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[2018] ZANCHC 66
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Paragon Lending Solutions (Pty) Limited v Weybridge Properties (Pty) Limited (2847/17) [2018] ZANCHC 66 (21 September 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTHERN
CAPE DIVISION, KIMBERLEY)
CASE
NO: 2847/17
In
the matter between:
PARAGON
LENDING SOLUTIONS (PTY)
LIMITED
Applicant
and
WEYBRIDGE
PROPERTIES (PTY)
LIMITED
Respondent
JUDGMENT
O’BRIEN
AJ
1.
This is an
application for the provisional winding-up of the respondent. The
applicant alleges that the respondent is unable to
pay its debts
which are due and payable in the ordinary cause of its business as
contemplated in s 344(f) read with s 345(1)(a)(i)
and
s 345(1)(c) of the Company’s Act No 61 of 1973 as amended
(“the 1973 Act”) and Item 9 of Schedule 5
to the
Company’s Act No 71 of 2008 (“the 2008 Act”).
2.
The
applicant claims that the respondent is indebted to it in the
amount of R6 754 301.02 (plus interest) (“the debt”).
The
debt remains unpaid and to this end the applicant has attached a
certificate of balance setting out the amount the respondent
is
allegedly indebted to the applicant. The respondent’s
indebtedness to the applicant arises as a result of a loan agreement
concluded between the parties. The applicant holds security for its
claim against the respondent by way of a mortgage bond registered
over the respondent’s immovable property situate at Erf 1013
Kimberley. But first, the facts.
Factual
Background
3.
On 3 July
2012, the parties concluded a written term loan agreement (“the
agreement”) in terms whereof the applicant
undertook to lend
monies to the respondent the sum of R3 287 050.00. It was a term of
the agreement that the applicant would
be entitled to charge interest
on the amount owing under the agreement at the rate of 2.75% per
month, calculated daily and capitalised
monthly. As in most of these
agreements, the interest rate would vary depending on the increase or
decrease from time to time of
the prime interest rate. If the
respondent should fail to make a payment, penalty interest would be
charged on the due date.
4.
The
agreement states that the respondent was to pay twelve consecutive
monthly instalments of at least R90 393.88 each; a raising
fee
of R32 500.00 plus VAT thereon; and one residual instalment
payable, in the amount of R3 250 000 by no later
than the
final maturity date 8 August 2013.
5.
In the
event of default, the respondent was given seven days to purge it.
That was to be done in writing demanding that it be remedied.
In the
event of a default the respondent was deemed to be unable to pay its
debts as they fell due for payment. Should that occur,
the applicant
could immediately declare that all or part of any amounts outstanding
under the agreement be immediately due and
payable and claim
immediate payment of all or part of any amounts outstanding under the
agreement.
6.
A
certificate signed by any director of the applicant setting out the
amount of indebtedness shall serve as
prima
facie
proof
of its contents and of its correctness for all purposes and shall be
a valid liquid document for any proceedings instituted
by the
applicant against the respondent.
The
respondent’s alleged indebtedness
7.
The
applicant contends since early December 2012 the respondent failed to
comply with its obligations under the loan agreement.
On a number of
occasions, debit orders processed by the applicant, and authorised by
the respondent, were returned.
8.
On 07 May
2013, in an email addressed to the respondent to confirm whether
payment has been made by sending proof thereof. The response
on the
same day, the deponent to the respondent’s answering affidavit
(“Kimber”) informed that he will make the
payment from
his personal account and that a debit order should not be processed.
The inference is irresistible that the respondent
was not in a
position to pay.
9.
On 29 June
2013, Kimber was advised via email that the agreement was expiring on
the 8
th
of August which was a month away and as the deal are 12 monthly
transactions the facility needs to be settled in full. It was stated
that the respondent’s payment history over the past 10 months
were intermittent with many missed instalments. Kimber was
further
advised that he made promises which have not been met. The deponent
to the founding affidavit of the applicant, Gary Palmer
(“Palmer”),
requested Kimber to transfer the arrear instalments as he promised;
ensure there is enough money in the
account of the respondent for the
debit order dated 07 July 2013 and ensure the respondent has the
capital available to settle
the facility in full on 18 August 2013.
