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[2011] ZAGPPHC 115
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Levin NO and Others v Wessels (49214/2007) [2011] ZAGPPHC 115 (10 June 2011)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT)
Case
Number: 49214/2007
DATE:10/06/2011
In
the matter between:
HAROLD
LEVIN
N.O.
........................................................................................
1st APPLICANT
ANDREW
MAXWELL TULLY
N.O.
...................................................................
2nd APPLICANT
COLIN
GRAIG ELSWORTH
N.O.
......................................................................
3rd
APPLICANT
RANDAL
JAMES BRERETON
N.O.
..................................................................
4th
APPLICANT
vs
HANS
JACOB
WESSELS
..................................................................................
RESPONDENT
JUDGMENT
Delivered
on: 10 June 2011
POTTERILL
J,
1.
The matter before me is a return date of an interim order wherein the
First, second, third and fourth applicants are applying
for the final
sequestration of the respondent. The respondent was provisionally
sequestrated on 21/ 9/2010 after variation of the
order on
27/10/2010.
2.
The application was issued and served on 1 November 2007. The grounds
for the application are that the respondent committed a
deed of
insolvency as anticipated in Section 8(g) of the Insolvency Act, Act
24 of 1937 and the respondent's inability to pay his
debt.
3.
The background to the application is set out in the following common
cause facts:
3.1
The Tully Family Trust and Imuniti Holdings Limited signed an
agreement of sale of shares in Impilo Marketing (Pty) Ltd and
P B
Tully Family Holdings (Pty) Ltd. In terms of clause 4 the purchase
price was to be paid no later than 31 January 2006. The
respondent
represented Imunitu Holdings Limited.
3.2
On 1 February 2006 an addendum to the agreements of purchase and
sale was concluded wherein Imuniti requested an indulgence
that the
payment date referred to above be extended to 28 February 2006. On 6
April 2006 a third addendum to the agreements of
purchase and sale is
concluded wherein a further indulgence by the seller is granted to
the purchaser whereby the payment date
was extended to 31 May 2006.
3.3
On 1 August 2006 a fourth addendum to the agreements of purchase and
sale entered into wherein the parties agreed that the balance
of the
purchase price would be paid as follows:
R1.4
million by 31 July, 2006, R3 million by 14 August 2006 and R15.6
million by 15 October 2006. Clause 1.4 set out that Imuniti
was to be
listed on the JSE and the Applicants would be issued shares at 60c
per share to the value of R20 000 million; the effect
thus that half
of the purchase price is be paid by means of shares in Imuniti.
3.4
On 30 October 2006 a Deed of Assignment is signed wherein Imuniti
assigned rights and obligations to the respondent. The Applicants'
interests were to pass to Imuniti upon signature and issue of the
agreed number of shares. This agreement is concluded because,
as set
out in the preamble, to be JSE compliant Imunity was to be debt-free.
In this assignment Wessels warranted that a parcel
of shares having a
value of R30 million at 0.60c per share were his sole and absolute
property. The effect with regard to payment
was that the Respondent
had to pay the outstanding balance of R15.6 million by 8 January
2007.
3.5
In the fifth addendum to the agreements dated 20 October 2006 it was
recorded that Imuniti paid R1.4 million and the R3 million
in
accordance with clause 3.1 of the Addendum dated 1 August 2006.
However the R15.6 million that had to be paid on 15 October
2006 was
not paid and an extension was granted for payment until not later
than 8 January 2007. The parties confirmed in the addendums
the terms
of the original agreement.
3.6
Between October 2006 and March 2007 the respondent made payments
totalling R4 million. The outstanding balance was thus reduced
to
R11.6 million but the full outstanding balance was not paid on 8
January 2007 as agreed to in the fifth addendum.
3.7
On 9 March 2007 a first letter of demand is sent to the respondent.
3.8
On 8 June 2007 a second letter of demand is sent off to the
respondent.
3.9
On 15 March 2007 the respondent sent a text message to the applicants
wherein he asked a further extension of the payment date
to the end
of June 2006, he offered 300 000 Imuniti shares as director of
Imuniti.
