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[2010] ZAGPJHC 48
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Pollock NO and Another v Simcha Properties 2 CC and Others (12264/2010) [2010] ZAGPJHC 48 (4 June 2010)
REPUBLIC OF SOUTH AFRICA
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
CASE NO:
12264/2010
In the matter between:
RICHARD
KEAY POLLOCK, N.O.
First Applicant
FAZLUL HUQ
SULIMAN, N.O.
Second Applicant
and
SIMCHA
PROPERTIES 2 CC
First Respondent
SIMCHA
PROPERTIES 20 CC
Second Respondent
SIMCHA
PROPERTIES 17 CC
Third Respondent
THE
REGISTRAR OF DEEDS, PRETORIA
Fourth Respondent
THE MASTER OF THE HIGH COURT,
JOHANNESBURG
Fifth
Respondent
INVESTEC
BANK LIMITED
Sixth Respondent
BFPG DEVCO
(PTY) LIMITED
Seventh Respondent
J U D G M E N T
LAMONT, J
:
[1] The first
and second applicants are the liquidators of Dynadeals Three (Pty)
Ltd in liquidation. (I refer to Dynadeals as the
insolvent.) The
applicants brought an urgent application for interim relief seeking
to interdict the first, second and third respondents
from selling and
the fourth respondent from executing or attesting any deed of
transfer of two developments one known as Willaway
Extension 14
(Willaway) and/or any erf which had been formed as part of the
development and another of which is known as Bluehills Extension
30
(Bluehills). The application was brought pending an action to decide
whether the dispositions were impeachable transactions.
In error one
of the developments was registered in the name of the second
respondent. It is common cause that that was an erroneous
registration.
[2] During
October 2008 the insolvent concluded contracts to transfer Willaway
to the first respondent and Bluehills to the third
respondent. During
March 2009 the insolvent transferred Willaway to the first respondent
and Bluehills to the third respondent.
At the time of transfer bonds
were registered over the properties. A bond of R13, 5 million was
registered over Willaway, of which
R5, 1 million had been drawn down
as at April 2010 as well as a bond for R2, 16 million which was
registered over the Bluehills
property.
[3] On 20
April 2009 a creditor of the insolvent known as Viewtown instituted
action against the insolvent in respect of work done
relating to the
supply, installation and commission of electrical reticulation for
two phases of Willaway for an amount of some
R2,25 million.
Accordingly as at that date at the latest that improvement had
occurred. As at that date the insolvent also was
indebted to Eksteen
and Le Roux CC for some R3, 2 million having signed a written
acknowledgement of debt in favour of that entity
on 8 December 2008.
This debt too arose out of improvements to Willaway. On 8 May 2009
the insolvent was placed in final liquidation
pursuant to an
application brought by itself for its own winding-up. In that
application the insolvent alleged that it had no
creditors save for
some unspecified debts and accruals of some R482 000. 00. This
allegation was patently false.
[4]
Over
the relevant period the members and directors of the insolvent, the
first respondent and third respondent were identical.
[5]
Subsequent to the winding-up no steps were taken to get a liquidator
appointed. It was only during early June 2009 when the
applicants’
attorneys began investigations, that they were able to obtain the
court order and bring the liquidation to the
attention of the Master.
[6] The
applicants obtained a valuation of one Havenga an associate valuer in
terms of section 14 of the Valuers Act No. 23 of 1982.
According to
that valuation the value of the land constituting Willaway is
approximately R8 million to R8, 5 million as at the
date of transfer.
The insolvent had purchased Willaway for an amount of R6 million in
2005. Township development work had been
done in respect of each of
the properties subsequent to the purchase thereof. In particular
insofar as Willaway was concerned
during November 2008 there was an
amount of some R12, 1 million made available towards guarantees
required
[
7]
The Bluehills development was valued by Havenga at an amount of some
R3, 7 million. The insolvent purchased Bluehills in May
2005 for R2,
5 million. The sale price to the third respondent by the insolvent
was R2, 4 million.
[
8]
Although no township register had been opened for either Willaway or
Bluehills the first and third respondents marketed residential
erven
which had been created within the development of Willaway. Of the 49
erven created a large number were sold pursuant to
contracts with
third parties (referred to as buyers).
[9] Applicants
formed the view that disposition of Willaway to the first respondent
constituted an impeachable transaction. The
applicants sought data in
relation to the discoveries they had made but were unable to obtain
any detailed information and as at
the date the application was
launched had not obtained any undertakings.
[10] The
application was brought as a matter of urgency in circumstances in
which the applicants had little information relating
to the case for
the simple reason that the information relating to the case was all
in the hands of the first and third respondents
and they were making
very limited disclosure.
[11] The
applicant making use of such evidence as it had available to it
urgently launched the application to prevent the sale
and transfer of
the developments and the individual erven in Willaway. Transfers were
imminent.
[12] In my
view the application was urgent and the applicants were entitled to
proceed to court as a matter of urgency to seek
relief. The
liquidators were hamstrung in providing sufficient facts to the court
at the time and provided such information as
they were able. This
resulted in a founding affidavit which dealt superficially with some
data and which entertained hearsay evidence.
