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[2019] ZASCA 162
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Zephan (Pty) Ltd and Others v Noormahomed (1303/18) [2019] ZASCA 162 (29 November 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 1303/18
In
the matter between:
ZEPHAN (PTY)
LTD
FIRST APPELLANT
NICOLAS GEORGIOU
N.O.
SECOND APPELLANT
MAUREEN LYNETTE GEORGIOU
N.O.
THIRD APPELLANT
JOE CHEMALY
N.O.
FOURTH APPELLANT
NICOLAS GEORGIOU
N.O.
FIFTH APPELLANT
and
SURAIYA
BEGUN
NOORMAHOMED
RESPONDENT
Neutral
Citation:
Zephan (Pty) Ltd & others v Noormahomed
(1303/18)
[2019] ZASCA 162
(29 November 2019)
Coram:
Navsa and Nicholls JJA and Tsoka, Gorven and Weiner AJJA
Heard:
20 November 2019
Delivered:
29 November 2019
Summary:
Practice and Procedure – application for rescission of
default judgment – whether defence
prima facie
established
– whether application for rescission correctly refused.
ORDER
On
appeal from
: The Gauteng Division of the High Court, Pretoria
(Swanepoel AJ sitting as court of first instance):
The
appeal is dismissed with costs including costs consequent on the
employment of two counsel, where applicable.
JUDGMENT
Tsoka
AJA (Navsa and Nicholls JJA and Gorven and Weiner AJJA concurring):
[1]
This appeal, with leave of this court, is against an order and
judgment of the Gauteng Division of the High Court, Pretoria
(Swanepoel AJ) in terms of which an application for rescission
launched by the appellants against a judgment granted in favour
of
the respondent was dismissed with costs. In terms of the default
judgment the appellants were ordered to pay Ms Suraiya Begun
Noormahomed (the respondent) the sum of R6 000 000, together with
interest at 15,5 per cent per annum with effect from 9 August
2014,
and costs, jointly and severally against delivery to them of share
certificate HSF 2234137 in Highveld Syndication (Pty)
Ltd (HS22).
[2]
Default judgment was obtained by the respondent on the basis of a
buy-back agreement (the agreement) in terms of which the first
appellant had irrevocably agreed to repurchase the respondent's
shareholding held in HS22 at a specified price and after an agreed
period of five years. The second to the fifth appellants guaranteed
the first appellant's performance in terms of the said agreement.
[3]
The issue in the application for rescission and in the appeal was
whether the appellants disclosed a bona fide defence to the
respondent’s claim in the sense of setting out averments,
which, if established at trial, would entitle them to relief. The
court below, having held that the appellants failed to establish such
a defence, dismissed the application for rescission of the
judgment,
with costs.
[4]
In the founding affidavit the appellants contended that the
respondent's claim had been novated by way of a duly adopted business
rescue plan in relation to associated entities and/or by way of a
scheme of arrangement in terms of s 155 of the Companies Act
71 of
2008 (the Act). The appellants contended that HS22 investors voted in
favour of accepting the scheme of arrangement (the
arrangement) in
respect of a third party company namely Orthotouch Ltd (Orthotouch).
It was contended that the effect of the arrangement
was that HS22's
liabilities to its creditors had been re-arranged and sanctioned by
the court. It was submitted further on behalf
of the appellants that
an acceptance by the respondent of payments of interest in terms of
that arrangement had the effect of the
respondent accepting that the
agreement had been novated.
[5]
The respondent disputed the appellants' defence. She was adamant that
whatever arrangements had been made, involving others,
court
sanctioned or not, her claim for specific performance for the
repurchase of the shares at a specified rate by the first appellant
was unaffected. She insisted that the agreements between her and the
appellants were not novated. It is the respondent's evidence
that her
claim is unaffected by the arrangement nor had it been novated by her
receipt of interest received from Orthotouch. According
to her, she
was entirely unaware of the arrangement and the interest payments
arrived without her requesting them. She maintained
that her claim is
against the first appellant in terms of the agreement and that the
court below was correct in refusing the appellants'
application for
rescission with costs.
[6]
It is now necessary to have regard to the detailed, factual
background. As alluded to earlier, the respondent instituted a claim
against the appellants for specific performance. Her claim was
founded on the agreement read together with the prospectus issued
by
HS22. The agreement formed part and parcel of the prospectus so
issued. On 9 August 2009, the extended date of the offer to
subscribe
for shares in HS22, the first appellant took up and acquired all the
unsubscribed shares in HS22. The first appellant
then mandated PIC
Syndication (Pty) Ltd (PIC) to offer these shares for sale to the
general public on the same terms and conditions
as set out in the
prospectus. In May 2010, the respondent accepted the first
appellant's offer and bought 3 000 shares from the
latter worth R3
000 000.
