest
rate.
10.4.
Fourth, he
asked for time over 36 months to pay the indebtedness. When asked why
he had not yet paid the debt, he said that when
the appellant was
wound-up, despite being able to afford to pay, partly by set-off of
some R2m, he:
“…
.was
going to see how it would pan out.”
[11]
The answering affidavit deposed to by the respondent raised several
grounds on which he relied to refuse to pay. In the answering
affidavit and supplementary answering affidavit, several defences are
put up. They are:
11.1.
The
application procedure was inappropriate because there are material
disputes of fact.
11.2.
The claim
is unsubstantiated by any documentary proof and must fail for want of
a ‘valid cause of action’.
11.3.
The
apparent admissions of liability in the section 417 enquiry, properly
understood in context, do not constitute any admission
of liability
to the appellant.
11.4.
The true
agreement between the appellant and the respondent was one in terms
of which the respondent deposited and withdrew various
sums of money
over time and the admitted debit amount of R8004697.96 must be set
off against a credit amount of R2,415,036.59.
11.5.
The
appellant was carrying on a ponzi scheme (a fact unknown to the
respondent until after the winding up) and therefore the loan
agreements are unlawful and unenforceable. Accordingly, a
reconciliation of the account between the appellant and the
respondent
to recalculate the rate of interest in terms of mora
interest rate and not the agreed 42% interest rate, would reflect a
credit
balance in respondent’s favour in the sum of
R1,090,416.18.
11.6.
The
appellant is in violation of Section 11 of the Banks Act 94 of 1990
by taking deposits from the public. (Presumably, although
it is not
actually alleged, the inference to draw is that no claim for
repayment of money lent is enforceable).
11.7.
Prior to
winding up, post - dated cheques, totalling R5,849,602.93 from the
ASD hosiery (Pty) Ltd were provided to the appellant
as security
which appellant was “entitled’(sic) to apply towards my
indebtedness” which cheques have been misappropriated
by
Destination Capital (Pty) Ltd, who demand the respondent pay money to
it, the validity of which demand the appellant has challenged.
Accordingly, so it is argued, it is said, any claim by the appellant
should be deferred until the dispute between the appellant
and
Destination Capital (Pty) Ltd is resolved. Moreover, the appellant
cannot sue the respondent for want of
locus
standi,
it is argued that because, prior to
litis
contestatio,
it
had ceded the indebtedness of the respondent to the appellant to
Destination Capital (Pty) Ltd by way of giving it possession
of these
very cheques.
Evaluation
of the contentions
The
Challenge to the establishment of the appellant’s cause of
action
[12]
The pleaded claim is that a determined sum was lent to the respondent
and it now due and payable. The evidence tendered for
that allegation
is the testimony of the respondent who said exactly that in the
section 417 enquiry.
[13]
Notwithstanding those admissions, the argument, advanced on the
respondent’s behalf, criticises the formulation of the
claim as
(1) vague, (2) bereft of details of the underlying transactions that
gave rise to the alleged indebtedness or (3) details
of how the sum
is made up, (4) is unclear as to the identity of the creditor.
Therefore, it is argued, no valid cause of action
is made out.
[14]
These contentions purport to re-describe the facts alleged and are
incorrect. There is no sound reason not to rely on oral
acknowledgement of a debt. Moreover, the respondent supplied a
schedule attached to his answering affidavit listing the transactions
between the appellant and him, totalling a sum owed to the appellant
by him which is exactly the sum claimed. The absence
of other
corroborating documentation, assuming it existed, does not dent the
effect of the acknowledgement. Moreover, the respondent’s
answering affidavit alludes to an oral agreement about the lending of
money to him by the appellant.
[15]
The identity of the creditor is, without doubt, the appellant. It is
so that the respondent suggested, faintly, that the appellant
and
Wainbergass were one and the same, but he belies any sincere belief
in that notion when he further alleged that Avron Melamed
told him
not to deposit money with the appellant any longer but deposit it
with Wainbergass. To fortify the distinct legal personality
between
the appellant and Wainbergass, the documents attached to the
answering affidavit include an affidavit by Avron Melamed
(in the
winding up application) to say other than he there were no other
employees of the appellant bar himself and also a corroborating
affidavit by Wainbergass to say this is true. Also, and more
importantly, a schedule of the respondent’s transactions with
MG Wainbergass Financial Services is attached to the answering
affidavit totalling a sum owed to appellant which is the sum which
he
wants to be set-off. It must be noted that these are not items of
evidence that the appellant relies on nor needs to rely on
to
formulate its claim; what these items do show however, is that the
argument advanced on behalf of the respondent are unsupported
and
indeed, contradicted by the documents the respondent has introduced
into evidence. Lastly, the very nature of the appellant’s
business as a financier is stated in Melamed’s affidavit.
[16]
Accordingly, the appellant did make out a valid cause of action,
unrebutted by the respondent. Insofar as the judgment
a
quo
held otherwise, it was in error.
A
material dispute of Fact?
[17]
The preliminary argument is made that the deponent to the founding
affidavit is a liquidator who has no personal knowledge
of the
underlying transactions. Obviously, she could not have such
knowledge, and nor does she purport to say so. What the deponent
has
done is marshal the facts assembled in the liquidation process, which
are facts with which she is required acquaint herself
and which
include the admissions, under oath, by the respondent as already
described above. The contention is, under such
circumstances,
misdirected.
