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[2020] ZALMPPHC 8
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Francis and Others v Southern Sky Hotel and Leisure (Pty) Ltd trading as Hans Merensky Hotel & Spa (2013/2016) [2020] ZALMPPHC 8 (21 January 2020)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH
AFRICA
(LIMPOPO DIVISION, POLOKWANE)
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES/
NO
(3)
REVISED.
CASE No 2013/2016
21/1/2020
In
the matter between:
SHANE
JOHN FRANCIS
First Applicant
MARTIN
CONLAN DOYLE
Second Applicant
WILLIAM
MURPHY
Third Applicant
EMER
MARY FOLEY
Fourth Applicant
CHRISTOPHER
SMITH
Fifth Applicant
RICHARD
PATRICK COOGAN
Sixth Applicant
STEPHEN
O'SHEA
Seventh Applicant
TOMAS
O'SHEA
Eighth Applicant
MICHAEL
WILLIAM
McGREAL
Nineth Applicant
And
SOUTHERN
SKY HOTEL AND LEISURE(PTY) LTD
Respondent
(Registration
Number 2006/005152/07) trading as
HANS
MERENSKY HOTEL & SPA
JUDGMENT
LEDWABA
AJ
Introduction
[1]
Shane
.John Francis and the other eight applicants (the applicants/ the
Irish Investors) apply for the final winding-up of the respondent.
The application is based on the allegation that the respondent is
unable to pay its debts , that it is factually and commercially
insolvent as envisaged in section 344(f) read with 345(1)(c) of the
Companies Act 61 of 1973( the Companies Act).
[2]
The
applicants' case is that the respondent is indebted to them in
respect of the debt which arises from the terms of the rental
pool
agreements (the agreements)
[1]
entered into by the parties. The applicants submit that the said debt
is due, owing and payable and the respondent is unable to
settle it.
[3]
The
applicants have served on the respondent the letter demanding payment
of the debt
[2]
.
Other statutory requirements have been complied with.
[4]
On the basis that the agreements are allegedly against the public
policy and unenforceable,
the respondent ls resisting the liquidation
application. It submits that as the agreements are allegedly
unenforceable, there is
no liability that is due and payable by the
respondent to the applicants. The respondent alleges that the alleged
debt is disputed
on
bona fide
and
reasonable grounds. It submits that this liquidation application
cannot be used for the disputed debt and deserves to be dismissed
with costs.
The
background
[5]
In
1967, the Phalaborwa Mining Company established the Hans Merensky
golf course. The golf course and the surrounding land were
purchased
by the Hans Merensky Country Club (Pty) Ltd ( the club) from the
Phalaborwa Mining Company and developed it into a golf
estate.
[6]
The
respondent bought the golf course and the hotel from the club and
developed it into the Hans Merensky Hotel and Spa. This offers
to the
members of the public facilities such as hospitality, golfing,
lodging, conferencing, weddings, wellness, restaurant, a
club house
and others. The purchase excluded immovable properties bought by each
of the applicants.
[7]
Each
of the applicants purchased immovable property from the club. The
properties are improved with furnished dwellings known as
the bush
lodges.
[8]
The
respondent's hotel and spa are on the same property from which each
of the applicants purchased their immovable properties.
[9]
In terms of the agreements entered into between the applicants on the
one hand and
the club on the other, the club obtained the right to
lease out the applicants' bush lodges to the members of the public
subject
to the applicants receiving certain agreed upon returns ( the
rental pool income).
[3]
An example of the agreement is attached to the application as
annexure D.
[10] The
respondent took over the management of the agreements from the club.
It is these agreements that
are the subject of the dispute.
Applicant's case
[11] To a
certain extent and until around 2012, the respondent paid to the
applicants the rental pool income.
[12]
Following the respondent's failure to pay to the applicants the
rental pool income of more than R2
Million, the applicants issued out
of the North Gauteng High Court the first liquidation application.
The respondent raised a jurisdictional
point. The applicants withdrew
the application and issued it in this division.