10.
Kimber
responded on 01 July 2013, requesting an updated statement of the
account reflecting all debits and credits; a re-conciliation
of the
respondent’s deposit account including the allocation of those
funds to the main agreement and with whom the respondent
needs to
engage in respect of bond cancellations.
11.
On 03 July
2013 Kimber was advised that the respondent was in arrears in the
amount of R389 000.00 and provided him with a
summary of the
loan and the latest account statement and reconciliation.
12.
On 9 July
2013 an email was sent by the applicant that as at 8 July 2013
the total balance owing (capital plus interest in
arrears) is
R3 883 342.99. Reference was made to an attached
reconciliation in support of that figure. Kimber was invited
to apply
for further information if the need arises.
13.
On 9 July
2013 Kimber responded that the computation provided by the applicant
would be reviewed and commented on by him.
14.
On 10 July
2013 the applicant advised Kimber that it is available to assist him
with understanding the statement.
15.
On 9 August
2013, the applicant processed a debit order from the respondent which
was returned by the bank. Palmer then advised
Kimber of the return of
the debit order as well as the fact that the loan had expired and the
full debt was now due, owing and
payable to the applicant.
16.
In answer,
Kimber indicated his willingness to transfer funds to the applicant.
Furthermore, a settlement figure computed by the
respondent would be
available on 12 August 2013. Upon receipt of this computation, Kimber
advised that he would contact Palmer
to discuss the settlement of the
account.
17.
As things
would have it, Kimber did not make good on his promises. The
applicant contends that this type of conduct was not unusual
because
Kimber would in the past often advise that he will discuss repayment
and then fail to do so.
18.
On 15
August 2013, a letter of demand was addressed to the respondent in
regard to the debt being due and payable. The respondent
failed to
pay the applicant in accordance with the terms of the demand. Because
of the respondent’s failure to make good
payment in terms of
the loan agreement – and after making numerous promises which
the respondent failed to fulfil –
interest has accrued to the
outstanding debt.
19.
On 24 April
2017, Kimber requested from the respondent a full detailed statement
of account since inception of the facility.
This was given on
the same day.
20.
The
applicant points out that Kimber attempted to raise disputes
concerning the computation of the debt but has failed to provide
the
applicant with a
bona
fide
reason
why it was not fully repaid.
21.
The facts
set out above are not in dispute or seriously challenged by the
respondent.
22.
On 24 July
2017 the applicant’s attorneys caused a written letter of
demand in terms of s 345(1)(a) of the 1973 Act read
with the
2008 Act to the respondent. In this demand, the applicant points out
that the respondent is indebted to it in the amount
of R6 754 301.02
together with interest at the rate of 41% per annum calculated daily
and compounded monthly from 1 July 2017 to
date of payment. It
accordingly demanded from the respondent to make payment immediately.
The respondent was advised that
should it fail to make payment within
a period of 3 weeks of receipt of the demand letter or should the
respondent fail to secure
or compound for such amount within the
aforementioned 3-week period, to the reasonable satisfaction of the
applicant, the respondent
shall be deemed to be unable to pay its
debts in terms of s 345(1)(a) of the 1973 Act, as read with the
2008 Act. Furthermore,
the respondent was advised that should it be
unable to pay its debts the applicant will proceed with an
application for its liquidation.
This demand was served on 3 August
2017 by the Sheriff at the respondent’s registered address.
23.
On 4 August
2017, the respondent’s attorneys advised the applicant’s
attorneys that their instructions are not to respond
to the letter of
demand until such time as negotiations have either succeeded or
failed. The applicant contends that negotiations
between the parties
have failed, and no further correspondence was received from the
respondent’s attorneys – the 3-week
period referred to in
the statutory demand has lapsed – the applicant was of the view
that the respondent is in fact deemed
to be insolvent.
