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[2017] ZAKZPHC 68
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Akbur and Another v Button NO and Others (AR529/2016) [2017] ZAKZPHC 68 (15 June 2017)
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO: AR529/2016
ASHRAF
AKBUR
FIRST
APPELLANT
GSC TRADING
CC
SECOND
APPELLANT
and
NEIL DAVID BUTTON
N.O
FIRST
RESPONDENT
KURT ROBERT KNOOP
N.O.
SECOND
RESPONDENT
SURENDRA NAIDOO
N.O.
THIRD
RESPONDENT
EBRAHIM
ABOOBAKER
FOURTH
RESPONDENT
MOOLLA
N.O.
FOURTH
RESPONDENT
DEON SCHAUP
N.O.
FIFTH
RESPONDENT
THE MASTER OF THE
HIGH
SIXTH
RESPONDENT
COURT OF SOUTH AFRICA
(KWAZULU-NATAL DIVISION)
Coram:
Koen J, et Poyo Dlwati J, et Bezuidenhout J
Heard:
19 May 2017
Delivered:
15 June 2017
O R D E R
The following order is
granted:
1. The appeal is upheld
with costs.
2. The order of the court
a quo
is set aside and substituted with the following:
‘
The application is
dismissed with costs’.
J
U D G M E N T
THE
COURT:
[1]
In
National
Director of Public Prosecutions v Zuma
[1]
it was said that:
‘
Motion
proceedings, unless concerned with interim relief, are all about the
resolution of legal issues based on common cause facts.
Unless the
circumstances are special they cannot be used to resolve
factual issues because they are not designed to determine
probabilities. It is well established under the
Plascon-Evans
rule
that where in motion proceedings disputes of fact arise on the
affidavits, a final order can be granted only if the facts averred
in
the applicant's (Mr Zuma's) affidavits, which have been admitted by
the respondent (the NDPP), together with the facts alleged
by the
latter, justify such order. It may be different if the respondent's
version consists of bald or uncreditworthy denials,
raises fictitious
disputes of fact, is palpably implausible, far-fetched or so clearly
untenable that the court is justified in
rejecting them merely on the
papers.
.’
[2]
The application giving rise to the present appeal is no exception.
[3]
In the application, the applicants, (the first to fourth respondents
in the appeal) successfully claimed the following relief,
in the
exact terms prayed in the notice of motion, against the first and
second respondents (the appellants in the appeal). The
parties will
hereinafter be referred to as in the court
a quo
.
‘
1. Declaring that
the following amounts paid by the Corporation from its Nedbank
Kingsmead Branch bank account number: […]
to the following
persons in the following amounts, namely:
1.1
R41 000.00 (Ashraf sal July) on 26 July 2013;
1.2
R11 000.00 (Ash expenses) on 12 August 2013;
1.3
R 1 900 000.00 (n/l trust on 16 August 2013;
1.4
R200 000.00 (inv. return) on 2 September 2013;
1.5
R50 000.00 (inv. return) on 10 September 2013;
1.6
R41 000.00 (Ash salary) on 30 September 2013; and
1.7
R250 000.00 (inv return) on 7 October 2013.
TOTAL:
R2 493 000.00
constitute voidable
preferences of the property of the Corporation, as debtor to, in
favour of and for the benefit of the first
respondent and/or the
second respondent as the Corporation’s creditors, in preference
to the Corporation’s other creditors,
within a period of 6(six)
months preceding the winding-up of the Corporation at a time when its
liabilities exceeded the value
of its assets, were not made in the
ordinary course of the business of the Corporation and were intended
to prefer one or more
of the respondents’ creditors above
another, under and pursuant to the provisions of
Section 29
of the
Insolvency Act No. 24 of 1936
, as read with
Section 32
,
31
,
30
(1)(2)
and
26
(1)(b) of the
Insolvency Act.
