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[2012] ZAWCHC 43
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Absa Bank Ltd v Erf 1252 Marine Drive (Pty) Ltd and Another (23255/2010) [2012] ZAWCHC 43 (15 May 2012)
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
Case
No: 23255/2010
Before:
The Hon. Mr Justice Binns-Ward
In
the matter between:
ABSA
BANK
LIMITED
Applicant
and
ERF
1252 MARINE DRIVE (PTY)
LTD
Respondent
KING
CHARLES WINELANDS (PTY)
LTD
Intervening
Party
JUDGMENT
DELIVERED: 15 MAY 2012
BINNS-WARD
J:
[1]
The respondent company was
placed into provisional liquidation in terms of an order made by
Zondi J on 3 November 2011 in an
opposed application. The
current proceedings concern the application for a final winding up
order on the extended return
date of the provisional order. The
application is opposed by the respondent company, and also by an
intervening party, King
Charles Winelands (Pty) Ltd. Mr Charles
Potgieter is the deponent to the principal answering affidavit on
behalf of
the respondent, and also to the intervening party’s
supporting affidavit. The intervening party is a creditor of
the
respondent. The respondent and the intervening party are
both companies in what Mr Potgieter refers to as ‘the Charles
Potgieter group’. I think it may reasonably be inferred
from this description that there is probably some commonality
of
proprietary interest or control, whether direct or indirect, in or
over the component entities in the group.
[1]
The business of the group is property development and matters related
thereto.
[2]
Charles Potgieter
Investments (Pty) Ltd (‘CPI’), which is also a company in
the group, is indebted on overdraft to the
applicant bank in the sum
of approximately R22 million. The respondent company stood
surety in favour of the applicant
in respect of an amount of up to
R10 million of CPI’s overdraft debt. It would appear
from information set out
in Mr Potgieter’s affidavit in support
of the intervening party’s opposition to the winding-up of the
respondent that
CPI has been placed under a final winding-up order at
the instance of JLK Construction. The provisional winding up
order
obtained by the applicant against the respondent company in the
proceedings before Zondi J came about because of the
respondent’s
failure or inability to discharge its obligation
as surety.
[3]
The papers before me are
in the same state as they were when the matter was before Zondi J.
The only difference is that
in consequence of an order by the learned
judge dismissing the intervening party’s application for leave
to intervene in
the application for a provisional order, it was
necessary for the intervening party to apply afresh to be admitted as
an opposing
party at this further stage of the proceedings.
That application was granted, without opposition from the applicant.
The intervening party’s case at this stage remains that set out
in the affidavit that was before the court in the application
for a
provisional order.
[4]
While the evidence might
be the same as it was when the provisional order was granted, the
approach to be taken to it for the purposes
of considering whether a
final order should be made is different. At the provisional
stage the applicant had to make out
only a
prima
facie
case – in
the peculiar sense of that term explained in
Kalil
v Decotex (Pty) Ltd and another
1988 (1) SA 943
at 976D – 978F. In order to succeed in
obtaining a final order the applicant has to prove its case on the
evidence
as it falls to be assessed in the usual manner in
proceedings on motion for final relief. The practical
distinction between
the two requirements thus arises out of the
application of the
Plascon-Evans
evidentiary rule in opposed proceedings for a final order; cf.
Export
Harness Supplies (Pty) Limited v Pasdec Automative Technologies (Pty)
Limited
2005 JDR 0304
(SCA), at para. 4.
[2]
The effect has been described in terms which suggest that a higher
‘degree of proof…on a balance of probabilities’
is
required for a final order than for a provisional order (
Paarwater
v South Sahara Investments (Pty) Ltd
[2005]
4 All SA 185
(SCA), at para. 3). While the basis for that
description is understandable, I would suggest respectfully that the
position
might more accurately be described as being that while the
applicant must establish its case on the probabilities to obtain
either
a provisional or a final order, in an opposed application, a
different, and more stringent approach to the evidence, consistent
with the
Plascons-Evans
rule, must be adopted by a court in deciding whether the applicant
has made a case for a final order. This is in contradistinction
to the approach to an opposed application for a provisional order,
when the case is decided on the probabilities as they appear
from the
papers.
[5]
The import of the
Plascon-Evans
rule is so well established that it hardly bears stating: it is to
the effect that where there is a dispute of fact on the papers
final
relief may be granted in an application only if it is justified by
the averments in the affidavits of the applicant which
are either
admitted or not disputed by the respondent, together with the facts
alleged by the respondent. It is, however,
the qualifications
and exceptions to that simple principle that are sometimes
overlooked, and because they have borne importantly
on the
determination of the current application, I make no apology for
quoting Corbett JA’s exposition of them in full:
In
certain instances the denial by respondent of a fact alleged by the
applicant may not be such as to raise a real, genuine or
bona fide
dispute of fact (see in this regard
Room Hire Co (Pty) Ltd v Jeppe
Street Mansions (Pty) Ltd
1949 (3) SA 1155
(T) at 1163 - 5;
Da
Mata v Otto NO
1972 (3) SA 858
(A) at 882D - H). If in such a
case the respondent has not availed himself of his right to apply for
the deponents concerned to
be called for cross-examination under
Rule 6(5)
(g)
of the Uniform Rules of Court (
cf
Petersen v Cuthbert & Co Ltd
1945 AD 420
at 428;
Room Hire
case
supra
at 1164) and the Court is satisfied as to the
inherent credibility of the applicant's factual averment, it may
proceed on the basis
of the correctness thereof and include this fact
among those upon which it determines whether the applicant is
entitled to the
final relief which he seeks (see eg
Rikhoto v East
Rand Administration Board and Another
1983 (4) SA 278
(W) at 283E
- H). Moreover, there may be exceptions to this general rule, as, for
example, where the allegations or denials of
the respondent are so
far-fetched or clearly untenable that the Court is justified in
rejecting them merely on the papers (see
the remarks of Botha AJA in
the
Associated South African Bakeries
case,
supra
at
924A).
[6]
The principal basis upon
which the respondent opposes the application is its allegation that
due to the unreasonably prejudicial
conduct
[3]
of the applicant, the principal debt is not owed by CPI, as principal
debtor, and thus also not by the respondent, as surety. To
enable an understanding of the defence it is necessary to summarise
the factual allegations made in support of it.
[7]
The respondent alleges
that CPI, and indeed, so it would seem, the entire Charles Potgieter
group, has been adversely affected by
the global collapse in the
property market that has been evident since 2008/9. The effect
has allegedly been exacerbated
by the tightening regulation of the
extension of credit by institutional lenders introduced upon the
commencement in operation,
in June 2007, of the
National Credit Act
34 of 2005
. These events provided the backdrop, at least
latterly, to the relationship between the applicant, as lender on
overdraft
to CPI, and CPI, as borrower; in other words to the debt to
which the suretyship obligation that the applicant wishes to exact
pertains. The respondent alleges that the applicant breached
the terms of the overdraft agreement that it had with CPI by
refusing, unreasonably, to grant mortgage loans to intending buyers
of property in certain residential township developments being
undertaken by the principal debtor. It is this alleged breach
of contract that constitutes the unreasonable prejudicial conduct
upon which the respondent relies for the contention that it has been
discharged from its suretyship obligation.