24.
On 3 May
2018, the respondent made an application to this court for an order
staying the winding-up proceedings pending the outcome
of arbitration
proceedings. In this application, Kimber refers to a summons which
was issued out of the South Gauteng High Court,
Johannesburg by the
applicant against him in his personal capacity as surety for payment
of the debt in terms of the loan agreement.
He filed an affidavit
resisting summary judgment a copy of which was attached to this
application wherein he disputed the quantum
of the applicant’s
claim, and raised various other defences.
25.
On 3 May
2018, the respondent filed a counter-application seeking orders
declaring the applicant’s claim prescribed alternatively;
declaring the applicant’s claim as being settled in full; an
order in terms of which it is declared that payment to the applicant
is not yet due and payable and condoning the late filing of the
respondent’s affidavit. On 4 May 2018, Olivier J struck the
application to stay the winding-up proceedings from the roll.
26.
I shall
refer to the parties as they are described in the main application.
The
issues
27.
Although
the respondent is seeking declaratory relief in its
counter-application, Mr Smith acting for the respondent confined his
arguments mainly to the following: First, clause 4.3 of the term loan
agreement is in the nature of a suspensive condition governing
the
whole contract. Because the onus is on the applicant to proof
fulfilment of the condition precedent and in the absence of such
evidence the court cannot grant a provisional winding-up order.
Second, an amount of R2 299 000.00 was paid to an entity Rodel
Financial Services (Pty) Ltd (“Rodel”), and not to the
respondent. Thus, it was not in accordance with the terms of
the
agreement constituting a breach. Furthermore, the aforestated amount
was not paid to any of the designated accounts prescribed
in
paragraph 8 of the agreement. The submission is that the certificate
of balance cannot in these circumstances serve as
prima
facie
proof
of any indebtedness on the part of the respondent.
28.
It will be
immediately apparent that the relief the respondent seeks in its
counter-application as alluded to in paragraph 25 is
in conflict with
the arguments advanced by counsel in paragraph 27 of this judgment.
Discussion
29.
In its
founding affidavit in the counter-application the deponent states as
follows:
“
18. It is also
important that I draw the court’s attention to the fact that on
the applicant’s version, the anniversary
date being the date
when all amounts were due, the anniversary date of the loan would be
a year after the date of the last payment
meaning that any amounts
that may have been due, would be repayable by no later than 11 August
2013. More than 3 years have lapsed
since the 11 August 2013 and
therefore any claim that the applicant may have had has prescribed.
”
30.
In response
to this, the applicant in its answering affidavit to the
counter-application pointed out that the relevant loan was
secured by
way of a mortgage bond therefore the said claim had not prescribed.
31.
In its
reply in the counter-application the respondent made a
volta
face
alleging that the applicant paid an amount of R2 299 000.00 to Rodel
which was not in accordance with the agreement. Because the
amount
stated was not paid to the respondent but to Rodel, the mortgage bond
cannot serve as security for monies advanced in terms
of the said
agreement. In these circumstances, so the argument goes, there is
therefore no mortgage bond to extend the term of
prescription in
regard to the monies advanced to Rodel. The argument is without
merit.
32.
It is trite
that in motion proceedings an applicant must set out the facts to
justify the relief sought in the founding affidavit
which would alert
the respondent of the case it is required to meet (
National
Council of Societies for the Prevention of Cruelty to Animals v Open
Shaw
[2008] ZASCA 78
;
2008 (5) SA 339
(SCA)
).
Although the rule is not absolute, there are instances where our
courts have allowed an applicant to introduce additional facts
or
grounds for relief in his replying affidavit. As was pointed out by
Ogilvie Thompson JA in
James
Brown & Hamer (Pty) Ltd (
Previously
Named Gilbert Hamer & CO Ltd)
v
Simmons, N.O.
1963 (4) SA 656
(AD) at 660 E-F
:
“…
must
always be rigidly applied: some flexibility, control by the presiding
Judge exercising his discretion in relation to the facts
of the case
before him, must necessarily also be permitted.
