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[2000] ZAWCHC 8
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Payslip Investment Holdings CC v Y2K Tec Limited (1868/2000) [2000] ZAWCHC 8; 2001 (4) SA 781 (C) (9 June 2000)
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO: 1868/2000
DATE:
9-6-2000
In
the matter between:
PAYSLIP
INVESTMENT HOLDINGS CC
Applicant
and
Y2K
TEC LIMITED
Respondent
JUDGMENT
BRAND,
J:
This
is an application for the provisional winding up of the respondent
company which is a public company listed on the Johannesburg
Stock
Exchange. There are numerous disputes of facts on the papers. Broadly
speaking these disputes can be categorised under four
headings,
namely:
(a) The jurisdiction of
this Court.
(b) Respondent's alleged
indebtedness to applicant.
(c) Respondent's alleged
inability to pay its debts as contemplated by section 344F of the
Companies Act, No. 61 of 1973 ("the
Act").
(d) Respondent’s
solvency.
Guidelines as to how
factual disputes should be approached in an application such as the
present were laid down by the Appellate
Division in
Kalil v
Decatex
1988(1) SA 943 (A). According to these guidelines a
distinction is to be drawn between disputes regarding the respondent
1s liability
to the applicant and other disputes. Regarding the
latter, the test is whether the balance of probabilities favours the
applicant's
version on the papers. If so, a provisional order will
usually be granted. If not, the application will either be refused or
the
dispute referred for the hearing of oral evidence, depending on,
inter alia
, the strength of the respondent's case and the
prospects of
viva voce
evidence tipping the scales in favour
of the applicant. With reference to disputes regarding the
respondent's indebtedness, the
test is whether it appeared on the
papers that the applicant's claim is disputed by respondent on
reasonable and
bona fide
grounds. In this event it is not
sufficient that the applicant has made out a case on the
probabilities. The stated exception regarding
disputes about an
applicant's claim thus cuts across the approach to factual disputes
in general.
I propose to deal with
the disputes of facts on the papers in accordance with these
guidelines.
Jurisdiction
I first deal with the
disputes concerning the jurisdiction of this Court. In terms of
section 12(1) of the Companies Act, this Court
will have jurisdiction
in this matter if the registered office or the principal place of
business of respondent is situated within
the area of jurisdiction of
this Court. It is common cause that respondent's registered office is
in Gauteng. Applicant's case
is that respondent's main place of
business is in Mowbray in the Cape. This is denied by respondent.
According to respondent its
main place of business is also in
Gauteng.
Although this dispute
cannot be determined on the papers I am satisfied that the balance of
probabilities on the papers favours
the applicant's version. The
deponent to applicant's founding affidavit is Mr David Black
("Black"). It is common cause
that at least until the end
of February this year, Black was also the Chairman and Chief
Executive Officer of the respondent. The
main answering affidavit
filed on behalf of respondent was deposed to by Mr Russel Roth
("Roth"), who is the present
CEO of respondent company.
Apart from Roth's
ipse dixit
that respondent's main place of
business is in Gauteng, the sole factual basis for his allegation to
this effect is a letter which
was written to the Johannesburg Stock
Exchange ("JSE") on 26 October 1999. The letter does indeed
aver that respondent’s
head office had relocated to Windy Wood
in Sandton.
Black says this averment
in the letter is incorrect. He also points to other statements in the
letter which are demonstratably incorrect,
such as the averment that
Roth had been appointed as CEO of respondent whereas it is common
cause that he was only so appointed
on 26 February 2000. Black, on
the other hand, relies on various other facts which are common cause
and which tend to indicate
that the respondent's main place of
business was indeed in the Cape.
These
facts include:
(a) Black, who was the
CEO of the company until 26 February this year, lives in Cape Town.
(b) Respondent's
financial manager Ms Williams also resides in Cape Town.
(c) The company's bank
account is in Cape Town.
(d) At present
respondent’s audit is being done in Cape Town.
In
these circumstances I find, as I have indicated, that on the papers
the balance of probabilities favour the applicant's version
on the
jurisdiction issue.
The
applicant's claim
This brings me to the
dispute regarding applicant's claim which forms the basis of its
locus standi
to bring this application. In the founding papers
Black alleges that respondent is currently indebted to applicant in
the sum of
R135 543, 00 in respect of rental. This rental is due,
Black contends, in terms of a written lease concluded on 12 February
1998
which he annexed to his founding affidavit as Annexure DB1. For
ease of reference I will refer to this document as "DBl".
