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[2009] ZAGPJHC 103
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Levitan v Mopana Properties 69 (Pty) Ltd and Others (09/46494) [2009] ZAGPJHC 103 (10 December 2009)
SOUTH GAUTENG HIGH COURT,
JOHANNESBURG
Case No. 09/46494
DATE:10/12/2009
In the matter between:
GARY
LEVITAN
........................................................................................
Applicant
and
MOPANA PROPERTIES 69 (PTY)
LTD
.......................................
First
Respondent
COLIN
STEINBERG
................................................................
Second
Respondent
MASTER OF THE HIGH COURT,
JOHANNESBURG
...............
Third
Respondent
MEYER, J
[1] The applicant seeks an order
setting aside or staying the winding-up of the first respondent in
terms of s 354 of the Companies
Act 61 of 1973.
[2] The circumstances giving rise to
the application are essentially undisputed. The first respondent was
registered on 6 December
2004 under the name Panamo Properties 96
(Pty) Ltd (‘the company’). On 4 May 2006, the applicant,
the company, and
the second respondent concluded a written
shareholders’ agreement. The shareholders’ agreement
records that the
company had purchased an immovable property with the
intention of developing clusters thereon for the purpose of resale.
It was
a term of the shareholders’ agreement that the second
respondent would transfer 50 percent of his 100 percent
shareholding
in the company to the applicant. It records the loan
amounts which the applicant and the second respondent had advanced to
the
company as part payment of the purchase consideration for the
immovable property. It was a term of the shareholders’
agreement
that additional funding would
inter
alia
be obtained from them.
[3] On 17 June 2008, the applicant
instituted motion proceedings against the second respondent and the
company in this division
under case no. 08/18136. The present second
respondent was the first respondent in those proceedings and the
company the second
respondent. The matter was settled on 5 November
2008 and the settlement agreement concluded between the parties was
made an order
of this court on 6 November 2008. The preamble to the
written settlement agreement summarizes the applicant’s claims
against
the second respondent and the second’s respondent’s
answer thereto. It reads as follows:
‘
WHEREAS the Applicant has
claimed from the First Respondent
inter
alia
an amount of R340
000.00 (Three Hundred and Forty Thosusand Rand) plus interest and for
an order directing him to take such steps
and sign all such documents
as are required in order to affect transfer to the Applicant of 50
percent of the ordinary shares
in the Second Respondent.
AND WHEREAS in the Answering Affidavit
the First Respondent alleged
inter
alia
a subsequent oral
Agreement on the 19
th
of June 2008 in terms whereof the First Respondent was to pay to the
Applicant an amount or R1 600 000.00 (One Million Six Hundred
Thousand Rand) (par. 5.1.3) and that the said R1.6 million could be
paid by the 31
st
of July 2008 (par 5.2) and that for payment of the said R1.6 million
the Sale of Shares Agreement and the Shareholders Agreement
would be
cancelled (par. 5.1).
[4] The matter appears to have been
settled in accordance with the second respondent’s version as
summarized in the second
paragraph of the preamble which I have
quoted above. Clause 5 of the settlement agreement provides that the
second respondent
acknowledged himself indebted to the applicant for
the amount of R1,6 milion plus interest, which amount was due for
payment on
the 31
st
of July 2008 as contended by the second respondent in his answering
affidavit. The second respondent in his answering affidavit
in the
present proceedings admits that he owed the applicant the amount of
R340, 000.00 arising from an unrelated transaction.
It is also
common cause that the applicant and the second respondent made
further loans to the company. The second respondent
avers that the
applicant was a creditor of the company in an amount of approximately
R1,2 at the time. The second respondent assumed
personal liability
for payment of this amount, which formed part of his R1,6 million
indebtedness referred to in the settlement
agreement.
[5] In terms of clause 3.1 of the
settlement agreement the applicant was ‘…specifically,
irrevocably and unconditionally
authorised, empowered and instructed
to proceed to sell…’ the company’s immovable
property, namely 203, Tweedale
Road, Hyde Park, Gauteng (‘the
property’) ‘… upon terms and conditions determined
by…’ the
applicant. Clause 3.2 provides that the
proceeds accruing from such sale were to be utilised and paid as
follows: the balance
outstanding on the mortgage bond registered
over the property, and it is common cause that such bond is
registered in favour of
Standard Bank which is the secured creditor;
the applicant would receive an amount of R1,6 million plus interest
thereon at the
rate of 15,5% per annum from 31 July 2008 to date of
payment; and any resultant balance would be paid to the second
respondent.
