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[2011] ZAKZDHC 54
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Business Partners Ltd v Westville Manor House (Pty) Ltd (1100/2008, 10402/2010) [2011] ZAKZDHC 54 (29 November 2011)
In
the KwaZulu-Natal High Court, Durban
Republic
of South Africa
Case
No : 1100/2008
In
the matter between :
Business
Partners Ltd
…....................................................................................
Applicant
and
Westville
Manor House (Pty) Ltd
…...............................................................
Respondent
Case
No : 10402/2010
In
the matter between :
Auction
Alliance KwaZulu-Natal(Pty) Ltd
…........................................................
Applicant
and
Lot
1213 Westville (Pty) Ltd
…..................................................................
1
st
Respondent
Business
Partners Ltd
…..........................................................................
2
nd
Respondent
The
Standard Bank of South Africa Ltd
…................................................
3
rd
Respondent
Judgment
Lopes J
[1] On the 11
th
August 2011
Koen J in this court granted provisional liquidation orders against
Westville Manor House (Pty) Ltd (the respondent)
under case number
1100/2008, and against Lot 1213 Westville (Pty) Ltd (the first
respondent) under case number 10402/2010.
[2] The two matters are closely
related because Westville Manor House runs the business of a boutique
hotel and conference centre
from premises which are partly owned by
Lot 1213 Westville and partly by Dr Willem Andries Augustinus Gouws,
a director of both
companies and the driving force and controlling
mind behind the companies and the entire business operation.
[3] The debts upon which the
liquidation proceedings were based are :-
in the case of Westville Manor House,
that it stood surety for the debts of Dr Gouws to Business Partners
Ltd (the applicant under
case number 1100/2008). Dr Gouws owes that
company in excess of R5 700 000 in respect of a loan agreement
concluded with him
and royalties payable by him to Business
Partners;
in the case of Lot 1213 Westville, it
is indebted to Auction Alliance KwaZulu-Natal (Pty) Ltd (the
applicant under case number
10402/2010) in the sum of approximately
R700 000. In addition, Lot 1213 Westville registered a mortgage bond
over its immovable
property in favour of Standard Bank as surety for
the indebtedness of Dr Gouws to Standard Bank.
[4] The application for the
provisional liquidation of Westville Manor House was issued in
January of 2008 and the application for
the provisional liquidation
of Lot 1213 Westville in April of 2011. The applications have been
strenuously opposed at every stage,
but what is clear is that the
respondents in both cases cannot discharge their indebtedness to the
respective applicants. This
is despite repeated undertakings that
they could, and would, do so. I shall refer to the parties herein as
‘Business Partners’,
‘Westville Manor House’
(or the applicants) and ‘Auction Alliance’ and ‘Lot
1213 Westville’
(or the companies).
[5] The approach in assessing the
solvency or otherwise of companies is set out in
Absa Bank Ltd v
Rhebokskloof (Pty) Ltd and others
1993 (4) SA 436
(CPD) at 443 D
– F, where Berman J stated :-
‘
Even,
however, where a debtor has not committed an act of insolvency and it
is incumbent on his unpaid creditor seeking to sequestrate
the
former’s estate to establish actual insolvency on the requisite
balance of probabilities, it is not essential that in
order to
discharge the
onus
resting on the creditor if he is to achieve this purpose that he set
out chapter and verse (and indeed figures) listing the assets
(and
their value) and the liabilities (and their value) for he may
establish the debtor’s insolvency inferentially. There
is no
exhaustive list of facts from which an inference of insolvency may be
drawn, as for example an oral admission of a debt and
failure to
discharge it may, in appropriate circumstances which are sufficiently
set out, be enough to establish insolvency for
the purpose of the
prima
facie
case which the creditor is required to initially make out. It is then
for the debtor to rebut this
prima
facie
case and show that his assets have a value exceeding the sum total of
his liabilities. ...’
[6] There can be no doubt that the
orders of Koen J placing both companies into provisional liquidation
on the 11
th
August 2011 were correctly granted. Very
strong prima facie cases were made out. No real defences were put up
and assurances were
given that the debts would be paid by way of
financial assistance imminently forthcoming. Indeed, the then counsel
for Westville
Manor House and Lot 1213 Westville agreed in a previous
order, that if the claims were not satisfied, those companies would
consent
to the grant of the provisional orders. Accordingly it is now
for Westville Manor House and Lot 1213 Westville to persuade me that
the prima facie cases established by the applicants should not be
confirmed.
