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[2014] ZAGPPHC 300
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Coastal Joy Investments CC and Others v Icarys Air Services CC (62678/12) [2014] ZAGPPHC 300 (30 April 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NUMBER: 62678/12
In
the matter between:
COASTAL
JOY INVESTMENTS CC (IN
LIQUIDATION)
..........................................................
1
st
APPLICANT
ECHO
CANYON TRADING 3 CC (IN
LIQUIDATION)
.............................................................
2
nd
APPLICANT
ENVIROCAP
TRADING CC (IN
LIQUIDATION)
......................................................................
3
rd
APPLICANT
TWO
SHIPS TRADING 412 CC (IN
LIQUIDATION)
................................................................
4
th
APPLICANT
and
ICARYS
AIR SERVICES
CC
...................................................................................................
RESPONDENT
JUDGMENT
TLHAPl
J
[1]
The Applicants in Liquidation and represented herein by their duly
appointed liquidators apply for the final winding up of the
Respondent on grounds that it is unable to pay its debts and that it
would be just and equitable for such order to be granted.
For
convenience the parties shall be referred to by name.
[2]
A brief summary of the inter-reiationship between the applicants in
liquidation and the respondent is necessary:
2.1
Coastal Joy with Salinga Trust (‘Salinga’) as sole member
was placed in final liquidation, pursuant to an application
by the
second applicant Echo Canyon on 12 March 2012. Prior to such
liquidation, Eviron-Concept Trust with John Cussons ('Cussons’)
as representative trustee was sole member of Coastal Joy.
EnvironConcept Trust resigned as a member and was replaced by Salinga
with Cussons remaining as representative trustee till his replacement
by his spouse Maria Cussons as representative trustee of
Salinga on 7
January 2011.
2.2
Prior to its conversion to a closed corporation Echo Canyon existed
as a private company with Cussons as sole director. As a
closed
corporation EnvironConcept Trust was appointed sole member with
Cussons as representative trustee, till final winding up
on 31 May
2011.
2.3
Prior to its conversion to a closed corporation Environcap Trading
existed as a private company with Cussons as sole director.
As a
closed corporation Cussons was appointed sole member till replaced by
Environcap Trust as sole member and Cussons as representative
trustee
on 29 March 2010. It was finally wound up on 27 July 2011.
2.4
Prior to its conversion to a closed corporation Two Ships Trading
existed as a private company with Cussons as sole director.
As a
closed corporation at liquidation EnviroConcept Trust was appointed
as sole member with Cussons as representative trustee.
It was finally
wound up on 9 March 2011.
2.5
Pnor to its conversion to a closed corporation on 17 August 2008 the
Respondent Icarys Air Services CC existed as a private
company known
as Twin Cities Trading 281 CC. EnviroConcept Trust was sole member
with Cussons as representative trustee as at conversion.
On 14 April
2010 the membership was transferred to Salinga whose representative
trustees were Cussons and his spouse Maria Cussons.
Cussons remained
representative trustee till about 19 September 2011 .Presently the
respondent was a closed corporation whose sole
member was the
Umhlothi Trust with Eugene Christofell Cussons (‘Eugene
Senior’) appointed as representative trustee
from 19 September
2011. Eugene Senior is the father of Cussons.
[3]
The Industrial Development Corporation of South Africa (‘the I
DC ) advanced monies to Echo Canyon in the sum of R19 233
293.69 and
R11 451 000.00 for the erection of a tented lodge (‘Nkambeni
’).
