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[2013] ZANCHC 6
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Khalil v New Diamond Corporation Ltd (957/2012) [2013] ZANCHC 6 (15 March 2013)
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IN
THE HIGH COURT OF SOUTH AFRICA (Northern Cape High Court, Kimberley)
Case
Nr: 957/2012
Case
Heard: 22/02/2013
Date
delivered: 15/03/2013
In
the matter between:
Nabil
Ali Khalil
........................................................................................
APPLICANT
and
New
Diamond Corporation (Proprietary) Limited
................................
RESPONDENT
Olivier
J:
[1]
This is an application for judgment in the amount of R700 000,00,
Interest thereon and costs of suit. The cause of action is
that a
loan in this amount was advanced by the applicant, mr Nabil Ali
Khalil, to the respondent, the New Diamond Corporation (Pty)
Ltd.
[2]
The case made out in the founding affidavit is:
[2.1.]
that the loan agreement was concluded on 27 May 2010 at Johannesburg;
[2.2.]
that the respondent was represented by its chief executive Officer,
mr Fernando Garcao;that Garcao had been duly authorised
to act on
behalf of the respondent;
[2.3.]
that Garcao had been duly authorised to act on behalf of the
respondent;
[2.4.]
that Garcao told the applicant that the money was urgently required
to pay people employed by the respondent at the Schmidtsdrift
Mine;
[2.5.]
that R500 000,00 was given to Garcao in cash;
[2.6.]
that the balance of R200 000,00 was electronically transferred into
the respondent's nominated bank account in the name of
"
Meepo
Investment
";
[2.7.]
that it was agreed that the loan would be repaid within two to three
weeks from then;
[2.8.]
that several oral demands have been made for repayment of the loan;
[2.9.]
that the respondent has never denied owing the money and has in fact
made promises to repay it; and
[2.10.]
that the loan was evidenced by an entry in annexure 'NAK 4' to the
founding affidavit, a document "
prepared
by the respondent as evidence of the respondent's creditors
[3]
These allegations are disputed by Mr Yosef Shabtay Weltsman, the
deponent for the respondent. He concedes that he has no personal
knowledge of whether the money was loaned to the respondent, because
he only became a director of the respondent after it had during
December 2010 been taken over, as part of the Lonrho group of
companies, by Signpost Trading 6 (Pty) Ltd
("Signposf').
He relies on
documentation which became available to him after he had become a
director of the respondent. It is his case, however,
that there is no
record of such a loan and that he ascertained that the respondent did
not at the time employ any staff at the
Schmidtsdrift Mine.
[4]
As regards annexure 'NAK 4' Weitsman states:
[4.1.]
that it was prepared by mr Kotze on behalf of New Africa Mining
Limited when the latter sold the entire issued share capital
in
Lonrho Mining SA (Pty) Ltd ("
LMSA
")
to Signpost; and
[4.2.]
that it was intended to be a list of the creditors of the Lonhro
group of companies, which consisted of LMSA and its subsidiaries
(of
which the respondent company was but one), and not specifically the
creditors of the respondent.
[5]
Weitsman also raised the issue of Garcao's authority to enter into
such a loan agreement on behalf of the respondent, stating:
[5.1.]
that had not been a director and had in terms of the articles of
association of the respondent not been eligible to be the
chief
executor officer of the respondent;
and
[5.2.]
that the respondent at the time had only three directors, mr Kotze,
mr Broido and mr Kogl, while the articles of association
required a
minimum of four directors.
[6]
Mr Gilbert, counsel for the respondent, furthermore submitted that,
when the number of directors was below the required minimum
of four,
the provisions of article 61 of the articles of association would
have limited the powers of the serving directors to
those there
prescribed
1
.
[7]
Mr Gilbert also argued that the applicant should be deemed to have
been aware of the provisions of the articles of association
regarding
the requirements that there should be a minimum of four directors and
that only an executive director could be the chief
executive officer
of the respondent, and of the fact that there were only these three
directors, and submitted in this regard that
the articles of
association and the records of the Registrar of Companies (which
would have reflected the names of the directors)
are public records.