2. Declaring
it to
be competent for the applicants to recover from the first respondent,
alternatively, the second respondent, or further
alternatively, from
the first and second respondents, jointly and severally, the one
paying the other to be absolved, the amounts
reflected in 1.1 to 1.7
above, for the purpose of setting aside such disposition under and
pursuant to the provisions of
Section 29
, as read with
Sections 32
,
30
(1) (2) and
26
(1)(b) of the
Insolvency Act 24 of 1936
, as amended;
3. Directing the first
respondent, alternatively, the second respondent, or further
alternatively, the first and second respondent,
jointly and
severally, the one paying the other to be absolved, to forthwith
repay the amounts for in 1.1 to 1.7 of paragraph 1
above, together
with interest thereon at the rate of 9% per annum a
tempore morae,
to date of payment;
4. Directing that the
first and second respondents pay the costs of this application on a
party and party scale, jointly and severally
the one paying
the other to be absolved.’
[4]
The Corporation referred to is Golden Rewards 698 CC Trading as
Global Steel Corporation to which the applicants were appointed
as
joint liquidators. The first respondent is Mr Ashraf Akbur in his
personal capacity and the second respondent is GSC Trading
CC, a
close corporation of which the first respondent was at all times the
sole member.
[5]
Although the learned Judge in the court
a
quo
also
alluded to ‘collusive dealings’
[2]
and ‘undue preference’,
[3]
the judgment concluded that the dispositions complained of
constituted voidable preferences. The appeal lies against that
conclusion.
[6]
In order to succeed with a claim on that basis the provisions of
s 29
of the
Insolvency Act
[4
]
had to
be complied with.
Section 29
provides:
‘
(1)
Every
disposition of his property made by a debtor not more than six months
before the sequestration of his estate or, if he is
deceased and his
estate is insolvent, before his death, which has had the effect of
preferring one of his creditors above another,
may be set aside by
the Court if immediately after the making of such disposition the
liabilities of the debtor exceeded the value
of his assets, unless
the person in whose favour the disposition was made proves that the
disposition was made in the ordinary
course of business and that it
was not intended thereby to prefer one creditor above another
.’
[7]
The applicants were accordingly required to prove:
(a) the dispositions of
property by the corporation to the first alternatively the second
respondent;
(b) that such
dispositions were not made more than six months before the
liquidation of the corporation;
(c) that the dispositions
had the effect objectively of preferring one of the corporation’s
creditors above another; and
(d) that immediately
after the making of each disposition the liabilities of the
corporation exceeded the value of its assets.
[5]
The
disposition would then qualify as a voidable preference, unless the
Respondent in whose favour the disposition was made, and
who would
have the onus to do so proves that:
(a) the dispositions were
made in the ordinary course of business; and
(b) that it was not
intended thereby to prefer one creditor above another.
[6]
[8]
The further trite principle of our law that an applicant for relief
in motion proceedings must make out his case in the founding
affidavit and not in reply, also goes without saying.
[7]
[9]
The drafter of the applicants’ founding affidavit proceeded in
a most unusual and unorthodox way. The deponent to the
founding
affidavit, an attorney, but not one of the co-liquidators, confirmed
that he is ‘intricately involved in the administration
of the
estate of the corporation’ on behalf of the applicants and that
he had represented the applicants ‘in attending
the on- going
commission of enquiry being conducted in the corporation pursuant to
the provisions of s 417 and 418 of the Companies
Act No. 61 of 1973
(as amended), as read with Act No. 71 of 2008 (‘the
Act’), which has been conducted
by attorney Monty Stanley
Hacker before the duly appointed commissioner’, the third
respondent in the application.
He confirmed from his own
knowledge that the application for the winding up of the corporation
was served and filed on 9 October
2013 and a final order was granted
on 9 December 2013 and hence that the liquidation of the corporation
commenced on 9 October
2013. He then turned to the loan account
of the first respondent and the bank account of the corporation
within the six month
period preceding the commencement of the winding
up and presented a precis of some of the evidence adduced at the
aforesaid commission
of enquiry by the first respondent, a Durban
attorney, Mr Peter Andrew, two other members of the corporation,
namely Mr Moosa Aslam
and Mr Oscar Naidoo, as well as the accounting
officer of the corporation, Mr Shyan Vather.
