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[2013] ZAKZPHC 71
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James and Others v Kimostar (Proprietary) Limited (3172/13) [2013] ZAKZPHC 71 (6 September 2013)
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IN
THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC
OF SOUTH AFRICA
Case
No: 3172/13
In
the matter between:
WILLIAM
OLIVER NEVILLE JAMES
(ID
NO:
4[…])
.......................................................................................................
First
Applicant
RONALD
MCDONALD N.O
(ID
NO:
3[…])
...................................................................................................
Second
Applicant
RONALD
JAMES GLAISTER N.O
(ID
NO:
3[…])
...................................................................................................
Third
Applicant
IVAN
STEVEN COLENBRANDER
N.O
....................................................
Fourth
Applicant
and
KIMOSTAR
(PROPRIETARY) LIMITED
REGISTRATION
NO:
2010/018402/07
...............................................................
Respondent
JUDGMENT
Delivered:
06 September 2013
MBATHA,
J
[1]
Before me is an application for the provisional winding up of the
Respondent. The application is opposed by those representing
the
Respondent.
[2]
The Applicants are the Trustees of the Royal Mews Trust, who are the
beneficial owners of the commercial property in Pietermaritzburg.
The
Respondent is Kimostar (PTY) LTD, a company with registered offices
situated at Pietermaritzburg, represented by its sole director,
Mr
Vidyavrata Baijoo.
[3]
The Respondent is opposing the granting of any liquidation order
against it.
[4]
On or about the 23
rd
of December 2010 at Pietermaritzburg, the Applicants duly represented
by, William Oliver Neville James and the Respondent duly
represented
by its sole director, Vidyavrata Baijoo, concluded a lease agreement
of the premises situated at 1 Heslop Road, Pietermaritzburg.
This
lease agreement is commonly referred to as the “main agreement”
in the papers. The term of the lease was for a
period of five (5)
years commencing from the 1
st
of January 2011. The monthly rental was fixed at R28 000.00 per
month excluding VAT and excluding additional charges payable
by the
Respondent.
[5]
The Respondent defaulted in its obligations under the main lease,
which resulted in the conclusion of another agreement. On
the 17
th
of September 2012 the parties entered into the agreement entitled
“Agreement Varying a Lease”.
[6]
The material terms of the variation agreement
inter alia
,
state the following:
6.1 It records that
the Respondent has defaulted in its obligation under the Main Lease
resulting in the Applicant instituting action
against it and its
surety for recovery of rental and other relief (Clause 1.2);
6.2 The rental
payable by the Respondent in respect of the premises is varied for a
period of six months from 1 August 2012 to 31
January 2013 (Clause
2);
6.3 The monthly
rental payable by the Respondent to the Applicant is reduced to
R25 000,00 inclusive of VAT, and excluding
the additional
charges referred to in paragraph 13.6 above, and such rental is to be
paid on or before the 7
th
day of each month (Clause 3.1);
6.4 The rental
referred to in Clause 2.1 of the Variation, and the deferred rental
for March and April 2012 is to be settled in
full on or before 15
January 2013 (Clause 2.2);
6.5 The service
charges in terms of paragraph 14 of the Main Lease must be paid by
the Respondent to the Applicant within ten (10)
days of receipt by
the Respondent of the Applicant’s invoice in respect thereof
(Clause 2.3);
6.6
The Variation will not in any way constitute a waiver of the
Applicant’s rights in terms of the Applicant’s action,
nor will it constitute a remedy by the Respondent of its breaches in
terms of the Main Lease. The Applicant agreed not to
exercise
its rights to cancel the lease and eject the Respondent provided that
the Respondent fulfils all the terms of the Main
Lease as amended by
the Variation (Clause 4).
[7]
The Applicant alleges that the Respondent despite all the efforts to
accommodate it, it still defaulted in its payments in terms
of the
new varied lease agreement. Furthermore that, at the time of
the issuing of this application it was still indebted
to it in the
amount of R170 537,19.
[8]
The Respondent is opposing this application on the following basis.
(a) That the parties
had been engaged in settlement negotiations as late as the 14
th
of February 2013;
(b) Pursuant to such
settlement negotiations, three (3) amounts totalling to a sum of
R69 527,34 were paid towards the Applicants’
claim and the
Applicants has not acknowledged such payment in their application;
(c) The payments
were made with an understanding that the Applicants will allow the
Respondent to continue trading and that the
balance of the
Respondent’s indebtedness would be liquidated out of the
Respondent’s trading activities;
(d)
The Applicants, without the knowledge of the Respondent launched an
application in terms of Section 32 of the Magistrates’
Court
Act
[1]
, which caused the
Respondent’s business to be closed, cease trading and prevent
the Respondent from having access to the
premises by changing the
locks of the doors. It found that the actions of the Applicants
were dilatory and not
bona
fide
in the circumstances;
(e)The
Respondent further states that this led to loss of profits and has a
counterclaim against the Applicants for loss of profit.
