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[2020] ZAGPJHC 320
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T B v L B In Re L B v Aurum Properties CC and Another (36874/19) [2020] ZAGPJHC 320 (8 September 2020)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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Policy
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO:
36874/19
In
the matter between:
B,
T
Applicant
and
B,
L
Respondent
In
Re: (Main application)
B,
L
Applicant
and
AURUM
PROPERTIES
CC
First Respondent
B,
T
Second Respondent
J
U D G M E N T
(H
anded
down electronically by circulation to the parties’ legal
representatives by email and release to SAFLII. The date and
time for
hand-down is deemed to be 10h00 on 8 September 2020.)
MAIER-FRAWLEY
J:
Introduction
1.
An
application for the winding up of Aurum Properties CC (Aurum) was
brought by L B (as applicant) against Aurum (as first respondent)
and
T B (as second respondent) in terms of
sections 66
to
81
of the
Close
Corporations Act, 69 of 1984
, read together with sections 81(1)(d)(i)
and 81(1)(d)(iii) of the Companies Act, 71 of 2008 (‘the main
application’).
2.
Thereafter,
the second respondent (as applicant) launched an interlocutory
application for the postponement of the main application,
pending the
finalisation of divorce proceedings pending between the applicant and
second respondent, and therein further seeking,
inter
alia,
(i)
condonation for ‘the late of this counter-application’
and (ii) ‘that the founding affidavit to this application
shall
constitute the founding affidavit to the counter-application.’
3.
For
convenience, the parties in the interlocutory application will be
referred to as cited in the main application. Aurum Properties
CC
will interchangeably be referred to as ‘Aurum’ or ‘the
corporation’ in the judgment, as the context
requires.
4.
By
some slip of performance, only the main application was set-down for
hearing on 11 August 2020. It was subsequently allocated
for hearing
by me on 12 August 2020. Counsel for the applicant and second
respondent filed practice notes and heads of argument
in respect of
the main application, in which they referred only to the relief
sought in the main application with reference to
the estimated
duration of its hearing. No mention was made therein of the
interlocutory application, nor was the court alerted
to the fact that
the interlocutory application was to be pursued at the hearing of the
main application.
5.
The
court was only alerted to the need to determine the interlocutory
application during the course of the presentation of applicant’s
argument in the main application. This resulted in the following
quandary: Firstly, court time had by then been expended in the
presentation of the applicant’s argument on the merits of the
main application; secondly, the interlocutory application would,
if
granted, necessarily result in the postponement of the main
application.
6.
Given
that the right to a ‘fair trial’ is a constitutional
imperative,
[1]
I decided to hear
the interlocutory application, since the parties (applicant and
second respondent) were already before court,
a complete set of
papers had been filed and uploaded to the Caselines electronic
platform, and despite the failure to file heads
of argument, the
matter was otherwise ripe for hearing. Furthermore, the outcome of
the interlocutory application would, for obvious
reasons, have a
direct bearing on whether or not the main application could proceed,
whether with or without the counter-application.
In any event, a
postponement of the interlocutory application for hearing on another
day in another forum (the interlocutory court),
would serve no
purpose other than to increase both parties’ legal costs.
7.
The
issue of determination at the hearing thus converted into whether or
not condonation should be granted to allow the second respondent’s
counter-application to be ventilated together with the main
application; and whether or not the main application should be
postponed
until the divorce proceedings between the applicant and the
second respondent (‘the parties’) were finalised, or some
earlier date.
Relevant
background
8.
The
applicant and the second respondent are husband and wife. For
purposes of the interlocutory application, they are the relevant
parties. They were married to each other on 27 January 2006, out of
community of property, with the inclusion of the accrual system.
In
due course, they together formed Aurum as a property owning
enterprise.
9.
The
erstwhile matrimonial home is situated on immovable property that is
owned by Aurum. There are various buildings on the property,
including a residence and office premises. The parties are members of
Aurum on a 50/50 basis. The parties acquired the property
through the
medium of Aurum for investment purposes and established their family
home at the residence located on the property.
The property is the
only asset of Aurum and the only source of income it receives, is in
the form of rental obtained by it from
tenants on the property,
including Laser X CC. There is a bond registered over the property in
favour of Standard Bank. The monthly
bond liability is discharged
from rentals paid by tenants on the property
10.