[13] In
reaction to the applicants' letter of demand, the respondent did not
deny the liability. It expressed
a willingness to meet with the
applicants for the discussions. The applicants accepted the
respondent's discussion invitation on
condition that its attorneys
were involved in the discussions. Although the respondent was
unwilling to have the applicants' attorneys
involved in the
discussions, after some communications, the discussions took place in
the presence of the applicants' attorneys.
The communications and
discussions did not lead to the resolution of the dispute.
[14] The
respondent placed itself under business rescue. The applicants voted
against the business rescue
plan, The respondent failed to set aside
the applicants' vote against the business rescue plan. The business
rescue proceedings
were set aside.
[15] The
respondent did not dispute its liabilities to the applicants. The
respondent's "defence"
of avoiding the consequence of the
rental pool agreement was raised for the first time before Tuchten J
in 2018 when the business
rescue related application was dealt with.
Until then, it was common cause that the respondent was unable to pay
its debts as and
when they became due.
[16]
The respondent has access to the
applicants' bush lodges which are generating income. The respondent
has not paid the applicant
any rental pool income since around 2012.
[17]
The
Botha
case
[4]
relied on by the respondent does not assist its case. The
circumstances of these two cases are vastly different. The latest
authority
on the subject matter is the
Oregon
case.
[5]
[18]
The respondent's argument is effectively
that the principle of
pacta sunt
servanda
[6]
ought to be abandoned in the current
circumstances.
[19]
The respondent cannot argue that the
agreements are repugnant to the constitutional principles such as
Ubuntu
and
fairness.
[20]
The applicants have proved that the
respondent is unable to pay its debts when called upon to do so.
[21]
The respondent's "defence"
must fail. The applicants' final winding-up application must succeed
at the respondent’s
costs.
Respondent's case
[22]
The respondent and associated companies
have invested substantial sums of money in the acquisition,
development and operation of
the golf course the hotel and spa.
[23]
The respondent has taken over the
management of the agreements from the club in 2006.The agreements are
ones sided, oppressive and
unfair. Among others, the terms of the
agreements are:
(a)
the
respondent is the applicants' agent in the running of the bush lodges
to generate income for the applicants for twenty years,
with the
applicants having the right to cancel the agreements md sell the bush
lodges ,
(b)
for
the first three years the applicants are guaranteed 6% income based
on the properties purchase price, fifty percent of which
payable in
the South African Rands and the other fifty percent at the rand to
euro exchange rate,
(c)
from
the fourth year, and every third anniversary thereafter, the base
cost of the purchase price would be adjusted only upwards
and the
respondent is obliged to pay the applicants the higher of the rent
contractually payable or the open market rental,
(d)
the
respondent is responsible to maintain the lodges at its costs , pay
services and keep them up to the standard of the hotel,
(e)
the
applicants are entitled to occupy and use the lodges for five weeks
per year without any payment and ,
(f)
the
respondent is entitled to retain the access money only after
honouring the terms of the agreement.
[24]
Between
2003 and 2008 and while the rand as against the euro depreciated by
40%, the base cost of the lodges was adjusted upwards.
The effect was
that rental payable to the applicants more than doubled from about
R534 600.00 in 2003 to about R1 080 000.00 in
2008. Between 2007 and
2017 the rental increased by about 300%.
[25]
The situation was that:
(a)
the values of the lodges were adjusted
upwards,
(b)
the rand depreciated as against the
euro,
(c)
the lodges maintenance costs increased
while
(d)
the revenue dwindled due to the decline
in the bookings.
[26]
Except during the 2010 world cup, the
respondent never generated more revenue than the guaranteed payments
and never profited from
the agreements.
[27]
The agreements structure is such that
the applicant benefits irrespective of the market performance. The
applicants are guaranteed
the higher returns, being the highest
between the contractual amount or the market related amount. This can
only work if the respondent
is able to rent out the bush lodges at a
higher rental than the guaranteed rentals.
[28]
Between 2007 and 2013, the respondent
paid the applicants R6 Million.
