About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2018
>>
[2018] ZAGPJHC 689
|

|

Absa Bank Ltd v 57 Hyde Close Estate CC and Another (013319/17) [2018] ZAGPJHC 689 (26 November 2018)

REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
CASE
NO:
013319/17
In
the matter between:
ABSA BANK
LTD                                                                                                  Applicant
and
57 HYDE CLOSE ESTATE
CC                                                                     1
st
Respondent
JP KRUGERRAND DEALS
(PTY) LTD                                                       2
nd
Respondent
JUDGMENT
KEIGHTLEY J
1.
The applicant in this
matter, Absa Bank Limited (“Absa”) applies for the final
winding up of the respondent, 57 Hyde
Close Estates CC (“Hyde
Close”). A provisional winding-up order was granted previously
by this court, and this judgment
deals with the issues raised on the
return day. Absa avers that Hyde Close is unable to pay its debts, as
envisaged in sections
344(f) and 345(1)(a) and (c) off the Companies
Act 61 of 1973, read with the relevant provisions of the
Companies
Act 71 of 2008
, and
sections 66(1)
, (2) and
69
(1)(a) and (c) of the
Close Corporations Act 69 of 1984
.
2.
Absa
relies on a suretyship agreement undertaken by Hyde Close  in
terms of which it bound itself as surety and co-principal
debtor for
the debts of an entity, JP Krugerrand Deals (Pty) Ltd (“the
principal debtor”), to Absa.  Absa claims
that the
principal debtor is indebted to it in terms of an overdraft facility
granted to it in March 2016 (“the facility”).
[1]
The
amount of the debt owed by the principal debtor, and hence by Hyde
Close as surety, is averred by Absa to be R29 million.
I should
add, by way of introduction, that the principal debtor has been
placed under business rescue, and one Mr Klopper, has
been appointed
as the business rescue practitioner.
3.
On 22 May 2018, this
court granted a provisional order placing Hyde Close under winding
up.  The order was made in terms of
a written judgment handed
down by Mudau J.  The return day of the provisional order was
placed on the roll for hearing on
1 August 2018.  I am advised
that at that stage the principal debtor (represented by Mr Klopper)
sought to intervene in the
proceedings, and to be afforded a
postponement for purposes of filing an affidavit opposing the final
winding up of Hyde Close.
An order was granted by the court on
that occasion postponing the matter, extending the rule
nisi
and giving the principal debtor, as well as the other two parties,
the opportunity to file further affidavits.
4.
The principal debtor
duly filed its affidavit opposing the winding up on grounds I will
deal with later in my judgment.  Absa
filed an answer to its
affidavit, and Hyde Close also filed an affidavit in which it
essentially made common cause with the principal
debtor.  Before
dealing with the substantive merits of the case, there are certain
preliminary issues to consider.
PRELIMINARY ISSUES
5.
When the matter came
before me Absa raised as a first preliminary issue the question of
whether the principal debtor ought to be
permitted to intervene in
the proceedings.  Absa submitted that in order to intervene the
principal debtor would either have
to be a creditor of Hyde Close, or
would have to hold some other direct and substantial interest in the
winding-up proceedings.
While Absa acknowledged in its own
founding affidavit that the principal debtor held a loan account in
its (the principal debtor’s)
favour as against Hyde Close, Absa
pointed out that both Hyde Close and the principal debtor denied that
Hyde Close was indebted
to the principal debtor.  This,
submitted Absa, ruled out an intervention based on the principal
debtor being a creditor of
Hyde Close.  Absa also submitted that
the principal debtor had not shown any other direct and substantial
interest in the
application to wind up Hyde Close.
6.
The principal debtor,
on the other hand, argued that in granting the order of 1 August 2018
this court had accepted that the principal
debtor had standing to
intervene in these proceedings, and that this question was no longer
open for debate.  Absa took issue
with this submission, arguing
that the question of the principal debtor’s intervention had
been left open for consideration
by the court on the return day.
7.
In view of the approach
I adopt to the remainder of the issues raised, it is not necessary
for me to decide this matter.  I
will proceed on the assumption
(without deciding) that the order of 1 August 2018 gave the principal
debtor leave to intervene.
8.
A second preliminary
issue was raised by the principal debtor.  In its heads of
argument, the principal debtor foreshadowed
a possible application on
its part to strike out certain material from Absa’s replying
affidavit to the principal debtor’s
affidavit.  The
material in question related to admissions made by Mr Klopper as to
the existence of the principal debtor’s
debt to Absa in
affidavits filed in this court in the business rescue proceedings.
Extracts from these affidavits were also
attached to Absa’s
affidavit.  The principal debtor indicated in its heads of
argument that if I did not strike out
this material it would apply
for a postponement and for leave to file a further affidavit in order
to respond to it.
9.
At a preliminary stage
of the proceedings I indicated that I would not be prepared to grant
a postponement of the matter: there
had been one postponement already
and a further postponement would not serve the interests of justice.
In addition, if Mr
Klopper felt that he needed to respond to the
allegations. the most practical and time effective way of proceeding
would have been
for him to prepare a supplementary affidavit and then
simply to have asked my leave for it to be accepted at the
commencement of
the hearing.  Counsel for the principle debtor
did not press the point of a postponement.