The
counterclaim which far much exceeds the claim of the Applicants.
[9]
It is common cause that the Respondent is in arrears with its rental
payments. It is also common cause that the Respondent has
failed to
perform in terms of the main agreement and in terms of the variation
agreement.
[10]
The Respondent avers that there was an oral variation of the lease
agreement. I have to determine from the papers if such an
oral
agreement came into place. I cannot lose sight that I am dealing here
with an application for a provisional winding order
of the
Respondent. The issue to determine is whether the Applicants have
made out a
prima facie
case
for the winding up of the Respondent. The question to be considered
being – is the Respondent indebted to the Applicant
or not and
is the Respondent unable to pay its debts? I must also consider the
averments made by the Respondent in their answering
affidavit.
[11]
The Applicant in a provisional order must make out a
prima
facie
case, in the absence of any evidence to the contrary. I must
determine in particular where the matter is opposed like this one
if
there are no fundamental factual disputes that are raised in the
affidavit. One must bear in mind as stated in
Mohamed
v Malik
[2]
that
viva
voce
evidence
can only be allowed in exceptional circumstances.
[12]
The factual dispute must be
bona
fide
and genuine. I was referred to various decisions of our Court by
counsel for the Applicant, amongst others,
Brisley
v Drotsky
[3]
whereby the Court held that a term (an entrenchment clause) in a
written contract providing that all amendments to the contract
have
to comply with specified formalities is binding, still remains in
force. Furthermore, the principle as of
bona
fides
,
namely, that the entrenchment clause ought not to be enforced because
it would be in the circumstances be unreasonable, unfair
and in
conflict with the principles of
bona
fides
,
cannot be successfully invoked. The non-variation clause virtually
kills the factual disputes.
[13]
If one looks at the variation agreement, the Respondent acknowledges
its indebtedness to the Applicants and that it defaulted
with its
payments. This is further acknowledged by the Respondent in paragraph
6.2 on page 89 of its representatives’ answering
affidavit, in
that the amount still outstanding is the sum of R163 394,24.
This is further confirmed by the exchange of emails
between the
Director of the Respondent and those representing the Applicants.
[14]
I am satisfied that the Respondents’ inability to pay its debts
has been proved. The director of the Respondent in one
of his emails
to the Applicants intimated that the company was to be placed under
business rescue. There is no such evidence in
the papers before me
that indicate this. There is nothing that indicates any form of
solvency on the part of the Respondent that
has been placed before
the Court.
[15]
the question that arises is whether the Respondent is in fact
insolvent. It is not in dispute that the Respondent owns no assets
other than certain stock in trade. There is a notarial bond
registered by Business Partners over movables in the premises. The
Respondent has committed an act of insolvency. It has
acknowledged in writing through its attorneys its indebtedness and
requested for indulgences to raise funds. It has given undertakings
to pay, but at the same time failed to confirm whether these
payments
can be made or not. Furthermore, the Applicant holds no security for
its claim against the Respondent.
[16]
The variation agreement expressly states in paragraph 2.2 that in
addition to the rental referred to in sub-paragraph 2.1,
the deferred
rental for March and April 2012 in terms of the lease shall be
settled in full on or before the 15
th
of January 2013. This did not happen. This indicates that the
Respondent is hopelessly insolvent.
[17]
The Respondent alludes to that it understood that it would be allowed
to continue trading irrespective of it not meeting the
terms of the
varied agreement. The Respondent further stated that the Applicant
acted
mala fide
as the applicants proceeded with the application in the Magistrates’
Court, which was later withdrawn, though they were still
negotiating
with them. The view held by the Respondent is that this has led to a
dispute of facts and the matter must be referred
to oral evidence.
[18]
In
Buffalo
Freight Systems (PTY( LTD v Crestleigh Trading (PTY) LTD
and
Another
[4]
the court endorsed the principle held in
Truth
Verification Centre CC v PSE Truth Detection CC
and
Others
[5]
that a “common sense and robust approach” in relation to
the resolution of disputed issues on paper, where a Respondent
contents himself with bald and hollow denials of factual matter
confronting him must be adopted. It went further to state that
the
Court should be prepared to undertake an objective analysis of such
disputes when required to do so.