[29]
It was not within the parties'
contemplation when they entered into the agreements that the
respondent would continue making guaranteed
annual payments
irrespective of the factors beyond its control. The parties
contemplated that the agreement would benefit both
parties, with the
applicants receiving the guaranteed return and the respondent renting
out the lodges at a higher rate to cover
the guaranteed returns.
[30]
The applicants rejected an offer to
renegotiate the terms of agreement in line with the prevailing
circumstances. In 2013, the applicants
attempted to liquidate the
respondent. Faced with this liquidation application, the respondent's
board of directors decided to
commence with the business rescue
proceedings. The applicant voted against the adoption of the business
rescue plan, preferring
to proceed with this liquidation.
[31]
The respondent's financial position has
improved to the level that it has settled some of its liabilities and
is able to service
some of its debts. Between March and August 2019,
it has made an income of R6 920 419.03 with expenses of R5 900
260.56. The net
profit was R1 020 158.47.
[7]
[32]
The respondent should be allowed to
continue trading without being liquidated. The liquidation may result
in the liquidators cancelling
the agreements, which is not in the
interest of the parties.
[33]
Because the agreements are bilateral and
reciprocal, they require co- operation between the parties and
performance by each in order
to benefit both. They are subject to
constitutional control and accord with the constitutional notions of
good faith, fairness,
justice, equity, dignity, freedom, equal worth
of respective worth, reasonableness and the traditional African value
of
Ubuntu..
They
must also accord with the public policy and the interest of the
community.
[33] The
applicants are not entitled to pursue their self-interest without
regard to the interested and
affected parties such the respondent,
the employees and the shareholders. The applicants rejected all
attempts to resolve the matter.
[34]
Sections 346 and 347 of the Companies
Act gives the court a discretion whether to grant or refuse the
winding-up application, even
if the grounds on which application is
brought is established.
[35]
The court should consider the
enforceability of the agreements and refuse to enforce them. The
court should find that the debts
relied upon have not been
established.
[36]
The respondent has been honouring the
terms of the agreements because it was not advised by its previous
legal team that it was
not obliged to do so.
[37] The
court should use its discretion against the granting of a winding-up
order and dismiss the application
with costs.
Analysis
[38]
An applicant to the company winding-up
application is required to prove one or more of circumstances set out
in section 344 of the
Companies Act and that it ls a creditor of a
respondent in the amount of not less than R100. The debt must be due
and payable and
a respondent be unable to pay it. There must also be
compliant with the statutory requirements.
[39]
The applicants and the respondent
entered into the agreements ln terms of which the applicants' bush
lodges were placed into the
agreements managed by the respondent in
return for certain agreed returns to the applicants. The respondent
does not deny that
as at the time of the issuing of this application
in 2016, it had not paid to the applicants an amount of more than R2
Million
and that the figure has since increased. Since the respondent
is not disputing the figure as stated in the applicants' founding
affidavit and that it has not paid the amount when the demand was
made and unless it rebuts the deeming provisions of the Companies
Act
, that should be the end of the winding up proceedings. Not according
to the respondent.
[40]
It is not the respondent's case that it
is able but unwilling to pay the applicants' debts. The respondent
has formulated its "defence"
beyond the
Badenhorst
[8]
principle that says winding-up
proceedings should not be resorted to as a means of enforcing payment
of a debt the existence of
which is
bona
fide
disputed on reasonable grounds.
It is attacking the terms of the agreements on various grounds,
including that they are contrary
to Constitutional values, the Bill
of Rights and the public policy. The respondent submits that the
agreements are unenforceable.
The respondent has also raised dispute
of facts.
[41]
Where a respondent shows on a balance of
probability that its indebtedness to an applicant is disputed on
bona
fide
and reasonable grounds, the
court will refuse a winding-up order. The onus on a respondent is not
to show that it is not indebted
to an applicant. It is merely to show
that the indebtedness is disputed on
bona
fide
and reasonable grounds.
[9]
[42]
The
Badenhorst
rule is conventionally formulated as
requiring a respondent to satisfy the court of two things, its
bona
fides
and the reasonableness of its
grounds for disputing the claim.
