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[2014] ZAWCHC 90
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Questek Transit Technologies (Pty) Ltd v Lumen Technologies CC; InRe: Lumen Technologies CC v Questek Transit Technologies (Pty) Ltd and Another (19604/2013) [2014] ZAWCHC 90 (12 June 2014)
IN
THE REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 19604/2013
DATE:12
JUNE 2014
In
the matter between:
QUESTEK
TRANSIT TECHNOLOGIES (PTY)
LTD
..................................
Applicant
Versus
LUMEN
TECHNOLOGIES
cc
............................................................
Respondent
And
in the in limine application between:
LUMEN
TECHNOLOGIES
cc
...............................................................
Applicant
And
QUESTEK
TRANSIT TECHNOLOGIES (PTY) LTD
..................
First
Respondent
THE
HONOURABLE JUDGE ERASMUS
...............................
Second
Respondent
JUDGMENT: 12 JUNE
2014
BOZALEK,
J
[1]
There are three applications before me in
this matter. Firstly, case 19604/2013 in which the applicant (which I
shall refer to throughout
as ‘
Questek’
)
seeks a provisional liquidation order against the respondent (which I
shall I refer to throughout as ‘
Lumen’
).
That is the main application. Secondly, there is an in limine
application brought by Lumen for the rescission of the order of
Dlodlo J, made in the main application on 27 February 2014. Finally,
Questek has brought a conditional counter-application, now
no longer
conditional, in terms of section 23 of the Arbitration Act, 42 of
1965 (‘
the Act’
)
seeking to extend the time period provided for the conclusion of an
arbitration conducted largely before retired Judge Erasmus.
At an
earlier stage Lumen sought a postponement of the main application
pending the outcome of the rescission application but the
postponement application has now become moot.
Questek also seeks
an order for costs
de bonis propriis
against Lumen’s attorney.
[2]
All three applications are opposed and
first came before me in the urgent lane on 15 May 2014 when by
agreement they were postponed
for hearing to 20 May 2014. On that day
argument was heard but not completed and, as a result of illness on
the part of Lumen’s
counsel, only took up again and was
concluded on 29 May 2014.
[3]
These three applications are but the latest
chapter in a long and tortuous saga of litigation between the
parties. In order to determine
the liquidation application, as well
as Questek’s application for costs
de
bonis propriis
, it is necessary to set
out the background to and course of the litigation as briefly as
possible.
BACKGROUND
TO AND HISTORY OF THE LITIGATION
[4]
Lumen was employed by the City of Cape Town
on a contract known as the 25 G contract, being in respect of certain
work required
on the City’s My Citi bus service. Lumen failed
to pay Questek, its sub-contractor, several million rand for work
done by
Questek and its own sub-contractors on the contract. Questek
subsequently initiated arbitration proceedings in this regard and
obtained an arbitration award in its favour from Erasmus J (retired)
together with interest and costs. Prior to the conclusion of
the
arbitration proceedings Questek concluded that Lumen was dissipating
the funds which formed the subject matter of the arbitration
and
applied to this Court for an anti-dissipation order.
[5]
On 21 June 2013 this Court granted a rule
nisi ordering Lumen to pay into the trust account of an attorney the
sum of R2mil as well
as 92% of certain retention monies which were at
that stage still to be paid by the City of Cape Town. Pursuant to
this order the
sum of R2mil was duly paid into the trust account of
the firm of attorneys and was ultimately paid over to Questek.
[6]
The anti-dissipation application was duly
argued on the return date and on 2 September 2013 the rule nisi was
confirmed as well
as an additional order to the effect that a further
R4 426 687.29 be paid into the attorneys trust account
pending the
finalisation of the order. Lumen failed, however, to pay
the outstanding balance into trust and to date has not done so.
Instead
it unsuccessfully sought to appeal this part of the order but
its petition to the Supreme Court of Appeal was dismissed in late
January 2014.
[7]
A related contempt of court application
arising out of Lumen’s failure to pay the monies into trust was
dismissed when the
judge hearing the matter found himself unable to
reject Lumen’s contention that it was unable to comply with the
order because
of an inability to pay.
[8]
Questek was ultimately successful in the
arbitration proceedings obtaining an award for the payment of the
capital sums of R1 969 541.30
and R4 603 908.90
together with interest and costs of the proceedings up to 31 October
2013.
