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[2021] ZAGPPHC 178
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Business Partners Ltd v Sophia Property Investments (Pty) Ltd (1307212019) [2021] ZAGPPHC 178 (29 March 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
C
ase
n
u
mber:
1
3
072
1
20
1
9
Heard
on:23,25 and 26 March 2021
Date
of
judgment:
29
M
arch
2021
In
the matter between:
BUSINESS
PARTNERS
LTD
Applicant
and
SOPHIA
PROPERTY INVESTMENTS (PTY) LTD
Respondent
JU
DG
M
EN
T
SWANEPOEL
AJ:
[1]
In the classic novel Catch 22 Joseph Heller writes about a
paradoxical situation from which it is impossible to escape due to
the prevailing circumstances. When an airman at war wants to be
declared mentally unfit to serve, In order to escape his war duties,
the medic Doc Daneeka explains that anyone wishing to escape from war
must of necessity be sane, and therefore incapable of being
declared
mentally unfit. This is a so-called catch-22 situation.
[2]
In this application respondent finds itself with a similar paradox,
one to which there seems to be no solution. Applicant seeks
the final
winding up of the respondent on the basis that it is unable to
pay
its debts, and that it would be just and equitable to liquidate
the respondent.
[3]
Respondent is a property holding company. It does not trade,
but it is the owner of a sectional title unit, section 2
in the
scheme known as Wilson Park Phase 1,which is situated at Erf 260
Silvertondale Ext. 2 Township, City of Tshwane. Applicant
is the
bondholder over the property as security for two loans of R 1 665
600.00 and R 224 000.00 respectively, which applicant
extended to
respondent on 6 June 2017. Respondent defaulted on the loan
repayments, and on 25 January 2019 it was in arrears with
its monthly
instalments in respect of the first loan in the sum of R 107 215.86.
The balance on the loan as at that date was R
1650 747.19. In respect
of the second loan the respondent was also in arrears in the sum of R
230 141.04, with the balance on that
loan amounting to R 243 312.68.
[
4]
On
1
4
November 2018 appl
i
ca
n
t
caused a
l
e
tter
i
n
terms of
section 345 of the
C
om
p
a
n
i
es
Act,
1
973
to be
served on
r
es
p
ondent.
Responde
n
t
did not settle
t
h
e
debt
with
i
n
3
weeks, and
thu
s
t
h
e
respondent
i
s
deemed
to
be unable
to
pay
i
ts
debts.
I
t
i
s,
it
seems,
comm
o
n
cause
that
r
espondent
was,
and
still
i
s,
u
n
ab
l
e
to settle
its
de
b
ts
a
s
they fall
d
u
e.
I
t
i
s
therefore
commercially
i
n
solvent.
[1]
[5]
On 20 November 2018 respondent's director, Mr. Serguei Ivanov
addressed a rather belligerent letter to applicant in which he
admitted that the respondent could not maintain the agreed
instalments, and he questioned why applicant was not prepared to
reduce
the instalments. In response applicant's attorney wrote to Mr.
Ivanov proposing that respondent be granted until 31 March 2019 to
sell the property on the open market Applicant was prepared to accept
payment of interest only until 31 March 2019, whereafter
the
arrangement would be reviewed. Respondent paid interest in December
2018, but then failed to effect payment in January and
February
2019.This application was launched on 26 February 2019.
[6]
On 4 July 2019 a provisional winding up order was granted. returnable
on 17 February 2020. On the return date, at the request
of both
parties, the matter stood down and on 21 February 2020 a settlement
agreement between them was made an order of Court.
The settlement
essentially required respondent to pay instalments of R 24 000.00 per
month from 1 March 2020. The agreement provided
that applicant would
be entitled, in the event of breach of the agreement, to move for a
final winding up order. Furthermore, respondent
undertook to sell the
property within nine months from 21 February 2020. The net proceeds
would be used to settle the debt, the
costs of the provisional
liquidators, and applicant's attorney/client costs of the winding up
application, and in respect of a
separate action instituted against
Mr. Ivanov personally. Respondent effected payment in March and April
2020, but then made some
payments but less than the agreed amount.
[7]
Applicant gave respondent notice of Its intention to move for a final
order on 19 November 2020.The matter did not appear on
the rofl on
that date, and the provisional order lapsed, only to be reinstated on
an urgent basis on 4 December 2020.Respondent
sought leave to appeal
against the reinstatement of the order. but was refused leave to
appeal. Respondent has taken no further
steps in that application.
