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[2022] ZAFSHC 250
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Standard Bank of South Africa Limited v Chakane Properties (Pty) Ltd (2709/2022) [2022] ZAFSHC 250 (29 September 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
no: 2709/2022
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrate: YES/NO
In
the matter between:
THE
STANDARD BANK OF SOURT AFRICA LIMITED Applicant
(Registration
number: 1962/000738/06)
and
CHAKANE
PROPERTIES (PTY) LTD
Respondent
(Registration
number: 2017/273536/07)
CORAM:
Opperman,
J
HEARD
ON:
1 September 2022
DELIVERED
ON:
The judgment was handed down
electronically by circulation to the parties’
legal
representatives by email and release to SAFLII on 29 September 2022.
The date and time for hand-down is deemed to be 29 September
2022 at
15h00.
SUMMARY
Sequestration/liquidation
proceedings are not legal proceedings for enforcement of a credit
agreement under the
National Credit Act 34 of 2005
or
ex
contractu
JUDGMENT
[1]
The applicant applies for an order in terms of
which the respondent must be placed under provisional liquidation in
the hands of
the Master of the High Court: Free State.
[2]
The allegation is that the respondent is unable
to pay their debt and it will be just and equitable to order the
interim relief
sought.
[3]
Crucial is to state what this application is
not concerned with: It is not legal proceedings to enforce a credit
agreement under
the
National Credit Act 34 of 2005
and liquidation
proceedings are not legal proceedings for enforcement of a credit
agreement under the
National Credit Act 34 of 2005
or purely
ex
contractu
. The Law of Insolvency is
applicable and not the Law of Contract or law in terms of the
National Credit Act. The
matter of
Collett
v Priest
1931 AD 290
at 299 stated
the law and the
National Credit Act did
not amend the situation.
[S]equestration
cannot fittingly be described as an order for a debt due by the
debtor to the creditor. Sequestration proceedings
are instituted by a
creditor against a debtor not for the purpose of claiming something
from the latter, but for the purpose of
setting the machinery of the
law in motion to have the debtor declared insolvent. No order in the
nature of a declaration of rights
or of giving or doing something is
given against the debtor. The order sequestrating his estate affects
the civil status of the
debtor and results in vesting his estate in
the Master. No doubt, before an order so serious in its consequences
to the debtor
is given the Court satisfies itself as to the
correctness of the allegations in the petition. It may for example
have to determine
whether the debtor owes the money as alleged in the
petition. But while the Court has to determine whether the
allegations are
correct, there is no claim by the creditor against
the debtor to pay him what is due nor is the Court asked to give any
judgment,
decree or order against the debtor upon any such claim.
[4]
The
Supreme Court of Appeal in
Naidoo
v ABSA Bank
2010 (4) SA 597
(SCA) ruled on the issue with reference to
Investec
Bank Ltd and another v Mutemeri and another
2010 (1) SA 265
(GSJ). The discussion of Maghembe, N: “
The
appellate division has spoken – sequestration proceedings do
not qualify as proceedings to enforce a credit agreement
under The
National Credit Act 34 of 2005
: Naidoo v Absa Bank
2010 4 SA 597
”
brings the issue to light.
[1]
[4]
Mr
Reddy
’s
submission, as I understand it, implicitly contains a concession that
sequestration proceedings are not in and of themselves
“legal
proceedings to enforce the agreement” within the meaning
of
section 129(1)(
b
).
That his concession is correct is clear from the recent judgment
in
Investec
Bank Ltd and another v Mutemeri and another
where Trengove AJ concluded that an order for the sequestration of a
debtor’s estate is not an order for the enforcement
of the
sequestrating creditor’s claim and sequestration is thus not a
legal proceeding to enforce an agreement. He did so
after carefully
considering the authorities which have held that “sequestration
proceedings are instituted by a creditor
against a debtor not for the
purpose of claiming something from the latter, but for the purpose of
setting the machinery of the
law in motion to have the debtor
declared insolvent” – they are not proceedings “for
the recovery of a debt”.
The
learned Judge’s reasoning accords with this court’s
description of a sequestration order as a species of execution,
affecting not only the rights of the two litigants but also of third
parties, and involves the distribution of the insolvent’s
property to various creditors, while restricting those creditors’
ordinary remedies and imposing disabilities on the insolvent
–
it is not an ordinary judgment entitling a creditor to execute
against a debtor
.