Ex facie
DBl
respondent was not a party thereto. It was entered into between
applicant as lessor and another company, Commercial Software
International ("CSI") as lessee. Black's explanation is,
however, that CSI which subsequently changed its name to Computer
Management Group ("CMG"), on 1 March 1999 ceded and
assigned all its rights and obligations as lessee in terms of DBl
to
respondent. Consequently, Black concluded, respondent became the
lessee in terms of DBl. In fact, he alleges, respondent has
exercised
its rights as such by taking possession of the premises concerned,
but failed to fulfil its obligations in terms of the
lease by paying
the rental for which it provides.
In the answering
affidavit, respondent does not pertinently deny the conclusion of the
lease agreement between applicant and CSI,
which later became CMG. It
is also not denied that the lessee's rights and obligations in terms
of such lease were delegated to
respondent. What is denied is the
allegation that the lease which was delegated to respondent was the
one reflected in DBl. The
lease which was delegated to respondent, so
it is contended, is the one annexed to the answering affidavit marked
"BM to which
document I will for the sake of convenience refer
to as "B". Respondent does not deny that rental was payable
to applicant
nor is it denied that no such rental was in fact paid.
According to the answering affidavit, respondent's only answer to
applicant's
claim is:
"That the rental is
not due in respect of the alleged agreement of lease" and "that
applicant has failed to establish
a basis on which the alleged rental
is due."
The matter first came
before me on 18 May 2000. On that occasion, Mr
Sievers
appeared for applicant, while the respondent was represented by Mr
Goddard
. On that occasion it was pointed out to Mr
Goddard
during his argument that the written lease agreement, admitted by
respondent as binding upon it {that is "B") also provides
for payment of rental by respondent which,
prima facie
, is due
and payable. Consequently, so it was suggested to Mr
Goddard
,
respondent had, even on its own version, failed to disclose any
defence to applicant's claim. Mr
Goddard’s
response to
the suggestion was to ask for a postponement in order to file further
affidavits dealing,
inter alia
, with the potential problems
regarding applicant's claim which transpired during argument. The
postponement was granted until today's
date.
In the interim,
respondent filed a supplementary answering affidavit, again deposed
to by Roth. The new defence raised by Roth differs
quite radically
from the putative defence originally raised. In a nutshell the new
defence amounts to this; Black, so respondent
avers, represented the
vendor company which sold respondent's present business to it. Black
required respondent to be listed on
the Johannesburg Stock Exchange.
In respondent's prospectus it was predicted that applicant would earn
a profit of R5,3 million
during the year ending 29 February 2000.
Black was also responsible for writing the specifications of a
computer programme, the
sales of which would significantly contribute
to respondent's business. These allegations are not disputed by
applicant in the
supplementary replying affidavit. Its only response
thereto is that the allegations are irrelevant. According to
respondent, Black,
however, failed to produce the specifications for
the computer programme. At board meetings he was taken to task for
such failure
on his part. The supplementary answering affidavit then
continues as follows:
"He (Black) placated
his critics by assuring them that he assumed full responsibility for
the delay in producing the specifications
and that he would
personally subordinate any monies owing to him, either in his
personal capacity or as a duly authorised representative
of
applicant, he being its only shareholder.
…
From the inception of the
lease Black waived applicant's right to receive rental until such
time as the profits forecasted by him
for the financial year ending
29 February 2000 as set out in RR5 hereto [that is an extract from
the prospectus] had been achieved.
As such profits had not been
achieved applicant's claim is at this point in time not due, owing or
payable."
In
the supplementary replying affidavit and in argument at the resumed
hearing, the answers on behalf of the applicant to this line
of
defence are four-fold, namely:
(a) Black denied that he
had waived or agreed to subordinate applicant's right to receive
rental.
(b) Respondent's new
defence cannot be regarded as
bona fide
, particularly since it
has never been raised before and is in fact in conflict with the
defences thus far raised, namely that respondent
does not owe
applicant any rental.
(c) The lease agreement
"B" provides that no relaxation, indulgence or waiver which
the lessor may grant to the lessee
would become binding on the lessor
who would at all times be entitled to claim due and prompt
performance by the lessee of all
its obligations. The lease further
provides that no variation of the terms thereof would be of any force
and effect unless reduced
to writing and signed by both parties.
There is no suggestion of any written variation of the lease
agreement.
(d) Further and in any
event applicant is, even on respondent's own version, a contingent
and prospective creditor.
I
believe that the fourth and last answer is a good one and I did not
understand Mr
Goddard
to contend otherwise. It follows that
even on respondent's own version, applicant has
locus standi
.