[8]
The matter came before me on 21January 2021. On the day before the
hearing, 20 January 2021 respondent delivered a notice of
intention
to oppose the final order. I extended the rule
nisi
to 23
March 2021 to give respondent an opportunity to either settle the
matter or to deliver an answering affidavit. On 23 March
2021the
matter was again before me. Respondent had still not delivered an
affidavit opposing the application. Respondent advised
me that the
property had been sold and that guarantees for R 1 097 000.00 had
been provided to applicant. In addition, respondent
had paid R 273
284.11 and a further R 35 000.00 into its attorney's trust account to
make up the shortfall on the capital. I directed
respondent to file
an answering affidavit by 24 March 2021, and I ordered that the
matter be heard on 25 March 2021.On 25 March
2021 the parties
indicated that the respondent's affidavit had been filed, together
with an application for condonation for its
late filing.
[9]
As far as
condonation
i
s
co
n
cer
n
ed,
responde
n
t
can g
i
ve
n
o
better exp
l
anation
for its de
l
ay
i
n
filing its aff
i
d
avit
than to say
i
t
h
ad
b
een,
and still
was. of
the
view
that
the
matter
co
ul
d
be
s
e
ttled.
R
e
spondent
had
decided
to save
on
l
egal
fees
b
y
n
ot
filing
an
answering
affidavit.
I
n
T
aslma
v
De
p
artment
of
Transport and
o
thers
[2]
and the
Constitutional
Co
u
rt
(
i
n
V
an
W
y
k
v
U
nltas
Hospital
and
an
o
ther
(Open
Democratic
Advice
Centre as amicus curiae))
[3]
h
ave
h
eld
that
an
ex
t
ension
of
time
may
have
i
mportant
con
s
eq
u
e
n
c
e
s,
and
i
s
n
ot
me
r
e
l
y
for the ask
i
ng:
"
An
a
pplic
a
nt for candonation must
g
ive
a full explanation for the delay.
In addition,
the
explanation must cover the entire period of the del
a
y.
And, what is more,
the
e
xplanation
given must be reasonable”
[10]
Respondent has not given reasonable explanation for its delay in
delivering an answering affidavit. It did not oppose the provisional
order, it knew in November 2020 that applicant was intent on
proceeding with the application, and when the matter came before me
in January 2021, applicant's counsel made it abundantly clear that
applicant intended to seek a final order. There was nothing
to
suggest to respondent that the parties would necessarily reach
agreement, and thereby stave off a final order. Respondent should
have filed its answering affidavit timeously.
[11]
I am therefore not inclined to grant condonation for the late filing
of the affidavit. Respondent's counsel argued that the
entire debt
had been secured, and that it would be unjust to nevertheless grant a
final order. That contention is simply not correct.
Although the
capital might be secure, there are substantial costs that also have
to be paid, and it seems to me that the funds
available to the
respondent is insufficient to cover the entire debt. I stood the
matter down for one last time to 26 March 2021
so that the parties
could attempt to reach agreement on the balance of the debt due to
the applicant. They were unable to do so.
That is the catch 22 in
which the respondent finds itself. Ii cannot pay the capital owing
without transferring the property to
the purchaser, but that would
leave the applicant without security for its costs. Applicant will
not allow transfer of the property
unless the entire debt Is secured.
[1
2
]
A
Court
has
a
discretion
n
ot
to
grant
a
final
winding
u
p
or
d
er,
even
when all
the
ot
h
er
j
u
ri
s
d
i
ct
i
o
n
al
r
equire
m
ents
h
ave
be
e
n
m
e
t.
H
owever
, that
d
i
scre
t
i
on
i
s
a
n
arrow
one.
I
n
SAA
Distributors
(Pty)
Ltd v Sport
e
n
Spel
(
Edms)
Bpk
[4]
the Court
h
e
l
d
as follows:
"As
pointed
o
ut
b
y
DOWLING,
J
.
,
in
Service
T
rade
Supplies (Pty
.
) Ltd. v.Dasco
& Sons
Ltd.,
1
962 (3)
S.A.
424
(N) at
p.
428:
"The
cases
s
how that the
discretion
of
the Court w
h
e
re unp
a
id creditors
seek
a winding-up
order
against
a co
m
pany
un
a
b
le to
p
a
y
its de
b
ts is in
reality a
very
narrow one,
just
as
its
discretion
to
refuse
a
sequestration
order
of
an
application
of an unpaid creditor
in
an
insolvent
estate is very
narrow.