[8]
The respondent’s
case in respect of the alleged breach of contract by the applicant
was set forth in the following terms in
the principal answering
affidavit:
5.14 Charles
Potgieter Investments (Edms) Bpk het ’n oortrokke fasiliteit
van R20 Miljoen by ABSA Bank Beperk gehad en weens
die opskorting van
finansiering en verlies van inkomste veroorsaak deur die handelinge
van ABSA Bank Beperk kon Charles Potgieter
Investments (Edms) Bpk nie
hierdie rekening diens nie en het dit agterstallig geraak.
5.15 In die
kontraktuele verhouding tussen Charles Potgieter Investments (Edms)
Bpk en ABSA BANK Beperk:
5.15.1 ABSA BANK
Beperk het die geld aan Charles Potgieter Investments (Edms) Bpk
geleen en voorgeskiet op oortrokke rekening sodat
Charles Potgieter
Investments (Edms) Bpk sy normale besigheid, naamlik die ontwikkeling
en verkoop van eiendomme kon doen en voortsit;
5.15.2 Te alle
relevante tye en in die besonder ook by die aangaan van die
ooreenkoms ten aansien van die oortrokke rekening, was
dit in die
kontemplasie van ABSA bank Beperk en Charles Potgieter Investments
(Edms) Bpk, en was dit as sodanig geïnkorporeer
as ’n
stilswyende of/of geïmpliseerde term van daardie ooreenkoms, dat
ABSA BANK Beperk, in die gewone loop van besigheid,
soos al die ander
finansiële instellings, finansiering sal verskaf aan kopers van
eiendomme van die Groep, en in die besonder
ook die van Charles
Potgieter Investments (Edms) Bpk, op die normale bankpraktyk en
standaarde, welke beperk is tot:
(a) Die koper se
finansiële vermoë, dit is sy vermoë om die
verbandverpligtinge na te kom; en
(b) Die bestaan van
sekuriteit, in die vorm van die waarde van die onroerende eiendom.
5.15.3 In die
omstandighede het daar:
(a) ’n
Regsplig op ABSA BANK Beperk gerus om nie gewillige en daartoe
instaat kopers van Charles Potgieter Investments (Edms)
Bpk se
eiendomme, teen billike en markverwante pryse, se finansiering af te
keur op gronde nie verbandhoudend met die koper se
finansiele vermoë
en die bestaan van voldoende sekuriteit in die waarde van die
betrokke onroerende eiendom, nie.
(b) ’n
Regsplig op ABSA BANK Beperk gerus om hul nie skuldig te maak aan
onredelike besigheidpraktyke en samespanninge deur
ander finasiele
instansies te oortuig om gewillige en daartoe instaat kopers van
Charles Potgieter Investments (Edms) Bpk se eiendomme,
verkoop teen
billike en markverwante pryse, se finansiering af te keur op gronde
nie verbandhoudend met die koper se finansiele
vermoë en die
bestaan van voldoende sekuriteit in die waarde van die onroerende
eiendom, nie.
5.16 In stryd met sy
regspligte:
5.16.1 Het ABSA BANK
Beperk gewillige en daartoe instaat kopers van Charles Potgieter
Investments (Edms) Bpk se eiendomme, verkoop
teen billike en
markverwante pryse, se finansiering afgekeur op gronde nie
verbandhoudend met die koper se finansiele vermoë
en die bestaan
van voldoende sekuriteit in die waarde van die onroerende eiendom; en
5.16.2 Het ABSA BANK
Beperk hom skuldig gemaak aan ’n onredelike besigheidpraktyk
deur Eerste Nasionale Bank en Standard Bank
te oortuig om gewillige
en daartoe instaat kopers van Charles Potgieter Investments (Edms)
Bpk se eiendomme, verkoop teen billike
en markverwante pryse, se
finansiering af te keur op gronde nie verbandhoudend met die koper se
finansiele vermoë en die bestaan
van voldoende sekuriteit in die
waarde van die onroerende eiendom.
[9]
The basis upon which a
surety can escape its obligations because of the prejudicial conduct
of the creditor has been considered
by the Supreme Court of Appeal in
two cases:
Absa Bank
Ltd v Davidson
2000
(1) SA 1117
(SCA) and
Bock
and others v Duburoro Investments (Pty) Ltd
2004 (2) SA 242
(SCA). In
Davidson
,
at para. 16, Olivier JA rejected the notion that there was
a general so-called ‘prejudice principle’ in
our law to
the effect that if a creditor should do anything in his dealings with
the principal debtor which has the effect of prejudicing
the surety,
the latter is fully released. The learned judge of appeal went
on, at para. 19, to hold:
As
a general proposition prejudice caused to the surety can only release
the surety (whether totally or partially) if the prejudice
is the
result of a breach of some or other legal duty or obligation. The
prime sources of a creditor's rights, duties and obligations
are the
principal agreement and the deed of suretyship. If, as is the case
here, the alleged prejudice was caused by conduct falling
within the
terms of the principal agreement or the deed of suretyship, the
prejudice suffered was one which the surety undertook
to suffer.
In
Duburoro
, at para.s 20-21, Harms JA endorsed the
judgment of Olivier JA in
Davidson
in this respect, and
rejected the criticism of it expressed in Forsyth & Pretorius,
Caney’s The Law of Suretyship
5
th
ed., at
205-206.
[10]
The liability which the
respondent contests arises out of CPI’s failure to repay its
overdraft. The breach of the overdraft
loan agreement upon
which the respondent - conforming with the approach laid down in
Davidson
- relies to establish the alleged prejudicial conduct consists of the
breach of an alleged tacit (Afr.
stilswyende
)
or implied (Afr.
geïmpliseerde
)
term of the contract (see para. 5.15.2 of the answering
affidavit, quoted above). Probably the most authoritative
explanation of the distinction between an implied and a tacit term is
that given in
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 531-533. An implied term in the true
sense is a term imputed by law: it is a
naturalium
of the contract. A tacit term, on the other hand, is an
unexpressed provision of the contract, which derives from the common
intention of the parties, as inferred by the court from the expressed
terms of the contract and the surrounding circumstances.
[11]
A learned and detailed
consideration of the nature of a contract of loan on overdraft by a
banker was undertaken by Selikowitz J
in
Standard
Bank of SA Ltd v Oneanate Investments (Pty) Ltd
1995
(4) SA 510
(C) at 546I – 551B.
[4]
The learned judge found that a loan made by a bank to its customer on
overdraft was, in the absence of agreement between
them on
distinguishing terms, repayable from the moment the advance was made,
and that no specific demand by the bank for repayment
was needed to
make the loan due and repayable.