I therefore find it unnecessary to dwell at length on the three other
answers given by the applicant. Suffice it to say that these
answers
are not of such a nature that they completely destroy the line of
defence under consideration. The correctness of the answer
in (a)
cannot be determined on the papers. As to the answer in (b) I do not
believe that the new line of defence is necessarily
in conflict with
the old defence. The old defence was a purely technical one, namely
that the rental was not payable in terms of
the document DB1.
Although the answer in (c) appears to be a fairly good one, it may be
that it can be met by the reasoning subscribed
to, for example, in
Phillips & Another v Miller & Another
1976(4) SA 88
(W) and in
Minnitt v Stewart Wright son (Ptv) Ltd & Another
1979(4) SA 151 (C) at 154.
For present purposes it
can therefore be accepted as a real possibility that respondent
entertained at least the
bona fide
belief, though maybe
mistaken, that the arrear rentals are at present not due and payable.
Respondent's
inability to pay its debts
In the founding
affidavit, applicant sought to establish its allegation that
respondent is unable to pay its debts on the basis
of the approach
subscribed to, for example, in the case of
Rosenbach & Company
v Singh Bazaars
1962 (4) SA 593
(T). According to this approach,
evidence that a company has failed to pay a debt, payment of which is
due, is cogent prima facie
proof of inability to pay its debts, for,
so it is stated by Canev, J at 597 of the report in the
Rosenbach
case:
"A company which is
not in financial difficulty ought to be able to pay its way from
current revenue or a readily available
resource."
In
support of applicant's further contention that respondent had failed
to pay a debt which is due, it relied on two claims against
respondent; first, applicant's own claim for arrear rental and
secondly, a claim by another company, Computer Management Group
Holdings (Pty) Ltd ("CMG Holdings") in the sum of R230
000,00. Black is the sole shareholder of CMG Holdings. The claim
for
R230 000,00 is based on an acknowledgement of debt for that amount,
signed by Black on behalf of respondent, in favour of his
own
company, CMG Holdings. Black's allegation in the founding affidavit
is that despite demand, this debt which is due and payable,
remains
unpaid.
Respondent's answer to
applicant’s claim for arrear rental has already been dealt
with. As to the claim by CMG Holdings, respondent
denies that the
claim is a genuine one and contends that Black had no authority to
sign the acknowledgement of debt on behalf of
respondent in favour of
his own company.
In the answering
affidavit, respondent denies that it is unable to pay its debts. This
denial is elaborated upon in the supplementary
answering affidavit,
essentially in three ways. First, by presenting a bank guarantee in
terms whereof the bank binds itself to
applicant as co-principal
debtor with respondent for payment of the full amount claimed by
applicant in the founding papers. Secondly,
by filing an affidavit
deposed to by respondent's auditors. In this affidavit the auditors,
Messrs Isaacson Bamber,
inter alia
, makes the following
unequivocal statement:
"I have been
requested by respondent to comment on its solvency. I accordingly
annex hereto a solvency certificate. I state
that respondent is both
legally and commercially solvent."
Thirdly,
by annexing respondent's draft financial statements for the year
ending 29 February 2000, which, so respondent contends,
indicate that
the respondent is in fact solvent.
In the supplementary
replying affidavit applicant points out that the tender of a bank
guarantee does not constitute payment and
that it therefore does not
constitute a bar to the relief sought. In any event, so it is
suggested by applicant, applicant's claim
is in fact more than the
amount suggested in the founding affidavit and thus also exceeds the
amount guaranteed by the bank. In
response to respondent's reliance
on the affidavit by its auditors and its draft financial statements,
Black, on behalf of applicant,
embarked on an analysis of the
financial statements. On the basis of this analysis Black concludes
that respondent is in fact both
legally and commercially, totally
insolvent.
After a consideration of
all the facts and of the arguments and counter-arguments presented by
Mr
Sievers
and Mr
Goddard
, who again appeared for the
parties today, I am not persuaded that I can find on a balance of
probabilities on the papers that
respondent is unable to pay its
debts as contemplated in section 344(1)(f) of the Act. I say this for
the reasons that follow.
Both the claim by
applicant and the claim by CMG Holdings are clearly disputed by
respondent. I have already indicated that a finding
that these
disputes are not genuine and
bona fide
is not justified on the
papers. The fact that respondent is able and willing to put up a bank
guarantee for respondent's claim,
tends to strengthen the view that
this claim is in fact disputed on genuine grounds . It follows that
it cannot be inferred from
respondent's failure to meet these claims
that respondent is
unable
to do so. It is equally likely that
respondent is unwilling to do so.
