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[2011] ZAGPPHC 133
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Stander NO And Another v De Bruin & Partners Inc (69975/2009) [2011] ZAGPPHC 133 (29 July 2011)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
NORTH
GAUTENG DIVISION, PRETORIA
CASE
NO: 69975/2009
DATE:
29 July 2011
In
the application of
COENRAAD
LOUWRENCS STANDER
N.O.
..................................................
1ST APPLICANT
IGNATIUS
CLEMENT Ml KATE KO SHIRILELE
N.O.
.......................................
2ND
APPLICANT
[In
their capacity as provisional liquidators
of
KIRSTEN LOITERING SCHEEPERS INC. (in liquidation ) and
DE
BRUIN & PARTNERS
INC
..........................................................................
RESPONDENT
JUDGMENT
MABUSE
J
1.
In this application the applicants seek the following order:
1.1
That leave be granted to them in terms of sections 387(3) and 386(4)
of the Companies Act NO. 61 of 1973 ("the Companies
Act")
(as it then was), to launch this application.
1.2.
That it be declared that payment of R117, 958.75 to the respondent on
12 May 2009 constituted a void disposition of the property
of
Kirsten, Lettering, Scheepers Incorporated (in liquidation ), after
commencement of the winding up in terms of the provisions
of section
341 (2) of the Companies Act.
1.3.
Alternatively, that the payment of R117, 958.75 to the respondent be
set aside as impeachable disposition of the property
of the insolvent
estate of Kirsten, Lottering Scheepers Incorporated (in liquidation
), in terms of the provisions of section 26,
alternatively, section
29, and further alternatively section 30 of the Insolvency Act 24 of
1926 ("the Insolvency Act").
1.4.
That judgment be granted against the respondent for payment of the
amount of R117, 958.75 together with costs, and the costs
of this
application.
1.5.
That the respondent be ordered to pay interest at the rate of 15.5
percent per annum on the amount of R117, 958.75 from 12
May 2009 to
date of payment.
2.
THE PARTIES
The
applicants are both adult male insolvency practitioners who operate
under the name and style of Corporate Liquidators (Pty)
Ltd at 120
Lange Street, Nieu Muckleneuk, Pretoria, Gauteng. They were appointed
joint liquidators of the Kirsten, Lottering, Scheepers
Incorporated
("KLS Inc") by virtue of a Certificate of Appointment
issued on 10 July 2009 by the Master of the North
Gauteng High Court.
The aforementioned liquidators have only been appointed as
provisional liquidators of KLS Inc; and their powers
are as
circumscribed in section 386 of the Companies Act read with section
66 of the Close Corporations Act N0.69 of 1984. They
do not therefore
have any powers to litigate. It is for the said reason that the
applicants seek the order prayed for in prayer
one (1) of the notice
of motion.
3.
The respondent is a company duly registered in terms of the laws of
this country and has its registered place of business at
First Floor
Ladegaard House, 6 Ben Schoeman Street, Vanderbijlpark.
4.
This is an application by the applicants to recover the amount of
R117, 958.75 from the respondent. The said amount represents
payment
which was made to the respondent from the funds of an insolvent
company on the basis that the said payment was made after
the
commencement of the wounding up of the concerned company, namely KLC
Inc.
5.
In contravention of the provisions of section 341 (2) of the
Companies Act, as amended, the respondent was paid the amount of
R117, 958.75. The said section 341 (2) provides as follows:-
"Every
disposition of its property (including rights of action) by any
company being wound up and unable to pay its debts made
after the
commencement of the wound up, shall be void unless the court
otherwise orders."
6.
In the alternative, the aforementioned payment constitutes, in terms
of the provisions of section 26 of the Insolvency, a disposition
without value, or, in terms of the provisions of section 29 of the
Insolvency Act, a voidable preference, or, in terms of section
30 of
Insolvency Act, an undue preference to creditors. The Applicants
claim that on the premises set out above, the respondent
is liable to
refund the amount that it received by reason of the fact that the
said payment was made from the funds of an insolvent
company after
the commencement of its liquidation, in the alternative, on the basis
that the said disposition contravened the provisions
of the said
sections of the Insolvency Act.
7.
Before its liquidation, KLS Inc; was a private company properly
registered in terms of the companies statutes of the Republic
of
South Africa. It conducted its business as a firm of attorneys in
accordance with the provisions of section 23 of the Attorneys
Act 53
of 1979, "(the Attorneys Act)", read with the provisions of
section 53 of the Companies Act at Hertz Boulevard,
Vanderbijl Park,
Gauteng. its registered office or address was located at 38 Chopper
Street S E 5 Vanderbijlpark.