[10]
The existence of the debt must
bona
fide
be disputed on reasonable
grounds. A respondent is required to be
bona
fide
and provide reasonable grounds
for disputing a claim.
[43]
A finding that a respondent is not
bona
fide
in disputing a claim would
usually go hand in hand with a finding that a claim is being disputed
solely for the purpose of delay,
and such purpose would often support
an inference that a respondent is unable to pay its debts and
militate against the exercise
of a discretion in its favour.
[11]
[44]
At issue is whether on the balance of
probabilities, the respondent is
bona
fide
in its dispute of the
applicants' claims and that the dispute is based on reasonable
grounds for this court to exercise its discretion
in favour of the
refusal or the granting of the applicants' winding-up application.
[45]
The respondent is not
bona
fide
in the dispute of the
applicants' debts. It does not dispute that it has not paid to the
applicants its contractual obligations
of what it has collected from
the applicants' bush lodges bookings. While it disputes the
enforcement of the agreements on the
basis of public policy, there is
no application to declare the agreements to be unenforceable and the
prayer that the agreements
be cancelled. There is no offer from the
respondent to surrender the right to collect booking monies from the
applicants' bush
lodges. There is no
offer
to open its books for the applicants
to satisfy themselves that the bush lodges bookings have declined and
the extent of such decline.
Simple justice between man and man does
not allow that the respondent continues to collect bookings income
and not hand over to
the applicants what is due to them in terms of
the agreements.
[46]
While it is not in dispute that the
respondent has not paid the applicants incomes, the respondent
submits that because the agreements
are unenforceable, it is not
obliged to pay the applicants the rental income. Instead of setting
aside the agreements, the respondent
is only praying for the
dismissal of the liquidation application. While the respondent claims
it retains the right to collect money
from the bush lodges bookings
in terms of the agreements, it accepts no obligation to pay over any
money to the applicants in terms
of the terms of the same agreements.
[47]
The fact that the applicants are now
owed more than R8 Million is not because from the start the
respondent held back rental pool
income on its believe that the
agreements are unenforceable. The applicants rightly pointed out that
the respondent is not paying
even what it is able to pay to the
applicants. The respondent's board of directors instituted the
business rescue proceedings not
because they believed the agreements
are against the public policy.
[12]
It is because the respondent's board
bona
fide
believed that the respondent
was in financial distress or the board is not
bona
fide
in the opposition of this
application. The previous winding-up application did not proceed not
because the respondent raised the
unenforceability of the agreements.
The unfulfilled offers were made not because of ill-advice. This new
proposition emerged with
the new legal team employed by the
respondent in the middle of the dispute where the validity and the
enforceability of the agreements
were never questioned before. This
is not a sign of
bona fide
on
the part of the respondent.
The
sanctity of contract and public policy
[48]
Agreements which are clearly inimical to
the interest of the community, whether on the basis of being contrary
to law or morality,
or run counter to social or economic expedience
will on the grounds of public policy not be enforced.
[13]
[49]
While the court should not shrink from
its duty of declaring a contract to be contrary to public policy when
the occasion so demands,
the power to do so should be exercised
sparingly and only in the clearest of cases, lest uncertainty as to
the validity of contracts
results from an arbitrary and
indiscriminate use of the power. One must be careful not to conclude
that a contract is contrary
to public policy merely because its terms
(or some of them) offend one's individual sense of propriety and
fairness. Although the
power of the court to invalidate bargains of
parties on the ground of public policy is unquestionable and
necessary, the impropriety
of the transaction should be convincingly
established in order to justify the exercise of the power of
declaring a contract to
be contrary to public policy.
[14]
[50]
Generally, public policy favours the
utmost freedom of contract and requires that commercial transactions
should not be unduly trammelled
by restrictions on that freedom.
Public policy should take into account the doing of simple justice
between man and man.
[15]
The
applicants acquired bush lodges to generate income and this was
incorporated in the agreements. It is on the respondent to prove
that
on the balance of probabilities, it is against the public policy to
enforce these agreed terms of the agreements.
