About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2016
>>
[2016] ZAGPPHC 1076
|
|
Firstrand Bank Ltd v Mahem Verhurings CC (91998/2015) [2016] ZAGPPHC 1076 (15 December 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
15/12/2016
CASE
NO: 91998/2015
Reportable:
No
Of
interest to other judges: Yes
Revised:
Yes
In
the matter between:
FIRSTRAND
BANK
LTD Applicant
and
MAHEM
VERHURINGS
CC Respondent
JUDGMENT
DE
VILLIERS, AJ:
Introduction
1.
This is an application for liquidation of the respondent. The
applicant relied on two grounds in its founding affidavit:
1.1 The respondent is deemed to be
unable to make payment of its debts by virtue of the provisions of
section 69 of the
Close Corporations Act, 69 of 1984
("
the
CC Act
"). It is common cause that the applicant delivered a
notice ("
the statutory demand
") in terms of the
section to the respondent and it has not paid the sum demanded or
secured it or compounded it to the reasonable
satisfaction of the
applicant; and
1.2 The respondent is unable to make
payment of its debts.
Main
facts
2.
The big picture facts are uncomplicated.
3.
The case in the founding affidavit was:
3.1 The respondent is a close
corporation, and Gert Jacobus de Beer is its only member;
3.2 The applicant and the respondent
concluded "a
mortgage redemption agreemenf'
in 2011 and
its terms were set out in a credit facility letter, attached to the
founding affidavit. This document formed part of
the founding papers;
3.3 Amendments to the agreement had to
be in writing and signed by both parties, and no relaxation or
indulgence granted by the
applicant to the respondent would be deemed
to be a waiver of any of the applicant's rights;
3.4 The facility of four million rand,
and interest, had to be repaid by the respondent over one hundred and
twenty months in monthly
instalments, the minimum monthly amount
payable would be R33 514.60;
3.5 A mortgage bond in favour of the
applicant would be registered as security for the facility over
sections 1 to 15, 24 and 26
to 42 in the sectional title scheme known
as
"Mahem"
together with all exclusive use areas;
3.6 The respondent also ceded to the
applicant its rights in and to all rentals and other revenues of
whatsoever nature which may
accrue from the mortgaged property as
security for the due repayment by the respondent of all amounts owing
or claimable;
3.7 The respondent would be in default
of the facility should it fail pay any amount owing to the applicant
when due and the applicant
would be entitled to claim immediate
repayment of the full outstanding balance;
3.8 In the event of such default,
should the default continue for a period of longer than twenty days,
the applicant would draw
such default to the respondent's notice in
writing by pre-paid registered mail affording it seven days to
rectify such default.
3.9 The respondent defaulted-
3.9.1.
The debit order for the monthly payment of the instalment which fell
due on the 7th of December 2014 was returned as unpaid
due to
insufficient funds in its account;
3.9.2.
The debit order for the monthly payment of the instalment which fell
due on the 7th of April 2015 was returned as unpaid
and no amounts
have been paid since;
3.10 The applicant demanded payment of
the instalment in arrear (December 2014) in a letter dated 12
February 2015. The default
has not been rectified;
3.11 As a result, the applicant avers,
it ·is entitled to payment of the full amount due, which on 7
April 2015 stood at
R3 016 204.30. The respondent did not take issue
with any of the averments set out so far, save for the applicant's
conclusion
that it was entitled to payment of the full amount due;
3.12 The applicant thereupon in the
statutory demand dated 9 April 2015 demanded payment of the above sum
within twenty-one days,
alternatively that it be secured. The letter
was served on 13 April 2015, and on 15 April 2015 the respondent's
attorneys reacted
thereto and setting out their client's approach as
follows (without stating its defence):
"...
Ons kliente ontken dat u
klient geregtig is om
op te tree soos wat hy tans optree en
spesifiek nie geregtig is om
die skuld van ans klient op te
roep nie.
Ons hou instruksies
om
op
rekord te plaas dat ans kliente van mening is dat u klient se optrede
mala
fide is en dat ans enige aansoek van u klient moet
opponeer en ook 'n bestraffende kostebevel teen u klient aanvra.
...
"
3.13 The respondent only took issue
further with any of applicant's conclusion that it was entitled make
the statutory demand;
3.14
As stated at the outset, the
applicant relies on the statutory demand as one of its two
liquidation grounds. The other ground of
inability to pay is essence
a conclusion drawn upon the respondent's failure to make payments to
the applicant. The applicant based
its conclusion further on the
wide-ranging financial troubles in entities that conduct farming
operations in which the "de
Beers" have an interest.
[1]
The applicant averred that-
"The De Beers (together with
their father) are, in their own capacities and through trusts, the
beneficial owners of Koedoeskop
River Farms Alpha
CC,
Seringhoek
Boerdery
CC
and various other legal persons. They carry on
farming activities through these entities"
4.
The defendant raised the following defences to the claim:
4.1 The real defence in this matter is
about the effect of an undertaking not to institute
"any form
of legal action"
for a period. From that defence flowed a
denial that the applicant was entitled to make the statutory demand,
and had any right
to call for repayment of the whole indebtedness on
7 April 2015. This case was argued at some length. The respondent
raised the
defence in its answering affidavit as (underlining added):
"The application is
mala
fide
because the Applicant undertook to
refrain from taking any form of legal action against inter alia
the Respondent”;
"
The application
under the abovementioned
case
number is
legal action
that is covered by the undertaking
";
"In the circumstances the
application under the abovementioned
case
number is not
legally competent, constitutes
ma/a
fide conduct on the part
of the Respondent and should be dismissed with
costs
on
a
scale
as
between attorney-and-own client”;
4.2
The defence based on "mala
fides"
was
not persisted with in the heads of argument delivered on behalf of
the respondent and was not dealt with in argument. It had
no
prospects of success, as such a case had not been proven. The
requirements to succeed with such a defence are trite.