The
parties separated in July 2017 whereupon the applicant vacated the
erstwhile matrimonial home. The second respondent instituted
divorce
proceedings against the applicant during July 2018.
11.
The
second respondent still resides in the erstwhile matrimonial home
together with his girlfriend and the four minor children born
of the
marriage between the parties.
12.
The
parties have joint interests in other entities, including Laser X CC
(‘Laser X’). The parties agreed to form the
B Business
Trust (‘BB Trust’), which owns the member’s
interest in Laser X. Laser X’s business business
is run by the
second respondent, from which he draws a monthly income. The parties
are both trustees and beneficiaries of the BB
Trust. Laser X in turn
is one of the tenants on the property owned by Aurum and has, until
November 2019, historically paid rent
to Aurum in respect of its
occupation of business premises situate on the property.
13.
The
parties’ personal and working relationship became strained
after they separated, which intensified as time went on, not
only
because of the distrust that was building between them on a personal
level but because of certain other contentious and acrimonious
litigation they are engaged in, including their divorce proceedings.
Their various disagreements between the parties are highlighted
in
the papers filed in the main application as well as in the
interlocutory application.
14.
It
is common cause that Aurum is solvent. Although the parties disagree
about the precise value of the property, its value, on either
party’s
version, far exceeds the value of the outstanding bond liability. In
the main application, the applicant seeks to
have Aurum liquidated on
grounds of deadlock between the members in the management or
functioning of the corporation, alternatively,
because it is just and
equitable for it to be wound up, not least of all because the feuding
between the members has resulted in
a situation where the second
respondent is said to be benefitting from the corporation at the
expense of the applicant. The main
liquidation application is thus
aimed at a sale of the property, with its nett proceeds distributed
between the parties equally.
That would of course place the second
respondent and the parties’ children at risk of having to
vacate what has been and
still remains their primary residence.
15.
In
the intended counter-application, the second respondent seeks an
order in terms of section 36 of the Close corporations Act for
the
cessation of the applicant’s membership of the corporation,
inter
alia,
on
grounds that it would be just and equitable to do so, with the aim of
purchasing her member’s interest in the corporation,
thereby
avoiding a forced sale of the property through liquidation.
Alternatively, relief is sought in terms of
section 49
of the
Close
Corporations Act, based
on
inter
alia,
allegations
that particular acts on the part of the applicant are unfairly
prejudicial, unjust or inequitable to the second respondent,
such as
would justify the grant of an order for the purchase of the
applicant’s interest in the corporation by the second
respondent.
16.
In
her answering affidavit in the interlocutory application, and based
on the second respondent’s valuation of the property,
the
applicant made a
with
prejudice
offer to purchase the second respondent’s membership interest
in Aurum for R2 million. Her offer was framed as follows:
“
If
the 2nd Respondent is serious about this contention I will with
pleasure purchase his 50% for an amount of R 2 000 000 00. I
say this
with prejudice and will purchase it on the same conditions as the
second Respondent wishes to purchase my 50%. If the
second Respondent
is honest and bone fide he will accept this offer and make a large
profit for himself. …If he …
accepts my offer he will
make a handsome profit of R 700 000 00 and I will obviously on-sell
the property and make a profit of
several million
.
17.
In
a letter dated 25 June 2020 addressed by the second respondent's
attorneys to the applicant's attorneys, the applicant's offer
was
accepted, as follows:
"1
In paragraph 12.10
[of the answering affidavit]
your client
makes a with prejudice offer to purchase our client's membership in
Aurum Properties CC for the amount of R2 000 000.00
(two million
rand). Our client accepts your client's offer.
2.
Your client is required to pay the purchase price of R2 000 000.00
into our trust account (the details of which are set out below)
within 7 (seven) days from the date hereof, and upon receipt of the
payment our client will deliver the signed CK documents to
yourselves
reflecting the transfer of membership from our client to your client.
”
18.
For
reasons not immediately discernible, a sale on the basis of the
applicant’s aforesaid tender fell through. In the replying
affidavit, the second respondent avers that the applicant reneged on
the tender and now insists on the liquidation of Aurum proceeding.
Submissions
of Counsel
Second
Respondent:
19.
The
second respondent submits that this case involves a domestic
partnership between the parties, albeit run through the mechanism
of
the corporation. The genesis of such partnership is the marriage
between the parties, which is subject to the accrual system.