3.10
On 15 March 2007 in an e-mail from the respondent the following was
stated:
"...
I am confident that I will be able to raise an amount of R2 million
with
a property in Pretoria as security for such amount. "
3.11
On 23 October 2007 this application for sequestration was launched, a
notice of opposition was filed and served on 1 November
2007. The
matter was removed from the unopposed roll and the respondent had to
file his opposing affidavit by 22 November 2007.
3.12
No opposing affidavit was filed and the matter was set down for 18
March 2008 on the unopposed roll. The respondent asked for
time to
pay and the matter did not proceed.
3.12
The matter was then set down on the unopposed roll for 7 May 2008. On
7 May 2008 an affidavit is filed by the respondent wherein
he
admitted in paragraph 3.1 that: "the effect of the Deed of
Assignment signed by me (Annexure "A") would be to
render
my estate insolvent immediately upon its signature" In paragraph
3.4 "I admit that I am lawfully indebted to the
Applicant, that
I am presently unable to pay the Applicant and that I will be unable
to do so until the said Trust makes the necessary
funds available to
me." In the affidavit he confirmed each and every allegation
made by the applicants, once again asked for
a further extension for
payment and confirmed his withdrawal of opposition to the Application
for sequestration. The matter was
then postponed to 20 June 2008.
3.13
On 13 June 2008 the respondent's attorney sent a surety bond wherein
the respondent again acknowledged his indebtness to the
applicants.
3.14
On 20 June 2008, the postponement date, the respondent's attorney
filed an affidavit. The thrust of the affidavit is that
the
respondent was pulling out all stops to facilitate payment and that
security was offered in a letter dated 13 June 2008. In
court on the
20lh a settlement agreement was made an order of court with the crux
that the respondent was to pay R1 million by
27 June, R1 million by 4
July and the balance on 8 September 2008. It was also agreed that the
applicants may forthwith take judgment
against the Hans Wessels Trust
in case number 38861/07 for payment of R11 600 000, 00, interest and
costs on attorney and client
scale.
3.15
By 5 July 2008 the order made on 20 June 2008 was not complied with
in
that the 2 million that had to be paid before 27 June 2008 and
4 July 2008
was not paid. An addendum to the settlement agreement
was entered into
wherein the respondent agreed to pay:
Clause
2.2:. "The amount referred to in clause 4.2 (R1 million) will no
longer be payable on 4 July 2008 but will be added
to the balance
which shall be paid, by close of business on Monday 8 September
2008." Interest on the capital amount is to
run from 9 March
2007 and was to be paid to the Applicants by close of business on
Monday 10 September 2008.
3.16
On 5 September 2008 the Respondent sent an e-mail to Harold Levin
with content that the respondent had successfully raised
an amount of
R1 million and will on 8 September 2008 be advised as to when payment
thereof will be effected and then the R1 million
will be paid over to
the applicants' attorney trust account.
3.17
On 4 September 2008 the matter is set down on the 22nd of September
2008. No payments were by then received. On 26 September
2008 the
respondent filed an affidavit requesting that this matter be
postponed sine die because the "the sequestration of
my estate
would not be in the in anyone's interest at this stage. I further
wish to bring to the notice of the above Honourable
Court certain
recent developments, in particular the sale of an immovable property,
the proceeds of which would be utilized to
extinguish the Applicants'
claim against me. I request an indulgence of sixty days to finalize
the transfer.
By
virtue of a payment ofR1 M made by me on 27 June 2008, the balance of
the Applicants' claim against me amounts to R10.6M."
[Paragraph
4] He further set out that the Applicants have security in the form
of fifty million shares held by him in Imuniti Holdings
(Pty) Ltd.
