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[2019] ZAGPPHC 71
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Dinath NO and Others v Mukhawana (85785/2017) [2019] ZAGPPHC 71 (7 March 2019)
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REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
(1)
NOT REPORTABLE
(2)
NOT OF INTEREST TO OTHER JUDGES
(3)
REVISED
CASE NO: 85785/2017
7/3/2019
IMRAN
DINATH
N.O
First Applicant
HELENA
JEANETHA
N.O
Second Applicant
BRAHAM
VICTOR DAWSON
N.O
Third Applicant
(In
their capacities as the appointed provisional
trustees
in the insolvent estate of
GERHARD
JACQUES
DU PLESSIS
Masters-ref: T3317/17
and
NKATEKO
TREVOR MUKHAWANA
Respondent
(Identity
Number [….])
JUDGMENT
SKIBI
AJ
Introduction
[1] This is an
application for final sequestration of the respondent's estate. The
estate
of the respondent was provisionally sequestrated on 20
December 2017 by virtue of a court order granted by Mabuse J on an
urgent
basis.
[2]
The application for a final sequestration order is
opposed by the respondent.
The
parties
[3]
The applicants are the duly appointed provisional
trustees in the insolvent estate of Gerard Jacques du Plessis
(Identity Number
[….]) ("the insolvent" or "the
insolvent estate" and "Du Plessis"), whose estate was
provisionally
sequestrated by order of this Court on 1 December 2017.
[4] The respondent is an adult
male erstwhile employee of Madibeng Local Municipality ("the
Municipality"). He is also a sole director of the company,
Mukhawana & Mukhawana Supply & Logistics (Pty) Ltd registered
in terms of the Company Laws of the Republic, registered number
2014/190691/07.
Factual
background
[5] For anyone to follow
this judgment the following background facts need to be set
out.
These facts are neither disputed or contested. The insolvent's estate
was provisionally sequestrated on application of the
following
entities:
[5.1.] Brits X98 Home Owners
Association NPC ("Brits X98"), a non profit company with
registration number
2008/009639/08 with physical address at 84
L'Ecluse Place, De Kroon Villas, Brits North West Province. Brits X98
was appointed
as the entity that administers the Brits Mall
responsible to make payment to Madibeng Local Municipality of rates
and taxes and
all services in respect of the Brits Mall.
[5.2] Resilient Properties (Pty)
Ltd ("Resilient"), a company duly registered in terms of
the
Company Laws of the Republic of South Africa with registration
number 2002/016890/07.
[5.3] Snowy Owl Properties 300
(Pty) Ltd ("Snowy Owl"), a company duly registered in terms
of
the Company Laws of the Republic of South Africa with registration
number 2003/017970/07 and with registered address at 02 Barnard
Street, Potchefstroom, North West Province.
[5.4] The companies referred to
above will be referred hereinafter as "sequestrating
applicants".
[5.5] Resilient and Snowy Owl
are the co-owners of Brits Mall, a regional mall in the Brits area.
The Brits
Mall opened during October 2010.
[6] The insolvent, in
his capacity as an attorney, acted as a consultant on behalf
of the
sequestrating applicants and more specially at all material times
acted as the sequestrating applicants' liaison with Madibeng
Local
Municipality. The insolvent was a specialist in the field of township
planning and establishment and dealt with the Municipality
on a daily
basis.
[7] Before the fraud
perpetrated was uncovered, the payment of rates and taxes and
services accounts, occurred in the following manner:- All tenants in
the Brits Mall were paying their monthly obligations, which
include
services contributions, towards the Centre Management entity
contracted by the Brits Mall. The Centre Management distributes
these
funds to the account of Resilient and Snowy Owl. Brits X98, on a
monthly basis receives an account in respect of rates and
taxes and
other services from the Municipality. Based on the aforesaid
mentioned, Brits collected these funds from the Resilient
and Snowy
Owl and, on monthly basis, makes payment to the municipality.
[8] After the opening
of the Mall in 2010 until June 2016, Brits X98 effected payment
in
respect of the rates and taxes and services accounts directly to the
Municipality. During 2014 the municipality caused a stir
when it
unilateral increased the rates and taxes levied against the Brits
Mall exceeding a 260% increase. The average monthly rates
and taxes
payment increased from approximately R170 000.00 to approximately
R422 000.00. Since September 2014, the insolvent, on
behalf of the
sequestrating applicants, engaged the Municipality to address the
drastic increase negotiated a discount in respect
of this liability.
During this process however, Brits X98 continued to make payment of
the full monthly rates and taxes levied
and the full services
accounts.
[9] During June 2016,
the insolvent approached a representative of Brits X98 (Mr
Klaas
L'Ecluse") and Snowy Owl and advised them that he had been
successful in negotiating a rebate in favour of the sequestrating
applicants, with the Madibeng Local Municipality. The effect of such
rebate was that the sequestrating applicants were entitled
to a
monthly credit on the account in the sum of R422 000.00 for a period
of 10 months. The insolvent further advised that, seeing
as he
concluded this agreement with the Madibeng Local Municipality in his
capacity as an attorney, and seeing as the Municipality
had such a
requirement, the monthly payment from the Brits X98 had to be made
into the trust account of the insolvent. The insolvent
undertook to
ensure payment towards the municipality and also to ensure that there
is proper accounting in respect of all funds
paid including the
monthly rebate as agreed on.