The
joint efforts of the parties in amassing their respective estates are
to be accounted for in the divorce, when the patrimonial
consequences
of the marriage will be dealt with. The patrimonial consequences
include: (i) the extent to which one party’s
accrual exceeds
that of the other, which must be accounted for; and (ii) what is to
happen to the parties’ overall joint
interests in various
entities
[2]
including Aurum,
upon divorce – if necessary, a liquidator or receiver will be
appointed to distribute the assets. The divorce
court is the right
forum for the dissolution of the partnership to be addressed.
20.
The
breakdown in the marital relationship has been ongoing since 2017.
The second respondent therefore questions why now, three
years later,
the applicant insists on the liquidation of Aurum, more so when the
very property in question is the primary residence
of the children.
The
Close Corporations Act allows
for relief to enable a corporation
to continue in existence, with the one member buying the other out at
a fair price. On the second
respondent’s calculations, the
accrual in the applicant’s estate exceeds the accrual in his
estate.
21.
There
are disputes in the papers concerning the value of the property owned
by Aurum. These disputes should not be resolved on paper
but should
be determined in the course of the divorce proceedings. The second
respondent’s argument can be summarised as
follows: he seeks to
purchase
the applicant's membership in Aurum from her for a market related
price. He contends that this aspect cannot be seen in
isolation - the
value of the applicant's membership must be taken into consideration
together with all accrual and thereafter to
determine the amount of
money which is to be paid to him in respect of his entitlement to
share in the accrual. On his calculations
of the accrual, the amount
the applicant will be required to pay him exceeds the value of her
membership interest in Aurum
.
In
the premises set off will extinguish his liability
to
the to the applicant in respect of her share in Aurum, should the
court order the cessation of applicant's membership in the
corporation.
22.
According
to the second respondent, even if Laser X does not pay rental, the
applicant would not be prejudiced thereby in that she
is effectually
a co-owner of the business and any profits derived from the business,
ultimately inure to her benefit. The second
respondent alleges that
Laser X is experiencing financial distress and that it will to the
ultimate benefit of both parties for
it to be given an opportunity to
recover financially and to carry on trading, as its profitability
would preserve its financial
value to the parties.
Applicant:
23.
The
applicant submits that the corporation’s business (that of
property ownership with income generating capability through
rentals
paid by tenants on the property - for purposes of liquidating the
bond liability) is not being conducted to the advantage
of both
members generally but rather for the benefit of the second
respondent, who: (i) pays no rent to Aurum for his occupation
of the
residence on the property owned by Aurum or his use of the municipal
utilities; (ii) has stopped paying rent on behalf of
Laser X to Aurum
since November 2019; (iii) pays for his personal expenses such as
legal fees from Aurum’s banking account.
The applicant submits
that this is a cosy situation for the second respondent, but not one
from which the applicant derives any
benefit, rather, her membership
value is being eroded by the non-payment of rental
[3]
and the concomitant delay in the full discharge of the bond liability
whereby interest continues to accumulate on the unpaid debt.
24.
The
applicant submits that she will be prejudiced by a delay in the
hearing of the main application, not only as a result of the
aforegoing, but because the divorce action will likely not be heard
within the next year – pre-trial procedures have not
been
completed and no trial date has yet been obtained. Furthermore, the
applicant foresees the need to
apply
for the joinder of the B Business Trust in the divorce action,
[4]
which will cause a further delay
in trial readiness.
25.
The
applicant further submits that
a
postponement until the divorce is finalised will serve no purpose as:
25.1.
The
liquidation of the corporation is not a dispute on the pleadings and
whether the divorce is finalised or not, it will remain
a dispute;
25.2.
The
parties’ respective accruals are also not a dispute in the
divorce proceedings as both the Applicant and the second respondent
seek an order that their assets be divided in terms of their
ante-nuptial contract. In the event that the parties cannot agree
on
the division of their estates in terms of the ante-nuptial contract,
then the court will have to be approached again and/or
a liquidator
appointed; and
25.3.
The
divorce action will not resolve the impasse that has arisen between
the parties whereby Aurum’s bank account is being
utilised by
the second respondent as a ‘piggy bank’ for subsidising
the second respondent’s living and personal
expenses to the
prejudice of the applicant
Evaluation
26.