8.
KLS Inc: was provisionally liquidated by an order of the Court
issued on 27 May 2009 following an application that had been
issued,
for that purpose, on 25 November 2008, under case number 55052/08.
The applicants contend that in terms of the provisions
of the said
section 341 (2), the commencement date of the winding up of KLS Inc:
was the date on which the applicants' application
under case number
55052/08 was issued by the office of the Registrar of the Court. The
final winding up order of the said KLS Inc;
was granted by the Court
on 25 August 2009.
9.
For the purposes of this judgment, the circumstances that led to the
liquidation of KLS Inc: are not relevant. In its answering
affidavit,
the respondent did not dispute the applicant's allegation that, as on
the date on which the application for its winding
up was issued, KLS
Inc: was insolvent and unable to pay its debts. Accordingly it is
common cause between the parties, or, it is
not in dispute that on 25
November 2008 KLS Inc: was not only insolvent but was also unable to
satisfy its debts. The respondent
is unable to deny that the amount
of R117, 958.75 was received by it from the funds of the insolvent
company and that the said
amount was paid to the respondent after the
commencement of the winding up of the company from whose funds the
said amount was
paid. Nowhere in its affidavit did the respondent
challenge this allegation.
10.
The issue this court is called upon to decide is whether the said
payment contravened the provisions of section 341 (2) of the
Companies Act or, in the alternative, the said sections of the
Insolvency Act and whether or not it is void or liable to be
impeached
as claimed by the applicants.
11.
The respondent admits that on 11 May 2009 it was paid an amount R117,
958.75 in order to enable it make certain payments for
specific
purposes. It denies however that the said payment to it by KLS Inc;
constituted a contravention of the provisions of section
341 (2) of
the Companies Act.
12.
Against this application, the respondent has raised three defences.
The respondent opposes the application on the basis, firstly,
that
the amount of R117, 958.75 that it received from the KLS Inc; was
deposited into its trust account which it operated in terms
of the
provisions of section 78 (1) of Attorneys Act; secondly, it contends
that the attorneys acting for the applicant should
have taken steps
to contact Pieter Hendrik De Bruin("De Bruin"), the
deponent of the answering affidavit, who is the
sole director and
shareholder in the respondent company; and thirdly, that section 341
(2), which constitutes
the
basis of the applicants' application, is unconstitutional as it is
against the spirit of section 9 (1) of the Constitution of
the
Republic Act No. 108 of 1996 ("the Constitution"). I now
wish to turn my attention to the grounds of defence raised
by the
respondent.
13.
The respondent contends that, because all the monies received from
KLS Inc; or Mrs Scheepers were deposited into its trust account
opened and operated in accordance with provisions of section 78 (1)
of the Attorneys Act, such monies never constituted part of
its
estate nor were they ever appropriated by the respondent. This
contention is disputed by the applicants, whose view is that
the
respondent's reliance on the provisions of the said section 78 (1)
was flawed by reason of the fact that the respondent received
the
said amount of R117, 958.75 well knowing not only about the pending
liquidation application against KLS Inc: but also the grounds
for
such liquidation. With such knowledge the respondent nonetheless made
those payments from the said amount.
14.
It is only apposite at this stage to analyse the provisions of
section 341 (2) of the Companies Act vis-a-vis the respondent's
three
grounds of defence in order to establish whether such grounds are
valid. In order to achieve this goal, it is very important
that one
should look at the relevant section 341(2) in order to establish what
the applicant should prove in order to succeed with
its application.
In doing this it will become evident that the target of the
provisions of the said section is not so much the
conduct of the
person or persons, party or parties that received the money as it is
the conduct of the person or persons, party
or parties that made the
payment. Even then it is the source of such money that is equally
important. Accordingly it is the conduct
of the company that pays out
the money and not of the company that receives it that determines
whether or not such a disposition
is tainted by the provisions of
section 341 (2). In terms of the provisions of the said section
341(2), only the effect and the
intention of the disposition need to
be considered. All that the applicants need to establish is actual
prejudice to the creditors
or preference of one creditor or some
creditors above others.
15.