[10] On 6 October 2017,
representatives of the municipality delivered to the Centre
Management a notice
of demand for payment in the sum of R18 983
510.00. Upon the receipt of such demand from Centre Management,
L'Ecluse immediately
contacted the insolvent seeing as Brits X98
diligently made monthly payments of the requisite amounts into the
trust account of
the insolvent as agreed. The insolvent gave L'Ecluse
every assurance that it has to be a mistake on the part of the
municipality
and undertook to immediately rectify the problem. To the
sequestrating applicants' shock and surprise, the electricity supply
to
the Brits Mall was disconnected on 9 October 2017 by
representatives of the municipality. The disconnection led to an
urgent spoliation
application brought by the sequestrating applicants
against the municipality under case number 69330/17 on that very same
day.
A rule
nisi
was issued in favour of the sequestrating
applicants. In the urgent application, the sequestrating applicants
provided proof of
the payments made in respect of the monthly rates
and taxes and services accounts.
[11] On 21 November
2017, L'Ecluse attended a meeting at the offices of the municipality
where
various issues were discussed. They were advised that the
municipality had received no payments from Brits X98 since July 2016.
It transpired that officials in the municipality who (some of them)
had already resigned were accomplices in a fraudulent scheme
to
defraud the municipality and rate payers. When this was discovered,
the fraudulent entries were reversed by the municipality
which
resulted in the disconnection of the electricity supply to the Brits
Mall on 9 October 2017. None of the funds that were
paid over to the
insolvent's trust account since July 2016, were paid over to the
municipality's account although monthly accounts
reflected such
payments. Of the total sum of R33 00 901.01 paid into the trust
account of the insolvent, the sum of R26 309 854.34
had been reversed
and indications are that further funds were to be reversed on their
system. The insolvent and his accomplice/s
have effectively stolen a
sum in excess of R33 million, which funds have now been utilised and
misappropriated as the fruits of
their fraudulent scheme.
[12] The aforementioned facts
culminated in an urgent application, for the provisional
sequestration of
the estate of the insolvent which was duly granted.
[13] The applicant's
case against the respondent is that the first applicant met with the
insolvent
on 5 December 2017 wherein he admitted his involvement in
the fraudulent scheme at Madibeng Local Municipality. In this meeting
he exposed the identity of one of his accomplices and named the
respondent. The evidence of conversation between the insolvent
and
the first applicant is inadmissible.
[14] Further
investigation by the provisional trustees to the appointment of an
investigator,
Mr Jan Brink (Mr Brink) of an investigative firm
operating under the name of Pinkerton Consultants for the purpose of
identifying
the flow of funds from the insolvent to the individuals
and other entities who ultimately benefited from these funds.
[15] The preliminary
findings of Mr Brink are summarised as follows:
[15.1] Funds were initially paid into the trust
account of the insolvent's attorney's firm. These funds were
earmarked for
the payment of the monthly electricity and services
bill of the Brits Mall;
[15.2] From this account, the bulk of the funds
were transferred into the personal banking account and the business
account
of the insolvent and a substantial portion of these funds was
transferred from there to the First National Bank account of the
company,
Mukhawana and Mukhawana Supply and Logistic
(Pty) Ltd
which belong to the respondent;
[15.3] Fake beneficiaries and references were
created in order to systematically syphon a sum exceeding R33
million. An amount
in excess of
R11 000 000.00
(eleven million
rand) was paid into the account nominated by the insolvent's
accomplice, the respondent;
[15.4] The applicants obtained an affidavit
deposed to by Ms Grace Mogale, Municipal Manager at Madibeng Local
Municipality
confirms the complicity of the respondent. Ms Mogale
states that the respondent was an employee of Madibeng Municipality
at the
time, who was working in the Finance Department. When the
Municipality became aware of the deception he was suspended for four
weeks and later resigned to avoid disciplinary action according to
the municipality. Miss Mogale states further that criminal charges
were laid against the respondent however, it was submitted from the
bar that no criminal charges were preferred against the respondent;
[16] The applicant, on the other
hand, says that the result of the investigation directly implicates
him
to the wrongdoing at the Municipality.
[17] The respondent does not
dispute that he used to work for Madibeng Local Municipality in the
finance
department but he denies having been involved in any
fraudulent activities
[1]
.
He also admits that Mukhawana & Mukhawana Supply & Logistic
(Pty) Ltd is his own company and that he is the sole director
of this
company
[2]
.
His company was focused mainly on delivery of material, supply of
material and plant hire.
[18] The respondent says he
bought his first truck in 2015 and whilst doing operations he
acquired more
plant equipment. In an attempt to prove the extent of
his business he produced some invoices annexed as Annexure
"NTM11"
and
"NTM 12".
He admits that in 2015 he met with
the insolvent through a business associate, Mr Jason van Der
Westhuizen . He states further that
the insolvent had required him to
supply material and plant hire as he was both a property developer
and a property attorney. The
respondent also admitted that he
rendered services to the insolvent through his company at the request
of the insolvent and he
duly received payment for services rendered.