[5]
The learned judge remarked in this connection ‘
When
the customer requests an overdraft he must be taken to know that the
loan is repayable on demand and that if he wishes to repay
the loan
at a later fixed date or only after receipt of notice of repayment
from the bank, he must conclude the necessary agreement
with the bank
to vary the common law that a loan without an agreed date of
repayment is repayable on demand without specific notice.
’
[6]
An ordinary overdraft agreement is therefore a loan repayable on
demand. The term alleged by the respondent is thus most
definitely not a
naturalium
of a loan on overdraft; on the contrary, such a term would
constitute an exception to the usual character of such a contract.
It follows that the allegation that there was an implied term of the
nature alleged by the respondent must be rejected. Thus
the
only question is whether there was a tacit term in the overdraft
agreement with the import alleged by the respondent.
[12]
At p.550E-I of his
judgment in
Oneanate
,
Selikowitz J made the following observations about the scope for
the existence of a tacit term in an overdraft agreement
of the nature
alleged by the respondent, which I find to be pertinent:
I
accept that where, for example, a businessman seeks an overdraft from
his bank he will often intend to use the overdraft facility
to fund
his business on an ongoing basis and that it could not be said that
he intended the loan to be repayable on demand. It
may well be that
in such circumstances it can be established that the parties varied
the usual role but each such case will have
to be decided on its own
facts. In my view it cannot, as a general rule, be said that either
by necessary implication or in order
to ensure business efficacy the
grant of an overdraft in circumstances such as those just described
must necessarily involve the
recognition of a tacit term that the
bank will give its customer specific notice before requiring
repayment. The customer may feel
that he requires such notice in
order to efficaciously conduct his own business, but such a term is
hardly necessary for the proper
conduct of the banking relationship
between the parties to the loan. As Millin J observed in
Rapp
and Maister v Aronovsky
1943 WLD 68:
It
has often been pointed out that it is not sufficient to show that the
term [which it is alleged should be implied as a tacit
term of the
contract] would be highly reasonable or convenient to one or other or
even both of the parties. The cases show that
the Court has to be
continually on its guard against being persuaded to introduce a term
which, on analysis of the argument, appears
to be no more than a term
which would make the carrying out of the contract more convenient to
one of the parties or to both of
the parties and might have been
included if the parties had thought of it and if they had both been
reasonable.
(At
74-5.)
[13]
The dicta of Millin J
in
Rapp and Maister
have, of course, been approved in many subsequent judgments,
including in the authoritative dissertation on the existence and
imputation of tacit terms in
Wilkens
NO v Voges
1994 (3) SA 130 (A) by Nienaber JA. As
noted
[7]
by the learned judge of appeal:
Being unspoken a
tacit term is invariably a matter of inference. It is an inference as
to what both parties must or would have had
in mind. The inference
must be a necessary one: after all, if several conceivable terms are
all equally plausible, none of them
can be said to be axiomatic. The
inference can be drawn from the express terms and from admissible
evidence of surrounding circumstances.
The onus to prove the material
from which the inference is to be drawn rests on the party seeking to
rely on the tacit term. The
practical test for determining what the
parties would necessarily have agreed on the issue in dispute is the
celebrated bystander
test. Since one may assume that the parties to a
commercial contract are intent on concluding a contract which
functions efficiently,
a term will readily be imported into a
contract if it is necessary to ensure its business efficacy;
conversely, it is unlikely
that the parties would have been unanimous
on both the need for and the content of a term, not expressed, when
such a term is not
necessary to render the contract fully
functional.
’
In
related vein, in
Maphango v Aengus Lifestyle Properties
[2011]
ZASCA 100
,
2011 (5) SA 19
(SCA), at para. 13, Brand JA
observed:
Because a tacit
term is derived from an inference as to what both parties must have
intended, if they had applied their minds, the
inference will be
drawn only if the court is satisfied that it is a necessary one. Once
there is difficulty and doubt as to how
the term should be formulated
or how far it should go, it can hardly be said that the parties
clearly intended the proposed term
to be part of their agreement (see
eg
South
African Mutual Aid Society v Cape Town Chamber of Commerce
1962 (1) SA 598
(A) at 606B;
Desai
v Greyridge Investments (Pty) Ltd
1974 (1) SA 509
(A) at 522H-523A)
.
As
observed by Brand JA in
Cape Town, City of (CMC Administration) v
Bourbon-Leftley NNO
2006 (3) SA 488
(SCA); [2006] 1 All SA
561, at para. 19, the cases show that the courts do not easily
infer the existence of tacit terms.
[14]
The observations of
Selikowitz J, quoted earlier, bear out the view that it is not a
necessary feature of an overdraft agreement
entered into by a
businessman to fund his business on an ongoing basis that it not be
repayable on demand. In my view it
is even less evident that a
term that the bank should, by granting its customer an overdraft
facility, hold itself willing on its
usual terms to extend finance to
other persons, to enable them to do business with its customer,
should be imputed to an overdraft
loan agreement. It is far
from axiomatic why such a term should be regarded by both the bank
and its customer as necessary
to ensure the efficacy of the overdraft
agreement. The alleged tacit term bears with it the implication
that the applicant
bank would, while CPI remained indebted to it on
overdraft, be obliged - for so long as CPI continued to do business -
to finance
qualifying purchasers in developments undertaken by CPI.
This begs the question when or in what conditions would the applicant
be able to call up the overdraft? If one proceeds on the basis
of an acceptance of the averments made on behalf of the respondent,
the answer to the question is far from obvious. Indeed, the
implication bound up in the tacit term alleged by the respondent
that
in agreeing to extend an overdraft facility to CPI, the applicant
committed itself, while CPI remained indebted to it under
the
agreement, to do business with CPI’s customers, is on the face
of it, and in the absence of a compelling effect in support
of it in
the evidence of the circumstances surrounding the conclusion of the
agreement, quite palpably a far-fetched one.
[15]
The applicant has denied
the respondent’s allegation as to the existence of the alleged
tacit term. It did so quite
baldly in its replying affidavit,
but then I do not think it can be seriously criticised for the
baldness of its denial when –
bearing in mind the onus upon it,
referred to by Nienaber JA in
Wilkens
in the passage cited earlier - the respondent had put up no detailed
facts with which the applicant might have been expected to
engage
concerning the conclusion of the overdraft agreement and the
inclusion in it of the alleged tacit term. The respondent
did
not allege when, and by whom representing the bank and CPI,
respectively, the overdraft agreement was concluded. It also
did not set forth the express terms of the agreement, or allege
whether the express terms were agreed to orally or in writing.
It made no allegations to establish with any particularity what the
factual circumstances were attending the conclusion of the
agreement
that militated in favour of its contention as to the existence of the
alleged tacit term. If the respondent wished
to raise a real,
genuine or
bona fide
dispute of fact on the existence of the alleged tacit term, it
behoved it to provide this detail.