10.
As to the question of
whether the allegations concerning Mr Klopper’s previous
admissions of the existence of the debt ought
to be permitted as
evidence, or disregarded, counsel for the principal debtor submitted
that by including the allegations in its
supplementary replying
affidavit Absa was relying on new evidence which had been available
to it when it drafted its founding affidavit.
The principal
debtor argued that Absa gave no explanation as to why it had not
included this evidence in its founding affidavit.
It contended
that Absa ought not to be permitted to include this evidence in its
reply, as this amounted to nothing short of litigation
by ambush in
respect of the respondents.
11.
In my view, there are
at least two reasons why the material complained of is admissible.
In the first instance, it is quite
plain why Absa introduced this
evidence in its final affidavit: it was in direct response to the
allegation made by the principal
debtor that the principal debtor’s
debt was not due and payable.  Once the principal debtor
(represented by Mr Klopper)
placed the debt in dispute, Absa was
within its rights to produce evidence of Mr Klopper’s previous
admission of the debt.
This evidence was produced by Absa
directly in response to the Mr Klopper’s own averment.  In
these circumstances, it
is difficult to understand how Absa ought to
have foreseen, at the time it was preparing its founding affidavit,
and when the principal
debtor was not even a party to the
proceedings, that it would have to produce the evidence.
12.
The
second reason for treating the evidence as admissible is that it is
relevant to the
bona
fides
of the principle debtor’s defence that its debt is not due and
payable to Absa.  The “Badenhorst principle”
[2]
lays
down that winding-up proceedings ought not to be resorted to as a
means of enforcing payment of a debt, the existence of which
is
bona
fide
disputed on reasonable grounds, as winding-up proceedings are not
designed for the resolution of disputes as to the existence or
not of
a debt.  The principle debtor in this case disputes that its
debt (and hence Hyde Close’s obligation as surety)
is due and
payable.  Mr Klopper’s previous admissions under oath to
the contrary are relevant to my consideration of
whether the
principal debtor is
bona
fide
in disputing its debt.
13.
Before leaving the
preliminary issues, it is necessary to deal with a third one, this
time raised by Hyde Close.  It argued
that certain aspects of
Absa’s replying affidavit should be struck out.  The
offending parts of the replying affidavit
(there was no formal
application to strike out, nor were the specific paragraphs in
question identified by Hyde Close) relate to
Absa’s averments
that the suspensive conditions in the facility agreement were
fulfilled.  Hyde Close’s complaint
is that in the founding
affidavit, Absa averred that the suspensive conditions were either
fulfilled or waived, whereas in the
replying affidavit, it avers that
they were fulfilled.  Hyde Close argues that this is tantamount
to it making out a new case
in reply, and changing its cause of
action.
14.
There is no merit in
this argument.  Where a party relies on statements in the
alternative in a founding affidavit (viz. that
suspensive conditions
have been either waived or fulfilled), and is then challenged to
state on what it relies, and to provide
details in support of that
reliance, it can hardly be accused of making out a new case in reply
when it responds to this challenge.
If one reads the answering
affidavit of Hyde Close, it issues this challenge to Absa, and all
Absa does in its replying affidavit
is to state that it relies on the
fulfillment of the conditions, and it provides details of how the
conditions were fulfilled.
Hyde Close could not possibly have
been prejudiced by Absa’s averments in its replying affidavit:
the details provided in
the replying affidavit made it clear to Hyde
Close what case it had to meet.  Indeed, as I discuss later in
my judgment, Hyde
Close advanced various submissions disputing that
the conditions had been fulfilled.
DEFENCES RAISED BY HYDE
CLOSE
15.
Hyde Close raises the
following two defences:
(a) It disputes the
validity of the facility agreement between the principal debtor and
Absa on the basis that that the suspensive
conditions were not
fulfilled (“the suspensive conditions defence”).
(b) It disputes the
validity of the suretyship agreement between Hyde Close and Absa on
the basis that the intention of the parties
was that Mr Salilidis
(who is the sole member of Hyde Close) would enter into the
suretyship agreement in his personal capacity,
and not as a
representative of Hyde Close (“the invalidity of the suretyship
defence”).
16.
Hyde Close submits that
these defences are raised
bona
fide
and are
reasonable, and that based on the Badenhorst principle, the
winding-up application should be refused.  It points to
the
established case law which provides that:
“
The
onus
on the respondent is not to show that it is not indebted to the
applicant: it is merely to show that the indebtedness is disputed
on
bona
fide
and reasonable grounds.”
[3]
And further:
“
(The
respondents) do not,.. have to prove the company’s defence in
any such proceedings.  All they have to satisfy me
of is that
the grounds which they advance for their and the company’s
disputing these claims are not unreasonable ... It
seems to me to be
sufficient for the trustees in the present application, as long as
they do so
bona
fide
... to allege facts which, if proved at a trial, would constitute a
good defence to the claims made against the company.”
[4]
17.
Hyde Close submits that
the two defences it raises fall within the confines of these
principles.  I consider each the defences
in turn, starting with
the suspensive conditions defence.
18.
At the outset, it is
noteworthy that in its answering affidavit Hyde Close relies on a
bald denial that the suspensive conditions
in the facility agreement
were met.  It does not indicate which of the conditions were not
met, or say why they were not met.