[7] Dr Gouws on behalf of the
companies has filed further affidavits subsequent to the provisional
orders in order to attempt to
demonstrate that the companies are not
in fact insolvent. Mr
Jefferys
SC who appeared for both
Westville Manor House and Lot 1213 Westville raised two defences in
opposition to the grant of a final
order against Westville Manor
House. Those defences are :-
on the 19
th
September 2008
Dr Gouws concluded a settlement agreement with Business Partners
which novated the original cause of action which
Business Partners
had against Westville Manor House. The submission is that any breach
of that settlement agreement requires
that Business Partners, as
against Dr Gouws qua principal debtor, must be dealt with in
accordance with the breach provisions
of that settlement agreement.
That has not been done by Business Partners and it is accordingly
not entitled to enforce the suretyship
agreement given in favour of
it by Westville Manor House for the debts of Dr Gouws;
with regard to the alleged inability
of Westville Manor House to pay its debts, Dr Gouws in his affidavit
deposed to after grant
of the provisional liquidation order attempts
to show that Westville Manor House has assets available to it which
exceed its
liabilities and, given time to realise those assets, it
will be able to pay its debts. In this regard Mr
Jefferys
made reference to the fact that Dr Gouws had disputed in a number of
letters the calculations made by Business Partners on which
the
balance alleged to be outstanding was calculated. His submission was
that as Business Partners had failed to deal with those
letters in
any way, the allegations therein stood and Business Partners had not
demonstrated on a balance of probabilities that
Westville Manor
House was unable to pay its debts or was insolvent.
[8] With regard to the settlement
agreement concluded between Dr Gouws and Business Partners, the
following aspects are relevant
:-
Dr Gouws admits having breached the
original agreement he concluded with Business Partners;
Business Partners was entitled to
have instituted action against him and Business Partners was
entitled to the relief claimed
by it in its action;
Dr Gouws confessed in whole to the
judgment sought by Business Partners in accordance with a confession
to judgment annexed to
the settlement agreement;
Business Partners undertook not to
lodge the confession to judgment provided that Dr Gouws made timeous
payments of stipulated
amounts to Business Partners beginning on the
28
th
August 2008 and extending monthly for a further
period of two years;
in the event of Dr Gouws failing to
make any payment timeously, the entire amount due to Business
Partners would become immediately
due and payable. Dr Gouws would be
obliged to pay that amount without demand;
Business Partners would abandon the
judgment it had already obtained in the action against Dr Gouws on
the basis that Dr Gouws
had given Business Partners a confession to
judgment;
the winding-up application against
Westville Manor House would be adjourned sine die;
in the event that Dr Gouws failed to
discharge his obligations, Business Partners was entitled, in its
sole and unfettered discretion,
to cancel the agreement without
notice and proceed on its original cause of action which remained
fully reserved. If it needed
to do so, Business Partners could lodge
the confession to judgment;
Dr Gouws confirmed that in the event
of him failing to make timeous payment in terms of the agreement,
Business Partners would
be entitled to sell the immovable property
owned by him. Dr Gouws gave Business Partners a power of attorney to
enable it to
do so.
[9] It is common cause that Dr Gouws
did not make timeous payment of all amounts in terms of the
settlement agreement. It is clear
from the correspondence annexed to
the affidavits filed by Dr Gouws after the provisional liquidation
order, that he was unable
to abide by the terms of the settlement
agreement and that he did not timeously make all the payments due in
terms thereof. Given
the reservation of its rights, which Business
Partners included in the settlement agreement, there is no doubt that
it was entitled
to proceed against Dr Gouws, inter alia, by selling
his immovable property.
[10] The clauses contained at the end
of the settlement agreement make it clear that any variation thereof
would only be valid if
recorded in an addendum to the settlement
agreement and signed by the parties. Any concession, condonation or
indulgence or any
breach of any terms of the settlement agreement
would in no way operate as a waiver of any rights accruing to
Business Partners
in terms of the settlement agreement, or constitute
a novation thereof.
