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[2021] ZAGPPHC 342
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Kilotech Investments (Pty) Ltd v De Jongh Ontwikkelings (Pty) Ltd and Another (63945/2013) [2021] ZAGPPHC 342 (18 May 2021)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 63945/2013
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
KILOTECH
INVESTMENTS (PTY) LTD
Applicant
and
DE
JONGH ONTWIKKELINGS (PTY) LTD
First
Respondent
ELIZABETH
WILANDA PRINSLOO N.O.
Second
Respondent
J
U D G M E N T (Leave to Appeal)
This
matter has been heard by way of a virtual hearing in terms of the
Directives of the Judge President of this Division.
The
judgment and order are accordingly published and distributed
electronically.
DAVIS,
J
[1]
Introduction
1.1
On 25 March 2021 this court declared that a
disposition of the assets of the De Jongh Ontwikkelings (Pty) Ltd
(“DJO”)
in the amount of R1, 9 million to Kilotech
Investments (Pty) Ltd (“Kilotech”) had taken place in
circumstances as contemplated
in either section 26 or
section 31
of
the
Insolvency Act, 24 of 1936
.
1.2
Kilotech now seeks leave to appeal the
above judgment and the order whereby DJO’s liquidator was
empowered to recover the
amount of the disposition, together with
certain interest and costs.
[2]
The factual matrix
The following factual
matrix in respect of which the above order has been granted, has not
been attacked in the application for
leave to appeal and remains
intact:
2.1
Mr Neil de Jongh was the controlling mind
and a director of both DJO and Kilotech.
2.2
Kilotech was, prior to the disposition, a
shelf company with no assets or income. Its shareholder was a
trust of which Mr
De Jongh was the creator and a trustee.
2.3
DJO sold a certain immovable property (the
“Knysna property”) to a Mr Sachs for R8,55 million.
Part of the purchase
price, in the agreed amount of R5,5 million,
would be “paid” by Mr Sachs by way of a transfer of a
property of his
(the “Sedgefield property”) to DJO.
2.4
Mr Sachs had discharged his obligations as
purchaser to DJO but, rather than DJO becoming the transferee of the
Sedgefield property,
Kilotech ended up with the property. This
was contrived by Mr De Jongh, on behalf of Kilotech, having
ostensibly entered
into a second sale agreement with Mr Sachs whereby
he “sold” the Sedgefield property to Kilotech.
There was no
actual sale by Mr Sachs to Kilotech and he received no
payment for the Sedgefield property. Even the purported sale
agreement
provided that the purchaser (Kilotech) would “
pay
R nil as the transfer of the property is in part payment …
”
for the Knysna property sold by DJO to Mr Sachs.
2.5
The only “payment” made by
Kilotech, was not to Mr Sachs, but was the passing of a bond in the
amount of R3, 6 million
in favour of DJO’s principal creditor,
ABSA. Despite the illusion being created that the full R5, 5
million purchase
price had been paid, no value was given for the
difference of R1,9 million, which Mr De Jongh referred to in
cross-examination
as “the equity”.
2.6
The last important part of the factual
matrix which also remained intact, was that the providing of indirect
ownership of a property
in which Mr De Jongh’s ex-wife could
share, being the Sedgefield property, was so that Mr De Jongh could
discharge his divorce
settlement obligations. This, combined
with the reduction of DJO’s exposure to Absa, was referred to
by Kilotech’s
counsel, as proverbially killing two flies with
one swat.
[3]
The applicant’s contentions:
In both oral and written
argument, the primary contentions of Kilotech on which it argues it
has reasonable prospects of success
on appeal, are the following:
3.1
The submission that different divisions of
the High Court have interpreted the Supreme Court of Appeal’s
judgments referred
to in this court’s judgment in this matter
(in paragraphs 6.3.1 and 6.3.2 thereof) in different ways when
considering the
reciprocal value given for a disposition as
contemplated in
Section 26
of the
Insolvency Act. Whether
this
court’s judgment contributed to obtaining harmony between the
judgments (in those instances where the facts in the different
cases
are indistinguishable) or not, need not be resolved as the facts in
this case remain that no value was given for the R1,
9 million, but
an illusion was created of a disposition for value. In view
hereof, I find no reasonable prospect that a court
of appeal would
find that no impeachable disposition had taken place, irrespective of
the differences in the other judgments referred
to. The
differences are, in any event, more nuanced than substantive and have
been explained in the judgment in this matter.
3.2
Even if Kilotech’s contentions might
hold water, there was no answer to the alternative ground that, even
if
Section 26
may be found not applicable, a collusive disposition
had taken place as contemplated in
Section 31
of the
Insolvency Act.
This
would result in the order still being unassailable. Mr
Greyling valiantly sought to argue on behalf of Kilotech that the
different hats Mr De Jongh wore were of little or no consequence, but
one cannot ignore the existence of the different legal personalities
at play: Mr De Jongh, wearing the hat of a director of DJO, abdicated
its claim to receive transfer of the Sedgefield property
at the same
time that Mr De Jong, this time wearing the hat of director of a
Kilotech, received transfer of the property in the
name of the shelf
company. Wearing the same hat, Mr De Jong then had Kilotech
take over R3, 6 million of DJO’s debt
which takeover Mr De
Jong, wearing both his own hat and that of a director of DJO had
pre-arranged with Absa. Again, at the
same time, Mr De Jong,
wearing his own hat, agreed with his ex-wife that she should accept
the transfer of the property into Kilotech
as a discharge by Mr De
Jong of his personal obligations to her, instead of one half of the
Knysna property (which had previously
been tendered instead of two
other townhouses as initially agreed in the divorce settlement
agreement). In this fashion,
the multiple hats, as it were,
colluded with each other to dispose of R1,9 million of DJO’s
equity. Whilst these facts
remain as unaltered as they are, I
do not find any prospects of success on appeal in favour of Kilotech,
irrespective of which
section of the
Insolvency Act finds
application.