[16]
There is authority to the
effect that the rule about bald denials by a respondent not giving
rise to a genuine dispute of fact also
holds true in respect of bald
allegations of fact in the answering affidavits; see
Dausa
v Middleton NO and others
[2005] 2 All SA 83 (C)
[8]
at 93 in fin -94 (approved in
Wightman t/a JW
Construction v Headfour (Pty) Ltd and another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA),
[2008] 2 All SA 512
, at para. 12).
Compare also
National
Scrap Metal v Murray & Roberts
[2012] ZASCA 47
(29 March 2012), at para. 19, which exemplifies
the effect of a party’s failure to put up such substantiating
evidence
as it might have been expected to, as a factor to which
regard may be had in determining the existence or not of a real or
genuine
dispute of fact on a point in issue.
[17]
The absence of
corroborating or supporting detail is significant in a situation
where the allegation made by the respondent is not
just improbable,
but so improbable as to appear on its face, as I have said, to be
far-fetched. In the current case the position
is underscored by
the respondent’s failure to apply to cross-examine the deponent
to the bank’s replying affidavit
on the latter’s denial
of the existence of the alleged tacit term. It is also
underlined by the absence of any evidence
to suggest that CPI sought
to assert the existence of the alleged tacit term when the applicant
bank called up the overdraft debt.
On the contrary, the
Managing Director of CPI wrote to the applicant on 8 December
2009, after the applicant had indicated
its refusal to finance
purchases in the Burgundy Estate development, requesting the
applicant to extend CPI’s overdraft facility
to 30 June
2010. The tenor of the lengthy letter is that of a plea for the
applicant’s understanding of the difficult
trading conditions
in which CPI found itself. The letter contains no suggestion
whatsoever of the existence of the tacit
term or the legal obligation
(Afr.
regsplig
)
on which the respondent relies in opposition to the winding up
application; this despite having been written in circumstances
in
which a reference to the term or the obligation – if they
existed - would have been to be expected.
[18]
In the circumstances I
have concluded that the respondent’s bald and unsubstantiated
allegation of the existence of the alleged
tacit term was not
sufficient to raise a genuine dispute of fact concerning CPI’s
liability as principal debtor to repay
its overdraft debt on demand,
as ordinarily the case in such contracts. In reaching this
conclusion I have not overlooked
the recent judgment of the Supreme
Court of Appeal in
Mathewson
& another v Van Niekerk & others
[2012] ZASCA 12
(16 March 2012) in which it was held
[9]
that the test entailed in the rejection of a respondent’s
allegations as so far-fetched or untenable as to be susceptible
to
rejection on the papers is a stringent one. It is significant
that in that matter, in which the allegation of a tacit
term was also
central to the dispute, the SCA was of the view that the
probabilities actually supported the existence of the tacit
term
alleged by the respondent. Obviously the more inherently
improbable the respondent’s allegation is, the more amenable
it
becomes to rejection as untenable or far-fetched. The baldness
with which an inherently most improbable allegation is
made must, in
my view, be a material factor in the application of the test to
determine whether it falls to be rejected in terms
of the
qualifications or exceptions to the
Plascon-Evans
rule.
[19]
As appears from the
passage from the answering affidavit quoted above, the respondent
founded the existence of the legal obligation,
the alleged breach of
which is said to have excused CPI from its obligation to repay its
overdraft debt, in contract. I have
found that baldly made
allegation to be so far-fetched as to justify rejection on the
papers. This renders it unnecessary
for me to canvas, or make
any determinative findings in respect of the factual allegations on
which the respondent relied to make
out the alleged commission of the
breach. These pertained to the applicant’s refusal to be
involved in the provision
of financial assistance to purchasers in
two sections of the Burgundy Estate residential development being
undertaken by CPI.
Suffice it to say, however, that it was
evident, on the basis of documentation which the respondent appears
to be in no position
to contravert, that the applicant’s
refusal to be involved was predicated upon the use by CPI of
contracts of sale which
- in breach of the terms of an
agreement between CPI and the applicant under which the applicant
agreed to treat with purchasers
of property in the development
seeking bond finance on the basis of a pre-valuation of standardised
building units in the development
- allowed for the deferment of the
payment of the purchase price deposit by buyers, and also for the
provision in favour of buyers
of a rental guarantee scheme for use to
subsidise their bond repayments. For the reason mentioned,
whether CPI was in breach
of its contract with the applicant in this
regard has no bearing on CPI’s liability to pay up on its
overdraft debt.
The apparent breach by CPI of its contract with
the applicant concerning the financing of sales of property in the
Burgundy Estate
development does, however, have some relevance to the
consideration of CPI’s alleged counter-claim for damages
against the
applicant, which is a subject to which I shall now turn.
[20]
The allegation that CPI
enjoys a damages claim against the applicant in an amount exceeding
its overdraft debt is also predicated
on the breach by the applicant
of the alleged tacit term. The finding that I have made in
respect of the alleged existence
of the term is adversely
determinative of the alleged claim for contractual damages.
However, Mr
Joubert
SC, who, together with Mr
De
Vries
, appeared for
the respondent and the intervening party, submitted that the
allegations in para. 5.16 of the answering affidavit
also
supported the existence of a claim in delict by CPI against the
applicant. For present purposes, and without making
any finding
to that effect, I am prepared to approach the determination of the
application assuming that Mr
Joubert
’s
argument in this respect is well-founded.
[21]
On that approach CPI’s
claim for damages would fall to be regarded as an unliquidated
counter-claim, which, upon judgment
in CPI’s favour, would give
rise to a set-off against its overdraft liability. It is a well
established practice in
South Africa to allow a defendant to use an
unliquidated counter-claim as a dilatory defence to a liquidated
claim. The effective
availment of the defence is, however,
subject to the court’s discretion. The practice, insofar
as it pertains in actions,
is reflected in the provisions of rule
22(4) of the Uniform Rules of Court. I am willing also to
accept in favour of the
respondent that in the circumstances the
defence would be available to it as a surety; cf.
Muller
and others v Botswana Development Corporation
2003 (1) SA 651
(SCA), at para.s 9-11.
[22]
In Blackman
et
al
,
Commentary
on the Companies Act
vol. 3 (Juta) at 14-93 it is stated, with reference to English,
Australian and New Zealand authority, that ‘
It
has been held that where a company has a genuine and serious
counterclaim – whether of liquidated or unliquidated damages,
and whether or not arising out of the same transaction – which
it has been unable to litigate, in an amount equal to or exceeding
the amount of the applicant’s debt, the court will in the
absence of special circumstances, dismiss or stay the winding-up
application in the exercise of its discretion under s 347(1).