[13] Two
points were raised
in
limine
.
The first was that the buyers should have been joined. It was
submitted that the buyers had a direct and substantial interest
hence
a legal interest in the proceedings. In my view the purchasers have
only an interest in the rights that they seek to exercise
against the
seller (in the present case the first respondent). The purchasers
have in my view no rights as against the property
which it is sought
to interdict.
[14] The
position in my view is similar to that which pertains in a case where
a landlord seeks to eject a tenant and is not required
to join on
sub-tenants. The sub-tenants have contractual rights against the
tenant but no rights in the property. They therefore
have no legal
interest in the litigation.
[15] The
second matter concerned the failure of the expert to both qualify
himself, furnish an affidavit both by himself and by
the persons on
whose information he relied.
[16] In my
view having regard to the urgency which existed at the time the
application was brought, these omissions were excusable
and I formed
the view the fact that the case had not been better established in
the founding affidavit did not disentitle the applicants
to relief.
The right of the applicants to relief must in my view be tested on
the basis of all the evidence before me.
[17] For
these reasons I dismissed the application
in
limine
with costs.
[18] The
applicants have instituted an action against the first and third
respondents by way of action instituted during April
2010 under Case
No. 15263/2010. In that action the applicants seek to impeach the
dispositions on the basis of common law section
26, 29, 30 and no. 31
of the
Insolvency Act No 24 of 1936
.
[19] In order
for the applicants to be successful the applicants are required to
establish.
Under
section 26
of the
Insolvency Act No. 24 of 1936
a disposition not
made for value and that immediately after the disposition was made
the liabilities of the insolvent exceeded
his assets.
Under
section 29
a disposition
made not more than six months before sequestration which has had
the effect of preferring one creditor above another and that
immediately after the disposition the liabilities of the insolvent
exceeded his assets.
Under
section 30
a
disposition made of property at a time when the insolvent’s
liabilities exceeded his assets and the intention on the
part of
the insolvent of preferring one of the creditors above another.
Under
section 31a
disposition of property pursuant to a collusive
transaction
which
has the effect of prejudicing the insolvent’s creditors or of
preferring one creditor above another.
[20] The
principal submissions made before me concerned whether or not the
applicant had established that the price at which the
property should
have been sold (the market-value) was disparate from the price at
which it was in fact sold. I was invited to
draw an inference that
if there was a disparate price paid that the transaction was on the
face of it impeachable. The contentions
of the respondents were that
the evidence which had been provided by the “expert” put
up by the applicants was inadmissible
in that it of itself relied on
hearsay (the source of the value obtained by the expert was a variety
of estate agents and other
persons with expertise) and was not
established by way of affidavit. In certain circumstances hearsay
which an expert has relied
upon in the compilation of his report is
permitted. See for example
Rusmarc
SA (Pty) Ltd v Hemdon Enterprises (Pty) Ltd
1975 (4) SA 626
(W).
[21] The
salient features of the case relevant to dispositions are the
following:
The members and directors of the insolvent and of the first and
the third respondents are identical.
Transfer of the property occurred shortly prior to the winding-up.
The price paid for the property to the first and third respondents
Is less than the price paid originally for the property by
the
insolvent.
The price at
which the insolvent sold the properties to first and
third respondents was the price required to meet the
claims of
the
preferred creditors (bondholders) not the market value. That price
coincidentally might have equated the market value. The
parties made
submissions relating to this issue and it was in this context that
the matters (referred to above) relating to experts
were ……………
The
insolvent and hence the concurrent creditors lost the
chance
of directing what should happen to the property
pursuant to the transfer of the property to the first and
third
respondents.
The
concurrent creditors will receive zero cents in the rand.
On the face of it the insolvents assets were less than its assets
incurred
after the disposition.
On the face
of it the one property had been extensively
developed at a costs of millions and that value is not
reflected
in
the sale price. In respect of the one development where stands had
already been from the property to be developed those
stands were
on offer at prices of the order of
R900
000, 00. The resultant value of the defendant, assuming the
properties were in its hands who taking into account the
building
contracts was approximately R45 million. There is no evidence as to
what the costs of the building contracts would be.
21.9 The
disposition appears on the face of it to be a unusual in that the
members and persons in control of the property through
the insolvent
derive no advantage by the sale, but incurred the costs of transfer
through the first and third respondents of transferring
the property.
21.10 The
insolvent’s concurrent creditors before the disposition could
look to an asset owned by the insolvent to meet their claims.
After
the disposition the insolvent became a shell owning only liabilities.
21.11 At a point in time a moneylender was prepared to lend an
amount
in excess of R12 million subject to security of a bond passed over
one of the properties.
21.12 The
disposition was part of a scheme divest the insolvent of the property
re-vest the property in the hands of first and third respondents and
wind up the insolvent.
[2
2]
There is a dispute between the facts and opinions provided by the
applicants “expert” which are not supported by
affidavit,
and the facts provided by the respondents “expert” under
oath.