[19]
I am not persuaded to accept that the indulgencies afforded to the
Respondent by the Applicants, translated into an oral agreement
between the parties. Firstly, the main lease agreement was in writing
and it categorically at paragraph 27.3 thereof state that
no
agreement varying, adding to, deleting from or cancelling this
agreement shall be effective unless reduced to in writing and
signed
by or on behalf of the parties. This is confirmed by the fact that
the variation agreement was done in writing. The version
of the
Respondent cannot be accepted as there is no indication that the
Applicants waived their rights, by granting the Respondent
certain
indulgencies. The main agreement is clear on this aspect as it states
as follows:
“
No
indulgencies granted by a party shall constitute a waiver of any of
that party’s rights under this agreement; accordingly,
that
party shall not be precluded, as a consequence of having granted such
indulgence, from exercising any rights against the other
which may
have arisen in the past or which may arise in the future”
I
find that there are no fundamental factual disputes that need this
matter to be referred to oral evidence, as the non-variation
clause
puts paid to any suggestion of an oral variation.
[20]
The Respondent was afforded an opportunity to settle its indebtedness
but failed to do so. Every effort was made by the Applicants
to
accommodate it. Nothing in the exchange of correspondence or in any
form suggests that there were other terms entered into,
save the
variation agreement.
[21]
Nowhere in the Respondent’s affidavit that I can find where he
states that he has settled his indebtedness to the Applicants.
The
Respondent is not in a position to settle its debts. The closing of
the business premises was communicated by email dated the
31
st
of January 2013 to the Director of the Respondent. The email
categorically stated that provided that everything owing through the
end of January, plus the February rental is paid in full by no later
than 16h00 on the 8
th
of February 2013, they were amenable to permit the Respondent to
continue trading through the end of February. This did not happen.
There is no suggestion here that he can trade indefinitely, whilst
trying to find cash elsewhere
[22]
The Respondent has raised that it has a counterclaim against the
Applicants. The Applicants’ counsel submitted that it
was not
even quantified what losses it suffered. In the light of the state of
insolvency of the Respondent it is unlikely that
the business was
generating any form of income. Though submitted from the bar,
which was not disputed by the Respondents’
counsel, in the
light that Business Partners have also perfected their notarial bond,
it is indicative of the state of insolvency
of the Respondent. The
Respondent is both factually and commercially insolvent.
[23]
I am satisfied that the Applicants have established a prima facie
case on a balance of probabilities. I was referred to
Kalil
v Decotex
(PTY)
LTD and Another
[6]
by the Respondent. The very same case states categorically that the
Court must be satisfied that a
prima
facie
case has been made out; then it can exercise its discretion to grant
or refuse the order and that in exceptional circumstances
it can hear
viva voce evidence on any relevant aspect of the matter. This is not
an appropriate matter for a referral to oral evidence.
The Applicants
have not been wrongfully responsible for the situation in which the
Respondent finds itself in.
[24]
I therefore find in favour of the Applicants. I make the following
order:
(a)
That Kimostar (PTY) Limited (Registration
number CK 2010/018402/07) be and is hereby placed under provisional
liquidation in the
hands of the Master of the KwaZulu-Natal High
Court, Pietermaritzburg;
(b)
That the rule nisi be and is hereby issued
calling upon the Respondent, and all other interested parties to show
case, if any, to
this Honourable Court on the 10
th
of October 2013 at 09h30 why the First Respondent close corporation
should not be finally wound-up;
(c)
That this order be served on the Respondent
Company at its registered office situated at Ground Floor, Nedbank
House, 161 Pietermaritz
Street, Pietermaritzburg, KwaZulu-Natal and
be published on or before the 07
th
day of October 2013, once in the Government Gazette and once in the
Witness newspaper; and
(d)
That the costs hereof be in the
liquidation;
MBATHA,
J
Date
of hearing: 23 August 2013
Date
of Judgment: 06 September 2013
Counsel
for the Applicant: Adv C.G Van der Walt
Instructed
by: Tomlison Mnguni James Incorporated
165
Pietermaritz Street
Pietermaritzburg
Counsel
for the Respondent: Adv R. Nirghin
Instructed
by: Sangham Incorporated
188
Retief Street
Pietermaritzburg
[1]
Act
32 of 1944, as amended.
[2]
1930
TPD 615
[3]
2002
(4) SA 1 (SCA)
[4]
2011(1)
SA 8 (SCA)
[5]
1998
(2) SA 689 (W)
[6]
[1987] ZASCA 156
;
1988
(2) ALL SA 159
(A)