Clause 3.4 provides that the parties would do all things
within their power and sign all documents which might be necessary to
give effect to the aforementioned and in particular to enable the
property to be transferred into the name of the purchaser thereof,
and if the first and/or second respondent refusing or failing to
sign, on demand, any conveyancing or other document necessary
to
transfer the property into the name of the purchaser thereof, then
the applicant ‘…is hereby specifically, irrevocably
and
unconditionally nominated, constituted and appointed as his/their
Attorney and Agent to sign such document. Clause 3.3 provides
that
if the applicant did not receive the sum of R1,6 million plus
interest, the second respondent would remain liable to the applicant
for any such shortfall. By way of security for the obligations thus
undertaken in favour of the applicant, the second respondent,
in
terms of clause 4, pledged the shares in the company to the
applicant.
[6] The second respondent did not sign
the share transfer forms to give effect to the pledge and he failed
to make payment of the
amount of R1,6 million plus interest thereon
to the applicant. The second respondent was indebted to the
applicant in the sum
of R1, 724, 000.00 as at the date of the
institution of this application.
[7] The applicant engaged an estate
agent to find a purchaser for the property. A written offer to
purchase the property for a
purchase consideration of R10 million was
submitted on 30 September 2009. It is undisputed that this offer is
a most favourable
one and it was accepted by the applicant on 1
October 2009. During the conveyancing process it emerged that the
second respondent
had caused the name of the company to be changed
and had further caused the company to be wound up voluntarily by way
of special
resolution dated 20 August 2009.
[8] The second respondent seeks to
justify his unilateral conduct in causing the company to be wound-up
voluntarily by contending
that the first respondent was commercially
insolvent and unable to pay its debts. He contends that his
intention was to ensure
equality of treatment amongst the creditors
of the first respondent. He contends that had the first respondent
not been liquidated,
only the applicant and Standard Bank, which is
the secured creditor in terms of the mortgage bond for the sum of
about R8,8 million,
would have benefited, and he and the concurrent
creditors would have been left without any benefit.
[9] The second respondent’s
allegation of the existence of other concurrent creditors of the
company is in conflict with the
content of the statutory statement of
affairs of the company which he made or caused to be made wherein
reference is only made
to his unsecured claim in the amount of R1,85
m, that of the applicant in the amount of R1,6 m, and the secured
claim of Standard
Bank in the amount of R8,6 million. The allegation
relating to such other concurrent creditors is unsubstantiated and
the primary
facts on which it depends are omitted [see:
Radebe
and others v Eastern Transvaal Development Board
1988 (2) SA 785
(A) at p 793D;
Swissborough
Diamond Mines v Government of the RSA
1999 (2) SA 279
(TPD) at p 324F].
[10] I have mentioned that it is
undisputed that the sale of the company’s property for a
purchase consideration of R10 million
is a most favourable one. The
secured claim of Standard Bank is in excess of approximately R8,8
million. The excess would therefore
be small and it can hardly be
suggested that the second respondent intended benefiting the general
body of creditors. The effect
of the settlement agreement was a
subordination of the second respondent’s loan account.
Furthermore, the effect of the
winding-up is to delay the realization
and transfer of the property with the result that the liability to
Standard Bank as a secured
creditor is growing significantly on a
daily basis and the residue available for concurrent creditors, in
turn, is reducing accordingly.
[11] The second respondent contends
that the settlement agreement is invalid and of no force or effect
vis-à-vis
the
company since it amounts to the giving of financial assistance in
connection with the purchase or acquisition of its own shares
and
therefore a contravention of s 38 of the Companies Act. With
reference to the settlement agreement the second respondent states
the following in his answering affidavit:
‘
Prior to us signing the
settlement agreement, the Applicant was a creditor of the First
Respondent in an amount of approximately
R1 200 000,00. In terms of
the settlement agreement, I assumed personal liability for payment of
this debt against transfer of
the Applicants’ claim for 50
percent of the First Respondent’s issued share capital. On
the proper interpretation
thereof, the purpose of the settlement
agreement was to vest in me the entire share capital of the First
Respondent, as well as
to effect the cession of the Applicant’s
loan account against the First Respondent. The sale of the shares
and cession of
the loan account was however always regarded as one
indivisible transaction on which a single value was placed, namely R1
600 000.00,
which amount further included the amount of R340 000.00 I
owed to the Applicant, arising from an unrelated transaction and
which
was the amount he claimed by virtue of the 2008 proceedings.’
