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[2021] ZAGPPHC 228
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SV Trading CC Virtual Production v Suliman and Another (19614/2021) [2021] ZAGPPHC 228 (10 May 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF
SOUTH
AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO:
19614/2021
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
NOT
REVISED
In
the matter between:
SV
TRADING CC t/a VIRTUAL PRODUCTION
APPLICANT
and
SHAZIA
SULIMAN N.O.
FIRST
RESPONDENT
THE
SHERIFF OF THE HIGH COURT OF
SOUTH
AFRICA PRETORIA-EAST
SECOND
RESPONDENT
JUDGMENT
Van
der Schyff J
[1]
In this application the applicant by way of
rei
vindicatio,
claims from the first respondent, who is the duly appointed
liquidator of Audio Logic CC, certain assets (listed in annexures VS
and V6 to the founding affidavit) , on the basis that it is the owner
thereof (the assets). The only issue for my determination
is whether
the applicant succeeded in proving ownership of the assets, which
were attached and removed by the second respondent
at the behest of
the first respondent (the liquidator), in terms of an order obtained
in terms of s 69(3) of the Insolvency Act.
The application was found
to be urgent and heard in the urgent court on 30 April 2021. On 3 May
2021, a judgment was handed down,
in terms of which the matter was
referred for hearing of oral evidence on the limited issue of
ownership of the assets. Evidence
was adduced on behalf of the
parties, on Friday 7 May 2021.
[2]
As stated in the judgment dated 3 May 2021, the facts of this
application are mostly common cause. Both parties agree that an
oral
agreement of sale was concluded between Audio Logic CC ('Audio
Logic') and the applicant during 2018. The applicant's case
as set
out in the founding affidavit, is that the parties agreed in 2018
that the applicant would purchase 'each and every asset'
of Audio
Logic, for an amount of R13m. The amount would not be paid in a lump
sum, the creditors of Audio Logic would be paid and
the balance would
be paid to Marais, Audio Logic's sole member, by 2023. Pursuant
to the conclusion of the agreement, the
assets were delivered to the
applicant on 6 April 2018 . The applicant contends that since this
was not a cash sale, ownership
passed to it upon delivery to it. The
applicant also planned to convert Audio Logic into a company , as a
vehicle to run a sound
engineering academy.
[3]
Audio Logic's version was set forth by its sole member, Marais. He
intended selling Audio Logic and during 2027, met with Van
Graan, who
is a member of the applicant. In 2018 a meeting was held between Van
Graan, Marais and Audio Logic's accountant, Vorster.
According to
Marais, they discussed that 'Audio Logic' could be sold as a going
concern for an amount of R13m. The applicant intended
to integrate
Audio Logic's business under the name of 'Virtual Productions'. The
proposed terms of the agreement were that (i)
the applicant would
settle all Audio Logic's creditors before December 2018; (ii) the
balance of the purchase price would be paid
to Marais over a period
of five years; (iii) Marais would remain an employee of Audio Logic
for five years at a salary of R50 000.00,
until April 2023. He was
adamant that ownership of the assets would remain vested in Audio
Logic until full payment of the purchase
price. The liquidator states
in her affidavit: 'No person in his right mind would conclude an oral
agreement for the delivery of
moveable assets worth R13m without the
reservation of ownership'.
[4]
The urgent court application was preceded by an application in the
Magistrate's Court in terms of s 69(3) of the Insolvency
Act. The
founding affidavit to that application was attached to the
applicant's founding affidavit in the urgent court application.
It is
noteworthy that the affidavit deposed to by the liquidator in the s
69 application corresponds largely with the answering
affidavit. The
terms of the proposed agreement are repeated verbatim , save for the
fact that it is not stated in the first affidavit
that the parties
agreed that ownership of the movable assets would remain vested in
Audio Logic until the full purchase price was
paid. After considering
the affidavits filed of record, together with the annexures thereto ,
I was of the view that a
bona
fide
and
genuine dispute of fact exists as to the parties' intention on
whether ownership would pass, even if a robust approach was followed
as required when the Plascon Evans principle is applied in deciding
questions of fact in motion proceedings. As stated, I was of
the view
that a factual dispute existed regarding the question as to whether
the parties' oral agreement contained an ownership
reservation
clause. In the result, the application was referred to oral evidence
on this limited aspect.
[5]
Three witnesses were called to testify. The applicant called Mr. Van
Graan, the managing member of the applicant. Mr. Van Graan's
evidence
was that the sale agreement was concluded in March 2018 when he met
with Mr. Marais, the sole member of Audio Logic, Mr.
Vorster - Audio
Logic's accountant and Mr. Marais' girlfriend at Rhapsody's. He
confirmed the terms of the agreement as set out
in his founding
affidavit. He stated unequivocally that the issue of the reservation
of ownership did not come up at all during
the discussions. His
evidence was that he wanted to buy all Audio Logic's equipment, all
its clients and obtain Mr. Marais' expertise.
