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[2019] ZAGPPHC 272
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Mahem Verhurings CC v First Rand Bank Limited (A 316/2017) [2019] ZAGPPHC 272 (27 June 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)
Case number: A 316/2017
Date: 27/6/2019
In
the matter between:
MAHEM
VERHURINGS
CC
APPELLANT
AND
FIRST
RAND BANK
LIMITED
RESPONDENT
JUDGMENT
TOLMAY, J:
INTRODUCTION
[1] The
Appellant (Mahem) appealed an order granted for its final winding up,
by
the Court
a quo.
The
Respondent (First Rand) relied on a debt of R3 016 2014-30 owing to
it by Mahem, which it alleged was due and payable.
[2] The
debt originated from a mortgage redemption agreement (the agreement),
entered
into between First Rand and Mahem on 27 September 2011, the
terms of the agreement were set out in a credit facility letter dated
23 September 2011.
[3] The
material terms of this agreement were
inter
alia
that First Rand would extend a
facility of R4 000 000-00 to Mahem, which would be paid back over a
period of 120 months in instalments
of R33 514-60. A covering
mortgage bond would be registered by First Rand over certain
immovable property. All Mahem's rights,
title and interest of all
rentals or revenue which might accrue from the property mortgaged
were ceded, transferred and assigned
to First Rand. The agreement
also contained a non-variation clause that prohibited any variation
of the agreement, unless it was
reduced to writing and signed by both
parties.
[4] It
was common cause that Mahem failed to comply with the terms and
conditions
of the agreement. It failed to make payments of the
monthly instalments and fell in arrears. The debit order for the
monthly payment
of the instalment, which fell due on 7 December 2014
was returned as unpaid due to insufficient funds. After this failure
three
debit orders for January, February and March 2015 were met. The
debit order of 7 April 2015 was however again returned unpaid.
Koedoeskop River Farms Alpha CC (Koedoeskop)signed surety for Mahem.
[5] As
a result of the aforesaid failure to comply with the agreement
letters of demand
were sent to Mahem to rectify the default within 7
days. Mahem failed to comply. The last payment by Mahem in terms of
the agreement
was during March 2015.
[6] The
liquidation application brought by First Rand against Mahem was
premised on the
ground that Mahem should be deemed to be unable to
pay its debts, by virtue of the provisions of Section 69 of the Close
Corporation
Act 69 of 1984 (the CC Act). First Rand, who was a
creditor of Mahem, of not less than R200-00, did in terms of section
69 serve
on Mahem a demand at its registered office. This demand
required Mahem to pay the amount due. Mahem for a period of 21 days
thereafter
failed to pay the sum. First Rand then proceeded to launch
the liquidation application.
[7] Mahem's
attorneys reacted to the launching of the liquidation application in
an email
dated 15 April 2015 and averred that First Rand was not
entitled to launch the application and was not entitled to call up
the
amount due. It was alleged that First Rand was mala
fide
and that Mahem would seek a special
costs order in the application for winding up. The failure to comply
with the agreement was
however not disputed on the papers by Mahem.
[8] The
only member of Mahem was Mr Gert Jacobus De Beer. The sureties were
Lambertus
Nicolas De Beer, Gert Jacobus De Beer and Koedoeskop. The
De Beers and their father were in their own capacities and through
trusts,
the beneficial owners of Koedoeskop, Seringhoek Boerdery CC
and various other legal entities. These entities were referred to as
"the De Beer's Group of entities". The basis of Mahem's
defence was that First Rand was not entitled to take any legal
action
against Mahem. This commitment not to take legal action was allegedly
contained in an Undertaking (the Undertaking) that
was partly in
writing and partly oral. In the Undertaking First Rand allegedly
undertook to refrain from taking any form of legal
action, pending
the finalisation of an application for business rescue and a counter
application for liquidation of Koedoeskop,
against any of the
entities forming part of the De Beer's Group of entities, and it was
alleged that Mahem formed part of the group
of entities. Koedoeskop
was placed under provisional liquidation on 2 March 2015 and the
final order was granted on 5 May 2015.
[9] The
background to the liquidation application of Koedoeskop, was that on
3 February
2015 the trustees of Sandstone Projects Trust, an entity
within the De Beers Group of entities, brought an urgent application
to
place Koedoeskop under business rescue. On 2 March 2015 First Rand
brought an application to intervene in the business rescue
application
and brought a counter-application for the liquidation of
Koedoeskop.