This is despite the fact
that Hyde Close had the facility agreement at its disposal as an
attachment to the founding affidavit.
Furthermore, the deponent
to the answering affidavit on behalf of Hyde Close is Mr Salalidis.
Mr Salalidis is also listed
as the director of the principal debtor,
and he in fact signed acceptance of the facility letter on behalf of
the principal debtor.
Mr Salalidis confirms that he is the
controlling mind of both Hyde Close and the principal debtor.
One would have expected
that if Mr Salalidis (in his capacity as the
despondent to the answering affidavit on behalf of Hyde Close)
genuinely intended
to dispute the validity of the facility agreement
(which he had signed on behalf of the principal debtor) he would at
least have
been able to identify in his answering affidavit what
conditions had not been fulfilled and on what basis it was alleged
that they
were not fulfilled.  Unfortunately, these expectations
are not met in the answering affidavit.
19.
It was only in Hyde
Close’s heads of argument that an attempt was made to put flesh
on the bones of this defence.  There,
Hyde Close pointed to
clause 2.1.1 of the facility letter.  This clause appears under
the heading “suspensive conditions”.
It requires
the principal debtor to:
“
sign
and return the
original
or a copy of this Facility Letter
and Facility Schedule together with
a
certified copy of a board resolution
from the Borrower and a signed copy of the requisite indemnity to
supply documentation to, and communicate and transact with, the
Bank
by electronic means from the Borrower (if applicable) ... .”
(Words in brackets in the original)
20.
Absa contended that the
last requirement was not applicable to the facility in question.
Hyde Close raises three arguments
as regards the other requirements
in this clause.  It points to annexure “RA1” to the
replying affidavit, which
is the “
Resolution
by Directors for an Overdraft
”.
The document goes on to say that it is an “
extract
from the minutes of a meeting of the directors
”
of the principal debtor.  It notes that it was:
“
Resolved:
That Absa Bank Limited (“the Bank”) is hereby requested
and authorised to grant the Company overdraft facility
on its cheque
account(s) to maximum amount of R28, 500, 00 ... from time to time,
provided that the facilities shall be at the
Bank’s discretion
until this authority is revoked in writing.”
21.
Hyde Close contends, in
the first place, that this is not a board resolution, as required
under clause 2.1.1, as it is only an extract
from the minutes of a
meeting of directors.  There is no substance to this complaint:
at the bottom of the document, it is
noted that it is a “
true
extract from the minutes
”.
Read as a whole, it is quite clear that at a meeting of the directors
held on 16 March 2016, it was resolved to enter
into the facility
agreement with Absa (the amount of the facility accords with the
amount in the facility letter), that such a
resolution was adopted,
and that, for purposes of providing Absa with proof of such a
resolution, the Chairman/Secretary (once
again it appears to Mr
Salalidis’ signature appended in this capacity) provided the
bank with this extract from the minutes
of the meeting.  It is
not clear why anything more would have been required from the
principal debtor to satisfy this particular
suspensive condition.
The complaint would not provide Hyde Close with a defence if the
matter were to be tested at trial,
and thus it cannot establish a
reasonable defence to the winding-up application.
22.
The second leg of Hyde
Close’s defence under clause 2.1.1 is that the resolution
attached to the replying affidavit was not
a certified copy, as
required by that clause.  Again, there is no substance to this
complaint: the chairman/secretary signs
the resolution on 16 March
2016, and in doing so, he signifies that the document is: “
CERTIFIED
A TRUE EXTRACT FROM THE MINUTES
”
(my emphasis).  Absa regarded this as compliance with its own
requirements under the suspensive conditions.  Mr
Salalidis, in
either his capacity as a representative of Hyde Close, or as a
director of the principal debtor, does not dispute
that the
resolution was taken, nor that RA1 was, indeed, certified by him to
be a true extract from the minutes.  Once again,
this is not a
defence that would be upheld as valid if the issue were to be tested
at trial, and it does not constitute a reasonable
defence for
purposes of opposing the winding-up application.
23.
Thirdly,
Hyde Close argues that there is no evidence that the original
facility letter was  Absa “
returned
....  together with
”
the board resolution.  Hyde Close does not dispute that these
documents were returned to Absa: copies of them are attached
Absa’s
affidavits, and Absa expressly confirms that they were returned.
Hyde Close’s point seems to be that clause
2.1.1 must be
interpreted to mean that there will be compliance only if all the
documents referred to are provided to Absa
at
the same time
.
It does not say why this would serve the purpose of the suspensive
conditions, or why it would make business sense to insist
that they
were returned in one pack, as it were.  I can think of no reason
why such a constrained meaning should be given
to this requirement.
The phrase is certainly broadly enough stated to mean that the
facility letter and schedule
and
the resolution should be provided to Absa.  Surely, the purpose
of the requirement is to signify that
only
after all
of the
documents had been provided, could the principal debtor expect that
Absa would make the facility available.  I cannot
see that this
purpose would be served by an interpretation requiring all the
documents to be provided at the same time.  In
my view, once
again this is not a defence that could reasonably prevail at trial.
24.
