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[2010] ZAGPPHC 632
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Ramalho N.O. and Others v Venter (42105/08) [2010] ZAGPPHC 632 (25 March 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT)
Case number:
42105/08
Date: 25 March
2014
In the matter
between:
RAMALHO NO:
GEORGE DA
SILVA
.........................................................................
FIRST
PLAINTIFF
YEUN NO:
AMORE
....................................................................................................
SECOND
PLAINTIFF
VENTER NO: ANNA
FRANCINA
................................................................................
THIRD
PLAINTIFF
and
VENTER:
CARLO
.....................................................................................................................
DEFENDANT
JUDGMENT
RAULINGA,
J
INTRODUCTION
[1] The plaintiffs
in their capacity as the duly appointed joint liquidators of Money
Skills Limited ( in liquidation) sought an
order declaring the
payment of the sum of R10099054.84 by certain creditors to the
Defendant, which constitute dispositions of
Money Skills' property
within the meaning of Section 2 of the Insolvency Act 24 of 1936 as
read with Section 340( 1) of the Companies
Act 61 of 1973 to be paid
by the defendant in terms of Section 26 (1) (b) or the dispositions
be set aside in terms of the provision
of Section (29) (1) of the
Insolvency Act as read with Section 340 (1) of the Companies Act.
[2] The plaintiffs
allege that during the period September 2006 to January 2007 and at
or near Centurion, Money Skills made the
following payments to the
Defendant:
13 September
2006
....................................................
R354,
200-00
29 September 2006
…...............................................
R255,
000-00
30 September
2006
............................................................
6,000-00
5 October
2006
...................................................................
2,500-00
9 October
2006
............................................................
R201,
354-84
31 January
2007
............................................................
R
95,000-00
28 February
2007
..........................................................
R
95,000-00
The said
dispositions:
(i) were not made
for value;
(ii) were made
within two years of the winding-up of Money Skills; and
(iii) fall to be set
aside in terms of the provisions of Section 26(1) (b) of the
insolvency Act as read with Section 340(1) of
the Companies Act, in
that Money Skills has been wound-up and unable to pay all its debts.
[3] In the
alternative to Claim 1, during the period September 2006 to January
2007 and at or near Johannesburg, Money skills made
the said payments
to the Defendant. The aforesaid payments made by Money Skills to the
Defendant constitute dispositions of Money
Skills property within the
meaning of Section 2 of the Insolvency Act as read with Section
340(1) of the Companies Act.
The dispositions;
(i) were made not
more than six months before the winding-up of Money Skills;
(ii) had the effect
of preferring one of its creditors above another;
(iii) were made in
circumstances where, immediately after making of the dispositions,
the liabilities of Money Skills exceeded the
value of its assets, and
(iv) fall to be set
aside in terms of the provisions of Section (29) (1) of the
Insolvency Act, as read with Section 340(1) of the
Companies Act, in
that Money Skills has been wound-up and is unable to pay all its
debts.
[4] The defendant
admits all other allegations save for paragraphs 3.1.2 to 3.1.3.3 as
well as paragraphs 4.1.2 to 4.1.3.4 in the
alternative claim. The
plaintiffs are put to proof of these claims. The admitted facts
appear in the pre-trial minute and during
trial they were recorded as
common cause issues. It is therefore not necessary to regurgitate
same in this Judgment.
[5] There was
consensus between the parties that since no witnesses were called to
testify by both parties, the court would decide
the matter on common
cause issues. The plaintiffs have the duty to begin. The onus will be
determined by the pleadings. The parties
also agreed that no issue
should be decided separately in terms of Rule 33(4) or otherwise. The
cardinal common cause issues are
the following:
(i) All payments
alleged in the particulars of claim are common cause and not in
dispute
(ii) It is common
cause that at the date the payments alleged in the particulars of
claim were made, Money skills was insolvent.
Annexure "C"
is a copy of a final winding- up order of Money Skills by the North
Gauteng High Court (Pretoria) on 28
May 2007
(iii) The Expert
Report and its annexures prepared by Jaco Spies are common cause.
(iv) The evidence
given by the Defendant at the insolvency inquiry and the exhibits
thereto are common cause.
(v) Paragraphs 1.1
to 1.5 of the plaintiffs' pre-trial agenda is common cause.
