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[2008] ZAWCHC 76
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Hammel v Radiocity Contact Centre CC (13778/2008) [2008] ZAWCHC 76 (12 December 2008)
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
REPORTABLE
Case Number
:
13778/2008
In the
matter between:
DAVID
HAMMEL
APPLICANT
And
RADIOCITY
CONTACT CENTRE CC RESPONDENT
Coram : DLODLO, J
Judgment by
: DLODLO,
J
For the Applicant/Plaintiff : ADV.
S. MILLER
Instructed by : Bernadt Vukic
Potash & Getz
11
th
Floor
1 Thibault Square
CAPE TOWN
TEL. NO. 021 405 3800
REF. MJ TYFIELD
For the Respondent : ADV. M.
IPSER
Instructed by : Schliemann Inc.
2 Fairview Centre
SOMERSET-WEST
TEL. NO. (021) 852 7511
REF. J.E. SCHLIEMANN
C/o LESTER & ASSOCIATES
Unit 2, 10 Pepper Street
CAPE TOWN
Date(s) of Hearing : 2 DECEMBER
2008
Judgment delivered on : 12
DECEMBER 2008
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
REPORTABLE
Case Number
:
13778/2008
In the
matter between:
DAVID
HAMMEL
APPLICANT
And
RADIOCITY
CONTACT CENTRE CC RESPONDENT
JUDGMENT DELIVERED ON FRIDAY, 12 DECEMBER 2008
DLODLO,
J
[1]
The
Applicant in his capacity as a creditor brought an application for
the winding up of the Respondent in terms of section 68 (c)
of the
Close Corporation Act 69 of 1984 (the Close Corporation Act) on the
basis that the Respondent was unable to pay its debts.
The Respondent
did not dispute its indebtedness to the Applicant. On the contrary,
the Respondent tendered payment of the sum of
Five thousand nine
hundred and six rands sixty seven cents (R5906.67), due at the time
the application was launched, and the payment
of the sum of One
thousand six hundred and thirty six rand and seventy cents
(R1636.70), due and payable on 10 September 2008.
The Respondent did
indeed pay both the abovementioned sums of money to the Applicant on
1 September 2008. Accordingly, as the
Applicant received the above mentioned sum of money, by the time the
application for the provisional
winding up of the Respondent was
heard on 3 September 2008, the cause for the application had been
removed. In other words, the
locus
standi
the
Applicant had had in the matter, had been taken away. The issue for
determination in the instant matter is simply which party
is
responsible for the costs incurred in the matter.
[2]
The
Applicant is an adult male engineering student resident at 5 Bellwood
Road, Fresnaye, Western Cape. The Respondent is a Close
Corporation
duly incorporated in terms of the Close Corporation laws of the
Republic of South Africa and it has its registered
address and
principal place of business at Suite 20—201C, Waverly Business
Park, Wyecroft Road, Mowbray, Cape Town. The Respondent
conducts
business as a producer of an in-house radio pursuant to mandates
furnished to it by its clients. Its entire member’s
interest is
owned by Marnus Flats who controls the Respondent’s sister
company in Australia. Much of the Respondent’s
business relates
to work delegated to it by its Australia sister company. Mr Miller
and Ms Ipser appeared before me for the Applicant
and the Respondent
respectively.
[3]
It
was submitted on behalf of the Respondent that the general rule is
that a party withdrawing proceedings is liable, as the unsuccessful
litigant, to pay the costs of the proceedings. It was further
emphasised that very sound reasons, such as dishonesty or fraud,
must
be shown before a defendant or respondent would not be entitled to
his costs. Ms Ipser relied on the following cases for the
aforementioned assertion, namely:
Germishuys
v Douglas Bespreingsraad
1973 (3) SA 299
(NKA) at 300D—E;
Waste
Products Utilisation v Wilkes
(Biccari interested party)
2003
(2) SA 590
(W) at 597A-B;
Reuben
Rosenblum Family Investments v Marsubar
2003 (3) SA 547
(C)
at 550 C-D. In Ms Ipser’s submission, there exist no sound
reasons in the instant matter which would justify the Respondent
being deprived of its costs. It, however, needs to be mentioned
hastily that the cases Ms Ipser referred to
supra
are factually distinguishable from the matter at hand. I may revisit
this aspect latter on in this Judgment.