[9]
Questek then brought an application to make
the arbitration award an order of court which was opposed by Lumen
which in turn brought
a counter-application to have the matter
remitted back to the arbitrator.
[10]
Argument in that matter commenced before
Freund AJ on 11 February 2014.
[11]
In the meantime, in November 2013, Questek
instituted the present liquidation proceedings against Lumen on the
grounds that the
latter was unable to pay its debts as they became
due and payable and secondly, on the basis that it was just and
equitable for
Lumen to be wound up. On 27 February 2014 and by
agreement between the parties Dlodlo J granted an order in the
following terms
which I summarise:
1.
All claims enjoyed by Questek and Lumen
arising out of the 25 G tender contract were fully and finally
settled subject to Lumen
complying with various obligations and,
failing which, Questek would be entitled to pursue the liquidation
application and any
other remedies it might have as well as their
respective claims and counter-claims in the arbitration proceedings.
2.
The arbitration award of retired Judge
Erasmus together with a further subsidiary costs award was made an
order of court.
3.
Respondent was ordered to make payment of
the capital amount stipulated in the arbitration award by release of
the sum of R2mil
from the attorneys trust account and the balance, an
amount of R4 573 450.00, within thirty days.
4.
Lumen undertook to pay the taxed bills of
costs in the liquidation application, all costs as provided for in
the arbitration award
and the costs of at least three other high
Court cases and certain costs awards in the arbitration within 14
days of taxation.
5.
Questek authorise and instructed the City
of Cape Town to pay over to Questek 92% of any retention monies to
Questek as and when
these sums became payable to Lumen vis-a-vis the
City.
6.
The hearing of the liquidation application
was postponed sine die in a clause which contained the following
stipulation: ‘
Respondent (Lumen)
consents to applicant (Questek) setting the matter down for hearing
in Third Division on the next available date
after payment becomes
due and payable in terms of (certain paragraphs) in the event of
respondent failing to make payment as contemplated
therein, whether
in part or in full or in any other respect failing to comply with
this Order. Respondent consents to applicant
taking a final order of
liquidation in such event’
.
[12]
Thereafter Lumen failed to make the
payments as stipulated in the order of Dlodlo J. The liquidation
matter was set down on an unopposed
basis on 29 April 2014 when,
against a promise by Lumen to make certain other payments, a further
postponement to 9 May 2014 was
agreed to between the parties.
[13]
The payments were not received, however,
and Questek gave notice of its intention to seek the provisional
liquidation of Lumen on
9 May 2014.
[14]
On the day preceding that hearing Lumen
asked for a further postponement which was refused. Shortly
thereafter Lumen filed what
it termed an in limine application for
rescission in which it sought the rescission of the order made by
agreement by Dlodlo J
on 27 February 2014. It also brought an
application for the postponement of the liquidation application
pending the termination
of the application for rescission. The main
ground in Lumen’s rescission application was that the order of
Dlodlo J was incompetent
inasmuch as it had been discovered that the
arbitration award of Erasmus J (rtd) was a nullity for non-compliance
with
section 23
of the
Arbitration Act, 42 of 1965
by reason of a
period of more than four months having elapsed between the making of
the award and the entering into the reference
by the arbitrator.
After further postponements Questek launched on 12 May 2014, in
response to the rescission application, a conditional
counter-application in terms of
section 23
of the
Arbitration Act,
seeking
an extension of the period within which the arbitrator was
entitled to make his award to 16 November 2013, this being the date
on which the second part of the initial award was handed down.
[15]
As mentioned the three applications were
argued on 20 and 29 May 2014, the application for a postponement
having become moot.
[16]
I propose to deal firstly with the
rescission application.
APPLICATION FOR
RESCISSION
[17]
As mentioned the basis for the application
for the rescission of Dlodlo J’s order is that more than four
months passed between
retired Judge Erasmus entering into the
reference and the date on which he made the arbitration award.
Erasmus J (rtd) commenced
the arbitration proceedings, taking over
from Adv Farber, on 4 June 2013 and the hearing concluded on 25
September 2013. Erasmus
J (rtd) issued an unsigned copy of his
arbitration award on 31 October 2013 and a signed copy of the award
on 6 November 2013.