In
the interlocutory application, the second respondent seeks the
following relief:
“
(a)
That
the application for the liquidation of the Second Respondent be
postponed up to and until the divorce action between the First
Respondent and the Applicant has been finalized.
(b)
That the above Honourable Court condone the late filing of this
counter-application.
(c)
That the founding affidavit to this application shall constitute the
founding affidavit to the counter-application.
(d)
The First Respondent is granted 20 days within which to file her
answering affidavit to the counter-application, the rules of
court
will apply to the filing of any further processes, affidavits in
these proceedings.
(e)
Costs of the application if opposed.”
27.
The
legal principles governing the grant and refusal of postponements are
well-established. In
Carephone
(Pty) Ltd
v
Marcus
NO and Others,
[5]
Froneman DJP held:
‘
In
a court of law the granting of an application for postponement is not
a matter of right. It is an indulgence granted by the court
to a
litigant in the exercise of a judicial discretion. What is normally
required is a reasonable explanation for the need to postpone
and the
capability of an appropriate costs order to nullify the opposing
party’s prejudice or potential prejudice.’
28.
The
Constitutional Court held in
Lekolwane
& another
v
Minister
of Justice and Constitutional
Development
:
[6]
‘
The
postponement of a matter set down for hearing on a particular date
cannot be claimed as a right. An applicant for a postponement
seeks
an indulgence from the court. A postponement will not be granted,
unless this court is satisfied that it is in the interests
of justice
to do so. In this respect the application must ordinarily show that
there is good cause for the postponement, whether
a postponement will
be granted is therefore in the discretion of the court. In exercising
that discretion, this Court takes into
account a number of factors,
including (but not limited to) whether the application has been
timeously made, whether the explanation
given by the applicant for
postponement is full and satisfactory, whether there is prejudice to
any of the parties, whether the
application is opposed and the
broader public interest.’
29.
It
is against this background that I proceed to consider the relief
sought in the in the interlocutory application.
30.
The
second respondent states that t
he
counter claim was not included at the time that the answering
affidavit was filed as he was not advised that he had the right
to do
so. This was as a result of an oversight on the party of the Second
Respondent's legal team. The legal team consulted with
counsel late
in March 2020, after receipt of the Applicant’s heads of
argument, and was advised to bring the current counter
- application
and application for a postponement. The papers were prepared
expeditiously thereafter. He submits that there can
be no prejudice
to the Applicant if leave is granted to introduce the counter-claim
at this stage.
31.
The
second respondent submits that Aurum forms part of the accrual and
that it should not be liquidated before the accrual is finally
determined in the divorce,
[7]
by
reason of the following: On the second respondent’s
calculations,
his
estate shows no accrual whilst that of the Applicant shows an accrual
of R 3 357 996,93. On his calculations, the Applicant
will be liable
to pay him an amount of R2 308 846,33, which amount exceeds the value
of the Applicant's membership interest in
the corporation. In the
premises, set off will extinguish his liability to the First
Respondent in respect of her share in Aurum,
should the court order
the cessation of applicant's membership in the First Respondent.
32.
The
applicant has disputed the correctness of the second respondent’s
calculations as too, the second respondent’s valuation
of the
accrual. A determination of the accrual in the respective estates of
the parties and the calculation of what will be payable
to the party
whose estate shows the lesser or no accrual, is to be determined in
the pending divorce, either by agreement between
the parties or by a
receiver or liquidator appointed for such purpose. On the applicant’s
version,
[8]
the value of the
parties’ interests in Laser X CC (‘Laser X’) will
also form part of the accrual calculation
on divorce.
[9]
33.
The
applicant contends that the liquidation of Aurum need not and should
not await the finalisation of the parties’ divorce.
On her
version, the bond liability ought to have been discharged by now but
has not been discharged due to the conduct of the second
respondent
in failing to pay rental due to Aurum (whether personally or on
behalf of Laser X) and in utilising funds from the corporation’s
account for his personal expenses and business interests in which the
applicant is not involved. This, so she contends, essentially
means
that the income stream to which Aurum is entitled, is being drained
as a result of the second respondent’s conduct.
