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[2015] ZAGPPHC 944
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Drillcon (Pty) Ltd v Soden (88615/2014) [2015] ZAGPPHC 944 (7 July 2015)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
DATE:
7/8/15
CASE
NO:
88615/2014
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
DRILLCON
(PTY)
LTD
Plaintiff
and
GRAHAM
KEVIN
SODEN
Defendant
DATE
OF
HEARING
27 JULY 2015
DATE
OF
DECISION
07 AUGUST 2015
J
U D G M E N T
MANAMELA
AJ:
[1]
This matter came before me by way of a summary judgment application
on Monday, 27 July 2015. The application was opposed and
at the end
of very lively oral submissions by counsel, I reserved judgment.
There is an intriguing issue embedded in the arguments.
But, I
undertook to return quickly with this judgment in order to avoid
hamstringing the litigation through delay in delivery of
my ruling on
the application.
[2]
Although the plaintiff is naturally the applicant and the defendant
the respondent in this application, I will conveniently
retain the
references in the action proceedings.
[3]
The plaintiff s claim against the defendant is based on a judgment
granted by default by this court on 19 December 2011 for
payment of
amounts of R364 780.80; R1 268 776.40 and interest at 15.5% per annum
on the aforesaid amounts and various other amounts,
plus costs (the
default judgment).
1
However, the defendant only pursues claims based on the aforesaid
capital amounts in this matter.
[4]
The default judgment was not granted against the defendant, but an
entity called Olympic Park Trading 61 (Pty) Ltd (Olympic
Park) in a
separate litigation between the plaintiff and Olympic Park. It is not
necessary to go into the details of the default
judgment litigation,
save to point out that, the defendant in this matter was not even
cited as a party therein.
[5]
Olympic Park did not timeously defend the proceedings in the default
judgment litigation and default judgment had already been
granted
against it by the time it filed its notice of intention to
defend.
2
Its
attorneys were advised in correspondence after they filed the notice
that judgment had already been granted against their
client.
3
Nothing appears to have become of this correspondence.
[6]
However, attempts by the sheriff in March 2012 to execute a writ at
the registered office address of Olympic Park were unsuccessful.
The
sheriff's return on the last of these attempts on15 March 2012 is one
of
nulla
bona.
It is stated therein that there
is a new occupant of the premises at the address.
4
[7]
It is common cause that Olympic Park filed or applied for voluntary
liquidation after the default judgment.
5
It was placed under voluntary liquidation on 07 March 2013
6
.
The voluntary liquidation is the origin of the current dispute in
this matter. The defendant submits that Olympic Park was effectively
managed and controlled by the defendant as its sole director or
managing director. Therefore, by voluntarily placing Olympic Park
in
liquidation with knowledge of existence of the judgment in favour of
the plaintiff or when such knowledge should have been acquired,
the
defendant abandoned the business of Olympic Park. This, it is further
submitted, constitutes reckless or gross negligence or
both, on the
part of the defendant, and was done with an intention to defraud the
plaintiff as a creditor of Olympic Park.
7
Therefore, the plaintiff is entitled to an order as contemplated in
section 424(1) of the Companies Act 61 of 1973 (the 1973 Companies
Act),
8
read
with sections 22, 77, 214 and 218 of the Companies Act 71 of 2008
(the 2008 Companies Act)
9
and
judgment summarily on the amounts claimed in the summons. Mr. P.J.
Niemann, on behalf of the plaintiff, was to later
submit in reply
that references to the provisions in the 2008 Companies Act would
only become relevant later in the proceedings,
should they proceed,
and were not relied upon for purposes of the summary judgment
application.
[8]
So, the instrumental provision for the summary judgment application
is section 424(1) of the 1973 Companies Act. It reads as
follows:
"(
1) When it appears, whether it be in a winding-up, judicial
management or otherwise, that any business of the company was
or is
being carried on recklessly or with intent to defraud creditors of
the company or creditors of any other person or for any
fraudulent
purpose,
the Court may,
on
the application
of
the Master,
the
liquidator, the judicial
manager,
any creditor
or
member or contributory of the
company,
declare that any person
who was knowingly
a party
to the carrying on of the business
in the manner
aforesaid,
shall be personally
responsible,
without
any limitation of liability, for all or
any of the debts or other liabilities of
the
company
as the Court may d
irect."
[underlining
added for emphasis]
[9]
The defendant defends the action and opposes the summary judgment. It
is submitted on his behalf that, the plaintiff's claim
against the
defendant is not a liquidated amount in money as contemplated by Rule
32 of the Uniform Rules of this court. Rule 32(1),
which is material
part of the aforesaid rule, reads as follows:
"(
1) Where the defendant has delivered notice of intention to defend,
the plaintiff may apply to court for summary judgment
on each of such
claims in the summons as is only -
(a)
on a liquid document;
(b)
for a liquidated amount in money;
(c)
for delivery of specified movable property;
(d)
for ejectment; together with any claim for interest and costs. "
[10]
The defendant raises other issues in his defence like lack of
knowledge in respect of the default judgment, due to the fact
that
the general manager of Olympic Park, who has since passed on, was the
one involved in this matter on behalf of Olympic Park.
It appears
that the late manager would have been the one who instructed
the attorneys who filed the notice of intention to
defend the
proceedings brought against Olympic Park [albeit belatedly so] which
led to the default judgment. The defendant states
that upon becoming
aware of the judgment he consulted with attorneys who advised him on
the default judgment. Be that as it may,
in my view, what is relevant
for current purposes is the defence that the claim is not based on a
liquidated amount in
money and therefore incapable
of sustaining a summary judgment application.
