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[2013] ZAGPPHC 176
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Slip Knot Investments 111 (Pty) Ltd v Martycel Properties CC (55059/2012) [2013] ZAGPPHC 176 (14 June 2013)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT.
PRETORIA
/ES (REPUBLIC OF SOUTH AFRICAN
CASE
NO: 55059/2012
DATE:14/06/2013
IN
THE MATTER BETWEEN
SLIP
KNOT INVESTMENTS 777 (PTY)
LTD
.......................................................
APPLICANT
AND
MARTYCEL
PROPERTIES
CC
............................................................................
RESPONDENT
JUDGMENT
PRINSLOO.
J
[1]
Before me in the special motion court the applicant applied for the
final winding- up of the respondent.
[2]
Mr Stockwell SC assisted by Mr Pretorius appeared for the applicant
and Mr Wagener SC appeared for the respondent.
The
relief sought and the chronological procedural path followed by this
application
[3]
In the notice of motion, the applicant applies for the final
winding-up of the respondent. Counsel for the applicant contended,
in
the alternative, that I may consider issuing a provisional winding-up
order and, in the further alternative, referring certain
factual
disputes emerging from the papers to oral evidence.
[4]
The application was launched in the normal course on 21 September
2012.
[5]
With a lengthy answering affidavit, the respondent filed a
"counter-application" in the form of a notice of motion
asking for the matter to be heard as one of urgency.
[6]
A replying affidavit was filed on 4 October 2012.
[7]
The respondent then filed a "replying affidavit in the
counter-application" dated 8 October 2012.
[8]
On 10 October 2012, this court struck the application from the roll
for lack of urgency and the respondent was ordered to pay
the costs.
[9]
On 25 October 2012 the applicant filed a "supplementary founding
affidavit".
[10]
The respondent then filed a "supplementary answering affidavit"
dated 4 December 2012.
[11]
In the founding affidavit, it is stated that the winding-up
application is based on the following two grounds:
(1)
the respondent is unable to pay its debts as intended by the
provisions of section 344(f) read with section 345 of the Companies
Act, no 61 of 1973 ("the old Act") and section 69 of the
Close Corporations Act, no 69 of 1984 ("the Corporations
Act11);
and
(2)
it is just and equitable that the respondent be wound-up as
envisaged in section 344(h) of the old Act.
[12]
In the opposing affidavit, it is argued by the respondent that it is
solvent, if the test prescribed in section 4 of the Companies
Act, no
71 of 2008 ("the new Act11) is applied. It is submitted on
behalf of the respondent that its assets, fairly valued,
materially
exceed its liabilities, fairly valued. Moreover, the respondent will
be able to pay its debts as they become due in
the ordinary course of
business for a period of twelve months after the date on which the
test is considered.
It
is then argued by the respondent, that it being solvent, the
provisions of inter alia section 344 of the old Act do not apply
to
the winding-up of the respondent as provided for in item 9(2) of
schedule 5 of the new Act. These
provisions
also apply to the winding-up of a close corporation (such as the
respondent) in terms of the provisions of section 66(
1) of the
Corporations Act.
[13]
In the result, one of the defences offered on behalf of the
respondent in the opposing affidavit is that the application is
bad
in law.
[14]
Perhaps to counter this argument, or perhaps only to introduce an
alternative attack for the winding-up of the respondent,
the
applicant, in the replying affidavit, argued that it would also rely
on the provisions of section 81(1 )(c)(ii) of the new
Act which deals
with the winding-up of solvent companies by a court on the
application of a creditor. The particular subsection
provides for the
winding-up of a solvent company if "it is otherwise just and
equitable for the company to be wound-up".
This
move by the respondent inspired the respondent to argue, in one of
the further affidavits which I have mentioned, that the
applicant was
not entitled to introduce a new cause of action in the replying
affidavit and that I should not pay any regard thereto.
During the
course of my debate with counsel on this issue, 1 ruled that the
argument would be entertained, because both parties
had the
opportunity to ventilate the issue in the further affidavits which I
have listed.
[15]
To make matters even more interesting, the following further legal
point arose during the proceedings before me: item 9(2)
of schedule 5
of the new Act reads as follows:
"...
sections 343, 344, 346 and 348 to 353 (of the old Act) 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."