"These shares were pledged to the Applicants in securitatem
debiti for the outstanding liability due by me the
Applicants. At the
time of the pledging of these shares, these shares were valued at
approximately sixty cents each. They have
decreased in value but are
still presently worth approximately eight cents a share on the ALTX
Division of the JSE, This will translate
into security of R4M, which
the Applicants presently hold." [Par 5] He also set out that the
proceeds from the sale of an
immovable property would be utilized to
extinguish the Applicants claim. This matter is then on 26 September
2008 postponed to
28 November 2008.
3.18
On 28 November 2008 the matter is postponed to 6 March 2009 and
the
following agreement is made an order of court:
Respondent
was to pay R1 million before 7 November 2008. Respondent also
undertook to pay R200 000 on 15 December 2008, 15 January
2009 and 15
February 2009. The full outstanding balance was to be paid on or
before 28 February 2009. During the period 29 November
2009 to 14
February 2009 respondent made payments totalling R1.6 million but the
balance was not paid on or before 28 February
2009 or at all.
3.19
On 6 March 2009 the matter is postponed to 14 April 2009. On 9 April
2009 the respondent delivered his opposing affidavit.
Herein the
respondent for the first time denied any liability towards the
applicants. He denied that he committed an act of insolvency.
He
denied that the applicants held no security for the amount owing to
him and that it would be to the benefit of his creditors
if he was to
be sequestrated.
3.20
On 24 March 2010 the respondent signed particulars of claim in the
Kwa-Zulu High Court claiming repayment of the R5.6 million
from the
applicants that he had paid to the applicants.
3.21
On 30 August 2010 the respondent filed and served a supplementary
affidavit in this application. The averment
is made that the
agreement of assignment that was concluded is to be set aside due to
misrepresentations made to him by the applicants.
It would be
premature to sequestrate him before the matter in the Kwa-Zulu High
Court relating to these misrepresentations is finalized.
4.
All of these facts were before my brother Mabuse J when he granted
the provisional sequestration of the respondent.
5.
It was argued on behalf of the respondent that the Applicants had not
on a balance of probabilities proven its claim. The respondent
instituted a claim in the High Court in March 2010, now disputing the
Applicants claim. The tenure of the dispute is that when
the
respondent concluded the agreement it was reported to him that the
share value of the Imuniti Shares were 60c per share. It
was in fact
represented to him that the shares transferred to the respondent were
transferred at a discount of 20% of the real
value of the shares.
These were however all material misrepresentations. In fact the
latent defects in Impilo Pharmaceutical Factory
rendered the shares
worthless. The respondent was not informed that the Medicine Control
Council (MCC) had placed Impilo Drugs
on terms to implement certain
changes to the factory. The main asset of Imuniti was Impilo Drugs
and therefore the misrepresentations
are material. The Applicants
made these misrepresentations to persuade the respondent to enter
into the Delegation Agreement. The
respondent only became aware of
these misrepresentations during 2009 when he was handed a file from
which the misrepresentations
became apparent.
6.
In opposition to these averments the applicants deny making any
misrepresentations. It was common cause that the respondent was
the
attorney for Imuniti since early 2004. Imuniti's chosen domicilium
was the respondent's address. A due diligence on Impilo
was done by
BDO Spencer Steward and their report was available on 18/2/2004. The
Applicants set out that the Deed of Assignment
was signed on 30
October 2006. This deed was a proposal from Imuniti represented by
the respondent and did not emanate from the
Applicants. "The
Respondent, at a meeting at the Applicant's Attorneys' office,
personally implored me and my co-trustees
to conclude the agreement
in order to assist him and Imunitt." [Paragraph 9.3.7 of
replying affidavit]
The
Applicants deny that they made any representations to Imuniti or the
Respondent as to the value of Impilo, they were made an
offer and
they accepted this offer.