[10] The
parties in these applications reached an agreement, which resulted in
a draft order, in which the
business rescue application was postponed
sine die,
and
Koedoeskop was placed under provisional liquidation, with a return
day of 5 May 2015. The provisional liquidation of Koedoeskop
came
about as a result of a settlement, in terms of the Undertaking.
[11] The
business rescue application and the liquidation application were
still pending at the time of the
drafting of the answering affidavit
in this application. Mahem was of the view that it was a party to the
aforesaid Undertaking
and that the Undertaking was still operative
and binding, when the liquidation application was launched and that
as a result First
Rand could not proceed with the application against
it.
[12] Mahem
stated that the purpose of the Undertaking was to enable the persons
and entities within the
De Beers Group of entities to keep on trading
in an attempt to settle the obligations of the different entities.
First Rand however
took the stance that Mahem was not a party to the
undertaking, and that it was limited to the farming operations in the
De Beer
Group of entities.
[13]
Although Mahem denied indebtedness to First Rand this denial was
purely based on the terms
of the Undertaking and not on the agreement
that was entered into and in terms whereof First Rand lent and
advanced money to Mahem.
On the papers it was common cause that Mahem
failed to comply with the terms of the agreement.
[14] Mahem
also alleged that, its property portfolio had a value of R12 000
000-00 (twelve million
rand), which exceeded its indebtedness and
that as a result it was not insolvent. Mahem attached a valuation to
prove this point.
It must be pointed out that this valuation did not
set out any details on which it was based.
[15] As a
result of the allegation regarding the Undertaking First Rand in the
replying affidavit,
stated that at the commencement of the business
rescue proceedings, it was advised by the De Beers that the property
belonging
to Mahem had been sold. As a result, at the time of
negotiating the draft order and the Undertaking, Mahem could not have
formed
part of the negotiations or the Undertaking. It was further
contended that the reference in the Undertaking to
"
the De Beer Group of entities"
referred
to the entities in the De Beer Group that was involved in farming
activities. First Rand stated that Mahem was obliged
to meet its
liabilities in terms of the written agreement entered into between
them.
[16] The
replying affidavit further revealed that the business rescue
application of Koedoeskop
was launched, because Koedoeskop was unable
to pay Escom and consequently the irrigation of crops could not
continue. First Rand
supported the appointment of a liquidator and
assisted to ensure that the farming activities could continue and had
nothing to
do with Mahem.
[17] First
Rand alleged that the facility agreement dated September 2014, in
terms whereof facilities
were granted to Koedoeskop, the Tamboties
Boerdery and Seringhoek Boerdery, was dealt with separately, and as
part of the farming
operations. As already indicated the agreement
between Mahem and First Rand was entered into during September 2011.
[18] In the
replying affidavit First Rand also set out that it had apparently,
after filing
its founding affidavit became aware of an application
issued by Beaumont Assist (Pty) Ltd
t/a
T A Progressive Financial Solutions
and L N De Beer N.O., G J De Beer N.O. and L N De Beer Snr N.O. (the
Beaumont application) and
annexed the notice of motion and founding
affidavit in that matter. It transpired
inter
alia
from that founding affidavit
that the rentals, which were ceded to First Rand in terms of its
agreement with Mahem, were also ceded
to Beaumont and that Beaumont
alleged that the Respondents were indebted to it in the sum of R6 365
871-23 plus interest. It was
also submitted that in this matter the
deponent of Mahem's affidavit, Mr Gert Jacobus De Beer, stated that
he was the sole member
of Mahem, but in the agreement with Beaumont,
the deponent stated that Sandstone Projects Trust was the sole member
of Mahem. First
Rand said that they would seek leave to intervene in
that application.
[19] This
was clearly new, matter, but First Rand argued that it became aware
of these facts only after
the founding affidavit was issued and the
response was actually solicited by the content of the answering
affidavit. At the hearing
of the matter, Mahem's representative
attempted to hand up the whole file in the Beaumont matter, but the
Court refused to accept
it. It is important to note that Mahem, did
not at any stage request leave to file any further affidavit to
address the new matter
contained in the replying affidavit.
[20] The
Court
a quo
granted a final
winding-up order and refused leave to appeal. The Supreme Court of
Appeal granted leave to appeal to the Full Court.