[2]
This is clearly not a case where I could be called upon to exercise
my inherent jurisdiction to prevent an abuse of the court processes;
4.3 A further defence was that the
applicant has pleaded and proven insufficient facts for its
conclusion that the respondent is
unable to pay its debts;
5.
Accordingly, the issues on the papers was the effect of the
undertaking, a crisp issue, and a view that insufficient evidence
was
pleaded for a finding that the respondent should be wound up.
6.
The replying affidavit took issue with the contentions by the
respondent, in particular with regard to the undertaking. The
replying affidavit further sets out that the applicant has become
aware of a winding-up application instituted by Beaumont Assist
(Pty)
Ltd against the respondent for payment of loan finance amounting to
R6 365 871,23 together with interest thereon from 8 January
2016. The
alleged interest rate is exorbitant, somewhere on average between 42%
per annum and 54% per annum respectively. Furthermore,
it was alleged
that all the rental of the fixed property belonging to the respondent
was ceded again to its financier (despite
a prior cession) to the
applicant. These agreements were entered into in July 2015, i.e.
after the respondent stopped to make payment
to the applicant.
7.
This new evidence in reply is strong evidence of an entity in dire
financial straits, yet the respondent did not seek to answer
the
averments or have them struck out. At the hearing I enquired if the
respondent would seek an opportunity to answer, or would
seek the
striking out the averments in reply. The respondent's counsel stated
that his client's approach would be that I had to
ignore the
averments as new matters in reply as a matter of law.
8.
Ideal with this aspect immediately. The counsel had stated the
alleged legal position in clause 1.10 of his heads of argument,
relying on
Van Zyl and Others v Government of the Republic of
South Africa and Others
2008 (3) SA 294
SCA at Para 50 and
endnote 17, as follows:
"The content of the replying
affidavit by means of which the Applicant endeavours to make out a
case that should have been
made out in its founding papers, stands to
be ignored. One is taught at mother's knee that the case for the
Applicant needs to
be made out in its founding papers and not in its
replying papers."
9.
The statement is wrong in law
and could even be misleading. The law in this regard is trite.
[3]
The law taught at mother's knee is that the rules about new matter in
reply is not a law of the Medes and Persians. This is not
a matter
where in reply an impermissible summersault was made in the case that
the respondent had answered.
[4]
On the facts of this matter, the new matter was not abandoned, known
matter, that were resurrected in reply, as had happened in
the
Van
Zyl-case. The new matter
about the winding-up application instituted by Beaumont Assist (Pty)
Ltd, is admissible and relevant.
10.
A further replying affidavit was served, dealing with the undertaking
and subsequent events to reflect that the undertaking
has run its
course. I refer thereto later herein. Again this evidence is material
and relevant.
The
legislated basis for a winding-up of a close corporation
11.
I first address the legislated basis for a winding-up of a close
corporation on the two grounds set out in the founding affidavit.
I
have to do this, as the respondent took issue with the powers of this
Court.
12.
It was argued on behalf of the respondent that the matter had to be
approached on the basis that this is an application for
the winding
up of a solvent close corporation and that it had to be done in terms
of section 81 of the Companies Act 71 of 2008
("the New
Companies Act''). This
, it was argued, would leave no room for a
reliance on the statutory demand for a finding that the respondent
was unable to pay
its debts.
13.
The respondent's counsel argued
that that there was an onus on the applicant to plead insolvency
[5]
as was held in HBT Construction and Plant Hire CC v Uniplant Hire CC
2012 (5) SA 197
(FB). It is correct that the court
[6]
held at Para 13:
"No proof of any nature was
tendered by the applicant that the respondent is
insolvent,
which
has
the effect that it must be taken that the respondent
is indeed still solvent. If solvent,
s
68
is no longer
available to the applicant."
14.
Counsel
[7]
did not refer me to two reported decisions where it was found,
correctly so, that the HBT Construction-case was wrongly decided.
The
first case is Standard Bank of South Africa Ltd v R-Bay Logistics CC
2013 (2) SA 295
(KZD) at Para 37, and 41 to 43. The second case is
Scania Finance Southern Africa (Pty) Ltd v Thomi-Gee Road Carriers CC
and Another
Case
2013 (2) SA 439
(FB) at Para 12.
[8]
I agree with the findings in the Standard Bank-case and in the Scania
Finance-case that there is no onus on the applicant to allege
and
prove actual insolvency for a finding to be made by me
in
limine
(or later) on the
legislated regime to be applied.
15.
In addition, the respondent's counsel did refer me to Boschpoort
Onder nemings (Pty) Ltd v ABSA Bank Ltd
2014 (2) SA 518
(SCA)
where the court ruled at Para 21 to 24 that a solvent company has be
both actually and commercially solvent (for the matter
to be dealt
with in terms of section 81 of the New
Companies Act). For
the rest,
the matters are to proceed as they were dealt with under the
Companies Act 61 of 1973 ("the Old Companies Act").
The
relevant discussion started at Para 13. The court held at Para 24 and
25 (footnotes omitted):
"[24] Factual solvency in
itself is accordingly not
a
bar to an application to
wind
up
a
company in terms of the old Act on the ground that it is
commercially insolvent. ft will, however, always be
a
factor
in deciding whether
a
company is unable to pay its debts. See
Johnson v Hirotec (Pty) Ltd. It follows that
a
commercially
solvent company (whether factually solvent
or insolvent)
may
be wound up in terms of the new Act only;
a
solvent
company cannot be wound up in terms of the old Act.