The arbitration proceedings before him thus
lasted a little more than five months.
[18]
The parties did not specifically agree,
during the arbitration proceedings, to extend the time for making an
award as contemplated
in section 23 of the Act. Lumen now contends
that the parties agreed to the order before Dlodlo J on the basis of
a common mistake,
namely, that Erasmus J (rtd) had the requisite
jurisdiction when he made his award, and this mistake vitiated any
apparent consent.
Lumen ascribes its failure to raise the issue of
the four month period to ‘
an
oversight by its legal representatives’
.
[19]
Questek strongly opposes the application
for rescission pointing out that Lumen had never previously raised
any difficulties with
the time that was taken in concluding the
arbitration proceedings and pointing out that given the extensive
scope of the evidence,
the ambit of the matter and the issues before
the arbitrator it could hardly have been expected of him to make his
award within
four months of 4 June 2013. Erasmus J (rtd) eventually
ruled only on certain parts of the arbitration which were made the
order
of Court now sought to be rescinded by Lumen. Questek submits,
furthermore, that through its conduct, Lumen had waived any right
it
may have had to rely on the award having been made more than four
months after 4 June 2013.
[20]
To the extent that it might be necessary
Questek asked the Court, through its counter-application, to extend
the four month period
until the date on which the award was actually
made. In this regard it was contended on its behalf that if the
entire arbitration
was to be undone the proceedings would be required
to commence
de novo
and this would be an extremely unfair and unsatisfactory result.
Questek alleged further that Lumen did not give its full co-operation
at all times in the arbitration process and in fact sought to delay
the proceedings. Whatever delays outside of the four month
period
took place these were, it contended, attributable to Lumen’s
conduct of the matter.
[21]
In Lumen’s affidavit in reply in the
rescission application and in its opposition in the conditional
counter-claim, I can
find no reference to what it envisages must take
place if the rescission application is successful and the
counter-application
is unsuccessful, more specifically whether it
envisages that the entire arbitration proceedings must commence anew.
Neither was
Ms Ferreira, who appeared on behalf of Lumen, able to
advance any reason how such a state of affairs would advance the
resolution
of the disputes between the parties. In this regard it is
most relevant that Lumen has exhausted all its remedies in its
attempts
to challenge the arbitration award made by Erasmus J (rtd)
by way of an application to review same, to have it remitted back to
the arbitrator by way of an application in the High Court and its
attempts to appeal unfavourable rulings in these respects.
[22]
Relying on a dictum of Kroon J in
Van
Zijl v Von Haebler
to the effect that
in such a situation the arbitrator’s award is of no force and
effect until an extension is obtained, Lumen’s
application for
rescission is premised on Rule 42(1)(c) of the Uniform Rules, namely,
a common mistake and the common law ground
of justus error.
[23]
In terms of Rule 42(1)(c) a Court may
rescind or vary an order or judgment that has been granted based on a
mistake common to the
parties. That mistake, says Lumen, was that the
parties had the power effectively to confer jurisdiction upon the
arbitrator by
agreeing to make the award an order when they clearly
lacked the power to do so under section 23 of the Act. However, on a
proper
analysis there was, in my view, no such common error as to the
facts. Both parties knew when the arbitration had commenced and
concluded before Erasmus J (rtd). When they took the order by
agreement from Dlodlo J, at best for Lumen, both parties were unaware
that the four month period had elapsed. There is, however, no
evidence before me as to what the state of mind of Questek or its
legal representatives was at the time that the order was taken. On
the probabilities it was the same as that of Lumen’s legal
representatives, namely, the question of the elapse of the time
period had simply not occurred to them given that the parties had
concluded a lengthy and difficult arbitration process over a period
of little more than five months and neither party had raised
the
point in question at any prior stage.
[24]
I
do not regard this as a ‘
mistake’
common to the parties such as warrants a Court rescinding an order
pursuant to the provisions of Rule 42(1)(c). The purpose of
the rule
is to correct an obviously wrong judgment or order, not to assist a
party whose legal representatives failed to take a
legal point at the
time that they entered into the agreement which was made an order of
court
[1]
. The dictum in
Van Zijl’s case is distinguishable inasmuch that case was not
concerned with an award which was being
made an order of court by
agreement. Furthermore, a Court has no power to recall or amend an
order which was deliberately made,
in the absence of fraud in the
course of the proceedings
[2]
.