He lives
rent-free in the residence; and has now, as is common cause, caused
Laser X to stop paying rent. This has effectually
impaired the
attainment of the corporation’s economic ends (full discharge
of the bond liability) and has resulted in a situation
where: (i)
the second respondent is benefitting from the present state of
affairs at the expense of the applicant and (ii)
the corporation’s
business is not being conducted to the advantage of the shareholders
generally.
34.
The
monthly rent payable by Laser X to Aurum was historically used to
discharge the monthly bond liability over the property, that
is,
until November 2019, when rent payments ceased to be made at the
behest of the second respondent, who is in sole control of
the
business but manages same to the ultimate benefit of the parties in
their capacity as joint beneficiaries of the B Business
Trust, it
being the sole member of Laser X. The bond account has not been shown
to be in arrears by virtue of the non-payment of
rent by Laser X.
Although the question of whether or not the applicant is being
prejudiced by the current situation or to what
extent remains in
dispute on the papers,
[10]
what is not in dispute is that Laser X paid reduced rental for a
period of time and no rental to Aurum since November 2019. It
is thus
losing its rental income stream of R72,000.00 per month.
35.
Although
the second respondent’s case for condonation is scant on
detail, the ultimate test is whether it is in the interests
of
justice to grant condonation.
[11]
According to established jurisprudence,
[12]
the question of prejudice to the opposite party, should condonation
be granted, is to be considered.
36.
In
determining whether the interests of justice require that condonation
be given, I cannot lose sight of the nature of the relief
sought by
each of the parties (in the main application and intended
counter-application) as well as the importance to the parties
of the
consequences thereof.
37.
Accusations
of misconduct have been levelled by each party against the other in
the papers in justification of the relief sought
by them. Ultimately,
a determination of the merits of the accusations will have a bearing
on what relief, if any, the court will
ultimately grant. A court
hearing the liquidation application is, pursuant to the exercise of
its discretion, restricted to the
remedy of granting a winding-up
order, if the requisites for the grant thereof are found to have been
established,
[13]
whereas the
court enjoys a wide discretion under
section 49
of the
Close
Corporations Act as
to the order it will make to settle the dispute
between the members of a corporation, if it is just and equitable to
do so.
[14]
38.
The
papers indicate that the applicant wishes to liquidate her investment
- whether this occurs by means of winding-up of the corporation
or
through a disposal of her member’s interest, will be for a
court to determine in due course under the just and equitable
provisions envisaged in the statutory enactments relied on by the
parties. On the papers as they presently stand, the second respondent
seeks to retain the property and to purchase the interest of the
applicant at a fair price, as determined by court.
39.
I
am not persuaded that it will be in the interests of justice for the
second respondent to be deprived of the opportunity to have
his
counter-application determined by court, precisely because principles
of fair play and justice demand it.
[15]
Any prejudice to be suffered by the applicant as a result of a delay
in the adjudication of the main and counter-application will
be
alleviated to a great extent by the order which I propose to grant,
which aims at eliminating unnecessary delays in the set-down
of the
hearing of both the main application and the counter-application in
due course. It remains open to the applicant to
seek an
expedited hearing upon a duly motivated request directed to the
office of the ADJP.
40.
The
applicant strongly contends that the postponement application is a
delaying tactic to enable the second respondent or Laser
X to
continue, with impunity, not to pay any rental to Aurum, which she
contends will cause ‘irreparable harm’ to her.
The papers
do not, however, demonstrate that the monthly bond instalment is not
being serviced monthly, despite the non-payment
of rental by Laser X
to Aurum. There is in any event a dispute on the papers as to when
the attainment of Aurum’s economic
goal was to be achieved.
[16]
The applicant also retains a joint financial interest in the
profitability of Laser X, in her capacity as joint beneficiary of
the
B Business Trust. In that regard, any prejudice resulting from the
delayed hearing of the liquidation application is in my
view,
ameliorated.
41.
It
is clear that the disagreements between the parties surrounding the
functioning of the corporation and their inability to work
together
can seemingly only be resolved in one of three ways: by way of (i)
settlement or (ii) liquidation of the corporation;
or (iii) by means
of a buy-out by one member of the other member’s interest.
42.
Since
the right to share in the accrual is exercisable only upon
dissolution of the marriage, it is only then (once such value is
determined) that it will be known whether or not payment in respect
of the value of the applicant’s member’s interest
(assuming the counter-application succeeds) can be applied by way of
set-off.
43.