’
I have not undertaken a detailed examination of the foreign cases
cited in Blackman’s work. Suffice it
to say that my
consideration of the judgment in
Re
Bayoil SA; Seawind Tankers Corp v Bayoil SA
[1998]
EWCA Civ 1364
,
[1998] BCC 988
,
[1999] 1 All ER 374
,
[1999] 1 BCLC 62
,
[1999] 1 Lloyd's Rep 211,
[1999] 1 WLR 14
7, which rehearses the
effect of the English Court of Appeal’s earlier judgments in
Re
Portman Provincial Cinemas Ltd,
(1964)
108 SJ 581, [1964] CA Transcript 207 and
Re
L H F Wools Ltd
,
[1969] 3 All ER 882
(CA),
[1970] Ch 27
,
[1969] 3 WLR 1
bears out the
proposition; at least in English jurisprudence. The effect is
that the judicial discretion to grant a winding-up
order in the
context of a ‘genuine and serious’ counter-claim by the
respondent of the nature mentioned is narrowly
circumscribed in
English practice. The English courts do not have a ‘discretion
at large’ in such matters.
The winding-up application
will therefore usually be stayed, or refused.
[23]
In
Ter
Beek v United Resources CC and another
1997 (3) SA 315
(C) at 333H-J, Van Reenen J - despite actually
mentioning the decisions in
Portman
Provincial Cinemas
and
LHF Wools Ltd
- described his understanding of the position under English law with
no acknowledgement of the narrow nature of the discretion
available
to an English court and, after citing two South African cases
[10]
which merely recite the trite principle that a South African court
has a discretion to refuse to make a winding up order even when
the
applicant has proved the elements necessary to obtain such an order,
opined
[11]
that there existed no reason why the English approach should not be
followed in South African law. With respect, however,
in
failing to appreciate its limiting effect on the breadth of the
applicable judicial discretion, the learned judge appears to
have
misdirected himself on the import of the English law in point.
[12]
[24]
The approach in English
law - following on what Nourse LJ, in
Bayoil
,
said may have been an incorrect assumption by the court in
Portman
Provincial Cinemas
of
the contextual effect of a reference by Greene MR in
Re
Welsh Brick Industries Ltd
[1946] 2 All ER 197
(CA) to a passage in
Buckley
on the Companies Act
-
would seem to be predicated on equating opposition based on the
existence of genuine and serious counter-claim by a respondent
company to an application for its liquidation with opposition by a
company based on the
bona
fide
dispute by it of
its alleged indebtedness to the applicant. Notwithstanding his
evident misgivings about the soundness of
such an approach, Nourse LJ
nonetheless considered that English courts were obliged to follow the
precedent created in
Portman
,
expressing himself thus ‘
From
the terms in which Lord Denning MR and Harman LJ, in particular
the latter, expressed themselves in
Re
Portman Provincial Cinemas, Ltd
it seems that they assumed, perhaps wrongly, that the practice that
had been adopted in disputed debt cases had also been adopted
in
cross-claim cases. Be that as it may, the actual decision in that
case is clear authority for the proposition that the petition
ought
to be dismissed in cross-claim cases, except in special
circumstances
’.
Appearing to hold (through his reference to
Kalil
v Decotex
, where the
question was in fact left open) that the
Badenhorst
rule,
[13]
which pertains to the determination of ‘disputed debt cases’
in our law, went to
locus
standi
, van Reenen J
expressed himself (at 334 of
Ter
Beek
) against
following that approach in South African law and, to that extent,
qualified his opinion that we should, in general, follow
the English
judicial practice, as he understood it to be.
[25]
I am hesitant to accept
the notion that the
Badenhorst
rule goes to standing. After all, as Corbett JA observed in
Kalil v Decotex
supra, at 980, it is conceivable that a creditor could establish on a
balance of probabilities that it had a claim against the
respondent
company in winding-up proceedings, while the respondent at the same
time was able to establish that the claim was disputed
on
bona
fide
and reasonable
grounds. The applicant in such a case would have established
its standing, while the respondent would have
established,
irrespective of the merits of the claim or its defence to it,
[14]
that the remedy sought by the applicant should not be granted.
The
Badenhorst
rule would thus seem to constitute a self-standing (and possibly
flexible) principle that winding-up proceedings are not an
appropriate
procedure for a creditor to use when the debt is
bona
fide
disputed.
Availment of the procedure in circumstances in which the
Badenhorst
rule applies can be an abuse of process. It is so, however,
only when the creditor knew, or should reasonably have foreseen
that
the debt was disputed on
bona
fide
and reasonable
grounds at the time of the institution of the proceedings. I am
thus unable, with respect, to find any substance
in the qualification
to which van Reenen J expressed his willingness to follow the
English law as he understood it.
[26]
It is possible to state
the position in South African law without reference to the English
law. There is no reason for our
courts to adopt or entrench
what Nourse LJ, in
Bayoil
,
clearly suspected to be a mistakenly taken course in English
jurisprudence determined in
Portman
.
In my view reliance by a respondent on a ‘genuine and
serious’ unliquidated counterclaim to oppose an application
for
its a liquidation is a quite distinguishable basis for resisting
winding-up from that premised on a
bona
fide
and reasonable
dispute of an alleged indebtedness to a creditor-applicant. As
pointed out by van Reenen J in
Ter
Beek
, reliance by a
respondent company on a counterclaim to avert a winding-up order
actually entails an admission by it of the alleged
indebtedness to
the applicant relied upon by the creditor applicant. The
allegation of the existence of the unliquidated
counter-claim is
nothing more than the putting up by the respondent of a basis upon
which it is able to ask the court to exercise
its discretion against
making a winding-up order, notwithstanding that the applicant may
have satisfied the technical requirements
to achieve the remedy.
There is accordingly no basis in our law in such circumstances
to treat the application for winding-up
as an inappropriate
procedure, as a court would, applying the
Badenhorst
rule, in the circumstances of a claim for winding-up by a creditor
when the existence of the debt in question is reasonably and
bona
fide
disputed.
For the same reason there is no reason in our law for a court, as a
matter of principle, to adopt a general disposition
against the
granting of the remedy just because the existence of an unliquidated
counterclaim is alleged by the respondent.
There is also no
basis in our law, in the postulated circumstances, to apply s 347(1)
of the 1973 Companies Act
[15]
in a manner as would circumscribe the judge’s discretion, as
under English law.
[27]
I venture that in the
majority of cases the distinction between the English approach and
ours will be notional rather than real,
certainly in respect of the
result. A court will in the nature of things be inclined to
exercise its discretion against making
a winding up order in a matter
in which it appears that there is a reasonable possibility that a
counter-claim by the debtor company
will upon its determination
extinguish the debt relied on by the applicant in its application for
a winding-up. The exercise
of a broad discretion by South
African courts in closely analogous circumstances is well
established, and as mentioned, in respect
of actions, reflected in
the provisions of rule 22(4). It is for the respondent to
persuade the court to exercise the discretion
in its favour by
showing on the papers that its counterclaim is what the English
judges would call a ‘genuine and serious’
one. This
requires more of a respondent than is needed if its basis for
opposition is the existence of a disputed indebtedness.
