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[2021] ZAGPJHC 524
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Keevy N.O. and Another v Lubbe Construction (Pty) Ltd (4784/2020) [2021] ZAGPJHC 524 (12 March 2021)
IN
THE HIGH COURT OF SOUTH AFRICA,
GAUTENG
DIVISION, JOHANNESBURG
CASE
NO: 4784/2020
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED
NO
DATE: 12 MARCH 2021
In
the matter between:
BENNIE
KEEVY
N.O
.
First Applicant
GUNVANTRAI
MUGGAN
N.O
.
Second Applicant
And
LUBBE
CONSTRUCTION (PTY)
LTD
Respondent
JUDGMENT
ENGELBRECHT,
AJ:
1.
This is
an application by the joint liquidators of Secutron (Pty)
Ltd (in
liquidation)
(Secutron) for the final winding up of the respondent (Lubbe
Construction), as follows.
1.1.
In terms of an order of this Court under case number 9595/2018
of 27
March
2018, Lubbe Construction is indebted to Secutron in the amount of
R408 894.33 (excluding VAT), together with interest on that
amount at
the rate of 10,8% per annum from 10 October 2017 to the date of final
payment, plus costs.
1.2.
Secutron’s efforts in April 2018 and early 2019 to
satisfy the judgment
debt
were met with returns to the effect that there were insufficient
movable goods and insufficient amounts available in Lubbe
Construction’s bank account to satisfy the judgment debt.
1.3.
A further writ of execution of October 2019 rendered a return
to the
effect
that Lubbe Construction had no attachable assets.
2.
In the circumstances, the
applicants submit that Lubbe Construction is
deemed unable
to pay its debts in terms of section 344(f) and 345(1)(b) of the
Companies Act No 61 of 1973 (the 1973 Companies Act)
and/or that
Lubbe Construction is liable to be wound up in terms of section
81(1)(c)(ii) of the Companies Act No 71 of 2008 (the
2008
Companies
Act).
3.
Lubbe
Construction has
abandoned its
in
limine
point that the applicants have
no
power to bring the proceedings, on account of being satisfied that
the applicants were appointed as joint final liquidators of
Secutron.
However, before me it persisted in its second point
in
limine
,
in which it challenged the authority of the applicants to bring the
application, and which point was elaborated upon in the heads
of
argument to explain that it the objection lies in the fact that the
liquidators were not shown to have acted jointly.
4.
I have
grave reservations about the legitimacy of the point taken.
4.1.
If an
attorney acting for a party is authorised so to act, there is no need
for any other
person, whether he be a witness or someone who becomes involved, to
be additionally authorised (see
Eskom
v Soweto City Council
1992 (2) SA 703
(W)).
4.2.
Plainly put, in applications it is the institution of the
proceedings and
the
prosecution thereof which must be authorised. It is irrelevant
whether the deponent had been authorised to depose to the founding
affidavit (
Ganes
v Telecom Namibia Ltd
2004
(3) SA 615
(SCA)
at 624G-I).
4.3.
In the present case, there was no case made out that the
liquidators
had
not jointly given the instruction to the attorney, as had been the
position in
Lynn
NO and Anothers v Coreejes and Another
2011
(6) SA 507
(SCA), which Mr. Marais (for the applicants) referred me
to.
5.
Be that as it may, the
Supreme Court of Appeal made plain in the aforesaid
Lynn NO
case that, while the proceedings have not been finalized,
ratification was in any event possible (at paras 6 and 14). Moreover,
the issue of a lack of authorization is an issue between the
liquidator and the creditors (at para 12).
5.1.
In the present case, the applicants’ attorney filed a
confirmatory
affidavit
of the second applicant, which made clear that the objection based in
the applicants allegedly not acting jointly was
without merit.
5.2.
The affidavit was filed as an additional affidavit, out of
sequence and
in
response to the content of the heads of argument. That does not mean
that I cannot take it into account.
5.2.1.
in
PPE
International Inc (BVI) and others v Industrial
Development
Corporation of South Africa Limited
2013 (1) BCLR 55
(CC), the Constitutional Court emphasized that
“
rules
are made for courts to facilitate the adjudication of cases”
,
and that the Superior Courts “
enjoy
the power to regulate their processes, taking into account the
interests of justice”
(at
para 30), recognizing that in “
some
cases the mechanical application of a particular rule may lead to an
injustice”
,
which must be avoided (at para 31).