[4]
Another
submission made on behalf of the Respondent is that it is not
necessary for the Court to go into the merits of the application
when
determining liability for cost in a situation where an application
has been withdrawn prior to being heard. In Ms Ipser’s
submission, the very fact that the application was withdrawn is
conclusive as regards the issue of determining costs, save in those
circumstances where the aforementioned good grounds exist which would
justify the Court depriving the other party of costs. I was
referred
to
Germishuys v
Douglas Besproeingsraad
supra
at 303G—304A where the following,
inter
alia
appears:
“In
Jenkins se saak,supra, het dit gegaan om die toekenning van koste en
die houding wat die Hof moet inneem wanneer ‘n
saak op die
meriete geskik is en die Hof daarna ‘n bevinding op koste moet
doen. In so ‘n geval is dit vir die Hof
dienstig om aandag aan
die meriete te skenk om te sien wat ‘n billike kostebevel sou
wees…………Daar
is na my mening ‘n
kernverskil tussen die posisie van ‘n applicant wat sy saak
skik op die meriete en dan vir die Hof
om uitsluitsel oor koste vra
en die posisie van ‘n applikant wat sy eis terugtrek en dan
probeer om ‘n kostebevel teen
hom af te weer.
Mnr. Zietsman se hele betoog dat
daar na die meriete geky
k
moet word om te sien of applikant op ‘n sekere kostebevel
geregtig is, al dan nie, gaan vir my in die onderhawige geval
nie op
nie. Vir my is die aangeleentheid duidelik. Applikant het ‘n
aansoek gerig teen die respondent en sy eise teen respondent
laat
vaar sonder enige uitsluitsel deur die Hof of sonder dat enige
aansoek aan die Hof gerig is op die meriete. Respondent het
geweier
om toe te stem dat applikant nie die koste hoef te betaal nie; wat
respondent geregtig was om te doen”.
[5]
In
the instant matter, however, in my view, it would virtually be
impossible to reach a just decision without considering the merits
of
the application. I accept that there is some inconvenience in
allowing the merits to be examined at any length, when only costs
are
at stake. This is at times unavoidable in cases settled on the merits
without an agreement between the parties as to what must
happen with
regard to costs incurred. In Ms. Ipser’s submission the
Applicant did not really have a case made out against
the Respondent
in this matter. In her view, the Applicant brought this application
with the sole purpose of merely embarrassing
the Respondent.
Accordingly, in Ms. Ipser’s submission, the Applicant engaged
himself in proceedings which tantamount to
an abuse of the Court
process. I deal with these submissions
infra
.
[6]
I
agree with Mr. Miller that upon receipt of the payment which
constituted the reason for the application, the Applicant had three
(3) choices open to him, namely: Firstly, the Applicant could either
have persisted with the application for purposes of recovering
the
costs it had incurred in bringing the application. In this category,
the Applicant’s principal argument would have been
that despite
having received payment after the launching of the application, he
was nevertheless justified in launching the application
and was
therefore entitled to his costs. Secondly, the Applicant could tender
to withdraw the Application on the basis that each
party pay their
own legal costs incurred up to that time. Thirdly and lastly, the
Applicant could have tendered to withdraw the
application on the
basis that he pays the Respondent’s costs incurred up to that
time. I am told the Applicant did in fact
choose the second option. I
am also told that the Respondent was not amenable to the proposal
contained in the offer made.
[7]
I
have mentioned earlier on that the only issue for determination in
the instant matter is which party ought to be liable for the
costs of
this application. Both parties sought costs on the punitive attorney
and client scale. It seems to me that the first and
primary question
for consideration is whether the Applicant was justified in launching
the application for the winding up of the
Respondent. In this regard,
the Respondent’s view is that there was never any justification
for this application. On behalf
of the Respondent, it was contended
that it is the Respondent which is entitled to costs because the
Applicant has not made out
a case that the Respondent is unable to
pay its debts as envisaged in section 68 (c) of the Close Corporation
Act and that the
application, as mentioned above, is an abuse of the
Court’s process.
[8]
The
question is simpler than the Respondent apparently contended it to
be. The question is not whether the Applicant ought to succeed
with
the winding up of the Respondent on the basis that it is not able to
pay its debts in terms of section 68 (c) of the Close
Corporation
Act. Rather, the question is whether the Applicant made out a proper
case, in principle, in the Founding papers that
the Respondent was
not able to pay its debts and was hence justified in bringing the
application. An entity’s inability to
pay its debts remains a
question of fact that may be proved in any manner. In
Rosenbach
and Co. (Pty) Ltd v Singh’s Bazaars
1962 (4) SA 593
at
597, it was held that evidence that an entity has failed on demand to
pay a debt of which payment is due is cogent
prima
facie
proof of its
inability to pay its debts “….
for
a concern which is not in financial difficulties ought to be able to
pay its way from current revenue or readily resources”.