(Part
G of chapter 2 deals with the winding-up of solvent companies and
deregistering companies.) It was argued on behalf of the
applicant
that because section 345 of the old Act which deals with the
circumstances when a company is deemed to be unable to pay
its debts,
is left intact by the provisions of item 9(2), a company can still be
liquidated notwithstanding the promulgation of
the new' Act, on the
grounds of its "commercial insolvency" or inability to pay
its debts. This much was decided in this
division by VAN DER BYL AJ
in March 2012 in the case of First Rand Bank Ltd v Lodhi 5 Properties
Investment CC case no 38326/2011
and two other respondents under
different case numbers. Mr Wagener indicated that he was not going to
argue against the correctness
of this finding for present purposes.
In the circumstances I am not inclined to deal with this issue any
further, and will accept
that the applicant is also entitled to apply
for the winding-up of the respondent on the ground that it is unable
to pay its debts
or that it is "commercially insolvent".
Brief
remarks about the background of the case
[16]
All the facts are not common cause. Indeed, there are material
factual disputes in existence. Nevertheless, I shall attempt
to
briefly sketch an overall picture.
[17]
In March 2008, the respondent entered into a written agreement of
purchase in terms of which it bought, as a going concern,
a shopping
centre or so-called community centre, situated on erven 316 and 317,
Clarina extension in Akasia, Pretoria North ("the
property").
The building is popularly named "Station Square". It covers
some 40 000m2 and houses shops and other
businesses. Some of the
tenants of the shops include the Department of Public Works, the
Metro police, Sasol and Shoprite. There
is also a Sasol petrol
garage. There are staircases, balconies and passage ways. Photographs
of the complex are included in the
record. The purchase price was
some R49,5 million.
The
two parties got together and struck a deal. The details of the oral
agreement which they entered into, are in dispute.
It
is, however, common cause that the applicant provided the R49.5
million so that the respondent could buy the property and did
so by
advancing R14,5 million of its own funds and borrowing R35 million
from Investec. As security for the Investec loan, a first
mortgage
bond was registered over the property in favour of Investec, and the
respondent also bound itself as surety and co-principal
debtor (with
the applicant which borrowed the money) in favour of Investec.
It
is common cause that the parties agreed that the property would be
sold at a profit (preferably) and that the profit would be
shared
between the two parties on the basis of 60% for the applicant and 40%
for the respondent.
[
18] The property was transferred into the name of the respondent on
18 July 2008.
[19]
The weight of the evidence suggests that both parties, initially,
contemplated a quick and profitable sale so that the profits
could be
shared and the deal finally concluded.
In
the event, however, the property was not sold right away and had
still not been sold by the time this application was launched.
According to the respondent, the delay was caused largely because the
applicant wanted to effect certain improvements in order
to enhance
the prospects of a higher sale price. It is common cause that the
applicant financed some improvements to the tune of
more than R2
million and there is also strong evidence to the effect that the
applicant insisted on VAT invoices in respect of
these improvements
being issued in its name.
[20]
With the properties being an income generating going concern, which
income, on the weight of the evidence, comes to more than
R1 million
per month net, the respondent, between April 2008 and August 2012
(the month before this application was launched) paid
the applicant
an amount of some R27,4 million. According to the applicant, these
payments were used to meet interest requirements
flowing from the
written loan agreement entered into between the applicant and
Investec. According to the respondent, these payments
were made to
protect its interests as co-principal debtor of Investec and
mortgagor of the property and also, in reduction of the
capital sum
advanced by the applicant on behalf of the respondent.
[21]
The applicant paid off the loan of Tnvestec in January 2012. By then,
the liability came to some R29 million. When the respondent
got wind
of this, it instructed Investec to cancel the bond, which duly
happened some time before October 2012 when the replying
affidavit
was signed. The respondent also stopped making payments to the
applicant, arguing that there was no need to do so anymore
because
the principal debt had been extinguished. The stance adopted by the
respondent was that the applicant had to wait for its
60% profit
share once the property was sold. The respondent never disputed the
fact that, in addition to the profit share, the
outstanding balance
on the advance made by the applicant on behalf of the respondent,
would also have to be paid. This would come
from the proceeds of the
contemplated sale.