[51]
In the
Sasfin
matter, it was common cause that if
the interpretation of clauses 3.4 and 3.14 of the agreement was the
correct one, they were contrary
to public policy.
[16]
The court held that because certain materials were non severable and
contrary to public policy, the deed of cession was invalid
and
unenforceable.
[17]
[52]
While interpretation of a contract may
be a mixed question of fact and law, in this case there is no dispute
of fact that since
around 2012, the respondent has not paid the
applicants' income as per the agreements.
[18]
[53]
The principles governing private
contracts and public policy underpinned by the Constitution were
summarised as follows:
[19]
(i)
Public
policy demands that contracts freely and consciously entered into
must be honoured;
(ii)
A
court will declare invalid a contract that is
prima
facie
inimical to a constitutional
value or principle, or otherwise contrary to public policy;
(iii)
Where
a contract is not
prima facie
contrary to public policy, but its
enforcement in particular circumstances is, a court will not enforce
it;
(iv)
The
party who attacks the contract or its enforcement bear the onus to
establish the facts;
(v)
A
court will use the power to invalidate a contract or not to enforce
it, sparingly, and only in the clearest of cases in which
harm to the
public is substantially incontestable and does not depend on the
idiosyncratic inference of a few judicial minds and
(vi)
A
court will decline to use this power where a party relies directly on
abstract values of fairness and reasonableness to escape
the
consequences of a contract because they are not substantive rules
that may be used for this purpose.
[54]
There is the need for commercial
certainty. The notion that a sanction for breach or failure to comply
with the agreed terms of
the contract is disproportionate and
therefore unenforceable is entirely alien to South African contract
law. To recognise it would
be to undermine the principle of legality.
That does not mean that a sanction that is contrary to public policy,
or that is unconscionable
in the circumstances is to be enforced. The
question is the one that centres on policy-the community legal
conviction rooted in
the Constitution.
[20]
[55]
No consideration of public policy
permits the making of contracts for the parties by a court
[21]
.
It is difficult to conceive how a court, in a pure business
transaction, can rely on
"ubuntu"
to import a term that was not
intended by the parties, to deny the other party the right to rely on
the terms of the contract to
terminate it
[22]
This will be contrary to the right of the parties to freely enter
into valid and enforceable agreements. Calculated risks expected,
the
parties contract on the basis and expectations of certainty rather
than surprises.
[56]
The fact that a term of a contract is
unfair or may operate harshly does not by itself lead to the
conclusion that it offends the
values of the Constitution or is
against public policy.
[23]
Dispute
of facts
[56]
The
respondent's case appears to be that there are serious dispute of
facts as contemplated in Rule 6(5)(g) of Uniform Rules
[24]
of this court that the dispute deserves to be referred for oral
evidence.
[57]
If
there are genuine dispute of facts regarding the existence of the
applicant's claim at the final stage, the applicant will fail
on the
ordinary principles unless it can persuade the court to refer the
matter to oral evidence.
[25]
There must be real and genuine dispute of facts.
[58]
A
court will dismiss an application if an applicant should have
realised when launching its application that a serious dispute of
facts, incapable of resolution on papers, was about to develop.
[26]
[59]
There
is no genuine dispute .that as a matter of fact, the respondent is
not paying the applicants the agreed income which the applicants
believe are due and payable to them. The respondent's case is that
due to its view that the agreements are legally unenforceable,
there
is no liability that is due and payable to the applicants.
[60]
The
respondent's opposition to the winding-up application is not based on
factual dispute. It is common cause that as a matter of
fact the
respondent is not paying the applicant the agreed rental incomes. The
respondent is not paying the money because in its
view and based on
its position that the agreements are unenforceable, the rental pool
income is not legally due and payable. It
is not the respondent's
case that it is able to pay the admitted amount.
[61]
Whether
the agreements entered into by the parties are enforceable is not a
matter of facts that needs the leading of oral evidence
to resolve.
This is not the kind of dispute that should be referred for oral
evidence to be addressed by way of witness evidence.