[6]
The defendant was the Director of Money Skills Ltd. The total amount
of proved claims is R78 276 718-22. The liquidators instituted
58
claims against investors who received payments. The value amounted to
R12.2 million. Thirty claims have been finalised and an
amount of
92.772
million
has been recovered. There are twenty five unresolved claims worth
R7.2 million.
[7] A Mr Molakeng
(one of the creditors) proved a claim of R350-000 and has received a
dividend of R14461-60. A Mr Maphali (also
one of the creditors)
proved a claim of R500-000 and received a dividend of R20659-43.
[8] The payments
were made from 1
st
September 2006. It is apparent from the
pre-trial minute and the insolvency inquiry that at the time of the
payments the Defendant
was aware that the pyramid scheme was unlawful
and that it would not work. At that time the Defendant was aware that
the company
was insolvent. As a financial Director he ought to have
advised the creditors of that danger, particularly because the
Reserve
Bank voiced concerns about the scheme.
[9] An interesting
feature is that summons was issued on the 8
th
September
2008. There is evidence that at the date of each of the payments,
Money Skills Limited ( in liquidation) was unable to
pay its debts.
[10] Section 340(1)
reads:
Every disposition
by a company of its property which, if made by an individual, could,
for any reason, be set aside in the event
of the company being
wound-up and unable to pay all its debts, and the provisions of the
law relating to insolvency shall mutatis
mutandis be applied to any
such disposition.
Section 26(1) (b)
reads:
Every disposition
of property not made for value may be set aside by the court if such
disposition was made by an insolvent-within
two years of the
sequestration of his estate, and it is proved that, immediately after
the disposition was made, the assets of
the insolvent exceeded his
liabilities
Section 29(1) reads:
Every disposition
of his property made by a debtor not more than six months before the
sequestration of his estate or, if he is
deceased and his estate is
insolvent, before his death, which has had the effect of preferring
one of his creditors above another,
may be set aside by the Court if
immediately after the making of such disposition the liabilities of
the debtor exceeded the value
of his assets, unless the person in
whose favour the disposition was made proves that the disposition was
made in the ordinary
course of business and that it was not intended
thereby to prefer one creditor above another.
[11] It is also
relevant to quote the definitions of "disposition" and
"property" found in Section 2 of the
Insolvency Act.
"..........Disposition" means any transfer or abandonment
of rights to property and includes a sale,
mortgage, pledge,
delivery, payment, release, compromise, donation, any contract
therefore, but does not include a disposition
in compliance with an
order of court and "dispose" has a corresponding meaning".
"property"
means movable or immovable property wherever situate within the
Republic, and includes contingent interests
in property other than
the contingent interests of a fideicommissary, heir or legatee."
[12] By the
Defendant's own admission payments were received by him from the
Plaintiffs. What remains to be decided by the court
is whether these
payments amount to dispositions. Section 26 (1) (b) of the Insolvency
Act, requires that a person who alleges
disposition must prove that
immediately after the disposition was made, the assets of the
insolvent exceeded his liabilities.
On the contrary
Section 29(1) imposes a duty on the person in whose favour the
disposition was made to prove that the disposition
was made in the
ordinary course of business and that it was not intended thereby to
prefer one creditor above another. It is my
view that although the
Plaintiffs bear the onus to prove the implication of Section 26(1)
(b) the Defendant is imposed with the
duty to prove the implication
of Section 29 (1) of the Insolvency Act.
[13] A case of
similar nature came before Sithole AJ in Geyser NO and Others vs
Telkom SA Ltd 2006(2) All SA 148 (T). The first
plaintiff was
appointed as liquidator of the second plaintiff medical scheme. In
his capacity as liquidator of the scheme the plaintiff
sued the
defendant in an action where an order was sought for the setting
aside of dispositions made in favour of the defendant
by the scheme
on behalf of certain of its members. The dispositions were made
within two years of the scheme's provisional liquidation.
According
to the plaintiff the payments were made without value in that the
scheme received no benefit therefrom. It was therefore
contended that
the payments constituted dispositions without value within the
meaning of
Section 26(1)
(b) of the
Insolvency Act 24 of 1936
. The
Defendant's plea was based on the provisions of Section 33(1) of the
Act.