The
second respondent pegs his hopes upon his counter-application
succeeding and him ultimately obtaining an order terminating the
applicant’s membership of the corporation and the sale of her
member’s interest to the second respondent against the
payment
by him of a fair value for her member’s interest. He does not
want even the counter-claim to be determined until
the divorce is
finalised, because he believes that he will be entitled to pay for
the acquisition of the interest of the other
member, by way of
set-off.
[17]
The difficulty,
however, is that the second respondent’s version necessarily
presupposes that an order in those terms will
be granted by the court
hearing the counter-application. It further presupposes that the
accrual determination by the court hearing
the divorce will be
consistent with the second respondent’s calculations, which are
presently in dispute on the papers.
44.
I
am inclined to agree with the applicant’s counsel that the
divorce hearing will not resolve the disagreements between the
members as to the management or functioning of the corporation or
whether the business is being conducted to the advantage of the
members generally. Whilst the value of the accrual remains an issue
in the divorce proceedings, the determination of which will
resolve
what payment is to be made to the party whose estate has shown the
lesser accrual, unless the parties reach agreement as
to the
distribution of their joint owned assets, liquidation would have to
be resorted to.
45.
To
delay a determination of the issues arising in the main and
counter-applications until after the divorce is finalised would not
be in the interests of justice. The applicant submits that the second
respondent is deriving an unfair advantage from using the
bank
account of Aurum as a source of funds,
inter
alia,
to pay for his personal and legal expenses, which is to her
disadvantage. For the second respondent to merely say that all these
transactions are ‘accounted for’ and that the applicant
has access to the bank accounts of the corporation, fails to
address
the point: the point being, that it is the very conduct complained of
by the applicant in seeking the liquidation of the
solvent
corporation. The second respondent also failed to disclose to
the court that Laser X had stopped paying any rent
to Aurum since
November 2019, with full knowledge that this is an important issue
upon which the parties fundamentally disagree.
46.
In
seeking to introduce claims under the provisions of
section 36
and
49
of the Close corporations Act at an advanced stage of the liquidation
proceedings, only to postpone the adjudication thereof until
the
divorce is finalised, premised on the view that the calculation of
the accrual should more appropriately be dealt with at trial,
given
the nature and extent of the disputes in regard thereto in the
papers, is akin to wanting ‘the best of both worlds’.
[18]
Having launched the applications on motion, the sword must fall
where it lands.
[19]
47.
Whilst
I have already concluded that it will be in the interests of justice
for the counter-claims to be introduced, it is clear
the second
respondent failed to prosecute such proceedings in accordance with
the practice directives of this court. The second
respondent failed
to file a practice note or heads of argument or to enrol the matter
for hearing, whether timeously or at all.
48.
Heads
of argument are important for the proper administration of justice,
as Marcus AJ pointed out in
S
v Ntuli
[20]
when he said:
‘
Heads
of argument serve a critical purpose. They ought to articulate the
best argument available to the appellant. They ought to
engage fairly
with the evidence and to advance submissions in relation thereto.
They ought to deal with the case law. Where this
is not done and the
work is left to the Judges, justice cannot be seen to be done.
Accordingly, it is essential that those who
have the privilege of
appearing in the Superior Courts do their duty scrupulously in this
regard.’
49.
The
second respondent’s aforesaid failure has thus inevitably
resulted in the postponement of the main application. Heads
of
argument will have to be filed by both parties in the
counter-application, whereafter the merits of the applications can be
determined in one joint sitting. The consequences of the second
respondent’s failure cannot be laid at the door of or visited
upon the applicant. The applicant gave notice in paragraph 18 of her
answering affidavit in the interlocutory application that
she will
seek costs on the attorney and client scale. Having regard to
the peculiar circumstances of the matter, I consider
that such an
order would be fair and just.
50.
For
all the reasons given, the following order is made:
ORDER:
1.
.The
late filing of the second respondent’s counter-application to
the main application is condoned.
2.
The
founding affidavit, dated 13 April 2020, deposed to by Troilyn John B
in the interlocutory application, shall constitute the
founding
affidavit in the counter-application. The answering and replying
affidavits filed pursuant thereto, shall constitute the
answering and
replying affidavits in the counter-application.
3.
The
second respondent is directed to file and deliver his heads of
argument in the counter-application within 15 days of grant of
this
order. Thereafter, the applicant is directed to file and deliver her
heads of argument in the counter-application within 15
days of the
delivery of the second respondent’s heads of argument.
