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[2012] ZAKZDHC 96
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Business Partners Ltd v Yellow Star Properties 1061 (Pty) Ltd (7188/2011) [2012] ZAKZDHC 96 (17 July 2012)
IN THE KWAZULU-NATAL HIGH COURT -
DURBAN
REPUBLIC OF SOUTH AFRICA
CASE NO: 7188/2011
In the matter between:
BUSINESS PARTNERS LIMITED
......................................
APPLICANT
AND
YELLOW STAR
PROPERTIES 1061 (PTY) LTD
.............
RESPONDENT
(REGISTRATION NUMBER: 2000/016619/07)
DATE OF DELIVERY:
JUDGEMENT
RADEBE J
INTRODUCTION
[1] The applicant brought an
application for the final winding-up of the Respondent in terms of
Section 344(f) of the Companies
Act 61 of 1973 ("the Old Act").
The crisp and primary issue for
determination in this matter is whether the Applicant is entitled to
rely upon the now- repealed
section 344(f) of ("the Old Act").
The secondary issue is whether condonation for the late filing of the
Replying Affidavits
should be granted. Nothing much turns on the
latter issue since the Respondent in the application for condonation,
does not oppose
that application and indicated that it would abide by
the Honourable Court's decision.
[2] Relying on
the provisions of Rule 27(3) of the Uniform Rules,
1
which provides that "the court may, on good cause shown, condone
'any' non-compliance with the Rules, such condonation was
granted at
the commencement of the hearing on 10 May 2012.
This issue
need not, therefore, be deliberated upon further. The main concern
falls to be the primary issue, which is a point
in
limine,
raised by the Respondent.
If the court
finds that the Applicant is entitled to rely upon section 344 (f) of
the Old Act, then the other issue raised in the
papers become
relevant. At the hearing of the application I indicated that I would
deal with the point
in limine
only at this stage.
BACKGROUND
[3]
3.1. It is common cause that:
(i) the Applicant is a 40%
shareholder in Respondent;
(ii) the Applicant is a creditor of
the Respondent, owes it an amount in the region of R7,7m;
(iii) there are other creditors like
eThekwini Municipality.
3.2. The
Application arose from the fact that the said amount owed to the
Applicant remains unpaid despite the undertaking by the
Respondent on
20 July 2011 that the debt would be paid when the immenent transfer
of its principal asset went through.
2
3.3. The Applicant relies upon
Section 344(f) of the Old Act which provides, as a ground for winding
up, that: "if the company
is unable to pay its debts as
described in Section 345." It further contends that such
reliance is by virtue of the transitional
provision in Section 9 of
Schedule 5 of the Companies Act 71 of 2008 ("the New Act").
3.4. The
Respondent on the other hand, contends that it is a solvent company
and therefore the now-repealed section 344 (f) of the
Old Act does
not apply in the instance of solvent companies; that the full reading
of section 9 subitems (1), (2) & (3) reveals
that provisions of
"sections 344,
inter alia
does not apply to the winding up of a solvent company; that the New
Act does not contain any provision enabling a winding up of
a solvent
company on the ground of inability to pay its debts, but instead
makes provision for other grounds as envisaged in section
81 of the
New Act, none of which apply in its case.
The provisions of section 9 of
schedule 5 of the New Act are as follows:
"9(1)
Despite the repeal of the previous Act, until the date determined in
terms of subitem (4), Chapter 14 of that Act continues
to apply with
respect to the winding up and liquidation of companies under this
Act, as if that Act had not been repealed, subject
to subitems (2)
and (3).
(2)
despite subitem (1) sections 343, 344, 346 and 348-353 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.
(3)
if there is a conflict between a provision of the previous Act that
continues to apply in terms of subitem (1), and a provision
of Part G
of Chapter 2 of this Act with respect to a solvent company, the
provisions of this Act prevails.
(4)
..."