3.3
The second contention was that, in the
event that the finding of a disposition remains intact, the amount
thereof should be R266 295,40.
and not R1, 9 million. This
figure was not testified about by Mr De Jongh, nor contemplated by
him when he effected the hat-transferring
manoeuvres referred to
above, but by an ex-post facto calculation exercise undertaken
regarding the values, purchase prices and
VAT implications of the two
property transactions. Not only are these calculations
incomplete regarding input VAT and VAT
obligations, but it is not
supported by evidence. Hand-in-hand with this argument is the
one that, once the time for the
proving of their claims in the
insolvent estate came to pass, the secured creditors chose to limit
their claims to the value of
the realisation of their securities and
therefore, so the argument goes, the insolvent estate is not in need
of the restoration
of the disposition. In my view, Kilotech
cannot rely on post-liquidation choices by DJO’s creditors,
based on what
was left in the estate after the disposition to justify
the disposition or rather, the non-reversibility thereof. I do
not
find a reasonable prospect that another court would come to a
different conclusion on either of these aspects.
3.4
The next reason why Kilotech argued that it
was entitled to leave to appeal, is the issue of the timing of the
commencement of interest.
This court ordered interest to run
from the date that the Sedgefield property had been transferred to
Kilotech. Adv. Greyling
conceded that this issue was not
debated at the trial, but argued that certain Supreme Court of Appeal
judgments have “finally”
determined that the correct date
for the commencement of the running of interest to be the date of a
court’s declaration
of the disposition being void. For
purposes of this argument, reliance was placed on
Duet
and Magnum Financial Services CC (in liquidation) v Koster
2010 (4) SA 499
(A) and
Griffiths v
Janse van Rensburg
2016 (3) SA 389
(SCA).
3.5
The submission that the above cases have
“finally” determined the position, is not that simple.
The conclusion
by the majority judgment in
Griffiths
(above) states at para [40] the position to be the following:
“
It
is clear that the object of
section 32(3)
[of the
Insolvency Act] is
to ensure that the property brought back into the estate for the
benefit of creditors has not diminished in value. It may
be
that a case could be made out for an increased award in certain
circumstances where money forms the disposition. Judgment
could
then be granted for payment of a higher amount. Interest would
run on that higher amount from date of judgment according
to the
principle in
Janse van Rensburg
[with reference to
Janse van
Rensburg and Others NNO v Steyn
2012 (3) SA 72
(SCA)] … whether such a case can be made out,
and the correctness of the reasoning of the trustees referred to in
[32] hereof,
must therefore be left for decision at the time when
these issues arise squarely
”.
3.6
The reasoning of the trustees in
Griffiths
,
referred to by the learned (then acting) judge of appeal, contained
in paragraph [32] of that judgment was “
to
allow for the payment of mora interest on the judgment debt …
from date of the disposition
” in
order to fulfil the objects of
section 32(3)
of the
Insolvency Act so
as to not leave the insolvent estate out of pocket. It is
trite that the award of pre-judgment interest serves to counter
the
loss of the value of money over time. This was what was granted
in this case and, save for reliance on the two cases
referred to in
paragraph 3.3 above (which reliance was only raised when leave to
appeal was sought and not at the conclusion of
the trial) no other
evidence, contentions or considerations were raised or referred to on
behalf of Kilotech. The considerations
referred to in
Griffiths
therefore “arose squarely” and the trustee’s
contentions were not refuted. Having regard to the “equity”
disposed of (in the words of Mr De Jongh) at the time of transfer of
the Sedgefield property as described above, I find no reasonable
prospects that another court would find on appeal that the insolvent
estate should be deprived of the interest on the R1,9 million
for the
years since the disposition to the conclusion of the trial and that,
consequently, Kilotech as the others collusive party,
should have the
benefit thereof. Such a finding would be contrary to the object
of
section 32(3)
of the
Insolvency Act and
I see no reasonable
prospect of success of Kilotech obtaining such a finding.
3.7
In the written heads of argument submitted
on behalf of Kilotech, it was also submitted that reliance could not
be placed on the
Liquidation and Distribution account of DJO for
inferring its insolvency at the time of the disposition, but this is
not so and
it was only one of the issues on which the court relied.
It was in any event permissible to do so. See
Nicholls
and Whitelaw, NO v Akoo
1948 (4) SA 197
(N). It must also be remembered that Kilotech had the onus to
satisfy this issue, in respect of which it only sought to rely
on Mr
De Jongh’s subjective and vague “guestimate”, which
does not suffice.
[4]
Conclusion
Reflecting
dispassionately on this court’s decision, I find that the
requirements set out in
sections 17(1)(a)(i)
and (ii) of the
Superior
Courts Act, 10 of 2013
have not been met.
[5]
Order
The
application for leave to appeal is refused with costs.
N
DAVIS
Judge
of the High Court
Gauteng
Division, Pretoria
Date
of Hearing: 11 May 2021
Judgment
delivered: 18 May 2021
APPEARANCES:
For
the Applicant:
Adv PJ Greyling
Attorney
for Applicant: Schabort
Inc, Pretoria
For
the Respondents:
Adv GW Amm
Attorney
for Respondents:
Lowndes Dlamini Attorneys, Pretoria