ISSUES
ON APPEAL
[21] Mahem
divided the issues on appeal in two categories. The first category
dealt, basically
with an interpretation of what needs to be proven to
succeed in a winding-up order in terms of section 69(1)(a) or
69(1)(c) of
the CC Act. This category's second leg dealt with what
needed to be proven in order to conclude that Mahem was unable to pay
its
debts. The third leg of this category relied on what Mahem
regarded as the Court a
quo' s
reliance on new matter contained in
the replying affidavit and the refusal of the Court to accept the
Court file in the Beaumont
matter.
[22] The
second category's starting point concerned the Undertaking negotiated
and which Mahem
argued covered it as part of the so called
"De
Beers Group of entities"
and
which prevented First Rand, pending the finalisation of the
application to place Koedoeskop under business rescue and the
counter-application
by First Rand for liquidation of Koedoeskop, from
proceeding with legal action against Mahem. Mahem argued that the
undertaking
had the effect of precluding First Rand from making
demand for payment and also precluded First Rand from making
statutory demand
in terms of section 69(1)(a) of the CC Act and
launching a liquidation application against Mahem.
[23] Mahem's
view was that the undertaking suspended Mahem's indebtedness to First
Rand, and
as a result, it was argued that the indebtedness to First
Rand was no longer
" due and
payable".
It was argued that
the words
"legal action"
did include liquidation
applications. Mahem also argued that, by making demand for payment
First Rand repudiated the undertaking,
as a result whereof further
payments to First Rand seized on the basis of
exceptio
non adimpleti contractus.
THE
NEW MATTER CONTAINED IN THE REPLYING AFFIDAVIT
[24] It is trite
that it is not permissible to make out new grounds for an application
in a replying
affidavit. However, it is sometimes permissible to
supplement allegations contained in an application by way of facts in
a replying
affidavit.
[1]
Courts do not normally countenance a mere skeleton of a case in a
founding affidavit, which skeleton is then sought to be covered
in
flesh in the replying affidavit.
[2]
However each case depends on its own facts. It is impermissible to
rely on a completely different cause of action to the existing
cause
of action as set out in in the founding affidavit.
[3]
[25] The Court
has a discretion to allow new matter in reply.
[4]
Relevant circumstances which may allow for a deviation from the
general rule that a litigant cannot rely on new matter in a replying
affidavit, include the complexity of the case, whether it was
realistic to expect the Applicant to be in possession of all facts
at
the time of launching of the application, whether the particular
evidence refuted what was contained in the opposing affidavit
and
whether one is concerned with a sequestration/liquidation application
- the latter being important as the particular evidence
could be
highly relevant as it informs the Court as to precisely what the
state of affairs were relating to the close corporation/company
concerned.
[5]
[26] The papers
show that Mahem had First Rand's replying affidavit in its possession
since 1 June
2016 and did not launch an application to strike out the
new matter in reply, nor was leave sought to file a further
affidavit.
[27] One must
also take into consideration that at least some of the new matter in
this instance was
solicited by Mahem's allegation contained in the
answering affidavit, namely, that First Rand was bound by the
Undertaking. Secondly
the facts regarding the Beaumont application
only came to First Rand's knowledge, after the liquidation
application was filed.
This allegation required an answer from First
Rand. Under these circumstances Mahem could have and should have
sought leave to
file a further affidavit, but failed to do so. As a
result the Court
a quo's
refusal
to accept the file at the hearing was not an inappropriate exercise
of its discretion, Mahem, at its own peril, did not
apply to file a
further affidavit. The belated attempt to hand up the file was
correctly refused in the light of the circumstances.
[28] Mahem's
argument that the new matter in reply had to be ignored as a blanket
rule is clearly
incorrect. In the light of the aforesaid the Court
a
quo
did not err when it took
cognisance of the facts contained in the replying affidavit and
refused to accept the court file during
the hearing.
THE
UNDERTAKING
[29] The
starting point in the evaluation of the facts of this appeal should
be the Undertaking.
This necessitates an analysis of both the content
and to a certain extent the background to the undertaking.
[30]
The Undertaking ·reads as follows:
"DRAFT LETTER OF
UNDERTAKING ON BEHALF OF FIRST RAND BANK LTD AND WESBANK LTD
In re:
LAMBERTUS
NICOLAAS DE BEER N.O., GERT JACOBUS DE BEER N.
0
.