[19] The respondent says that
invoices were issued to him either electronically or were hand
delivered,
in which case he would sign for receipt. He relies on
annexures
"NTM13"
and
"NTM 14"
as
copies of the invoices which were issued to the insolvent. He says he
purchased material from different suppliers, such as Vibro
Bricks and
Paving. The invoices referred to are annexed as Annexure
"NTM15"
[3]
.
In essence the respondent says his company
received payment from the insolvent for legitimate services rendered.
He denies working
at the finance section dealing with allocation of
funds for levies and taxes.
Issues in
dispute
[20] The respondent puts
the following issues in dispute:
[20.1] The preliminary report of the forensic
investigator, by Mr Jan Brink has been put in dispute and his
qualifications
as a forensic investigator;
[20.2] whether the legal requirements for final
sequestration order have been proven.
[20.3] There is also an issue about the lifting of
the corporate veil;
[21] Before dealing with the
issues and the applicable law, I am going to deal with the
admissibility or
otherwise of the evidence of Mr Jan Brink.
[22] The respondent for the
first time during the oral argument in court raised an issue about
the admissibility
of the conversation between the first applicant and
the insolvent where it was revealed that the respondent was an
accomplice in
the fraudulent scheme at the Municipality. In his
answering affidavit when dealing with the paragraph which alleges
that he was
an accomplice to the fraud he denies any allegation of
him being an accomplice and he carries no knowledge
[4]
.
In his answering papers he does not raise any legal issue regarding
the objection to the admissibility of this piece of evidence.
[23] This court will look at the
evidence in totality and decide whether the respondent worked
together
with the insolvent or was involved in the fraudulent scheme
at the Municipality. This court will decide at the end whether the
final sequestration order be granted or the rule
nisi
be
discharged.
[24] The respondent does not
point out which opinion was provided by Mr Brink. All what Mr Brink
did was
to conduct a forensic investigation and provided. a
preliminary report as per his mandate.
[25] The evidence of the
forensic investigator, Mr Brink is challenged on the basis that no
qualifications
stated in the affidavit, therefore an opinion he
provided is inadmissible. Again counsel for the respondent raised the
challenge
regarding the admissibility of the qualifications of Mr
Brink for the first time during the argument in court. Nowhere in the
answering
affidavit did the respondent put in dispute the
qualifications of Mr Brink. In fact, in his answering affidavit the
respondent
admits that he received payments from the insolvent but it
was unknown to him where the money came from. He says that was for
legitimate
business.
[26] The evidence on record is
that Mr Brink is a retired Colonel from South African Police Services
(SAPS)
with 35 years' experience in forensic investigation and asset
management in the insolvency industry.
[27] The applicants' submission
is that there is no reason why the evidence of Mr Brink cannot be
admitted.
It is contended that Mr Brink's investigation resulted in
the production of the bank statements with the transactions which are
not denied by the respondent, save to say that they were for
legitimate business. The court concludes that the evidence of Mr
Brink regarding the obtaining of the bank statements and the tracing
of the flow of funds from the insolvent to other entities or
individuals is admissible. This evidence relates to the bank
statements and there is no prejudice to the respondent because he
provides a justification for the transactions and he admits that
payments were made by the insolvent to his company's account.
Law
[28] It is trite law that for an
order for final sequestration to be granted the applicant must
establish
three statutory requirements :
[28.1] the creditor must establish that he/she has
a liquidated claim of not less than R100,00 or if there are two or
more
creditors, liquidated claim of an aggregate amount of not less
than R200,00.
[5]
[28.2] the debtor has committed an act of
insolvency or is insolvent
[6]
or is factually insolvent, with reference to section 8 of the
Insolvency Act;
[28.3] that there is a reason to believe that it
will be to the advantage of creditors if the debtor's estate is
sequestrated
[7]
.
Application
of law to the facts
Whether
the applicants have proven a claim
[29] The applicants case is that
they succeeded in proving the claim against the respondent
and this
requirement has been met. The amount sought to be recovered from the
respondent is in excess of
R11 000 000.00.
The contention of
the applicants is that funds were transferred from the estate of the
insolvent to that of the respondent constitutes
impugnable
transactions as contemplated in the Insolvency Act, 1936. The estate
of the insolvent is entitled to recover these monies
as a result the
insolvent estate is a substantial creditor of the respondent.
[30] The respondent also contends
that there is no causal link between the applicants, Insolvent
and
the respondent. His argument is that the evidence of Mr Brink cannot
be relied upon in the absence of the evidence that he
has done an
accounting to can conclude that the respondent owes
R11 000
000.00.
He says that the applicant failed to make out a case on
the founding affidavit. The applicants maintain that a proper case
has been
made on the papers and this statutory requirement has been
complied with. The applicants' argument is that there is no legal
requirement
that the forensic investigator must have done accounting.
[31] The court agrees with the
submission by the applicant that the respondent's argument on this
requirement has no merit. Mr Brink in the course of his investigation
obtained insolvent's bank statements indicating the flow
of funds
which were transferred from the insolvent's bank account to the
respondent's company. The total amount of money paid from
the
insolvent to the respondent's company's account has been arrived
based on the transactions reflected in the bank account of
the
respondent's company. The said calculation does not need one to have
a diploma in accounting.