[22]
The main dispute between the parties can perhaps be described as
follows: the case of the applicant is that the parties entered
into a
loan agreement when the purchase price of R49,5 million was advanced
by the applicant on behalf of the respondent. This
loan is interest
bearing. The interest is payable over and above the 60% profit share
which, according to the applicant was agreed
to be a minimum of RIO
million. The case of the respondent is that there was no question of
a loan agreement neither would there
be any interest payable on the
advance. It was simply a case of the applicant advancing the purchase
sum and the respondent identifying
and providing the property which
was purchased. The anticipated quick profitable sale would generate
enough to repay the amount
advanced by the applicant and also provide
a 60% profit share. According to the respondent, the outstanding
balance on the initial
advance is only some R27,9 million, with the
respondent having made substantial payments between 2008 and 2012 as
described.
[23]
When the respondent stopped making the payments after the main debt
was extinguished, as mentioned, the applicant adopted the
attitude
that the full outstanding balance became due and payable (that would
be the capital advanced plus accrued interest less
payments made).
[24]
To enforce payment of this alleged debt, the applicant, before
launching these liquidation proceedings, instituted action against
the respondent, under case no 55004/12, for the following relief:
"
1. A declaratory order declaring that the defendant is, upon the sale
of the property, obliged to make payment to plaintiff
of an amount
equaling 60% of the gross profit generated by the sale of the
property
or the amount of RIO 000 000,00 whichever amount may be the larger;
2.
2.1 payment of the amount of R48 681 610,03;
2.2
interest on the amount of R48 681 610,03 at 5% above the interest
rate charged by Investec to be calculated from 1 June 2012
to date of
payment."
[25]
Pleadings in this action were already closed in November 2012 when
the applicant filed a plea to a counter-claim instituted
by the
respondent. Details of the counter-claim do not appear from the
papers which came before me.
I
enquired from counsel whether a trial date had already been allocated
but it appears that the applicant (as plaintiff) has not
yet applied
for a trial date. I am left with the impression that there was an
undue delay on the part of the applicant to take
this action forward.
I will refer to this as "the main action".
[26]
The applicant instituted yet further proceedings against the
respondent: shortly before these liquidation proceedings were
instituted, and on 6 September 2012, the applicant instituted an
application for interim interdictory relief against the respondent
(as first respondent), Investec Bank Ltd as second respondent and the
Registrar of Deeds, Pretoria as third respondent. This was
done under
case no 51915/12 and will be referred to as "the interdict
application". The other two parties did not enter
an appearance,
and played no part in the interdict application which also came
before me at the same time as the liquidation application.
The
original notice of motion in the interdict application contained
prayers for relief aimed at restraining the three respondents
from
cancelling the bond over the property. Once the applicant paid the
full debt to Investec in January 2012, as I have mentioned,
the
respondent requested Investec to cancel the bond, which was done.
Consequently, the original relief prayed for in the interdict
application became moot. The applicant then amended the notice of
motion so that the relief now sought in the interdict application
reads as follows:
"1.
That the first respondent be interdicted and restrained from
encumbering the properties described as erven 316 and 317,
Clarina
Extension 19, Registration Division J.R., province of Gauteng
(hereinafter 'the properties') in any manner whatsoever pending
the
finalization of the action instituted under case no 55004/12;
2.
directing the first and third respondents, in the event of the
properties being sold, to cause an amount equal to the amount
claimed
under case no 55004/12, together with such interest as may have
accrued on the transfer date, to be paid into an interest
bearing
trust account, and to further cause the money to be retained in such
trust account pending the final determination of the
proceedings
instituted under case no 55004/12;
3.
that the third respondent be directed to register a caveat against
the properties to the effect that the properties may not:
3.1
be encumbered in any manner whatsoever, pending the finalization of
the action instituted by the applicant against the first
respondent
under case no 55004/12; and
3.2
be transferred into the name of the purchaser, unless an amount equal
to the amount claimed under case no 55004/12, together
with such
interest as may have accrued on the date of transfer is paid into an
interest bearing trust account where the money shall
be held pending
the final determination of the proceedings instituted under case no
55004/12.
4.
That the first respondent be directed to pay the costs of the
application.
5.
That the second and third respondents be ordered to pay the costs of
this application, jointly and severally with the first respondent,
only in the event of the second or third respondent opposing the
relief sought herein.”