As to clause 2.1.2 of
the facility agreement, Hyde Close also raises defences in similar
vein to those raised in respect of clause
2.1.1.  Clause 2.1.2
is also a suspensive condition relating to the collateral required by
Absa.  It requires the borrower
(the principal debtor) to, among
other things, provide Absa with certified copies of any resolutions
required in this regard, and
to furnish Absa with duly executed
originals of the collateral in question.
25.
Hyde Close makes the
same arguments regarding the resolutions in relation to the
collateral as it did about the resolution relating
to the acceptance
of the facility.  For the same reasons as stated in regard to
the latter, I find that there is no substance
to these submissions.
Absa confirms in its replying affidavit that “
the
collateral and resolutions required in terms of clause 2.1.2 of the
Facility Letter, as read with clause 3.3, were indeed furnished
to
the applicant
”.
Hyde Close cannot dispute this.  Indeed, what it does not
disclose to the court is that in separate proceedings
to perfect
Absa’s security under a notarial bond (as one of the forms of
collateral held by it under the facility letter),
Absa attached the
relevant security documents to its founding affidavit and served them
on Mr Salalidis.  This was in February
2017.  Mr Salalidis
must have been aware that Absa had indeed been furnished with the
security documents establishing its
collateral under clause 2.1.2,
and that it was acting to enforce its rights in terms of that
collateral.  This places Hyde
Close’s defence in relation
to clause 2.1.2 in poor light, and raises material questions as to
the
bona fides
of Mr Salalidis in raising this defence.  For these reasons, I
am not persuaded that the defences it raises in respect of
clause
2.1.2 of the facility agreement are
bona
fide
, or
reasonable.
26.
I turn now to the
invalidity of the suretyship defence raised by Hyde Close.  By
way of background, I record that it seems
Mr Salalidis and his
entities (Hyde Close and the principal debtor included) have a
long-standing banking relationship with Absa
going back a number of
years.  The history of the suretyship relied on by Absa against
Hyde Close goes back to 2012, when
Absa extended an earlier facility
to the principal debtor (“the 2012 facility”).  On
31 October of that year,
Absa avers that Hyde Close entered into a
suretyship agreement as surety and co-principal debtor jointly and
severally with the
principal debtor “
for
the repayment on demand of any sum or sums of money, which the debtor
owes or may hereafter owe to the bank from whatever cause
arising
”.
Subsequently, the present facility agreement was concluded between
Absa and the principal debtor, in 2016.  In clause
3.2.9 of the
present facility agreement, Hyde Close’
s 2012
suretyship was
listed as “
existing
collateral
”
held by Absa in respect of the principal debtor.  It is this
suretyship that Absa contends is the basis for Hyde Close’s

indebtedness to it.
27.
What Mr Salalidis says
in his answering affidavit is that he met with a representative of
Absa, one Mr Fourie, on 31 October 2012
to execute the suretyship
agreement.  Mr Fourie informed Mr Salalidis that Absa required a
suretyship from him in his personal
capacity as collateral for a
facility granted to the principal debtor in 2012.  He was handed
the suretyship forms, but these
were in blank.  Clause 1, which
described the surety as: “
Ioannis
Salalidis - .... acting on behalf of 57 Hyde Close Close Estate CC
”
had not yet been filled in.  Mr Fourie told Mr Salalidis that he
would attend to the insertion of the relevant details
(in particular
Mr Salalidis’ name in his personal capacity) later.
Similarly, Mr Fourie told Mr Salalidis that he should
sign next to
clause 20, and that Mr Fourie would fill in the relevant details
required afterwards.  This is the clause that
describes whether
the surety is unlimited (i.e. for all the liabilities of the
principal debtor now or in the future) or whether
it is limited to a
certain amount.  Mr Salalidis says that the suretyship he
undertook was for a limited amount.  On
the basis of these
averments, Mr Salalidis contends that it was the intention of both
him and Absa that the suretyship would be
executed by Mr Salalidis
personally, and not as a representative of Hyde Close.  Further,
that the suretyship was to be limited
only to the facilities extended
to the primary debtor under the 2012 facility agreement, and not for
any future liability.
For these reasons, he says, the
suretyship in the name of Hyde Close is invalid.
28.
In its replying
affidavit, Absa secured a confirmatory affidavit from Mr Fourie.
He disputes Mr Salalidi’s version of
events in no uncertain
terms as being patently untrue.  He avers further that at the
time he dealt with Mr Salalidis and Hyde
Close in 2012 he was a
“
relationship
executive
”.
According to Mr Fourie, it is not possible for someone with that job
description to procure a signed, blank deed
of suretyship and
thereafter to insert material portions of the document in typed
format.  I note that the portions of the
suretyship alleged by
Mr Salalidis to have been inserted later are indeed in typed format,
rather than manuscript.
29.
Absa also points out
that it had no need to secure a personal suretyship from Mr Salalidis
in October 2012.  This is because
at that stage it already held
an unlimited suretyship from him in his personal capacity in respect
of the facility extended to
the principal debtor under the 2012
facility.  Indeed, Mr Salalidis attached to his answering
affidavit on behalf of Hyde
Close a copy of the 2012 facility
agreement.  It records that  Absa held a personal,
unlimited suretyship by “
Mr
I Salalidis, supported by Cession of Loan account
”
for the facility extended to the principal debtor.
30.