[14]
The court held that in order to succeed with the above defence the
defendant bore the onus of proving on a balance of probabilities
that
it had lost a right against another person; such loss of right was in
return for a disposition which was liable to be set
aside; and that
it had acted in good faith. The purpose of Section 33(1) is to ensure
that in the stated circumstances when a disposition
is set aside
there is restitutio in intergrum, that is, the restoration of both
parties to their position before the disposition
was
made............It was found that the payments were dispositions
without value, and the remaining question was whether the
defendant
was able to prove the requirements of Section 33(1). In
casu
there
is no need to analyse the provisions of Section 33(1) of the Act.
However
in the Geyser case
(supra)
it
was further held that as the payments were invalid, the debts of the
account holders in question were not discharged, and the
defendant
retained the right to proceed against them for the debts. This may
not hold in the instant case because what need to
be decided is
whether the defendant preferred certain creditors over the others.
[15]
Of interest, is that the court also held that the defendant did not
act in good faith, first because our courts have recognised
the
requirements of "good faith" for more than 150 years and
that proof of
bona
fide
includes
a consideration of all the circumstances surrounding the transaction.
[16]
In
casu
one
is dealing with dispositions as expounded in Section 26 of the Act,
which has to do with dispositions without value, and Section
29 of
the Act, which caters for voidable preferences. The Plaintiffs
contend that the payments are dispositions without value and
alternatively that one Venter was preferred over Messrs Molakeng and
Maphali: They also aver that the Defendant did not act in
good faith
in that he knew from the outset that the pyramid scheme was a fraud
and that it was not working. They also base this
on the fact that
since the Defendant was a Financial Director he could have advised
the creditors that there was danger in the
operations of the scheme.
Although, the Defendant admits that at the date of payment Money
Skills was unable to pay its debts and
it was therefore insolvent, it
is however not clear whether immediately after the dispositions were
made, the assets of the insolvent
exceeded its liabilities. However,
payments were made on 1
st
September 2006 and Money Skill was provisionally wound-up on the 29
th
March 2007 and finally wound-up on the 28
th
May 2007, long after the creditors had become aware of the "debt"
of Money Skills.
[17] In Duet and
Magnum financial Services CC( in Liquidation) v Korster 2010(1) SA
312 (T), the plaintiff, represented by its joint
liquidators, sued
the defendant for an order setting aside, in terms of Section 26(1)
(b), alternatively Section 30(1) read with
Section 66
of the
Close
Corporations Act 69 of 1984
, further alternatively, in terms of
Section 29(1)
of the
Insolvency Act 24 of 1936
, certain dispositions
in the total amount of R459 446-71 and also an order for payment of
the said sum.
[18] Defendant
raised a special plea of prescription in terms of
Section 10
,
11
(d)
and
12
of the
Prescription Act 68 of 1969
in that-
(a) the disposition
had been made, at the latest, in March 2002;
(b) the plaintiff
had been wound-up in 2001 and the joint liquidators appointed on 18
July 2001;
(c) summons had been
served on 12 July 2005, by which time the plaintiff had been aware of
the defendant's identity and the facts
from which each of the debts
arose for a period of more than three years.
What the dispute
boiled down to in the end was the question whether-
(a) the preliminary
step, being the order that the disposition be set aside before the
claim for payment of the amount due could
be instituted, was a bar to
the commencement of the running prescription of the claim for
payment; or
(b) The preliminary
step and the claim for payment jointly constituted a debt in respect
of which the running prescription commenced
as soon as the necessary
facts were known to the plaintiff.
[19]
After referring to a number of decisions Preller J was in agreement
with the decisions in
Barnard
NO v Bezuidenhout en Ander
2004 (3) SA 274
(T) and Burley Appliances
Ltd v Grobelaar NO and Others
2004 (1) SA 602
(c).
In
this two judgments it was held that prescription starts to run in
respect of the entire "debt" including the preliminary
question that has to be decided, as soon as the creditor is aware, or
should be aware, of the identity of his debtor and the facts
giving
rise to his claim.
I cannot find
anything untoward with the finding of Preller J. I cannot agree more
with him.
In
casu
the
defendant argues that Section 340 of the Companies Act makes Sections
26 (1) (b) and alternatively 29 (1) of the
Insolvency Act applicable
at the date of impeachment or liquidation, whereas the plaintiffs
argue that it is at the date of the institution of the action.
