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[2009] ZAGPPHC 116
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Motala and Seriti NNO v Mineral Loy (Pty) Ltd, Motala and Seriti NNO v Jofida Construction (Pty) Ltd (35649/2009, 35953/2009) [2009] ZAGPPHC 116 (4 August 2009)
IN THE HIGH COURT OF
SOUTH AFRICA
(NORTH GAUTENG HIGH
COURT, PRETORIA)
CASE NO:
35649/2009
In the matter between:
ANVER MOHAMMED MOTALA
N.O FIRST APPLICANT NOMVUYO
YVONNE SERITI N.O.
SECOND APPLICANT
In their capacity as
liquidators of Hua Wei Manufacturing (Pty) Ltd (in liquidation)
Mineral-Loy (Pty) Ltd
RESPONDENT
And
CASE NO:
35953/2009
In the matter between:
ANVER MOHAMMED MOTALA
N.O FIRST APPLICANT
NOMVUYO
YVONNE SERITI N.O. SECOND APPLICANT
(In their capacity as
liquidators of Hua Wei Manufacturing (Pty) Ltd (in liquidation))
And
JOFIDA CONSTRUCTOIN
(PTY) LTD RESPONDENT
JUDGMENT
MAVUNDLA, J.,
[1] I have decided,
for sake of convenience, to combine the above matters, and give one
consolidated judgment because the relief
sought in each matter is
premised essentially on similar facts and principles. Save for the
amounts sought and the respective respondents,
to a great extent the
facts are the same. Besides, the applicants in both matters are the
same. Both matters are unopposed, although
the papers were served on
the respective
respondents.
[2] The applicants
are the appointed joint liquidators of Hua Wei Manufacturing Company
(Pty) Ltd in liquidation. I shall
henceforth refer to
this company as WHM. The applicants have brought under the respective
case numbers referred to herein above, against
the respective
respondent, seeking an order in terms of which, in respect of: (a)
case number 35949/09:
(1) that the payment
of R16 526. 58 on 17 November 2007 and R13 699. 38 on 28 November
2007 to the respondent constitute a disposition
of the property of HW
M (in liquidation), after commencement of the winding-up in terms of
section 341 (2) of the Companies Act 61
of 1973.
(2.) That judgment be
granted against the Respondent for the amount of R30 225. 58.
(3.) That the
Respondent be ordered to pay interest on each respective amount at
rate of 15.5% per annum a tempore morae.
(4.) In the
alternative to prayer 1 and 2 that payment of the respective amounts
on 17 November 2007 and 28 November 2007 to the
Respondent be set
aside as an impeachable disposition of the property of the insolvent
estate of HWM in terms of section 26 alternatively
in
terms of section 29
alternatively section 30 of Insolvency Act 61 of 1973 as preferential
disposition.
(5.) That the
Respondent be ordered to pay the interest on the amount received from
date of payment thereof, to date of judgment
at a rate of 15.5% per
annum
(6.) Costs of suit.
(b) In respect of
case 35953/2009, the claim is for the
amount of R56 475. 14
paid to the Respondent on 30 November 2007. The prayers are identical
as those set
out herein above in
respect of case number 35949/2009.
[4] The background
facts is fully set out in the affidavit of Mr. Deon Marius Botha, an
insolvency practitioner, who has been appointed
by both the
applicants to assist them in the administration of the liquidated
estate of Hua Wei Manufacturing Company (Pty) Ltd (in
liquidation).
[5] Botha has been
appointed as the joint liquidator of Malokiba Trading 19 (Pty) Ltd.
The latter company is also one of the companies
that signed together
with WHM a "Sale of Shares and Loan Agreement", which
agreement I refer to herein below.
[6] The applicants have
attached an affidavit of Stephen Raymond Robinson who states that he
is a Chartered Accountant (SA) and a
Chartered Financial Analyst and
holds a post-graduate diploma in Company Law, Income Tax and
International Tax. Robinson states in
his affidavit that he has
undertaken a forensic investigation into the affairs of HWM after its
liquidation on 30 October 2007.
[7] The essence of the
affidavits of Botha and Robinson is that the original share holders
of WHM sold their shares when their loan
account stood at R38
million. The only share holder after the aforesaid sale of shares was
Cheg Trading 142 (Pty) Ltd. Cornelius
(Cottie) Kirsten and Ronald
Allan Wiggil were appointed directors of Cheg Trading 142 (which I
shall henceforth refer to as CT 142.)
respectively on 8 September
2004 and 1 June 2006.
Kirsten and Wiggil were also directors of HWM.1
[8] According to Botha,
Kirsten who is an attorney of this Court was one of the key figures
in the business affairs and financial
management of HWM and acted as
a de facto managing director.