In
Effune v.
Hancock,
1
923
T
.
P
.
D.
355, a full
Court decision on
a
ppeal by
a
creditor against a
refusal to grant
a
fin
a
l winding-up order, at
p.
364,
DE
WAAL,
J.,
is
reported
to
have
said:
'Wher
e
a
creditor alleges an
act
of
insolvency, and
proves his
claim,
he has the unfettered
right
to
choose
his form of
execution, one of
which is
to sequestrate
h
is debtor's estate
'
,
and
His
Lordship
goes
on to indicate
that
any discretion the
Court
may
have
is a narrow one.
In
the sphere
of
company
law
the same
sort
of
approach is
valid.
The
great w
e
ight
of authority is t
h
at generally speaking an
unpaid creditor has
a right ex debito justitiae
to
a
winding-up order against a
c
ompany unable to
pay
its
debts.
See
In re James
Millward
and
Co.
Ltd.,
1940
Chancery
333,
end
Buckley
on
the
C
ompanies Acts,
1
3th
ed., p. 450,
wh
e
re
the
learned
author
quotes
the remarks
of
Lord
CRANWORTH
In
Bowes
v.
Hope
Life Insurance,
[1865] EngR 351
;
11
H.L.C.
389
,
which
follow:
'
I
t
is
not
a
discretionary
matter
with
the
Court,
wh
e
n
a
debt
Is
established and
not
satisfied, to
say whether
the
company shall
be
wound
up
or
not;
that
is
to
say.
if
there
be
a
valid
debt
established,
valid
both
at
law
and
inequity.
On
e
does
not like
to
say
positively
that
no
case
could
occur
in
which It
would
be
right
to refuse
it,
but
o
rdinarily speaking,
it
is
th
e
duty
of
the
Cour
t
to
direct
a
wi
n
ding
up.”
[13]
This approach was followed in
ABSA Bank Ltd
v
Rhebokskloof
(supra):
"Notwithstanding
this
the Court has
a
discretion
to
refuse a winding-up order in these
circumstances
but it is one which Is limited
where a creditor
has
a
debt which
the company
cannot pay;
in
such a case
the
creditor
is
entitled, ex debito
justitiae,
to
a
winding-up
order,
see
Henochsberg
on
the
Companies
Act
(4th
Edtn) Vol.
2
p
586
,
·Sammel
and
Ot
h
ers
v
President
Brand Gold
Mining
Co
L
t
d
1
9
69
(3)
SA
629
(A)
at
662F."
[14]
I am acutely aware of the fact that In winding up applications there
are most likely to be financial implications not only
for the company
being wound up, but also for the persons behind the corporate fade.
Such hardship is often inevitable and devastating
. However, I must
also consider that applicant has waited more than two years for the
debt to be satisfied. It has on a number
of occasions tried to
accommodate the respondent, without success. I have postponed the
matter on three occasions to allow respondent
to resolve its
problems.
[15]
Consequently, I do not believe that
it
is appropriate
in these circumstances to exercise a discretion not to grant the
final winding up order.
[16]
I make an order in the following terms:
[16.1]
Respondents finally wound up in the hands of the Master of the High
Court.
[16.2]
The costs of the application will be costs in liquidation.
JJC
SWANEPOEL
ACTING
JUDGE OF THE HIGH COURT
GAUTENG
DIVISION OF THE HIGH COURT, PRETORIA
Delivered:
This judgement was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation
to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on Caselines. The
date for
hand-down is deemed to be 29 March 2021.
COUNSEL
FOR APPLICANT: Adv.
CL Markram-Jooste
ATTORNEY
FOR APPLICANT: Morris
Pockroy
Attorney
COUNSEL
FOR RESPONDENT: Adv.
A Granova
ATTORNEY
FOR THE RESPONDENT: Hack Stupel & Ross
Attorney
HEARD
ON:
23, 25 and 26 March 2021
JUDGMENT
ON:
26 March 2021
[1]
ABSA Bank
Ltd
v
Rhebo
k
skloof
(Pty) Ltd
and
others
1
993
(4)
SA
436
(C)
[2]
[20
1
6]
1ALL
SA
465
(SCA)
[3]
2008
(4)
BCLR
442
[4]
1
973
(3)
SA
371(C)