[18]
Naturally, any relevant dispute of fact needs to be material to the
claim by the appellant against the respondent and to a
valid defence.
No facts are adduced which contradict the appellant’s
admissions in the section 417 enquiry; indeed, the answering
affidavit fortifies the admissions.
[19]
In particular, it may be mentioned that the respondent, in the
answering affidavit, alludes to an agreement of October 2010
among
Melamed, Wainbergass and him. In terms of this oral agreement, he
made deposits and made withdrawals as the needs of his
business
required. He repeats the vain assertion that he thought Wainbergass
was an employee of the appellant notwithstanding the
documentation
which he attaches contradicts that being a fact, and moreover his
account of being told not to deposit money with
the appellant but
with Wainbergass belies such a bona fide belief.
The
Plethora of other defences
[20]
The further allegations are arguments, rather than allegations of
fact, about why he is not liable, but do not contradict or
challenge
the indebtedness
per se
or his admission that it was overdue.
Some of the ‘defences’ can be dismissed out of hand for
want of substantiation,
ie those that either depend on arguments bad
in law or fail for want of the necessary factual allegations needed
to sustain them.
The
Set- Off defence
[21]
The critical point is that the set off cannot apply to the
indebtedness of Wainbergass to the respondent as regards an
indebtedness
of the respondent to the appellant. At best, for the
respondent, if Wainbergass promised to pay part of the respondent’s
debt to appellant, then the appellant shall have to enforce that
obligation against Wainbergass. He could have joined Wainbergass
as a
third party. He did not. He is not relieved of his obligations to the
Appellant.
The
Cession and post-dated cheques defence
[22]
The answering affidavit describes a dispute between the appellant and
Destination Capital (Pty) Ltd over the ownership of post-dated
cheques from ASD Hosiery (Pty) Ltd, and which of the two is entitled
to effective payment. The appellant claims the cheques
were
unlawfully misappropriated. This dispute is plainly irrelevant to the
subject matter of this application. The cheques were
apparently made
out in blank by ASD Hosiery (Pty) Ltd, ie the respondent’s
business, not the respondent personally, in favour
of the appellant
for the purposes of furnishing a form of security for the loan. No
nexus exists between that quarrel and the dispute
between the
appellant and the respondent that could warrant the contention that
the present matter must be deferred until that
matter is resolved;
moreover, it provides no defence to the indebtedness of the
respondent to the appellant. The further allegation
that the
appellant ceded the cheques and thus its security to Destination
Capital (Pty) Ltd is another naked averment. The facts
adduced about
the cheques do not afford a platform upon which to build such a
contention, still less that such a cession absolves
the respondent of
his indebtedness to the appellant.
The
section 11 of the Banks Act 94 of 1990 Defence
[23]
The contention is that a creditor who violates section 11 by
accepting or soliciting deposits without being a registered financial
institution cannot enforce a debt. This is incorrect. The very
argument was rejected in
Gazit
Properties v Botha & Others NNO
2012 (2) SA 306
(SCA) at [10] –
[11].
The
Ponzi Scheme defence and the cession defence
[24]
Whether the appellant was engaged in a Ponzi scheme is the subject
matter of a bald allegation unaccompanied by any factual
substantiation. Moreover, even if that were so, whether the
respondent was an investor or in any other way implicated in such a
scheme is not spelt out. Furthermore, the link between such an
averment, even if substantiated, and the ‘illegality’
of
a loan agreement is neither articulated nor, objectively, likely.
Conclusions
and Costs
[25]
In the result, the appeal must succeed and the order dismissing the
application must be set aside.
[26]
The appellant seeks punitive costs against the respondent on the
basis that there was never a bona fide dispute about the indebtedness
which he had admitted in the section 417 enquiry and at which time he
had sought terms to pay. This is an appropriate submission
in the
circumstances. The answering affidavit was a constellation of
meritless skittles tossed up to obscure the simple reality
of an
admitted obligation to pay. Its aim could only have been to gamble on
securing a un justified delay. In my view attorney
and client costs
are indeed called for.
The
Order
(1)
The appeal
is upheld.
(2)
The order
of the court a quo is set aside and is substituted with an order that
the respondent pay to the appellant the sum of R8,004,697.96
together
with interest thereon calculated at 42% per annum from 15 April 2014
to date of payment.
(3)
The
respondent shall bear the costs of the application and of the appeal
on attorney and client scale.
___________________________
Sutherland
J
(with
whom Molahlehi and Twala JJ concur)
Judge
of the High Court,
Gauteng
Local Division, Johannesburg
___________________________
Molahlehi
J
Judge
of the High Court,
Gauteng
Local Division, Johannesburg
__________________________
Twala
J
Judge
of the High Court,
Gauteng
Local Division, Johannesburg
Hearing:
7 June 2017
Judgment:
26 June 2017
Appearances:
For
the Appellant:
Adv
G. D. Wickins,
Instructed
by Brooks and Brand.
The
respondent in person;
(Heads
of argument prepared by Adv A. Subel SC)
[1]
No controversy exists
that the testimony of a witness in section 417 proceedings can be
used against that witness in subsequent
proceedings:
O’
Shea N. O. v Van Zyl & others N.N. O
.
2012
(1) SA 90
(SCA) at [21]