”
33.
In my
judgment, the respondent is precluded from relying on this new
defence which was made out in reply in the counterapplication
for the
following reasons:
33.1
The facts
were known to the respondent at all material times;
33.2
No
explanation is given why the defence is raised at this stage;
33.3
The defence
raised in the founding affidavit of the counter-application and the
new defence raised in reply are at odds. The monies
paid to Rodel
cannot at the same time be a valid payment in terms of the loan
agreement as stipulated in the respondent’s
founding affidavit
to the counter-application and an invalid payment as contended by the
respondent in reply;
33.4
In any
event, Mr Smith acting for the respondent conceded that the latter
renounced the legal exceptions
non
causa debiti
and
non
numeratae pecuniae
.
33.5
Moreover,
the loan is secured by a covering mortgage bond which means that the
prescriptive period is 30 years.
34.
In my view,
the new defence raised by the respondent cannot be sustained and
falls to be rejected.
35.
Counsel for
the respondent complained that according to the loan summary which is
attached to the agreement, designated accounts
are created into which
the monies were supposed to be paid. He submits that an amount of
R182 390.03 was paid to Nedbank.
This amount reflects an
outstanding payment to Nedbank Ltd. Accordingly, payment was not made
to the respondent. But the respondent
ignores the purpose for which
the amount of R182 390.03 was paid. It was done in order to have
the Nedbank mortgage bond in
respect of the respondent’s
property cancelled and a first covering bond to be registered in the
applicant’s favour.
36.
Allied to
the above, so the respondent submits, is the fact that the amount of
R2 299 000.00 was not paid to the respondent
but to Rodel. That
being the case, the payment was not in accordance with the agreement.
Rodel is a company that provides bridging
finance. In this instance,
it provided bridging finance to the respondent pending the
registration of the mortgage bond in favour
of the applicant. It is
common ground that the respondent enjoyed the use of these funds.
These funds were utilised by the respondent
to set up its operations.
For the respondent to now cry foul – after utilising the funds
– that it was not paid in
accordance with the agreement is of
no moment. The argument is overly technical and detracts from the
whole purpose of the agreement
that is to advance money to the
respondent.
37.
The
respondent further submits that the agreement was subject to the
fulfilment of a number of conditions precedent. It points out
that
clause 4.3 of the agreement is in the nature of a suspensive
condition governing the whole contract. Clause 4.3 reads as follows:
“
The Conditions
Precedent are for the benefit of the lender who may (in its sole
discretion) waive or extent any such Conditions
Precedent (whether in
whole or in part), by written notice to the Borrower. Any waiver or
extension may be subject to such conditions
as the lender may
determine in its sole discretion.
”
38.
The
difficulty with this submission, is that it was never canvassed in
the affidavits. Furthermore, the respondent does not indicate
which
of those conditions precedent were not complied with. Lastly, the
applicant indicated that these conditions were fulfilled,
alternatively waived.
39.
It was
urged upon me in the absence of a defence not pleaded to do justice
between the parties which is fair, just and reasonable.
It was stated
that it would be unfair, if not inappropriate, to ignore the terms of
the contract on which the applicant relies
for its cause of action in
the liquidation application. As authority for that is cited
Courtis
Rutherford & Sons CC & Others v Sasfin (Pty) Ltd
[1999] 3 All
SA 639
(C)
.
40.
The
Courtis
Rutherford
case
dealt with the failure by a defendant to raise s 3 of the
Conventional Penalties Act 15 of 1962. It was not covered in
the
pleadings but was fully argued at the end of the case. On appeal, it
was held that a Court’s primary function was to
ensure that
justice was done on the basis of what was just, fair and reasonable
in the circumstances. The Court held that these
principles were
inherent in the common law and particularly in the law of contract,
where they went hand in hand with the concepts
of good faith and good
morals, or public policies. Therefore, it would be contrary to these
principles to refuse to consider the
application of the Conventional
Penalties Act purely because of a failure to plead same.