Matters of
disputes of facts are dealt in terms of Rule 6(5)(g) of the Uniform
Rules of this court. Such disputes are referred
for oral evidence for
the parties' evidence to be tested.
[62]
An
application to refer a matter for oral evidence should be made at the
outset and not after argument on merits.
[27]
The respondent is not applying that the matter be referred for oral
evidence. Although its counsel indicated from the bar that
the
respondent is not opposed to the matter being referred to oral
evidence, this is not part of its prayers. The applicant's counsel
indicated that because their clients are based in Ireland, the
applicants' legal team is not in position to obtain such instruction.
[63]
I
do not understand the
Badenehorst
principle to apply to pure
legal disputes
[28]
Legal disputes to be resolved by way of evidence will be rare, if
any.
[64]
In
Sasfin
case
and on the basis that the contract was contrary to public policy and
virtually made the applicant a slave, the prayer was to
set it aside.
In
Desert Star Trading
case,
the respondent filed a counterclaim to set aside the reckless credit
agreement. There is no prayer to declare the agreements
(or their
portions) to be contrary to public policy, invalid and that they be
set aside. The prayer is only that the liquidation
application be
dismissed. From the bar, the respondent's counsel responded that this
would pave the way for the matter to be dealt
with on the basis of
disputed facts. This is not the respondent's prayer and if the
winding-up application is dismissed and the
applicants were to
approach the court on action proceedings, nothing will prevent the
respondent from raising the plea that the
matter has been dealt with.
The other implication of just dismissing the winding up
application and leaving the agreements
as they are will mean that
despite the fact that the respondent will be entitled to use the bush
lodges and collect the bookings
income, it will not be obliged to pay
the applicants what is due to them in terms of the agreements from
the money collected from
their lodges' bookings.
Winding-up proceedings.
[65]
In
terms of section 346 of the Companies Act, winding-up proceedings are
by way of an application. It will defeat the purpose if
the existence
of a dispute which cannot be described as real and genuine will
result in the winding-up application proceedings
be kicked out to be
proceeded with by way of action proceedings.
[66]
Winding-
up proceedings are not designed to enforce payment of debt,
especially where a debt is
bona fide
disputed on reasonable grounds.
These proceedings are meant to liquidate a respondent company which
is unable to pay its debt, among
others circumstances In this case
the existence of debt is a matter of fact, which is not disputed on
l:Jone fide
grounds,
ln providing clarity why the respondent is not even paying what is
able to pay the appl9i ants, the respondent's counsel
respondent that
the payment to the applicants is withheld on policy considerations.
This does not appear from the respondent's
opposing papers. What is
denied is the enforceability of the agreements on the basis of
alleged public policy. The authorities
relied on by the respondent do
not support the notion that winding-up proceedings should be
dismissed because the factually existing
debt which the respondent is
unable to pay is delayed on the basis that the contract between the
parties is contrary to public
policy.
[67]
Rather
than the fact that it is unable to pay the amount claimed by the
applicants, the respondent is disputing the enforcement
of the
agreements. Nowhere is the respondent saying it is able to pay the
claimed amount. By not setting aside the agreements aside,
the
respondent is by implication saying the agreements should be used
only for the purpose of collecting monies from the bookings
without
the respondent's obligation to pay the applicants as their agent in
terms of the same agreements.
[68]
There
is the difference between resisting the winding-up application on the
basis of the
bona fide
denial
of liability on reasonable grounds and the resistance of the
winding-up proceedings because the enforcement of the founding
agreement between the parties is resisted on public policy
consideration. The respondent is relying on the latter, which is not
sustainable in these proceedings.
[69]
I
do not regard the alleged unenforceability of the agreements on the
basis of public policy as a genuine dispute of fact which
needs to be
resolved by way of oral evidence. This cannot be used to dismiss the
winding-up application where the figures as set
out ln the founding
affidavit are not disputed and it is common cause that the respondent
is not in a position to settle the figures.