[23] This is
an interlocutory matter and it is necessary for the applicants to
establish a
prima
facie
right. A
prima
facie
right is constituted by proof which if uncontradicted and believed at
the trial would establish the right in question. The proposition
is
that it must be established that the applicants could obtain the
rights they seek to protect at a trial. See
Webster
v Mitchell
1948 (1) SA 1186
at 1189. If serious doubt is thrown upon the case
of the applicant then he could not succeed in obtaining temporary
relief for
his right
prima
facie
established may “only be open to some doubt”. However,
if there is mere contradiction or an unconvincing explanation
the
matter should be left to trial and the right being protected in the
meanwhile subject of course to the respective prejudice
in the grant
or refusal of the interim relief. The question which I must ask
myself is whether the applicant if the facts he has
set up are
established at trial has a reasonable prospect of success. In my
view it is not necessary for the applicant to presently
prove the
facts. He must set up facts which show that he has witnesses which
can establish them and then I am entitled to find
that he has a
reasonable prospect of success. This is particularly so in the
context of the present application which came as a
matter of extreme
urgency relying on hearsay. There is no reason not to accept that
the witnesses referred to by the expert of
the plaintiff and the
expert himself will be available at the trial and give appropriate
evidence. All the relevant issues concerning
the value of their
evidence can be canvassed by proper cross-examination. For present
purposes I take into account the fact that
there is albeit not on
properly established evidence an indication that there are views of
persons who profess to be experts that
the property in question had a
greater value than that was achieved by the sale. There is
corroborative evidence for their views
in the matters set out supra.
[24] In my
view it is not necessary for the applicant to establish the extent of
the disparity between the price otherwise then
as part of evidence
entitling me to infer a benefit or preference. On the fact of it the
evidence establishes a scheme. A consequence
of this scheme is that
the directors of the insolvent and the concurrent creditors in
insolvency have lost the right or chance
to direct what should happen
to the property forming the subject matter of the disposition. The
loss of a chance has a value and
the effect of the loss of this
chance is on the face of it that the creditors have been prejudiced.
See as to loss of a chance
De
Klerk v Absa Bank Ltd and Others
2003 (4) SA 315
at 329
et
seq
.
[25] If the
applicants show a scheme which on the face of it is has the effect
that the disposition which occurred in its implementation
has the
effect of prejudicing creditors then they are entitled to relief
under
section 31.
[2
6]
The applicants have in my view
prima
facie
established this.
[27] I am
required to weigh up the harm which the applicants suffer against the
harm which the first and third respondents suffer.
The harm the
liquidators suffer is immediately apparent. The only asset owned by
the insolvent has been sold. The income from
the sale has been used
to pay preferred creditors. There is no money available to pay any of
the other creditors. The only source
of money is the property.
[
28]
The harm the first and third respondents suffer is that they are
unable to deal in the properties. Insofar as the third respondent’s
property is concerned there is no immediate prospect of dealing
therein taking place accordingly the harm it may suffer is small.
Insofar as the first respondent’s property is concerned various
sales have been concluded pursuant to which purchasers have
paid
deposits and in respect of which delivery can be effected and the
building contracts executed.
[29] The
purchasers of the first respondent can, if they are not prepared to
wait, exercise the rights conferred on them under
the contracts. If
there are cancellations the buyers will have claims for deposits.
There is no definite evidence as to what this
amounts to but it seems
to be a relatively small amount. The first respondent suffers harm in
that it is unable to continue dealing
with its property. This
effectively puts the business of the first respondent on hold until
the matter is resolved. In my view
if this business be put on hold
the harm suffered by the first respondent is still less than the harm
suffered by the applicant.
The properties came to be in the state in
which they currently are by reason of the activities of the directors
while the properties
were in the hands of the insolvent. In my view
the prejudice the insolvent suffers is more than the prejudice
suffered by the freezing
of the business of the first respondent as
the property remains available to be recovered by the applicants. The
first and third
respondents were chosen as vehicles to trade in
interests which prior to the disposition vested in the insolvent,
those interests
which but for the disposition have been available to
the insolvent to pursue. This feature of the case in my view must
carry some
weight.
[
30] I
would accordingly grant an order as follows:-
Pending the final determination of the action instituted by the
applicants as plaintiffs under case no 15263/2010 the first,
second
and third respondents are interdicted and restrained from selling
and the fourth respondent from executing or attesting
any deed of
transfer for either:
the
whole of the township know as Willaway Extension
14 and/or Blue Hills Extension 30; or
1
.2 any
individual erf forming part either of Willaway Extension 14 or of
Blue Hills Extension 30.
2. The first
and third respondents are directed to jointly and severally pay
the costs of the applicants including the costs
consequent upon
the employ of two counsel.
_____________________________
LAMONT
J
JUDGE
OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
Counsel for Applicant : I Miltz SC
Instructed by : John Davidson Inc
Counsel for Respondent : PJ van Blerk SC
Instructed by : Michael Werner & Associates Inc
Date of hearing : 13 May 2010
Date of
Judgment : 04 June 2010