Ben Moodie Industrial Psychologists (Pty) Limited and Another v Malan Developments (Pty) Limited and Another (2019/22622) [2019] ZAGPJHC 252 (19 July 2019)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 2019/22622

In the matter between:

BEN MOODIE INDUSTRIAL PSYCHOLOGISTS (PTY) LIMITED First Applicant

MOODIE, BENJAMIN Second Applicant

and

MALAN DEVELOPMENTS (PTY) LIMITED First Respondent

MALAN, FRANCOIS Second Respondent

JUDGMENT

Adams J:

[1]. This is an opposed urgent application by the applicants for the final liquidation of the first respondent. In the alternative, the applicants apply for an order enforcing a settlement agreement concluded between the parties. Further alternatively, the applicants apply for a Mareva injunction for the freezing of certain funds held for the benefit of the first respondent.

[2]. Central to this urgent application is the question whether, if regard is had to the common cause facts in the matter, the surrounding circumstances and the communications between the parties, a contract came into existence between the first applicant and the second respondent in terms of which the first respondent had acknowledged itself to be truly and lawfully indebted to the first applicant in the total amount of R14 million.

[3]. The relief sought by the applicants in their notice of motion is for an order:

‘1. That the forms and service provided for in the rules, be dispensed with and this application be heard on an urgent basis as is provided for in Rule 6(12)(a);

2. That the first respondent be liquidated;

3. That the costs of this application are to be costs in the liquidation;

4. In the alternative to prayers 2 and 3:

4.1. It is declared that the second applicant is entitled to enforce clause 3(h) of annexure "BMI" with immediate effect;

4.2. The second respondent is ordered to cause all the shares in the first respondent to be transferred to the second applicant;

4.3. The second respondent is ordered to immediately resign as director of the first respondent;

4.4. The second respondent is ordered to pay the costs of this application;

5. In the further alternative to prayers 2, 3 and 4:

5.1. The respondents are ordered to pay the amount of R5 million (in terms of phases 1 and 2) from the first proceeds of the sales in respect of phase 2 of the development of the Brentwood Park property to the applicants' attorneys, Kritzinger Attorneys;

5.2. The respondents are ordered to pay the amount of R3 million from the first proceeds from the sale of units in respect of phase 3 of the development of the Brentwood Park property;

5.3. The respondents are ordered to pay R6 million from the first proceeds from the sale of units in respect of phase 4 of the development of the Brentwood Park property to the applicants' attorneys of record;

5.4. The amount of R14 million is to be held in trust by Kritzinger Attorneys, pending final adjudication of respondents' claims under case number 2019/07194;

5.5. The second respondent be ordered to pay the costs of this application;

6. In the further alternative to prayers 2, 3, 4 and 5:

6.1. It is declared that the second applicant is entitled to restitution to the effect that he and Gerhard Kotzee be reappointed as directors of the first respondent together with only the second respondent, and that 50% shareholding in the first respondent be transferred to the second applicant;

6.2. The respondents are ordered to immediately take all reasonable steps to have the second applicant and Gerhard Kotzee be appointed as directors of the first respondent and the second applicant as 50% shareholder of the first respondent;

7. The second respondent is ordered to pay the costs of this application.’

[4]. The first and second respondents oppose the application, which is founded on a settlement agreement (‘the agreement’) between the parties, which agreement, according to the applicants, was concluded on the 28th of March 2018 as a compromise in a previous liquidation application launched by the applicants for the liquidation of the first

respondent. In terms of the agreement, which, according to the applicants, was reduced to writing, the first respondent acknowledged

itself to be indebted to the first applicant in an amount of R14 million. The said amount was to be paid, in terms of the agreement,

as follows: R2.5 million on completion of ‘phase 1’ of the Brentwood Park Property development, being upon transfer of the first 22 units in the said development, which the parties estimated would occur during April 2019; R2.5 million upon transfer of a further 28 units (‘phase 2’ of the development), which the parties estimated would occur during November 2019; R3 million on completion of ‘phase 3’, which the parties estimated would occur during May 2020; R3 million on completion of ‘phase 4’ during or about October / November 2020; R3 million on completion of ‘phase 5’, which the parties estimated would occur during November 2020; all interest payable on the capital amount of 14 million during December 2020.