[32] The court makes a finding
that the applicants have managed to prove on a balance of
probabilities
that they have a claim against the respondent. The
amount claimed is above the minimum threshold.
Whether an act of insolvency
has
been proven or the respondent
is
insolvent
[33] The applicants' submission is that
the respondent has committed an act of insolvency. The respondent
contends that the applicants have failed to distinguish their right
based on an alleged liquid claim which grants them
locus standi
in
terms of section 9 (1) of the Insolvency Act and the second
requirement which requires an actual act of insolvency. The
respondent's
argument is that none of the requirements set out in
section 8(1) of the Insolvency Act have been proven. This is clearly
wrong,
the applicants have stated in their supplementary affidavit
and established two although they say they believe that the
respondent
has committed more than two acts of insolvency.
[34] The applicants' contention is that
their investigation has not identified sufficient realisable
assets
to meet
R11 000 000.00.
They argue that the respondent is
insolvent and his propensity to liquidate assets (probably to defeat
the claims against his estate)
constitute discrete deeds of
insolvency. The court concludes that there is no substance in the
argument by the respondent on this
point. From the evidence presented
it has been established that the respondent has accounted for only
R3
000 000.00,
the rest of it has not been accounted for. The
applicants have been able to show that their investigation has not
identified the
existence of realisable assets to meet R11, 000
000.00. From those facts the only reasonable inference which can be
drawn is that
the respondent is insolvent. The respondent has no
realisable assets to meet a demand of R11, 000 .000. The applicants
have identified
assets to the value of approximately R2 235 000.00
and the rest of the money is not known where it went. From the best
evidence
available the respondent is a debtor to the applicants in a
liquidated claim of R11 480 867.78
[8]
.
The Act
[9]
defines various deeds of insolvency, in the case at hand the
applicants rely on two discrete sections
[10]
.
Firstly, in that during December 2017 and after having been
discovered as a co-conspirator to the fraud, financed his Porsche
motor
vehicle that had been bought and paid for in cash during
February of 2017. This constitutes a realisation and liquidation of
the
asset and a disposition that has or would have the effect of
prejudicing his creditors as contemplated in section 8 (c) of the
Act. Secondly, the respondent has effectively commenced the
devaluation of his estate through the leveraging of his assets. Given
the timing of this re-financing (ie after the discovery of the fraud
and his suspension from his employment), the respondent did
this in
order to defeat the claims of creditors to their prejudice as
contemplated in section *(d) of the Act.
Factually
insolvent and advantage to creditors
[35] The applicants case is that they
have proven that the respondent is factually insolvent in that
his
liabilities exceed his assets. The respondent contends that the
applicants have failed to prove this requirement and there
is no
evidence presented that the respondent has committed an act of
insolvency or that his estate is in fact insolvent and is
asking the
court to exercise its powers in terms section 12 (2) of the
Insolvency Act to dismiss the application. I am persuaded
from the
evidence
[11]
presented before me and I am satisfied that the applicants have been
able to prove on a balance of probabilities that the respondent
is
both commercially and factually insolvent. The respondent has been
unable to discharge evidential burden about being able to
meet a
demand of R11 000 000.00 or any realisable assets which exceeds his
liability.
[36] The element which must be
established that it will be to the advantage of the creditors
if the
respondent is sequestrated always presents a challenge. In the
instant case the respondent contends that there is no evidence
that
if the court grants a sequestration it will be to the advantage of
the creditors. The applicants contend that an investigation
has been
conducted to search if the respondent has employees but could not
find any employees of the respondent. I am of the view
that the
applicants have proven that it will be to the advantage of creditors
if the respondent is sequestrated In this regard
the advantage, as a
starting point, relies on the fact that the trustees would be
empowered to investigate the extent of fraud
and theft, and further
follow the flow of funds from the respondent to other third parties'
estates, specially through the invocation
of the mechanisms contained
in the
Insolvency Act, 1936
, in order to recover monies from the
individuals and/or entities. In
Stratford v Investec Bank
[12]
where Leeuw AJ said
"The meaning of the term 'advantage'
is broad and should not be rigidified. This includes the nebulous
'not negligible' pecuniary
benefit on which the applicants rely...
The correct approach in evaluating advantage to creditors is for
a
court to exercise its discretion guided by the dicta outlined in
Friedman. For example, it is up to the court to
assess
whether
the sequestration will result in some payment to the creditors
as
a
body, that there is
a
substantial estate from which the
creditors cannot get payment, except through sequestration, or that
some
pecuniary benefit will redound to creditors".
[37] The court makes a finding
from the evidence presented that the applicants have managed
to prove
all the three requirements. The applicants have managed to establish
against the respondent a liquidated claim of not
less than R100.00;
that the respondent has committed an act of insolvency or is
insolvent and that there is a reason to believe
that it will be to
the advantage if the creditors if his estate is sequestrated. The
applicants have complied with formal requirements
pursuant to the
final sequestration and the provisional order. Ms Nerine
Diederichs
[13]
has deposed to an affidavit regarding the service of process after
the provisional order was granted. There has been publication
of the
provisional order to the newspaper, in the government Gazette;
service in the Master's Office and to various attorneys of
the
respondent.