41.
In the
matter under consideration, the Court is dealing with a defence –
a condition precedent – which was never canvassed
in the
respondent’s affidavits. It would be unfair and prejudicial to
allow the respondent this defence which was not dealt
with in its
founding affidavit in the counter-application. The applicant did not
have an opportunity to deal with these allegations,
causing prejudice
to it. Furthermore, this is not a case where it should be allowed,
for the reasons stated in paragraph 33 above.
42.
The
respondent’s counsel, although referring to the
in
duplum
and
a settlement agreement in its heads of argument did not pursue these
issues in oral argument. However, the
in
duplum
rule does not assist the respondent. All this rule means is that when
a debt is owed it draws interest, the amount of such interest
may not
exceed the capital amount. It only relates to interest that has
accrued but is unpaid (
Paulsen
and Another v Slip Knot Investments 777 (Pty) Ltd
2014 (4) SA 253
(SCA) at para 20
).
The further question begs: if the respondent claims the debt is not
due and payable or was paid, why did he sign a settlement
agreement.
Also, if it relies on in duplum how is it possible to still make a
computation of the debt owed.These questions the
respondent could not
answer.
Badenhorst
Rule
43.
During
argument, counsel for the respondent fleetingly touched on the
Badenhorst rule (
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at
347- 348
.)
It was compared in
Kalil
v Decotex (Pty) Ltd and Another
1988 (1) SA 943
at 980 B-D
:
“
In regard to
locus
standi
as a creditor, it has been held, following certain English authority,
that an 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 balanced of probability that its indebtedness to the applicant
is
disputed on
bona
fide
and reasonable grounds, the Court will refuse a winding-up order. 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.”
44.
For the
reason set out hereunder in my opinion the grounds upon which the
respondent disputes the debt are unreasonable and rejected.
Ever
since the conclusion of the agreement the respondent continuously
attempted to avoid re-payment.
45.
The
respondent signed a settlement agreement notwithstanding the fact
that it claimed that the debt to the applicant had already
been
repaid in full. This it failed to do. Furthermore, the
respondent undertook to review the applicant’s computation
of
the amounts owing. This never happened. The applicant advised the
respondent that it would assist it by processing the statements
line
by line with the respondent. The respondent has failed to take up
this invitation. The respondent also indicated that it intended
to
engage an accounting expert to recalculate the amounts owed to the
applicant. The applicant still waits. From the above, it
is evident
that although claiming not to be in debt or that the debt is not due
and payable, the respondent’s conduct clearly
indicates to the
contrary.
Conclusion
46.
In my view,
the respondent is unable to pay its debt of more than R100 owed to
the applicant.
47.
I make the
following order:
47.1
The
respondent is placed under provisional liquidation;
47.2
A
rule
nisi
is
issued calling upon all persons interested to show cause, if any, to
the court on a date to be fix by the court as to:
47.2.1
Why the
respondent should not be placed under final liquidation; and
47.2.2
Why the
cost of this application should not be cost in the liquidation.
47.3
That
service of this order be affected:
47.3.1
By one
publication in each of the Diamond Fields Advertiser and the
Volksblad newspapers;
47.3.2
By service
on the South African Revenue Services at Oranje Toyota Building,
corner of De Villiers and Bean Streets, Kimberley;
47.3.3
By service
on the respondent at its registered address at 42 Carington Road,
Kimberley;
47.3.4
By service
on the employees of the respondent, if any; and
47.3.5
By service
on all registered trade unions of the employees, if any.
47.4
That the
costs of this application be paid as cost of administration in the
winding-up of the respondent;
47.5
The
counter-application is dismissed with costs.
S
C O’BRIEN AJ
Date
heard: 6 August 2018
Date
delivered: 21 September 2018
Obo
Applicant: Adv L Lever SC
Instructed
by: Duncan & Rothman Inc.
Obo
Respondent: Adv J Smit
Instructed
by: Hugo Mathewson & Oosthuizen Attorneys