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[2016] ZAGPPHC 226
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Dormell Properties 521 (Pty) Ltd v Ellis and Others (65724/2013) [2016] ZAGPPHC 226 (23 March 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case
No: 65724/2013
DATE:
23 MARCH 2016
In
the matter between:
DORMELL
PROPERTIES 521 (PTY)
LTD
..........................................................................
Applicant
And
JAN
CHRISTIAAN
ELLIS
............................................................................................
1
ST
Respondent
REGISTRAR
OF DEEDS,
PIETERMARITZBURG
.................................................
2
nd
Respondent
HENDRIK
JOHANNES
GREYLING
..........................................................................
3
rd
Respondent
JUDGMENT
MAGARDIE AJ
1. The applicant
initiated motion proceedings against the respondents after
discovering a loan agreement purportedly concluded between
the
applicant, represented at the time by the third respondent, and the
first respondent, who apparently represented an entity
named Paforma
Property Finance (Pty) Ltd (“Paforma”) and himself
respectively.
2. At the time of
the conclusion of the alleged loan agreement, the third respondent
was the only registered director of the applicant.
The directorship
of the applicant later changed; the third respondent was removed and
Mr Furstenberg and Mr Botha became the new
directors of the applicant
with effect from 18 June 2011.
3. These
proceedings were initiated late in 2013, which was approximately two
years after Mr Furstenberg and Mr Botha became directors
of the
applicant.
4. The founding
papers are replete with serious allegations of impropriety and fraud
on the part of the third respondent. However,
it is apposite to
mention forthwith that the third respondent did not oppose the
application and also did not file any papers to
refute any of the
allegations made against him.
LATE FILING OF
THE REPLYING AFFIDAVIT
5. The counsel
for the first respondent, the only party resisting the granting of
the relief in this matter, was adamant that the
applicant’s
replying affidavit should not be considered on the grounds that it
was filed out of time and that the applicant
did not make a formal
application for condonation for the late filing thereof. The first
respondent did not identify any particular
prejudice he would suffer
as a result of the late filing of the replying affidavit. This must
also be considered against the backdrop
that a respondent is not
entitled to file any further sets of papers after the applicant had
filed a reply, unless there are new
issues raised in the replying
affidavit.
6. The first
respondent’s argument is not founded on new issues raised in
the replying affidavit. Whilst it is correct that
the applicant filed
its replying affidavit out of time without a formal application for
condonation for its conduct, the objection
raised by the first
respondent against the replying affidavit is just a case of mere
formalism. In any event, the court has discretion
to either admit or
refuse to accept an affidavit filed out of time.
7.
In
Trans-African Insurance Co Ltd v Maluleka
[1]
it was held that while indeed their legal advisers should not be
encouraged to become slack in the observance of the Rules of Court,
which are an important element in the machinery for the
administration of justice; however, technical objections against
imperfect
procedural steps should not be allowed, more so in the
absence of prejudice, to thwart speedy resolution of matters on their
merits.
8.
In
Safcor
Forwarding (Johannesburg) (Pty) Ltd v National Transport
Commission
[2]
the
court said "
naturally,
it is for the Court to decide whether the matter is really one of
urgency and whether the circumstances warrant a departure
from the
normal procedures. To hold otherwise would
,
in
my view, make the Court the captive of the Rules. I prefer the view
that the Rules exist for the Court, rather than the Court
for the
Rules
”
9. The issues
that the applicant raises in its replying affidavit are germane and
do not require the medium of a replying affidavit
to be entertained
by the court. The court can also raise those issues outside the
framework of the replying affidavit. Whether
the replying
affidavit
is accepted or not is of no moment inasmuch as the refusal of the
affidavit does not enhance the first respondent’s
case. For
this reason, the replying affidavit is admitted.
THE LOAN
AGREEMENT(S)
10.