[25] Subject to the consideration
of business rescue proceedings in terms of parts A to D of ch 6 of
the new Act, it is indeed 'business
as usual' when it comes to
a
decision as to whether
a
commercially insolvent company
should be placed in liquidation.
..."
16.
In as far as the Standard Bank-case and the Scania Finance-case did
not bring an end to the respondent's contention, the Boschpoort-case
did. The case made out in the founding affidavit is clearly one of
commercial insolvency. In the light of the Standard Bank-case,
the
Scania Finance case, and the Boschpoort-case, an application
based on commercial insolvency, as is the present case, has
to be
determined in terms of Item 9 of Schedule 5 of the New Companies Act,
as addressed briefly in what follows.
17.
It is not a question of an
in limine
onus, as suggested by the
respondent's counsel. If I were to find that the applicant has failed
to establish commercial insolvency,
I must dismiss the application,
or possibly refer commercial insolvency for the hearing of evidence.
The applicant cannot succeed
with a winding-up of a solvent company
(i.e. both factually and commercially solvent) under the New
Companies Act, as it did not
seek such relief. It therefore does not
matter in this case that neither party has placed any accounting
records or financial statements
before me as evidence for an
in
limine
or later finding that the respondent is solvent (both
actually and commercially).
18.
In the alternative, the
respondent's counsel further contended that it has proven that it has
an asset that exceeds the amount of
the applicant's claim, and that
it is therefore solvent and that therefore the matter should be dealt
with as the liquidation of
a solvent close corporation.
[9]
This has never been the test, even in the case of actual
solvency.
[10]
In any event the submission is wrong in law as the New Companies
Act's provision only applies in cases of both actual and commercial
solvency as determined in the Boschpoort-case. Not only was solvency
not alleged, not only was commercial solvency not alleged,
but the
valuation of the property was by a professional valuer, Hanumankumar
Bridgeraj Dinna with experience in property valuations
and having
been in private practice as such since 1995. The valuation was done
on a forced sale basis, and under oath. The relevant
part of the
valuation affidavit reads (underlining added):
"I have
visually
inspected
the assets of the applicant and
based
on my experience in the valuation of
movables
as
well
as
immovables on
a
regular basis
,
I have valuated the
assets
on the strength of the following:
·
I have thoroughly
inspected
the condition of the assets
.
·
I regularly
attend
and preside over loose asset auctions
and
am
aware
of the prices attained at these auctions
FORCED SALE VALUE: R 12200000
Twelve Million Two Hundred Thousand
Rand."
19.
The cover page to the valuation reflect that the property, a
sectional title scheme, was acquired for a purchase price of R4
Million and that transfer was registered on 23 August 2011.
20.
I have not encountered matters where sectional schemes have been sold
on a forced sale basis, perhaps the valuer has. He does
not say so.
Even if he had, his valuation, with respect, is nothing more than a
guess. He made no effort to value the scheme on
an income stream
basis, on a comparable sale basis, or on any other basis that would
have reflected an attempt to come to a reasoned
valuation.
21.
I therefore find that the bald statement of valuation (not supported
by any fact or reason) is of no value, on the basis of
inter alia
Holtzhauzen v Roodt
1997 (4) SA 766
(W),
Nel v Lubbe
1999 (3) SA 109
(W),
Ex Parte Mattysen
Et Uxor
(First
Rand Bank Ltd Intervening)
2003 (2) SA 308
(T), and
Ex
Parte
Ogunlaja and Others
[2011] JOL 27029
(GNP) or
2010 JDR 0035 (GNP). Attorneys and professional valuers should take
note of these decisions and many others.
22.
The law that I have to apply in this matter, arises against a
background of changes brought about by the
New Companies Act
:
22.1.
Both the grounds relied upon by
the applicant as the basis for the relief that it seeks (impact of
statutory demand and inability
to pay debts) are grounds that still
are contained in
section 69
of the
Close
Corporations Act
;
[11]
22.2.
Section 68(c)
of the
Close
Corporations Act
, to which
section 69
refers, has been repealed by the
New
Companies Act
;
[12]
22.3. The repeal of
section 68(c)
of
the
Close Corporations Act
took
place in circumstances where
sections 66
and
67
of the
Close Corporations Act
were
replaced
by the
New Companies Act
:
22.3.1. Before its replacement,
section 67 had the heading
"Voluntary winding-up".
It
now reads (underlining added):
“
67 Dissolution of
corporations
(1)
Part
G
of Chapter
2
of the Companies Act, read with the changes required by the
context,
applies to
a
solvent
corporation.
(2) This Part of this Act must be
administered in accordance with the Jaws mentioned or contemplated in
item 9 of Schedule 5
of the Companies Act."
22.3.2.
Before its replacement, section 66 had the heading
"Application
of the Companies Act, 1973".
It listed the sections and had
an extensive deeming clause to effect
mutatis mutandis
a
change in the reading of the applicable winding-up sections of the
Old Companies Act
. The new section 66(1) reads (underlining
added):
"The laws mentioned or
contemplated in
item 9 of Schedule 5
of the
Companies Act
, read with the changes required by
the context, apply to the liquidation of a corporation in respect of
any matter not specifically
provided for in this Part or in any other
provision of this Act."
22.4.
Item 9 of Schedule 5 of the New
Companies Act, to which both
sections 66
and
67
of the
Close
Corporations Act refer
after their replacement, essentially maintains
the applicability of the winding up provisions of the Old
Companies Act for
the time being.
[13]
23.
Accordingly, I have to apply Chapter 14 of the Old Companies Act.