[27]
I turn briefly to the merits of the winding-up application and the
grounds upon which it is based.
The
grounds for winding-up
[28]
The court's power to grant a winding-up order is a discretionary
power, irrespective of the ground upon which the order is
sought -
see Meskin, Henochsberg on the
Companies Act volume
1 p693 and the
authorities there quoted.
[29]
The onus is on the applicant for a final w'inding-up order to prove
the grounds upon which it relies. In the present case the
applicant
relies, at least to some extent, on an oral agreement entered into in
2008. In my view, there are material disputes of
fact emerging from
the papers, the primary one being whether or not the parties entered
into a loan agreement which would require
the advance made by the
applicant on behalf of the respondent to be repaid with interest or
whether it was merely an investment
arrangement which would entitle
the applicant to 60% of the profits and, as already described,
repayment of the original advance
made. In such a case, the
well-known test enunciated in Plascon-Evans Paints Ltd v Van Riebeeck
Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 3 SA 623
(A) at 634E-635C, is of application.
In terms of this test, the final winding-up order will only be
granted if the facts stated
by the respondent together with the
admitted facts in the applicant's affidavits justify such an order -
see Budge v Midnight Storm
Investments 256
2012 2 SA 28
(GSJ) at
34G-I; Paarwater v South Sahara Investments (Pty) Ltd [2005] 4 AM SA
185 (SCA) at 186g-187g.
[30]
In the present case there is also the additional consideration that a
winding-up application is not a legitimate means of seeking
to
enforce payment of a debt
where
the indebtedness is disputed on bona fide and reasonable grounds -
see Badenhorst v Northern Construction Enterprises (Pty)
Ltd ] 956
2
SA 346
(T) at 347H-348B (also known as "the Badenhorst rule").
In such a case, there is an onus on the respondent, not to show
that
it is not indebted to the applicant, but merely to show that the
indebtedness is disputed on bona fide and reasonable grounds
- see
Kalil v Decotex (Pty) Ltd and another 1988 I SA 943 (AD) at 980B-D.
[31]
I have already described the main dispute between the parties.
[32]
The applicant heavily relies on a letter which its attorney wrote to
the respondent dated 25 April 2008 which is annexure "FA2"
to the founding affidavit ("FA2").
[33]
In "FA2", the applicant's attorney informs the respondent
that the applicant had agreed to arrange finance for the
full
purchase price of the properties in the amount of R49,5 million. For
this financing, certain conditions are stipulated. These
include that
a loan agreement "shall be entered into" by the parties in
terms of which the respondent borrows the money
from the applicant at
a certain interest rate which is specified in the letter. Repayment
is to take place within 120 days from
the date on which a guarantee
is issued and the payment of interest will run from the date of
transfer of the property. A bond
will be registered in favour of
Investec, the respondent will bind itself as a surety and
co-principal debtor and there will be
a deed of pledge/cession by the
member of the respondent, Mr Smit, of his membership in the
respondent as security for due compliance
with the foreshadowed loan
agreement. The letter also stipulates that an option agreement "shall
be entered into" between
the parties in terms of which an option
is granted to the applicant to purchase the properties for R49,5
million or certain higher
amounts should certain future events take
place.
"FA2”
then concludes with the paragraph stipulating that this loan
agreement and other agreements will be prepared by
the applicant's
attorney "as soon as reasonably possible" and the last
sentence is couched in the following rather ominous
terms:
"In
the event of Martycel Properties or Sarel Petrus Smit failing to sign
these agreements when requested to do so, Slip Knot
Investments shall
be entitled to take such steps as may be necessary to have the
guarantees issued by Investec Bank Ltd withdrawn."
Attached
to "FA2" is then a page providing for the signatures of the
parties under the line "the terms and conditions
hereby
accepted". The signatures of both parties were appended to this
page on 29 April 2008.
[34]
As I have already pointed out, the first covering bond was duly
registered in favour of Investec and the respondent bound itself
as
surety and co-principal debtor. When the main debt was discharged,
the bond was cancelled and Mr Smit was released from his
obligations
as surety.
[35]
It is common cause that the loan agreement was never submitted to the
respondent's representative ("Smit") for signature
neither
was the deed of pledge or the option agreement.
