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[2010] ZAWCHC 609
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Body Corporate of Soteria Scheme v Reality Dynamics 32 (Pty) Ltd (10965/2010) [2010] ZAWCHC 609 (8 December 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
CASE
NUMBER
:
10965/2010
DATE
:
8
DECEMBER 2010
In
the matter between:
BODY
CORPORATE OF SOTERIA SCHEME
….....................................
Applicant
and
REALITY
DYNAMICS 32 (PTY) LTD
…..............................................
Respondent
JUDGMENT
MIA,
AJ
:
In
this matter the Applicant seeks a provisional order for the
winding-up of the Respondent company. The Applicant avers it has
a
claim for damages in the amount of R4 629 234 against the Respondent.
It applies for the winding-up of the Respondent on the
ground that it
is unable to pay its debts as contemplated by section 344(f) read
with section 345(1) of the Companies Act, Act
No. 61 of 1973,
(hereafter the "Companies Act").
The
issues to be considered are whether the Applicant is a creditor of
the Respondent and whether it is unable to pay its debts.
The
Respondent disputes the Applicant's claim and avers that it can meet
any claim against it through raising shareholder loans.
The
facts which give rise to this application are as follows: the
Applicant is the body corporate of Soteria Scheme, (hereafter
Soteria"), a sectional title scheme comprising 14 separate
buildings together with common properties situated in Strand, Cape
Town. The Respondent is a company with limited liability, duly
registered and incorporated in accordance with the provisions of
the
Companies Act. The Respondent was the developer and seller of units
in Soteria together with the common property pertaining
thereto.
Paragraph 13.2 of the sale agreement provides that:
"The
seller shall only be responsible in terms of clause 14.1 for defects
caused by faulty materials and/or workmanship and
the SELLER shall
under no circumstances be liable for any consequential loss."
Further,
that:
"The
contractor shall abide by all requirements of the NHBRC (the National
Home Builders Registration Council), and provide
warranties according
to their requirements.
In
addition to 13.1 above the roof leaks are guaranteed for 12 months
from occupation date and the structure of the building and
roof is
guaranteed for five years from date of occupation."
(My
emphasis)
The
Respondent as developer gave warranties against latent or patent
defects caused by faulty materials and or workmanship. The
developer
also provided a guarantee against roof leaks for 12 months. The
structure of the building and the roof is guaranteed
for five years
from the date of occupation.
The
Applicant avers that the occupation of the units occurred less than
five years ago and the warranties are therefore applicable.
The
Applicant avers that various defects have manifested and have come to
light in all the apartment blocks in Soteria. The areas
of concern
relate to waterproofing, window seals, poorly designed plumbing,
tiling and cracking of external walls.
In
an attempt to address their concerns they held meetings with the
director of the Respondent to obtain the Respondent's compliance
with
the warranty obligations. This endeavour did not succeed in
addressing the concerns and remedying the defects. Initially a
report
was submitted to the Respondent, which was compiled by Property
Diagnostic Services. Hereafter I will refer to it as the
"PDS
report".
The
report comprises about 24 pages. In the summary of the report the
consultant listed problems with waterproofing of the roof,
the
balcony and walkways, joints that have been insufficiently finished,
leading to excessive water ingress and damage to units.
The plumbing
is also alleged to be in contravention of SABS codes. It ends by
suggesting a meeting with the developers to assist
in bringing the
original builders and subcontractors back to the site to reinstate
areas which have failed or are insufficient.
The
Respondent did not acknowledge responsibility for remedying the
problems raised. The response of the sole director is reflected
in
correspondence dated the 19
th
of
July 2009. The relevance excerpt reads as follows:
"Ek
weet nie wat julle opdrag was nie en wil nie onnodige kritiek daarop
lewer nie. Ongelukkig skep die verslag die indruk
dat die
ontwikkeling 'n totale gemors is en dat dit afgebreek en oorgebou
moet word. Dit is nie waar nie en julle weet dit. My
voorstel is dat
julle die beheerliggaam sal bystaan om 'n ordentlike
instandhoudingsplan ("maintenance plan"), op te
stel sodat
hulle voorkomende instandhouding kan uitvoer. Sodra ons oortuig is
dat hulle bereid is om hulself te help, sal ek my
invloed en die
verhaalsreg wat JBCC gee gebruik om die kontrakteur te versoek om die
latente defekte reg te stel."