[2]
(Accentuation added)
[5]
The
respondent opposes the application on the grounds set out in their
Notice in terms of Rule 6(5)(d) of the Uniform Rules of Court.
[3]
The Rule 6(5)(d) - Notice is in fact based on the
non-compliance by the applicant to the relevant clauses of the three
agreements
that all contains similar provisions regarding a written
notice to rectify default. The argument for the respondent, without
denying
their indebtedness and inability to honour the debt, is that
the applicant may only commence with the proceedings subject and
pursuant
to giving the
inter
partes
contractually prescribed default notices. This, according to the
respondent, bars the applicant from instituting any legal proceedings
and make them to fail as creditors
ex
contractu
and
in terms of the
National Credit Act.
[6
]
The above is not the cause of action and law
applicable here. The cause of action is a deed of insolvency and the
Law of Insolvency
is the scope wherein the judgment must be decided.
The questions of law raised in terms of Rule (6)(5)(d) of the Uniform
Rules
of Court do not find application.
[7]
The
respondent is indebted in the amount of R2 981 144.33 in respect of
three accounts located at The Standard Bank of South Africa
Limited;
the applicant.
[4]
1.
On 10 June 2019 the respondent concluded
a written Business Revolving Credit Plan Agreement. There was also a
variation agreement
concluded on 20 June 2020. The agreement was
implemented and the applicant made the loan amount of R2 000 000.00
available for
use to the respondent. The respondent breached the
agreement by not making timeous payments or any payments. A
Certificate of Balance
dated 5 April 2022 shows the amount
outstanding to be R1 745 036.86 together with interest at the rate of
16,6% per annum calculated
from 25 February 2022.
2.
The second agreement is one of a Credit
Card Facility. The agreement was entered into on or upon 18 November
2018 between the parties.
The respondent failed to pay any
instalments due and is indebted to the applicant as per a Certificate
of Balance dated 4 April
2022 in the amount of R738 935.19 plus
interest at 18,5% calculated from 4 April 2022.
3.
The third agreement is an Overdraft
Agreement entered into on 30 July 2020. The respondent breached
the terms of the agreement
by failing to make payments and is in
arrears in the amount of R497 172.28 plus interest at 25,5%
calculated from 25 February 2022.
The Certificate of Balance dated 31
March 2022 is confirmation of the above.
[8]
The
respondent is unable to pay their debt.
[5]
They do not deny the indebtedness nor the inability to meet the debt.
As said; their defence is that the contracted process to
establish
default was not complied with by Standard Bank.
[9]
Notifications of the indebtedness were served
on the respondent by registered post and Sheriff. Service was among
others effected
personally on the Director of the respondent. It was
done in terms of section 345 of the Companies Act 61 of 1973.
[10]
The respondent is unable to pay their debt in
terms of section 345 of the Companies Act 61 of 1973 because,
notwithstanding notifications,
the respondent has not made any
payments of the instalments or any amounts due to the applicant. In
addition; there is not any
explanation for the neglect to do so. The
respondent is well aware of their responsibilities but they do not
comply and do not
explain the non-compliance.
345.
When company deemed unable to pay its debts.
(1)
A company or body corporate shall be deemed to be unable to pay its
debts if:
(a)
a creditor, by cession or otherwise, to whom the company is indebted
in a sum not less than one
hundred rand then due
(i)
has served on the company, by leaving the same at its registered
office, a demand requiring
the company to pay the sum so due; or
(ii)
in the case of any body corporate not incorporated under this Act,
has served such demand by
leaving it at its main office or delivering
it to the secretary or some director, manager or principal officer of
such body corporate
or in such other manner as the Court may direct,
and the company or body corporate has for three weeks thereafter
neglected to
pay the sum, or to secure or compound for it to the
reasonable satisfaction of the creditor; or
(b)
any process issued on a judgment, decree or order of any court in
favour of a creditor of the
company is returned by the sheriff or the
messenger with an endorsement that he has not found sufficient
disposable property to
satisfy the judgment, decree or order or that
any disposable property found did not upon sale satisfy such process;
or
[Para.
(b) substituted by s. 26 of Act No. 59 of 1978.]