Accordingly in terms of that act, adapting the wording in
terms of
sections 66(1)
and (2) of the
Close Corporations Act:
23.1. A close corporation may be wound
up the Court [section 343(1)(a)];
23.2. A close corporation may be so
wound up-
23.2.1. Upon an application by a
creditor (including a contingent or prospective creditor [section
346(1)(b)];
23.2.2. If the close corporation is
deemed to be unable to pay its debts as described in
section 69(1)(a)
of the
Close Corporations Act [section
344(f) read with
section
345(1)(a)]
;
2.5cm;
margin-bottom: 0cm; line-height: 150%">
23.2.3. If it is proved to the
satisfaction of the Court that the close corporation is unable to pay
its debts taking into account
the contingent and prospective
liabilities of the close corporation [section 344(f) read with
section 345(1)(c)
and (2)].
24.
It follows that the respondent's contention that in law it is no
longer open for the applicant to rely on the statutory demand
for
payment, is wrong in law.
25.
Should it fail in its defences
based on the undertaking not to institute
"any
form of legal action"
for
a period, I have a discretion to wind it up based on the statutory
demand. My limited discretion is trite.
[14]
In exercising it, I would only have the views of a substantial
creditor before me, the applicant before me, and the knowledge that
another entity avers that it is a substantial creditor, and that it
also seeks a winding-up, Beaumont Assist (Pty) Ltd. That case
has not
been addressed in papers before me. The respondent's counsel handed
me a file of affidavits in that matter during argument
and invited me
to have regard thereto should I find that the new matter in reply is
admissible. Orderly practice and the
audi
alteram partem
rule
dictated that I had to ignore those papers. I did. I also knew of
non-payment by the respondent to the applicant for a very
long time.
The
Badenhorst-rule
26.
The next matter that took a
substantial amount of time to address, is that the respondent's
counsel contended that the
Badenhorst
-rule
[15]
has an extended meaning to include the dispute arising from its
reliance on an undertaking. It seems that the case is that I am
invited to apply the rule to the applicant's
locus
standi
as creditor.
[16]
27.
The starting point obviously
ought have been the origin of the rule, Badenhorst v Northern
Construction,Enterprises (Pty) Ltd 1956
(2) SA 346 (T).
[17]
The court held at 348 A to C (underlining added):
'"n Gerieflike opsomming
is
die volgende, uit Buckley on Companies, 11de ed., bl. 357:
'A winding-up petition
is
not
a
legitimate means of seeking to enforce payment
of
a
debt which
is
bona fide
disputed
by the company. A petition presented ostensibly
for
a
winding-up order but really to
exercise pressure
will be
dismissed
and under circumstances may be
stigmatised as a
scandalous abuse of the
process
of the
Court. Some years ago petitions founded on
disputed debts
were directed to stand over till the
debt was established
by action. If, however, there
was
no reason to believe that
the debt, if established, would not be paid, the petition was
dismissed.
The modem practice has been to
dismiss
such
petitions. But, of course,
if the debt
is
not
disputed on
some
substantial ground, the Court may decide it
on the petition and make the order.'
Die respondent
betwis die
geldigheid van die beweerde skuld
, en ek
is
van
oordeel dat die juiste benadering
is om
te oorweeg of
respondent die Hof op 'n
.
balans van waarskynlikheid oortuig
het,
nie dat die beweerde skuld nie opeisbaar
is
nie, maar dat dit bona fide en op rede/ike gronde betwis
word
.
As
hy dit doen ten opsigte van
so
'n gedeelte van die beweerde skuld dat die onbetwiste gedeelte
daarvan
(as
daar
is)
minder
as £50
word,
dan moet die aansoek afgewys word."
28.
In that case, the applicant had to prove that it was a creditor with
debt of the minimum prescribed amount. If that debt was
disputed on
bona fide and reasonable grounds, it lackedlocus
standi
as a
creditor, so the court found. Accordingly, from the outset the
Badenhorst-rule was not aimed at a dispute about whether or
not the
debt was claimable/payable (in the words of the judgment
"opeisbaar"),
but if it existed (in the words of the
judgment
"betwis
word'). Any argument about extending the
interpretation of the rule to include disputes about whether or not a
debt is payable as
well, certainly had to start at this point. The
case is squarely against the respondent's submissions.
29.
The
Badenhorst
-rule was dealt with in
Kalil v Decotex (Pty)
Ltd and Another
1988 (1) SA 943
(A), which in itself is trite
law. That case did not resolve if the
Badenhorst
-rule should
be applied as a
locus standi
rule or not, but it shed light on
the flexibility of the rule.
30.
The
Kalil
-case
dealt with a matter where the applicant's locus standi was sought on
two grounds, membership for the just and equitable ground,
and as a
creditor. Factual disputes existed. The court a
quo
found that the applicant
had not established
prima
facie
that he had locus
standi, either on the basis of a shareholder, or as a creditor, and
dismissed the application. On appeal the court
held with regard to
the membership
locus standi
ground that there was not a
preponderance of probabilities either way on the affidavits and asked
the following question:
[18]
"The question then arises: how
should the Court deal with an opposed application for a provisional
winding-up order where the
affidavits reveal fundamental and crucial
disputes of fact and there is no preponderance of probability, either
way, on the papers?''
31.
It is this context that the court held at 9808 to 981C (underlining
added):
"As in the present case, the
disputes which arise on the affidavits may relate to the locus standi
of the applicant, either
as a member or creditor, or as to whether
proper grounds for winding-up have been established.
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 balance 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. Though not always formulated in
exactly the same terms this rule appears from
decisions such as
Badenhorst v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA
346
(TJ at 347H - 3488; ... (the court referred to several judgments)
... . For convenience I shall refer to this as the Badenhorst
rule.