It
was averred that an amount of R 200 000.00 was then advanced by Echo
Canyon to the respondent and that this amount was used as
a deposit
by the respondent to purchase an aeroplane. The applicants made
further payments to Nedbank as instalments for the airplane
so
purchased. As security for its indebtedness Echo Canyon had
registered a general notarial bond in favour of IDC and had ceded
its
rights in the lease agreement entered into with the Nkambeni Tribe to
IDC. An attempt by Nedbank to take possession of the
assets of Echo
Canyon by issuing an application of perfection of the general
notarial bond was opposed by Cussons. In his affidavit
Cussons had
confirmed that all the assets situated at the lodge belonged to Echo
Canyon. On 23 November 2010 IDC obtained judgment
against Echo Canyon
and its sureties among whom were Cussons, Envirocap Trading,
EnviroConcept Trust and others. This was followed
by Echo Canyon
being wound up finally on 31 May 2011. An application by its
liquidators to take possession of its assets was opposed
by Maria
Cussons citing an operating agreement concluded on or about 1
November 2009 between Echo Canyon, the Nkambeni Tribe and
Coastal
Joy, in terms of which Coastal Joy was to operate the lodge on behalf
of Echo Canyon.
[4]
Prior to Coastal Joy coming into the picture Tau Safari Destination
Administration CC (‘Tau Safari’) with Cussons
as its sole
member operated the lodge. Tau Safari’s employee contracts were
transferred to Coastal Joy on 28 February 2010
before the former was
wound up on 3 March 2010. The liquidators were not aware of the
operating agreement with Coastal Joy prior
to the launch of the
application to take possession of the assets of Echo Canyon. The
liquidators terminated the operating agreement
by communicating this
to Coastal Joy and an interim order was granted to take possession of
the assets of Echo Canyon. The liquidators
of Echo Canyon discovered
that Cussons had concealed certain assets when the sheriff called
pursuant to the order, to prepare an
inventory of the assets. The
liquidators of Echo Canyon took possession of the lodge on 16 August
2011 and are currently conducting
its business. Cussons was finally
sequestrated on 13 October 2011.
[5]
The applicants averred that the indebtedness by the respondents to
them in the following amounts was established during investigations
into the affairs of the applicants and from various books and records
of the applicants:
Coastal Joy:
5.1
Advanced to the respondent totalling R117 479.00 (R81 709.00 and R35
770.00) reflected in the 2011 and 2012 ledger accounts;
5.2
Bank transfers to the bank account of the respondent totalling R166
609.00
5.3
An amount of R11 600.00 of 18 March 2011 of R14 609.00 of 02 July
2010 not reflected in the ledger or loan accounts but are
reflected
on the bank statements.
5.4
The bookkeeper at the lodge, Christine Vorster confirmed that the
reference to Twin Cities Training’ in Coastal Joy’s
loan
account was reference to the respondent and that extracts from the
ledger account of 2011 and 2012 reflect advances to the
respondent;
Echo Canyon:
5.5
Bank transfers to the respondent amounting to R41 500.00 and an
amount of R200 000.00 paid as deposit for the acquisition of
an
aeroplane;
Envirocap Trading:
5.6
Bank transfers to the respondent amounting to R64 900.00
Two Ships Trading:
5.7
Bank transfers to the respondent amounting to R103 300.00
[6]
The aeroplane was registered in the name of the respondent with
Cussons reflected as director dun^a
Anrii
?nnft
Durinn
Aunust
2012
an
aoDlication for the amendment of the certificate of registration was
done reflecting ‘Icarys Air Services CC’ as
‘applicant/registered owner’ and Eugene Senior was
reflected as the member. The amendment was to be effected from Twin
Cities Trading 281CC’ to 'Icarys Air Services CC’. The
applicants contended that the purchase of the aeroplane was
paid for
by them. It was established that all the payments referred to in
paragraph 5 above were received into the bank account
of the
respondent. Furthermore other entities controlled by Cussons also
made payments into the respondents bank account. The monthly
instalments for the aeroplane were therefore funded by the applicants
and other entities.
[7]
The applicants addressed letters of demand which were duly served on
the respondent, in respect of each of the claims plus interest
at
15.5%, calculated from 17 September 2012 to date of payment, in terms
of section 69 of the Close Corporation Act read with the
New
Companies Act. The said demand stated that ‘if for 21 days
after the letter of demand was served on the respondent, the
respondent neglected to pay the aforesaid amount demanded’ to
the applicants respectively, ‘or to secure or compound
it to
the satisfaction of the’ respective applicant, ‘then the
respondent would be deemed unable to pay its debts’.