In order to succeed in its application in terms of section 341 (2) of
the Companies Act, the applicants need only to prove that;
(a) the
payment that is challenged was made by a company; (b) that such a
payment was a disposition; (c) that the company disposed
of its
property; (d) that at the time the company disposed of its assets or
property it was unable to pay its debts; (e) and, that
the company
disposed of its assets or property after steps had been taken to
liquidate or wind it up. These are all the requirements
of the law
that the applicants must comply with in terms of section 341 (2) of
the Companies Act in order to show the Court that
they are entitled
to the remedy they seek. Unless the court orders otherwise there is,
in my view, no reason why it cannot grant
the relief, if it is
satisfied with the other requirements for the application.
16.
As correctly pointed out by counsel for the applicant the purse of
Section 341 (2) is to ensure that the property of the company
threatened with winding up is not improperly dissipated before the
commencement of winding up so that it is available for the
satisfaction of the claims of the creditors on the footing of
equality of treatment, subject only to any security or preference
which any of them may enjoy under the Insolvency Act. See, in this
regard, Herrigel N.O v. Bon Roads Construction Company (Pty)
Ltd
1980
(4) SA 669)
(SWA) at p. 678. In his heads of argument the
respondent's counsel hit the nail on the head when, though for a
different reason,
he referred this court to the court's description
of the provisions of section 115 (the predecessor of Section 341
(2)), in Lief
v Western Credit Africa (Pty) Ltd 1976 (3) SA344 at 347
B - C. The court stated in that case that:
"The
mischief aimed at by Section 115 is a possible attempt by dishonest
companies or directors or creditors or others to snatch
some unfair
advantage during the period between presentation of the petitioner
for the wounding up order and the granting of that
order by a court."
17.
It is clear that the respondent's defence is not that it did not know
about the pending liquidation application nor is it the
respondent's
defence that it was not aware of the pending liquidation application.
On the contrary it holds the view that it acted
bona fide in
accepting the said payment from KLS Inc; and furthermore in making
payments to some people from the said payment.
In fact save for
stating that the provisions of section 341 (2) are unconstitutional
on the basis that they are inconsistent with
the provisions of
section 9 (1) of the Constitution, the respondent has not mounted any
credible challenge against the provisions
of section 341 (2), even
though Counsel for the respondent, in his heads of argument, very
tersely dealt with what the word "disposition"
as used in
the said section 341 (2) meant. He argued that the payment of the
said amount of R117, 958. 75 by KLS Incorporated to
the respondent
did not constitute a disposition for the purposes of section 341 (2)
of the Companies Act. Section 2 of the Insolvency
Act defines
disposition as being " any transfer or abandonment of rights to
the property and includes a sale, mortgage, pledged,
delivery,
payment, release, compromise, donation or any contract therefor, but
does not include a disposition in compliance with
an order of the
court; and "dispose" has a corresponding meaning". The
payment by KLS Inc; of the sum of R117, 958.75
to the respondent
constitutes a disposition that is liable to be set aside on the basis
that it is void. It is a contravention
of the provisions of section
341(2) of the Companies Act.
18.
In support of his argument counsel for the respondent relied on the
provisions
of section 78 (7) of the Attorneys Act, which provides
that-
"A/o
amounts stating to the creditor (sic) of any practitioner's trust
account shall be regarded as forming part of the assets
of the
practitioner, or may be attached on behalf of any creditor of such
practitioner."
According
to his argument, KLS Inc; was not dispossessed of the funds when it
transferred them from the KLS account to the trust
account of the
respondent. While the said amount remained in its (the respondent's)
trust account, it was always the property of
KLS Inc.
19.
At any rate it is irrelevant whether or not the said amount became
part of the respondent's estate or that it was deposited
into its
trust account. If it was not the intention of the legislature to
regard monies paid into an attorney's trust account as
a disposition
in terms of section 341 (2) of the Companies Act, or a disposition
without value, in terms of section 26 or voidable
preference in terms
of section 29 or an undue preference to a creditor in terms section
30,
all of the Insolvency Act, the legislature would have made it
clear. Moreover section 341 (2) uses the words "Every
disposition
clearly with no exception.
20.
Again it is clear from the wording of the said section 341(2) that
lack of knowledge or ignorance about the fact that the company
that
made the payment was, at the time it made such payment, insolvent and
unable to pay its debts and being wound up, affords
the receiver of
the money with no defence. In my view the respondent is a firm of
attorneys who should have known better and who
should have exercised
caution in its dealings with KLS Inc.
21.