3.5. Mr
Harcourt SC, for the Applicant, argued that the point
in
limine
had not been raised by the
Respondents in papers, and that it was only raised in the course of
argument on the opposed motion,
thus taking the Applicant by
surprise. Mr Harpur SC, for the Respondent argued that the only issue
to be decided initially is whether
the Respondent is solvent or not,
and if solvent, then section 344 of the Old Act does not apply; that
common cause of facts as
set out in the affidavits is that the
Respondent is solvent; and that a point of law can be raised in these
circumstances even
if it has not previously been raised.
LEGAL POSITION
[4] It is
trite that a point of law can be raised in court by counsel for the
parties and/or
meromotu
even when it has not been dealt with in the papers, otherwise a
decision may be made by court based on an incorrect application
of
the law.
In the case of CUSA V TAO
YING Metal Industries
3
Ngeo bo J
(as
he then was) made the following remark:
"where
a point of law is apparent on the papers, but the common approach of
the parties proceeds on a wrong perception of what
the law is, a
court is not only entitled, but is in fact obliged,
mero
mutu,
to raise the point of law and
require the parties to deal therewith. Otherwise, the result would be
a decision premised on an incorrect
application of the law. That
would infringe the principle of legality."
[5]
In Telkom Suid-Afrika BPK vs Richardson
4
GrossKopf-JA said
:
"Daar
bestaan myns insiens niks wat 'n Hof verplig om uitvoering te gee aan
so 'n vertolking as die Hof nie daarmee saamstem
nie. Onder hierdie
omstandighede was die vertolking wat die partye aan die regulasies
geheg het, blote regsubmissies wat die Hof
op meriete kon aanvaar of
verwerp. Soos dit gestel is in
Paddock
Motor (Pty) Ltd vs Igesund 1976(3) SA 16 (A)
op 23 F,
it
would create an intolerable position if a court were to be precluded
from giving the right decision on accepted facts merely
because a
party failed to raise a legal point, (on paper) as a result of an
error of law on his part../
[6] In this
matter, the common cause facts set out in the Affidavits is that the
Respondent is solvent. Counsel for the Applicant
argued that the
Applicant, over and above being a creditor of the Respondent, is also
a 40% shareholder of the Respondent and therefore
entitled, as an
alternative, to rely on Section 81(l)(c)(ii) and section 81(l)(e) of
the New Act. For this contention he referred
to pp 431-449 of the
indexed papers (the Applicants Replying Affidavit). None of the
contents thereof show that the Respondent
is insolvent. The
submission by Mr Harcourt SC that during March 2009 the Director of
the Respondent was trying to sell the major
asset of the Respondent
does not go to show that the Respondent is not solvent
5
.
Further, nothing on papers show that the Respondent's assets are
being misapplied or wasted - to fit in with the provisions of
section
81(l)(e)(ii) of the New Act
6
.
[7] The above
is designed to show that the common cause facts set out in the
affidavits, show that the Applicant cannot be said
to have been taken
by surprise in regard to the point
in
limine,
and is not intended to get
into the merits of whether the Applicant is entitled to, or not to
the relief it seeks, that is of provisional
liquidation of the
Respondent.
[8] Mr Harcourt SC, referred me to
the decision in
Minister of Land Affairs and
Agriculture and others v D & F Wevell Trust
7
,
where following was stated:
"...
The second is that the case argued before this court was not properly
made out in the answering affidavits deposed to
by Andreas. The case
that was made out, was conclusively refuted in the replying
affidavits as I pointed out in paras [18] to [20]
above. It is not
proper for a party in motion proceedings to base an argument on
passages in documents which have been annexed
to the papers when the
conclusions sought to be drawn from such passages have not been
canvassed in the affidavits. The reason
is manifest - the other party
may well be prejudiced because evidence may have been available to it
to refute the new case on the
facts. The position is worse where the
arguments are advanced for the first time on appeal. In motion
proceedings, the affidavits
constitute both the pleadings and the
evidence: Transnet Ltd vs Rubenstein, and the issues and averments in
support of the parties'
cases should appear clearly therefrom. A
party cannot be expected to trawl through lengthy annexures to the
opponent's affidavit
and to speculate on the possible relevance of
facts therein contained. Trial by ambush cannot be permitted."