This rule would tend to cut across the general approach to
applications for a provisional order of winding-up which I have
outlined above as it is conceivable that the situation might arise
that the applicant
could show a balance of probabilities in
his favour on the affidavits,
while at the same time the
respondent established that
its indebtedness to the
applicant
was disputed on bona fide and reasonable
grounds. Whether the Badenhorst rule should be accepted then as an
exception to the general
approach
relating specifically to
the locus standi of an applicant as a creditor
. and the
further question as to whether it should be applied inflexibly or
only when it appears that the applicant is in effect
abusing the
winding-up procedure by using it as a means of putting pressure on
the company to pay a debt which is bona fide disputed
(see the
English case of Mann and Another v Goldstein and Another
[1968] 2 All
ER 769
at 775C - D) need not, however, be decided in this case. The
point was not argued before us and, as I shall show, it seems to me
that for various reasons the Badenhorst rule should not be applied
here.
I return now to the
facts
of
the present
case. As
I have shown,
the issue
as
to whether the appellant had locus standi, either
as
shareholder or
as
creditor
,
to bring the application,
as a/so
the merits of the
application,
are vitally dependent upon how certain factual
disputes, principally
as
to whether or not the
Easter agreement
was
concluded. are resolved
.
The probabilities in regard to the Easter agreement are, in my view,
evenly balanced. No prima facie
case
(in the above-described
sense)
on these
issues was
thus established; and
consequently the Court
a
quo could not grant
a
provisional
order of winding up. Before
us
it
was
argued on
appellant's behalf that the Court
a
quo ought to have referred
the matter for the hearing of viva voce evidence and appellant's
counsel submitted to
us
a draft order to this effect.."
32.
The court then came to the
following conclusion (underlining added):
[19]
"For these reasons, I am of
the opinion that this Court, exercising the discretion which was
vested in the Court a quo, should
allow the application to refer the
matter for the hearing of viva voce evidence on the disputed issues.
The one further point which arises in this connection is
whether such referral should include the issue as to appellant's
locus
standi as a creditor or whether, applying the Badenhorst rule,
this should be
excluded. In my opinion, it should be
included. Even though it might be said that Decotex's indebtedness to
the appellant is disputed
on bona fide and reasonable grounds,
there
are several reasons why in this case the Badenhorst rule should not
be applied
. It is not disputed that Decotex was originally
indebted to the appellant by way of his loan account. The dispute is
whether this
indebtedness has been eliminated by cession in terms of
the Easter agreement.
This is hardly a case of a creditor
seeking to enforce a disputed debt by winding-up proceedings and
thereby abusing the Court process
. Moreover, since the
matter is being referred to oral evidence on the issues of
appellant's locus standi as a member and the merits
of the
application, which are also dependent on the existence or
non-existence of the Easter agreement, it seems to me that it
would
be the height of technicality to deny appellant the opportunity of
establishing by the same evidence his locus standi as
a creditor."
33.
I refer to herein to this approach as a flexible approach.
34.
The
Badenhorst
-rule
has been quoted with direct approval in numerous judgments. No
argument has been presented that I should find that the
Badenhorst
-decision
was wrongly decided or overturned. As a single judge sitting in the
same jurisdiction I need to do so in order not to
follow it.
[20]
However, the
Badenhorst
-rule
has never been inflexibly applied. Our courts have always had to deal
with the overlap between the
Badenhorst
rule and
Plascon Evans
[21]
approach to the resolution of factual disputes in motion proceedings
where final relief is claimed.
35.
Against this background to the application of the
Badenhorst
-rule
the respondent relied only two cases for its contention that the
Badenhorst
rule as opposed the
Plascon Evans
approach
should be applied to the dispute that it raised with regard to
undertaking not to institute
"any form of legal action"
for a period. The first one,
Herman and Another v Set-Mak
Civils CC
2013 (1) SA 386
(FB), at Para 17 merely quoted the rule
as set out in the second case. The second case is
Desert Star
Trading 145 (Pty) Ltd and Another v No 11 Flamboyant Edleen CC and
Another
2011 (2) SA 266
(SCA).
36.
It was argued by the respondent's counsel that the Desert Star-case
is authority for an expansion of the interpretation of the
so-called
Badenhorst rule in that it not be limited to a dispute about the
indebtedness, but also as is this case, a defence
based on an
undertaking not to institute
"any form
of
legal
action"
for a period (i.e. not a payable debt). The Desert
Star-case is distinguishable as it in fact dealt with the existence
of the debt
in issue. The debt was disputed on the basis that it was
based on an invalid agreement. The case did not expressly deal with
the
extension of the Badenhorst-rule. Para 16 (footnotes omitted and
underlining added) in essence reflected an intention to apply the
Badenhorst-rule as it has always been applied.
37.
This ought to have ended the matter. But, I came across a judgment in
point, Firstrand Bank Limited v Nomic 153 (Pty) Limited
(A165/2013)
[2014) ZAWCHC 20 (20 February 2014), a judgment by Cloete J, Yekiso J
and Zondi J concurring. In that case the court
held in Para 28, with
no reference to authority (underlining added):
"..."Indebtedness' for
purposes of the Badenhorst rule comprises two elements namely: (a) an
admitted liability; and (b)
that the debt is due and payable
.
In the present matter the respondent disputes that the debt (although
its existence is admitted) is due and payable, which brings
the
dispute within the application of the rule".
38.
For the reasons reflected earlier, this is conflict with the wording
of the
Badenhorst
-judgment itself and does not refer to any of
the numerous cases that followed the
Badenhorst
-judgment and
the Kalil-judgment. Notwithstanding, the case is quoted with approval
by the authors of
Henochsberg on the
Companies Act 71 of 2008
,
Vol.
2 Page APPl-46
[issue 11].
39.