[10]
I do not intend repeating any of the contents of the founding
affidavit in this judgment. It forms part of and is a matter
of
record. Suffice it to say that the deponent deals with what the
first respondent testified, not by actual repeat of the
verbatim
evidence led or the
ipsissima verba
of the witnesses, but
rather what they testified in summarised form.
[11]
In terms of s 417(7) of the Companies Act, 1973:
‘
(7)
Any
examination or enquiry under this section or section 418 and any
application therefor shall be private and confidential, unless
the
Master or the Court, either generally or in respect of any particular
person, directs otherwise
.’
[12]
There is no reference whatsoever in the founding affidavit that the
master or the court has directed otherwise. The effect
of the
requirement that the examination or enquiry under s 418 shall be
private and confidential is explained in Meskin
Henochsberg on the
Companies Act
Vol 1 at 894(8) in a commentary on s 417 as
follows:
‘
Unless
the Court or, as the case may be, the Master, were otherwise to
direct (which direction, it is submitted, can be made at
any time, ie
even during the examination or enquiry, at the instance of a person
who is able to show a sufficient interest), s 417(7)
operates to
deny all persons access to the application and any documents
accompanying it and to the examination or enquiry itself,
the record
of it and to any books or papers produced at it.
’
[13]
Prima
facie
therefore,
the record of the enquiry and documents or papers produced at the
enquiry remained confidential and could not be used
in the
application. We say
prima
facie
,
as this particular issue was not raised and therefore was not dealt
with in the court
a
quo,
and
was further not sufficiently ventilated before us
[8]
having been raised on very short notice to counsel. However, even if
we were wrong in our
prima
facie
view,
and assuming for the moment in favour of the applicants that the
evidence and documents produced at the enquiry were not confidential
and could be used, we have very serious reservations whether the
deponent to the founding affidavit’s summary and impression
of
what witnesses might have said at the enquiry could properly be
presented as admissible evidence to found relief claimed. If
any
evidence adduced at such an enquiry could legitimately be used, then
at a minimum we would expect that the actual transcript
of the
evidence of such witnesses reflecting the
ipsissima
verba
of
the witnesses would have to be annexed to the founding papers.
[14]
In addition, the summarised version of the evidence of these
witnesses who testified at the enquiry was tendered as proof of
the
contents thereof, and would thus constitute hearsay evidence unless
confirmed by the actual witnesses. No confirmatory
affidavits
were annexed to the founding papers in respect of any of these
witnesses. To the extent that the evidence of the
first
respondent at the enquiry, but not in summarized form, could lawfully
have been adduced but for the provisions of s 417(7)
on the basis of
containing some extracurial admissions, it would not constitute
inadmissible hearsay against the first respondent.
But the actual
transcribed evidence of the first respondent did not form part of the
founding affidavit. The evidence of Messrs
Andrew, Aslam, Naidoo and
Vather would however constitute inadmissible hearsay evidence. The
applicants did not apply for the admission
of that evidence in terms
of s 3(1)(c) of the Law of Evidence Amendment Act.
[9]
[15]
In paragraph 10.4 of the judgment the learned Judge remarks that
Messrs Moosa Asmal and Oscar Naidoo ‘have deposed to
supporting
affidavits in replication to this application.’ Mr Andrews also
deposed to an affidavit which was filed with the
replying affidavit.
Those verifying affidavits however came too late. An applicant for
relief in motion proceedings must make out
his or her case in the
founding papers and not in reply. Furthermore, the reference to Mr
Moosa Asmal having deposed to a supporting
affidavit in replication
appears erroneous. There is no supporting affidavit filed anywhere in
the application papers in respect
of Mr Asmal. All that is
filed in respect of Mr Asmal, and then only in reply, is annexure
‘JDM 10’ to the replying
affidavit, which purports to be
a transcript of apparently a portion of the evidence of Mr Asmal
before the s 418 enquiry. It is
in any event unconfirmed, not
certified as correct, and therefore cannot be relied upon.