10
[11]
Mr Niemann submitted in both his heads of argument
11
and orally when he appeared before this court that, the claimed
amount is liquidated by virtue of the default judgment granted
against Olympic Park. However, upon a question from the court that
such judgment may not necessarily
apply to the defendant before a
declaration is made by the court that he is liable in terms
of
section 424, Mr. Niemann submitted that the declaration is
permissible even at summary judgment stage. He had submitted
in
his heads of argument that the plaintiff's claim "is not for a
declaratory order but for payment".
12
Mr. De Villiers appearing for the defendant submitted to the
contrary.
[12]
As already alluded to above, the crisp question to be answered here
is whether or not a claim based on section 424 of the 1973
Companies
Act is capable of summary judgment. In
Henochsberg
on
Companies
Act
61
of
1973
13
it is authoritatively stated that the "ambit of this
section is wide and, having regard to its object, namely to render
liable persons who, in effect, have
managed, or are managing, the business of a
company
recklessly or fraudulently, its language should
be given its full breadth".
14
It is further stated in
Henochsberg
that
"the declaration may be made in relation
to any debt or other liability
..."
15
Recently in the yet unreported decision of this
court per Bertelsmann J in the matter of
Engelbrecht
NO
and
Others
v
Zuma
and
Others,
Case Number: 25965/2012
delivered on 25 June 2015, this is stated:
"This
is not the end of the applicants' obligation to establish the
quantum
that they may actually be entitled to. It must
be born [sic] in mind that they have, for purposes of the present
proceedings sought
no more than a declaratory
order that the respondents are liable to them for
such damages that
may be proven at a later stage."
[13]
Therefore, in my view a declaration by the court is necessary for any
liability to ensue in terms of section 424 and it actually
precedes
any damages claim that may be pursued against the person declared
liable. Section 424 does not automatically ascribe
liability to
a "person who was knowingly a party to the
carrying on of the business"
"recklessly
or with intent to defraud creditors of the company". The
aggrieved or interested person, be it the Master,
liquidator or
creditor, would first have to request the court to declare the
particular person liable on grounds that he was knowingly
a party to
defraud creditors or had carried the business of a company in a
reckless manner. Obviously the court seized with the
matter would
have to conduct a factual inquiry into the factual allegations made
and the particular circumstances of the matter.
Depending on the
probative value of the material on hand, the requested declaration
may be made or refused. Assuming a favourable
finding is made for the
applicant's relief in terms of section 424, the declaration of
liability would be for an unlimited amount,
but may be "for all
or any of the debts or other liabilities of the company as the court
may direct". Therefore, with
no declaration of liability already
made against the defendant, this court does not have the competence
to grant summary judgment.
It also cannot grant any other order,
including a declaration in terms of section 424(1) of the 1973
Companies Act but only what
is provided by Rule 32(1) of the Uniform
Rules. Without a declaration the judgment against Olympic Park is not
attributable to
the defendant and therefore the current claims
against the defendant are not liquidated.
[14]
A declaration may or may not be made when the plaintiff's claims in
this matter are considered by the court in due course,
but at this
stage of the proceedings such declaration is impossible, no matter
whether there is a default judgment obtained against
the defendant's
liquidated company. This ought to have been foreseeable by the
plaintiff and summary judgment was clearly not available,
as an
option, for the plaintiff. Therefore, the application ought to fail
and the defendant is entitled to recover the costs of
the
application.
[15]
I therefore make an order as follows:
(a)
The summary judgment application is dismissed with costs on a party
and party scale;
(b)
The defendant/respondent is granted leave to defend the action.
_________________________
K.
LA. M. MANAMELA
ACTING
JUDGE OF THE HIGH COURT
1
See annexure "B" to the summons. The default judgment
appears to have included interest claims for late payment of
invoices, other than the two capital claims in amounts of R364
780.80 and Rl 268 776.40. A copy of the summons in respect of
the
default judgment is included as annexure "Al" to the
particulars of claim in this matter.
2
See para 6 of the particulars of claim on p 6; annexure "C"
to the summons on pp 155-156.
3
See annexures "D" and "E" of the particulars of
claim on pp 157 - 158.
4
See annexures "F" and "G" of the particulars of
claim on pp 162 - 165.
5
See para 11of the particulars of claim on p 7; para 15 of
defendant's affidavit in opposition to the summary judgment
application
(the opposing affidavit) on p 189.
6
See
annexure
"G"
to
the
opposing
affidavit
on
p
209.
Annexure
"G" is
letter
from
the
Companies
and Intellectual
Property
Commission
(the
CIPC)
dated
07
March
2013
to the
Master
of
the
High
Court
reporting
the voluntary
liquidation
status of Olympic Park.
7
See paras 11to 13 of the particulars of claim on pp 7 to 8.
8
Item 9 of schedule 5 of the Companies Act 71 of 2008 states that
Chapter 14 of the 1973 Companies Act will continue to apply
to
winding up or liquidation of companies, which are essentially
insolvent companies until determined otherwise by the legislature.
9
The Companies Act 71 of 2008 was assented to on 08 April 2009, but
its date of commencement was on 01 May 2011, except for a
few of its
provisions.
10
See para
1
3
of the opposing affidavit
on p
1
89.
11
See para 18 on p 6 of the plaintiff's heads of argument.
12
See para 21 on p 7 of the plaintiff's heads of argument.
13
See Kunst JA, Delport P and Vorster Q (editors)
Henochsberg on
the
Companies
Act
61
of
1973
(Lexisnexis online version June
2011
( Henochsberg ).
14
See
Henochsberg
on pp 912 to 913 and the authorities quoted
there.
15
See
Henochsberg
on 918(1).