As
I have already pointed out, the following happened: the guarantee was
issued and the property was transferred into the name of
the
respondent on 18 July 2008. The parties carried on for another four
years with the properties remaining unsold, and the respondent
making
regular payments, totaling some R27 million, towards servicing the
Investec loan. According to the applicant, these payments
represented
interest due by the respondent to the applicant in respect of the
advance made and according to the respondent, these
payments were
made to safeguard respondent's interests as a co-principal debtor
towards Investec and also to serve as a reduction
of the advance made
by the applicant on behalf of the respondent as the outstanding
balance of the advance has to be repaid to
the applicant together
with the 60% share of the profit once the properties are sold. This
is another dispute of fact between the
parties.
Moreover,
soon after the deal was concluded, the properties were improved,
according to the respondent at the instance of the applicant,
which
indicated that it was no longer keen to bring about an early sale,
but would rather improve the properties to enhance the
chances of a
more favourable purchase price once the properties are sold. It is
common cause that the applicant, as I have stated,
financed the
improvements to the tune of more than R2 million. There is also
strong evidence that the applicant insisted on VAT
invoices being
issued in respect of these improvements in the name of the applicant.
[36]
I now turn briefly to the actual grounds upon which the winding-up
application is based:
(i)
It was firstly argued that the respondent is factually insolvent
[37]
This would mean that the liabilities of the respondent exceed its
assets.
[38]
In this regard, the respondent attached to its opposing affidavit a
valuation of the property by one Mr Clive Frost of Frost
& Frost
Property Brokers (Pty) Ltd. The valuation was confirmed and supported
by an affidavit deposed to by Mr Frost. The valuation
is dated 27
September 2012. Mr Frost values the property at R107 387 308,46.
There is also a budget income statement attached to
the valuation
showing a total monthly income of R1 242 758,90 consisting of rental
income of more than R1 million, income from
the parking bays totaling
some R13 000,00 per month and the rest of the income consisting
of’’recoveries" which
I understand to be
electricity, water, refuse, sewerage and other monthly expenses paid
by the respondent and then recovered from
the tenants in terms of
individual lease agreements. According to the income statement the
gross annual income of the property
is some R 15,07 million
consisting of rental income of R 12,3 million, parking income of some
R160 000,00 and recoveries of some
R2,5 million. The annual expenses
only come to some R3,2 million consisting of operating expenses of
some R3.1 million and company
expenses of some R72 000,00. The annual
net income is approximately R11,8 million.
[39]
In addition, the respondent presented a valuation by one Mr
Sebastiaan Kamstra, a professional valuer, also supported by an
affidavit by Mr Kamstra. The latter, on 1 October 2012, valued the
property at R109 600 000,00. He also postulates a potential
annual
income generated by the properties in the amount of some R17,2
million.
[40]
In the opposing affidavit, the respondent alleges that it has cash on
hand in the amount of some R2,5 million.
[41]
It is common cause that the applicant is the respondent's only
creditor. On the respondent's version the applicant is only
a
potential or future creditor to be paid when the properties are sold.
[42]
There is no longer any bond over the property so that it is
unencumbered.
[43]
The applicant also presented a copy of an offer to purchase the
property for some R92 million. The offer was dated 4 July 2012
and
made by Arrow Head Properties Ltd.
[44]
The applicant offered no meaningful evidence to rebut this evidence.
[45]
The onus is on the applicant to show that the respondent is factually
insolvent. Given the details set out above, and the test
in
Plascon-Evans, I am satisfied that this onus was not discharged.
(ii)
The respondent is commercially insolvent
[46]
This would mean that the respondent is unable to pay its debts.
[47]
The answer to this question depends to some extent (but not entirely,
given the favourable position of the respondent, owning
an
unencumbered property valued at approximately R100 million generating
an income in excess of R1 million per month) on whether
or not the
parties entered into a loan agreement in March or April 2008 which is
interest bearing and immediately payable. This
debt, according to the
particulars of claim in the main action, which I have quoted, came to
some R48,6 million in June 2012.