5.2.2.
In
South
African Broadcasting Corporation SOC Ltd v South African Broadcasting
Corporation Pension Fund and Others
2019
(4) SA 279
(CC) this Court reiterated that courts have always been
inclined to adopt a pragmatic approach in dealing with formalistic
and
technical objections (at para 37).
5.2.3.
That judgment, in turn, made reference to the judgment of the Supreme
Court of Appeal in
Anglo Operations Ltd v Sandhurst Estates (Pty)
Ltd
2007 (2) SA 363
(SCA), which sets as the “
overriding
factor”
to be taken into account the “
question of
prejudice”
and which baulks at the notion of a “
pointless
waste of time and costs”
that may be brought about by a
failure to condone technical irregularities.
5.2.4.
In the interests of justice, I condone the filing of the additional
affidavit. It would be pointless to refuse entertaining
the
application before me on the basis of the objection that the joint
liquidators had not acted jointly when it is known at the
time of
adjudication that factually the submission lacks merit.
6.
In the circumstances, the
points
in
limine
fall to be dismissed. Which brings
me
to the merits of the application.
7.
Lubbe Construction
advances the case that Secutron was not entitled to levy
execution
against it, because the amount owed under the judgment debt had not
yet fallen due. For this submission, Lubbe Construction
essentially
relies on an alleged “
paymaster
agreement”
described in the answer as follows:
“…
a
meeting was thereafter convened between the Respondent and its
sub-contractors in terms of which it was primarily agreed that
the
sub-contractors would suspend all actions which some of them may
already have taken against the Respondent and that a ‘paymaster’
would be appointed to whom payment of the amount payable by the
Department of Public Works would be paid and that such paymaster
would then, on receipt of the payment, make payment directly to the
various sub-contractors in respect of the project.”
8.
The problem with the
reliance on the “
paymaster
agreement”
is that Lubbe
Construction
has not made the necessary allegations under Uniform
Rule 18(6)
, and
has not attached the agreement itself. Indeed, it is not known
whether the agreement as alleged was concluded orally or in
writing.
The best evidence of such an agreement being in existence is a Final
Statement of
Account
issued by Lubbe Construction acknowledging a “
contract
amount”
of
almost R537 000, and dated 3 April 2018, i.e. some days after the
grant of the order that gave rise to the present application.
It
records that “
All
parties agree that payment will be as per the 3
rd
Party Paymaster Agreement”
.
But what the terms of that agreement might have been, remain a
mystery. This Court cannot be asked to speculate on the terms of
the
agreement, and, since Lubbe Construction remained unresponsive to a
notice in terms of Uniform Rules 35(12) and (14), it cannot
place
reliance on the alleged agreement.
9.
It is in any event
questionable whether the applicants can be bound by any
undertaking by
Secutron not to enforce a debt due to it under an order of this
Court.
9.1.
The fundamental purpose of insolvency legislation (of which
the
relevant
provisions of the 1973
Companies Act form
part) is to secure the
realisation of the remaining assets of an insolvent and the
distribution of the resulting amounts among
creditors in accordance
with the order or preference laid down by law.
9.2.
As Navsa JA made plain in
Standard
Bank v Master of the High Court
[2010]
3 All SA 135
(SCA) at para 1, “
liquidators
occupy a position of trust, not only towards creditors but also the
companies in liquidation whose assets vest in them.
Liquidators are
required to act in the best interests of creditors”
.
The best interests of creditors can only be served if the liquidators
seek to enforce a judgment debt in favour of the company
in
liquidation. Surely, they cannot be expected to heed the alleged
terms of an agreement allegedly struck, the contents of
which
cannot be proven by the judgment debtor, and therefore not pursue
enforcement of the judgment debt?
10.
That then leaves only the question whether
the applicants have made out a
case
for the final winding up of Lubbe Construction, on either of the
bases contended for.
11.
Section 344(f)
provides that a company may
be wound up by the Court if “
the
company is
unable to pay its debts as prescribed in
section 345
”
.
