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[2010] ZAWCHC 617
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Absa Bank Ltd v Curtain Warehouse Franchise (Pty) Ltd (21743/2010) [2010] ZAWCHC 617 (9 December 2010)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH COURT,
CAPE TOWN)
CASE
NUMBER:
21743/2010
DATE: 9 DECEMBER 2010
In the matter between:
ABSA BANK LIMITED
…....................................................
Applicant
and
CURTAIN WAREHOUSE
FRANCHISE
(PTY) LTD
….............................................
Respondent
JUDGMENT
LOUW, J
This application for the
provisional winding up of the respondent is based on the statutory
demand provided for in section 345(1)(a)(i)
of the Companies Act 61
of 1973 ("the Act"), which was served by the sheriff on
the respondent at its registered address
on 28 July 2010 and was
received by the respondent. The respondent is indebted to the
applicant in respect of monies lent and
advanced on a mortgage bond,
in respect of which the outstanding balance as at 28 June 2010 stood
at R4 399 081,90. The outstanding
balance, I understand, is at this
stage in the vicinity of R4,6 million.
The
deeming provision in section 34S(1)(a)(i) creates a rebuttable
presumption that the respondent is unable to pay its debts.
The
respondent was already in arrears with the payment of its mortgage
debt and since it received the demand on 28 July 2010,
the
respondent has not made any payment to the applicant in respect of
the indebtedness. In the papers there is a denial by the
respondent
that the aforesaid amount was owing and there is also a denial that
the respondent is insolvent. These assertions
were not pursued in
argument by Mr
Elliott
on
behalf of the respondent. Suffice to say that the bald
unsubstantiated statement in the answering papers to the effect that
respondent is not insolvent, is not sufficient to rebut the
presumption of insolvency created by section 345(1)(a)(i) of the
Act.
The
application was launched on 5 October 2010. The respondent has,
however, since this matter first came before this Court on
21
October 2010, taken a different tack in supplementary affidavits,
namely that the respondent has concluded a written deed
of sale with
the Donaldson Family Trust on 6 November 2010, in terms whereof the
respondent sold the property that is bonded
to the applicant,
together with an enterprise conducted by the respondent, for a
purchase price of R7,4 million. When the matter
became before
Desai
.
J on 11 November 2010, the respondent asked that the matter be
postponed in order to allow for all the conditions of the sale
to be
fulfilled.
Desai
.
J acceded to the request and postponed the application for one week
to 18 November 2010 to allow the respondent an opportunity
"to
indicate if/how/when the conditions contained in the deed of sale
are to be complied with".
The sale relied upon by
the respondent was, at the time, subject to two conditions relevant
to these proceedings. (1) the approval
of bond finance within seven
days from the sale date, that is clause 4.1 and (2) the conditions
set out in clause 1.1.7, defining
the effective date of the sale as
"the date upon which all conditions referred to in clause 6 are
fulfilled", and clause
6 which reads:
"It is recorded
that the seller will provide to the purchaser copies of the title
deed, municipal plans, agreements of lease
with terms and
conditions, rental transactions, rent roles, municipal accounts,
utility service accounts, service contracts,
fixed asset register,
list of prepaid and other expenses (refer clause 7.2.1) and the
like, within 15 days of the sale date "
The matter came before
me in the Motion Court on the postponed date on 18 November. It then
appeared that the bond clause had
not been complied with. In a
further supplementary affidavit, it was revealed, however, that on
that very morning, the morning
of 18 November 2010, the parties to
the sale had concluded a further sale agreement on the same terms,
save that this time the
sale was without the suspensive condition
relating to bond finance.