[8]
With regard to the requirements in the articles of association of a
minimum of four directors
2
and that the chief
executive officer had to be an executive director
3
,
Mr van Wyk, counsel for the applicant, argued that the respondent has
not shown that the loan agreement would have been
ultra
vires
. He
pointed out that the relevant provisions are qualified by words like
"
subject
to the provisions of any shareholders' agreement, usave as may
otherwise be stated in a shareholders' agreement
and "
unless
otherwise determined by a genera! meeting
"
and he submitted that the respondent has failed to disclose whether
any such shareholders' agreement exists
4
and whether or not
any determination regarding the minimum number of directors was made
by a general meeting.
[9]
In his replying affidavit the applicant raised
estoppel,
claiming that the
directors had negligently represented to him that Garcao was
authorised to conclude the loan agreement.
[10]
Although it was not raised in the replying affidavit, Mr Van Wyk also
argued that the provisions of section 36 of the 1973
Companies Act
preclude the respondent from raising the issue of the minimum number
of directors.
[11]
In my view it is not at this stage, and in view of the nature of
these proceedings, necessary to consider the issues pertaining
to
Garcao's capacity and authorisation
5
and the minimum
number of directors required. The same goes for another issue raised
by the respondent,
viz
that the provisions
of the National Credit Act
6
would have been
applicable and were not applied.
[12]
The starting point should in my opinion be whether it can be found,
on the papers, that a loan agreement as described by the
applicant
had in fact been concluded. In these motion proceedings the validity
and enforceability of the alleged agreement need
only be considered
once it is found that the conclusion thereof has on the papers been
proved.
[13]
Mr Van Wyk argued that Weitsman has failed to raise a genuine and
bona fide
dispute of fact in
this regard. As already mentioned, Weitsman has no personal
knowledge. He therefore has no personal knowledge
of whether in fact
there was any form of contact between the applicant and Garcao in
Johannesburg on 27 May 2010.
[14]
This does not, however, mean that he would be incapable of raising
such a factual dispute. As Mr Gilbert pointed out there
is more than
one way in which a genuine and
bona
fide
dispute
of fact can arise, one of them being where the respondent "
may
concede that he has no knowledge of the main facts stated by the
applicant, but
………
deny
them, putting applicant to the proof and himself giving or proposing
to give evidence to show that that the applicant and his
deponents
are biased and untruthful or otherwise unreliable, and that certain
facts upon which applicant and his deponents rely
to prove the main
facts are untrue. The absence of any positive evidence possessed by a
respondent directly contradicting applicant's
main allegations does
not render a case ....free of a real dispute of facts"
7
.
[15]
In my view this is the position in the present case. Although
Weitsman has no personal knowledge, he relies on documentation
and
information obtained by him after his appointment as a director of
the respondent.
[16]
I do not agree with mr Van Wyk's submission that there are no serious
and
bona
fide
disputes
of fact. When regard is had to the papers as a whole there are to my
mind a number of disputes and issues which, when viewed
as part of
the "
broader
matrix of circumstances
"
8
,
do constitute genuine and
bona
fide
factual
disputes and which in my view cannot be resolved on the papers.
[17]
Weltsman's denial of the conclusion of the alleged loan agreement
should not be viewed in isolation. It should be considered
with,
inter
alia,
the
allegation by both the applicant and Garcao that the money was
urgently required by the respondent to pay employees. The probability
of the applicant being prepared to advance such a substantial sum of
money
9
to
a company which to his knowledge was in a financial crisis, and to
hand over R500,000.00 thereof in cash, on the basis of an
oral
agreement and without any record thereof is an issue that could and
should be explored in cross-examination.
[18]
In an affidavit annexed to the founding affidavit Garcao confirmed
the applicant's version that the money was needed to pay
the salaries
of employees of the respondent at the Schmidtsdrift Mine, and this
was in effect also confirmed by Kotze in his affidavit
annexed to the
founding affidavit
10
,
where Kotze claimed to have been
"responsible
for the control of authorised disbursements and receipts from and
into the banking account used by
(the
respondent)".
[19]
This was challenged by Weitsman who, with reference to an affidavit
by the respondent's erstwhile financial manager and other
documentation procured by him, stated
inter
alia
that
the respondent had no employees at the Schmidtsdrift Mine at the time
of the alleged loan and that the workers there had been
in the employ
of Schmidtsdrift Mining Enterprises (Pty) Ltd ("SME"), a
joint venture between the respondent and the Schmidtsdrift
Communal
Property Association.