There is no suggestion at all in this matter that there was any
fraudulent misrepresentation on the part Questek.
[25]
There
is a further important consideration and that is the reliance which
is placed on agreements reached between legal representatives.
This
was expressed as follows by Traverso DJP in the
National
Director of Public Prosecutions v Yolande Brandt
[3]
:
‘I cannot simply, because the applicant’s counsel
realised at a later stage that she had made an error of judgment
in
entering into the agreement, permit her to renege on that agreement.
Agreements entered into between parties, and particularly
legal
representatives, are sacred and should be enforced.’
[4]
These considerations are of course, all the weightier when it is
borne in mind that the agreement between the legal representatives
representing their clients was embodied in an order of court.
[26]
In
the commentary in Erasmus, Superior Court Practice
[5]
the authors states that a common mistake would cover the case of a
judgment entered into by consent where the parties consented
in
justus error. They qualify this statement by saying, however, that it
is not sufficient, however, if the error is that of one
of the
parties only, adding that if a litigant by mistake of himself or his
legal advisors abandons relief to which he is or may
be entitled, the
Court has no power, in the absence of fraud of the other party in the
course of the proceedings, to recall or
amend the order it had made.
Where the Court has given judgment on mistaken facts the judgment can
only be set aside if the error
was due to fraudulent
misrepresentation and, as previously mentioned, no such case is made
out in the present matter. It may be
added that in any event the
author’s note that the mistake must relate to or have been
based on something relevant to the
question to be decided by the
Court or to something in the procedure adopted: ‘
this
means that there must be a causative link between the mistake and the
grant of the order or judgment’.
That
element has not in my view been established in the present matter
since, on the overwhelming probabilities, had this point
been raised
by Lumen any earlier it would have successfully been met by the
counter-application presently before this Court.
[27]
Lumen’s reliance on the
common law ground of justus error takes its case no further. Such an
error must firstly be material
and have the effect of excluding
consensus between the parties. In my view there was consensus between
the parties that the award
would be put in the form of an order of
court and made binding. But even if I am incorrect in this regard an
error is justus when
it is reasonable or excusable in all the
circumstances of the particular case. Lumen engaged in arbitration
proceedings over a
protracted period of time and, before eventually
agreeing to the award being made an order of court, in litigation in
which it
sought to avoid the award. In this process Lumen used a
number of legal advisors including half a dozen counsel. If none of
these
legal representatives was ever alive to the fact that the award
had to be made within four months after the arbitrator’s entry
into the reference such a mistake is neither reasonable nor
excusable.
[28]
In the result I consider that Lumen has
failed to make out any case for the rescission of the order of Court
made by agreement by
Dlodlo J. My conclusion is strengthened when I
have regard to Questek’s counter-application for an extension
in terms of
section 23
of the
Arbitration Act. That
section, under
the heading
Time for Making Award
provides as follows:
‘
The
arbitration tribunal shall, unless the arbitration agreement
otherwise provides, make its award –
a)
in the case of an award by an
arbitrator or arbitrators, within four months after the date on which
such arbitrator or arbitrators
entered on the reference or the date
on which such arbitrator was or such arbitrators were called on to
act by notice in writing
from any party to the reference, whichever
date be the earlier date; and
b)
…
or
in either case on or before any later date to which the parties by
any writing signed by them may from time to time extend the
time for
making the award: Provided that the Court may, on good cause shown,
from time to time extend the time for making any award,
whether that
time has expired or not’
.
[29]
The good
cause shown by Questek is, in essence, that a full arbitration
process was concluded, that a reasoned award was made which
withstood
litigation and appeal and that the only ‘
shortcoming’
in the process was that the award was handed down approximately a
month after the expiry of the four month period. However, both
parties appeared to be unaware, until shortly before the application
for rescission that this shortcoming existed and both parties
had,
prior to Lumen taking the point, reconciled themselves to the process
to take as long as it did. During the arbitration process
various
postponements were granted at the instance of both parties. In fact
Questek alleges that the proceedings were unduly protracted
by Lumen.
It is unnecessary, however, to consider whether these latter
averments are correct or not. Lumen has made out no case
which has
been brought to my attention that it will suffer any unfairness or
prejudice as a result of the requested extension being
granted.