(c)
it is proved to the satisfaction of the Court that the company is
unable to pay its debts.
(2)
In determining for the purpose of subsection (1) whether a company is
unable to pay its debts, the Court shall also
take into account the
contingent and prospective liabilities of the company.
[11]
The inability of the respondent to pay and the
lack of any response or explanation are strongly indicative of the
fact that the
business is operated at a loss. It is, on a balance of
probabilities, commercially insolvent.
[12]
It will not be to the benefit of the applicant
and other creditors if the court allows the respondent to operate on
an insolvent
basis. The reality is that if the creditors recover
their debt when time is allowed to run, time might diminish what is
recoverable.
The respondent should be prevented from disposing of
their assets and incurring further liabilities without the
supervision of
the Master of the High Court. Legal fees for
collection of debt on a random basis will be prevented. The
respondent may still show
their solvency and soundness on the return
date of the provisional order.
[13]
The
respondent relies exclusively on the Rule 6(5)(d) – Notice and
the allegations in the Founding Affidavit must therefore
be taken as
established facts by the court.
[6]
The respondent did not indicate or seek any relief for an opportunity
to file an Answering Affidavit on the merits. The application
is by
its mere nature urgent and justice demands that the application be
granted. The applicant complied with the further statutory
requirements for the provisional liquidation of Chakane Properties
(Pty) Ltd.
[7]
[14]
ORDER
It
is ordered that:
1.
The questions
of law raised in terms of Rule 6(5)(d) of the Uniform Rules of Court
are dismissed.
2.
The respondent
company, Chakane Properties (Pty) Ltd
(Registration
number: 2017/273536/07),
is
hereby placed under PROVISIONAL LIQUIDATION in the hands of the
Master of the High Court: Free State.
3.
A PROVISIONAL
LIQUIDATION ORDER is thus issued calling upon all interested parties
to show cause, if any, to the court on Thursday
the
10th
day of November 2022 at 09h30
why a FINAL ORDER OF LIQUIDATION should not be granted against the
respondent company.
4.
SERVICE of
this rule
nisi
and a copy of the notice of motion and annexures shall be effected on
the respondent company at its registered office or its principal
place of business within the court's jurisdiction.
5.
This order
shall, without delay, be published in THE CITIZEN and THE GOVERNMENT
GAZETTE.
6.
The sheriff
shall ascertain whether the employees of the respondent are
represented by a trade union and whether there is a notice
board on
the premises to which the employees have access.
7.
A
copy of this provisional liquidation order shall be served by Sheriff
on:
[8]
-
7.1
Every registered trade union that, as far as the Sheriff can
reasonably ascertain, represents any of the employees of
the
respondent company;
7.2
The employees of the respondent company by affixing a copy of the
application and provisional liquidation order on any
notice board to
which the employees have access inside the respondent company's
premises or if there is no access to the premises
by the employees,
by affixing a copy to the front gate or front door of the premises
from which the respondent company conducted
business; and
7.3
The South African Revenue Services.
8.
The
applicant must, before or during the hearing for the final
liquidation order, file an affidavit by the person who furnished
a
copy of the application which sets out the manner in which
service
was
complied
with.
9.
The
report of the Master of the High Court; Free State, if any and in
terms of sub-section 346(4)(a) of the
Companies
Act 61 of 1973
,
shall be filed on record.
10.
Costs of this
application shall be costs in the liquidation.
M
OPPERMAN, J
APPEARANCES
On
behalf of the applicant:
ADVOCATE J ELS
Chambers
Bloemfontein
BLOEMFONTEIN
NC
Oosthuizen
EG
Cooper Majiedt Inc
17
Third Avenue
Westdene
BLOEMFONTEIN
051
447 3374
litigation2@egc.co.za
REF:
NC/JPD/SO2296
On
behalf of respondent:
ADVOCATE
A SANDER
Chambers
Bloemfontein
BLOEMFONTEIN
B
Blair
Blair
Attorneys
Blair
House
32
First Avenue
Westdene
BLOEMFONTEIN
051
430 7543
bruce@blairattorneys.co.za
[1]
PER / PELJ
2011 VOLUME 14 No 2, pages 171 to 180, ISSN 1727-3781.
[2]
Naidoo
v ABSA Bank
supra.