Section 345(1)(b)
, for its part, provides that a company “
shall
be deemed to be unable to pay its debts if … any process
issued on a judgment, decree or order of any court in favour
of a
creditor of the company is returned by the sheriff or the messenger
with an endorsement that he has not found
sufficient
disposable property
to satisfy the judgment, decree or order or that any disposable
property found did not upon sale satisfy such process”
(emphasis supplied).
12.
The requirement that must be met is that the
Sheriff declares that he has not
found
sufficient “
disposable
property”
to satisfy the judgment. What, then, is “
disposable
property”
?
13.
An extract from the commentary on
non-satisfaction of a warrant of execution
in
LAWSA
Vol
11 (2 ed) at paragraph 213 is worth reciting here (with emphasis
supplied, and footnotes omitted):
“
The
term ‘disposable property’
is
not confined to movable property but includes immovable property as
well
.
A return that refers only to movables or movable property is,
consequently, not adequate because, if a return is to be relied
on as
proof of an act of insolvency, it must indicate that the sheriff has
found no
disposable
property of any nature
.
… Whilst it is correct to say that
disposable
property includes immovable property
,
it does not include immovable property which has been mortgaged,
since such property is clearly not freely disposable.”
14.
The commentary on
section 345(1)(b)
in
Henochsberg
on the
Companies Act
also
states, by reference to the judgments in
Richard
Goldman Finance & Investment Co (Pty) Ltd
1977 (2) SA 624
(W) at 627 and
Cornelissen
NO v Welkom Tractors & Auto’s (Pty) Ltd
1971
(3) SA 114
(O) at 116 - 117, that “
disposable
property”
includes “
unencumbered
immovable property”
.
The commentary concludes that “
A
return which contains an endorsement that the execution officer has
not found sufficient movables to satisfy the judgment etc
or that any
movables found did not upon sale satisfy the process would
accordingly be
insufficient
to enable
s 345(1)(b)
to operate”
(emphasis
supplied)
.
15.
In course of argument, Ms. Potgieter, who
represented Lubbe Construction,
referred
me to the judgment in
Absa
Bank Ltd v Collier
2015 (4) SA 364
(WCC). The judgment, concerned with whether an act of
Insolvency had been established under
section 8(b)
of the
Insolvency
Act 24 of 1936
, noted in para
12
that our Courts have consistently found that disposable property may
include immovable property, and explained in para 27 that
“
It
is immaterial that if the property found by the sheriff is unbonded
immovable property, an order of special execution against
such
property under the provisions of
rule 46(1)
remains a requirement,
regardless of the identity of either the judgment creditor or the
debtor, whether the property is a primary
residence or not, or is
owned
by an individual or a company
”.
The Full Bench there made the point (at para 28, emphasis supplied)
that:
“
If
immovable property by its nature were to fall outside the definition
of disposable property … unless an order of special
execution
had been granted in terms of
rule 46(1)
declaring the property
executable and therefore disposable, the search for disposable
property by the sheriff executing a writ
against movables …
would practically be limited to a search for movable property. The
relative ease with which a writ against
movables is capable of being
obtained supports a conclusion that the process of execution is aimed
at encouraging a judgment creditor
to
execute
against movables first and in the event that insufficient movables
are found to be available to satisfy the debt, then only
against
immovable property
.
Were it to be required … that for immovable property found to
be considered disposable an order of special execution must
already
have been granted against the property, this could encourage
execution against immovable property even before a writ had
been
executed against movables”.
16.
The consequence of the judgment must be that
a party seeking to rely on
section
344(f)
, read with
section 345(1)(b)
, must show that such party has
first excused all movable property, and then immovable property. Only
if the judgment debt is not
satisfied after these steps, can reliance
be placed on the act of insolvency, or deemed inability to pay a
debt.
17.
In the present case, correspondence of 25
April 2018 concerning the goods
that
were attached by the Sheriff in a first attempt to satisfy the
judgment debt stated that “
there
are no other movable goods on the premises belonging to
the
defendant which could be attached”
.
On 4 February 2019, ABSA Bank Ltd responded to a warrant of execution
served on it, advising that there were insufficient funds
available
in the relevant account to attach.
18.