[9] I am of
the view that this case is distinguishable to the case before me in
that
Cloete JA
in
that case, made an overrider that "... when the conclusions
sought to be drawn from such passages have not been canvassed
in the
affidavits," whereas, in
casu,
the issue can be determined on a point of law from the common cause
facts set out in the affidavits themselves, particularly the
Answering Affidavit and the Replying Affidavit
8
,
in so far as the solvency of the Respondent is concerned and from the
Founding Affidavit
9
in so far as the transitional requirements of the New Act are
concerned. The conclusions can therefore be drawn from the Affidavits
themselves.
[10] I am
therefore of the view that the point
in
limine
was correctly raised and had
to be dealt with.
[11] I come now to the determination
of whether the Applicant is entitled to rely upon the now repealed
section 344(f) of the Old
Act.
Although in
the papers the Applicant did make allegations of "just and
equitable" in terms of section 344(h) of the Old
Act, these were
not persisted with in the Applicants Heads of Argument, nor before
court
10
.
[12] Section 344(f) of the Old Act
reads as follows:
"344.
A company may be wound up by Court if-(f) the company is unable to
pay its debts as described in section 345;"
Section 344(f) has been repealed by
section 224(l)of the New Act, which provides that:
"224(1)
The Companies Act, 1973 (Act No. 61 of 1973), is hereby repealed,
subject to subsection (3)
(
2
)...
(3)
the repeal of the Companies Act, 1973 (Act No. 61 of 1973), does not
affect the transitional arrangements, which are set out
in Schedule
5."
[13] It is clear therefore that the
application was brought in terms of S344(f) of the Old Act under the
mistaken construction of
the transitional provisions in Section 9 of
Schedule 5 of the New Act, as if the Old Act had not been repealed. I
say this because
if one reads subitems 2 & 3 of Section 9 of
Schedule 5 of the New Act, one can clearly discern that section 344
is amongst
those sections that do not apply to the winding up of
solvent companies.
[14]
In
Budge and Others
NNO VS Midnight Storm Investments 256 (Pty) Ltd and Another
11
Meyer J
stated
the following:
"Each
application was brought in terms of s344(h) of the Companies Act 61
of 1973 (the Old Companies Act) upon the erroneous
supposition that
the transitional provisions of the Companies Act 71 of 2008 (the new
Companies Act) have
the effect of keeping s344(h) of the Old
Companies Act
operative. The supposition was incorrect insofar as the
winding-up of solvent companies, such as Midnight Storm and
Wavelenghts,
is concerned. This is clear from the provisions of item
9 in schedule 5 of the new
Companies Act."
[15
]
This brings me to the enquiry as
to what is a solvent company, and to the question therefore, of
whether the Respondent is a solvent
company.
In
Southern
Life Association vs Estate Van Zyi
12
the word "solvent" was analysed as follows:
"the
word "solvent" in section 5 of the Moratorium Act, 1914,
should be liberally construed... and hold that, where
a person gives
a
bona fide
statement of his assets and liabilities, from which it would appear
that under ordinary circumstances he would be able to discharge
his
obligations and that merely on account of the war he has difficulty
in meeting them, there the court ought to hold that the
Act should
apply."
[16] The word "solvency"
is described in section 4(l)(a) of the New Act, which provides as
follows:
"4. Solvency and liquidity
test.
(1) For any purpose of this Act, a
company satisfies the solvency and liquidity test at a particular
time if, considering all reasonably
foreseeable financial
circumstances of the company at that time-
(a) the assets of the company, as
fairly valued, equal or exceed the liabilities of the company, fairly
valued; and;
(b) it appears that the company will
be able to pay its debts as they become due in the ordinary course of
business
[17]
In Ex Parte Harmse
13
Magid J
held
that:
"(i)
the word "insolvent" must be taken to mean that the
liabilities of the debtor, fairly estimated, exceed the
value of his
assets, fairly valued."
and at para 9.8
"...only
when it is established that it is improbable that his assets will
realise sufficient to settle the amount of his debts
in full that it
can truly be said that the court ought to be satisfied that the
estate of the debtor is insolvent.