The latter reason
resulted in Virtual Productions offering Mr. Marais employment for
the next five years. Mr. Marais was also offered
shares and a
membership interest in Virtual Productions, but he declined this as
he only wanted to focus on the business of sound
engineering. Mr.
Marais, who was in a bad emotional state and pressed by debts and
personal losses wanted to free himself of the
stress associated with
running a business. He sought financial assistance to tend to
personal financial issues as well as Audio
logic's debt. The issue of
a reservation of ownership only came up at a later stage after Mr.
Marais and Audio Logic's immediate
financial concerns were addressed
and Mr. Marais was in a better position. It was an outright credit
sale and ownership was transferred
when the equipment was delivered
to Virtual Productions. It was a handshake agreement. Although he
wanted the agreement to be put
in writing some issues needed to be
sorted out before a written agreement could be drafted. It was never
put to the witness that
the contract would only come into existence
if put in writing. Mr. Van Graan's evidence that he gave certain
equipment to Mr. Marais
after the equipment was delivered on 6 April
2018, because Mr. Marais asked whether he could have it, was also not
disputed during
cross examination. I found it significant that it was
not put to Mr. Van Graan that Mr. Marais and
I
or Mr.
Vorster would testify that the parties agreed that the property would
remain Audio logic's property until full payment of
the purchase
price of R13million was affected. Instead it was put to Mr. Van Graan
that the witnesses would testify that the words
'ownership' and
'reservation of ownership' was not mentioned or used during the
discussion. It could have been the tenor of the
discussion but the
words were not used.
[6]
Mr. Van Graan was a passionate witness, who was somewhat
confrontational during cross-examination. His answers were quick and
straightforward. Despite stringent cross examination he never wavered
as far as his evidence that the issue of the reservation
of ownership
was not discussed and never even came up during the meeting, is
concerned. Counsel for the respondent did not argue
that Mr. Van
Graan was not a credible witness. Of importance to me, is the fact
that Mr. Van Graan's evidence as set out in the
founding affidavit
corresponds with the
viva voce
evidence he gave.
[7]
Mr. Vorster,
Audio
Logic's
accountant
testified
on behalf of the respondent.
He
can be
described
as a
very
cautious
witness
who
qualified
his
evidence
frequently
by stating
'in my
view' or 'as I saw
it'. He was
very
soft
spoken. I
got
the
impression that he did not want to
perjure
himself and
that he was
not in a
position
to
give
strong
straightforward
answers
to
the
questions
asked.
Mr.
Vorster
testified that after
the meeting
it
was
his impression that the parties came to a 'baseline
agreement'.
Although
he
initially
said
that
the meeting
was
scheduled
to discuss a possible sale of Audio Logic's equipment and client
base,
he
continued
to state that it
was decided
at
the
meeting that the equipment would
be sold for
an amount
of R13 000 000. He emphasised-
"that
has
not
changed
up
to now'. He continued to state that it
was also
decided that the first portion of
the
payment
would
be
made
towards
Audio Logic
and
Mr.
Marais's
existing
creditors
and the
remainder
would be
paid to
Mr.
Marais
over
a
period of
five
years.
Urgent
attention
was to
be
given
to
the
existing
creditors
to
settle
their
claims. He
repeated
at
least three
times
that
the general
agreement
was
that
those
creditors were pertinent and that they were the first order of
business and had
to
be
settled
first.
The
parties
wanted
to
go
ahead
with
the
transaction
although
some minor issues still needed to be ironed out. Mr.
Vorste
r
's
evidence
was that
some
of
the equipment was
linked to
hire-purchase
agreements
. Mr.
Vorster
said the mere fact that Audio Logic's credit agreements were
mentioned
during the
meeting is indicative of the tenor of the agreement that ownership of
the
property
could
not
pass
to
Virtual
Production unless,
at
l
east,
the
hire
purchase agreements were redeemed. He stated during cross examination
that
the
parties
agreed that
i
f
the Wi
l
denmar
account was taken over and settled by Virtu
a
l
Productions
that the
ownership
of the
equipment
l
inked
to that
account
would
be
transferred
to Virtual
Production
s
.
Although
the words
or term
'ownership
was
reserved'
were
not
used, the
understanding
he
had from
the
conversation
was that ownership was reserved.
Every
instance when Mr.
Vorster
i
ndicated
that ownership could not be transferred
he linked
that to the existence of hire-purchase agreements
.
However,
no
evidence
was placed before the court that any of the
movable
assets, the equipment
concerned,
is owned by a third
party
in
lieu
of
a
hire-purchase agreement. The
e-mail
dated 11
September
2018,
written by
Mr.