[16]
If the aforesaid inadmissible evidence in the founding affidavit is
ignored, (it should more correctly have been struck out
on the
application of the respondents) then one is left with very little
which can safely be attributed to the deponent’s
own personal
knowledge or that is admissible.
[17]
Reading the founding affidavit fairly generously it can be accepted
as common cause that the dispositions detailed in paragraph
1 of the
notice of motion and the court order were made, as they appear from
the corporation’s bank accounts, being documents
which might
have been obtained at the enquiry, but which the deponent to the
founding affidavit also might have acquired during
his administration
of the estate. These detail the various dispositions with reference
to date, amounts and also the description
reflected next to the
amounts in paragraph1 of the Notice of Motion.
[18]
That these dispositions occurred within the six month period, would
also follow from an acceptance of the bank statements of
the
corporation referred to in the preceding paragraph.
[19]
As regards whether the dispositions had the effect of preferring one
creditor above another, the deponent from personal knowledge
refers
to ‘the largest proved unsecure creditor in the insolvent
estate of the corporation’ being Aveng Trident Steel
(Pty)
Limited ‘a proved creditor in the sum of R10 561 834.66’
who was not paid. The dispositions made therefore,
certainly and
objectively, would have had the effect of preferring any creditor to
whom payment was made in preference to Aveng
Trident Steel (Pty)
Limited.
[20]
As to whom the dispositions were made and whether the liabilities of
the corporation exceeded its assets immediately after
each
disposition was made, is not established, mired in various factual
disputes, and is sought to be addressed by applicants
at the
level of probabilities, to which motion proceedings don’t lend
themselves. Very briefly, the requirement that the
liabilities of the
corporation exceeded the assets after each disposition was made, has
been sought to be established generally
with reference to financial
statements of the corporation. These financial statements annexed to
the founding affidavit are however
unsigned and were therefore never
approved by the members of the Corporation as being correct.
The respondents deny that
the liabilities of the Corporation exceeded
its assets in each instance. This denial is not a bare denial or one
which can simply
be disregarded as not giving rise to a genuine
dispute of fact, as the respondents in this regard referred to an
invoice discounting
facility which the corporation enjoyed with
Nedbank at the time and which, to the first respondent’s
knowledge, continued
until or about May 2013. They submit that
Nedbank certainly would not have continued to advance such invoice
discounting facility
to the Corporation if it was trading under
insolvent circumstances. Doubt is sought to be cast on this
answer in reply, but
a dispute of fact remains between what is
alleged in the founding affidavit and what is
bona fide
contended in support of the denial of insolvency in the answering
affidavit.
[21]
The applicants did also not, in our view, establish on a common cause
basis in whose favour the dispositions were made. The
contention
advanced by the applicants, based mainly on inadmissible evidence
contained in the founding affidavit, is that the dispositions
were
made to the first respondent. The first respondent in the
answering affidavit however contends, with reference to some
documentation, that the facts giving rise to the initial indebtedness
in respect of which some of the dispositions are claimed
to be
repayments in discharge of such liability, was a liability incurred
by the Corporation towards the second respondent.
There might
be some indicators detracting from that contention, again based
largely on inadmissible evidence contained in the founding
affidavit,
but a material dispute of fact remains. Specifically in respect of
the alleged disposition of R1 900 000 paid into the
trust account of
Natalie Lange attorneys, the respondent’s attorney confirms
under oath that she was present when the first
respondent
telephonically requested Mr Andrews of that firm to credit the amount
to the second respondent. This in conflict with
Mr Andrews’
alleged evidence at the enquiry and the contents of his affidavit
filed in reply, but it gives rise to a material
dispute of fact,
which cannot, with respect, be discounted on the basis of simply
adopting a ‘robust approach’. At
the very least, it
involves a dispute of fact between the versions of two officers of
this court.