The
lifting of the corporate veil
[38] The description of the word
piercing or lifting the corporate veil has been highlighted
in few
cases : Binns- Ward J quoting from the English case law in the
Ex
Parle Gore and Others
[14]
said ... "piercing of the corporate veil a familiar term in this
context, locally and in the English common law jurisdictions,
before
the introduction of
s 20(9)
of the new Companies Act. Some
might
suggest that 'lifting' the veil was the more appropriate label in the
circumstances. Staughton LJ offered the following basis
for
a
distinction
:
in Atlas Maritime
Co SA
v Avalon Maritime Ltd,
The Coral Rose
[15]
.
To pierce the corporate veil is an expression that I would reserve
for treating the rights or liabilities or activities of
a
company
as the rights or liabilities or activities of its shareholders. To
lift the corporate veil or look behind it, on the other
hand, should
mean to have regard to the shareholding in
a
company [in other
words, to its controllers] for some legal purpose.
[39] In the instant case, the
respondent in his answering papers admitted that funds were
transferred
from the account of the insolvent to the account of his
company, Mukhawana & Mukhawana Supply Logistic Pty Ltd. During
argument
his counsel contended strongly that the court is not
empowered to grant a sequestration order against him because the
company as
a juristic person is a separate entity from the respondent
as an individual. The court has been referred to
MARS: The Law of
Insolvency in South Africa
[16]
where it reads:
"the mere fact that the creditor alleges that
the debtor had carried on his business under the name of a company
and that his
affairs had been inseparably intermingled to justify
such
a
conclusion, does not affect the legal position that the
company is nevertheless
a
separate entity and not
a
mere
agent or alias of the debtor, and consequently a debt due by the
company cannot be held to be providing
a
ground for
sequestration of his estate."
The court was also referred to
the case of
Estate Salzmann v Van Rooyen
[17]
.
MARS, set out is a general the legal position but the facts of this
case are so unique from the general rule. The facts of this
case
places the respondent at the finance department of the Municipality
at the section where fictitious beneficiaries and reference
numbers
were created. Miss Mogale, the Municipal Manager points to the
respondent's involvement. By co-incident he happened to
have business
dealings with the insolvent and the latter received monies and
transferred some to the respondent's company whose
sole director is
the respondent.
[40] Section 20 (9) of the new Companies
Act
[18]
has introduced a statutory basis for piercing or lifting the
corporate veil of companies. It provides:
"If, on application by interested person, or in
any proceedings in which
a
company
is involved,
a
court
finds that the incorporation of the company, any use of the comp any,
or any act by or on behalf of the company, constitutes
an
unconscionable abuse of the Juristic personality as
a
separate entity, the court may-
(a)
declare that
company is to be deemed not to be
a
Juristic person in respect
of any right, obligation or liability of the company or of
a
shareholder of the company or, in the case of
a
non-profit
company, or of another person specified in the declaration; and
(b)
make any further
order the court considers appropriate to give effect to
a
declaration contemplated in paragraph (a).
[41]
In the
Ex Parte: Gore NO and Others
[19]
Binns-Ward J holds at para
[32] to [35]:
[32] "the language off section 20(9) is cast
wide terms, indicative of an appreciation by lawgiver that the
provision might
find application in widely varying factual
circumstances.
[34] The newly introduced statutory provision affords
a
firm, albeit very
flexible defined, basis for the remedy, which inevitably operate, I
think, to erode the foundation of the philosophy
that piercing the
corporate veil should be approached with
·a
priori difference. By expressly establishing
its availability simple when the facts of
a
case justify it, the provision detracts from
the notion that the remedy should be regarded as exceptional, or
'drastic.' This much
seems to be underscored by the choice of words
'unconscionable abuse' in preference to the 'gross abuse' employed in
the equivalent
provision of the Close Corporation Act; the latter
term having more extreme connotation than the former. The term
'unconscionable
abuse of the juristic personality of
a
company' postulates conduct in relation to the
formation and use of companies diverse enough to cover all the
descriptive terms
like 'sham', 'device'; 'stratagem' and the like
used in that connection in the earlier
cases,
and- as the current cases illustrates
conceivably much more. The provision brings about that
a
remedy can be provided whenever the legitimate
use of the concept of juristic personality adversely affect the third
person in
a
way that
should not countenanced. Having regard to the established
predisposition against categorisation in the area of law and
the
elusiveness of
a
convincing
definition of the pertinent common law principles, if seems that it
would be appropriate to regard section 20(9) of the
Companies Act as
supplemental to the common law, rather than substitutive. The
unqualified availability of the remedy in terms
of the statutory
provision also militates against an approach that it should be
granted only in the absence of any alternative
remedy. Paragraph (b)
of the subsection affords the court the very widest of powers to
grant consequential relief. An order made
in term s of paragraph (b)
will always have the effect, however, of fixing the right, obligation
or liability in issue in the company
somewhere else. In the current
case the right, involved is the property held by the subsidiary
companies in the King Group and
The obligation or liability is that
which any of them might actually have to account to and make payment
to the investors ...
[35] Relief in terms of section 20(9) of the
Companies Act may be granted on application by any 'interested
person', or mero motu
in any proceedings in which
a
company
is
involved.