[9]
When
one deals with the inability to pay a debt, one immediately becomes
reminded of the following formulation by Innes CJ in
De
Waal v Andrew Thienhaus
1907 TS 727
at 733:
“
Speaking for myself, I
always look with great suspicion upon, and examine very narrowly, the
position of a debtor who says, ‘I
am sorry that I cannot pay my
creditor, but my assets far exceed my liabilities.’ To my mind
the best proof of solvency is
that a man should pay his debts; and
therefore I always examine in a critical spirit the case of a man who
does not pay what he
owes”.
It is common cause in the instant
matter that the Applicant was faced with a situation that his de
bt
(which the Respondent subsequently admitted was due and owing on 10
August 2008), was not paid. It is also common cause that
the
Applicant’s fellow employee, one Sascha Globisch (Mr.
Globisch), was in an equivalent position. When Mr Globisch confronted
the Respondent about payment, he alleges that he was advised by the
Respondent that it had no funds at that time with which it
could pay
the salary due to the former as it had paid other trade creditors,
such as its liability in respect of its telephone
account, that it
was more important for the Respondent that these creditors be paid. I
am mindful of the Respondent’s denial
of this aspect of the
Applicant’s case. Whether or not this was true is irrelevant
for purposes of determining the issue
at hand.
[10]
In
my view, it was justifiable for the Applicant to draw the inference
that the Respondent’s failure to meet its salary obligations
to
him was for the same reason given to Mr Globisch. Mr Miller correctly
questioned the Respondent’s response to the allegation
contained in Mr Globsch’ Affidavit. It would be recalled that
the Respondent denied that it ever discussed any financial
issues
with Mr Globisch and that whatever the latter alleged in this regard
is fabrication which is motivated by malice on the
part of Mr
Globisch. In addition, the Respondent alleged that the real reason
for its delay in making payment to Mr Globisch was
because of an
agreement concluded between the Respondent and Mr Globisch himself
that the latter had a choice of receiving R2705.22
on 10 August or
waiting until later in the month until the Respondent had received
payment from its customers in respect of which
Mr Globisch was due to
earn commission, in which event Mr Globisch would receive a lump sum
payment of R5725.49. It will be borne
in mind that Mr Globisch
disputed this version put forth by the Respondent in reply. According
to Mr Globisch, the quantum of his
salary and his financial position
was such that he would never have agreed to a delay in receiving
payment of his money until later
in the month so that he could
receive this payment together with the additional payment of the
alleged commission. In Mr Miller’s
submission, the version
presented by the Respondent in this regard “runs against grain
of the common sense”.
[11]
It
was pointed out on behalf of the Applicant that Annexure
“SG1”
to Mr Globisch’s Affidavit in reply is a salary slip produced
by the Respondent and is identical in form to the salary slips
received by the Applicant, indicating that there was no commission
due in respect of July salary. Therefore, in Mr Miller’s
submission, a document produced by the Respondent entirely
contradicts the version put up by the same Respondent. I agree with
this submission by Mr Miller. The Respondent’s version is not
only far-fetched but it is also untenable in the circumstances
of
this case. Suppose the Respondent was not serious and was merely
making a joke of Mr Globisch when the latter was told there
was no
money for him, but that money had been used to honour certain
important debts of the Respondent, then the latter engaged
itself in
a rather expensive joke. The probabilities do not favour the
Respondent’s version in this matter. This is further
demonstrated
infra
.
[12]
In
the first instance, the Applicant alleged that in his understanding
the tenth day of the month meant the tenth business day rather
than
the tenth calendar day. The Respondent subsequently admitted that it
was guilty of an error in this regard. It is important
to note that
the Respondent in explaining its delay in making payment to Mr
Globisch did not raise the same point. Why would the
Respondent
conclude an agreement with Mr Globisch on 10 August 2008 as regards
the payment of the latter’s salary if it did
not think that its
obligation to pay arose on the tenth calendar day of the month? This
smacks of an untruth on the part of the
Respondent. In the second
instance, the Respondent alleged that payment was not made to the
Applicant because there were difficulties
experienced in setting up
the Applicant as a beneficiary for purposes of making an internet
payment to the latter. I am not told
in the Answering papers in
respect of which account such difficulties were experienced. This
alone brings about more questions
than answers in this matter.