As already indicated
above, prescription in this case started to run in respect of the
entire "debt" as soon as the creditors
were aware of the
identity of the Defendant and the facts giving rise to the claim. The
fact that the Defendant admitted that at
the date of payment Money
Skills was unable to pay its debts and was insolvent bears proof of
the fact. Further that the Plaintiff's
were aware that Money Skills
was finally wound-up on the 28
th
May 2007.
[20]
In
Barnard and Lynn
NNO v Schoeman and Another 2000(3) SA 168 (N)
the
court dealt with claims instituted by the liquidators of a company
against defendants to whom the company had paid back loans
under
circumstances that constituted dispositions which prefer one creditor
above another in terms of Section 340 (1) of the Companies
Act. The
defendants raised prescription as a defence and the plaintiff argued
that in terms of
Section 29(1)
of the
Insolvency Act, the
court has
discretion to set aside such a disposition. Once that discretion has
been exercised, the court shall, in terms of
Section 32(3)
declare
the liquidator entitled to recover anything alienated under that
disposition. The court upheld this submission and it found
that the
claim had not become prescribed. In this matter the plaintiffs submit
that the court should apply its discretion.
I am of the view
that while discretion is a tool available to the court in matters
such as this, discretion should rather be used
sparingly,
particularly when there are other avenues to manoeuvre. However in
the instant case I do not find any avenues which
may persuade me not
to apply my discretion. I therefore apply my discretion in favour of
the Plaintiff.
[21]
The decision in
Gunn and Another, NNO vs Barclays
Bank D.C.O 1963 (3) 678 (AD)
concerned
the interpretation of whether the repeal of
Section 29(2)
of the
Insolvency Act destroyed
or rendered ineffective a right which has
arrived before the passing of Act 64 of 1960. The court then decided
that the applicable
Section of the repealed Companies Act would be
applicable to
Sections 26
and
29
of the
Insolvency Act on
the date of
the disposition and not at the date when proceedings were instituted.
[22]
In the recent case of
Sackstein NO vs Proud food
SA (Pty) Ltd
2006 (6) SA 359
(SCA)
the
court held that the company's inability to pay must exist at the date
the impeachment proceedings are brought.
[23]
In
casu,
the
summons was issued on the 8
th
September 2008, long after the plaintiff had become aware of the
identity of the defendant. There is evidence that at that time
the
liabilities exceeded the assets. The contention that the defendant
did not act in good faith is a factor that overshadows the
other
factors.
[24]
I am of the view that the decision in
Sackstein
{supra)
is
not applicable in the instant case in that the creditors were aware
of the entire "debt" before the institution of
the action.
The plaintiffs have as such discharged their onus in proving that the
payments made to the Defendant constitute dispositions
of Money
skills' property within the meaning of
Section 2
of the insolvency
Act as read with Section 340 (1) of the companies Act.
CONCLUSION AND
ORDER
Based on the
admissions made by the Defendant one can conclude that he failed to
prove that the dispositions were made in the ordinary
course of
business and that it was not intended to prefer one creditor above
another. I am therefore persuaded to agree with the
plaintiffs on
their submissions on these aspects. I would therefore also find that
the Defendant was not candid with the court
in that he did not act in
"good faith". The Defendant preferred Mr Venter over Mr
Molakeng and Mr Maphali.
[25]
In the light of the
findings above the following order is made:
(1) The
dispositions as mentioned in the alternative to claim 1 (i.e. claim
2) are set aside in terms of the provisions of
Section 29
(1) of the
Insolvency Act as
read with Section 340(1) of the Companies Act.
(2) The Defendant
is ordered to pay the Plaintiffs the amount of R10099054, 84 being
the total sum constituting the dispositions
as mentioned in claim 2.
(3) The Defendant
is directed to pay the plaintiffs' costs.
T J RAULINGA
JUDGE OF THE HIGH
COURT
NORTH GAUTENG
HIGH COURT
DATE OF HEARING :
10 February 2010
DATE OF JUDGMENT:
25 March 2010
PLAINTIFF'S
ATTORNEYS : Brooks & Brand Attorneys
PLAINTIFF'S
ADVOCATE : Adv
3
W Steyn
DEFENDANT'S
ATTORNEYS : Marais Mthembu Attorneys
DEFENDANT'S
ADVOCATE : Adv C Harms