(in
their capacity
as
trustees
of the Sandstone Projects Trust, IT 475109) I KOEDOESKOP RIVER FARM
ALFA
CC
(Registration
number: 2006/128221 / 23 I FIRST RAND BANK LIMITED
It is recorded that against the
grant of
a
provisional
liquidation order of Koedoeskop River Farm Alfa
CC
by agreement
between the parties and (sic) the business rescue application of the
company (sic) postponed sine die:
1.
"
That
pending the finalisation of the application for business rescue and
the counter application for liquidation under
case
number 13506/2015:
1.1
That First Rand Bank Ltd ("the
bank''), the intervening Creditor under case number 13506/2015 and
Wesbank Ltd ("Wesbank
''),
shall
refrain from taking any form of legal action to collect outstanding
debt against Messrs Lambertus Nicolaas De Beer (Snr),
Gert Jacobus De
Beer and Lambertus Nicolaas De Beer (Jnr), in their personal
capacities
as
sureties
and co-principal debtors or otherwise, or any of the entities in
which they are involved, directly or indirectly including,
but not
limited to, Tamboties Boerdery Trust and Sering Boerdery
CC
or any of the sureties liable
to the bank for outstanding debt;
1.2
That the current business rescue
proceedings in Sering Boerdery
CC
continue in terms of the provisions
of the
Companies Act no 71 of 2008
, subject to the statutory rights
of the parties under the provisions of the Act;
2.
That
the bank acting through its attorneys undertakes to support the
appointment of Mr Hannes Muller as the provisional liquidator
of
Koedoeskop River Farm Alfa
CC;
That upon the appointment of
the provincial liquidator, he obtaining the
necessary
extension of
powers to borrow funds against the security
as
a
first charge
against the crops on hand or to be cultivated the bank undertakes
against such security to finance and facilitate with
immediate
effect, the payment of what is necessary, through the appointed
provisional liquidator, to ensure the supply of electricity
BY Escom
to the farm Koedoeskop River Farm Alfa
CC,
during the
liquidation
process
". [Court's emphasis]
[31] Certain
general principles regarding interpretation of documents may be
important and must be
considered. It is trite than when more than one
meaning is possible considering the language used, each possibility
must be weighed
in the light of certain factors. These factors, which
must be applied objectively, are: (a) the language used in the light
of the
ordinary rules of grammar and syntax; (b) the context in which
the provision appears; (c) the apparent purpose to which it is
directed;
and (d) the material known to those responsible for its
production.
[6]
It must also be remembered that
"
Interpretation
is
no
longer a
process
that
occurs in
stages
but
is
essentially
one unitary exercise".
[7]
[32] In
Picardi
Hotels v Thekwini Properties
[8]
,
the SCA made the point that a
sensible meaning must prevail over one that is not. A Court will not
give an interpretation that leads
to impractical, unbusiness like or
oppressive consequences or that will stultify the broader operation
of the contract under consideration.
[9]
[33] One of the
issues in interpreting the Undertaking that must be considered is
that it remained
a “
draft”,
that much is obvious from the
heading.
[34] The first
emphasis should then be on the word
"draft'
and its implication for the status
of the document. In the Shorter Oxford dictionary the word draft is
defined as follows:
"A preliminary version or
rough form of something to be written or printed, esp. an official
document".
This
undertaking was accordingly nothing more than a preliminary version
of an undertaking that could or could not be accepted by
the parties.
Importantly it must be noted that, the Undertaking was never signed
by the parties. However a perusal of the papers
seem to include that
First Rand accepted that it was bound by the Undertaking at least in
regard to the other entities in the Group
of entities. However this
must be seen in the context that the agreement between First Rand and
Mahem contained a non-variation
clause, which reads as follows:
“
Non-variation”
No alleged terms or conditions
of any facility letter shall be of any force and effect unless
reduced to writing and signed by you
and the Bank''.
The conclusion in the light of the
non-variation clause is that the Undertaking could not have applied
to Mahem.
[35] If the
aforesaid conclusion is not correct the Undertaking states that First
Rand shall
refrain from
" taking
any form legal of action to collect outstanding debt."
It
accordingly needs to be determined whether the reference to
"legal
action"
included a demand, and
the subsequent institution of liquidation proceedings.