[13] On the other hand, given the
fact that the Applicant had not been paid and had been informed by Mr
Globisch that the Respondent
had told the former that the Respondent
did not have sufficient funds to pay Mr Globisch’s salary,
despite whatever the Respondent
now explains, that does not take away
the fact that the Applicant was justified in drawing an inference
that the Respondent was
unable to pay its debt. This was a reasonable
inference in the circumstances to have been drawn by the Applicant. I
hold, therefore,
that the Applicant had all justification to have
resorted to launching the present application. It is cause for
concern that the
Respondent attached to its Answering papers as
Annexure
“SK6”
,
a document that hardly tells the Court anything. This Annexure shows
an opening balance of R60392.70 and a closing balance of
R99626.36.
The document speaks and says to the reader that there were certain
unmentioned transactions during the period in question.
The
Respondent, for reasons best known to it opted to blank out
information relating to such transactions from Annexure
“SK6”
.
I have been asked to draw an inference unfavourable against the
Respondent in this regard. It may well be that the information
on
Annexure
“SK6”
is blanked out because of its confidential nature. I do not think
much purpose will be served by making an issue out this aspect.
[14]
The
Applicant is accused of abusing the process of Court. Before
considering this accusation, it is perhaps appropriate that one
first
looks at the law ordinarily applied in determining whether an
application amounts to an abuse of process. The authors of
Meskin,
Insolvency Law and
its Operation in Winding Up
,
summarise the law applicable in this regard as follows:
“
In addition to its
statutory discretion when asked to grant a sequestration order, the
court has an
inherent jurisdiction to prevent abuse of its process. Therefore,
although a case for sequestration may be capable
of being
established, a court will not grant the order where the sole or
predominant motive or purpose of the applicant is something
other
than the bona fide achievement of the sequestration of the estate for
its own sake”.
The starting point was stated by Van
Winsen J (as he then was) in
Cohen
v Mallinick
1957 (1) SA 615
(C) at 622H-623A as follows:
“
evidence however of an
uncompromising intention to insist upon
the
letter of one’s rights, even if accompanied by some evidence of
personal hostility, does not in my view establish the
act that
applicant’s real intention was to harass respondent rather than
to recover her money”.
The following are instances where our
Courts have found to have been
the
abuse of process: First and foremost, the enforcement of a debt that
is disputed on
bona
fide
and reasonable
grounds. See:
Badenhorst
v Northern Construction Enterprises
1956 (2) SA 346
(T)
at 347H-348B;
Kalil
v Dectex (Pty) Limited and Another
1988 (1) SA 943
(A)
at 980.
The second such instance would be
procuring of a suspension of legal proceedings by or against the
debtor, the prevention of enforcement
by the debtor of a legitimate
claim against another. See:
Millward
v Glazer
1950
(3) SA 547
(W).See also
Tucker’s
Land and Development Corporation (Pty) Ltd v Soja (Pty) Ltd
1980 (3) SA 253
(W) where a Court refused an application for
sequestration because it had the effect of stifling an appeal. The
third and possibly
the last such instance is where the granting of a
sequestration order would bring the administration of justice into
disrepute.
See:
Standard
Bank of SA Limited v Essop
1997 (4) SA 569
(D)
and
Lotter v
Arlow and Another
2002 (6) SA 60
(T).
[15]
It
is needless to mention that none of the aforementioned instances
previously pronounced upon by our Courts is present in the
application brought by the Applicant in the instant matter. There is
hardly any evidence of any ground which is remotely analogous
thereto
at all. The Respondent contended that the Applicant should have used
another remedy, for an example, the issue of summons
for purposes of
collecting a debt owed to him. The alternative remedy, according to
Ms Ipser, would have spared the Respondent
the embarrassment of
having to be faced with the winding up proceedings. It has been
established that a creditor has an unfettered
right to choose his
form of execution, one of which is to wind up the debtor. See:
Service Trade
Supplies (Pty) Ltd v Dasco $ Sons (Pty) Ltd
1962 (3) SA 424
( )
at 428C-D;
Effune
v Hancock
1923 (TPD) 355 at
364;
Bylo
v Rhosdesian Barter & Export (Pty) Ltd
1974
(1) SA 601
(R) at 602A-D.
Notably, where a creditor has a debt
which a company cannot satisfy, the unpaid creditor is
ex
debito justitiae
entitled to a winding up order. The creditor is not bound to give the
debtor time to raise the funds necessary to make payment.
See:
Absa
Bank Ltd v Rhebokskloof (Pty) Ltd and Others
1993 (4) SA 436
(C)
at 440H -441B;
Service
Trade Supplies
supra
at 428D—E;
Rosenbach
supra
at 597C—H;
Coughlan v Ward &
Son (Pty) Ltd
1931 NPD 153
at
153;
Sammel v
President Brand Gold Mining CO. Limited
1969 (3) 629 (A) at 622D-F.