I believe on the reasons stated
earlier, that the statement that the question if the debt is due
and
payable
forms part the
Badenhorst
rule, is wrong in law, with respect. I am not bound by the
decision
[22]
and it to the best of my knowledge has not been followed. In
addition, I need not deal with this case in that the finding does
not
matter as the flexible approach followed in the
Kalil
-case
and followed in the South Gauteng court
[23]
would in the end lead to the same result. As a result, I also do not
address the decisions in the Western Cape
[24]
it was questioned if the
Badenhorst
-rule
goes to standing or should also apply where for example a
counter-claim is in issue,
[25]
as had been raised in the
Kalil
-case.
40.
The test that I will apply is
the usual, limited
Badenhorst
-rule.
The summary in
Orestisolve
(Pty) Ltd t/a Essa Investments v NDFT Investment Holdings (Pty) Ltd
and Another
2015 (4) SA 449
(WCC)
[26]
at Para 9 to 12 is concise (underlining added):
[9] The test
for a final
order of liquidation is different
.
The applicant
must establish its case on a balance of probabilities
.
Where the facts are disputed, the court is not permitted to determine
the balance of probabilities on the affidavits but must
instead apply
the
Plascon-Evans
rule (
Paarwater v
South Sahara Investments (Ply) Ltd
(2005) 4 All SA 185
(SCA) para 4;
Golden Mile Financial Solutions CC v Amagen
Development (Ply) Ltd
{2010) ZAWCHC 339 paras 8 - 10;
Budge and Others NNO v Midnight Storm Investments 256 (Pty)
Ltd and Another
2012 (2) SA 28
(GSJ) para 14).
[10]
The difference in
approach to factual disputes at the provisional and final stages
appears to me to have implications for the Badenhorst rule.
If
there are genuine disputes of fact regarding the existence of the
applicant's claim at the final stage. the applicant will fail
on
ordinary principles unless it can persuade the court to refer the
matter to oral evidence.
The court cannot, at the final
stage, cast an onus on the respondent of proving that the debt is
bona fide disputed on reasonable
grounds merely because the balance
of probabilities on the affidavits favours the applicant. At the
final stage, therefore, the
Badenhorst rule is likely to find its
main field of operation where the applicant, faced with a genuine
dispute of fact, seeks
a referral to oral evidence.
The
court might refuse the referral on the basis that the debt is bona
fide disputed on reasonable grounds
and should thus not be
determined in liquidation proceedings. (In the present case neither
side requested a referral to oral evidence.)
[11] If, on the other hand, and
with due regard to the application of the
Plascon-Evans
rule,
the court is satisfied at the final stage that there
is no genuine factual dispute regarding the existence of the
applicant's claim,
there seems to be limited scope for finding that
the debt is nevertheless bona fide disputed on reasonable grounds
.
It is thus unsurprising to find that the reported judgments where the
Badenhorst
rule has been relevant to the outcome
have been cases of applications for provisional liquidation
rather than final liquidation
.
[12] Even where the facts are
undisputed, there may be a genuine and reasonable argument whether in
law those facts give rise to
a claim. I have not found any case in
which the
Badenhorst
rule has been applied,
either at the provisional or final stage, to
purely legal
disputes
. If the
Badenhorst
rule's
foundation is abuse of process, it might be said that itis as much an
abuse to resort to liquidation where there is a genuine
legal dispute
as where there is a genuine factual dispute. But if the
Badenhorst
rule extends to
purely legal disputes
,
I venture to suggest that the rule, which is not inflexible, would
not generally be an obstacle to liquidation if the court felt
no real
difficulty in deciding the legal point. I have not conducted an
exhaustive anaysis of the English authorities but the position
stated
by the Court of Appeal in
Commissioners for Her Majesty's
Revenue and Customs v Rochdale Drinks Distributors Ltd
[2011] EWCA Civ 1116
paras 79 - 80 indicates that the equivalent rule
in England finds application where the dispute is shown to be one
'whose resolution
will require the sort of investigation that is
normally within the province of a conventional trial'. A purely legal
question would
not have that character."
An
undertaking not to take legal action for a period
41.
The material facts pleaded about the undertaking are set out next:
41.1. Gert Jacobus de Beer, the
deponent to the answering affidavit, avers that he, Lambertus
Nicolaas de Beer, Koedoeskop River
Farms Alpha CC, Seringhoek
Boerdery CC, and Sandstone Projects Trust, form part of the
"De
Beer group of entities".
He makes the statement that
although he is the sole member of the respondent,
"(t)he
other entities within the De Beer group of entities however also have
a
direct or indirect interest in the Respondent” .
He
did not explain how such interests could exist in law, or why a
person should be seen as an entity. His version looks contrived
on
the application of normal legal interpretation;
41.2. The trustees of the Sandstone
Projects Trust brought an urgent application to place Koedoeskop
River Farms Alpha CC in business
rescue. The applicant sought leave
to intervene to wind up Koedoeskop River Farms Alpha CC;
41.3. The legal representatives of the
parties in those applications (only some of whom were identified)
reached an agreement
"which resulted in
a
draft order'
on 5 March 2015 postponing the business rescue proceedings and
placing Koedoeskop River Farms Alpha CC under provisional liquidation
with a return date of 5 May 2015.
42.
In issue is not the draft order, but the agreement that led thereto.
The respondent's version is that
"(w)hen the aforementioned
settlement agreement was negotiated and reached, the parties were
represented by not only their
attorneys but also by senior counsel on
each side".
The settlement agreement was reduced to writing
by two senior counsel, but I do not know who the decision-makers
were.
43.
The relevant portion of the agreement reads as follows (emphasis
added):
"That pending the
finalisation of the application for business rescue and the counter
application for liquidation under case
number 1350612015:
1.1.