Relying
on the provisions of section 347(1) of the Act, which affords the
Court a discretion to grant or dismiss any application
under section
346 or to adjourn the hearing thereof conditionally or
unconditionally, or to make any interim order or any other
order it
may deem just, Mr
Elliott
,
on behalf of the respondent, submitted that the matter should once
more be postponed to 6 December 2010. This, he submitted,
would
allow for the fulfilment of the condition set out in clause 6. He
stated that the condition will be fulfilled by 3 December
2010,
being 15 days from the sale date, resulting in the sale going
through, the applicant's debt being paid from the proceeds
and the
bond being cancelled.
Mr
Vivier
.
who appeared on behalf of the applicant on this occasion,
strenuously opposed a further postponement and submitted that a
provisional order should be made. He submitted that this is a clear
case where the applicant has a claim which the respondent cannot
pay
and that the applicant is ex
debito
justitiae
entitled
to a winding up order and the Court's discretion to make any other
order, is limited and narrow. He, therefore, urged
me to make a
provisional order of winding up. I then reserved judgment.
The position was that I
was ready to deliver judgment in this matter on the respondent's
application to postpone or whether a
provisional order should be
made on 25 November. A further postponement of the matter was at the
last moment sought by the respondent.
I heard argument and on 26
November 2010 made an order that certain further affidavits by Mr
Wille, the respondent's attorney
and Ms Wiggett, be admitted as
evidence and that the respondent pay the costs associated with those
affidavits and also that
the main application be postponed to
today's date, that is 9 December 2010 for hearing. At the same time,
the respondent was
granted leave to supplement its papers solely in
regard to the outcome of the contract of sale by no later than 12
noon Tuesday
7 December 2010, and the applicant was given leave to
reply to such papers by no later than 3 p.m. on Wednesday 8
December.
A further flurry of
affidavits were filed pursuant to that order and it now turns out
that the sale is not free of any condition
relating to bond finance,
but that in fact the Trust purchaser, although it had paid the
deposit of R740 000,00, was still dependent
on being granted a bond
by Nedbank for the balance of the purchase price. Now this, of
course, is again a different tack which
has been taken by the
respondent.
In an affidavit on
behalf of the respondent, by Mr Abrahams, which was filed on 7
December, he says that the bond finance referred
to in paragraph 4.1
of the original contract of sale is in place and that he is advised
by Nedbank that the guarantee wilt be
issued in accordance with
paragraph 4.4 of the sale agreement on 8 December 2010.
He enclosed a copy of
the bond approval by Nedbank Limited, which advised that a loan had
been approved in the name of the bond
applicant, that is, the
Donaldson Family Trust, upon certain conditions being complied with.
He further confirmed that the seller
had complied with the
conditions set out in Clause 6 of the sale agreement.
Mr Sanderberg - the
attorney on behalf of the applicant, filed an affidavit in response
to this affidavit by Mr Abrahams - and
expressed the view that it is
highly unlikely that Nedbank would issue an unconditional guarantee
as suggested in the affidavit.
He drew attention to the fact that on
the previous occasion, the Court was persuaded not to grant a
provisional liquidation order
on the basis that an unconditional
contract of sale had been concluded. Now, as I pointed out earlier,
there again is a condition
that the purchase price be raised by way
of a bond being registered over the property, being the very
property over which the
applicant's bond is registered and also the
simultaneous cancellation of the applicant's mortgage bond.
Mr Sanderberg pointed
out that he had made it clear to the respondent at all times, that
it would require an acceptable guarantee
for payment of the capital
due to the bank and the costs incurred in the liquidation
application, before it would consent to
the cancellation of its
mortgage bond. He refers to an e-mail he addressed to the
respondent's conveyance who would handle the
transfer pursuant to
the sale on 9 November 2010, which sets out that attitude. He points
out that on 30 November, he invited
the conveyancer to respond to
the e-mail and that on 2 December he addressed a further e-mail to
the conveyancer in which he
stated that he had noted that the
conveyancer had failed to respond to the condition referred to in
the earlier e-mail. The conveyancer
then responded on 2 December
2010 and stated that she had asked Mr Wille to respond to the query
as her mandate was limited to
the registration of the transfer. Mr
Wille then responded in the following terms:
"Please note that
our client requires any and all legal costs to be taxed by the
taxing master of the High Court."