[5]. I interpose here to mention that, in the founding affidavit, the applicants point out that the written settlement agreement indicates that the ‘approximate dates’ for the completion of phases 1 to 6 are respectively April 2018, November 2018, May 2019, October / November 2019, November 2019 and December 2019. This, according to the applicants, is a patent error in the written portion of the settlement agreement. The dates should in fact be: April 2019, November 2019, May 2020, October / November 2020, November 2020 and December 2020. By all accounts, this is clearly the case. The settlement agreement was concluded on 28 March 2018, and it is impossible that the first phase of the development could have been completed by April 2018. I therefore accept as a fact that the agreement provided for the dates, being the approximate dates on which the particular phases would have been completed, to be during 2019 and 2020.

[6]. The respondents contend that this concession by the applicants is fatal to their cause. The applicants, so the respondents submitted, ought to have applied for a rectification of the agreement. They did not do so, and therefore, on their own version, the applicants have failed to prove the agreement on which their urgent application is founded. There is no merit in this contention by the respondents. Firstly, the written agreement provides that the amounts are payable on completion of certain phases of the property development. In the agreement, the contracting parties had estimated the completion dates as per the above dates. The fact that the dates, which I must emphasize are approximate dates, are incorrectly recorded is neither here nor there. The important provision is that the payments become due on completion of a particular phase, and this clearly indicates the agreement by the parties that sums become due on completion of the particular phases. Secondly, the provision gives ‘approximate dates’, which I interpret to mean that the parties would not have regarded themselves as bound to the exact dates stipulated. What they did agree on was that the instalments would become payable on completion of the phases in question. Therefore, as I indicated above, there is no merit in this submission made by the respondents that an application by the applicants for rectification was required.

[7]. Phase 1 of the development was completed by the first respondent during September 2018. The first 22 units were transferred to the purchasers during December 2018, which means that, in terms of the settlement agreement, an amount of R2.5 million then became due and payable by the first respondent to the first applicant. However, during January / February 2019 the first applicant was advised that the first respondent would be unable to pay the amount of R2.5 million, which had by then become payable to the first applicant. There was then a request by second respondent for a postponement of the payment date. The applicants were agreeable to the postponement, subject to conditions imposed by the second applicant. These conditions were not complied with. Instead, the respondents proceeded with the issue of a summons against the applicants on 26 February 2019, claiming declaratory orders to the effect that there exist a joint venture between the parties for purposes of property development. The respondents also claim in that action a statement and debatement of the accounts of the joint venture. It is the view of the applicants that this action by the respondents is a red herring aimed exclusively at frustrating their claim of R14 million against first respondent. The legal proceedings instituted by the respondents are a sham, so the applicants contend.

[8]. If the applicants are correct in their submissions that there is in existence a settlement agreement concluded between the parties, then, by all accounts, the first respondent owes to the first applicant an amount of R14 million, of which at least R2.5 million became due and payable during or about January 2019. The R2.5 million has not been paid by the first respondent, which, again by all accounts, is unable to pay the said amount. This means that the first respondent has committed an act of insolvency.

[9]. It is the case of the first and second respondents that they ‘do not see the alleged agreement as binding between the parties for the simple reason that the alleged agreement simply constitutes settlement negotiations that were entered into between the parties in an attempt to try and settle certain disputes between the parties, on a “without prejudice” basis, nothing more.’ The way in which the respondents formulate their defence is somewhat peculiar. It is particularly instructive that the respondents appear to accept that an agreement was concluded. However, they contend that the agreement is not binding between the parties.