If the
respondent fails in this respect the court is unlikely to exercise
the discretion in terms of s 347(1) of the Companies
Act in its
favour.
Ter
Beek
’s case is
an example in point. The court granted a winding-up order in
Ter Beek
notwithstanding the
allegation of an unliquidated counterclaim by respondent. It
did so because of the features of the case
apparent on the papers
that militated against existence of the alleged breaches of contract
upon which the alleged counterclaim
fell to be founded. The
factors to which the court had regard in this respect included ‘
the
startling lack of particularity in respect of the alleged breaches of
contract and the manner in which the amounts claimed as
damages are
calculated and arrived at
’.
[16]
[28]
It is time to apply the
principles just rehearsed to the case in hand. Proceeding from
the passage of the answering affidavit
quoted in para. [8],
above, the deponent to the respondent’s principal answering
affidavit described CPI’s alleged
counter-claim against the
applicant in the following terms:
5.17 As gevolg van
ABSA BANK Beperk se verbreking van sy regsplig teenoor Charles
Potgieter Investments (Edms) Bpk het Charles Potgieter
Investments
(Edms) Bpk skade gely in ‘n bedrag van minstens R50,067,250.00,
welke bedrag as volg bereken en saamgestel word:
5.17.1 Verlies aan
netto inkomste bereken teen 35% van die verkoopsom ten aansien van
die 65 eiendomme wat verkoop was en wat gestaan
het om geregistreer
te word teen ’n gemiddelede prys van R799,000.00 in ’n
totale bedrag van R18,177,250.00;
5.17.2 Afkeuring en
veroorsaking van afkeuring van finansiering van ’n verdere
geskatte 30 eenhede teen ’n gemiddelde
prys van R630,000.00 en
’n winsmarge van 10% in ’n totale bedrag van
R1,890,000.00; en
5.17.3 Verdere
voorsiene/kontemplatiewe gevolgskade in die omgewing van R30 miljoen
deurdat geen verdere bemarking gedoen kon
word nie aangesien
bankbeleid bepaal dat ’n enkele bank nie meer as 25% van ’n
projek se eindfinasiering doen nie en
die nodige voorverkoopsyfers
gevolglik nie bepaal kon word nie.
5.18 In die
vooropstelling het Charles Potgieter Investments (Edms) Bpk ’n
eis teen ABSA Bank Beperk wat by verre ABSA Bank
Beperk se vordering
teen Charles Potgieter Investments (Edms) Bpk oorskry, met en die se
borge, wat die respondent insluit nie
enige bedrag teenoor ABSA Bank
Beperk verskuldig is nie.
[29]
The damages alleged in
terms of para.5.17.1 of the answering affidavit are related to the
Burgundy Estate transactions mentioned
in para. [19], above.
I have already remarked that it appears
ex
facie
the
documentation in respect of the applicant’s withdrawal as
financier of the Burgundy Estate developments that CPI’s
manner
of marketing and selling properties in that development was in breach
of the applicant’s conditions which forbad any
contract that
allowed deferred payment of the deposit on the purchase price or a
scheme of guaranteed rental It cannot be
said that the
applicant was under any duty in law, outside of any applicable
contractual obligation (and, as already held, such
has not been
established) to finance the purchase of property in the development.
The only basis for the allegation of delictual
liability by the
applicant to CPI is the alleged persuasion by the applicant of other
banks not to advance mortgage loans to qualifying
purchasers in the
development. As mentioned, I am prepared for this purpose to
assume, without finding, that the allegations
do make out a
cognisable delict.
[30]
The only evidence offered
in support of the supposed delict is the presence of an employee of
First National Bank at a meeting held
between representatives of CPI
and the applicant to discuss the applicant’s position on the
Burgundy Estate sales. The
insinuation that this pointed to
some form of collusion between the applicant and other banks, at the
instigation of the applicant,
to refrain from extending finance to
CPI’s buyers is fatally undermined by the production of an
email from one of CPI’s
agents in terms of which the First
National Bank employee had been invited to the meeting. The
implication that the applicant’s
competitors would forego the
opportunity to engage in viable business simply to support the
applicant in a grievance against CPI
is inherently improbable.
On the contrary, the unwillingness of other banks to be involved in
the financing of purchases
in the development is understandable
because of the very characteristics of the sale agreements used by
CPI to which the applicant
objected, and for the same reasons.
[31]
In any event the
allegation of the make-up of CPI’s alleged damages is also
suspect. Such a wide margin of profit (35%)
for a housing
developer in a property market acknowledged by the deponent to the
answering affidavit to have been in a state of
‘collapse’
is dubious. In this respect it appears from the answering
affidavit that CPI’s ‘business
plan’, which allowed
for an up to five year interest-free deferral of payment of the 10%
deposit on the purchase price by
purchasers in CPI’s
developments and the provision of a rental guarantee scheme, which
would enable purchasers to subsidise
the bond repayments on their
acquisitions, was a response to the difficult business conditions
prevailing. It is self-evident
that the cost of the so-called
‘business plan’ would necessarily impinge materially on
CPI’s profit margin. There
is no indication, however,
that the cost of the business plan has been factored into the
calculation of the alleged profit margin
used to quantify the damages
allegedly sustained by CPI. Mr Potgieter has furthermore been
noticeably unforthcoming about
the relationship of the company,
Itakane Trading (Pty) Ltd, that was to underwrite the rental
guarantee scheme, and the Charles
Potgieter group. According to
his evidence, Itakane (to which he cryptically refers as ‘a
third party’) would
in terms of the scheme only begin to
realise a nominally positive return in year three of the contemplated
five year rental period.
It seems to me inherently unlikely
that a company outside the Charles Potgieter group would be willing
to undertake the outlay
and risk involved in such a scheme if its
shareholders did not have in common with the shareholders of CPI an
interest in maintaining
the sale of units in CPI’s developments
during difficult market circumstances.
[32]
Indeed, the answering
affidavit contains no meaningful particularity as to how the alleged
profit margin is calculated or arrived
at. Having regard to the
fact that the answering affidavit was made by Mr Charles Potgieter on
23 November 2010, some
11 months after the applicant had
indicated its refusal to provide mortgage finance to purchasers in
the development, one would
have expected a more detailed and
substantiated setting out of the alleged counterclaim than has been
provided. One might
also have expected CPI to have taken steps
in the year that intervened between the deposition of the answering
affidavit and the
making of the order of provisional winding-up to
institute proceedings to exact the claim if it were a ‘genuine
and serious’
one. There is no evidence that any steps
were taken to pursue the claim for damages.
[33]
The allegations in
paragraphs 5.17.2 and 5.17.3 are even vaguer than those in
para. 5.17.1. Why the reference to an ‘estimated’
(Afr.
geskatte
)
30 additional units referred to in para. 5.17.2? When
asked, the respondent’s counsel were unable to give me
any
meaningful explanation of the import of the allegation in
para. 5.17.3.