They
further deny that any information relating to the business of Impilo
was held from BDO Spencer Steward. This is borne out by
the fact that
in the due diligence report BDO Spencer Stewart refers to the
"changes in progress as was required per plant
evaluation audit
conducted on 5 November 2003." On 24 May 2006, this after the
agreement was concluded, Ernst and Young invite
prospective investors
and attach a SWOT analysis and set out as a weakness "Environmental
control of operations area"
[AMT2" to applicants' replying
affidavit]. The MCC Notice to suspend the licence was issued after
the GMP Audit conducted
on17/18 May 2007, after the control and
management of Impilo was taken over by Imuniti. In Impilo Drugs
written answer to the MCC
Audit the following is stated:
"Subsequent
to the MCC audit in November 2003 Impilo had an airflow system
installed in 2004, which was completed in early
2005. Once installed
the efficiency of the airflow system was found to be lacking in terms
of temperature control however the airflow
and pressure differentials
have been found to be acceptable. A second opinion has been requested
and is being awaited with respect
to the system." [HJ12B to
opposing affidavit]
The
Applicants deny that they made any misrepresentation pertaining to
the value of the shares. The allocation of the shares in
Imuniti was
made by the respondent and not by the Applicants. In the preamble of
the Deed of Assignment the respondent warrants
that the shares in
Imuniti belong to him and the value of the shares are given as 60c
per share and R30 million in total. On 26
September 2008 the
respondent under oath stated that the shares were now worth 8 cents.
The Applicants contend that if there was
misrepresentation the
appropriate time to raise it could only have been then. Yet the
respondent requested postponement of payment
because the proceeds of
a sale of an immovable property would be utilized to extinguish the
Applicants claim.
7.
I am satisfied that the applicants have on a preponderance of
probabilities proven their claim. Only when all else failed this
claim is instituted three and a half years after the contract was
concluded. From the respondent's own papers he knew of the MCC's
2003-audit and had the queries therein classified as a weakness in
the SWOT analysis. In paragraphs 16.6-16.21 of the respondent's
subsequent affidavit he set out in vague terms that from the middle
of 2007 he heard that the applicants had made misrepresentations
and
that the factory of Impilo had to be upgraded. This is in stark
contrast to his averment that he only knew of the alleged
misrepresentations in 2009. If these alleged misrepresentations were
real then when the notice of opposition to this application
was filed
on 1 November 2007 this would have been a good defence to this
application, yet it is not raised. Instead many addendums
to the
agreement are concluded and many court orders granted deferring
payment of this admitted debt. This claim then surfaced
when the
court orders and addendums were not complied with. The respondent's
version is so clearly untenable and palpably implausible
that there
is no bona fide dispute of fact before me. The claim as set out by
the applicants has been proven.
8.
The respondent acknowledged his indebtness to the Applicants in more
ways than one. Once too many he had made deals and schemes
from which
he offered deferred payment. These orders always included cost orders
for which he was accountable. His deferring led
to interest
accumulating and as a businessman and attorney he was prepared to
succumb to this to facilitate payment of his debt.
His communications
amount to acts of insolvency as set out in Section 8(g) of the
Insolvency Act, 24 of 1937. His averred duress
when signing
acknowledgement of debts and settlement agreements which where by
consent made orders of court are far-fetched and
untenable and I
agree with the reasons proffered by my brother Mabuse J for his
decision. The respondent did not and does not have
the ability to pay
the debt and this was proven on a preponderance of probabilities
before me.
9.
The applicants have no security for the debt. The respondent has now
tendered a first covering mortgage bond in favour of the
Applicants
over immovable property registered in the name of a company, Burnside
County Estate (Pty) Ltd. This security paragraphs
1.2, 1.3 and 1.4
read as follows:
"Bogenoemde
Eerste Verband word gegee as sekuriteit in die saak wat Hans Jacob
Wessels ingestel het teen die Tuliy Family Trust
onder Saaknommer
3741/201 in die Natal Hoe Hot, Durban. Die geld uit hoofde van die
verband sal betaalbaar wees indien die Hot
in bogenoemde saak ofenige
enige Hot van Appel, in die guns van die Tully
Family
Trust sou beslis. Hans Jacob Wessels gemagtig word om alle dokumente
wat uitvoering daaraan moet gee, namens die maatskappy
te
onderteken."
This
document is then signed by one director being the respondent's wife.
10.