[8]
According to the respondent the monies advanced by the respondent
were in respect of services rendered by the respondent and
with
regard to the R200 000.00 paid as deposit for the aeroplane it denied
indebtedness and contended that the claim had prescribed.
The
applicants contended that Cussons and Eugene Senior had engaged in a
unlawful stratagem to dispute the claims by the applicants.
They
attempted to conceal the R200 000.00 deposit paid by Echo Canyon, by
reflecting same as a loan by Eugene Senior to the respondent
in the
amount of R199 900.00 in the respondents financial statements for the
year ending 28 February for the years 2009, 2010 and
2011. The
financial statements were signed by Cussons on 12 December 2011.The
remaining R100.00 was allocated for the acquisition
of membership in
the respondent by Eugene Senior. No proof of payment was provided by
Eugene Senior. Furthermore it was contended
that the invoices for
services rendered and sent to the applicants by the respondent were
not authentic in that there was no evidence
‘supporting the
allegation of the services rendered and that the statements did not
correspond with the actual amounts paid
by the Applicants. Cussons
had in enquiry by the Magistrate requesting such invoices responded
that none were made out. An IT Forensic
Specialist called in to
investigate the invoices discovered that they were produced by Eugene
Senior from his excel programme and
backdated.
[9]
Eugene Senior deposed to the answering affidavit as representative
trustee of the sole member of the respondent. He disputed
the grounds
upon which the winding up application was brought and contended that
it was brought to put pressure on the respondent
to obtain payment
for monies to which the applicants were not entitled to. This he said
constituted an abuse of the process of
court.
[10]
According to Eugene Senior the respondent had bona fide defences to
the claims of the Applicants:
10.1
payments to the respondent by the applicants were for the use of the
Aeroplane and in return the applicants had agreed to pay
the
instalments in respect of respondent’s credit agreement with
Nedbank and a flight folio clocking approximately 230 flight
hours
was attached.
10.2
He contented that the respondent was able to pay its debts and was
not insolvent.
10.3
the R200 000.00 allegedly paid as deposit constituted repayment for a
loan received from Eugene Senior being the value for
the erection of
a reed bed purification plant and that he borrowed the money to the
respondent for the deposit on the aeroplane;
10.5
he queried the veracity of amounts and payments in annexures JE25 and
JE35; he contend that certain purported claims of 2008
and 2009 had
prescribed;
10.6
that the amounts paid by the third applicant were for use of the
Aeroplane;
[11]
Eugene Senior acknowledged that payments made by the applicants went
towards payment of instalments on the aeroplane. He denied
that Mr Du
Toit was the general manager of the lodge since inception. He averred
that Mr Du Toit came after Mr G Kemp and Mr P
Lubbe. He contended
that the registration of the aeroplane into his name was effected on
advise of the CAA.
[12]
He acknowledged that the letters of demand were delivered by the
sheriff but contended that these were for debts that are not
due and
payable. The invoices he prepared had never been presented to the
applicants because they were in draft form and were presented
to
Loitering on request. The fact that no invoices were presented did
not mean that there were no records in existence of applicants
use of
the aeroplane. He denied that the issue of the invoices was a
stratagem to prevent applicants from recovering their money.
He
disputed Mr Du Toit’s version on the use of the aeroplane. The
aeroplane was mainly used by Cusson’s for businesses
of the
applicants
[14]
The issue to be determined is articulated in the respondent’s
supplementary heads of argument dealing with the changes
brought
about by the
Companies Act 71 of 2008
, and the applicability of the
Old
Companies Act to
the winding up of a corporation by virtue of
Item 9 of schedule 5 of the
Companies Act and
as to what the meaning
of ‘solvent. The question posed on behalf of the respondent was
whether the applicant could rely on
a deemed provision that the
respondent was insolvent by virtue of it being unable to pay its
debts and if the court was satisfied
that it was just and equitable
to wind it up.