[34]
It is striking that Mr
Potgieter stated that he had until very shortly before making his
affidavit been of the view that it would
not be worth the candle to
oppose the winding-up applications brought against CPI and the
respondent. In this regard he expressed
himself as follows (I
translate from the Afrikaans): ‘
I
made the decision not to oppose the liquidation application
(s)…..because I did not see the sense, in the hugely difficult
economic climate prevailing, of expending further time and energy
continuing with the businesses in circumstances in which the
market
leader
[the
applicant]
, was vetoing
all the business of these entities
’.
That is hardly a credible attitude if the deponent had any genuine
belief in the existence of a R50 million
plus damages claim
against the applicant.
[35]
In all the circumstances
the respondent has not persuaded me that its alleged counterclaim is
a genuine and serious one. It
has failed to convince me that
the court’s discretion in terms of s 347(1) of the 1973
Companies Act should be exercised
in its favour.
[36]
But Mr Potgieter avers
that the applicant has in any event failed to make out a case in
terms of s 344(f) of the 1973 Companies
Act that the respondent
is unable to pay its debts as described in s 345. He
asserts that the respondent is not insolvent
‘commercially or
otherwise’. It is not necessary for an applicant who
proceeds for the winding up of a company
in terms of s 344(f) to
show that the company is actually insolvent. The applicant has
to prove to the satisfaction
of the court that the company is unable
to pay its debts – a condition commonly referred to as
‘commercial insolvency’
(see s 345(1)(c)).
Actual insolvency might be a powerful indicator of a company’s
inability to pay its debts,
but evidence of a failure of a respondent
company to pay on demand a debt which is due for payment is regarded
as a cogent
prima facie
proof of an inability by the company to pay its debts; cf.
Rosenbach
& Co (Pty) Ltd v Singh’s Bazaars (Pty) Ltd
1962 (4) SA 593
(D) at 597H.
[37]
In the current case it is
clear that CPI’s assets by value consisted in the main of
immovable property. The respondent’s
opposing affidavit
gives abundant proof of the difficulties confronting intending
sellers of fixed property into a ‘collapsed’
market.
The indication by Potgieter that he had initially not been disposed
to cause the applications for the winding up
of CPI and the
respondent to be opposed suggests that conditions had not improved by
the time these proceedings were instituted.
Thus, even
accepting for present purposes his allegation that the respondent’s
assets, fairly valued, exceed its liabilities,
it is evident that
they are illiquid. In the affidavit made by him in support of
the intervening party’s case, Mr Potgieter
indeed expressly
states that the Charles Potgieter group - of which both the
respondent and the intervening party are part - has
been experiencing
cashflow problems. Mr Potgieter ascribed these problems as
having been in consequence of the pressure exercised
by the applicant
in refusing to do business with purchasers in developments undertaken
by the group because of the failure by CPI
to undertake remedial work
at a development known as Tyger Falls II. The applicant’s
position on Tyger Falls II is
also relied upon by the respondent as
evidence of the applicant’s prejudicial conduct towards CPI, so
it is convenient at
this stage to deal with those contentions.
[38]
Tyger Falls II is an
apartment complex developed by CPI. The applicant financed the
purchase of a number of apartments in
the complex by means of loans
to the purchasers advanced against the security of mortgages over the
units concerned. After
the purchasers had taken occupation of
the units it became apparent that the building was affected by
serious structural
problems; so badly, in fact, that parts of the
structure either collapsed or were in imminent danger of collapse.
The result
was that the value of the applicant’s security as
mortgagee was imperilled.
[39]
It seems that the
purchasers of the units in the development were not able themselves
to afford the extensive remedial work required.
The applicant
sought to persuade CPI, as the developer, to undertake the required
remedial work. CPI maintained that the
structural faults had
happened as a result of defective work undertaken by building
contractors employed by them. It denied
that it was liable for
the remedial work. The applicant maintained that CPI was
responsible, as a developer in the business
of home-building, amongst
other reasons, because of the provisions of the
Housing Consumers
Protection Measures Act 95 of 1998
. CPI, however, appears to
have adopted the attitude that the provisions of the Act did not
inure to the benefit of the applicant
as mortgagee, which really was
to obfuscate because any remediation of the defects at the instance
of the purchasers of the units
would redound to the applicant’s
benefit as mortgagee..
[40]
Whatever merit there
might, or might not have been in the position adopted by CPI in
respect of liability to address the problems
with the Tyger Falls
development, it was one likely to engender circumspection amongst
institutional lenders in respect of future
involvement in
developments undertaken by CPI. It is evident that the problems
with the development attracted publicity.
The reputational
damage that such publicity would have done CPI, whatever the
technical merits or demerits of its position in respect
of a
liability to repair the defects, is not difficult to imagine.
On the face of matters that would seem to me a more likely
cause of a
general reluctance by institutional lenders to become involved with
CPI’s developments than a collusive scheme
instigated by the
applicant, which Mr Potgieter seems to allege. As pointed out
by Mr
Van Riet
SC who, together with Mr
Vivier
,
appeared for the applicant, the events in respect of Tyger Falls II
preceded by a year the withdrawal of the applicant from the
financing
of purchases in the Burgundy Estate developments in the circumstances
described earlier, which undermines the allegation
that the applicant
was engaged in a concerted campaign to destroy CPI’s business.
[41]
It remains to consider the
case of the intervening creditor. The intervening creditor
contends that if the respondent were
to be afforded a period to sell
the properties which are its stock in trade in the ordinary course it
would be able to generate
sufficient net proceeds to pay all its
creditors in full, including the amount allegedly due to the
applicant. It alleges
that this will not be the result if there
is a fire sale of the respondent’s properties upon its
liquidation. The intervening
creditor seeks to persuade the
court in the circumstances to exercise its discretion against
granting a winding up order, having
regard to the adverse effect that
such an order would allegedly have on the respondent’s other
creditors.
[42]
The applicant’s
counsel argued against the position of the intervening creditor,
relying strongly in this respect on the
dicta
of Berman J in
Absa
Bank Ltd v Rhebokskloof (Pty) Ltd and others
1993
(4) SA 436
(C) at 440-1 to the effect that the court’s
discretion to refuse a winding up order is limited when the
creditor-applicant
is entitled to seek such remedy
ex
debito justitiae
.
The authority of the
Rhebokskloof
case does not appear to me to be in point. No creditor
intervened to oppose the winding up application in that matter.
Indeed
the learned judge mentioned the absence of opposition by
any other creditor as one of the factors to which he had regard in
refusing
to exercise what he regarded to be his limited discretion
against the applicant-creditor.