One observes, from the copy of the alleged agreement annexed to the
answering affidavit marked annexure “B”,
that the third
respondent purportedly signed a loan agreement on behalf of the
applicant on 15 March 2010.
11.
In paragraphs 38 to 54 of the answering affidavit, the first
respondent went to great length to explain how
the loan agreement
between the applicant and Paforma came about with carefully selected
words and syntaxes. What is puzzling from
the elaborate explanation
is that, nowhere is it ever mentioned that on a particular date
Paforma effected transfer of any amount
of money to the applicant
and/or the third respondent or drew a cheque of a certain amount of
money payable to the applicant and/or
the third respondent. There is
that glaring omission or allegation lacking from the first
respondent’s papers. What is clear
is that the first respondent
specifically chose the words as stated in paragraph 41 of the
answering affidavit that it was the
terms *of the First Loan
Agreement that the Applicant would sign all documentation necessary
to register a first covering mortgage
bond in favour of
Paforma
over the immovable property
,
in
an amount of R2 million
”
(own
emphasis).
12.
The first respondent then proceeded to explain that the covering bond
papers were duly prepared but not registered
with the registrar of
deeds. The first respondent made no mention whatsoever that there was
indeed payment of the R1 000 000.00
to the third respondent, despite
being alive to the fact that payment of money was a contested issue.
The first respondent went
further to explain the agreement for the
amount of R2 000 000.00, without any elucidation of how the first
amount of R1 000 000.00
was to be paid and what the terms of
repayment were.
13.
In terms of the first loan agreement marked annexure B to the
answering affidavit, the applicant, purportedly
represented by the
third respondent, had until 15 June 2010 to repay the entire amount
of that loan allegedly advanced to the applicant,
though allegedly
payable to the third respondent, basically given a period of three
month to repay the entire loan amount. It is
clear from the first
respondent’s answering affidavit that 15 June 2010 came and
passed without the applicant and/or the
third respondent repaying the
alleged loan. No legal action whatsoever was taken or even initiated
against either the applicant
or the third respondent for the recovery
of the amount allegedly paid to the third respondent. There is only
an allegation in paragraph
54 of the answering papers that
“
the
Applicant was pressurised bv Paforma to repay the loan amount and
interest to Paforma” (own emphasis). The nature and
extent of
the alleged pressure remain unexplained. As matters stand, the
alleged loan, strongly defended by the first respondent,
remains in
serious doubt.
14.
On or about 15 September 2010, an even more bewildering action came
to the fore, namely the alleged conclusion
of a loan agreement
between the applicant, represented by the third respondent, and the
first respondent, in his personal capacity,
for an alleged amount of
R2 000 000.00. The alleged new loan agreement marked annexure 3 to
the founding papers, was concluded
despite the fact that neither the
applicant nor the third respondent repaid the first loan.
15.
At
this point, I deem it necessary to digress herein to traverse certain
provisions of the National Credit Act (NCA).
[3]
There was a registered mortgage bond purporting to secure the amount
of the alleged loan, as claimed by the first respondent. For
all
intents and purposes, the alleged second loan agreement has all the
hallmarks of a credit agreement as defined in section 8
of the NCA.
16.
Section 81(2)(a) of the NCA provides, inter alia, that a credit
provider should not enter into any credit
agreement without
assessing
the debtor’s repayment history and existing financial means,
prospects and obligations. Section 81 (2)(b) provides
that a credit
provider should assess, prior to granting a loan, reasonable basis to
conclude that any commercial purpose may prove
to be successful, if
the consumer has such a purpose for applying for that credit
agreement.
17.
The first respondent failed to divulge information relating to the
purpose for which the alleged loan was
paid to the third respondent.
The first respondent did not furnish information relating to the
purpose for which money was to be
advanced to either the applicant or
the third respondent. It is implausible that the first respondent
could have just been happy
and contented himself with advancing such
large sums of money without establishing what the purpose for same
was.
18.