[9] During and about
2005 one Phillip Owen Lawrenson, a supposedly professional business
rescuer joined the management of WHM. Notwithstanding
the presence of
Lawrenson and various cash injections WHM traded at a financial loss
running into several millions, R5 million during
2005, R12 million
during 2006 and R19 million during 2007 and R7.6 million from 1 March
2007 to September 2007.
[10] It is alleged that
the losses suffered by WHM was as the result of the inability of
Kirsten, Wiggil and Lawrenson to manage the
financial affairs of WHM,
and that the three traded recklessly and continued to incur debt
without any prospect of WHM being in a
position to repay its incurred
debts. This eventuated in Boldprops, as a director relying on a claim
of R288 909. 52 WHM failed to
pay notwithstanding a demand in terms
of section 345(1)2 of the Companies Act 61 of 1973.
[11] The relevant
application for the liquidation of WHM was issued on 4 October 2007
under case number 23559/07. The application
was brought by
Boldprayers on the grounds that it has supplied HWM with steel
products for which HWM failed to
pay. The application
was issued on 4 October 2007 and was not opposed. On 30 October 2007
WHM was placed in provisional liquidation.
The applicants were
appointed as joint provisional liquidators of WHM on 18 January 2008.
On 18 April
2 S345(l) A company or
body corporate shall be deemed to be unable to pay its debts ifâ
(a) if a creditor, by
cession or otherwise, to whom the company is indebted in a sum not
less than one hundred rand then dueâ
(i) has served on the
company, by leaving the same at its registered office, a demand
requiring the company to pay the sum so due;
or
(ii) in the case of any
body corporate not incorporated under this Act, has served such
demand by leaving it at its main office or
delivering it to the
secretary or some director, manager, or principal officer of such
body corporate or in such other manner as
the Court may direct
and the company or body
corporate has for three weeks thereafter neglected to pay the sum, or
to secure or compound for it to the
reasonable satisfaction of the
creditor;
(b) ...
(c) It is proved to the
satisfaction of the Court that the company is unable to its debt.
2008 both applicants
were nominated as and elected by creditors as the final liquidators.
[12] According to Botha
Kirsten, Wiggil and Lawrenson continued to conduct the business of
HWM despite of its factual and commercial
insolvency, after its
liquidation on 4 October 2007 whilst they were aware of its insolvent
status3. Kirsten was one of the two directors
of HWM on 4 October
2007 and Wiggil was the other director.
[13] Kirsten and
Wiggil were also directors of CT 142, which was the sole share holder
of HWM. Kirsten established CKLK Trust of
which he is a trustee.
According to Botha, Kirsten at all relevant times was effectively in
control of the affairs of CKLK Trust4,
which is the shareholder in
various companies relevant to the affairs of WHM. Annexure DM10 is a
diagram that reveals various family
trusts that in one way or another
relate to HWM.
[14] Loitering Family
Trust, is the family trust of Ian Loitering, a co-director with
Kirsten of KLS Attorneys, which attorneys held
in trust moneys of
HWM. CKLK Trust and Loitering Family Trust own all the shares in Cheg
Trading 155 (Pty) Ltd. Cheg Trading 155
in turn holds 40%
shareholding in Malokiba Trading 44, which owns 50% of the shares in
Cheg Trading 142, which is the sole shareholder
of HWM. Kirsten is
the director of Trading 155. Cheg Trading 155 is a 70%. shareholder
in Malokiba Trading 35 (Pty) Ltd, which in
turn is a shareholder in
Malokiba Trading 19 (Pty) Ltd. Kirsten, is the director of Malokiba
Trading 35.
[15] It is further
averred by Botha that Malokiba Trading 19 was a company which
ostensibly conducted business as a bridging company,
but in fact was
a pyramid scheme. The only director of Malokiba 19 was Ms Susan
Kretzmann. Kirsten was actively involved in the management
of
Malokiba Trading 19 and KLS Attorneys acted as the "promoter,
banker and administrator" of Malokiba Trading 19. KLS
Attorneys were in fact the paymaster of Malokiba Trading 19 through
which company they operated a pyramid scheme.
[16] Botha has further
averred that Kirsten was not only involved in Trading 19, but had
access to the funds of Malokiba 19, as all
monies received by
Malokiba Trading 19, were received in the trust account of KLS
Attorneys, where he was a director. He further
avers that Kirsten
transferred various amounts to WHM from the funds of Malokiba Trading
19, held in the trust account of KLS Attorneys.
Such transfer of
funds was not authorised by and was in breach of the mandate given by
investors to Malokiba Trading 19, namely that
such funds should be
used to finance bridging transactions where required.
[17] It is further
averred that no legal cause for the payment of funds from Malokiba
Trading 19 to Cheg Trading 142, or HWM existed.