As to the applicant's
reliance on the analysis of respondent's financial statements by
Black, it will, in my view, be unfair to
respondent to accept the
conclusion of this analysis. I say this for two reasons. The first is
that it is in direct conflict with
the opinion expressed on oath by
respondent's auditor, which I cannot simply ignore. Secondly,
respondent never had the opportunity
to deal on affidavit with
Black's analysis of its financial statements. Mr
Sievers's
response to this objection was, in essence, that respondent cannot
plead prejudice when applicant makes out a case on respondent's
own
papers. However, as was pointed out by Botha, JA in
Administrator
Transvaal v Theletsane & Others
[1990] ZASCA 156
;
1991 (2) SA 192
(A) 195-6,
the fact that applicant's case is built on respondent's papers does
not
per se
mean that respondent will not be prejudiced. The
reason why this is so appears from the following
dicta
at
196B-E of the report:
"It was not for the
appellants to show that the respondents were given a proper hearing.
They were called upon to meet the
specific allegations put forward by
the respondents in support of the relief claimed. The appellants were
required to answer a
case founded on the allegation of fact that the
respondents were not given a hearing. They were not called upon in
any other way
to raise a valid defence to the relief sought. In
particular, for instance, the question whether the hearing given was
unduly limited
in its scope was not an issue to which the appellants1
deponents were required to address their minds. It is not permissible
to
consider appellants' affidavits in isolation, divorced from the
context of the case which they were answering. To the extent that
the
appellants' deponents went further than may have been necessary to
answer the case as presented, it cannot be postulated
a priori
that they will not be prejudiced if their affidavits are relied
upon to determine the nature and ambit of the hearing that took
place. To do so may be unfair to the appellants and in effect is
tantamount to reversing the
onus
."
Although
these statements by
Botha, JA
obviously pertain to the facts
of the case
Theletsane
case, the underlying reasoning is, in
my view, also applicable to this matter.
In its founding
affidavit, applicant founded its allegation that respondent was
unable to pay its debts on certain inferences that
I have alluded to.
This was the case respondent was required to answer. Although it is
true that the case that applicant now wants
to rely on i.e. the one
based on Black's analysis of the financial statements is ultimately
based on respondent's papers, it is
not a case that respondent was
required to meet and, in the words of
Botha, JA
;
"It cannot be
postulated
a priori
that they will not be prejudiced if
applicant is allowed to rely on this new case."
It follows that applicant
has, in my view, failed to make out one of the essential requirements
for the order that it seeks. Consequently
the application cannot
succeed. However, even if I did conclude that respondent was unable
to pay its debts, I would still in the
exercise of the judicial
discretion that I am afforded in terms of section 344 of the Act,
have refused the application.
What is clear from the
papers is that there is bad blood between Black and the respondent's
board of directors and that Black is
the driving force behind this
application. Respondent's board no longer trusts Black. Insofar as
the claims by Black and his companies
are based on facts which are at
present almost exclusively within Black's knowledge, respondent's
board requires further investigation.
On the other hand it is
difficult to understand how, on applicant's version, the winding-up
of respondent can be in the applicant's
interest, particularly in
view of the bank guarantee which respondent tendered. It is true, as
applicant says, that a guarantee
is no payment, and it may even be
that in fact applicant's claim exceeds the amount guaranteed.
However, the fact remains that
respondent was prepared to put up a
guarantee for the exact amount that applicant initially claimed.
Furthermore, and more importantly,
on applicant's version it will at
best receive no more than a few cents in the rand if respondent is to
be wound up.
In the circumstances the
inference is justified, in my view, particularly after the bank
guarantee had been furnished, that the
predominant motive or purpose
of applicant in seeking the liquidation order, is something other
than a
bona fide
attempt to enforce payment of its claim. In
short, I cannot liquidate a public company on an application which
may very well amount
to an abuse of the process of this Court.
Costs
In my view, respondent's
first proper answer to applicant's case is contained in the
supplementary answering affidavit, which was
only filed on 26 May 2
000. This was also the date upon which the bank guarantee was
tendered. In the circumstances I believe that
it would be fair to
order respondent to pay applicant's costs up until 26 May 2000, and
for applicant to pay respondent's costs
subsequent to that date. This
is the cost order I propose to make.
For
these reasons it is ordered:
(a) That the application
is dismissed.
(b) Respondent is to pay
the costs incurred by applicant up until 26 May 2000.
(c) Applicant is ordered
to pay the costs incurred by respondent subsequent to that date.
BRAND,
J