The term 'interested person'
is
not
defined. I don't think any mystique should be attached to it. The
standing of any person to seek
a
remedy
in terms of the provisions should be determined on the basis of
well-established principle; see Jacobs en 'Anderv Waks en
Andere 1992
(1)
SA
521 (A), at
533J-534E, and, of course, if the facts happen to implicate
a
right in the Bill of Rights, section 38 of the
Constitution. There can be no doubting that the applicants have
a
direct and sufficient interest in the relief
sought
so as
to
qualify
as
'interested
persons' within the meaning of the provision."
[42] The court concludes that
section 20(9) applies squarely in the case of the applicant against
the respondent. Section 20(9) of the new Companies Act gives a
discretion to court to grant any consequential relief sought. The
respondent's company received stolen money which were transferred
from the insolvent's trust account. He was the sole director
of the
company and he on his own version says he was involved in the
business of his company by giving a response that the business
he had
with the insolvent were legitimate business transactions. Based on
the authority cited above and section 20 (9) of the Companies
Act
[20]
the merit of the case remains unaffected by whether the funds were
received by the respondent personally, or by the company.
[43] There is ample evidence which
points out that funds which were paid from the account of
du Plessis
to Mukhawana & Mukhawana Supply & Logistic (Pty) Ltd were
stolen as a result of fraudulent scheme, and paid
pursuant thereto,
that being the case renders inconsequential the question as to
whether the funds were paid into the account of
the company or to du
Plessis personally. Funds were meant for Brits Mall.
[44] The service providers paid
for their levies and taxes millions of rands to the insolvent's
trust
account. The fake beneficiaries and reference numbers were created in
order to systematically syphon the entire sum exceeding
R33 Million.
Miss
Mogale, Madibeng Municipal Manager says
" ...the
Municipality has been
a
victim of grand manipulation. It has
in fact been defrauded by Mr du Plessis and his employees. The
receipted payments that appeared
in the cash book were fictitious.
They were not genuine payments and had been falsely created by Mr
Mukhawana. He appears to have
acted in concert in defrauding the
Municipality with the applicant's legal representative, Jacques du
Plessis"
[21]
.
[45] The respondent was the head of the
section responsible for preparation of the Municipal bank
reconciliation. He was tasked with reconciliation of the bank
statements with cash book and Mr Nelson Sambo was assisting him.
It
was uncovered that the Brits Mall's payments were never reflected in
the bank statements as having been paid. Payments were
only reflected
in the cash book. The payments had been inserted manually. The System
Administrator of the Municipality, Thami Ntantiso
confirms that the
entries were reflecting purported payments made by service providers
were made by Mr Mukhawana. Mr Ntantiso's
confirmatory affidavit has
been attached.
[22]
[46] During the occurrence of the
fraudulent scheme from June 2016 and onward du Plessis transferred,
by way of intermittent electronic bank transfers from First National
Bank account, an aggregate amount of
R11 480 867.78
of the
stolen funds to a bank account reference "M Supply & Log
S
[23]
"
on the duplicitous version proffered by the respondent in the
answering affidavit these transactions were received either
by
himself
[24]
or by Mukhawana & Mukhawana Supply and Logistic (Pty) Ltd, a
private company of which the respondent is the sole Director
[25]
.
[47] Aside from the vague and
contradictory on the question of which party in fact received
the
stolen funds (as it appears common cause that it was either received
by himself or the company which he wholly owns and operates),
the
respondent positively states that the money was in fact received from
du Pless is pursuant to legitimate business transactions.
From the
evidence on record it has been proven that the respondent was
complicity in the fraud as alleged and an order sequestrating
the
respondent is justified.
The dictum by Lord Denning in
Lazarus Estate Ltd v
Beasly [1956] 1
.Q
B
;
[1956]
2
W.L.R 502
,
which
has long since been adopted as part of South African law, is apposite
and instructive in this respect:
"No court in this land will
allow
a
person to keep an advantage which he has obtained by
fraud. No judgment of
a
court, no order of a Minister, can be
allowed to stand if it has been obtained by fraud. Fraud unravels
everything.. . once it is
proved, it vitiates judgments, contracts
and all transactions whatever.. . "
[48] The respondent places reliance to the
quotation in MARS:
The Law of Insolvency in South Africa
[26]
and the
dictum
in the case of
Estate Salzmann v Van
Rooyen
[27]
where the court made the following remarks:
" Now I do not
propose traversing all the grounds covered under this heading.
Suffice it to say that to my mind sequestration
proceedings are not
the proper steps to take in achieving this end; the mere fact that
the company is alleged to be
a
"one man company"
does not affect the legal position that the
company
is nevertheless
a separate entity
and presumably it can never be considered
a
mere alias or agent of the respondent;
[49] The passage quoted in the
Estate
Salzman's case
was a
dictum
is not a decision of that
case. In fact, the sequestration was granted in favour of the
applicant in the said case. The facts of
that case are
distinguishable from this one. In that case the respondent was a sole
director of a company after the resignation
of the other directors of
the said company. Once the new directors were reappointed he
relocated to Cape Town and on arrival in
Cape Town he sent a letter
of resignation and the new directors who were re-appointed and they
uncovered that certain money was
missing from the estate. After all
the evidence was presented it was found that he is liable for
sequestration. In that case there
was no fraudulent claims except the
suspected theft. In the case at hand the respondent was not just a
sole director of the company
which received stolen funds from the
insolvent but there is a strong
prima facie
evidence which
places him at the finance department of the Municipality where funds
were due to be paid and Brits Mall didn't receive
monies and
fictitious reference numbers were created at the municipality which
misled the municipality to believe that funds for
services were
received only to be discovered it was not so a year later. From the
evidence of Mr Brink and Miss Mogale there is
a
prima facie
case
evidence which demonstrates an irresistible inference that the
respondent was complicity working with the insolvent. In conclusion
on this although ordinarily the respondent and his company are
separate individuals but the facts of this case are such that the
individual and the company are interlinked and indistinguishable.