Absa says that it also
already held an unlimited suretyship from Hyde Close at the time the
2012 facility was extended to the principal
debtor.  This is
also recorded in clause 3.1.4 of the 2012 facility letter.
However, according to Absa,  this existing
suretyship by Hyde
Close was too limited in that it did not include a cession of loan
accounts between various of Mr Salalidis’
entities.
Accordingly, in clause 3.2.1 of the 2012 facility agreement, it was
recorded that further cross suretyships were
to be provided as
collateral by these entities to include a cession of loan accounts.
Hyde Close was one of the entities
listed in respect of which a
cession of loan accounts was required.  Absa avers that it was
for this reason that Absa required
Hyde Close to enter into a new
suretyship agreement in October 2012.  That suretyship agreement
included, in clause 4, a cession
of loan accounts.  In the
original suretyship executed by Hyde Close, and held by Absa already
at the time the 2012 facility
was extended, this same clause 4 was
deleted.  This is confirmed by a copy of the original cession to
Absa’s replying
affidavit.
31.
The upshot of Absa’s
version in this regard is thus that there is no truth to Mr
Salalidis’ version that Mr Fourie misled
him about the identity
of the surety under the 2012 suretyship agreement.  Not only
does Mr Fourie deny Mr Salalidis’
version, but, significantly,
on the one hand, there was
no
reason
for Absa to
obtain another personal surety from Mr Salalidis in 2012, and, on the
other hand, there was
every
reason
to obtain a
new (and extended) suretyship from Hyde Close at that time.
Absa contends that for this reason, it made perfect
sense for the
parties to agree that Hyde Close, and not Mr Salalidis personally,
should enter into the 2012 suretyship.  In
the circumstances,
Absa submits that this is one of those cases where the respondent’s
version is so patently implausible
or untenable as to warrant
rejection.
32.
I accept Absa’s
submissions in this regard.  What I find significant is that the
paper trail from the original suretyship
agreement entered into by
Hyde Close prior to 2012, to the facility agreement in 2012, to the
suretyship agreement of 2012, to
the 2016 facility agreement, lends
complete evidential support to Absa’s version that both Absa
and Hyde Close (through Mr
Salalidis) intended the surety under the
2012 suretyship agreement to be Hyde Close, and not Mr Salalidis
personally.  On
the contrary, there is no evidence to support Mr
Salalidis’ version that he signed a blank suretyship form and
that he understood
he was entering into a personal limited suretyship
agreement.  Absa already had an unlimited suretyship from him.
It
must have been obvious to him that it would not require another.
I also reject his version as untenable that he signed a suretyship

form in blank.  I note that in signing the suretyship agreement
on behalf of Hyde Close Mr Salalidis expressly confirmed in
clause
21. that the suretyship:
“
was
properly completed at the time of signature especially with reference
to the name of the debtor and clause 20; and is in so
far as no
amount is specified in clause 20 as a limit if my/our liability,
my/our liability shall be for an unlimited amount; and
is in all
respects in accordance with the agreement between me/us and the bank
is not as a result of a common mistake between me/us
and the bank,
not representative of our true intentions.
”
In my view, it is
absolutely untenable that Mr Salalidis, who is by all accounts a
seasoned businessman (and on his own account
the controlling mind of
both Hyde Close and the principal debtor) would have signed a blank
suretyship form, knowing that he was
confirming that the form was
complete in these critical respects. Mr Salalidis must be held to
that which he signed, and his version
to the contrary is, in my view,
without
bona fides
.
33.
I accordingly find that
Mr Salalidis’ version as to the circumstances in which he
signed the 2012 surertyship falls to be
rejected: it is patently
implausible and untenable and is not raised
bona
fide
.  It does
not provide a
bona
fide
or reasonable
defence to the debt arising out of Hyde Close’s suretyship
obligations.
34.
I conclude that Hyde
Close has failed to establish that it has a
bona
fide
and reasonable
defence to its indebtedness to Absa under the suretyship agreement.
Of course, if I am persuaded otherwise
by any of the defences raised
by the principal debtor, this will inure to the benefit of Hyde
Close, as surety.  I turn to
consider those defences.
DEFENCES RAISED BY THE
PRINCIPAL DEBTOR
35.
The principal debtor
raises three defences in respect of the debt allegedly due by Hyde
Close under the suretyship agreement:
(a) In the first
instance, it contends that the principle debt is not due and payable
because Absa did not lawfully make demand
for its repayment by giving
due notice to the principal debtor to remedy the default before
calling up the debt (“the notice
defence”).
(b) In the second
instance, it contends that the application for winding up is “
stale
”
(“the stale application defence”).
(c) In the third
instance, it contends that there may be new employees who have not
received the requisite notice of the winding
up proceedings (“the
new employees defence”)
36.
As regards the notice
defence, the principal debtor points to the founding affidavit in
which Absa contended that it (the principal
debtor) breached its
repayment obligations and for this reason the facility was not
renewed.  Absa averred that it addressed
a letter of demand to
the principal debtor on 12 December 2016 cancelling the overdraft and
demanding full payment with immediate
effect (“the 12 December
letter”).  This letter also served the purpose of
section
345(1)(a)
of the
Companies Act.  Absa
averred that despite this
demand, the principle debtor remained indebted to it.  Absa duly
issued a letter of demand to Hyde
Close as surety, demanding payment
from it of the amount owed by the principal debtor.  The letter
of demand to Hyde Close
also served the purpose of
section 345(1)(a)
of the
Companies Act insofar
as the winding-up application was
concerned.