Security in the form of a power of attorney also to register a bond
over different property as security was already offered
on 25
September 2008, but on 26 October 2008 he once again offered to pay
the debt. In his affidavit the respondent set out that
he consented
to the court orders not with the motive to pay, but to obtain a
delay. This is an attorney who in this application
acted deceitful
and was prepared to say so under oath, yet it is argued that the
applicants should accept a security, not from
the respondent himself,
signed by his wife, not all the directors, over properties not
belonging to the applicant. The amount offered
is prima facie suspect
as to covering the capital amount, the agreed interest and costs. The
Burnside Company provides security
for another asset of the Trust
impacting on the value of the security. I agree with the submission
made by the applicants' counsel;
the security is not worth the paper
it is written on. The respondent has in essence not complied with one
undertaking or fully
with any court order and the probability of him
honouring security involving the registering of a mortgage bond over
property of
which he is not the owner is not satisfactory or
sufficient security.
11.
There was no argument on whether the sequestration would be to the
advantage of the debtors before me. I am satisfied that for
the
reasons set out in Mabuse J's judgment applicant also proved on a
preponderance of probabilities that there is reason to believe
that
it would be to the advantage of the creditors if the respondent is
sequestrated.
12.
The respondent argued that even if I find the applicants proved all
three requirements of section 12(1) of the insolvency Act,
24 of 1936
then I still have a discretion to discharge this rule nisi. In
exercising my discretion judicially I must factor in
that if the
respondent is successful in the matter in Kwa-zulu Natal High Court
then the sequestration of the applicant would be
very unfair. The
Applicants have judgment against the Hans Wessels Trust and they have
additional security in the form of the first
mortgage bond. The
applicants would not be in a worse position even if the respondent is
unsuccessful in the Kwazulu Natal matter
because the applicants'
claim would be paid in full. I was specifically referred to Millward
v Glaser
1950 (3) SA 547
(W) and Dal's Service Station (Pty) Ltd v
Labuschange
1962 (3) SA 723
(SR) at 726 FG as support for these
contentions.
I
have found that on these papers the claim is untenable and the
security insufficient and I can accordingly not exercise my
discretion
based thereon. As for the judgment in the Hans Wessels
Trust Randal James Brereton [4th applicant and attorney of the
applicants]
in his affidavit set out the sheriff attached shares in
Canopusstraat 210 (Pty) Ltd and Maroelana Sentrum (Pty) Ltd. The
shares
per the certificate however reflect that the shares belong to
the respondent's wife as from 1/2/2010. The shares in the Maroelana
Sentrum (Pty) Ltd were also transferred to his wife on 1 February
2010. These transfers were made after the attachment by the sheriff.
No court can exercise a discretion in favour of a party conducting
himself in this manner; i.e frustrating the execution now relied
on
as a factor in his favour. The respondent did not deny these facts,
but stated it was a mistake.
Distinguishable
from the Dal's Service Station matter supra I can not find one fact
in support of the submission that the object
of this application was
to embarrass the respondent; it was brought due to his inability to
pay and for no ulterior motive. In
the Dai's Service station matter
the arbitration proceedings was to commence before the application
for sequestration, not three
and a half years after the agreement was
concluded. It was also argued that the prejudice that the respondent
would suffer would
be more than that what the applicants would suffer
if the application is granted. On the facts before me I can not
exercise my
discretion judicially in favour of the respondent, it
would be an endorsement of delaying tactics, contempt of court orders
and
not be in the interests of justice.
13.
The rule nisi is confirmed.
S.
POTTERILL
JUDGE
OF THE HIGH COURT
Matter
heard on: 24 March 2011
Delivered
on: 10 June 2011
Attorney
for the Applicant:
...........................
Attorney
for the Respondents:
JOHN
HUDSON & COMPANY
....................
FERREIRA
ATTORNEYS
P/A
J W ESELS & THERON ING
................
Garsfonteinweg
118
Schoeman
street 811
..................................
Alphenpark
Arcadia
.......................................................
Pretoria
Pretoria
......................................................
Tel:
012 346 6959
Tel:
(012)343 1410
....................................
(Ref: Mr Ferreira)
(Ref: Z de Lange/am/MJ0002)