Section 20(9) gives me a wide discretion to made a final
sequestration
order. See Ex Parte Gore
[28]
[50] The payment of the
respondent's company under those circumstances as stated above would
constitute the very definition of an unconscionable abuse of
corporate personality of which a Court should not countenance. The
respondent does not deny having received the amount of
R11 480.
78.
He rather contends that these intermittent payments were made
pursuant to legitimate transactions in the form of the selling and/or
renting of plant to the insolvent throughout the occurrence of the
relationship between the two.
[29]
[51] The respondent, in ostensible
fortification of this denial, annexes to its answering affidavit
annexures
"NTM11"
and
"NTM12",
being
"some of the copies of the invoices" which were issued,
presumably for services rendered to different companies.
[30]
The respondent further more attaches annexure
"NTM13"
and
"NTM14"
as alleged invoices issued to the
insolvent.
[31]
[52] In order to gauge the lack of
bona fides
in the respondent in assessing the transactions
between the respondent and the insolvent were legitimate business
transactions,
one must first contextualise the respondent's version
where he purports to deal with the affidavit
[32]
of Mogale, the Municipal Manager at Madibeng and his erstwhile
employer. This criticism is outlined
[33]
as follows in brief:
[52.1] The respondent in his answering affidavit
creates an impression that it was impossible to download or upload
any statements
into the financial system of Madibeng using Excel from
FNB using a "CNV" presumable he meant to say "CSV"
type
files. According to the Municipal Manager, Miss Grace Mogale she
says that cash book of the Municipality has been manipulated by
Mr
Mukhawana by entering fabricated receipts of Brits Mall services
payments therein. Fraud was uncovered after bank statements
were
obtained and compared with cash book entries.
[52.2] The respondent proffered a defence stating
that no one can upload information into the Madibeng financial system
using
Excel. The applicants in their reply produced the FNB system
detailing the functionality of FNB system which clearly demonstrates
that the version of the respondent was not true on this point.
[52.3] The respondent in attempt to exonerate
himself of any wrongdoing in his answering affidavit says that it was
Revenue
Department which was responsible for allocation of payments
and was not his function. This does not help him either, the
allocation
of payments was done utilising the information in the
municipal cashbook which is the book Mr Mukhawana manipulated. This
is illustrated
for example, when cash payment indicates payment by
Brits Mall, these fabricated payments will be allocated to Brits Mall
by the
responsible individual as they appear from the cash book.
[52.4] Although the respondent denies committing
fraud, he admits that payments were made by Du Plessis for legitimate
services
rendered by his company Mukhawana & Mukhawana Supply &
Logistic (Pty) Ltd. He says the payments were due and payable to
him.
All what he could do was to produce vouchers for the transactions
entered into that make up the amount of
R11 480 867.78
which
he does not deny he received.
[52.5] The respondent in his answering affidavit
in an attempt to justify his business transactions with the insolvent
he
producesvouchers
"NTM13"
and
"NTM14"
which consists of 148 pages. In these vouchers he accounts for
the total amount of
R3 055 415.32.
for the alleged goods.
[52.6] The respondent claims in
"NTM13"
where he shows 5 invoices for the value of
R154 540.00
which
relates to the period 10 March 2017 to 4 October 2017. All those
invoices are cash invoices and no delivery address or proof
of
delivery appears from them. The applicants say that they obtained a
lawful subpoena in order to get his bank statement for the
period
from 10 March 2017 to 4 October 2017 where he accounted for
R154
540.00.
In the bank statements which have been submitted as
annexure "10 13 " in actual the actual revue which went to
Mr Mukhawana
is for the amount of
RS 176 475.91.
[53]
All
what is expected of the respondent is to discharge the evidential
burden that he received funds from the insolvent
on reasonable
grounds or in a
bona fide
manner.
In
Kalil v Detoex (Pty) Ltd and Another
[34]
Cobert JA said the following:
"As
in the present case, the dispute arise on the affidavits may relate
to the locus standi of the applicant, either as
a
member or creditor, or as to whether proper
ground for winding-up have been established. In regard to locus
standi as
a
creditor,
it has been held, following certain English authority, that
application for liquidation should not be resorted to in order
to
enforce
a
claim which
is bona fide disputed by the company. Consequently, where the
respondent shows on
a
balance
of probability that its indebtedness to the applicant is disputed on
a
bona fide and
reasonable grounds, the Court will refuse winding-up order. The onus
on the respondent is not to show that it is not
indebted to the
applicant: it merely to show that the indebtedness is disputed on
bona fide and reasonable grounds."