A further writ of execution dated 27
September 2019, issued by the Registrar on 9 October 2019 and
received by the Sheriff on 11 October 2019, read (with emphasis
supplied):
“
You
are directed to attach and take into execution the
movable
goods
of LUBBE CONSTRUCTION CC, the abovementioned defendant with
registered address and principle [sic] place of business situate at
23 Webber Road, Dellville, Johannesburg and of the same cause to be
realized by public auction the sum of R408,894.33 (four hundred
and
eight thousand eight hundred and nine four rand and thirty three
cents), excluding VAT constituting the judgment amount, together
with
interest at a rate of 10.8% per annum, compounded monthly as
contemplated in Clause 31.11, to be calculated from 10 October
2017
to date of payment in full on the judgment amount plus the costs of
execution”
.
19.
On 21 October 2019, the Sheriff issued a
return which read as follows:
“
The
WRIT OF EXECUTION in this matter, which service address is 23 WEBBER
ROAD DELLVILLE JOHANNESBURG, is returned herewith on this
16
th
day of October 2019 at 15:30 as COMPANY HAS NO ATTACHABLE ASSETS, ALL
ASSETS WE SOLD ON SHERIFF’S AUCTION IN SEPTEMBER 2018,
INFORMATION FURNISHED BY MS ARMSTRONG, PA TO OWNER”
.
20.
What is evident from the foregoing, is that
the writ of execution was limited to
movable
goods, so that the return must be taken to be one that is confined to
movable goods. Indeed, the applicants make that very
point,
submitting in the founding papers, that “
the
respondent is the registered owner of no less than
14
(fourteen) properties”
,
relying for that proposition on a Windeed Spider Report “
indicating
the various properties owned by the respondent”
.
On the applicants’ own papers, it cannot be concluded that
Lubbe Construction owns no “
disposable
property”
.
Whilst the Windeed search shows that one of the properties is bonded
to Absa Bank Ltd, it appears that at least certain of the
properties
are not subject to a bond. On the evidence before me, I cannot come
to the conclusion that Lubbe Construction does not
hold “
disposable
property”
,
and the return of service certainly does not support such a
conclusion.
21.
In these circumstances, and on the
interpretation of the provisions that I have
referred to,
the applicants cannot satisfy the requirements for the grant of
winding up order under
section 344(f)
, read with section 345(1)(b) of
the 1973
Companies Act. Lubbe
Construction is not called upon in the
circumstances to put up grounds justifying a finding that it is not
able to pay its debts
for purposes of these provisions.
22.
That leaves the consideration of the
alternative basis for the grant of the order,
namely section
81(1)(c)(ii) of the 2008
Companies Act. That
provision allows a Court
to wind up a solvent company if one or more of the company’s
creditors have applied for a winding
up order on the grounds that it
were “
just
and equitable for the company to be wound up”
.
23.
For
section 81(1)(c)(ii)
to find
application, the first requirement to be met is to
establish
whether it is a “
solvent
company”
and then the second is to consider whether, if it is, it would be
just and equitable nonetheless to order that it be wound up.
24.
The Supreme Court of Appeal considered the
question of what a “
solvent
company”
is in
Boschpoort
Ondernemings (Pty) Ltd v Absa Bank Ltd
[2014] All SA 507
(SCA). For present purposes, I consider it
necessary to quote at length the Court’s exposition on the
question.
“
[16]
For
decades our law has recognised two forms of insolvency: factual
insolvency (where a company’s liabilities exceed its assets)
and commercial insolvency (a position in which a company is in such a
state of illiquidity that it is unable to pay its debts,
even though
its assets may exceed its liabilities). See, for example, Johnson v
Hirotec (Pty) Ltd; Ex parte De Villiers and another
NNO: In re Carbon
Developments (Pty) Ltd (in liquidation); Rosenbach & Co (Pty) Ltd
v Singh’s Bazaars (Pty) Ltd.