[20]
Although it was submitted on behalf of the applicant that the
particular affidavit constituted inadmissible evidence, both
Garcao
and Kotze have since, in further affidavits by them
11
,
conceded that the respondent had not "
directly
"
employed people at the mine at that time. Neither of them, however,
explained what this meant and whether the people had
actually been in
the employ of SME. Either way, however, if Garcao had told the
applicant that the respondent had employees who
worked at the
Schmidtsdrift Mine, that would apparently not have been true.
[21]
According to Kotze the cash amount of R500,000.00 was eventually used
to pay workers at the mine. Why is there no record of
this? Garcao,
who claims to have been the chief executive officer of the respondent
at the time, says that the payment of these
wages, and the receipt of
the amount of R700,000.00, "
were
;
to the best
of
(his)
knowledge
,
recorded in
the books of account of the respondent at the relevant time".
He gives no
particulars of exactly what books or of who would have made the
entries.
[22]
Garcao's version appears to be that only the cash amount of R500
000,00 was used to pay employees. Why would he then have told
the
applicant that the whole of the amount of R700 000,00 was required
for those purposes? Why would he not have toid the applicant
that the
balance of R200,000.00 was in actual fact required to pay ‘the
"
other
expenses"
he
now makes reference to in his latest affidavit, but of which he fails
to provide any particulars?
[23]
In response to Weltsman's statement that the account into which the
balance of R200,000.00 had according to the applicant had
been paid
was that of "
Garcao's
personal company
"
Meepo Investment, Garcao denies any knowledge of a company by the
name of
"Meepo
Investment'
.
This is, however, the name referred to by the applicant as that of
the respondent's nominated bank account, in other words the
name
according to him given to him by Garcao, and it is also the name
reflected on the Nedbank Statement Enquiry of which a copy
is annexed
to the founding affidavit. According to Garcao there are "
several
companies that use the word 'Meepo' in their names”.
He
goes on to say that he was at the relevant time a director of a
company by the name of Meepo Investment Consortium (Pty) Limited.
[24]
Kotze, who as already mentioned had according to him been responsible
for the control over receipts into and disbursements
from
"the
banking account used by
(the
respondent)" has not revealed any particulars of the "
banking
account
"
he referred to.
[25]
Be that as it may, Garcao's involvement and interest in whatever
account the money had been paid into by the applicant would
also be a
matter to be investigated.
[26]
The applicant has chosen not to give any particulars of the "
several
oral demands
"
that were allegedly made or of the alleged promises of payment. Who
made the demands and to whom on behalf of the respondent
were they
directed? When were they made and what were their contents? Who on
behalf of the respondent promised payment and when?
[27]
Not even a statement by Weitsman that no demand for payment had been
made since the acquisition of the respondent (as part
of the Lonhro
Group) by Signpost could prompt the applicant to buttress his case in
reply by furnishing further particulars in
this regard and possibly
by attaching affidavits by whoever made and received the alleged
demands and by those to whom the promises
had been directed
[28]
Kotze, Broido, Kogl, and even Garcao^ who claims to have been
responsible for the daily management of the respondent before
the
takeover, are silent on this. Not one of them claims to have
knowledge of such a demand or promise.
[29]
The statement that no demand at all has in any event been made since
the acquisition by Signpost, a period in respect of which
Weitsman
would have personal knowledge, was not denied. This in itself may be
significant. The acquisition took place on 2 December
2010. It would
mean that for some reason in the more than sixteen months after that,
and before this application was lodged, the
applicant never
approached the new management of the respondent for repayment of the
alleged loan.
[30]
In his founding affidavit the applicant stated as a fact that Garcao
had been
"duly
authorised
"
to act on behalf of the respondent. He did not at that stage allege
that Garcao and/or the respondent had represented to
him that Garcao
was duly authorised, the case he has now in reply attempted to make
out.
[31]
Whether or not Garcao had in fact been authorised is clearly a
genuine and
bona
fide
factual
dispute. Weltsman can obviously not have personal knowledge on this
issue, but he challenges the applicant's allegation
on the basis that
there is no such (written) resolution and that Garcao would in any
event not have been competent to be the chief
executive officer, the
capacity in which he had according to the applicant concluded the
loan agreement.
[32]
Garcao admits that cthere is no
'formal
resolution
"
which authorised him, but according to his most recent affidavit
12
he
had discussed the need for a loan with
"the
shareholders and directors"
of
the respondent and
“
they"
had
been very happy when he
advised
"them"
of
the fact that the applicant was willing to
13
advance
the loan.