That Firstrand Bank
Ltd
('the bank'), the intervening creditor under case
number 1350612015 and Wesbank Ltd (“Wesbank”),
shall
refrain from taking any form of legal action to collect outstanding
debt against
Messrs Lambertus Nicolaas De Beer (Snr),
Gert
Jacobus De Beer
and Lambertus Nicolaas De Beer (Jnr), in
their personal capacities
as
sureties and
co
principal debtors or otherwise,
or any of the entities
in which they are involved, directly or indirectly including
,
but not limited to, Tambotie Boerdery Trust and Sering Boerdery
CC
or any of the sureties liable to the Bank for outstanding debt."
44.
Despite a dispute in the papers about the ambit of the agreement, it
was conceded in argument that the agreement was wide enough
to cover
the respondent. The operative part of the agreement therefore reads:
"...
pending the
finalisation of the application for business rescue and the counter
application for liquidation under case number 1350612015
...
Firstrand Bank Ltd ...shall refrain from taking any form of legal
action to collect outstanding debt against ...(Mahem Verhurings
CC)
."
45.
This agreement was never signed and remains an oral agreement.
46.
I have been given almost no contextual material to assist me in the
interpretation of the agreement. The present law is summarised
in
Novartis SA (Pty) Ltd v Maphil Trading (Pty) Ltd
2016 (1) SA 518
(SCA) at Para 24 to 31. I have been asked to determine what the
parties meant to achieve without the tools to do so, as if there
had
been no development in our law on this front. The case referred to
pointedly summarises my role in Para 28:
"...
A court must examine all
the facts
-
the context
-
in order to determine what the
parties intended. And it must do that whether or not the words of the
contract are ambiguous or lack
clarity. Words without context mean
nothing."
47.
I must come to a commercially sensible meaning. See
Ekurhuleni
Metropolitan Municipality v Germiston Municipal Retirement Fund
2010 (2) SA 498
(SCA) at para·13 (footnotes omitted):
"The principle that a
provision in a contract must be interpreted not only in the context
of the contract as a whole, but also
to give it a commercially
sensible meaning, is now clear. It is the principle upon which
Bekker
NO
was decided, and, more recently,
Masstores
(Pty) Ltd v Murray & Roberts Construction (Pty) Ltd and Another
was based on the same logic. The principle requires a court to
construe a contract in context - within the factual matrix in which
the parties operated. In this regard see
KPMG Chartered
Accountants (SA) v Securefin Ltd and Another
.'
48.
There is a factual dispute about the purpose of the undertaking. The
respondent stated it as:
"...
The purpose of the
agreement reached was thus to enable the persons and entities within
the "De Beer group of entities' to
keep on trading in an
attempt to settle the obligations of the different entities".
49.
To this must surely be added in the light of the wording of the
agreement:
"pending the finalisation of
the business rescue application and the liquidation application of
Koedoeskop River Farms Alpha
CC".
50.
Leaving aside the respondent's version on the purpose of the
undertaking as a result of the application of the
Plascon Evans
rule, the respondent averred in reply:
"Furthermore it was certainly
an implied term that the Respondent would continue to meet its
liabilities in terms of the agreement
and not that the De Beers would
be entitled to take the proceeds of the rental of such property (it
being
a
rental earning concern) and use it for their own
purposes. The rental has been ceded to the Applicant. The
Respondent's failure
to make any payments constitutes a repudiation
of any agreement which may have existed (which is denied)";
"Furthermore the Respondent
alleges a variation of the agreement requiring it to make payment and
this is in direct contravention
of, inter alia, clause 15.1 of the
General Terms and Conditions of the FNB Structured and Facility
Mortgage Redemption appearing
at page
38
of the paginated
papers as well as clause 15.
9
thereof' .
51.
The respondent elected not to respond to these two averments.
52.
The applicant's counsel, in heads delivered on the morning of the
hearing, argued that
"any form of legal action to collect
outstanding debt
is a reference to either action or application
proceedings for payment of the debt. The respondent's counsel averred
that it meant
any action taken in terms of the law that could result
in payment and that it therefore includes the statutory demand and
liquidation
proceedings.
53.
I am satisfied that on a textual interpretation of the agreement the
applicant is correct. The only fact, that senior counsel
and
attorneys agreed on the terminology of
"any form of legal
action to collect outstanding debf'
would point to a finding that
they intended to use its standard meaning, that of a prohibition
against action or motion proceedings
to collect outstanding debt,
which excludes liquidation proceedings. The normal use of the words
"legal action"
would not include a demand, and it
was common cause that liquidation proceedings are not proceedings to
collect debt.
54.
Accordingly, I do not have to deal with the defences raised in
argument of repudiation, of the
exceptio non adimpleti contractus,
of non-compliance of the undertaking by the plaintiff, or of
repudiation of the undertaking.
55.
Consequently, I make the following order: That the respondent be
placed under winding-up.
_________________
DP
de Villiers
Acting
Judge of the High Court
Gauteng
Division
Heard
on:
22 and 23 November 2016
On
behalf of the Applicant:
L Meintjes
Instructed
by:
Rorich, Wolmarans & Luderitz Inc
On
behalf of the Respondent:
GF Heyns
Instructed
by:
Hartzenberg Inc
Judgment
handed down:
15 December 2016
[1]
The "de Beers" so referred to are Gert Jacobus de Beer and
Lambertus Nicolaas de Beer who are sureties for the debt
in issue
herein. Lambertus Nicolaas de Beer also represented the respondent
in concluding the agreement in issue with the applicant,
despite
Gert Jacobus de Beer being its only member. Another surety for the
respondent's debt herein is Koedoeskop River Farms
Alpha CC;
[2]
See Wackrill v Sandton International Removals (Pty) Ltd and Others
1984 (1) SA 282
(W) at 293B to F;
[3]
See Erasmus, Superior Court Practice, Volume 2 Page 01-66.