[36] The
distinction between what would constitute legal action and what would
merely be legal
processes were dealt with in
Steelpark
Estate v Vereeniging Town Council
[10]
the Court stated with approval the following:
“
In
Kempton Park Bombay (Pty) Ltd v Kempton Park Municipality 1956(1) SA
643 (T) MARAIS J., reviewed the authorities and summarised
their
effect at p 267 by saying:
Die onderskeiding tussen 'n
"action" aan die eenkant en
regsprosesse
aan die anderkant
wat nie op 'n "action" neerkom nie, berus derhalwe nie op
die onderskeiding tussen
prosesse
wat met 'n
dagvaarding ingelyf word, en die wat in 'n ander vorm onder die
aandag van die Hof kom nie. Die onderskeiding
is
tussen die
gedinge, in welke vorm oak, waarin die doen van iets of die betaling
van 'n geldsom of 'n verklaring van regte geeis
word aan die eenkant,
en daarteenoor gedinge waarin so iets nie geeis word nie.
Eersgenoemdeis "action", die ander nie
.”
[11]
[37] A
demand to pay an indebtedness prior to the institution of legal
proceedings cannot be
defined as a legal action. Such a demand is in
my view a mere precursor that may or may not lead to the institution
of actual legal
action.
[38] The
next question is to determine whether liquidation proceedings
constitute legal action
to collect outstanding debt. In
Collett
v Priest
[12]
the following was said:-
"...
The
order placing a person's estate under sequestration cannot fittingly
be described
as
an order for a
debt due by the debtor to the creditor.
Sequestration
proceedings are instituted by a creditor against the debtor not for
the purpose of claiming something from the latter.
but for the
purpose of setting the machinery of the law in motion to have the
debtor declared insolvent. No order in the nature
of
a
declaration
of rights or of giving or doing something
is
given
against the debtor. The order sequestrating his estate affectsthe
civil status of the debtor and results in vesting his estate
in the
Master.
No
doubt, before
an
order
so
serious
in its consequences to the debtor is given the Court satisfies itself
as
to
the correctness of the a/legations in the petition. It may for
example have to determine whether the debtor
owes
the money as
alleged in the petition.
But
while the Court has to determine whether the allegations are correct,
there is no claim by the creditor against. the debtor
to pay him what
is due nor is the Court asked to give any judgment, decree or order
against the debtor upon any such claim. It
is fruitless therefore to
seek to show that sequestration proceedings, which have repeatedly
been demonstrated to fall outside
of the words "civil suit",
falls within those words.
....
In
sequestration proceedings there is no claim either for the redress of
an injury or for the recovery of
a
right."
[Court's emphasis]
[13]
[39] This
reasoning was followed in various other cases.
[14]
Liquidation proceedings like sequestration proceedings, are by their
very nature not proceedings to claim an outstanding debt,
it is a
legal proceeding, which ultimately only seeks to create a
concursus
creditorum.
[40] The
nature of the proceedings is also illustrated by the fact, that when
a Court grants
a liquidation order, the Court's determination of the
creditor's
locus standi
is
not
res judicata
against
either the debtor, his/her trustee or the Presiding Officer at a
meeting of creditors in the event of the liquidator/trustee/debtor
subsequently challenging the validity or extent of the creditor's
claim.
[15]
Similarly agreements providing, for instance, that a creditor cannot
proceed with
"any legal action
instituted for the recovery of
a
debt"
does
not include proceedings to vindicate property
[16]
or proceedings for sequestration/liquidation.
[17]
[41] When
the aforesaid principles are applied it becomes quite apparent that
the Undertaking
did not apply to liquidation proceedings. Although
the wording of the Undertaking is so wide that it could have included
Mahem,
due to the references to all the entities in which the De
Beers were either directly or indirectly involved, I need not come to
a definitive conclusion in this regard, as the· undertaking
did not cover liquidation proceedings.
[42] As a
result of the aforesaid conclusion that the Undertaking does not
apply, this Court
does not have to concern itself with the question
of whether the Undertaking rendered the debt not due and payable.
Mahem never
disputed indebtedness in terms of the agreement, nor its
failure to comply with the agreement with First Rand, but based its
argument
solely on the fact that the undertaking as such rendered the
outstanding amounts not due and payable.
[43] As a
result Mahem could not rely on the undertaking as an impediment to
the bringing of
liquidation proceedings.