Now as pointed out by Mr
Sanderberg, it is clear that while the respondent is entitled to
insist on taxation of whatever fees
it is obliged to pay, those
costs are secured by the mortgage bond in favour of the applicant
and that the applicant will not
consent to the cancellation of its
mortgage bond until such time as both the capital and the costs have
been paid. He further
points out that taxation delays in this
division of the court, are substantial and in his experience, are in
excess of six months.
He further points out that a bill is still to
be prepared and that the period between 15 December and 15 January,
in general
adds to the normal delays in getting a taxation of costs.
Finally he states, on
behalf of the applicant, that it is not prepared to abandon its
position as secured creditor with regard
to unpaid and still to be
taxed costs. He, therefore, submitted that the respondent's sale of
its property did not provide sufficient
certainty that the mortgage
bond and legal costs payable by the respondent, would be paid in a
satisfactory manner and submitted
that the respondent should be
liquidated.
In response thereto, Mr
Wille filed two further affidavits on 8 December and in the first of
those, he annexed a copy of a guarantee
which had been issued by
Nedbank Limited and submitted that the guarantee secures and
compounds the alleged debt due to the applicant
in accordance with
section 345(a) of the Act. The Nedbank guarantee, to which reference
is made, advises that the bank held,
at the disposal of the
purchaser of the property, R6,6 million which would be paid on
condition that written confirmation of
registration be faxed to
Nedbank before noon and that there exist certain further conditions
to the guarantee which are listed
on the second page, namely,
"1. Registering a
covering mortgage bond of R8 million over erf 107555, Retreat and
erf 107549, Retreat, Cape Town."
So the first condition
is that two mortgage bonds be registered, one over the property here
concerned (erf 107549) and the other
over another property (erf
107555).
"2. Cancellation of
all existing bonds in favour of Investec over erf 107555, Retreat,
Cape Town.
3.
Cancellation of all existing bonds in favour of Absa Limited and
Hamsa Abrahams Trust over erf 107549, Retreat, Cape Town."
The guarantee further
states that the bank reserves the right to cancel the guarantee at
any time prior to registration, by giving
14 days written notice to
that effect and finally that the guarantee will expire on 8 June
2011, after which the bank's obligation
will cease to exist and the
guarantee will be regarded as null and void. The second affidavit
which was deposed to on 8 December
by Mr Wille, attaches an e-mail
from the transferring attorney, stating the following:
"Obviously transfer
will never be registered and the guarantee will never pay out if the
bond over the property is not cancelled.
I have asked for
cancellation figures and cancellation instructions to be issued on
several occasions unsuccessfully. Now that
the purchase price is
secure, it is in everybody's interest to get the transfer registered
as soon as possible. We can agree
an amount to be retained in trust
pending confirmation of the cost by way of taxation or agreement."
So, the transferring
attorney indicated that a further amount will be retained in order
to cover any costs that are taxed or agreed
in future.
This
morning Mr
Elliott
,
who appears on behalf of the respondent, asked for a further
affidavit to be received by Mr Abrahams on behalf of the respondent.
He confirms that the guarantee given by Nedbank was acceptable to
the respondent, and further annexes a copy of a telefax addressed
by
the transferring attorney to Mr Sanderberg, the applicant's
attorney, today, 9 December, which reads as follows:
"We refer to the
above matter and confirm that we are in receipt of a deposit of R740
000,00 and a guarantee in the sum of
R6,6 million in favour of the
payment of the balance of the purchase price. We hereby irrevocably
undertake to pay Absa Bank
Limited, subject to the conditions
referred to in Annexure A attached and below, the sum of R4.399
million plus interest at 9%
per annum capitalised monthly from 29
June 2010 to date of payment, limited to the amount of R7,4 million,
both days included.