[16]
I
agree that the quantum of the Applicant’s claim did not
disentitle him from bringing the present application. In terms of
section 9 (1) of the Close Corporation Act this Applicant did meet
the threshold and as such had the necessary
locus
standi
to bring the
present application against the Respondent. In my view, it is hardly
helpful to belittle the amount of the debt owed
to the Applicant by
the Respondent. The Applicant as a student needed his money paid to
him. It may appear to be an insignificant
amount to the Respondent,
but it is most certainly a lot of money owed to a student.
I do not share the
view that the application brought by the Applicant in the instant
matter was frivolous. It would be wrong and
unfair to overlook that
Mr Globisch was informed that the Respondent could not pay his salary
because it had insufficient funds
to pay its employees as well as its
trade creditors and that it was in the Respondent’s interest to
prefer the latter. I
have dealt with this aspect earlier on in this
Judgment and have demonstrated how far-fetched the Respondent’s
denial is.
The Respondent’s debt in respect of work done by the
Applicant during July 2008 was due and payable by 10 August 2008. We
now know that the Respondent (despite earlier denial and explanation)
has admitted as much. By the time that the Applicant caused
its
letter of demand to be written to the Respondent on 20 August 2008,
there was, even on the Respondent’s own version,
no dispute as
regards the quantum of the sum payable to the Applicant.
[17]
Importantly,
the letter of demand referred to above, forewarned the Respondent
that the Applicant might bring this application unless
payment of his
money was received by 22 August 2008. In the papers filed in this
matter, the Respondent does not dispute the receipt
of the letter of
demand. The Applicant cannot be blamed for having opted for this
remedy as a means of enforcing a debt owed to
him. I am not persuaded
that the launching of the application
per
se
amounted to the
Applicant engaging himself in an abuse of the Court’s process.
It is, in my view, only fair that the Applicant
should recover his
costs. What is also strange is that at the time that the Respondent
paid the debt owed to the Applicant, it
had not yet filed and served
its Answering Affidavit. This in effect means that the costs at that
moment were obviously minimal.
The Respondent must have known that
paying that amount owed to the Applicant necessarily meant that the
Applicant had to withdraw
the application. That withdrawal would come
about not because the Applicant originally had no case against
Respondent. The withdrawal
was eminent because the payment of the
debt had an effect of removing the cause for the application. In
other words, as soon as
the money owed was paid, the Applicant ceased
to have
locus standi
in this application. This was known to the Respondent (a juristic
person, who as such has legally viable advice at hand). The
Respondent was also competently legally represented in the instant
matter. Why proceed to file an Answering Affidavit? What has
happened
to the well-established practice that Attorneys communicate each time
they proceed to take further steps? The filing of
further papers in
the instant matter after the payment had been made, merely served to
increase the costs. In my view, the Respondent
could have handled
this matter differently. I hold that the Respondent caused the
escalation of costs in this regard.
[18]
The
argument as to who should pay the costs included the question of
scale. Both counsel argued that their respective clients were
entitled to be awarded costs on an Attorney and client scale. This is
a punitive scale. The general rule is that the party which
has
achieved substantial success is entitled to its costs. This normally
refers to party and party costs. It is trite that the
Court is
entrusted with a wide discretion in awarding costs but that the
discretion must at all times be exercised judicially.
When it comes
to the question of an Attorney and client costs, one needs to
consider the basis for awarding such costs as explained
by Tindall JA
in
Nel v
Waterberg Landbouwers Ko-operatiewe Vereeniging
1946 AD 597
at 607. Tindall JA gave the following formulation of
note:
“
The true explanation of awards of attorney and
client costs……seems to be that, by reason of special
considerations
arising either from the circumstances which give rise
to the action or from the conduct of the losing party, the court in a
particular
case considers it just, by means of such an order, to
ensure more effectually than it can do by means of an order for party
and
party costs that the successful party will not be out of pocket
in respect of the expense caused to him by the litigation.”
It is of some importance to bear in
mind that when a case has for all intents and purposes been settled,
it remains undesirable
to permit the question of costs to become an
occasion for incurring further significant costs and to occupy the
Court’s time
which could be better utilised in disposing of
other litigation. See:
Mashaone
v Mashaone and Another
1962 (2) SA 684
(D)
at 687G-H. There is, however, no justification in the instant matter
to resort to an Attorney and client scale when awarding
costs.
[19]
ORDER
In the circumstances I make
the following order:
The application is refused and the Respondent shall pay
costs hereof on the party and party scale.
_______________
DLODLO, J