THE
LIQUIDATION APPLICATION
[44] As
already stated the liquidation application was based on section 69 of
the CC Act which
is the equivalent of section 345 of the old
Companies Act no 61 of 1973 (the old Act). Section 69 provides as
follows:
"Circumstances under
which corporation deemed unable to pay its debts
(1)
For
the purposes of Section 68(c), a corporation shall be deemed to be
unable to pay
its
debts,
if-
(a)
a creditor, by cession or otherwise,
to whom the corporation is indebted in a sum of not
less
than R200,00 then due
has
served on the corporation, by
delivering it at its registered office, a demand requiring the
corporation to pay the sum
so
due,
and the corporation has for 21 days thereafter neglected to pay the
sum or to secure or compound for it to the reasonable satisfaction
of
the creditor; or
(b)
any process issued on a judgment,
decree or order of any Court in favour of a creditor of the
corporation is returned by a Sheriff,
or a messenger of a
Magistrate's Court, with an endorsement that he or she has not found
sufficient disposable property to satisfy
the judgment, decree or
order, or that any disposable property found did not upon sale
satisfy such
process;
or
(c)
it is proved to the satisfaction of
the Court that the corporation
is
unable to pay its debts.
(1)
In determining for the
purposes of subsection (1) whether
a
corporation
is
unable to pay its
debts, the Court shall
a/so
take into account
the contingent and prospective liabilities of the corporation."
[45] Prior
to coming into operation of the Companies Act 71 of 2008 (the New
Act), a creditor (including
a contingent creditor and/or prospective
creditor) could petition the Court for winding-up of a close
corporation on any one of
the three grounds mentioned in Section 69
of the CC Act quoted
supra.
Once a Court
found that any one of the grounds mentioned in Section 69 was proven,
the Court could place the close corporation under
liquidation. It was
not necessary to show that the close corporation was factually
insolvent. The following was stated in
Boschpoort
Ondernemings (Pty) Ltd vs Absa Bank Ltd
[18]
:
"[16]
For
decades our law
has
recognised two
forms of insolvency: factual insolvency (where
a
company's
liabilities exceed its
assets)
and commercial
insolvency (a position in which
a
company is in
such
a
state
of illiquidity that it is unable to pay its debts, even though its
assets
may
exceed its liabilities). See, for example, Johnson v Hirotec (Pty)
Ltd;
[19]
Ex parte De Villiers
&
another NNO: In
re Carbon Developments (Pty) Ltd (in Liquidation);
[20]
Rosenbach
&
Co
(Pty) Ltd v
Singh's
Bazaars
(Pty) Ltd.
[21]
[17]
That
a
company's commercial insolvency is
a
ground that will Justify an order for
its liquidation
has
been
a
reality
of law which
has
served
us well through the
passage
of
time. The
reasons
are
not hard to find: the valuation of assets, other than cash, is
a
notoriously elastic and often highly
subjective one; the liquidity of
assets
is
often more viscous than
recalcitrant debtors would have
a
court believe; more often than not,
creditors do not have knowledge of the
assets
of
a
company that owes them money
-
and cannot be expected to have; and
courts are more comfortable with readily determinable and objective
tests such
as
whether
a
company
is able to meet its current liabilities than with abstruse economic
exercises
as
to
the valuation of a company's
assets.
[22]
Were the test for solvency in
liquidation proceedings to be whether
assets
exceed liabilities, this would
undermine there being a predictable and therefore effective legal
environment for the adjudication
of the liquidation of companies: one
of the purposes of the new Act,
set
out in
s
7(1)
thereof
[18]
In view of the long established and
well-settled practice in our courts that commercial insolvency
justifies the liquidation of
a company, it must be presumed that the
legislature
was
aware
of this fact. The principle that Parliament
is
presumed to be acquainted with the
interpretation of earlier legislation by the court, applies where
there
has
been
a settled and well- recognised judicial interpretation before the
relevant legislation
was
passed.
[23]
[19]
It has also long been
a
construction of interpretation of
statutes that, in the absence of express wording to the contrary, the
legislature did not intend
to alter the law
as
it had previously stood.
[24]
Accordingly, it must be presumed that
the legislature deliberately refrained from defining 'solvency'. It
must have done
so
with
a
view
to ensuring that the well-oiled machinery of the courts in matters of
company liquidations should not stall. The legislature
must have been
content that prevailing judicial interpretations of solvency and
insolvency respectively should continue to have
effect. The meaning
of those terms must be one that leads to
a
sensible and business-like result.
See Natal Joint Municipal
Pension Fund v Endumeni Municipality. "
[25]
[46] When the new
Act came into operation, the provisions of the old Act dealing with
the liquidation
of companies were retained
[26]
.