[30]
In
Bester v
Easigas (Pty) Ltd and Another
1993 (1)
SA 30
(C) Brandt AJ (as he then was) found that a Court can extend
the time period contemplated in section 23(a) of the Act
notwithstanding
that the award has already been made. The Court
relied in this regard on the decision in
Naidoo
v Estate Mohamed and Others
1951 (1) SA
915
(N) where the Court quoted with approval from the case of
Lord
v Lee
(1868) LR 3 QB 404
at 409 as
follows:
‘
Surely
it is a very salutary enactment which enables a Judge to cure a
defect which he thinks are mere defect or form, and which
the parties
might have cured themselves. I am, therefore, clearly of the opinion
that the section gives power to the Judge to enlarge
the term for
making the award at any time, and under any circumstances in which he
thinks there is good cause for his intervention
(of course he would
not grant an order if he saw that an injustice might be done
thereby)…’
[31]
In the result, and for these reasons, the
counter-application is granted. I might add that it may well be that,
by clear implication,
Lumen waived any right which it had to rely on
the award being made four months after 4 June 2013 but, in view of
Questek’s
counter-application, I find it unnecessary to decide
this question.
[32]
This leaves the main application for a
provisional order of liquidation and the question of costs to be
considered.
THE
LIQUIDATION APPLICATION
[33]
As mentioned Questek brought the
application for liquidation on the basis that the respondent was
unable to pay its debts or that
it was just and equitable that the
respondent should be wound up. The debts on which it rely were the
arbitration awards made by
Erasmus J (rtd) which, together with
interest and excluding costs, exceeded R7 700 000.00.
[34]
The principal ground upon which the
provisional order of liquidation is now resisted by Lumen, if I
understood Ms Ferreira’s
argument correctly, was on the basis
that since the arbitration award was a nullity at the time that the
liquidation proceedings
were instituted, (this in turn as a result of
the fact that the award had been handed down more than four months
after the reference
was entered into) there was no question of any
debts being owing at the relevant time and therefore no grounds for
the liquidation
order.
[35]
Mr Stelzner, on behalf of Questek,
countered this line of argument in two ways; firstly, he submitted
that, should the arbitrator’s
awards be validated by a
successful application in terms of section 23 of the Act, that
validation took place with full retrospective
effect thereby curing
any defect in Questek’s initial reliance on the award in the
liquidation application. In my view this
is a complete answer to the
point raised on behalf of Lumen, particularly taking into account
that when the liquidation papers
were initially received Lumen was
also under the impression that the award was valid and treated with
it on that basis. Hence there
was no question of Questek not raising
a proper defence to the liquidation application based on this
misconception. Furthermore,
and in any event, section 346(1)(b) of
the Companies Act provides that such an application may be brought
‘
by one or more of its creditors
(including contingent or prospective creditors)’
.
Whatever view one takes of the status of the award at the time that
the liquidation proceedings were launched Questek was then,
on the
strength of that award, at the very least a contingent or prospective
creditor of Lumen.
[36]
Mr Stelzner’s second response was to
point out that even if no reliance was placed on the award the
liquidation proceedings
evidenced Questek’s reliance on other
liquidated debts, namely, costs awards against Lumen not only in the
arbitration but
in other High Court applications. In addition Questek
has a further damages claim against the respondent amounting to some
R24mil
which currently stands over for later arbitration. In
Gillis
Mason Construction Co (Pty) Ltd v Overvaal Crushers (Pty) Ltd
1971
(1) SA 524
at 528D it was held that an applicant who has a valid
claim against a company for damages for breach of contract is a
contingent
or prospective creditor of such company and as such, has
locus standi to bring a winding up application.
[37]
As far as the costs orders are
concerned, Ms Ferreira argued that these had as at the date of the
proceedings not yet been taxed.
However, it is common cause that two
of these orders were agreed in round sums.
[38]
I
turn now to the second requirement which Questek was required to
show, namely, that Lumen was unable to pay its debts. Inasmuch
as
Questek sought the liquidation of Lumen on the basis that it was not
a solvent close corporation, the weight of authority is
that this
concept refers to both actual and commercial insolvency
[6]
.