4.
The
main application for the liquidation of Aurum Properties CC and the
counter-application thereto, are postponed
sine
dies
;
5.
The
second respondent is to pay the wasted costs occasioned by the
postponement of the main application and the counter-application
on
the attorney and client scale.
_________________
Maier
Frawley J
Date
of hearing:
12 August 2020
Judgment
delivered
8 September 2020
APPEARANCES:
Counsel
for Applicant: Adv E.S. Heynecke
Instructed
by: Van Der Berg attorneys
Counsel
for Respondent: Adv. M. Smit
Instructed
by: Martin Pike Incorporated Attorneys
[1]
In
terms of Section 34 of the Constitution,
every
person has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court,
or where appropriate another impartial tribunal or forum.
The
right in Section 34 contains three central components:(i) The right
for disputes to be decided before a court; (ii) The right
to a
fair
public
hearing; and (iii) that where appropriate, the court may be replaced
by an independent impartial tribunal or forum. This
fundamentally
allows, as a substantive right, every person access to courts,
individual equality and non-discrimination. Section
9 of the
Constitution provides for the right to be equal before the law and to
equal protection and benefit of the law. The right
(of access to
justice) demands practical effective access or the right loses
meaning. Fairness of a hearing with its undoubted
inclusion of the
right to be heard
(audi
alteram partem)
bears
on the fact that for the right to be practical and effective it is
intended that this be accessible and possible to achieve
in the court
of litigation chosen. See in this regard:
Nedbank
Limited v Gqirana N.O and Another; First Rand Bank Limited v
Cornellisson and Another; Standard Bank of South Africa Limited
v
Msutu and Another; Nedbank Limited v Gcina; Firstrand Bank Limited
t/a Wesbank v Twynham; FFS Finance SA (Pty) Limited t/a Ford
Credit v
Jabanga; FFS Finance SA (Pty) Limited t/a Ford Credit v Rolomane
[2019]
ZAECGHC 71;
2019
(6) SA 139
(ECG), a decision of the full Court.
[2]
The
papers indicate that the parties have joint interests in
inter
alia,
:
Aurum Properties CC; B Business Trust; and Laser X.
[3]
By
virtue of the fact that the corporation is losing rental income
monthly, which loss is increasing with every month that goes
by.
[4]
This
is because the applicant points out that the second respondent
denies
that the value of Laser X CC should be taken into consideration for
purposes of the computation of the accrual, due to
the fact that B
Business Trust is the sole member of the Close Corporation, whilst
she contends that the second respondent utilises
the bank account of
inter
alia,
Laser
X CC as his personal ‘piggy bank’.
[5]
Carephone
(Pty) Ltd
v
Marcus
NO & others
1999
(3) SA 304
(LAC) para 54.
[6]
Lekolwane
& another
v
Minister
of Justice and Constitutional Development
[2006] ZACC 19
;
2007
(3) BCLR 280
(CC) para 17. See also
National
Police Service Union
v
Minister
of Safety and Security
2000
(4) SA 1110
(CC) at 1112C-F.
[7]
The
nett asset value of each party’s estate and the extent of the
accrual in their estates remains a point of contention
between the
parties on the papers, not least of all because the value of their
membership interests in Aurum is in dispute. The
applicant
previously indicated her willingness to accept the second
respondent’s calculations for purposes of her purchasing
his
50% membership interest in Aurum (at a windfall, according to her),
so that she could on-sell the property and make a ‘huge
profit’. The second respondent seeks to
purchase
the applicant's membership in Aurum from her for a market related
price. He contends that
this
aspect cannot be seen in isolation
-
the
value of the applicant's membership must be taken into consideration
together with all accrual and thereafter to determine
the amount of
money which is to be paid to him in respect of his entitlement to
share in the accrual. On his calculations of
the accrual, the amount
the applicant will be required to pay him exceeds the value of her
membership interest in Aurum
.
In
the premises set off will extinguish his liability to the to the
applicant in respect of her share in Aurum, should the court
order
the cessation of applicant's membership in the corporation.
[8]
In
para 13.4 of the answering affidavit filed in the interlocutory
application.