[33]
Although both Kotze and Broido
14
state
that they confirm the contents of Garcao's latest affidavit, neither
of them deal with the discussion described by Garcao
or claim to have
any knowledge of the circumstances under which the loan was obtained.
[34]
Where and when did the discussion described by Garcao take place? Who
else was present? Despite Garcao's reference to
"directors
"
(in the plural) it is conceded that at least Kogl was never informed
of the loan.
[35]
When, on the applicant's version, could such a discussion in any
event have taken place? He claims that the loan agreement
was
concluded, and the amount of R500 000,00 in cash handed over, on the
same day that Garcao advised him, in Johannesburg, of
the urgent need
for the money.
[36]
Why would Garcao have
"pleaded,
consulted and discussed"
with the shareholders
and directors of the respondent
"for
a solution to the shprtage of funds to pay salaries and expenses
"
if he had in any event generally been authorised to loan money for
such purposes?
[37]
In his last affidavit Kotze for the first time makes the rather
surprising allegation that he and Broido had in fact authorised
Garcao to conclude the loan agreement. Not even Garcao has made this
allegation. Such an authorisation would surely have been a
"
resolution"
(even if oral), and
that would be difficult to reconcile with Garcao's claim that he was
in general duly authorised to act on behalf
of the respondent and
that he needed no
"formal
resolution"
15
.
[38]
Kotze does not say when and where he and Broido authorised Garcao and
whether the authorisation was oral or written. Broido
does not
confirm this allegation
16
and makes no mention
at all of having been a party to such a particular authorisation.
[39]
The note
“
Nabil
Khalil (Loan for salaries and operational costs")...
R700,000.00",
which
the applicant in his founding affidavit referred to in "
support"
of his claim, appears
under the heading
"Loan
Accounts owing by
LMSA"
17
.
On the face of it
this could be interpreted to be a reference to a debt of the holding
company LMSA, and not necessarily a debt
of the respondent, one of
apparently several subsidiary companies of LMSA.
[40]
In his replying affidavit he himself states that annexure 'NAK4' is a
representation of the
"Lonrho
group's creditors
"
18
and he in fact
concedes that this document
“
is
not proof that the respondent owed the loan
to (the applicant)."
[41]
The fact that the respondent has not disclosed financial statements
for the relevant period does not in my view mean that the
respondent
has not done enough to expose a genuine and
bona
fide
dispute
of fact.
[42]
The applicant has for some reason chosen to utilise the application
procedure to enforce a claim sounding in money
19
,
and its affidavits should therefore
"constitute
both the pleadings and the evidence"
.
20
The applicant's
founding affidavit contains only the statement that Garcao was
authorised and no evidence at all to substantiate
it.
[43]
The same goes for the issue of estoppel that has been raised in the
replying affidavit. The applicant merely makes the allegation
that
the directors of the respondent negligently misrepresented that
Garcao was authorised. He tenders not a shred of evidence
to
substantiate it and he gives no particulars of when, where, how and
by whom such misrepresentation was made. There is also
no
allegation, let alone evidence, that the applicant had been
reasonable in acting upon the alleged misrepresentation.
[44]
Mr van Wyk pointed out that Weitsman has not attempted to file a
further affidavit to deal with the estoppels issue and submitted
that what the applicant had stated in this regard in this founding
affidavit should therefore stand. I disagree. There simply
is no
evidence
of a
misrepresentation or of negligence which called for a reply. The
applicant's allegation of negligence in effect amounts to
no more
than a conclusion (with nothing to substantiate it) and, as already
mentioned, no details of the alleged misrepresentation
are given.
[45]
There was also no need for Weitsman to file a further affidavit to
deal with the possibilities that the requirements regarding
the
number of directors and the position of chief executive officer may
have been the subject of a shareholders' agreement or
of a general
meeting, because these possibilities were not raised in the replying
affidavit. It is in any event, as already mentioned,
not necessary
to decide them at this stage. I cannot see any sense in deciding
whether the loan agreement would have been
ultra
vires
on
the hypothesis that such an agreement had indeed been concluded.
[46]
Both counsel indicated that, should it be found that there are
indeed
bona
fide
and
genuine factual disputes which cannot be resolved on the papers,
regarding whether a loan agreement had been concluded and,
if so,
whether Garcao had actually been authorised to do so, and should the
matter not be decided and disposed of on the basis
of any of the
respondent's technical defences, the application should be referred
to trial.