[7]
In terms of the agreement the first appellant contracted to buy the
shares back from the respondent after a period of five years
from the
initial investment date at the pre-agreed repurchase price of a 100
per cent premium. This essentially meant that upon
maturity she would
receive double the amount invested. The second appellant, Nicholas
Georgiou, the third appellant, Maureen Lynette
Georgiou, the fourth
appellant, Joe Chemaly, the joint trustees of the N Georgiou Trust
and the fifth appellant, Nicholas Georgiou,
guaranteed the due
performance by the first appellant of its obligations in terms of the
agreement towards the respondent. During
2014 the five year period in
terms of the agreement expired. This is the basis of the respondent's
claim against them. The respondent
demanded that the first appellant
repurchase the shares, as agreed, against tender of the share
certificate in respect of the shares
acquired earlier but the first
appellant failed, despite demand, to fulfil its obligations in terms
of the agreement. The respondent
approached the high court to enforce
the terms of the agreement against the first appellant and the other
appellants. As stated
above, the respondent obtained judgment by
default. This was followed by the application for rescission by the
appellants. The
only issue before the court below and before us was
whether or not a triable issue was raised by the appellants.
[8]
Prior to determining whether the appellants' affidavit raised a bona
fide defence, it is necessary to deal with a preliminary
issue. It is
common cause that on 7 November 2019, the first appellant resolved in
terms of s 129 of the Act to voluntarily begin
business rescue
proceedings. Further steps envisaged in s 129(3) of the Act were
taken. Conventionally, a moratorium in respect
of legal proceedings,
in terms of s 133 of the Act then takes effect. It may, however, be
lifted by leave of a court.
[9]
At the commencement of the hearing of the present appeal, we were
informed that the first appellant, as well as the Business
Rescue
Practitioner appointed, were agreed that the appeal be proceeded with
and finalised. That appeared to us to be in the interests
of justice.
[10]
I now turn to determine whether the court below correctly refused the
application for rescission of judgment on the basis that
the first
appellant did not establish a bona fide defence. In relation thereto,
see
Grant v Plumbers (Pty) Ltd
1949 (2) SA 470
(O) at 476 and
Chetty v Law Society, Transvaal
1985 (2) SA 756
(A) at
764I-765H.
[11]
The appellants' reliance on the arrangement and in particular the
provisions of s 155 of the Act for the assertion that the
respondent's claim against the first appellant was novated when HS22
was placed under business rescue or when the arrangement was
sanctioned by the court, is misconceived.
[12]
The respondent's evidence is that her claim is founded on the
agreement guaranteed by the three trustees and the fifth appellant.
In terms of this agreement, on expiry of the period of five years,
the first appellant was obliged to repurchase her shares at
double
the amount she paid for the shares. According to her, the agreement
reached between HS22 and Orthotouch, the third party
company, which
was also placed under business rescue, is irrelevant to the
enforcement of the specific performance guaranteed in
terms of the
agreement.
[13]
That the respondent's claim in terms of the agreement is
unassailable, is clear from the terms of the agreement. In terms of
this agreement, to which neither HS22 nor Orthotouch, a related
entity, were a party, there was an irrevocable undertaking to
repurchase all of the shares in HS22 sold by the first appellant to
the respondent. That the undertaking is independent and insulated
from the affairs of HS22, is clear.
[14]
Counsel on
behalf of the appellants submitted that the respondent's conduct in
receiving interest as a result of the business rescue
and re-
arrangement of the debts of HS22 is indicative of novation of the
agreement on which her claim was based. The respondent's
claim is for
specific performance against the first appellant to enforce the terms
of the agreement. In this context, the receipt
of interest from
Orthotouch is irrelevant to her claim against the first appellant.
This court, in dealing with a similar issue
in
Zephan
(Pty) Ltd & others v De Lange
[1]
,
in the context of an application for summary judgment, said the
following:
'The
BRP relates only to the restructuring of the business of the HS
companies and not the
appellants
. When the HS companies went
into business rescue the appellants were the primary carriers of the
obligation to buy back Mrs De
Lange's shares. The fact that the HS
companies might have been in business rescue was
irrelevant to the
appellants' discharge of their obligations under the buy-back
agreement. Neither was the fact that she had accepted
payments of the
reduced annual interest. Such interest was never part of the buy-back
agreement. There could be no basis for a
finding that Mrs De Lange
had compromised her rights under the buy-back agreement.
' (My
emphasis.)
[15]
The court below correctly refused the application for rescission. In
the result, the appeal is dismissed with costs including
costs
consequent on the employment of two counsel, where applicable.
__________________
M
Tsoka
Acting
Judge of Appeal
APPEARANCES:
For
appellant: A Bester SC
M
Mostert
Instructed
by:
Kyriacou
Inc, Melrose North
EG
Cooper Majiedt Inc, Bloemfontein
For
respondent: L Bolt
Instructed
by:
D
P du Plessis Attorneys, Lovius Block, Bloemfontein
[1]
Zephan v De Lange (1068/2015)
[2006] ZASCA 195
[2 December 2016]
para 19.