The
developer responds to the PDS report and describes the majority of
the problems as maintenance issues. The sole director, Mr
Van Der
Berg's response to the PDS report refers to "die paar probleme
wat gevind is", and notes that no solutions are
suggested. In
response to the problem with the gutters he alleges that it ought to
have been raised with the roof inspection and
it was too late to
raise it. He acknowledges that the faded coating is possibly a latent
defect and he indicated that there was
no intentional negligence on
the part of the developer and acknowledged the existence of "sekere
kleiner latente defekte".
Mr
Van Der Berg does not accept responsibility for remedying the defects
that are present, and refers to a right of recourse against
the
contractor and avers that the defects should be addressed through a
maintenance plan for Soteria. The Respondent's attitude
is that the
matter is a building dispute and should have been referred to the
appropriate forum. The defects are disputed and it
is averred that
the Applicant does not have a liquidated claim. Mr Le Roux on behalf
of the Respondent concedes that the complaints,
if valid, could
amount to latent defects.
The
Applicant appends a detailed report prepared by Davis Langdon Africa
(Pty) Ltd, construction consultants, to their founding
papers. The
report details extensively the defects and estimates the costs of
repair. The total costs, which includes some maintenance
items as
well, amounts to 4 629 234. The Respondent refuted that it was liable
based on advice received from a structural engineer.
It denies that
the defects are structural defects which it is liable to remedy. The
Respondent denies that it is indebted to the
Applicant. It also
denies that should any indebtedness arise, that it would be unable to
pay its debts.
The
dispute raised by the Respondent that the Applicant is not a creditor
with a liquidated claim is met by the Applicant's reply
that the
application is based on it being a contingent or prospective
creditor. Section 346(1)(b) of the Companies Act provides
the
following:
"An
application to the Court for the winding-up of a company may, subject
to the provisions of this subsection be made -
(a)
....
(b)
by one or more of its creditors, (including contingent or prospective
creditors).
The
Applicant as the body corporate has the right of recourse against the
Respondent for damage to the common property, or if determined
by
special resolution of the Body Corporate. Section 36 of the Sectional
Titles Act, Act 95 of 1986 provides:
"36(6)
The Body Corporate shall have perpetual succession and shall be
capable of suing and being sued in its corporate name
in respect of:
(a)
any
contract made by it;
(b)
any
damage to the common property;
and
(e)
any claim against the developer in respect of the scheme if so
determined by special resolution."
This
does not require the claim to be a minimum amount, except where it
relies on section 345(1)(a). In
Gillis
Mason Construction Company (Ptv) Ltd v Overvaal Crushers (Ptv) Ltd
1971(1)
SA 524 (TPD) at 528C-D, Trengrove, J stated the following:
"It
seems to me in light of these authorities that a contingent or
prospective creditor may be defined as one who by reason
of some
vinculum
iuris
has
a claim against the company which may ripen into an enforceable debt
on the happening of some future event or on some future
date....
Further,
...
it follows in my view, that an Applicant who has a valid claim
against a company for damages for breach of contract is a contingent
or a prospective creditor of such company and, as such he would have
locus
standi
to
present a petition for the winding-up of the company."
The
Respondent highlighted a number of defects listed in the Davis
Langdon Report which, it was submitted, did not fall under the
warranty for defects related to the roof.
In
any event, it is immaterial that only part of the indebtedness is
disputed by the company. The Applicant through the reports
placed
before this Court showed that there are various defects that are
covered by warranties noted by the construction consultants.
The
agreements of sale for the units in Soteria make provision for
warranties against defects. The warranty must accordingly cover
latent defects. These defects raise the possibility of a claim
against the Respondent, which the Applicants had given their
attorneys
an instruction to pursue.
In
Holzman
v Knights Engineering and Precision Works (Ptv) Ltd
1979(2)
SA 784 (W) at 787E-F Nestadt J, describes the
vinculum
iuris
as:
"A
legal obligation which creates a right enforceable in a court of law
and which could arise from contract or delict."
After
considering the definition of "contingent and prospective
creditors" as described by Trengrove J in the
Gillis
Mason
case,
Nestadt J, notes at 787F-G that there are two elements to the
definition, namely that a claim against the company (1) arises
from a
vinculum
iuris;
and
that it; (2) may in the future ripen into an enforceable debt.
The
Learned Judge then concludes that:
"It
is clear therefore that the claim of the creditor need not be due or
payable on the date of the presentation of the application
for
winding-up."