[11] The breach clause in the
settlement agreement does no more than reiterate the acceleration of
the requirement for payment in
the event that any payments are not
made timeously, and records the legal rights available to Business
Partners to cancel the agreement
without notice, obtain judgment,
apply to court for an enforcement of the agreement and other legal
relief available to it. Nowhere
does the breach clause provide for a
course of conduct which Business Partners was obliged to follow which
would have precluded
it from continuing with the liquidation
proceedings or selling the immovable property of Dr Gouws. Indeed, it
is clear from the
general tenor of the settlement agreement and the
adjournment of the liquidation proceedings, that the contrary was the
intention
of the parties. I accordingly find that the first defence
has no merit.
[12] With regard to the second defence
raised by Mr
Jefferys
– i.e. that Dr Gouws was not in
fact indebted to Business Partners and accordingly it has no right to
proceed against him
and Westville Manor House, the facts disclosed in
the affidavits appear to indicate the contrary. The overriding
suggestion in
the opposing affidavits is that given time, Dr Gouws
would be able to sell his own property (or raise funds) to enable him
to settle
his indebtedness to Business Partners.
[13] Mr
Jefferys
pointed to the
analysis put up by Dr Gouws as evidence of the fact that Westville
Manor House was not insolvent, and that if he,
as principal debtor,
sold certain assets, together with other assets which could be
obtained, Westville Manor House could pay its
debts. I do not believe
it is necessary for me to go into the details of all the allegations
and correspondence. Suffice it to
say that admissions made by Dr
Gouws throughout the papers, together with the vague and generalised
statements regarding various
assets and their alleged value and
ownership by various entities, do not in any way demonstrate the
solvency of Westville Manor
House. The liquidation application for
Westville Manor House was issued in January of 2008. Three and a half
years have elapsed
since the application was initially brought. If
there was any possibility that Westville Manor House could have paid
the debts
owed by it as a result of its suretyship obligation for the
debts of Dr Gouws, that would have been done long ago.
[14] Mr
Jefferys
submitted in
argument that the applicants have had every opportunity properly to
value the assets belonging to various parties
which could have been
used to settle outstanding indebtedness. In this regard I refer to
Mackay v Cahi
1962 (4) SA 192
(OPD) at 206A where the learned
acting judge stated the following :-
‘
A respondent
in an application for provisional sequestration who seeks by means of
a statement of his assets and liabilities to
rebut the
prima
facie
evidence of insolvency furnished by inferential evidence of the
nature contained in the applicant’s petition should state
what
the assets are and the values he places on each asset. If he fails to
place a value on any particular asset he runs the risk
of that asset
being ignored for the purpose of determining his solvency. Should a
respondent fail to value a particular asset the
applicant can hardly
be expected to do so.’
[15] In addition to that reasoning, I
would add that where those assets are dispersed between various legal
entities, it is incumbent
upon a respondent to demonstrate not only
the value of the assets, but the availability of those assets,
belonging as they do to
separate legal entities. In this regard Dr
Gouws put up no independent valuation of the various immovable
properties. With regard
to the furniture and fittings which he stated
are valued at between R8 000 000 and R10 000 000, he stated that some
were owned
by himself, some by his wife, and some by a company W A A
Gouws Management Services (Pty) Ltd. No real distinction is made with
supporting documentation between the various items of furniture which
could evidence the value of the items or who owned what.
[16] In addition, I am in respectful
agreement with the dicta of Caney J in
Rosenbach & Co (Pty)
Ltd v Singh’s Bazaars (Pty) Ltd
1962 (4) SA 593
(D) at 597
C – F where the learned judge stated :-
‘
The proper
approach in deciding the question whether a company should be wound
up on this ground appears to me, in the light of
what I have said, to
be that, if it is established that a company is unable to pay its
debts, in the sense of being unable to meet
the current demands upon
it, its day to day liabilities in the ordinary course of its
business, it is in a state of commercial
insolvency; ... If the
company is in fact solvent, in the sense of its assets exceeding its
liabilities, this may or may not, depending
upon the circumstances,
lead to a refusal of a winding-up order; the circumstances
particularly to be taken into consideration
against the making of an
order are such as show that there are liquid assets or readily
realisable assets available out of which,
or the proceeds of which,
the company is in fact able to pay its debts. ...’
Westville Manor House has failed to
adduce evidence which would persuade me that the company has assets
available to it which could
be sold to satisfy its debts.
[17] Mr
Jefferys
submitted that
in view of the letters written to Business Partners by Dr Gouws
disputing the accuracy of the amounts owing to that
company, I should
accept that Dr Gouws was not in arrears of the payments he was
obliged to make in terms of the settlement agreement.