[17]
That
a company’s commercial insolvency is a ground that will justify
an order for its liquidation has been a reality of law
which has
served us well through the passage of time. The reasons are not hard
to find: the valuation of assets, other than cash,
is a notoriously
elastic and often highly subjective one; the liquidity of assets is
often more viscous than recalcitrant debtors
would have a court
believe; more often than not, creditors do not have knowledge of the
assets of a company that owes them money
- and cannot be expected to
have; and courts are more comfortable with readily determinable and
objective tests such as whether
a company is able to meet its current
liabilities than with
abstruse
economic exercises as to the valuation of a company’s assets.
Were
the test for solvency in liquidation proceedings to be whether assets
exceed liabilities, this would undermine there being
a predictable
and, therefore, effective legal environment for the adjudication of
the liquidation of companies: one of the purposes
of the new Act, set
out in section 7(l) thereof.
[18]
In
view of the long established and well-settled practice in our courts
that commercial insolvency justifies the liquidation of
a company, it
must be presumed that the Legislature was aware of this fact. The
principle that Parliament is presumed to be acquainted
with the
interpretation of earlier legislation by the court, applies where
there has been a settled and well-recognised judicial
interpretation
before the relevant legislation was passed.
[19]
It
has also long been a construction of interpretation of statutes that,
in the absence of express wording to the contrary, the
Legislature
did not intend to alter the law as it had previously stood.
Accordingly,
it must be presumed that the Legislature deliberately refrained from
defining “solvency”. It must have
done so with a view to
ensuring that the well-oiled machinery of the courts in matters of
company liquidations should not stall.
The Legislature must have been
content that prevailing judicial interpretations of solvency and
insolvency respectively should
continue to have effect. The meaning
of those terms must be one that leads to a sensible and business-like
result. See Natal Joint
Municipal Pension Fund v Endumeni
Municipality
.
[20]
I
referred earlier to the fact that section 345 of the old Act was
retained in terms of sub-item 9(1) of Schedule 5 of the new Act.
Sub-item 9(2) provides that section 344 of the old Act shall not
apply to the liquidation of “solvent”
companies,
“except to the extent that it is necessary to give full effect
to the provisions of Part G of Chapter 2”.
Part G of Chapter 2
of the new Act, more particularly sections 79 to 81 thereof, relate
to the winding-up of solvent companies.
As we have seen, section
344(f) and section 345 of the old Act are fastened together by the
clasp in section 344(f) that refers
to a company being unable to pay
its debts “as described in s 345”. The seeming anomaly
may be resolved if one recognises
that section 345 was retained in
sub-item 9(1) to enable a determination to be made in terms of
section 79(3) of the new Act that
a company “is or may be
insolvent” - even though the application was made in terms of
either section 80 or 81 for its
winding-up as a so-called “solvent”
company. The deeming provisions concerning the inability to pay its
debts, contained
in section 345 of the old Act may be used to
establish the insolvency of a company. In this regard, I agree with
King AJ in Standard
Bank of SA Ltd v R-Bay Logistics CC.
[21]
This conclusion is significant in determining what is meant by a
“solvent company”. The retention by the Legislature
in
the context of a winding-up of a solvent company in the new Act, of
the deeming provisions as to when a company is unable to
pay its
debts as contained in section 345 of the old Act, is a clear
indication of what is meant by an insolvent company in the
new Act.
It can only mean a company that is commercially insolvent. It,
therefore, follows that a solvent company must be the converse,
namely
a company that is commercially solvent
.
[22]
Consequently, in order for a solvent company to be wound-up in terms
of either section 80 or 81 of the new Act,
it
must be commercially solvent
.
If it
is
commercially insolvent it may be wound-up in accordance with Chapter
14 of the old Act, as is provided for in sub-item 9(i) of
Schedule
5of the new Act.
25.
What, then, is the position in the present
case?
25.1.
It is not disputed that there is a judgment debt that Lubbe
Construction has not satisfied. Lubbe Construction accepts that
it is
liable for payment (although it seeks to argue that the debt
may be paid at a later stage, given the alleged “
paymaster”
agreement). What is also evident from the returns of service and
correspondence attached to
the
founding papers, is that Lubbe Construction has insufficient money in
its bank account and no movables to sell in order to
satisfy the
judgment debt. It does, however, own a number of properties, together
representing a significant value.
25.2.
