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[2013] ZAECPEHC 30
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ABSA Bank Ltd v Openscor Twenty Three CC (278/13) [2013] ZAECPEHC 30 (20 June 2013)
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE DIVISION : PORT ELIZABETH
CASE NO. 278/13
In the matter between”
ABSA BANK
.......................................................................................
Applicant
And
OPENSCOR TWENTY THREE CC
............................................
Respondent
JUDGMENT
GRIFFITHS, J.:
[1] The respondent has been placed under provisional
liquidation at the instance of the applicant. On the extended return
day of
the rule nisi the respondent has appeared to show cause why it
should not be placed under final liquidation.
[2] It being common cause that all the procedural
requirements are in place for the granting of a final liquidation
order, the respondent’s
opposition is based on a contention
that it has since entered into an agreement of sale of the farm which
constitutes the sole
asset of the respondent for an amount sufficient
to settle its indebtedness to the applicant. The sale price,
according to the
written memorandum of agreement, is R6,000,000. On
this basis, so the respondent further contends, it is in effect not
unable to
pay its debts and, furthermore, it is not just and
equitable that it be wound up.
[3] Mr. Richards, who has appeared on behalf of the
applicant in this matter, has submitted that these contentions of the
respondent
are misconceived for a number of reasons. The agreement
was, according to its written content, concluded between the
respondent
as represented by its member, one Murray, and the
purchaser, one Biggs, on 18 May 2013. This was subsequent to the
respondent having
been placed under provisional liquidation pursuant
to which provisional liquidators were appointed to take charge of its
assets
and affairs. It is clear, therefore, that at the time when the
contract was concluded, the respondent no longer had the capacity
to
conclude such a contract without the consent or ratification of the
provisional liquidators. This much is conceded by Mr. Mullins,
who
has appeared for the respondent in these proceedings.
[4] The second flaw in the contention of the respondent
is the fact that the sale was made subject to a suspensive condition,
that
being that the sale was subject to the purchaser obtaining a
loan from a financial institution on or before 14 May 2013. According
to the respondent’s own version, the loan was only approved on
17 May 2013 at which stage, even if the agreement had been
validly
concluded, it would have lapsed due to the non-fulfilment of this
suspension condition.
Furthermore, an examination of the approval of the loan
which, ironically, was granted by the applicant itself, reveals that
the
approval of the loan application was subject to certain
conditions including that the purchaser’s father-in-law was to
provide
a deposit of R2,000,000 and that a trust known as the
Colin Biggs Trust was to raise a bond on another
immovable property owned by it in the sum of R1,500,000. No evidence
has been placed
before the court from either the trust or the
purchaser's father-in-law indicating that they had indeed agreed to
such conditions.
[5] The sale agreement includes a term to the effect
that in addition to the farm itself, the sale would include certain
movable
assets valued at R1,500,000 which assets currently belong to
a third party. It appears that it was contemplated that the
respondent
would in turn purchase these assets from the third party
utilizing the proceeds of the sale of the farm so that they might in
effect
be included with the farm as assets purchased. The effect of
this transaction would thus clearly be to reduce the potential gross
proceeds from the sale to R4,500,000. On this basis, the applicant
has demonstrated in its papers that the sale, even if it were
to go
ahead, would not produce sufficient funds to settle the respondent’s
indebtedness to the applicant and would result
in a significant
shortfall.
[6] Mr. Mullins, in response, fairly conceded that the
respondent had serious difficulties with the sale agreement as
contended
by Mr. Richards. However, he argued that this court
nonetheless retains a discretion to refuse a confirmation of the rule
and referred
me in this regard to the commentary in Henochsberg
1
at page 693. On this basis, Mr. Mullins argued that it
would be preferable to discharge the rule and thus to allow the
proposed
sale of the immovable property to go ahead which would avoid
the probable consequences of a "forced" sale in execution.
In this regard, he pointed to the fact that, as alluded to earlier,
the applicant itself had approved a loan pursuant to the purported
agreement and, so he contended, this was an indication that the
applicant must have concluded that this purported sale was indeed
to
the applicant’s own benefit. In essence, therefore, he
submitted that the applicant seeks to impeach its own approval.
[7] In response hereto to Mr. Richards pointed out that
the approval of the loan was clearly subject to a number of
conditions imposed
by the applicant itself. But, apart from any other
consideration, such approval was based on a valid legal sale existing
between
the parties to that agreement which clearly isn't so.
Furthermore, the effect of the suspensive condition referred to
earlier was
such that by the time the approval had been given by the
applicant, even if the sale had been valid
ab initio
, the
relevant time period had come and gone rendering the sale in any
event of no force and effect. Finally, the approval of the
loan by
the applicant was based on an application by the purported purchaser
of the immovable property, Biggs, for a loan which
had nothing
directly to do with the position of the respondent.
[8] The net effect of Mr. Mullins’ argument is
that I am to exercise my discretion in this regard based on the
spes
that the purported purchaser, who at the most may be morally bound to
do so and nothing more, would indeed proceed with the sale
on the
terms as contained in the purported written agreement thereby
providing sufficient funds to repay the debt of the respondent.
In my
view, there is simply insufficient evidence before me to establish
with any degree of certainty that this will happen, and
even if it
did, that it will result in the liquidation of the full debt owed to
the applicant.
[9] In all these circumstances, and for these reasons, I
am not prepared to exercise my discretion in favour of the
respondent.
[10] In the circumstances:
I grant a final winding up order in this matter
.
JUDGE OF THE HIGH COURT
HEARD ON : 30 MAY 2013
DELIVERED ON : 20 JUNE 2013
COUNSEL FOR APPLICANT : Mr Richards
INSTRUCTED BY : McWilliams & Elliot Inc.
COUNSEL FOR RESPONDENT : Mr Mullins
INSTRUCTED BY : Gregory Clark & Ass.
1
Henochsberg
on the Companies Act, Volume 1