It
is only acceptance and admissible evidence which can displace the
prima facie
inference of solvency when the applicant's own estimate of values
exceed the amount of the liabilities."
[18] In
casu,
it is, or ought to be common cause that the Respondent's assets
exceed its liabilities. In paraphas 17 of its Answering Affidavit
14
the Respondent alleges
inter alia
that certain amounts owed to the
Applicant are indeed due but not payable, whereas there are also
amounts due and payable to the
credit of the Respondent. This should
be read together with Applicant's Replying Affidavit
15
which alleges
inter alia
that Respondent's immovable asset, fairly estimated, is valued at
R22m in terms of the 4
th
offer which was anticipated.
[19] The Applicant is a 40%
shareholder of the Respondent. Even if consideration is taken of the
fact that part of the nett proceeds
of the sale would be for the
benefit of the Applicant, it is improbable that the Respondent would
be left insolvent, regard being
had to all estimated liabilities as
evidenced in the papers.
[20] The Applicant alleges in its
Founding Affidavit that there are in fact judgements which have been
entered against the Respondent
as follows:
"44.1. a judgment in the amount
of R1 036 896.00 issued by this Honourable Court under case no.
6084/2010 on 5 August 2010
in favour of the eThekwini Municipality in
respect of rates, water and sewage; and,
44.2. a
judgement in the amount of R192 392.00 issued by this Honourable
Court under no 9043/2007 on 25 October 2007 in favour of
Rambos
Construction CC."
16
In answer to
that, the Respondent alleges that the judgment in favour of eThekwini
Municipality was taken by mistake and that it
has been abandoned in
writing. In regard to the Rambos Construction judgment, the
Respondent learnt for the first time about such
when the allegation
was made in this application and that it is taking steps to rescind
such judgement
17
.
The Applicant's reply in respect of
the eThekwini Municipality judgment is that:
"I
annex hereto, marked RA 24, a copy of a telefaxed report from the
Rates Legal Department ... dated 16 November 2011, which
records, as
is clarified in manuscript that the Respondent is indebted to the
Municipality in the amount of R445 386.24"
18
[20] Perusal
of RA24 does not show how the two amounts of R126 539.20 and R318
847.04 which make up the total of R445 386.24 were
arrived at.
Particularly, the amount of R126 539.20 seems to have accrued as at
2005/11/16 but it says nothing about what period
the sum of R318
847.04 covers. However, what is remarkable is that this amount is now
far less than the R1 036 896.00 referred
to in paragraph 19
supra.
The additional liabilities as contended by the Applicant are, by any
standards, relatively minor when measured against the value
of the
asset of the Respondent.
[21] The onus rests upon the
Applicant to satisfy the court, that the Respondent is insolvent and
therefore unable to pay its debts.
The applicant has not established
on a balance of probabilities that the Respondent is insolvent and
unable to pay its debts.
[22] The evidence in the papers
establishes that the only conclusion that the court can come to is
that the Respondent is indeed
a solvent company. The Applicant can
therefore not rely on section 344 of the Old Act. The Applicant could
if it chose to, have
relied on section 81(1) of the New Act, which
set out the grounds upon which a court may order a solvent company to
be wound up.
[23] Section 81(1) of the New Act
reads:
(1) A court may order a solvent
company to be wound up if -
(a) the company has -
(i) resolved, by special resolution,
that it be wound up by the court; or
(ii) applied to the court to have
its voluntary winding- up continued by the court.