Vorster
indicates
that the Wildenmar account was indeed settled
and that he
was of the view that the equipment linked to that account was now
owned
by
Virtual
Productions.
The
agreements
uploaded
to
case
lines
by
agreement
between the parties expired before the agreement was concluded. In
any event,
it
is
important
to note
that
the
liquidator
does not
state
i
n
the
answering
affidavit
or the
affidavit
filed in support
of the
s 69
application, that the
assets
belong to a
creditor of Audio Logic. She
stated
that the
assets belonged
to Audio
Logic.
On the
facts before me,
I
am unable
to find any hire-purchase agreement
that was
l
inked
to
the
equipment
that
was
still
effectiv
e
,
except for
one Instalment Agreement that expired on 1
April 2018,
when delivery of the assets occurred.
[1]
Mr. Vorster
's evidence
that the tenor of the discussion was that ownership
of the
assets
would
not
be
transferred
because
of
the
existence
of
hire-purchase
agreements linked
to the
assets, does therefore not make
l
egal
sens
e
.
[8]
Mr. Marais was the last witness to testify. Mr. Marais testified
during his evidence in chief that it was agreed during the
discussion
of March 2018 that ownership of the assets would remain in Audio
Logic until final payment. This evidence corresponds
with the
statement made by the liquidator in the answering affidavit that it
was 'categorically discussed' at the meeting in March
2018 that
ownership of the assets would remain in Audio Logic until full
payment of the purchase price. It, however, does not correspond
with
the statement made to the Van Graan that Mr. Marais would testify
that the words 'ownership' or 'reservation of ownership'
were not
mentioned or used at the March 2018 meeting. During cross examination
Mr. Marais conceded that 'ownership' and 'reservation
of ownership'
were not 'mentioned in so many terms'. When Mr. Marais was pressed
during cross examination to explain what he meant
when he said that
ownership and the reservation of ownership were 'not mentioned in so
many words' in March 2018 , he said 'If
they took ownership why did
they not honour the debts?' and 'How can you claim ownership if you
cannot pay the bills'.
[9]
Of importance is Mr. Marais account of the terms of the agreement as
contained in a document dated 5 November 2020 compiled
by Mr. Marais.
Mr. Marais confirmed during his evidence in chief that this document
was drafted by him, and that it is a summary
that contains the most
important information in relation to the agreement concluded. Mr.
Marais confirmed that the purchase was
structured as follows:
"Virtual
Productions would settle all Audio logic creditors. The balance of
the purchase price would be paid to myself over
a period of five
years. I would be under employment with a salary and benefits for the
five years that was over and above the sale
of the company. After the
five years, that would have ended April 2022 I would be released from
employment."
It
is noteworthy that no mention is made of any reservation of ownership
in this summary . Mr. Marais explained the absence of this
information by saying that the document is only a summary . In my
view counsel for applicant correctly submitted that the reservation
of ownership is an important aspect that one would not neglect to
include in a summary that contains the important components of
an
agreement. Even in the draft agreement prepared by Mr. Vorster that
was attached to the e-mail dated 16 September 2018, no mention
is
made of the reservation of ownership until the full amount of
R13million is paid. The draft agreement contains contradictory
clauses and requires, amongst others that the purchaser shall provide
security for the remaining amount payable after the payment
of an
amount of R9million to Audio Logic upon signature of the agreement.
The agreement was backdated with the effective date being
1 March
2018.
[10]
Mr. Marais's evidence deviated substantially from the respondent'
case as stated in the answering affidavit. There is quite
a
difference between stating that the issue of ownership was
categorically discussed and the evidence that 'it was the tenor of
the discussions' that ownership was reserved, or that the assets
would remain the property of Audio Logic until the purchase price
was
paid in full. As a result, I am unable to find that Mr. Marais
viva
voce
evidence is reliable.
[11]
Both parties attached draft unsigned agreements to their affidavits.
It is evident that the relationship between the parties
deteriorated
after the agreement was concluded in March 2018. As the relationship
deteriorated the respective parties drafted written
agreements with
provisions that would benefit them but were not agreed on during the
March 2018 meeting. Neither of the parties
submitted that no
agreement was concluded. The sole issue for determination is whether
I can find on a balance of probabilities
that the agreement concluded
between the parties during March 2018 did not contain a reservation
of ownership. Whether Virtual
Productions honoured the terms of the
agreement is irrelevant for purposes of this determination. Neither
Mr. Marais nor Mr. Vorster
could explain the 'tenor' of the agreement
that facilitated a mutual understanding that ownership of the assets
could only pass
to Virtual Productions on payment of the full
purchase price. However, since the agreement was concluded Mr. Marais
was employed
by the applicant and a portion of Audio Logic and his
personal creditors were paid - albeit that a dispute exists regarding
the
amounts that were paid. Virtual Productions was given access to
Audio Logic's bank account. These facts show that an agreement was
concluded. Mr. Vorster confirmed that Mr. Marais was emotionally
distressed when the agreement was concluded, and Mr. Marais confirmed
that he found the business of running Audio Logic both mentally and
physically draining. He wanted out and he concluded the sale
agreement. The evidence does not support a finding that the parties
agreed expressly of otherwise that ownership would be reserved
until
payment of the full purchase price. Mr. Van Graan confirmed that he
would not sell assets worth R13million without security
but that Mr.