I cannot agree
with this statement. The affidavits and the correspondence are
littered with admissions made by Dr Gouws which make
it clear that he
could not pay timeously the debts he owed in terms of the settlement
agreement. Even were I to accept that Business
Partners had
overcharged Dr Gouws by using an incorrect interest rate from time to
time, and had failed to calculate the royalties
due entirely
accurately, I am not satisfied that Dr Gouws has demonstrated
circumstances which would show that he had not failed
to make timeous
payment of his admitted indebtedness to Business Partners. Indeed,
the late raising of this defence together with
the admissions he has
made in the papers contradict this conclusion.
[18] In any event I would put the
denials of insolvency by Dr Gouws in the category of those which do
not raise a real, genuine
or bona fide dispute of fact as envisaged
in
Plascon-Evans Paints v Van Riebeeck Paints
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634 I – 635B. In the circumstances I am not persuaded
that the rule granted by Koen J in respect of Westville Manor
House
should not be confirmed.
[19] With regard to the provisional
order granted in respect of Lot 1213 Westville, Mr
Jefferys
raised only one point. He submitted that it was unlawful in terms of
s 34 of the Constitution of the Republic of South Africa,
1996 for
Auction Alliance to have relied upon the power of attorney given to
it by Dr Gouws to sell the immovable property which
gave rise to the
commission which formed the debt owed to it by Lot 1213 Westville.
[20] It was submitted on behalf of Lot
1213 Westville that there was nothing in the settlement agreement
which indicated that Auction
Alliance could sell the property without
notice to Dr Gouws. Auction Alliance should have approached a court
in the event that
it wanted to sell the property and should not have
sold the property without such authority.
[21] S 34 of the Constitution of the
Republic of South Africa, 1996 provides that :-
‘
Everyone has
the right to have any dispute that can be resolved by the application
of law decided in a fair public hearing before
a court or, where
appropriate, another independent and impartial tribunal or forum.’
[22] With regard to the sale of the
immovable property belonging to Dr Gouws :-
he agreed in the settlement agreement
that in the event of his failing timeously to make payment of the
amounts due therein the
defendant could realise his immovable
property and apply the proceeds to the accelerated debt;
when Business Partners attempted to
realise the immovable property by public auction, Dr Gouws brought
an application in the South
Gauteng Division of the High Court for
an interdict preventing Business Partners from proceeding with the
sale;
Business Partners then agreed not to
proceed with that auction pending the outcome of what is described
as the first interdict
application which was eventually dismissed
with costs;
Business Partners then instructed Ian
Wyles Auctioneers to proceed with another auction. At that sale a
friend of Dr Gouws, one
Harry Fouche outbid all potential purchasers
at the sale and then tendered a cheque in respect of the deposit,
which was returned
unpaid by his bank;
when Ian Wyles Auctioneers had
arranged to proceed with that auction, Dr Gouws sought a second
interdict in the South Gauteng
High Court which was summarily
dismissed with costs;
Auction Alliance was then instructed
by Business Partners to again attempt to sell the property by public
auction;
Dr Gouws and Fouche then repeated
their conduct at the subsequent auction and the property was again
knocked down to Fouche;
after that auction Fouche concluded
an agreement of sale. A deed of nomination of Lot 1213 Westville as
the purchaser was signed,
and an acceptance of that nomination,
together with deeds of suretyship in respect of the purchaser’s
obligations by Dr
Gouws and Fouche were completed;
in terms of the conditions of sale
the purchaser was responsible for paying the auctioneer’s
commission at the rate of 10%
of the purchase price plus VAT, which
was earned upon the fall of the hammer, and payable immediately.
[23] Accordingly, Auction Alliance was
owed the sum of R752 000 by Lot 1213 Westville, of which R50 000 only
was paid.
[24] In my view the constitutional
point cannot succeed in circumstances where :-
Dr Gouws was aware at all material
times of the pending sale;
Dr Gouws took legal steps to prevent
the sales taking place in the form of the two High Court interdicts
which were dismissed;
having been thwarted by the courts,
Dr Gouws then apparently arranged to have the property knocked down
to his friend who, it
would seem on the papers, had no means to
finalise either of the sales.
[25] Despite indulgences given to Lot
1213 Westville at the request of Dr Gouws, the debt has not been paid
to Auction Alliance.
This, despite numerous demands and undertakings
to pay.