In his answering affidavit, the said De Bruin stated it quite
unequivocally that, as a result of certain untoward dealings
by a
certain Kottie Kirsten and his involvement with the investment scheme
called "Molokiba", KLS Inc was in financial
difficulties.
He stated furthermore that he was not aware that KLS Inc. had been
served with a copy of the application for its
winding up. The problem
that I have with this statement is that he failed to furnish further
details about the date on which he
became aware of the financial
difficulties that KLS Inc; was experiencing or to explain fully what
it was that he became aware
of.
22.To
be fair to De Bruin I will accept that he was not aware, in November
2008, that the applicants had launched an application
for the winding
up of KLS Inc; On his version, I will accept furthermore, that a copy
of the said application
was
served on KLS Inc; during November 2008. It is possible that he did
not know about the pending application to wind up KLS Incorporated
until in January 2009. At any rate no evidence has been placed before
me to show that De Bruin knew about the said application
before
January 2009. However on his own evidence, De Bruin knew already in
January 2009 that there was pending application for
the winding up of
KLS Inc. He started knowing about this application when he was
approached by Scheepers, according to his own
version. Section 348 of
the Companies Act states that:
"
A winding up of a company by the Court shall be deemed to commence at
the time of the presentation to the Court of the application
for the
winding-up".
23.
That the said Scheepers approached him with a copy of the application
for the winding up of KLS Inc; is clear from his own affidavit
where
he states that:
"21.
On 11 May 2009 the Respondent received a cheque from KLS in the
amount of R117,958.75. A copy of the cheque is attached
to the
Applicant's Founding Affidavit and the receipt was recorded in the
respondent's trust ledger a copy of which is attached
hereto as
Annexure "1".
22.
Upon receipt of the aforesaid amount and because the application had
been enrolled for hearing on 27 May 2009 I briefed Adv.
Ellis SC to
appear on behalf of KLS".
24.
KLS Inc; was provisionally liquidated on 27 May 2009. Accordingly any
reference to the application that was enrolled on 27 May
2009 can
only refer to one application and that is the application for the KLS
Inc's winding up. Accordingly I agree with the applicant's
contention
that the respondent knew about the application for the winding up of
KLS Inc; and that, under those circumstances, he
cannot escape the
provisions of section 341(2) of the Companies Act or the other
sections of Insolvency Act.
25.
The respondent's view is that he received the sum of R117, 985.75 and
made certain disbursements from it in the ordinary course
of
business. In Malk (Pty) Ltd v Franks v Solomon N.O.
(1935 TPD, 85
, at
p 91, De Wet, stated, with reference with regard to the question of
payment being made "in the ordinary course of business"
that;
"
Whatever definition is adopted we think the transaction must not be
regarded as standing by itself, but must be regarded
in the light of
all the surrounding circumstances."
26.
There is no doubt that there was a relationship between the said
Scheepers the respondent. Scheepers was a member of KLS Inc;.
According to the evidence of the respondent, Scheepers had financial
problems which had been caused by the said Kottie Kirsten.
In order
to solve those problems he was forced to approach the respondent in
order for the respondent to assist him with such problems.
In that
manner Scheepers became the respondent's client.
27.
It is not clear whether Scheepers approached the Respondent as a
member of KLS Inc; or in his personal capacity. This however
seems to
be otiose by reason of the fact that the money i.e. R117,985.75
belonged to KLS Inc; and it is KLS Inc; that is in the
spotlight
because of the said payment. It has not been disputed that the said
money belonged to KLS Inc. Although De Bruin contends
that he acted
pro amico for him, Scheepers was however obliged to pay him for his
disbursements and expenses. In that regard, any
payment that
Scheepers would make to the respondent would be payment made in
ordinary course of business. However in Est. van Schalkwyk
v Hayman
and Lessom
1947 (2) SA 1025
CPD at p.1046, the Court, in approving
the Court approached Rex v Patel
1932 TPD 130
at 133 stated that:
"Although
the mode only and not the intention of the disposition is relevant
nevertheless the consequences which follow from
the mode employed,
whether or not such consequences were ever intended, must in absence
of other evidence be relevant in determining
whether in the words of
DE VILLIERS, J.P. in Van Eeden's Trustee v Pelunski and Mervis
(1922,
O.P.D. 144)
atp 149:
"The
disposition is in accordance with the principles, practices, usages
and methods adopted de facto by or between solvent
men of business or
which would be so adopted by them under the circumstances in
question".