We further undertake to pay your agreed or taxed
costs on date of registration of the above transfer in the matter
between Absa
Bank and Curtain Warehouse Franchise Holdings (Pty)
Limited (this particular application) including costs of
cancellation of
the bond registered over the above property, limited
to the sum of R3 million, less interest at 9% per annum, capitalised
from
9 June 2010 to date of payment. Our undertaking, as aforesaid,
shall be irrevocable except in the following instances in respect
of
which we reserve the right to withdraw or revoke this undertaking
upon notice to yourselves:
(a) Should the
registration of the above transaction be unreasonably delayed or not
proceeded with, or;
(b) We cease to control
the funds in the transaction, or:
(c) We are, by the
operation of law, prevented from doing so, or:
(d) Should it appear
that the transaction and the proceeds emanating from the sale are
subject to any preferent claim by the Commissioner
of Inland Revenue
or any obligation on us as agent for the said commissioner in terms
of section 99 of Income Tax Act as amended."
Annexure A thereto is
the conditions upon which Nedbank was prepared to guarantee the
payment to which I referred to earlier and
which is subject to the
registration, as I indicated earlier, of covering a mortgage bond of
eight million over the two erven
referred to earlier and also the
cancellation of the existing Investec, Absa Bank and Hamsa Abrahams
Trust bonds.
Mr
Vivier
.
on behalf of the applicant, again urged that the Court not grant a
further postponement of the matter or give further leeway
to the
respondent who, in the person of Mr
Elliott
,
has asked for this application, either to be postponed
sine
die
in
order for the proceeds of the sale to be used to pay the applicant's
bond and thus to remove the
locus
standi
of
the applicant, or a further postponement to allow the respondent to
provide the applicant with an unconditional guarantee as
to the
payment of its costs.
Mr
Vivier
,
as I have said, stressed that this application must now come to an
end. As indicated earlier, it first came before this Court
in
October this year, some two months ago, and on each occasion
thereafter, it was postponed at the instance of the respondent,
who
has, on various occasions, obtained a postponement on the bases that
I have indicated earlier on.
Mr
Elliott
relied,
and Mr
Vivier
also
referred to the judgment of
Williamson
.
JP in
Realisation
Limited v Agar
1961(4)
SA 10 (D) at 12, where the court dealt with the question whether or
not a moratorium should be given to a respondent in
sequestration
proceedings. Mr
Elliott
submitted
that a postponement would in fact be more advantageous to the
applicant, who will be paid his full costs and also the
debt covered
by the bond, if a postponement is granted. Now the court in that
case had the following to say:
"A Court in a
sequestration matter is not entitled to give a debtor a moratorium
if the result would be to deprive the creditors
of the prospect of
an early dividend. A discretion, of course, must be exercised in the
light of all the circumstances and the
fact that there may be no
prejudice to creditors and if an order is not granted, because there
is a substantial prospect of early
payment, is a matter which is
relevant and a matter which I should and have considered in this
case. But before I in effect grant
a moratorium by refusing a
sequestration order, I would have to be satisfied, quite clearly,
that the creditors do in fact stand
to lose nothing, that they will
be paid fully, or certainly paid not less than they would have if
they obtained a sequestration
order at this stage and that any such
payment would be made substantially at the time when a divided would
have been expected
in insolvency."
As indicated earlier, we
now know that the transfer of this property and the proceeds of the
sale will only be forthcoming if
a bond is in fact given by a bank,
which in this case is Nedbank There is no unconditional guarantee
before this Court, for the
payment of the mortgage debt and the
costs The guarantee, provided by Nedbank. is subject to the
conditions to which I referred
to earlier. In regard to the
uncertainty as to whether or not the money will be forthcoming from
Nedbank, there is the further
issue that, and it is common cause, it
is not known what the Investec debt amounts to, i.e. will the
proceeds be sufficient to
pay the Investec debt and leave sufficient
to pay the applicant's claims for capital and costs in this matter.