37.
In its 12 December
letter, Absa advised the principal debtor as follows:
(a) The limit of the
facility had expired on 30 November 2016 as the principal debtor had
failed to furnish Absa with its audited
financial information in
order for Absa to review the facility.
(b) In terms of clause
6.1 of the facility agreement the facility was payable on demand and
could be cancelled with immediate effect.
(c) After considering and
reassessing the principal debtor’s profile, Absa had decided to
cancel the facility.  The letter
was to serve as notice of the
cancellation.
(d) Absa demanded
immediate repayment of the outstanding amount of R29, 002, 364. 48.
38.
Clause 6.1 of the
facility agreement provides that:
“
Cancellation
6.1 Either party may at
any time cancel any of the Facilities with immediate effect or
according to any notice period stipulated
in the relevant Product
Agreement, by written notice to the other.  Upon such notice
being given, the Borrower shall repay
all outstanding amounts owing
to the Bank.”
39.
Of relevance, too, is
clause 26.2 of the conditions contained in the Banking Facility
Schedule (“the schedule”) attached
to the facility
agreement.  It provides that:
“
Notwithstanding
anything to the contrary in this Banking Facility Letter, all
Overdraft Facilities are repayable by the Borrower
on demand by the
Bank. ...”
40.
Both of these
provisions were identified as material terms and conditions of the
facility agreement in the founding affidavit.
The founding
affidavit also identified the breach provisions in the schedule as
being material.  In particular, clause 13.1
states that:
“
If
the Borrower fails to remedy an event of default (where capable of
remedy) in respect of Facilities that are not demand Facilities

within 2 (two) business days of having been given notice by the Bank
calling upon the Borrower to do so, or if the event is not
capable
for remedy and the Bank gives notice that such event has occurred,
then the Bank may elect to exercise any of its rights
in terms of
this Banking Facility Letter ... or in law.”
41.
The essence of the
principal debtor’s case is that because Absa relied on a breach
by the principal debtor, it’s election
to cancel the agreement
is constrained by the notice requirement in clause 13.1.  It
submits that the right of cancellation
provided for in clause 6.1,
and the right of Absa to demand immediate payment of overdraft
facilities in clause 26.2, are limited
by clause 13.1.  They
must be read, so the argument goes, as giving Absa the right to
cancel, or to demand immediate payment,
only after the two days’
notice to remedy the breach is complied with by Absa.  As Absa
did not give the principal debtor
two days’ notice to remedy
its default, it could not lawfully have cancelled and demanded
immediate repayment of the facility.
For this reason, the
principle debtor’s debt is not yet due and payable.
42.
I heard quite extensive
argument from both counsel for Absa and counsel for the principal
debtor on the correct interpretation of
the relevant provisions of
the facility agreement.  I have also had cause to look more
closely at clause 26.2, and provisions
related to that clause.
It is common cause that the facility in question in this case is what
the agreement describes as
an “
overdraft
facility
”.
It is also common cause that the facility letter identifies no less
than six facilities extended to the principal
debtor.  The
overdraft facility is the first, and the others include, for example,
business credit card facilities, fleet
card facilities and so forth.
Apart from the overdraft facilities, all the other facilities were
identified as being subject
to specific product agreements.  As
I have already noted, Absa relies on the overdraft facility as giving
rise to the debt
underpinning the winding-up application.
43.
Turning to clause 6.1,
on the face of it, and in clear terms, it gives either party the
right to cancel the agreement simply on
written notice.  Save
for those facilities where a specific notice period is prescribed in
a specific product agreement, clause
6.1 does not require any notice
period before the right to cancel may be exercised.  It is
clear, too, that a cancellation
under clause 6.1 is not dependent on
a breach by the other party.  In its letter of demand of 12
December 2016, Absa specifically
relied on its right under clause 6.1
to cancel the agreement, rather than on any specific breach by the
principal debtor.
44.
It is so that in its
founding affidavit, Absa refers to a breach by the principal debtor
of its repayment obligations.  While
the averment made in the
founding affidavit is in general terms and is not clearly stated,
what is clear from the relevant passage
in the founding affidavit is
that Absa relied specifically on its 12 December letter for the
cancellation of the facility.
As I have indicated, that letter
placed reliance on clause 6.1 for the cancellation.
45.
Is there merit in the
principal debtor’s argument that because of the reference to
“
breach
”
in the founding affidavit, clause 13.1 of the facility agreement
overrode, as it were, Absa’s right to cancel on notice
under
clause 6.1?  In my view, the argument is without merit.  In
the first place, clause 6.1 is not made subject to
the two day notice
period prescribed in clause 13.1.  If clause 13.1 was intended
to override the general right of either
party to cancel on notice in
clause 6.1, then surely the latter clause would have made this
clear?  The object of clause 6.1
is to provide either party with
an “out” regardless of whether breach has occurred, and
without any notice period.
The only limitation to this is where
a specific product agreement stipulates a notice period.
As I have indicated,
the facility is not subject to a special product
agreement.
46.