[47]
Although I find it strange that the applicant appears to have waited
for a further period of sixteen months after the acquisition
of the
respondent by Signpost to pursue its claim, and also more than four
months after it already had the initial supporting
affidavits by
Garcao and Kotze, I cannot at this stage, and on the available
information, find that the applicant should reasonably
have foreseen
a serious dispute of fact
21
.
[48]
The issues are relatively wide-ranging and in view of the above it
is not at this stage possible to
"know
how wide afield of evidence the disputed
(issues)
will
cover"
.
22
A referral to oral
evidence would therefore not have been appropriate.
[49]
The argument based on the provisions of section 36 of the 1973
Companies Act was, as already mentioned, not raised in the
replying
affidavit. The possibility exists that, should it be ordered that
pleadings be filed, it may be decided to raise this
issue by way of
an exception. The applicant also did not, in his founding affidavit,
deal with the issue of the applicability
or inapplicability of the
provisions of the National Credit Act. Then there are also the
submissions made by Mr Gilbert regarding
constructive knowledge on
the part of the applicant and the provisions of the articles of
association. I am therefore of the
view that, despite the fact that
some issues may be clear on the affidavits, the proper course would
be to order that pleadings
be filed so that the
"issues
(can)
be
defined
"
properly
23
.
[50]
To cater for the possibility that it may yet be shown that the
applicant should not have utilised the application procedure
in the
circumstances of this case, costs of these proceedings will be
reserved for determination at the trial.
[51]
In the premises I make the following orders:
1.
The application is referred to trial.
2.
The notice of motion will stand as a simple summons and the
applicant is ordered to file a declaration within one month of
the
date of this order.
3.
The provisions of the Uniform Rules and applicable practice
directives regarding pleadings and the conduct of trials will
thereafter apply.
4.
The costs of the proceedings by way of notice of motion are reserved
for determination at the trial.
CJ OLIVIER
JUDGE
NORTHERN
CAPE DIVISION
For
the Plaintiff: Adv. AM Van Wyk
Instructed
by: Adrian B. Horwitz & Associates, KIMBERLY
For
the respondents: Adv. B. Gilbert
Instructed
by: Duncan & Rothman, KIMBERLY
1
One
of which would not have been the authorisation of any loan.
2
Articles
59 and 59.1
3
Article
79
4
and,
if so, whether deals with any of these issues.
5
Ostensible
or actual.
6
34
of 2005
7
Room
Hire Co (Pty) Limited v Jeppe Street Mansions (Pty) Limited
1949 (3)
SA 1155
(T) at 1163
8
Wightman
t/a
JW
Construction
v Head four (Pty) Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SC A) para [13]
9
Even
when compared to the majority of the other debts reflected in
annexure
‘
NAK4’.
10
These
affidavits by Garcao and Kotze were deposed to in December 2011,
while for some reason the applicant’s founding affidavit
was
only deposed to on 24 May 2012.
11
Annexed
to the replying affidavit
12
Annexed
to the replying affidavit.
13
As
opposed to a statement that the applicant had in fact already
advanced the loan.
14
Of
whom an affidavit is also annexed to the replying affidavit.
15
How
likely is it that a general authorisation to conduct the day to day
management of a company would impliedly include the authorisation
to
incur such a substantial debt on behalf of the company?
16
His
affidavit was in any event deposed to prior to the particular
affidavit by Kotze.
17
My
emphasis.
18
Which
would still have included the holding company and all its
subsidiaries.
19
Compare
Arnold v Viljoen
1954 (3) SA 322
(C) at 329; London and Lancashire
Insurance Co Ltd v Puzyn
1955 (3) SA 240
(C) at 249; Miller v
Roussort
1975 (3) SA 876
(R) at 876-877
20
Minister
of Land Affairs and Agriculture and Others v D & F Wevell Trust
and Others
2008 (2)
SA
184
(SCA) para [43]
21
Compare
Standard Bank of SA Ltd v Neugarten and Others
1987 (3) SA 695
(WLD)
at 699A
22
Oblowitz
v Oblowitz
1953 (4) SA 426
(C) at 434G
23
Haupt t/a Soft Copy v Brewers Marketing Intelligence (Pty) Ltd and
Others
[2006] ZASCA 40
;
2006 (4) SA 458
(SCA) para [19]