Similarly when the new Act came into operation, the provisions of
Section 69 of the CC Act were retained in relation to the liquidation
of close corporations.
[27]
[47] In
Boschpoort
[28]
it was ultimately held that it is not necessary for a creditor to
prove factual insolvency/factual solvency when proceeding either
in
terms of the old Act or new Act.
[48] The
following was stated in
Boschpoort:
"[22]
Consequently, in order for
a
solvent company
to be wound-up in terms of either s 80 or 81 of the new Act, it must
be commercially solvent. If it is commercially
insolvent it may be
wound -up in accordance with chapter 14 of the old Act, as is
provided for in subitem 9(i) of schedule
5
of the new Act.
[23]
The confusion which has arisen as to
when
a
company
may be wound up in terms of the new Act or in terms of the old Act is
thus eliminated. The so-called factual solvency of
a company is not,
in itself,
a
determinant
of whether
a
company
should be placed in liquidation or not. The veracity of this
deduction may be illustrated, as in the present case, where
the issue
has arisen as to whether a company which is factually solvent, but
commercially insolvent, is to be wound-up in terms
of the new Act or
the old Act. To attribute so-called 'factual solvency' to the meaning
of the term 'solvent company' in the new
Act would lead to an
unbusiness-like result that would not make sense.
[24]
Factual solvency in itself is
accordingly not a bar to an application to wind-up a company in terms
of the old Act on the ground
that it is commercially insolvent. It
will, however, always be a factor in deciding whether a company is
unable to pay its debts.
See Johnson v Hirotec (Pty) Ltd,
[29]
It follows that a commercially
solvent company (whether factually solvent or insolvent), may be
wound up in terms of the new Act
only; a solvent company cannot be
wound up in terms of the old Act."
[30]
[49] In view of
the discussion of
Boschpoort
supra,
it is clear that the SCA did not
impose a further requirement upon a creditor to prove commercial
insolvency, when one of the grounds
mentioned in Section 69 have been
proven. The three grounds of inability to pay debts in Section 69
namely, (i) failure to comply
with a statutory demand, (ii)
nulla
bona
return; or (iii) proof to the
satisfaction of the Court that the close corporation is unable to pay
its debts are not tied together
with the word
"and",
but indeed with the word
"or".
This points clearly thereto that
each ground is a separate ground and does not require proof of
something in addition thereto.
[50] All that
Boschpoort
found,
is that any of the grounds relied upon in Section 69, if proven,
leads to the conclusion that the relevant close corporation
is
commercially insolvent and may therefore be wound-up in terms of the
old Act or the CC Act. In this instance First Rand demanded
a payment
of a debt and Mahem failed to pay the amount due within the required
21 days. As a result Mahem is deemed to be unable
to pay its debts,
and as a result is commercially insolvent and should be liquidated.
[51] In the light
of all the facts I am of the view that the Court a
quo
was correct in granting a final
winding-up order.
[52]
The
following order is made:
1.
The appeal is dismissed; and
2.
The Appellant to pay the costs of the
Respondent.
R
G TOLMAY
JUDGE
OF THE HIGH COURT
N
RANCHOD
JUDGE
OF THE HIGH COURT
V NKOSI
ACTING JUDGE OF THE HIGH COURT
DATE
OF HEARING:
24 APRIL 2019
DATE
OF JUDGMENT:
27 JUNE 2019
ATTORNEY
FOR APPELLANT:
RWL INC
ADVOCATE
FOR PLAINTIF:
ADV G F
HEYNS
ATTORNEY
FOR RESPONDENT:
HARTZENBERG INC
ADVOCATE
FOR RESPONDENT: ADV L
MEINTJIES
[1]
Director of Hospital Services v Mistry 1979(1) SA 626 (A) at 635 -
636.
[2]
Titty's Bar & Bottlestore (Pty) Ltd v ABS Garage (Pty) Ltd
1974(4) SA 362 (T) at 369 B
[3]
Triomf Kunsmis (Ply) ltd v AE & CJ Bpk 1 984(2) SA 261 (T) at
269.
[4]
Johannesburg City Council v Bruma Thirty-Two 1984(4) SA 87 (T).
[5]
Securefin Ltd v KNA Insurance (2001 ]3 ALL SA 15 (T).