The
existence of the warranty against defects and prospective claims to
realise the relief raises a
vinculum
iurus
between
the Applicant and the Respondent. Where such
prima
facie
indebtedness
is shown, the Respondent bears the onus to show that the indebtedness
is disputed in good faith. See
Henochsberg
5
th
Edition
at page 694(1).
The
Respondent boldly disputes liability and indicates that it is not
responsible for the defects listed. The Respondent suggests
that the
claims may lie against the contractor and he indicates that the
Respondent had insufficient time to address the faults
in the Davis
Langdon report, as the application was lodged in May 2010. It has not
dealt with the Davis Langdon report in any detail,
since the order in
June 2010 required it to file its opposing affidavit.
In
opposing the application the Respondent relies on the expertise of
the engineer of Ekcon (Pty) Ltd to indicate that there are
no
structural defects. Mr Ekermans of Ekcon has not dealt with the Davis
Langdon report in any detail and concedes that there are
latent
defects. In the opposing papers there is an acknowledgement that
there may be latent defects. The Respondent does not indicate
that it
has taken any steps to ensure that the contractor addresses the
latent defects, which it acknowledges require attention.
In
Reynolds
NO versus Mecklenberg (Ptv) Ltd
1996(1)
SA 75 at 105A-B, Stegmann J found that,
"...a
provisional winding-up order may be issued when the grounds relied on
in the Applicant's affidavit, although disputed
in the Respondent's
affidavit, can nevertheless be said to have been established
prima
facie
in
the sense that subject to anything that may emerge at a later hearing
of oral evidence, the Applicant's case appears to have
been
established on a balance of probabilities."
The
Respondent was a shelf company utilised to develop Soteria. The sole
director, acknowledges in his reply to the previous report
that:
"Die
maatskappy sal binnekort tot niet gemaak word, omdat a Me
ontwikkeling reeds einde September 2007 voltooi is en alle finansiele
en kontraktuele verpligtinge nagekom is."
The
company closed its books after the last unit was sold in 2009 and an
audit was completed for the year March 2008 to June 2009.
It has
fulfilled its obligations to the bank, SARS and paid dividends to its
shareholders. Consequently it has no assets left.
It was in the
process of being deregistered at the instance of its sole director.
Mr Le Roux on behalf of the Respondent indicated
that the
deregistration was being effected in the normal course and was
initiated by the accountants, as the company's business
was now
complete and the purpose for which it was registered no longer
existed.
It
is thus clear that the company has no funds at its disposal to meet
any claim which the Applicant may have. The Respondent was
aware of
the concerns raised by the Body Corporate of Soteria and in response
raised that the company was being wound up, giving
the impression
that there could be no relief sought against the company.
The
Respondent states that there is a possibility of raising shareholder
loans in the event that the Applicant's claims may be successful.
Nothing more is said about this and no supporting documents are
referred to in this regard. The Respondent has not responded
meaningfully
to a number of issues herein. It denied that it is
liable for defects. This denial is not supported by the warranty that
it had
given in the contracts. In response to the problems raised, it
informs the complainants that it has commenced a deregistration
process.
The
Respondent claims that the Applicant has a right of recourse against
the contractor. From these papers I cannot see that the
Applicant had
a contract with the contractors. Accordingly I cannot find that the
Applicant has a right of recourse against the
contractor.
In
having regard to these various aspects, it cannot be said that the
Respondent has met the onus that there is a genuine dispute
which was
raised in good faith. Any suggestion that there is a
bona
fide
dispute
falls shy of the measure in the concession that there are latent
defects. Mr Le Roux conceded that at the present there
was no
evidence before this Court that the Respondent could pay any debt due
to the Applicant.
The
Applicant has assumed responsibility for the repair and maintenance
of the common property in the Scheme and has a right of
recourse in
terms of section 36(6) of the Sectional Titles Act, Act 95 of 1986.
Accordingly, the Applicant is properly before this
Court and is
entitled to seek the relief it does.
Upon
considering the papers and having heard counsel herein, I am of the
view that the papers reflect that the Respondent acknowledges
a claim
by the Applicants with regard to latent defects. The Respondent is
unable to pay any claim made by the Applicant at present
and has not
indicated sufficiently how it can access funds to meet the claim of
the Applicant.
Consequently
I am satisfied that an order for the provisional winding-up of the
Respondent be granted.
MIA, AJ