Having been aware that the third respondent and/or the applicant
failed to repay the initial amount of R1
000 000.00 allegedly for the
first loan, the action of the first respondent of advancing even
double the amount which the third
respondent and/or the applicant
failed to repay was a classic case of reckless lending. It is more
astonishing that the first respondent
again stipulated a three months
repayment period for double the amount of the original loan, despite
knowledge about the debtor’s
failure to honour the terms of the
first loan agreement. The first respondent does not even explain how
the third respondent and/or
the applicant intended to repay the money
or from what resources such repayment would be made. One cannot think
of a more appalling
act of reckless lending that could surpass this
one, if any money really exchanged hands. I mention this alive to the
fact that
the jury is still out on whether there was any money that
either Paforma or the first respondent paid to the third respondent.
No single document proving payment of money of any sort to the third
respondent was ever placed before me.
19.
Returning to the salient facts of this matter, basically the terms of
the second loan agreement were for the
first respondent to repay the
total amount of the applicant’s alleged indebtedness to
Paforma. According to the first respondent,
the second loan agreement
was intended to "partially settle the indebtedness of the
Applicant and Broad Brush” (own
emphasis). Again, the first
respondent neither made allegations whatsoever that the third
respondent indeed paid any alleged amount
to Paforma nor furnished
proof of the alleged payment.
20.
What is starkly glaring is that, from the first respondent’s
version, the third respondent, having been
the only registered
director of the applicant, tried to use the applicant’s only
asset, namely the fixed property in Zimbali
Estate, to secure a
personal loan. This information was clearly known to the first
respondent insofar as the alleged loan agreement
stipulated that the
money should be paid into the third respondent’s personal bank
account. It must have occurred to the
first respondent that something
was certainly amiss when a loan to be paid to the third respondent
was being secured by a bond
over the applicant’s property; it
certainly did not require rocket science to discern this fact.
21.
Of further significance, as was the case with the first loan, the
applicant had already demonstrated to the
first respondent that it
was not able to repay the alleged loan to Paforma within a period of
three months. Despite that knowledge,
the first respondent wants this
court to believe that he unflinchingly went ahead to conclude a loan
agreement to advance his personal
amount of R2 000 000.00 to partly
extinguish the applicant’s indebtedness to Paforma in terms of
the first loan and another
debt of an unrelated entity styled Broad
Brush. I certainly find it hard to accept this; nowhere in the
answering affidavit is
any explanation given as to how the first
respondent satisfied himself that the applicant, which had earlier
allegedly defaulted
on the repayment of the same amount, would be
able to repay double the amount of the so-called original loan
agreement.
22.
One only finds allegations of a new covering bond of R3 000 000.00 to
cover the applicant’s indebtedness.
However, the first
respondent specifically stated that the R2 000 000.00 that he
allegedly personally advanced, was to partly pay
the applicant and
Broad Brush’s indebtedness to Paforma. It is not explained why
the applicant suddenly had to become responsible
for the indebtedness
of Broad Brush. When ail is said and done, there is again absence of
an unequivocal allegation that on a particular
date the first
respondent indeed effected transfer of a particular amount of money
allegedly owed by the applicant. The first respondent
failed to
attach any shred of evidence of any payment of money to his answering
affidavit.
23.
The second loan agreement claims that the applicant is indebted to
the first respondent for an amount of R3
000 000.00, plus an
additional amount of R600 000.00. However, there is no computation of
how the amounts were arrived at. Again,
as was the case with the
first loan agreement, the first respondent’s choice of words is
also telling. The allegations are
couched in the language of “would
conclude a loan agreement” or “would pay'\ there is no
subsequent allegation
that, on a particular date the first respondent
indeed, in accordance with the loan agreement, paid the alleged
amount of money
to Paforma.
24.