Marais had no choice but to sell on this basis in light of the
emotional and financial dilemma he was in.
[12]
The common cause facts indicate that the parties agreed that the
equipment be sold on credit. Counsel for the applicant argued
with
reference to
Norman
's Law
of Purchase
and
Sale in South Africa,
that a presumption exists
that where a seller gives delivery of the
res
vendita
to another, the intention is to make the purchaser the owner of
the goods. Fouche states in
Regsbeginsels
van
Kontraktereg en Verhandelbare Dokumente
(1995:156): 'Waar die
saak roerend is en vir kontant verkoop word, meet die koopprys betaal
word' (alvorens eiendomsreg oorgaan)
'By kredietkope hang die oorgang
af van regswerking, byvoorbeeld die "huurkoopkontrak ", of
van die bedoeling van die
partye, hoewel eiendomsreg gewoonlik by
lewering van die saak oorgaan. ' The legal position is succinctly set
out in
Wille's
Principles of
South
African Law
521-522. It is explained that ownership
of movable property does not pass by the making of a contract alone.
Two requirements must
be satisfied for the transfer of ownership. In
the first place, the parties must intend for the ownership to pass
and secondly
they must affect delivery. In
Eriksen
Motors
(Welkom)
Ltd
v
Protea
Motors,
Warrenton
1973 (3) SA 685
(AD)
Holmes JA held that the 'general rule' that in a sale for cash
ownership does not pass until the price is paid, even if delivery
has
been given, and that in a sale on credit, ownership passes on
delivery, is not an
'irrefrangible
principle of law. It is basically a question of fact in each case. It
depends whether the totality of the circumstances
shows, by inference
or otherwise, that the parties intended ownership to pass or not to
pass.'
[13]
Although this court is on face value faced by two mutually
destructive versions, I am for the reasons stated above, of the
view
that the applicant discharged the onus that was on him on a balance
of probabilities. The parties concluded a credit agreement
and
ownership was not reserved until the full purchase price was paid.
Although the parties discussed Audio Logic's liability towards
its
creditors there is no evidence before the court that the full
settlement of the creditor's claims, or the full payment of the
purchase price, was a pre-condition to the passing of ownership.
[14]
For purposes of clarity it is necessary to explain that 'SV5' and
'SV6' are annexures attached to the founding affidavit where
the
second respondent indicated with a 'tick' which of the assets listed
were attached. The finding made relates to all the assets
listed on
'SV5' that were delivered to the applicant irrespective as to where
they are, with the exclusion of the unidentified
assets that were
given to Mr. Marais as per Mr. Van Graan's evidence.
[15]
As to the appropriate costs order, the liquidator is not to be held
liable for costs in her personal capacity and the costs
are to be
costs in the liquidation of Audio Logic CC.
ORDER
In
the result, the following order is made:
1.
The applicant is declared the owner of the assets listed in annexure
'SV5" and 'SV6" to the applicant's founding affidavit;
2.
The second respondent is ordered to release the assets from
attachment and to return the assets to the applicant;
3.
The costs are costs in the liquidation of Audio Logic CC.
E
van der Schyff
Judge
of the High Court, Gauteng, Pretoria
Delivered
: This judgement is handed down electronically by uploading it to the
electronic file of this matter on CaseLines. As
a courtesy gesture,
it will be sent to the parties/their legal representatives by e-mail.
The date for hand-down is deemed to be
10 May 2021.
Counsel
for the applicant:
Adv. A J Venter
Instructed
by:
UMS Attorneys
Counsel
for the respondent:
Adv. A Rossouw SC
Instructed
by:
Jaco Roos Attorneys Inc.
Date
of the hearing:
7 May 2021
Date
of judgment: 10
May 2021
[1]
The Standard Bank (SB) Instalment
Sale
Agreement
uploaded
on 0001-0002 expired on
01/04/2018;
The
Standard Bank (SB)
I
nstalment
Sale Agreement
uploaded
on 0003-0004 expired in 2015; The Standard
Bank (SB)
Instalment
Sale
Agreement
uploaded
on 0005-0006 expired in
2015;
The
Standard Bank (SB)
I
nstalment
Sale
Agreement
uploaded on 0007-0008 expired in 2017; The Standard Bank (SB)
Instalment Sale Agreement
uploaded
on 0009-00010 expired in 2015;
the
Business
Partner's Agreement is a loan agreement