[22]
That factual dispute also affects the issue whether the alleged
dispositions were indeed made to the first or second respondent.
The
learned judge in the court
a
quo
found
the two respondents liable jointly and severally. There is no legal
basis advanced in the founding affidavit for a joint and
several
liability on the part of both the first and second respondents.
[10]
Either the voidable preference was in favour of the first respondent
or alternatively the second respondent.
[23]
The applicants never requested for the matter to be referred for the
hearing of oral evidence on any of the disputed facts,
or to trial.
Any factual dispute must therefore be decided on the version of the
first and second respondents. On that basis the
Applicants failed to
discharge the onus on all the issues in respect of which they bore
the onus. The application accordingly could
not succeed.
[24]
This application could never have been determined on the papers.
Indeed, if regard could legitimately be had to what
was allegedly
stated by witnesses at the enquiry, the applicants should have
clearly contemplated a material dispute of fact arising
and should
not have proceeded by way of motion proceedings. However even
assuming in their favour that motion proceedings were
still available
to them, when faced with the respondents’ answer, raising
numerous disputes of fact, the matter should have
been referred to
oral evidence. They elected not to do so.
[25]
Mr Wallis urged this court to refer the matter to trial in the event
that we find that there are material disputes of fact.
However, as
Harms DP (as he then was) stated in
Law
Society, Northern Provinces v Mogami and Others
,
[11]
‘
An
application for the hearing of oral evidence must, as a rule, be
made
in
limine
and
not once it becomes clear that the applicant is failing to convince
the court on the papers or on appeal. The circumstances
must be
exceptional before a court will permit an applicant to apply
in the alternative for the matter to be referred to
evidence should
the main argument fail
’.
[26]
There are no exceptional factors that have been presented to us so as
to consider that relief.
[27]
In the circumstances, the appeal must succeed with costs.
[28]
The following order is granted:
1. The appeal is upheld
with costs.
2. The order of the court
a quo
is set aside and substituted with the following:
‘
The application is
dismissed with costs. ‘
__________________________________
KOEN
J
__________________________________
POYO
DLWATI J
_____________________________________
BEZUIDENHOUT
J
Appearances
For
the Appellant: Mr M S Khan SC
Instructed
by: A.Sing & Associates, Durban
c/o
Siva Chetty & Co, Pietermaritzburg
For
the Respondent: Mr P J Wallis
Instructed
by: Fairbridges Werthem Becker, Gauteng
c/o
Berkowitz Cohen Wartski, Durban
c/o
Stowel & Co, Pietermaritzburg
[1]
National Director of
Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009
(2) SA 277
(SCA) para 26
[2]
Para 11.2 of the
judgment pg 364 of the papers. The judgment of the court
a
quo
is
reported on Saflii as
Button
N.O and others v Akbur and others
[2015]
ZAKZDHC 84.
[3]
Para 12 of the judgment
of the court
a
quo
.
[4]
Act
24 of 1936.
[5]
See
Cooper
and Another NNO v Merchant Trade Finance Ltd
2000
(3) SA 1009
(SCA) para 15.
[6]
Cooper
v Merchant Trade Finance
supra
para 15.
[7]
See
Shakot
Investments (Pty) Ltd v Town Council of the Borough of Stanger
1976 (2) SA 701
(D)
at704F-G and also
National
Council of Societies for the Prevention of Cruelty to Animals v
Openshaw
[2008] ZASCA 78
;
2008
(5) SA 339
(SCA) para 29.
[8]
We
accordingly do not express a final view thereon.
[9]
Act
45
of 1988. See also
Van
Zyl NNO and another v Kaye NO
and
others
2014
(4) SA 452
(WCC) para 44. It however seems unlikely that this
hearsay evidence would have been allowed, even if applied for, as
the witnesses
were available to give this evidence.
[10]
This much was conceded,
correctly in my view, by Mr
Wallis
who appeared for the
applicants.
[11]
2010 (1) SA 186
(SCA)
para 23.