What is further disturbing is the fact that the first respondent took
a completely technical approach to the
application against him. He
tried to argue his way out of the confines of the provisions of the
Companies Act, denouncing them
as completely irrelevant to the
matter. Unfortunately, I am less than persuaded by such an approach.
There are palpable acts of
impropriety herein and the first
respondent cannot be allowed to shirk responsibility by raising
technical legal argument and applicability
or otherwise of certain
provisions of the statute(s). The papers are crying out loud for
substantive averments and evidence of
certain deeds and the first
respondent has elected to counter such by technical legal arguments
and abuse of rules. The first respondent
wants this court to accept
his version that the events happened as he explained. I certainly
have serious problems with the first
respondent’s version, more
so that it is not supported by any other documentary proof of payment
except the say so of the
first respondent.
25.
Although the first respondent disputes that the second loan agreement
was concluded after the applicant’s
attorney’s letter of
09 December 2010, he attaches no confirmatory affidavit from the
third respondent with whom he concluded
the loan agreement. It
remains unexplained why the first respondent did not find it
necessary at any stage to pursue the third
respondent for recovery of
the loan allegedly advanced. After all, the amount of the alleged
loan was advanced to the third respondent
personally. It is common
cause that neither Paforma nor the first respondent nor the third
respondent paid any money to the applicant.
26.
At the end of the hearing of this matter, I was furnished with a copy
of an ABSA proof of payment by EFT of
an amount of R2 000 000.00 to
an entity called Bridgeway Limited, made on 17 September 2010. The
document identifies Mr Neil Esterhuysen
as the person who transferred
the money. Mr Esterhuysen is the first respondent’s attorney.
27.
Attached to the proof of payment are four copies of trust receipts
from Neil Esterhuysen Attorneys, all issued
on the same date,
apparently presented to demonstrate the alleged payment and also
breaking down the R2 000 000.00 into four different
amounts. However,
the receipts do not make any reference to the amount of R2 000 000.00
received.
28.
What is also confusing about the proof of payment is that the
reference for the payment is “NEA-BF2980
BF2981”, whereas
the copied receipts attached thereto are referenced “J C
ELLIS/DORMELLPROPERTIES 521.” In addition,
the payment was
effected on 17 September, whereas the receipts are dated 16 September
2010. No plausible explanation was proffered
for these glaring
discrepancies.
29.
The presentation of the aforementioned document is disquieting, more
so when the first respondent resisted
the request to furnish proof
that payment of any amount claimed by him was ever made.
In
his answering affidavit, the first respondent does not make any
mention of Esterhuysen transferring R2 000 000.00 and why the
amount
was broken down into smaller denominations. It is also not clear how
Bridgeway Limited fits into the scheme of things. If
the proof of
payment is worth anything, no cogent reasons were furnished as to why
the document was only just conveniently coming
to the surface towards
the end of the hearing. In fact, I must mention that, in paragraph
148 of the answering affidavit, the first
respondent categorically
stated that he was under no obligation to furnish any proof of
payment.
30.
In paragraph 57 of the answering affidavit it is specifically stated
that the R2 000 000.00 was to be paid
into Paforma’s bank
account. The proof of payment of R2 000 000.00 mentioned above was
neither done by the first respondent
nor was it made to Paforma, but
to Bridgeway Limited.
31.
The covering bond registered against the applicant’s property
is a total of R3 600 000.00. It was the
first respondent’s case
that the amount of R1 000 000.00 was paid to the applicant under the
first loan agreement. However,
on perusal of annexure B to the first
respondent’s papers, the money was not supposed to be paid to
the applicant, but into
the third respondent’s personal bank
account.
32.
The first respondent is himself a businessman and director of
companies; as such, he is not a beginner on
issues of corporate
governance. The alleged transactions of advancing money to the third
respondent and attempting to use the fixed
property of the applicant
as security for a transaction that had nothing to do with the
applicant, on its own, smacks of illegality.