[9]
The
monthly rent payable by Laser X to Aurum was historically used to
discharge the monthly bond liability over the property,
that is,
until November 2019, when rent payments ceased to be made at the
behest of the second respondent who, as is common cause,
is in sole
control of the business and solely manages same to the ultimate
benefit of the parties in their capacity as joint
beneficiaries of
the B Business Trust, being the sole member of Laser X.
[10]
Applicant
contends that Aurum is losing rental income monthly due to
non-payment of rent by Laser X; the second respondent is
living
rent-free, with all house maintenance, insurance, and municipal
utilities being paid for by Laser X; which is solely to
his
advantage and concomitantly to her disadvantage, as she derives no
benefit therefrom. Ultimately she contends that corporation’s
business is not being pursued to the advantage of both
shareholders. On the second respondent’s version, Laser
X is in a precarious financial position, which he attributes to the
withdrawal of funds (R1 million) by the applicant from the
account
of Laser X in 2017 (to pay for the purchase of her present home);
the negative impact of Covid 19 on the business; and
the downturn of
the economy. A ‘rent holiday’ was implemented to enable
Laser X to recover to profitability for the
benefit of both parties
and Aurum. The respondent submits that the mere fact of a ‘rent
holiday’ does not necessarily
in and of itself translate to
prejudice to Aurum or the other member.
[11]
See:
In
Van
Wyk v Unitas Hospital (Open Democratic Advice Centre as amicus
Curiae
[2007] ZACC 24
;
2008
(2) SA 472
at 477A-B (‘Van Wyk’), the Constitutional
Court put it thus:
“…
the
standard for considering an application for condonation is the
interests of justice.
Whether
it is in the interests of justice to grant condonation depends upon
the facts and circumstances of each case
.
Factors that are relevant to this enquiry include
but
are not limited to
the nature of the relief sought, the extent and cause of the delay,
the effect of the delay on the administration of justice
and other
litigants, the reasonableness of the explanation for the delay, the
importance of the issue to be raised … and
the prospects of
success
.”
(own emphasis).
See
too:
Grootboom
v National Prosecuting Authority and Another
2014
(2) SA 68
(CC), para 51.
[12]
To
name but a few, see:
Foster
v Carlis and Houthakker
1924
TPD 247
at 252;
Marais
v Aldridge
1976
(1) SA 746
(T) at 752C;
Santa
Fe Sectional Title Scheme No 61/1994 Body Corporate v Bassonia Four
Zero Seven CC
2018(3)
SA 451 (GJ) at 454F-G.
[13]
The
all-encompassing provisions of section 81(1)(d)(iii) of the new
Companies Act does
not provide for the disposal of shares from one
shareholder to another, or stated differently, the just and
equitable provisions
of the Act do not countenance any deviation
from the statutory prescriptions once the factual grounds for just
and equitable
winding-up have been established.
[14]
See:
Gatenby
v Gatenby & others
1996
(3) SA 118
(E) at 122 D-F where it was said,
inter
alia
,
that ‘
These
are far-reaching powers. One member can be compelled to purchase the
interest of another at a fair price, whether he wants
to or not
.’
[15]
See
fn 1 above.
[16]
I.e.,
whether this was to occur ‘as soon as possible, as the
applicant contends, as opposed to monthly over time, as the
second
respondent contends.
[17]
The
applicant alleges in his founding papers that ‘
lt
is clear that the Applicant will be liable to pay me an amount of R2
308 846,33
[in
respect of the accrual upon divorce]
This
amount exceeds the value of the Applicant's membership interest in
the First Respondent
[Aurum]
.
In the premises set off will extinguish my liability to the First
Respondent in respect of her share in the First Respondent,
should
the court order the cessation of the applicant’s membership in
the First Respondent.
’
[18]
This
expression is not unlike the E
nglish
idiomatic proverb or figure of speech, namely, ‘You can't have
your cake and eat it (too)’. The proverb literally
means ‘you
cannot simultaneously retain your cake and eat it ’
[19]
My
adaptation of the idiom: ‘to fall on one’s sword’,
which literally means, to take full responsibility for
a negative
situation.
[20]
S
v Ntuli
2003 (4) SA 258
(W) para 16; approved in
Feni
v Gxothiwe and Another
(2369/2013)
[2013] ZAECGHC 109;
2014 (1) SA 594
(ECG) (7 November 2013), para
[6]..