(b) the practitioner of a company
appointed during business rescue proceedings has applied for
liquidation in terms of section 141(2)(a),
on the grounds that there
is no reasonable prospect of the company being rescued; or
(c) one or more of the company's
creditors have applied to the court for an order to wind up the
company on the grounds that-
(i) the company's business rescue
proceedings have ended in the manner contemplated in section
132(2)(b) or (c)(i) and it appears
to the court that it is just
equitable in the circumstances for the company to be wound up; or
(ii) it is otherwise just and
equitable for the company to be wound up;
(d) the company, one or more
directors or one or more shareholders have applied to the court for
an order to wind up the company
on the grounds that -
(i) the directors are deadlocked in
the management of the company, and the shareholders are unable to
break the deadlock, and -
(aa) irreparable injury to the
company is resulting, or may result, from the deadlock; or
(bb) the company's business cannot
be conducted to the advantage of shareholders generally, as a result
of the deadlock;
(ii) the shareholders are deadlocked
in voting power, and have failed for a period that includes at least
two consecutive annual
general meeting dates, to elect successors to
directors whose terms have expired; or
(iii) it is otherwise just and
equitable for the company to be wound up;
(e) a shareholder has applied, with
leave of the court, for an order to wind up the company on the
grounds that-
(i) the directors, prescribed
officers or other persons in control of the company are acting in a
manner that is fraudulent or otherwise
illegal; or
(ii) the company's assets are being
misapplied or wasted; or
(f) the commission or Panel has
applied to the court for an order to wind up the company on the
grounds that:
(i) the company, its directors or
prescribed officers or other persons in control of the company are
acting or have acted in a manner
that is fraudulent or otherwise
illegal, the commission or panel, as the case may be, has issued a
compliance notice in respect
of that conduct, and the company has
failed to comply with the compliance notice; and
(ii) within the previous five years,
enforcement procedures in terms of this Act or the Close Corporation
Act, 1984 (Act No. 69
of 1984), were taken against the company, its
directors or prescribed officers, or other persons in control of the
company for
substantially the same conduct, resulting in an
administrative fine, or conviction for an offence.
This section does not include any
ground based on an "inability to pay its debts."
CONCLUSION
[24] I am satisfied that the
complexity of the matter is of such a degree that it necessitated the
engagement of Senior Counsel.
[25] In the result I make the
following order.
1. The late filing of the Replying
Affidavits by the Applicant is hereby condoned.
2. The point
in limine
is upheld.
3. The Applicant is ordered to pay
the costs of the application, which should include the costs of
Senior Counsel.
RADEBE, J
DATE 13 July 2012
DATE
OF HEARING: 10 MAY 2012
DATE
OF JUDGEMENT: 17 JULY 2012
COUNSEL
FOR APPLICANT: ADV. HARCOURT
INSTRUCTED
BY: MAHARAJ ATTORNEYS
COUNSEL FOR THE RESPONDENT: ADV.
HARPUR SC
INSTRUCTED
BY: OMAR ATTORNEYS
1
See
also in this respect: Mynhardt
vs
Mynhardt
1986(1)SA 456(T) at 463H; Van Wyk vs Unitas Hospital
[2007] ZACC 24
;
2008 (2) SA 472
at 477para 20 A-C (cc); Classen vs Ritter 1992(4) SA 323 (Sec LD) at
328G-329 G
2
Answering
Affidavit at para 48 on pp 286-287 and para 56 on pp 297-298.
3
[2008] ZACC 15
;
2009
(2) SA 204
225, para 68, at A-B
4
1995(4)SA
183(D) at 195 at B-D
5
Annexure
RA3(a) at page 449 of the indexed bundle.
6
"81
(l)(e)(ii) a shareholder has applied, with leave of the court (my
emphasis) for an order to wind up
the
company on the ground that:
(i)
(ii)
the company
’
s
assets are being misapplied or wasted
7
2008(2)SA
184(SCA) at 200 B-C
8
Para
30-to39 on pp252-27l (Second bundle ) and pp 435-para 104.5 to 104.6
(Third bundle) and in essence showing that Respondents
assets,
fairly valued, exceed its liability
9
para
5 on page 10 of he Indexed papers
,
(First
Bundle)
10
Paragraph
4.2 on page 10 of the papers (First Bundle) and paragraphs 1 & 2
of Applicant's Short Heads of Argumenet.
11
2012(2)
SA 28(GSJ) at para 2 page 30
12
1915
CPD 39
at 40
13
[2004]
1 All SA 26
n at para 8.
14
P.
226-229
15
P.
435
para 104.5
16
para
44 on page 27 of the papers (First Bundle)
17
Para
46 on page 283-285 of the papers (Second Bundle)
18
Para
57 on page 417 of the papers (Third Bundle)