[3]
Rule 6(5)(d):
Any person opposing the grant of an order sought in the
notice of
motion must;
(i)
within the time stated in the said notice, give applicant notice, in
writing
that such person intends to oppose the application, and in
such notice appoint an address within 15 kilometres of the office of
the registrar, at which such person will accept notice and service
of all documents, as well as such person’s postal, facsimile
or electronic mail addresses where available;
(ii)
within fifteen days of notifying the applicant of intention to
oppose the
application, deliver such person’s answering
affidavit, if any, together with any relevant documents; and
(iii)
if such person intends to raise any question of law only, such
person must deliver
notice of intention to do so, within the time
stated in the preceding sub-paragraph, setting forth such question.
[Substituted by GNR.3 of
19 February 2016 and by GNR.2133 of 3 June 2022.]
[4]
Founding
Affidavit at paragraph 6.1 on page 10.
[5]
Founding
Affidavit at paragraph 24 on page 27.
[6]
Paragraphs 1
& 2 of the Heads of Argument for the respondent.
Harms,
D: Civil Procedure, Civil Procedure in the Superior Courts, Part B
High Court, UNIFORM RULE 6 APPLICATIONS, Respondent’s
Options,
Last Updated: July 2022 - SI 74,
https://www.mylexisnexis.co.za/Index.aspx
on 26 September 2022:
“
B6.35
Points of law
Where a
respondent wishes to rely on a point of law only, he must deliver a
notice to that effect in lieu of an affidavit
setting forth such
point. If the respondent wishes to rely on the merits as well
as, or in the alternative, on a point of
law he ought to file
affidavits on the merits and argue the legal point (
in
limine
if
appropriate). Failure to file affidavits under these
circumstances does not deprive the court of its discretion to allow
the late filing of affidavits but the respondent is at risk
that the court may hold that the failure to file affidavits
was to
gain time and that, in consequence, late affidavits ought not to be
allowed thus a respondent should file affidavits on
the merits
irrespective of whether a preliminary point is to be raised. Only in
appropriate or exceptional circumstances will
a court allow the late
filing of affidavits where a preliminary point has failed.
Where
a respondent wishes to raise an objection
in limine
that
the application discloses no cause of action he ought to file
affidavits on the merits. If the point
in limine
fails,
the failure to file affidavits might also result in the application
being granted or in his having to pay the costs of
a postponement.”
[7]
Paragraph
28 of the Founding Affidavit at pages 30 to 31 of the Bundle.
[8]
Section
346 of the
Companies
Act 61 of 1973:
Sub
- section
(4):
(
a
) Before
an application for the winding-up of a company is presented to the
Court, a copy of the application and of
every affidavit confirming
the facts stated therein shall be lodged with the Master, or, if
there is no Master at the seat of
the Court, with an officer in the
public service designated for that purpose by the Master by notice
in the
Gazette
.
(
b
)
The Master or any such officer may report to the Court any facts
ascertained by him which appear to him to justify
the Court in
postponing the hearing or dismissing the application and shall
transmit a copy of that report to the applicant or
his agent and to
the company.
Sub
- section (4A)
(
a
) When
an application is presented to the court in terms of this section,
the applicant must furnish a copy of the
application—
(i)
to every registered trade union that, as far as the applicant can
reasonably ascertain, represents any of the
employees of the
company; and
(ii)
to the employees themselves—
(
aa
)
by affixing a copy of the application to any notice board to which
the applicant and the
employees have access inside the premises of
the company; or
(
bb
)
if there is no access to the premises by the applicant and the
employees, by affixing a
copy of the application to the front gate
of the premises, where applicable, failing which to the front door
of the premises
from which the company conducted any business at the
time of the application;
(iii)
to the South African Revenue Service; and
(iv)
to the company, unless the application is made by the company, or
the court, at its discretion, dispenses with the
furnishing of a
copy where the court is satisfied that it would be in the interests
of the company or of the creditors to dispense
with it.
(
b
) The
applicant must, before or during the hearing, file an affidavit by
the person who furnished a copy of the application
which sets out
the manner in which paragraph
(
a
)
was
complied with.
[
Sub-s.
(4A)
inserted
by s. 7 of Act No. 69 of 2002.]