[12] S 38 is only concerned with a
purchase of or a subscription for shares. If the financial
assistance relates to any other transaction,
s 38 is not contravened.
The second respondent in the quoted paragraph of his answering
affidavit is merely giving his interpretation
of the settlement
agreement that had been arrived it. The company’s financial
assistance clearly relates to the cancellation
of the sale of shares
agreement and the shareholders agreement or, as Adv. A Subel SC
submitted on behalf of the applicant, to
the assumption by the second
respondent of the company’s indebtedness owed to the applicant.
There was no resale of the
shares. No price was fixed as the
purchase price. The company was indebted to the applicant in an
amount of approximately R1,2
million, which represented the
applicant’s loan account. The second respondent assumed
liability for this indebtedness under
the settlement agreement. A
contract cancelling the sale and repaying the applicant what he had
paid under and pursuant to the
shareholders’ agreement was
concluded. This form of financial assistance does not contravene s
38. See:
Pires and Another
v American Fruit Market (Pty) Ltd
1952
(2) SA 337
(TPD), at p 341H. The financial assistance also relates
to the second respondent’s indebtedness to the applicant in the
sum of R340, 000.00 plus interest thereon, but this indebtedness
undisputedly relates to an unrelated transaction and cannot be
said
to have contravened s 38. Finally on this point, the settlement
agreement was made an order of court.
[13] The second respondent contends
that there is an impeachable ‘disposition’ constituted by
the settlement agreement.
This contention, as was correctly in my
view pointed out by Adv. Subel SC, overlooks the fact that the
definition of ‘disposition’
within the meaning of the
Insolvency Act, 1936
excludes dispositions made pursuant to an order
of court.
[14] The second respondent also
contends that there is a material non-joinder in that the joint
liquidators of the company have
not been cited as co-respondents in
the application. There is no merit in this contention. The company
has been correctly cited
as being in liquidation. See:
Ex
parte Liquidator Vautid Wear Parts (Pty) Ltd (in liquidation)
2000
(3) SA 96
(W), at p103. A copy of the application was served upon
the joint liquidators and their receipt thereof appears from the
notice
of motion.
[15] The applicant is supported in
this application by the major creditor of the company, which is The
Standard Bank of South Africa
Limited. The applicant and Standard
Bank consider the winding-up to have been a stratagem by the second
respondent to defeat the
applicant’s security enjoyed under the
settlement agreement and further to be prejudicial to both the
applicant and Standard
Bank. The second respondent’s conduct
in causing the voluntary winding-up of the company is, in my view,
inexplicable.
It is irreconcilable with the provisions of the
settlement agreement that was made an order of court.
[16] I am in all the circumstances
satisfied that the applicant has discharged the onus of establishing
that the winding-up ought
to be set aside in terms of s 354 of the
Companies Act.
[17] A conditional counter application
is made on behalf of the first and the second respondents to
interdict the applicant from
taking any further steps to procure the
transfer of the property into the name of the purchaser pending the
outcome of an application
to be instituted for the rescission and
setting aside of the settlement agreement and court order in terms
whereof it was made
an order of court. I need not dwell on the
counter application. The first and second respondents have dismally
failed to establish
the requisites for the right to claim such an
interdict.
[18] The applicant seeks a costs order
against the second respondent on the scale as between attorney and
client. I am of the view
that a punitive costs order against him is
warranted in the circumstances of this case.
[19] In the result the following order
is made:
All proceedings in relation to the
winding-up of the company Mopana Properties 69 (Pty) Ltd
(Registration No. 2004/034772/07)
are hereby set aside in terms of
section 354(1) of the Companies Act 61 of 1973.
The counter application is dismissed
with costs.
The second respondent is ordered to
pay the applicant’s costs of the application and of the
counter application on the scale
as between attorney and client,
which costs include the costs attendant upon the engagement of the
services of senior counsel.
P.A.
MEYER
JUDGE
OF THE HIGH COURT
10
December 2009