[54] The respondent has failed
to discharge evidentiary burden to illustrate its purported
opposition. It
is clear from the evidence before me that stolen funds
were channelled to the respondent, and on his own version proffered,
using
the company as a vehicle to facilitate the receipts of the
funds.
[55] The applicants have managed
to prove all statutory requirements:
[55.1] The respondent cannot repay the money and
he is accordingly both commercially and factually insolvent. He has
not denied
this fact. He has committed discreet deeds of insolvency.
[55.2] The applicants have shown a reason to
believe that it will be to the advantage of the creditors if the
respondent's
estate is finally sequestrated. The trustees will be
empowered to investigate the extent of the fraud and theft, and
further follow
flow of funds from the respondent to other third
parties' estates, specifically through the invocation of mechanisms
contained
in the
Insolvency Act, 1936
, in order to recover monies
from the individuals and/ or entities.
[55.3] It appears that the respondent has
appropriated the stolen funds through the purchase of substantial
immovable assets
in the company, which for all the reasons proffered,
would also have to be recovered by the applicants for distribution
amongst
the
concursus.
To my mind there is no doubt that the
sequestration of the estate of the respondent will render a financial
dividend to the creditors
which will be negligible.
Result
[56] After a thorough reading of
the papers and hearing the submissions of the respective parties,
I
am of the considered view that a final sequestration order should be
granted. A declaratory order in terms of section 20(9) of
the
Companies Act
[35]
as amended, that Mukhawana & Mukhawana Supply and Logistic (Pty)
Ltd be deemed not to be juristic person is warranted. An argument
that the applicant's application is not made in terms of section
20(9) of the Act has no merit. This court may
mero motu
grant
an order in terms of this section. See
Ex Parte Gore and
Others
[36]
.
Costs
[57] Cost order is a matter which is
within the court's discretion. Counsel for the applicant submitted
that this matter is a complex matter and it deserved the appointment
of two counsel and ask an order that a consequential cost
order as a
result of appointment of two counsel should be granted. The
respondent was legally represented by one counsel in the
matter.
However, having read the matter and the applicable law, the request
for a cost order for two counsel is justified.
Order
[58] It is ordered that:
[59.1.] The estate of the respondent is placed under
final sequestration;
[59.2] The respondent to pay costs of the
applicant including the costs of two counsel.
SKIBI AJ
ACTING JUDGE OF THE HIGH COURT
GAUTENG DIVISION, PRETORIA
Heard
on
:
6
February 2019
Judgment
delivered
:
7 March
2019
APPEARANCES
For the
Applicant
:
Adv. S G Gouws and
Adv. L W. de Beer
Instructing
Attorneys,
Vezi
& De Beer Incorporated
cnr Alphine & South Village Road
LYNNWOOD, PRETORIA
Tell: 012 361 5640
Ref: N Mohamed/ND/MAT48443
For
the Respondent
:
Adv. J H Groenewald
Instructed by BOK Attorneys
215 Orient Street ARCADIA,
PRETORIA
Tell: 012 342 3311
Ref: RCK/MW/Mukhawana
Email address :
Rudi@bdk.co.za
[1]
Answering affidavit page 233
[2]
Answering affidavit page 219 at para 10
[3]
Record page 224
[4]
Page 222, at para 21
[5]
Section 12 (1) read with
section 9(1)
and
10
(a) of the
Insolvency
Act 24 of 1936
as amended
[6]
Section 12
(1) (b) read with 10 (b) of the
Insolvency Act 24 of 1936
[7]
Section 12
(1) c) read with 10 (c) of the
Insolvency Act 24 of 1936
[8]
Page 18 of the paginate d record: Brink report
[9]
Section 8
of the
Insolvency Act
[10]
Applicants' supplementary affidavit page 180-181
[11]
Supplementary affidavit by Mr I Dinath at page 179 to 181
[12]
2015 (3) SA 1
(CC) at para [44] & [45]
[13]
[14]
Case No : 18127/ 2012 (Judgment of the Western Cape High Court
delivered on 13 September 2013
[15]
(No. 1)
[1991] 4 All SA 769
(CA), at 779
[16]
Ninth edition, 2008, Juta & Co Ltd, at page at page 113 to 114
[17]
1944 OPD 1
[18]
71 of 2008
[19]
[2013] 2 All SA 437
(WCC) (13 February 2013)
[20]
71 of 2008
[21]
Affidavit of Miss Mogale, Municipal Manager at Madibeng
Municipality, page 102 para 22
[22]
Affidavit of Mss Mogale, page 101 para 15, 16
[23]
See payment schedule at page 55
[24]
Answering affidavit page 224-225, para 23.7 and para 24
[25]
1944
OPD 1
[26]
Answering affidavit page 225 para 23.8
[27]
Ninth edition , 2008 , Juta & Co Lt d, at page at page 113 to
114
[28]
Supra at para [35]
[29]
Para 12-14 of the respondent's answering affidavit
[30]
Record page 290-342
[31]
Record page 343-359
[32]
Pages 96-162
[33]
Record page 377-380
[34]
1988 (1) SA 943
(AD) at 980B
[35]
71 of 2008
[36]
Supra at para [35]