[15]
The applicant found support for its submissions in the matter of
Firstrand
Bank Ltd v Lodhi 5 Properties Investments CC and Another
38326/2011
(20 March 2012)(GNP) which was cited with approval by
Scania
Finance Southern Africa (Pty) Ltd v ThomiGee Carriers Cc
4841/2012
(FSB) and
The
Standard Bank of South Africa Limited v R-Bay Logistics
CC
4165/2012 (KZN). The submissions on behalf of the respondent were
similar to those advanced on behalf of the respondents in
Lodhi5
supra,
Van
der Byl AJ citing
Absa
Bank Ltd v Rhebokskioof (Pty) Ltd
1993
(4)
S 436
(c) began his consideration at paragraph 25 and 26 by
stating:
“
[25]
Our law has always, for the winding-up of a company (and, as provided
in section 66(2) of the Close Corporation Act, 1984,
a close
corporation) relied, in addition to the concept of
‘
actually
{or factually insolvent),
on
the inability of a company(or close corporation) either because of
the deeming provision or otherwise, to pay its debts.
[26]
I find myself unable to agree with the contention that the
Legislature intended to do away; and in fact did away with this
well
established and in the words of Berman J in the
Rhebokskioof
case
supra
“commercially sensible”
approach
which has been followed in our law for decades.”
[16]
In developing his interpretation of the present law Van der Byl AJ
referred to the specific retention of s 345 of the Companies
Act,
1973 and s 69 of the Close Corporation Act, 1984 where an entity was
deemed to be unable to pay its debts and comes to the
following
conclusion at paragraph 30 of Lodhi 5
supra:
"[30]
(a) that there is, in the absence of an express provision, no
indication on the new Companies Act that the Legislature
intended,
particularly, in so far as it left section 345 of the Companies Act,
1973, in tact, to do away with the principle that
a company(or a
close corporation) may be liquidated on the grounds of its
‘
commercial
insolvency’
(b)
that the expression
‘
solvent
company
'
in item 9(2) of schedule 5 to the new Companies Act relates to
solvent companies, being companies that are either not
‘
actually(or
factually) insolvent or “commercially insolvent
”
,
envisaged in Part G of Chapter 2 of the new Companies Act, in
contrast to companies that are insolvent, being companies that are
either
1
commercially
insolvent’
or
actually (or factually) insolvent which are to be dealt with in terms
of Chapter x1v of the Companies Act, 1973.”
A
creditor in these circumstances is enabled to rely on commercial
insolvency the inability to pay debts by proving a statutory
demand.
In this matter it was not disputed that a statutory demand had been
properly served.
[17]
It was submitted for the applicants that Eugene became member of the
respondent only in September of 2011 and that the answering
affidavit
was silent on the role that he played in the Cussons entities prior
to this date, nor does he state how he gained knowledge
of the
averments in the answering affidavit, for example the use of the
aeroplane by the Cussons entities. The flight folio was
disputed on
many grounds, further that Eugene Senior had failed to substantiate
his defences and to advance facts to sustain his
defence of
prescription. The claim to solvency is not fully substantiated and it
is contended that the respondent had failed to
demonstrate solvency.
I am in agreement with these submissions and am satisfied that the
applicants have made out a case for winding
up.
[18]
In the circumstance I give the following order:
1.
The respondent is placed under final winding up;
2.
The costs of this application are costs in the winding up.
TLHAPI V.V
(JUDGE
OF THE HIGH COURT)
MATTER
HEARD ON: 20 MAY 2013
JUDGMENT
RESERVED ON: 23 MAY 2013
ATTORNEYS
FOR THE APPLICANTS:EDWARD NATHAN
SONNENBERGS
c/o
JACOBSON & LEVY INC
ATTORNEYS
FOR THE RESPONDENTS: LOMBARD ATTORNEYS