There are no
documents found substantiating or legally justifying whatever
payment made by Kirsten or KLS
Attorneys5. Robinson
further avers, inter alia, that Lawrenson and Lotterong, Kirstenand
Lawrenson on behalf of HWM entered into an
agreement of sale of the
assets of HWM with Friedshelf 635 (Pty) Ltd and Aisha 2 Ou Bottling
(Pty) Ltd. The purported sale of the
fixed assets of HWM was effected
by defrauding the purchasers of the assets by not disclosing to the
purchasers that the company
was in final liquidation, nor disclosing
the company's indebtedness to Malokiba Trading 19.
[18] It is further
averred, inter alia, that Friedshelf 635 paid to HWM an amount of
R5.6 million during November 2007. During such
payment, Friedshelf
itself had been placed under winding-up. Obviously, such payment was
after HWM was placed in liquidation. There
is pending case under case
number 56554/08 to determine the status of this amount.
[19] A further reading
of the papers reveals a disconcerting allegations concerning, what I
perceive as malpractice in trust accounts
and with trust amounts by
the firm of KLS Attorneys.6 Robinson avers, inter alia, that Kirsten
used trust account of KLS for his
personal financial affairs, paid
his personal creditors, doctors, suppliers of building material, his
wife and received large amounts
of money in this trust account7.
There
6 Vide Rule 69.5 of the
Rules of the Law Society which provides that a firm shall ensure that
withdrawals from its trust banking account
as transfers to its
business account shall be made in respect of money claimed to be due
to the firm and only in terms of Rule 69.6
when a fee of disbursement
has been correctly debited in its records.
are further serious
allegations made concerning the use of trust moneys held in the KLS
Attorneys. I find myself compelled to bring
to the attention of the
Law Society of Northern Provinces of Transvaal these allegations, if
these have not by now come to its attention,
so that a proper
investigation be conducted by them and take appropriate steps, if the
circumstances so warrant.
[20] for purposes of
this matter, I find it not necessary to chronicle all the averments
contained in the affidavits of Botha and
Robinson. I shall however
refer to what is essential for the purposes of the adjudication of
this matter.
[21] At paginated pages
222 and 223 is attached a copy statement of an ABSA cheque account
number 40-6869-845 in the name
negligence nor
wilfulness is an element of breach of such duty; Incorporated Law
Society, Transvaal v Behrman
1977 (1) SA 904
(T) at 905H. It is
significant that in terms of s 83(13) of the Attorneys Act a
practitioner who contravenes the provisions relating
to his trust
account and investment of trust money will be guilty of
unprofessional conduct and be liable to be struck off the roll
or
suspended from practice.' of HWM, as annexure SRR2 to the affidavit
of Robinson. This statement reflects that on 17 November 2007
an
electronic payment to Card No 6928 Mineral-loy in the amount of
R37548.18 was made.
[22] At paginated page
223 is attached a copy of statement of an ABSA cheque account number
40-6869-845 in the name of HWM, as annexure
SRR2 to the affidavit of
Robinson. This statement reflects that on 22 November 2007 an
electronic payment in the amount of R56844.
50 to Jofider was made.
On paginated page 220, on 30 November 2007 a debit transfer in the
amount of R56475. 14 was made to Jofider.
[23] There is attached
to the papers, a copy of an agreement titled Sale and Loan Agreement
between Fried Shelf 635 (Pty) Ltd, Cheg
Trading 142 (Pty) Ltd (CT142)
and various other entities, as well as HWM attached as annexure DMB
16.which states, Inter alia, that:
"CT142 is the
owner of the total issued share capital in HWM consisting of (a) 1000
(one thousand) shares at par value
thereof R1. 00 (one
rand); (b) 1 (one) share at par value thereof of R1.00 (one rand
issued at 12 0000 of R12 0000. 00
[24] The agreement
further provides under Loan Accounts that WHM is indebted to CT142 in
respect of the loan account in the amount
of R59 654 337.
[25] The aforesaid
agreement was signed on 23 November 2007. I must hasten to state that
it was signed after the concursus creation's
in respect of WHM has
manifested. I am made to understand that in respect of the status of
this contract and the consequential performance
by the respective
parties under it, there is an opposed pending matter before this
court, and which is set to be heard before the
end of this year. I
shall therefore refrain saying much about this contract.
[26] Section 341 of
the Companies Act 61 of 1973 provides that:
"(1) Every
transfer of shares of a company being wound-up or alteration in
status of its members affected after the commencement
of the
winding-up without the sanction of the liquidator, shall be void.
4
(2) Every disposition
of its property (including rights of action) by any company being
wound-up and unable to pay its debts made
after commencement of the
winding-up, shall be void unless the Court otherwise orders."