[48]
I have pointed out that the applicant relies mainly on "FA2"
in support of its case that it w'as indeed a loan agreement
that was
entered into. "FA2" foreshadowed a loan agreement to be
entered into in future. This never happened. The respondent
argues
that "FA2" is nothing more than a pactum de contrahendo, an
agreement to make a contract in future. There may
be something to be
said for this argument - see the brief discussion in Christie, The
Law of Contract in South Africa, 6th edition
p39 and the remark by
HARMS ADP in Van Zyl v Government of the Republic of South Africa
2008 3 SA 294
(SC A) para [75] that "a promise to contract is
not a contract". I consider it unnecessary to make a
pronouncement on
this point. I am also mindful of the fact that this
dispute may well be tested in evidence before a trial court when the
main action
is enrolled for hearing and care must be taken not to
usurp the functions of the trial court.
[49]
Moreover, Smit said in the opposing affidavit that "FA2"
came unexpectedly at a time when the guarantee had to be
furnished to
Dream World as a matter of urgency to avoid losing the opportunity of
purchasing the property. He signed "FA2"
in the belief that
he would be able to renegotiate a favourable position if and when the
foreshadowed "loan agreement"
was submitted to him for
signature. Smit also submitted that "FA2" did not reflect
the true arrangement between the parties
and was presented to him at
a crucial time placing him under duress and forcing him in the
circumstances to sign the document.
[50]
Smit also presented evidence to the effect that he would not have
agreed to pay interest and also part with a substantial portion
of
the profit (RIO million minimum according to the applicant, although
Smit disputes this figure) as such an arrangement would
not make
commercial sense. Smit illustrated how he could have borrowed the
purchase price of R49,5 million at an even higher interest
rate (1,5%
per week) over 120 days at a cost of some RI0 million without having
to incur an obligation to pay both interest and
a substantial share
of the profit. I add that the applicant, in reply, offered certain
arguments to the effect that the terms of
the agreement as postulated
by Smit (a pure investment agreement involving only a share of the
profit and no interest) also made
no commercial sense from the point
of view of the applicant.
[51]
In support of the case advanced by the respondent, there is also the
fact that the loan agreement and the option agreement
and the cession
agreement foreshadowed in MFA2" were never submitted to Smit for
signature.
[52]
Moreover, when a demand was finally addressed to Smit in May 2012 by
the applicant's attorney for payment of the alleged outstanding
balance of the "loan", Smit’s attorney, on 24 May
2012, wrote a letter to the applicant's attorney disputing this
liability and describing the stance adopted by the respondent in some
detail. It is a lengthy letter and I do not consider it necessary
to
quote the contents. This letter, annexure "SPS7", was never
responded to.
[53]
There were other arguments submitted by counsel in support of both
versions. I do not consider it necessary to deal with those
arguments.
[54]
In terms of the test in Plascon-Evans, I must consider the version
of the respondent in deciding whether or not the applicant
discharged
the onus of proving that the respondent is unable to pay its debts.
In my view\ this onus has not been discharged. Moreover,
the version
of the respondent is not "so far-
fetched
or clearly untenable" that it can be rejected merely on the
papers - see Plascon-Evans at 635B-D and the eloquent words
of
CAMERON JA in Fakie NO v CC.I1 Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 4 SA 326
(SCA)
where the learned Judge of Appeal revisits the test in Plascon-Evans
as follows at 348B-C:
"But
the limits remain, and however robust a court may be inclined to be,
a respondent's version can be rejected in motion
proceedings only if
it is 'fictitious' or so far-fetched and clearly untenable that it
can confidently be said, on the papers alone,
that it is demonstrably
and clearly unworthy of credence."
In
my view, this cannot be said of the version of the respondent. For
the same reason, I am satisfied that the respondent discharged
the
onus of showing, as described in Badenhorst and Kalil, supra, that he
is disputing the alleged indebtedness on bona fide and
reasonable
grounds.
[55]
In the result, I have come to the conclusion that the winding-up
application cannot succeed on the ground of so-called "commercial
insolvency".
(iii)
It will be just and equitable to wind-up the respondent
[56]
I have referred to the provisions of
section 81(1
)(c)(ii) of the
new' Act in terms of which a solvent company may be wound-up if it is
otherwise just and equitable to do so. This
is the additional ground
for winding-up introduced by the applicant in later affidavits, to
which I have referred.