The
Court held that:
"...
the fact that the payment was made by the insolvent in fraud of the
rights of third parties, though the defendants were
not knowingly a
party to the fraud, made it impossible to hold that it was made in
ordinary course of business,
28.
It is not hard to find the reason for the Court's approach. If the
Court were to hold that the payment that had been made by
the
plaintiff in that manner was proper, the Court would have condoned
the violation of the law by the defendants. In equal measures
if this
Court were to approve of the payment by the KLS Incorporated of the
amount of R117, 958.75 to the respondent, the Court
would in that
manner be condoning Scheepers' violation of the provisions of section
341(2) of the Companies Act. There is another
reason for which this
Court, the same as Estate Van Schalkwyk v.Hayman & Lessorrr supra
will not approve of the said payment.
The espondent, though acting
pro amico for Scheepers, as he claimed, was at all material times
aware of the financial situation
of KLS Inc;. Therefore, his reliance
on the provisions of section 78(7) of the Attorneys Act lacks merits.
29.
On the defence that the provisions of section 341(2) of the Companies
Act was unconstitutional, the applicant's approach is
that, in
challenging as unconstitutional the provisions of section 341(2), the
respondent failed to observe the correct procedure
set out in Rule
16A of the Uniform Rules of the Court. Rule 16A (1) provides that:
"Any
person raising a constitutional issue in an application or action
shall give notice thereof to the registrar at the time
of the filing
of the relevant affidavit or pleading".
According
to the said sub-rule, the respondent should have given such a notice
simultaneously with the filing of his affidavit.
It is clear that the
rule does not envisage a situation where such cumbersome and time
consuming for the registrar to read affidavits
in order to establish
whether parties have in such affidavits given the notice required by
the said Rule. Accordingly the said
notice must be given separately
from the affidavit or pleading. As there is no such notice, the
respondent may not now rely on
the perceived unconstitutionality of
the said section 341(2) of the Companies Act. Therefore I agree with
the applicant's contention
that the respondent cannot argue the point
relating to the unconstitutionality of section 341(2) of the
Companies Act when he did
not follow the correct procedure.
30.
I have already made a finding that, commencing in January 2009, the
respondent was already aware of the financial difficulties
of
Scheepers; that he knew that there was a appending application to
liquidate KLS Inc.; that he knew about the circumstances under
which
the application to wind up KLS Inc. had been brought and furthermore
that in dealing with the said Scheepers, he should have
been more
cautious and should have appreciated the consequences of receiving
payment from him or his wife. Since I have already
indicated that the
said payment by Scheepers from the funds of an insolvent company
which was unable to pay its debts and which
was already being wound
up amounted to a violation of the provisions of the said section
341(2), I find it difficult to exercise
my discretion in favour of
the respondent, as that may have the effect of emasculating the
purpose of the said section 341(2).
31.
In the result i must, without much ado, find that the applicants have
made out a good case. I have not found any valid reason
why I should
refuse the application. Therefore I find, on the facts placed before
court and which the respondent has not disputed
or has disputed on
grounds which are not valid, that by making a payment of R117, 958.75
to the respondent, KLS Inc. made a disposition
of its property when
it was already being wound up and at a stage when it could not pay
its debts. The said disposition was prejudicial
to the rights of
other creditors of KLS Inc. In my view, the said disposition should
therefore be declared void. In the result,
I make the following
order:
1.
The applicants are hereby granted leave, in terms of the provisions
of sections 387(3) and 386(4) of the Companies Act NO. 61
of 1973 (as
it then was), to bring this application on behalf of Kirsten
Lottering Scheepers lnc;( in Liquidation).
2.
It is hereby declared that payment of the amount of R117, 958.75 made
to the respondent on 11 May 2009 after the commencement
of the
winding up in terms of the provisions of section 341(2) of the
Companies Act NO. 61 of 1973 (as it then was) constituted
a void
disposition of the property of Kirsten Lottering Scheepers Inc; (in
liquidation).
3.
Judgment is hereby granted in favour of the applicants in their
aforementioned
MABUSE
J.
APPEARANCES
Applicants'
Attorneys : Strydom & Bredenkamp Inc:
Applicants'
Counsel : Adv. M A Bardenhorst SC.
Respondents'
Attorneys : Rudman Attornerys
Instructed
by De Bruin & Partners;
Respondents' Counsel : Adv. P Ellis
SC.