In the answering affidavit, no allegation is made on behalf of Lubbe
Construction that it is a solvent company, whether commercially
or
otherwise. In submission before me, Ms. Potgieter sought to explain
that Lubbe Construction was indeed commercially solvent,
and that the
failure to make payment was not a consequence of an inability to pay,
but rather the fact that it did not consider
the judgment debt to be
due and payable, given the alleged “
paymaster
agreement”
.
The submission does not serve Ms. Potgieter’s client, for if I
accept that submission, then I may enter the question of
whether the
winding up would be just and equitable; if I reject it, on the other
hand, then I must conclude that section 81(1)(c)(ii)
of the 2008
Companies Act cannot
be
relied on by the applicants, because Lubbe Construction is
commercially insolvent.
25.3.
Mr. Marais, for the applicants, insisted in reply that Lubbe
Construction was commercially insolvent. Equally, that submission
does not serve his client, because commercial insolvency as asserted
would exclude the operation of
section 81(1)(c)(ii)
, on which
reliance
was
placed.
26.
In light of the conundrum raised by
counsel’s submissions, I return to the
Boschpoort
Ondernemings
judgment of the Supreme Court of Appeal. It held (at para 24) that
“
Factual
solvency
in
itself is … not a bar to an application to wind-up a company
in terms of the Old Act on the grounds that it is commercially
insolvent. It will, however, always be a factor in deciding whether a
company is unable to pay its debts”
.
Commenting of the judgment of the court below, it considered that a
finding that the company had been unable to pay its debts
excluded
the operation of section 81(1)(c)(ii), but nonetheless justified an
order winding-up the company on the basis of section
344(f), read
with section 345 of the 1973
Companies Act.
27.
In
the present case, the facts before me
lead to the conclusion that Lubbe
Construction
is commercially insolvent: it is in such a state of illiquidity that
it is unable to pay its debts, even though its
assets may exceed its
liabilities. I am able to reach this conclusion on the basis of the
results of Secutron and the applicants’
efforts to satisfy the
judgment debt, in particular the absence of funds from the bank
account of Lubbe Construction, as well as
on the basis of the
allegation in the founding affidavit that “
the
Respondent was unable to
effect
payment of the amounts due to its sub-contractors engaged on the
project by reason of the fact that it simply did not receive
timeous
payment of performance draws from the Department of Public Works”
.
That was the very basis for the alleged conclusion of the “
paymaster”
agreement.
If I accept that such an agreement was concluded for the reasons
advanced (albeit that its terms are not known), then
I must accept
this as a concession of an inability to pay a debt.
28.
In accordance with the reasoning of the
Supreme Court of Appeal, a winding
up
order may therefore be granted on the basis of
section 344(f)
, read
with section 345(c) of the 1973
Companies Act. What
would stand in
the way of such an order is that the applicants did not plead
specific reliance on
section 345(c).
Does that mean I cannot order
the winding up? I think not. Even if
section 345(c)
is not
specifically referred to, the facts pleaded sustain a finding that
Lubbe Construction is unable to pay its debt to Secutron.
Moreover,
direct reliance was placed on
section 344(f)
, which provides for a
grant of an order if a company is unable to pay its debts as
described in
section 345
as a whole. It would be a complete waste of
the time and effort of all parties concerned, this Court not least,
to insist that,
where a case for winding up of a company has been
made out on the facts, the application ought to be dismissed merely
because the
applicants omitted to plead express reliance on the
relevant subsection of the statute. The effect would be the issue of
virtually
the same papers, only to invoke the identified section.
29.
In the circumstances, I conclude that a case
has been made out for the final
winding
up of Lubbe Construction. I make an order as follows:
29.1.
The respondent is placed under final winding up in the hands of the
Master;
29.2.
The applicants’ costs are to be costs in the liquidation of the
respondent.
MJ
ENGELBRECHT
ACTING
JUDGE OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Electronically
submitted therefore unsigned
Delivered:
This judgement was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation
to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on CaseLines. The
date for
hand-down is deemed to be 12 MARCH 2021.
Date
of hearing:
2 March 2021
Date
of judgment:
12 March 2021
Appearances
For
the applicants:
Adv. BSW Marais
Instructed
by:
Richer Attorneys
For
the respondents: Adv. K.
Potgieter
Instructed
by:
Klopper Jonker Inc