[57]
In terms of the Plascon-Evans rule, this ground will also have to be
adjudicated upon on the version of the respondent. I see
nothing in
the evidence of the respondent which can persuade me that it is just
and equitable to wind it up: it appears to be a
successful
corporation. It has been doing this type of business of buying and
selling developed properties as a going concern (with
its tenants)
for approximately 17 years, since 1996. It owns a valuable property,
worth probably in the vicinity of R100 million,
which is
unencumbered. It generates an income in excess of R1 million net per
month. It only has one creditor or, on its own version,
a prospective
or future creditor in the form of the applicant. It has, on oath on
these papers, committed itself to refund the
outstanding balance of
the amount advanced by the applicant on its behalf and to pay the 60%
profit share to the applicant, once
a sale materializes. On
respondent's version, and the available evidence with which I have
dealt, the respondent will, on the probabilities,
be able to meet
this obligation without any difficulty.
[58]
The argument advanced by the applicant, if I understood it correctly,
is that it will be just and equitable to wind-up the
respondent,
firstly because the relationship between the parties has broken down
in the sense that Smit and the director of the
applicant, Mr Du
Plessis, are no longer on speaking terms, and, secondly, because of
the delay in getting the property sold, thereby,
on the applicant's
version, allow ing interest on the outstanding balance on the advance
made on behalf of the respondent to accrue
to the extent that it may
ultimately eclipse the profit share which is due to the applicant.
[59]
As far as the breaking down of the relationship is concerned, the
applicant appears to rely on a so-called "deadlock"
situation which has been recognized as a ground for winding-up a
company on the basis that it is just and equitable to do so -
see
Rand Air (Pty) Ltd v Ray Bester Investments (Pty) Ltd
1985 2 SA 345
(W) at 349-350. As I have pointed out, on the respondent's version it
is willing and able to meet its obligations to the applicant.
1 also
do not consider this to be a classic "deadlock" situation
which, if I understand the position correctly, is generally
found
between directors or members of a particular company or corporation.
In this case, the applicant is not a member of the respondent.
On the
respondent's version, the applicant is an investor in the transaction
structured and concluded by the respondent.
Moreover,
on the respondent's version, the delay in proceeding with a sale of
the property was due to the actions of the applicant,
which insisted
on renovations and improvements being effected to the property in
order to enhance the selling price. In any event,
on the respondent’s
version, there is no question of interest accruing on the outstanding
balance of the advance made, for
the reasons mentioned.
[58]
Lastly, on my understanding of the "Badenhorst rule", which
I have found to apply in this case, a winding-up order
ought in any
event not to be granted.
[59]
In the result, I have concluded that the winding-up application
cannot succeed on this ground either.
[60]
The application must therefore fail.
[61]
In the circumstances of this particular case, I also see no merit in
a somewhat belated suggestion by the applicant that I
should consider
exercising my discretion in favour of granting a provisional order.
The same applies to a late suggestion that
the issue of the nature of
the agreement between the parties should be referred to evidence. In
the latter regard, the issues that
have to be decided in this case
may go wider than the limited question of whether or not there was a
loan agreement. A trial action
is pending and, but for what 1
consider to be undue delay on the part of the applicant, could
probably have been enrolled already.
It seems to me that that would
be the proper forum to have all the issues ventilated.
The
costs
[62]
Generally, the costs should follow the result. I would have been
prepared to make such an order. However, both counsci suggested
that
the appropriate order in this case should be to reserve the costs for
decision by the trial court. The reasoning appears to
be that a
favourable finding by the trial court (mainly to the effect that
there was a loan agreement which is interest bearing)
could render an
adverse costs order against the applicant for winding-up at this
stage to be seen to be unjust in hindsight.
[65]
I will accede to the suggestion of counsel in this regard.
The
order
[66]
I make the following order:
1.
The application is dismissed.
2.
The costs of the application are reserved for decision by the trial
court.
WRC
PRINSLOO
JUDGE
OF THE NORTH GAUTENG HIGH COURT
55059-2012
HEARD
ON: 21 and 22 MAY 2013
FOR
THE APPLICANT: R STOCKWELL SC ASSISTED BY J F PRETORIUS INSTRUCTED
BY: SIM & BOTS1 ATTORNEYS INC
FOR
THE RESPONDENT: S D WAGENER SC
INSTRUCTED
BY: COETZER & PARTNERS