[39]
In the present matter not only has Erasmus
J (rtd) made a final award to the effect that the respondent is
indebted to the applicant
in an amount in excess of approximately
R6 500.00 plus interest and costs, but Lumen was ordered by this
Court to pay the
amount of approximately R6 500 000.00 into
trust pursuant to the anti-dissipation application. Notwithstanding
this Lumen
ultimately only paid the amount of R2mil into trust, which
has since been released to Questek, and Lumen refuses or is unable to
pay the balance into the trust account or to Questek.
[40]
Even after reaching a settlement agreement
and obtaining some grace, Lumen was unable to meet the financial
obligations it undertook
in that agreement embodied in a court order
made by Dlodlo J.
[41]
I consider that these facts largely
speak for themselves as regards Lumen’s insolvency i.e. it
would appear that Lumen
is unable to meet the current demands upon it
and as such is in a state of commercial insolvency. See
Rosenbach
and Co (Pty) Ltd v Singh’s Bazaar (Pty) Ltd
1962 (4) SA 593
(D) at 597G. This conclusion is strengthened by the
following additional factors: in a contempt of court
application Lumen
admitted that it was unable to pay its debts as
they became due and owing and painted a dismal financial picture
regarding its
future financial situation. Secondly, it is common
cause between the parties that, since these proceedings were
launched, the City
of Cape Town has cancelled the 25 G contract
between it and Lumen with the result that this no longer provides any
stream of revenue
or income for Lumen. Finally, Lumen’s counsel
was unable to refer me to any indications in the papers that Lumen
had any
other significant of source of income other than the contract
in question or to dispute the contention made on behalf of Questek
to
this effect.
[42]
In its original opposing affidavits Lumen
resisted the application for its winding up on the grounds that none
of the various debts
owed by them to Questek were due and payable,
that they had an unliquidated counter-claim exceeding all of
Questek’s claims
and that Questek had an ulterior motive in
bringing with the application.
[43]
I have already dealt with the first defence
raised. A reading of the arbitrator’s award suggests that
Lumen’s contention
that it has a counter-claim well in excess
of Questek’s claim has no foundation in fact. All that is
quantified on the papers
before the Court are claims in respect of
defects allegedly uncovered for which Questek is said to be liable
and one based on an
alleged over-invoicing which, even if they
succeed to their fullest extent, do not extinguish those in respect
of which Questek
has already succeeded in obtaining an arbitration
award. This does not even take into account Questek’s further
claims for
damages against Lumen arising out of cancellation of the
subcontract.
[44]
What must also be taken into account in
this regard is that Lumen was a close corporation formed specifically
for the purpose of
the 25 G contract with the City of Cape Town and
that is has no significant assets of its own.
[45]
There is a further matter
relating to Lumen’s insolvency, namely, its claim in these and
other papers that it had no other
debtors apart from Questek. This
assertion has now proved to be incorrect, if not misleading. On the
final day of argument Questek’s
counsel drew the Court’s
attention to a matter which had appeared on the previous day’s
Third Division roll in which
a Swiss company, Trapeze Switzerland
GMBH, sought an order that Lumen make payment to it of the sum of
some 78 000 Swiss Franc,
which is approximately R900 000.00.
Trapeze Switzerland appears to also have been a subcontractor to
Lumen in the 25 G contract.
Included in the annexures is a letter
from Lumen’s attorney, Mr Erleigh, dated 19 February 2014 in
which Lumen unequivocally
admits its indebtedness to Trapeze
Switzerland subject only to receiving an invoice and compliance with
its exchange control regulations.
Notwithstanding the undertaking
that amount has clearly not been paid. Various explanations were
given from the bar by Lumen’s
counsel which were then
supplemented by affidavits from Mr Erleigh and Lumen’s director
seeking to explain the contradiction.
Suffice it to say that the
attorney ultimately admits that he was mistaken in advising his
client that Trapeze was not a creditor
and that it was not incumbent
upon Lumen to bring Trapeze’s debt and its application to the
attention of this Court. For
good measure at this eleventh hour Mr
Erleigh advised that on 29 April 2014 another supplier had served a
written demand on Lumen
claiming the sum of R141 156.05.