[27] The payment of the
amount R37 548.18 to Mineral-loy, the amounts of R56 844. 50 and R56
475.14 were all made during November
2007 after the concursus
creditorus had already commenced. WHM was placed under provisional
liquidation on 4 October 2007 after Boldprayers
had averred that WHM
is
unable to pay its
debts. The relevant application was not contested by WHM. I
therefore, for purposes of section 341(2) of the Companies
Act,
accept that WHM was unable to pay its debts at the time when it was
placed under provisional liquidation. After the 4 October
2007 the
estate of WHM vested in the hands of the Master, and after the
appointment of the provisional liquidators, in the hands
of the
latter. No other person either than the Master during November 2007
had authority to dispose of the assets of the WHM (in
liquidation.).Any payment effected from the account of WHM during
November 2007, was consequently void and I find as such.
[28] In the light of
the above findings, I am of the view that the applicants are entitled
to reclaim the above mentioned payments.
In the result I find it not
necessary to decide the alternatives of the claim in terms of either
section 26 or section 29 and or
30 of the Insolvency Act.
[29] With regard to the
costs, it is so that the costs follow the event. I, however, find it
necessary comment about the prolixity
of the documents in both
matters. Matter under case number 35949/ 07 consist of at least 220
paginated papers. Matter under case
number 35953/ 2007 consists of at
least 223 paginated pages.
In fact, the averments
in both matters are identical, if the papers are not a mere
duplication.
[30] The applicants
have gone to a great length in placing the genesis of the HWM, from
its inception to its financial woes eventuating
in it being placed
under provisional winding-up. They have also placed as annexure DMB11
which is a copy of the application of the
pending matter I have
referred to in herein above. In my view, the applicants have been
more than it is necessary over elaborate.
What was of essence for
purposes of this application was the fact that HWM was placed under
provisional winding-up on 4 October 2007
and that the applicants were
appointed joint provisional and final liquidators and that payment
were effected from the account of
WHM after concursus creditoris had
set in. Had the matters been singularly focused in placing only what
was necessary to justify
the orders
sought, the papers
would have been substantially less than what they are.
[31] In my view, where
an applicant has been over elaborate, as is the case in both matters,
where as he could have obtain the relief
sought without necessarily
having been over elaborate, he should not be entitled to all the
fees, especially those fees that relate
to the work they could have
done without to obtain the order sought.
[32] I am of the view,
that the respondents should not be burdened by the overzealousness of
the applicants in bring every piece of
evidence which could have been
left out. Prolixity should not be countenanced. I am of the view
that, this application should have
consisted of not more that 80
pages. I am of the view that the applicants are only entitled to
charge fees that would not exceed
the preparation of work of 80
pages, and not that is in excess of such pages.
[33] In the result I
make the following orders:
(A) Under case number
35949/2009:
1. That the payment of
R16 526. 58 on 17 November 2007 and R13 699.38 on 28 November 2007 to
the Respondent is declared to be a disposition
of the property of Hua
Wei Manufacturing (Pty) Ltd (in liquidation) , after commencement of
the winding-up in terms of the provisions
of section 341(2) of the
Companies Act 61 of 1973.
2. That judgment is
granted against the Respondent for the payment of the amount of R30
225. 96.
3. That the Respondent
is ordered to pay interest on the amount of R16 526. 58 at rate of
15.5% per annum from 17 November
2007 and on the amount
of R13 699.38 at rate of 15.5% per annum from 28 November 2008 to
date of payment.
4. Costs of suit, which
cost shall not exceed work done for not more than 80 pages.
(B) AD CASE number
35953/ 09
1. That the
payment of R56 475. 14 on 30 November 2007 to the Respondent is
declared to be a disposition of the property of Hua
Wei Manufacturing
(Pty) Ltd (in liquidation), after
commencement of the
winding-up in terms of the provisions of section 341(2) of the
Companies Act 61 of 1973. 2. That judgment
is granted against
the Respondent for the payment of the amount of R56 475. 14.
3 That the Respondent
is ordered to pay interest on the amount of R56 475. 14 at rate of
15.5% per annum a temporae morae from 30
November 2007 to date of
payment.
4 Costs of suit, which
cost shall not exceed work done for not
more than 80 pages.
(C) The registrar of
this Court is directed to immediately forward copies of this judgment
as well as of both applications in casu
to the Chairperson of the Law
Societies of Northern Provinces, who must decide whether or not there
is any cause to investigate the
trust accounts and records of the
firm KLS Attorneys referred to in these documents, and if need be, to
take appropriate steps against
such firm.
N M MAVUNDLA
JUDGE OF THE HIGH COURT
HEARD ON THE :
03/08/2009
DATE OF JUDGMENT: 04
/08/ 2009
APPICANTS ATT :
STRYDOM & BREDENKAMP
APPLICANTS ADV : MS
HANLIE VERMAAK.