[43]
As stated in
Henochsberg
on the Companies Act
at 699-700, with reference to a number of cases, ‘the principle
that an unpaid creditor is entitled to an order
ex
debito justitiae
applies between the creditor and the company, not as between
creditors’. The limiting effect of the
ex
debito justitiae
principle on the exercise by the court of its discretion when a
creditor seeks a winding-up does not apply to the exercise of its
discretion at the instance of other creditors who intervene to oppose
the application.
[44]
That said, the only
creditor that opposes the winding-up of the respondent, to which the
applicant is entitled
ex
debito justitiae
, is
another member of the Charles Potgieter group. Mr
Joubert
stressed that it is
not possible on the papers to say that the shareholders of the
respondent are the same persons as the shareholders
of the
intervening party. The correctness of the submission does not
afford an escape from the characterisation (
pace
Mr Potgieter) of the intervening party as a member of the same group
as the respondent. Commonality of proprietary interest
or
control is inherent the concept of a ‘group’ in the sense
that Mr Potgieter used the word and he has said nothing
in his
affidavits to distinguish that position in the context of the current
matter. On the contrary, he identified a Mr
Jacques Du Toit as
the general manager of the group. The interests of other
creditors urged for consideration by the intervening
creditor would
have been a much more telling consideration had they been put forward
by a creditor at arm’s length from the
respondent.
[45]
In the circumstances of
this matter it also weighs heavily against the exercise of the
court’s discretion in the respondent’s
favour that even
on the case advanced by the intervening party, a recovery period of
up to five years is required to enable the
respondent to order its
affairs in a manner that would enable it to fully repay its debts,
including that owed to the applicant.
On any approach that is
too long in my view. If the winding up application were to be
refused the applicant would in any
event be entitled to pursue its
claim by way of ordinary recovery proceedings. The execution of
the judgment which it would
probably obtain in that context, well
within the five year period contemplated by the intervening party,
would in any event completely
upset the gradual and orderly
realisation of the respondent’s assets which the intervening
party would like to see, with
a result probably not markedly
distinguishable from that which will follow on a winding-up order.
[46]
The intervening party
identified certain properties of the respondent which it was alleged
had been mortgaged in favour of the applicant
to secure the
respondent’s contingent liability for CPI’s overdraft.
There is no explanation, however, as to
why these properties were not
sold to settle the debt during the long drawn out process between the
institution of this application
and the granting of the provisional
order.
[47]
Another factor which
weighs against the exercise of the court’s discretion against a
winding-up on the grounds contended for
by the intervening party is
the failure of the intervening party, notwithstanding the
intervention of more than a year since its
supporting affidavits were
sworn, to provide an update of the respondent’s financial
state. Mr
Joubert
explained that the intervening party had not provided updated
information because the respondent was already in the hands of a
provisional liquidator. The explanation given is not
persuasive. There is no reason why the intervening party could
not have sought whatever information it required to update its case
from the provisional liquidator. There is no suggestion
that
the intervening party did anything to attempt to obtain and put
before the court an updated picture of the respondent’s
ability
to pay its debts. The explanation in any event does not address
Mr Potgieter’s failure to describe the financial
status of the
respondent as at the beginning of November 2011, when he was divested
by the provisional order of management of the
affairs of the company.
[48]
In the result the
following orders are made:
1.
A final winding-up order
is granted in respect of the respondent company.
2.
The applicant’s
taxed costs of suit, including the costs of two counsel, shall be
allowed as costs incurred in the winding-up.
3.
The applicant is directed
to attend forthwith to arrange service of this order by the Sheriff
in compliance with the provisions
of s 346A of the Companies
Act, 1973.
A.G.
BINNS-WARD
Judge
of the High Court
[1]
In
the affidavit made by Mr Potgieter in support of the intervening
party’s opposition to the winding-up of the respondent
he
indicates that the shares in CPI were held by a trust. Mr
Potgieter points out in that affidavit that the applicant
has
instituted proceedings against him personally and ‘the other
trusts of which I am trustee’ in respect of sureties
given for
the selfsame overdraft debt of CPI that is the basis for the current
proceedings. Mr Potgieter describes the
group as a
‘conglomerate’ of legal entities having as its object
the ‘development, possession, sale and management’
of
immovable property. The reference by Mr Potgieter to ‘the
group’ having developed cashflow problems is just
one of
several indications in the papers of an ownership and/or control
interrelationship between the entities of which it is
comprised.
[2]
The
judgment is also accessible at
http://www.justice.gov.za/sca/judgments/sca_2005/2004_097.pdf
.
[3]
The
words of the deponent to the answering affidavit put the allegation
thus in Afrikaans:
‘
weens
die onredelik benadelende optrede van ABSA Bank Beperk…
’.
[4]
This
section of the judgment was unaffected by the judgment on appeal in
Standard
Bank of SA Ltd v Oneanate Investments (Pty) Ltd (in Liquidation)
1998 (1) SA 811 (SCA).
[5]
See
the judgment at 550I-J.
[6]
At
550E-H.
[7]
At
136I- 137C.
[8]
Also
reported in the SALR
sub
nom
Ripoll-Dausa
v Middleton NO
2005 (3) SA 141
(C)
[9]
At
para. 7 of the judgment.
[10]
F
& C Building Construction Co (Pty) Ltd v Macsheil Investments
(Pty) Ltd
1959
(3) SA 841
(D) at 844C-D and
SAA
Distributors (Pty) Ltd v Sport en Spel Bpk
1973 (3) SA 371
(C) at 373C. The learned judge also cited an
English case,
Re
JD Swain Ltd
[1965]
2 All ER 761
(CA) at 762, which is to the same effect as the two
South African cases, but which did not deal with the peculiar nature
of the
discretion under consideration in
Portman
Provincial Cinemas
and
LHF
Wools Ltd
.
[11]
At
334A.
[12]
The
learned judge was in distinguished company in this respect, however,
as reflected in the Court of Appeal’s disapproval
in
Bayoil
of
the judgments of Warner J in
Re
F S A Business Software Ltd
[1990]
BCLC 825
and Millett J (as he then was) in
Re
a company
(
No 006273
of 1992
)
[1993] BCLC 131.
Both distinguished judges had applied the law
in England just as van Reenen J appears to have understood it
to be;
that is as affording them a discretion at large. The
Court of Appeal’s judgment in
Bayoil
was handed down two years after van Reenen J’s judgment
in
Ter
Beek
.
[13]
So
named a
fter
the ratio in
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at 347-8; see
Kalil
v Decotex
supra, at 980F-H. ‘The
Badenhorst
rule’
is the label used to describe the principle that winding-up is not
an appropriate procedure to be availed of by a
creditor whose claim
against the respondent company is
bona
fide
disputed on reasonable grounds.
[14]
Cf.
Hülse-Reutter
v HEG Consulting Enterprises (Pty) Ltd (Lane & Fey NNO
Intervening)
1998
(2) SA 208
(C) at 219F-220B.
[15]
Act
61 of 1973.
[16]
Ter
Beek
supra,
at 337.