[70]
I
do not understand the respondent's case to be that rental pool
agreements are generally unenforceable. Its submission is that
the
agreement between the parties is subject to constitutional control
and must accord with the constitutional notions of good
faith,
fairness, justice, equity and reasonableness as well as the
traditional African value of
Ubuntu.
The respondent further states that
constitutional values include the reciprocal recognition of the
dignity, freedom and equal worth
of inter alia respective contracting
parties.
[71]
It
is correct that the general principle that agreements must be
honoured cannot apply to immoral agreements which violate public
policy.
[29]
[72]
It
is also true that the reason for the continued application of the
principle embodied in the maxim
pacta
servanda sunt
is the need for
certainty in commerce. This means that unless they are against public
policy or their enforcement would be unconscionable,
the parties will
know what their contract means and that they are entitled to rely on
their terms.
[30]
[73]
The
respondent submits that it was not within the parties' contemplation
that a combination of factors such as the weakening of
rand exchange
rate, the decline in the bookings of the bush lodges and increased
maintenance costs will affect its ability to meet
its contractual
obligations. These are commercial contracts which involve the taking
of risks and where the failure to comply with
the agreed terms has
consequences.
[74]
The
principle of reciprocity as dealt with in the
Botha
case
[31]
does not arise in this matter. In terms of their obligations, the
applicants have placed their bush lodges at the respondent's
disposal
subject to the agreed terms. While in the
Botha
case
section 27
of the
Alienation of
Land Act 68 of 1981
was interpreted in line with the provisions of
section 39(2) of the Constitution, this is not the case with the
agreements. To
an extent that the winding-up proceedings are focused
on the respondent's ability to pay its liabilities, the alleged
proportionality
of the agreements does not arise.
[32]
[75]
It
can thus not be said that the claims are disputed on genuine disputed
facts and on reasonable grounds.
[76]
The
figures stated in the founding affidavit are not disputed. The
respondent submits that the amounts are not due and payable.
[77] If I
am wrong that the winding proceedings should be decided on whether
the respondent is able to pay
its debts as and when called upon to do
so and that I should decide whether the agreements are unenforceable
on public policy consideration,
I align myself with the principle
that the declaration that an agreement is contrary to public policy
should be made in the clearest
cases. This is not such a case. Just
because the respondent feels that the terms of the agreements require
it to do more compared
to the applicants does not render the
agreements to be contrary to public policy. If the respondent's view
is that the terms of
the agreement are disproportionate, the remedy
is not to dismiss the winding-up application. I am not called upon to
make the validity
declaration in respect of the agreements.
[78]
I agree that the proposition that on the
basis of notions such as
Ubuntu
and
equal worth, the company must be permitted to decline to perform in
terms of commercial contract is subversive of the very foundation
of
our
commercial law.
[33]
[79]
The applicants have proved that on the
balance of probabilities, the respondent is unable to pay their
claim. The respondent is
not
bon fide
in its "defence” and has
provided no reasonable ground for resisting the payment and the
granting of the final winding-up
application.
[80]
Even if I am wrong that the respondent
is factually insolvent, the circumstances are that the respondent is
commercially insolvent
and that it is just and equitable that it be
wound up.
[81]
I find that the respondent is unable to
pay the applicants' debts. It is just and equitable that the
respondent be wound -up
Order
[82]
The respondent is placed under the final
winding-up.
[83]
The costs of this application shall be
costs in the winding-up.
LEDWABA
LGP
ACTING
JUDGE OF THE HIGH COURT
LIMPOPO DIVISION : POLOKWANE
APPEARANCES
For
the Applicant: Adv J Hershensohn
Instructed
by : Pieter Swanepoel Attorneys
Brooklyn,
Pretoria
For
the Respondent: Adv GD Wickins
Instructed
by: Brooks & Braatvedt Inc
203
Jan Smuts Avenue, Parktown North
Heard
on: 25
th
November 2019
Judgement
delivered on:
[1]
The rental pool agreement can loosely be described as an agreement
in terms of which the parties to the agreement share equally
in the
generated rental incoming in this agreement, while the respondent
was to benefit from the balance, all properties involved
in the
rental pool agreement shared equally in the generated rental income.