To even go further to
again use the applicant’s fixed property as security for money
allegedly advanced to Broad Bush, which
had no relation whatsoever
with the applicant, is utterly unconscionable.
33.
There was every reason why the first respondent did not elect to go
after the third respondent to recover
the money allegedly advanced to
him as they were both in cohorts in the perpetration of the unlawful
deeds. Although in paragraph
63 of his answering affidavit the first
respondent alleged that the applicant had to pay the interest of R58
000.00 in three equal
instalments, when regard is had to clause 7.2
of the alleged loan agreement, one finds mention of the payment of
the amount of
R66 000.00 on the dates specified in the answering
affidavit.
34.
The first respondent’s explanations smack of a dishonest scheme
aimed at deceiving the applicant regarding
liability for money that
was neither paid to the applicant nor to the third respondent. The
inescapable conclusion that one reaches
is that the first
respondent’s version is contrived and tailored to create
nonexistent disputes of fact.
35.
It is
also apposite at this stage to mention that it is trite that a
litigant is not entitled to conceal material allegations in
order to
obtain an advantage of placing the onus on his opponent. Court
proceedings are not a game where one party may seek some
tactical
advantage by concealing facts from his opponents. No litigant is
entitled to plead his case in such a manner as to place
the burden on
the opponent to prove such facts as are best known to such party.
[4]
36.
As judicial officers, we must and are enjoined to dispense justice
fairly and should not allow strict adherence
to the rules to prevent
applying common sense to the facts of any case. In Soffiantini v
Mould
1956 (4) SA 150
(E) it was held that it is necessary to make a
robust, common-sense approach to a dispute on motion as otherwise,
the effective
functioning of the Court can be hamstrung and
circumvented by the most simple and blatant stratagem. The Court must
not hesitate
to decide an issue of fact on affidavit merely because
it may be difficult to do so. Justice can be defeated or seriously
impeded
and delayed by an over-fastidious approach to a dispute
raised in affidavits.
37.
For this court to come to the first respondent’s aid in the
sense of protecting his rights and interests,
there must be a factual
basis. Before me are clear averments of the applicant placing doubt
on the existence of a loan or payment
of any money supposedly secured
by means of a mortgage bond over the applicant’s property. The
first respondent dismally
failed to present documentary evidence of
payment of money either to the third respondent or the applicant. If
payments of money
were indeed made as alleged, it was the easiest
thing to present bank statements.
Applicability of the
Companies Act or Shareblocks Control Act 59 of 1980
38.
The applicability of the provisions of the Companies Act relating to
the disposal of assets, can only come
to the fore if the registration
of a mortgage bond over the applicant’s property constituted an
act of disposal of such property.
The third respondent could only
carry the obligation to obtain consent of the applicant’s
shareholders if he intended to
dispose of the applicant’s
asset.
39.
It is accepted that the act of registering a mortgage bond over an
asset of a company does not constitute
disposal of the asset. The
reason for this is that the person who is borrowing money and putting
the company asset as security
is not in anyway selling the asset, but
intending to unencumber the said asset as soon as he/she extinguishes
his debt. Encumbering
an asset does not bring about transfer of
ownership of the immovable property involved.
40.
In
Standard Bank v Hunkydory Investments 188 (Pty) Ltd (No 2) 2010 (1)
634 (WCC) the court had to decide the applicability of section
228 of
the Companies Act
[5]
to a transaction of registration of a mortgage bond over the
immovable property of a company. The court found that the
registration
of a mortgage bond did not amount to a disposal of a
company’s immovable asset and did not require the adoption of a
special
resolution contemplated in section 228 of the Companies Act.
41.
From the foregoing, if the third respondent genuinely sought a loan
and wanted to use the applicant’s
only immovable property as
security, there was no need for the third respondent to first obtain
the special resolution of the shareholders
of the applicant to
authorise him to do so.
42.