We simply do not
know what is owed to Investec. The same applies
also, to a certain extent, to the secured debt owed to the Hamsa
Abrahams Trust.
The bond is included in the papers and is for R2
million. There is also an affidavit by a Mr Abrahams, speaking on
behalf of
that Trust. He states that as at 6 November 2010, the
indebtedness amounted to the R2 million. So there is the uncertainty
as
to those two debts.
There is the further
point that the applicant has insisted for a long time in the context
of this application, that it be given
an unconditional security for
its costs in this application which is said to be substantial. The
respondent has said that they
wanted those costs taxed before they
are to be paid. The point, however, is that the applicant's bond
will not be cancelled and,
therefore, one of the condition upon
which Nedbank will advance the money, will not be fulfilled until
the costs are paid, which
will only take place when those costs are
taxed. The applicant is entitled to its claim for costs which is
secured by the bond
and, therefore, will not, they tell me, consent
to the cancellation until they know that their costs, which are
secured by that
bond, are in fact paid or there is a unconditional
guarantee for its payment.
There is an undertaking,
as I have indicated earlier, by the transferring attorneys and that
undertaking is subject to a number
of conditions, two of which is
that they receive the money from Nedbank and that the transfer is
not unreasonably delayed. Now
we know that the delay is likely to be
at least six months, the amount of time it will take to get the
applicant's costs in this
application to be taxed, because that is
the earliest date upon which the costs will be paid and that is the
earliest date upon
which Absa will consent to the cancellation of
its bond.
The position is,
therefore, that we today, after quite some time, sit with
uncertainties as to whether or not the applicant will
in fact be
paid its claim substantially at the time when the dividend could be
expected upon winding up. The history of this
matter shows that the
applicant is not unduly harsh in insisting upon a winding up. This
matter started off with a statutory
demand which was served upon the
respondent on 28 July 2010. The bringing of the application was then
delayed for almost two
months until 5 October, because of promises
that were made that the property would be sold in the meantime to
pay the debt. All
of these promises came to naught and the
application was brought.
A further postponement
will further increase the costs and will cause a practical
inconvenience to the applicant. The payment
of the debt will be
delayed and it will escalate with interest and costs. The question
is whether, in a case like this where
the respondent which is on the
papers clearly commercially and probably factually insolvent, should
be entitled to conduct, what
is in effect a private liquidation, and
why the applicant should not be entitled to insist on and be granted
a proper liquidation
in terms of the Act. An order of winding up, if
granted, will not prohibit the liquidator from electing to continue
with the
sale. In any event, if the sale should go through, the
respondent can request the liquidator to apply in terms of section
354
of the Act, for of the winding up to be set aside on the basis
that the continued liquidation is in fact unnecessary.
In the circumstances I
am now satisfied that I should not exercise the narrow discretion
open to me in this case in favour of
a further postponement of this
application.
It, therefore, follows
that a provisional order should and is here by made in the following
terms:
1. The respondent is
placed under provisional liquidation in the hands of the Master of
the High Court, Cape Provincial Division,
in terms of Act 61 of 1973
as amended.
2.
A
rule
nisi
is
issued, calling upon the respondent and all other interested parties
to show cause, if any, to this Court on Wednesday 26 January
2011.
Why:
(i) The respondent's
estate should not be placed under final liquidation,
(ii) The cost of this
application not be cost in the liquidation.
3. The order shall be
served as follows:
By the Sheriff of the
High Court on the respondent at its registered address being Suite
4, Constantia House, Steenberg, Office
Park, Constantia.
By the Sheriff of the
High Court on the South African Revenue Services.
Publication of this
order in one publication, each of Die Burger and Cape Times
newspapers.
On the employees of the
respondent, if applicable, and all trade unions representing such
employees.
That is then the order.
LOUW,
J