[2]
The demand is a statutory requirement in terms of section 345 of the
Companies Act.
[3]
The respondent guaranteed a 6% per annum return to the applicants
calculated in relation to the purchase price paid by the applicants
for the properties. The agreement was entered into with the club in
2003.
[4]
4Botha & Another v Rich N.O.& Others
(2014) ZACC 11
;
2014(4)SA 124(CC) (Botha). As indicated in paragraph 74 below, this
case deals with the principles of reciprocity in the contract,
the
disproportionate in the contract and the interpretation of
section
27
of the
Alienation of Land Act 68 of 1981
in line with
section39(2) of the Constitution.
[5]
The Trustee for the time being of the Oregon Trust v Beadica 231 CC
& Others (74/2018()
2019) ZASCA 29
; 2019(4) SA 517(SCA) (28
March2019)(Oregon). This case deals with the enforcement of the
lease agreement in relation to public
policy.
[6]
Latin loose translation for the agreements must be honoured.
[7]
Paragraph 7 of the respondent's supplementary affidavit.
[8]
Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956(2) SA
345(T)( Badenhorst)
[9]
Desert Star Trading 145 (PTY) LTD & Another v Flamboyant Edleen&
Another 2011(2)SA 266(SCA)(Desert Star Trading)
[10]
Orestisolve (Pty) Ltd t/a Essa v NDF Investments Holdings (Pty}Ltd &
Namakwaland Diamond Fund Trust: Case Number 18414/2014(
Western Cape
High Court)( Orestisolve) - paragraph 67
[11]
Orestisolve- paragraph 68
[12]
Section 128 of the new
Companies Act 7 of 2008
defines a business
rescue as proceedings to facilitate the rehabilitation of a company
that is in financial stress
[13]
Sasfin(Pty) Ltd)
v
Beukes 1989(1) SA 1(A )(Sasfin)- page 8
[14]
Sasfin-page
[15]
Sasfin - page 9
[16]
Sasfin- page 14
[17]
Sasfin - page 18
[18]
Orestisolve- paragraph 65
[19]
AB& Another v Pridwin Preparatory School & Others
(2018)
ZASCA 150
; 2019(1)SA 327(SCA)- paragraph
[20]
Oregon- paragraph38
[21]
Oregon - paragraph 42, Mohamed's LeisureHoldings(Pty(Ud v Southern
Sun Hotel lnterests (Pty)ltd
(2017) ZASCA 176
; 2018(2) SA 314(SCA(-
paragraph 32( Mohamed)
[22]
Roazar CC v Falls Supermarket CC(2017) ZASCA 166;
(2018) 1 All SA
438(SCA)
; 2018(3)SA 76(SCA)- paragraph 24
[23]
Mohamed (- Paragraph 30
[24]
Rule 6(5)(g)
provides that where an application cannot properly be
decided on affidavit, the court may dismiss the application or make
such
order as to it seem meet with a view to ensuring a just and
expeditious decision. In particular, but without affecting the
generality
of the aforegoing , it may direct that oral evidence be
heard on specified issues with a view to resolving any dispute of
fact
and to that end may order any deponent to appear
personally or grant leave for him or any other person to be
subpoenaed to appear and be examined and cross examined....
[25]
Orestisolve- paragraph 10
[26]
Room Hire Co(Pty)Ltd v Jeppe Street Mansions(Pty) Ltd 1949(3)SA
1153(T) at 1162
[27]
Kalil paragraph 78
[28]
Oristisolve- paragraph 12
[29]
Barkhuizen v Napier(2007) ZACC 5; 2007{5)SA 323 (CC);2007(7)BCLR
691(CC) -paragraph 87
[30]
Oregon - paragraph 26
[31]
Botha- paragraphs 45 and 46
[32]
Botha- paragraph 49
[33]
Shamira Rinderknecht & Others v Southern Sky Hotel and
Leisure(Pty) ltd & Others Case number 64129/ 2017- North Gauteng
High Court decided on the 18h October 2018( Unreported) -
Paragraph19