There is another, and
in my view, decisive, reason why the principal debtor’s
argument must fail.  Clause 26.2 is an
important provision in
this regard.  Clause 26 is specifically headed  “
Overdraft
Facility Terms
”.
There is an unnumbered paragraph before clause 26, which provides
that: “
Except
for the Revolving Loan Facilities described in clause 28, all
Facilities in this section are
demand
Facilities
”
(my emphasis).  Clause 26.2 then makes it plain that as regards
overdraft facilities (like the facility that is the
subject matter of
this dispute), they are payable on demand, “
notwithstanding
anything to the contrary
”
in the facility agreement.
47.
In clear terms then,
overdraft facilities, being “on demand facilities”, have
a special status as far as the bank’s
entitlement to demand
payment is concerned.  The principal debtor argued that one must
read into “
on
demand
” in
clause 26.2 that the demand must be lawful: i.e. in cases of breach,
the two-day’s notice requirement applies and
if that is not
complied with, the demand under clause 26.2 will not be lawful.
Apart from the clear interpretational difficulties
with this
argument, it is negated with reference to clause 13.1 itself.
It is as well to repeat clause 13.1: “
If
the Borrower fails to remedy an event of default ...
in
respect of Facilities that are not demand Facilities
within two business days of having been given notice by the Bank
calling upon the to do so ... then the Bank may elect to exercise
any
of its rights in terms of this Banking Facility Letter ....
.”
I refer in particular to the portion of the clause I have
underlined.  As I explained earlier with reference
to the
unnumbered paragraph preceding clause 26, overdraft facilities
are
demand facilities.  As such, the stipulation of a two day notice
period in clause 13.1 does
not
apply to, and does not circumscribe Absa’s right under clause
6.1 to cancel immediately on written notice, or its right under

clause 26.2 to render the overdraft facility immediately payable on
demand.
48.
If the agreement is
read as a whole, it gives the parties broader entitlements to cancel
the facilities immediately, even in the
absence of breach.
Furthermore, and in particular with the overdraft facility, Absa may
call up payment immediately on demand,
and such entitlement is
expressly not limited by the notice period that would otherwise apply
in respect of breach.
49.
I conclude, for all of
these reasons, that clause 13.1 did not limit Absa’s right to
cancel the agreement and to call up payment
of the outstanding
amount.  Absa was entitled, on the basis of clause 6.1, and
clause 26.2 to cancel the agreement immediately
on written notice,
which it did.  It was also entitled to call up the full amount
of the debt which amount became, on demand,
due and payable.  In
the circumstances, the principal debtor’s interpretation would
not, if the matter proceeded to
trial, provide a defence to the
principal debt and hence, by extension, to Hyde Close’s
obligation as surety.
50.
Turning
to the “stale application” defence, the principal debtor
relies on a decision of the KwaZulu-Natal High Court,
Air
Treatment Engineering and Mainteance CC v PAC-Con Pharmaceuticals
,
[5]
in
which it was held that a court should not grant an winding-up order
in circumstances where there has been unreasonable delay
in the
proceedings.  In that case, the matter was three years old, with
the last affidavits having been filed years before.
The present
application was instituted in April 2017.  Given that matter was
opposed both at the stage of the provisional
winding-up, and the
return day, a delay of a number of months is entirely to be expected
in a busy Division like this one.
In fact, the last delay was
caused by the principal debtor seeking to intervene.  It did not
do so early in the proceedings,
but waited until the matter was set
down for the return day hearing.  This caused a further delay of
the proceedings.
It thus hardly lies in the mouth of the
principal debtor to complain that the proceedings are stale.
Whatever the circumstances
may have been in the
Air
Treatment case
,
in my view there has not been unreasonable delay in the present
matter rendering the application stale.
51.
The final defence
raised by the principal debtor is related to the latter defence, and
relies on the same judgment.  The principal
debtor suggests that
because of the lapse of time, it is likely that Hyde Close will have
had a change in employees, and that it
may well be that some of the
new employees would not be aware of the application.  The
argument is made without any evidence
to back it up at all.  I
also find it to be a strange point for the principal debtor to make:
it is not its employees who
are affected.  If this were indeed
the case, one would have expected that Hyde Close would have been
better placed to make
the argument.  An abstract and tentative
defence such as the one raised by the primary debtor on this score
cannot establish
a reasonable basis on which to prevent the
confirmation of the provisional winding-up order, if the court is
otherwise satisfied
that such an order should be made.
52.
For these reasons, I
find none of the defences raised by the primary debtor find
purchase.  I am not persuaded that the primary
debtor has shown
that it has a defence constituting a
bona
fide
and reasonable
dispute of the primary debt that underpins the winding-up
application.
THE REQUIREMENTS FOR
WINDING UP
53.
It
follows from my findings above that the principal debt is due and
payable to Absa; that the suretyship is valid; and thus that
the debt
relied on by Absa is indeed due and payable by Hyde Close under its
suretyship obligations.  This gives Absa the
requisite
locus
standi,
as
a creditor, to pursue the final winding-up of Hyde Close, which has
assumed liability for the debt under the suretyship agreement.
[6]
I
am accordingly satisfied on this score.
54.