Needless to say, Lumen now claims to dispute that such debts are
payable on the basis that
it has illiquid counter claims against both
Trapeze and the additional creditor which exceed those parties’
claims. All this
additional information constitutes yet further
evidence that Lumen is besieged by creditors and unable to pay them.
[46]
The second ground upon which Questek seeks
Lumen’s liquidation is that it is just and equitable that it be
wound up and I
shall deal with this alternative basis
ex
abundante cautelae
. In regard to
this question Lumen’s initial suggestion was that Questek was
abusing the court process by bringing the
liquidation application
with the ulterior motive of preventing the respondent from pursuing
its alleged damages claim against Questek.
I can find no credible
substantiation for this broad and generalized allegation. As
mentioned, upon closer analysis Lumen’s
alleged damages claim
appears to have very limited prospects of success and in any event,
as I understand the position, still has
yet to be pursued by Lumen
through the arbitration process. By contrast, Questek has obtained
substantial awards and costs orders
against Lumen but to date has
managed to recover only the sum of R2mil. Notwithstanding this fact
those financial records of Lumen
which have come to Questek’s
attention reveal that very substantial sums of money have been
expended by Lumen on legal fees
and consultant fees to Lumen’s
director’s family members. In addition Lumen’s
transparent attempts at every turn
to forestall or avoid the effect
of the award made by the arbitrator and, earlier, the
anti-dissipation award made by the High
Court, present a picture of
an entity which will do everything it can to delay or avoid meeting
its financial obligations, all
the while disbursing the very monies
to which Questek lays claim. The longer that this position continues
the slimmer Questek’s
prospects of recovering any meaningful
sums from Lumen.
[47]
In
Rand
Air (Pty) Ltd v Ray Bester Investments (Pty) Ltd
it was held that the phrase ‘
just
and equitable’
in section 344h of the Companies Act is a ‘
special
ground under which … certain features of the way in which a
company is being run or conducted can be questioned to
point of
requesting the court to wind it up
[7]
’
.
In
Kia
Intertrade Johannesburg (Pty) Ltd v Infinite Motors (Pty) Ltd
[8]
,
a matter with marked similarities to the present, Wunsh J held that
it would be just and equitable that a company be wound up
in
circumstances where the company had
inter
alia
diverted funds in order to excuse the non-payments of its liabilities
and set up a contrived and baseless counter-claim and transferred
assets outside the ordinary cause of business. I conclude then that
there is no abuse of process on the part of Questek or improper
motive in its bringing these proceedings has been shown.
[48]
Furthermore, in my view, given the
circumstances and history of the litigation between Lumen and
Questek, it will be just and equitable
that Lumen be wound up so that
any dissipation of its funds can be brought to a halt and a
liquidator can be appointed to investigate
whether and to what extent
funds have been dissipated up to this point in time.
[49]
Finally, under this ground, there is the
consideration that Lumen consented to its liquidation failing its
compliance with the terms
of the agreement which was made on order of
court. It is common cause that Lumen failed to meet those
obligations.
[50]
Questek has complied with the form and
requirements of section 326 of the Companies Act through the
provision of sufficient security,
the lodging of the papers with the
Master of the Honourable Court and service of the founding papers in
the prescribed manner.
[51]
In the circumstances I am satisfied that
Questek has satisfied its onus of prima facie establishing on a
balance of probabilities
that Lumen is indeed unable to pay its
debts, that Lumen has failed to rebut the prima facie inference that
it is unable to pay
its debts and also that it is also just and
equitable that Lumen be wound up.
[52]
In the result an order for the provisional
winding up of the respondent must follow.
[53]
This leaves the question of Questek’s
application for costs order
de bonis
propriis
.
[54]
Questek initially sought the dismissal of
Lumen’s application for a postponement on the scale of attorney
and own client,
de bonis propriis
.
That application became moot, however, although certain wasted costs
were caused thereby. Nonetheless, Questek’s counsel
argued
vigorously for such a punitive costs order, as I understood him, in
respect of the applications for rescission and the
counter-application in terms of the
Arbitration Act.
>
[55]
In support of these costs orders Questek
relied on the general background to these three applications with,
what it contended, was
their overall history of delay, obfuscation,
reneging on agreements and the
mala fide
taking of spurious points, all in an effort to avoid the day when
Lumen had to meet its obligations in terms of court orders or
arbitration awards. Questek also relied on the conduct of Lumen’s
attorney in failing to disclose the debt owing by Lumen
to Trapeze
Switzerland GMBH.