[6]
Natal Joint Municipal Pension Fund v Endumeni Municipality 2012(4)
SA 593 (SCA) at par 18 and its restatement in Bothma-Batho
Transport
v S Bothma & Seun Transport 2014(2) SA 494 (SCA) at par 10
& 12.
[7]
Bothma-Botha par 12.
[8]
Picardi Hotels v Thekwini Properties 2009(1) SA 493
(SCA) at par 5.
[9]
Natal Joint at par 26
[10]
1963(3) SA 657 (T) at 663.
[11]
Steelpark p 663 par A-C; See also Dorpsraad van Schweizer-Reneke v
Van Zyl 1966(4) SA 115 (T) at 116 ; Prinsloo v Johannesburg
Ci ty
Council 1969(2) SA 355 (W) at 356.
[12]
Collett v Priest
1931 AD 290
[Collett].
[13]
Collet p 299 & 300.
[14]
Prudential Shippers SA Ltd v Tempest Clothing 1976(2) SA 856 0/v) at
863 - 865; Hassan v Berrange NO 2012(6) SA 329
(SCA) at
par 19; Investec Bank v Mutemeri 2010(1) SA
265
(GSJ) at
par 27 - 35; Naidoo
v
Absa Bank Ltd 2010(4) SA 597 (SCA) at
par 4, Firstrand Bank Ltd v Kona 2015(5) SA 237 (SCA) at par 11 -
13; Misnun's Heilbron
Roller Mills Holdings (Ply) Ltd v Nobel Street
1979(2) SA 1127 (WLD) at 1128 - 1129; King Pie Holdings (Ply) Ltd v
King Pie (Pinet
own) 1998(4) SA 1240 (D) at 1247 - 1248; Combustion
Technology v Technoburn 2003(1) SA 265 (C) at par 12 - 13; Smith v
Porritt
2008(6) SA 303 (SCA) at par 11 -12 and Arprint
Ltd v Gerber Goldschmidt Group SA 1983(1) SA 254 (A) at 261.
[15]
Smith v Perrett 2008(6) SA p 303 at par 11 – 12.
[16]
Haak's Garage v Rademeyer 1953(2) SA 188 (T)
[17]
Arprint Ltd v Gerber at 261.
[18]
2014(2) SA 518 par 16-19 (Boschpoort).
[19]
Johnson v Hirotec (Pty) Ltd 2000 (4) SA (SCA)para 6.
[20]
Ex parte De Villiers
&
another NNO: In re Carbon
Developments (Pty) Ltd (in Liquidation)
1993 (1) SA 493
(A) at
502C-D.
[21]
Rosenberg
&
Co (Pty) Ltd v Singh's
Bazaars
(Pty)
Ltd
1962 (4) SA 593
(D) at 596F-597H.
[22]
See, for example, the observation of the court in Firstrand Bank Ltd
v Lodhi 5 Properties Investment CC
2013 (3) SA 212
(GNP) para 34.
[23]
See, for example, Fundstrust (Pty) Ltd (in Liquidation) v Van
Deventer
1997 (1) SA 710
(A) at 732A-B;
Commissioner
for Inland Revenue Estate v Hulett
[1990] ZASCA 23
;
1990 (2) SA 786
(A) at 7988-C and
Krause v Commissioner for Inland Revenue
1929 AD 286
at 297.
[24]
See, for example, Ex parte Davidson
1981 (3) SA 575
(D &CLD) at
577H; Ex parte Aufrichtig
1979 (4) SA 426
(N) at 4298-C; Realisation
Company v Commissioner of Taxes
1951 (1) SA 177
(SR) at 184G-H;
In
re
Budget!; Cooper v Adams
(1894) 2 Ch 557
at 561.
[25]
Natal Joint Municipal Pension Fund v Endumeni Municipality
2012 (4)
SA 593
(SCA) para 18.
[26]
Item 9(1) of Schedule 5 to the new Act.
[27]
Section 66(1)of the CC Act provides:
"The laws
mentioned or contemplated in item 9 of Schedule
5
of the
Companies Act, read
with the changes required by the context, apply
to the liquidation of
a
corporation in respect of any matter
not spec1fically provided for in this Part or in any other
provisions of this Act."
[28]
2014(2) SA 518 par 9 – 13.
[29]
Johnson v Hirotec (Pty) Ltd
(supra)
para 6 [footnotes
re-numbered for purposes of this judgment].
[30]
Par 22 - 24 Boschpoort.