[26] Mr
Jefferys
relied on the
decision in
SA Bank of Athens Ltd v van Zyl
2005 (5) SA 93
(SCA) as authority for the proposition that the actions of Business
Partners in seeking to sell the property of Dr Gouws were
unconstitutional - i.e. - Those actions relate to the conduct of
Business Partners in proceeding with the auction sale without
resorting to judicial sanction for doing so.
[27] I do not believe that that is
what is provided for in
S A Bank of Athens Ltd
. That case
records that while parate executie may be permissible, stipulations
in a contract which are unconscionable, illegal
or immoral will have
the result that a court will refuse to give effect thereto. In my
view the provisions of the settlement agreement
are not such as would
render them contrary to public policy. In this regard see
Juglal
NO and Another v Shoprite Checkers (Pty) Ltd t/a OK Franchise
Division
2004(5) SA 248 (SCA).
[28] In any event, in view of his
conduct as a director of Lot 1213 Westville in accepting the
nomination as purchaser of his property,
and in providing a
suretyship for that company’s obligations as purchaser, Dr
Gouws not only knew about the sales but conspired
in seeking to use
them to his own advantage. His further conduct in conspiring together
with Fouche to have the properties purchased
to the exclusion of
anyone else in a manner which was at least questionable, in my view
further precludes him from raising any
question of the
unconstitutional conduct of Business Partners in causing the property
to be sold.
[29] In those circumstances I can see
no reason why I should not confirm the rule granted by Koen J in
respect of Lot 1213 Westville.
[30] There is one final matter upon
which I feel constrained to comment. No heads of argument were filed
by the companies in the
two applications for final liquidation. At
the hearing of the matter Mr
Jeffreys
sought to hand up a
notice of motion condoning the late filing of the companys’
heads of argument and the admission into
evidence of a further
supplementary affidavit by Dr Gouws purporting to deal with alleged
new matter raised in the replying affidavits
of Business Partners.
[31] The reasons given for late
delivery of the companies’ heads of argument were not
acceptable. They were typical of the
dilatory tactics adopted
throughout these proceedings. In the normal course I would have
refused the application for condonation
and directed the companies to
pay the costs of any adjournment occasioned by the failure to file
the heads timeously. However,
such a course of action would only have
played into the hands of the companies and further frustrated the
ability of the applicants
to finalise the two applications. Mr
Harcourt
SC, who appeared for the applicants, did not wish me
to adopt that course and I did not do so. I read and considered the
heads
of argument and the late supplementary affidavit. The
affidavit, in my view, does not contribute in any way to the debate
before
me.
[32] However, I find it necessary to
comment upon the conduct of the attorneys for Westville Manor House
and Lot 1213 Westville.
They knew well in advance of the hearing that
heads of argument were required to be filed. If Dr Gouws was not in a
position to
advance funds for that to be done (as he has indicated in
his affidavit he could not do), they should have considered their
options
more carefully. They could timeously have withdrawn from the
matter. In my view it was unprofessional of them to wait until the
very last moment, accepting a deposit from Dr Gouws and producing
heads of argument for the first time at the hearing. The whole
reason
for supplying heads of argument in advance is to eliminate the
element of surprise in the hearing and to give the opponents
and the
judge proper and timeous notice of the issues in dispute. The
attorneys have been on record for over three years. The papers
in
both matters ran to in excess of 1 200 pages. If no funds were
available to continue at such a late stage, they had a duty to
the
court nonetheless to ensure that heads of argument were delivered.
The attorneys themselves could have drafted the necessary
heads. As
officers of the court it was unprofessional and discourteous to the
parties and the court to simply have left matters
to the last.
[33] In the premises I make the
following order :-
the rule nisi granted by Koen J on
the 11
th
August 2011 in the matter between Business
Partners Ltd and Westville Manor House (Pty) Ltd under case number
1100/2008 is confirmed;
the rule nisi granted by Koen J on
the 11
th
August 2011 in the matter between Auction
Alliance KwaZulu-Natal (Pty) Ltd and Lot 1213 Westville (Pty) Ltd
and two others under
case number 10402/2010 is confirmed.
Date of hearing : 16
th
November 2011
Date of judgment : 29
th
November 2011
Counsel for the Applicants : AWM
Harcourt SC (instructed by Maharaj Attorneys)
Counsel for the Respondents : HP
Jefferys SC (instructed by Du Toit Havemann & Lloyd)