[56]
Lumen’s attorney explained in
an affidavit that the point relating to the arbitration award being a
nullity only came to his
attention shortly prior to the date on which
the liquidation application was again set down for hearing following
Lumen’s
failures to make payments in accordance with the order
of Dlodlo J. There is nothing to contradicts the attorney on this
point
and indeed it would seem that Questek itself was not alive to
this point before it was raised. It was undoubtedly Lumen’s
attorney who conveyed this point to his client but ultimately, when
the point was taken, I can only presume this was done on the
instructions of the client. In these circumstances, although the
bringing of the application for rescission was a vain and expedient
attempt to stop the inevitable, and without any merit at all, I am
reluctant to categorise the attorney’s conduct as deserving
of
a costs order
de bonis propriis
.
[57]
As far as the incident involving Trapeze
Switzerland GMBH, it reflects very poorly upon Mr Erleigh whose
explanation for the omission
I regard as somewhat disingenuous. Be
that as it may, on balance I do not consider that such conduct alone,
or in combination with
the other conduct complained of by Questek,
justifies a costs order
de bonis
propriis
. However, I do consider that a
special, punitive costs order should be made in all but the main
application not least because the
applications for rescission and
postponement constitutes litigation designed only to improperly
frustrate and delay court orders
and awards which were either agreed
to or which followed upon the conclusion of an exhaustive process of
arbitration and litigation
in which the parties exhausted their
rights of review and appeal.
[58]
In the circumstances the costs of the
rescission application, the wasted costs of the postponement
application as well as the costs
of the application for the extension
of the period within which the arbitration award had validity will
all be awarded but on the
costs on the scale of attorney and client.
[59]
For these reasons the following orders are
made:
1.
The time period contemplated in
section 23(a)
of the
Arbitration Act, 42 of 1965
is extended to the
later of the two dates upon which the arbitration awards of retired
Judge Erasmus were made, being 16 November
2013;
2.
Lumen Technologies cc’s
rescission application is dismissed;
3.
The costs of the rescission
application and conditional counter-application for extension of the
time period referred in para [1]
is to be paid by Lumen Technologies
cc on the scale as between attorney and client;
4.
These costs are to include the costs
of two counsel and the costs occasioned by the postponement of the
matters on 29 April 2014,
9 May 2014, 12 May 2014, 15 May 2014 and 20
May 2014;
PROVISIONAL
LIQUIDATION
5.
Lumen Technologies cc is placed under
provisional liquidation in the hands of the Master of this Honourable
Court;
6.
A rule nisi is issued calling upon Lumen
Technologies cc and all interested parties to show cause, if any, on
8 July 2014
why the following order should not be made:
6.1
That Lumen Technologies cc be placed under
final liquidation;
6.2
That the costs of this application be costs
in the liquidation
7.
A copy of this Order is to be
served in the following manner:
7.1
On Lumen Technologies cc at its registered
address;
7.2
By publication in one each of the ‘Cape
Times’ and ‘Die Burger’ newspapers
7.3
On the South African Revenue Service;
7.4
On the employees of Lumen Technologies cc;
7.5
On the trade union(s) representing the
employees of Lumen Technologies cc, if any.
L
J
BOZALEK
JUDGE
OF THE HIGH COURT
[1]
See
Promedia Drukkers en Uitgewers (Edms) Bpk v Kaimowitz
1996 (4) SA
411
(C)
[2]
De
Wet v Western Bank Ltd
1979 (2) SA 1031
(A) at 1044
[3]
Unreported
judgment Case No 2837/2006, handed down on 9 July 2007
[4]
At
para [25]
[5]
At
B1 – 310B
[6]
See
Standard Bank of South Africa v R Bay Logistics cc
2013 (2) SA 295
(KZB) and Firstrand Bank Ltd v Wayrail Investments (Pty) Ltd
[2013]
2 All SA 295
KZB and Scania Finance South Africa (Pty) Ltd v
Kommetjie Road Carries and Another
2013 (2) SA 439
(FB) and various
unreported judgements of this Court.
[7]
1985
(2) SA 345
W at page 349
[8]
[1999]
2 All SA 268
(W)