Although the applicant is a fractional ownership vehicle used to
acquire the immovable property, such did
not mean that section 14(1)
of the Shareblocks Control Act, 59 of 1980 as amended, applied to the
transaction. The applicant did
not use the term “share block”
as part of its name as required in term of the Act.
Accordingly,
the Shareblocks Control Act is of no relevance to the matter.
43.
The first respondent being the person who allegedly advanced the loan
amount of R2 000 000.00, was extremely
secretive about the details of
the loan, more especially where, when and how it was paid. There is
certainly no document whatsoever
to demonstrate the payment of money
to any person. The lack of this pertinent information inescapably
gives the impression that
the transaction(s) are simulated. It was
for the respondent to present cogent proof of the entire
transaction(s) to satisfy the
court that the transaction(s) indeed
existed and money exchanged hands, especially in circumstances where
the applicant made allegations
of fraud against the third respondent.
44.
It was strongly contended by the first respondent that the applicant
should have issued summons instead of
motion proceedings for the
relief sought insofar as there are dispute of facts not capable of
resolution on the papers. I do not
share the third respondent’s
view of dispute of fact in this regard. My view is that there are
points of law to be resolved
on the existence of the alleged loan
agreement, whether money was paid to the applicant for the benefit
and/or advancement of the
interest of the applicant and whether the
third respondent was authorised to encumber the applicant’s
property without the
resolution adopted by 75% of the applicant’s
shareholders authorising him to do so.
45.
It is clear that the applicant has done what it could insofar as
reasoning with and engaging the third respondent
regarding the
existence of the loan agreement is concerned. The applicant has also
registered a criminal case against the third
respondent.
46.
On the totality of the facts before me, the conclusion that the first
respondent was complicit in the schemes
aimed at defrauding the
applicant is inescapable. The short space within which the alleged
loans were granted and substituted and
the failure to take legal
action for the recovery of such loans are all telling.
47.
As already indicated elsewhere herein, an attempt was made to mislead
the court with the presentation of copies
of an electronic funds
transfer (EFT) by the first respondent’s attorney to another
company, and whose relationship with
any of the parties before me
remained unexplained. If it was so simple for the first respondent to
obtain a copy of such electronic
transfer of funds, it boggles the
mind why the bank statements proving all the transactions were not
presented at the time of the
filing of the answering affidavit.
48.
I am particularly concerned by the involvement of Neil Esterhuysen
Attorneys in these suspicious transactions.
The document furnished to
me as proof of payment certainly raises questions, and I think I am
entitled to conclude that it may
have been intended to mislead the
court into believing that there was repayment of money, when in truth
there wasn’t. Should
that be the case, such conduct is
certainly unbecoming of an attorney and raises issues of impropriety.
I direct the registrar
of this court to furnish the Law Society of
the Northern Provinces with a copy of this judgment with a view to
enquire into the
conduct of Neil Esterhuysen Attorneys insofar as it
pertains to the following:
48.1 Whether the
first respondent indeed paid different amounts totaling R2 000 000.00
into the trust account of Neil Esterhuysen
Attorneys on 16 September
2010;
48.2 The origin
of the amount of R2 000 000.00 transferred to Bridgeway Limited on 17
September 2010;
48.3 The matter
to which the reference number inserted in respect of the above
payment relates;
48.4 The state of
affairs of the firm’s trust account; and
48.5 Any other
matter which the Law Society of the Northern Provinces may consider
relevant.
49. I am of the
considered view that the applicant has succeeded to present
sufficient facts to support the relief sought in the
notice of
motion. In the result, I grant the orders in the notice of motion.
MAGARDIE AJ
ACTING
JUDGE OF THE HIGH COURT
[1]
1956 (2) SA 273 (A).
[2]
1982 (3) SA 654 (A).
[3]
National Credit Act, 34 of 2005
as amended.
[4]
Nieuwoudt v Joubert 1998 (3) SA (SE).
[5]
Act 61 of 1973.