On 4 January 2017 Absa
caused to be delivered, by registered post, a letter of demand to
Hyde Close, which letter included a notice
under
section 69(1)(a)
of
the
Close Corporations Act.  The
letter advised Hyde Close that
unless payment of the debt due was made within 21 days, Hyde Close
would be deemed to be unable
to pay its debts, and that a winding-up
application could follow.  Hyde Close failed to repay the debt
or to compound it to
the satisfaction of Absa within that time.
55.
Absa submits that in
accordance with
section 68(1)(c)
of the
Close Corporations Act, read
with section 344(f) and 345(1)(a) of the 1973
Companies Act, Hyde
Close is deemed, in the circumstances, to be unable to pay its debts,
and falls to be wound up.  Although Hyde Close disputed
its
indebtedness, based on the defences it raised, I have rejected those
defences.  Hyde Close does not place any other evidence
before
me to rebut the presumption arising from the relevant sections that
it is unable to pay its debts.  In the circumstances,
I find
that Absa is entitled to seek Hyde Close’s winding up on the
basis that it is deemed to be unable to pay its debts.
56.
Absa also submits that,
in any event, Hyde Close is commercially and/or factually insolvent.
It provides details of Hyde Close’s
property holdings and its
mortgage bond and other debts (including the debt to Absa of some
R29million).  According to Absa,
Hyde Close’s total known
debts amount to over R55million.  Absa concedes that it
does not have information as
to the actual outstanding amounts due
under the mortgage bonds, or a valuation for one of Hyde Close’s
properties.
The most valuable property was purchased for
R26million in 2016 and a mortgage bond of R17, 250, 000 was
registered over it.
The other property was purchased in 2004
for R1,3million.  It is currently mortgaged to the tune of
R3,5million.  Even
in the absence of the actual amounts
outstanding on the bond, and the actual values of the properties, it
is  probable that
their value nowhere near covers Hyde Close’s
debt.
57.
In its answering
affidavit Hyde Close fails to engage with these averments made by
Absa regarding its assets and liabilities, except
in the baldest of
terms.  It does not disclose the values of the properties, or
the current mortgage bond balances.
Although it claims to have
a rent-paying tenant in the one property, it provides absolutely no
details in this regard.  It
is so that an applicant for winding
up must establish on a balance of probabilities that a respondent
cannot pay its debts.
In this case, Absa has placed sufficient
evidence before the court to establish this as a probability.
In the absence of
any meaningful dispute raised by Hyde Close, and in
the face of Hyde Close’s essentially bald denials as to its
inability
to pay its debts, I must find that Absa has satisfied its
onus in this regard.  I accordingly conclude that in addition to

being entitled to rely on
s345(1)(a)
as a basis for the winding up,
Absa has also, and in any event, established a case for winding up
based on
section 345(1)(c).
0c
m; line-height: 150%">
58.
It has been held that:
“
...
generally speaking an unpaid creditor has a right
ex
debito justitiae
to a winding-up order against a company unable to pay its debts.”
[7]
Further,
that in these circumstances, the discretion of a court to refuse a
winding up is a very narrow one.
[8]
I
can find no reason to exercise my discretion against Absa in this
case: it has established an inability on the part of Hyde Close
to
pay its debts, and the ordinary result should follow.
59.
Finally, there is no
real dispute that Absa has complied with the statutory formalities
for winding-up.
CONCLUSION
60.
For all the above
reasons, I make the following order:
1. The above respondent
is placed under winding up in the hands of the Master of the High
Court;
2. The costs of this
application are costs in the winding up of the respondent.
R
M, KEIGHTLEY
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA,
GAUTENG
LOCAL DIVISION, JOHANNESBURG
DATE
OF HEARING: 30 OCTOBER 2018
DATE
OF JUDGMENT: 26 NOVEMBER 2018
APPEARANCES
APPLICANT’S
COUNSEL: M DE OLIVEIRA
INSTRUCTED
BY: CLIFF DEKKER HOFMEYR INC
RESPONDENT’S
COUNSEL: L HOLLANDER
A.L
ROELOFFZE
INSTRUCTED
BY: HIRSCHOWITZ FLIONIS ATTORNEYS
[1]
The
facility letter includes, in addition to the overdraft facility, a
number of other facilities extended to the principal debtor.

However, Absa’s case is premised on the alleged debt due in
respect of the overdraft facility.
[2]
From the
judgment in
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at 347-8
[3]
Kalil v
Decotex (Pty) Ltd & another
1988 (1) SA
943
(A) at 980D-F, cited in, among others,
Feshvest
Investments (Pty) Ltd v Marabeng (Pty) Ltd
[2016] ZASCA 168
(24 November 2016), at [4]
[4]
Hulse-Reutter
& another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey
NNO intervening)
1998 (2) SA
208
(C) at 219E-20A, cited in
Freshvest
Investments
,
above, at [6]
[5]
[2016]
ZAKZDHC 34 [25 July 2016] at paras [27] & [28]
[6]
See
Henochsberg on the
Companies Act, 71 of 2008
[Issue 15] Vol 2
APPI-48
[7]
Service
Trade Supplies (Pty) Ltd v Dasco & Sons (Pty) Ltd
1962 (3) SA
424
(T) at 428
[8]
Sammel
and Others v President Brand Gold Mining Co Ltd
1969 (3) SA
629
(A) at 662