[4]
See Triomf Kunsmis (Edms) Bpk v AE & Cl Bpk en Andere
1984 (2)
SA 261
(W) at 270F-G and Johannesburg City Council v Bruma
Thirty-Two (Pty) Ltd
1984 (4) SA 87
(T) at 91F-92E;
[5]
Heads of argument Para 3.16 and 3.19;
[6]
Zietsman AJ;
[7]
See a summary in The Law of South Africa, Vol. 14
Part 2
Second
Edition, Legal Practitioners by K van Dijkhorst and J Church at Para
132;
[8]
"I respectfully disagree with the ratio decidendi, insofar as
it relates to the issue at hand, in both the wellreasoned
judgments of HST and Set-Mak Civils. The misconception of requiring
a creditor to prove insolvency before being able to rely
on ch 14 of
the previous Act is apparent merely from the provisions of s 345,
read with s 344 of the 1973 Act, which clearly
does not provide for
factual insolvency, merely a deemed inability to pay debts (and also
if it is proved to the satisfaction
of the court that the company is
unable to pay its debts). The section has always brought about o
peculiar consequence, namely
that the debtor was deemed to be unable
to pay its debts, although it may well be able to pay other debts.
One of the grounds
available to such debtor to oppose the
application for winding-up on this basis was to prove solvency. Then
the court still retained
its discretion";
[9]
Respondent's heads of argument, Para 3.23;
[10]
See the Boschpoort-case at Para 16;
[11]
(Underlining added): "69 Circumstances under which corporation
deemed unable to pay debts
(1) For the purposes of section 68
(c) a corporation shall be deemed to be unable to pay its debts. if-
(a) a creditor, by cession or
otherwise, to whom the corporation is indebted in a sum of not less
than two hundred rand then due
has served on the corporation. by
delivering it at its registered office. a demand
requiring the corporation to pay
the sum so due. and the
corporation has for 21 days thereafter neglected to pay the sum or
to secure or compound for it
to the reasonable satisfaction of the
creditor: or
(b) ....;or
(c) it is proved to the satis faction
of the Court that the corporation is unable to pa y its debts.
(2) In determining for the purposes
of subsection (1) whether a corporation is unable to pay its debts,
the Court shall also take
into account the contingent and
prospective liabilities of the corporation";
[12]
Before its repeal,
section 68(c)
of the
Close Corporations Act under
the heading "Liquidation by Court" read:
"A
corporation may be wound up by a Court if the corporation is unable
to pay its debts";
[13]
"9 Continued application of previous Act to winding-up and
liquidation
(1) Despite the repeal of the
previous Act, until the date determined in terms of sub-item (4),
Chapter 14 of that Act continues
to apply with respect to the
winding-up and liquidation of companies under this Act, as if that
Act had not been repealed subject
to sub-items (2) and (3).
(2) Despite sub-item (It sections
343. 344. 346, and 348 to 353 do not apply to the winding-up of a
solvent company. except to
the extent necessary to give full effect
to the provisions of Part G of Chapter 2.
(3) If there is a conflict between a
provision of the previous Act that continues to apply in terms of
sub-item (1), and a provision
of Part G of Chapter 2 of this Act
with respect to a solvent company. the provision of this Act
prevails.
(4) The Minister, by notice in the
Gazette, may-
(a) determine a date on which this
item ceases to have effect, but no such notice may be given until
the Minister is satisfied
that alternative legislation has been
brought into force adequately providing for the winding-up and
liquidation of insolvent
companies; and
(b) prescribe ancillary rules as may
be necessary to provide for the efficient transition from the
provisions of the repealed
Act; to the provisions of the alternative
legislation contemplated in paragraph (a)”;
[14]
SAA Distributors {Pty} ltd v Sport en Spel (Edms) Bpk
1973 (3) SA
371
(C} at 373B to 374E;
[15]
The full reference is given later herein, in essence winding-up
proceedings ought not to used to enforce payment of a debt, the
existence of which is bona fide disputed by the company on
reasonable grounds, In such case the application will be dismissed;
[16]
Respondent's heads of argument, Para 5,15 and 5,16;
[17]
Hiemstra AJ;
[18]
At 975J;
[19]
At 982E to G;
[20]
Hahlo and Kahn,The South African legal System and its Background,
1968, Page 251
; Scania South Africa (Pty) Ltd v Smit
2003 (1) SA 457
(T) at 471B to F;
[21]
Plascon-Evans Paints Ltd v Van Riebeeck Paints {Pty) td
[1984] ZASCA 51
;
1984
(3) SA 623
(A); See too Wightman t/a JW Construction v Headfour
(Pty) Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) at Para 12 and 13;
[22]
Hahlo and Kahn,The South African egal System and its
Background,[supra] Page 255; Scania South Africa (Pty) Ltd v Smit
[supra]
at 4718 to F;
[23]
Total Auctioneering Services and Sales CC t/a Consolidated
Auctioneers v Norfolk Freightways CC (AS024/2012) [2012] ZAGPJHC 211
(30 October 2012) at Para 11to 15 and
[24]
See the discussion in Gap Merchant Recycling CC v Goal Reach Trading
55 CC (2480/2014)
[2014] ZAWCHC 53
;
2016 (1) SA 261
(WCC) (15 April
2014) at Para 20 to 33
[25]
I may add that Commentary on the
Companies Act, by
Blackman, Jooste
and Everingham, Volume
3, Page 14-93
and further deals with the
treatment of counter-claims as a special case, and not as part of
the Badenhorst-rule;
[26]
Rogers J;