[10]. Incidentally, the respondents make much of the fact that the written document is marked ‘without prejudice’, which, so the respondents contend, makes it a privileged document, which cannot form the basis for a claim in contract. There is no merit in this contention and that is so at a very fundamental level. The point is that any and / or all discussions and negotiations which are conducted on a ‘without prejudice’ basis. Until the matter is in fact resolved and settled the discussions and communications are privileged. However, once a settlement is reached based on the ‘without prejudice’ communications, a contract comes into existence and there can be no further talk of privilege.

[11]. Whether there was a settlement agreement between the first applicant and the first respondent is a matter of interpretation based on the factual matrix in the matter. Importantly, the document which the applicants allege is a settlement agreement was signed by the second applicant for and on behalf of the first applicant. It was also signed by the second respondent for and on behalf of the first respondent. The settlement agreement was negotiated and facilitated by a third party, one Gerhardus Dirk Kotzee (‘Kotzee’), who confirms in as many words that the document in question constitutes an agreement of settlement between the parties in terms of which an application by the applicants for the liquidation of the first respondent was compromised and settled. He also confirmed that, in his view, the second respondent had signed the document, clearly intending it to be a written settlement agreement on or about the 29th of March 2018. The evidence of this witness, in my judgment, signals the end of the matter. In the light of the confirmation by Kotzee, I am of the view that the respondents denial of the settlement agreement rings hollow.

[12]. But, there is more. Subsequent to the conclusion of the settlement agreement the parties acted in accordance with the provisions and the terms and conditions of the said agreement. Importantly, on or about the 4th of April 2018, i e some 7 days after the settlement agreement was concluded, the applicants formally withdrew by notice the liquidation

application against the respondents. Also, the second applicant as from April 2018 received from the respondents monthly financial

statements of the first respondent.

[13]. Wessels JA in South African Railways & Harbours v National Bank of South Africa Ltd, 1924 AD 704 at 715 – 16 said this:

‘Although the minds of the parties come together, courts of law can only judge from external facts whether this has or has not occurred. In practice, therefore, it is the manifestation of their wills and not the unexpressed will which is of importance...

…. the law does not concern itself with the working of the minds of the parties to a contract but with the external manifestations of their minds ..... if by their acts their minds seem to have met, the law will, where fraud is not alleged, look to their acts and assume their minds did meet and that they contracted in accordance with what the parties purport to accept as a record of their agreement.’

[14]. This pronouncement by the AD is a helpful guide in resolving conflicts of evidence on the existence or the terms of a contract. As was stated by the author of Christies: The Law of Contract in South Africa, 6th Ed, by RH Christie:

‘... in order to decide whether a contract exists one looks first for the true agreement of two or more parties and because such agreement can only be revealed by external manifestations one's approach must of necessity be generally objective’.

[15]. I find myself in agreement with this enunciation of the applicable legal principles. The point is this: notwithstanding the claim to the contrary by the respondents, the objective facts seem to support the claim by the applicants that a settlement agreement was concluded between applicants and the respondents in terms of which an amount of R14 million is owing by the first respondent to the first applicant. This conclusion is inescapable if regard is had to the facts in this matter. The objective facts in the matter and the external manifestations portrayed by the parties bear this out.

[16]. Another approach to be adopted in the adjudication of the dispute between the parties is one based on the rules relating to the interpretation of documents. In the matter of G4S Cash Solutions (SA) (Pty) Ltd v Zandspruit Cash & Carry (Pty) Ltd and Another, 2017(2) SA 24 (SCA), the following principle is enunciated at par [12]:

‘Whilst the starting point is the words of the agreements, it has to be borne in mind, as emphasised by Lewis JA in Novartis SA (Pty) Ltd v Maphil Trading (Pty) Ltd, [2015] ZASCA 111; 2016 (1) SA 518 (SCA) para 27, that this court has consistently held that the interpretative process is one of ascertaining the intention of the parties ─ in this case, what they meant to achieve by incorporating clause 9.9 in the agreements. To this end the court has to examine all the circumstances surrounding the conclusion of the agreements, ie the factual matrix or context, including any relevant subsequent conduct of the parties.’

[17]. Also, in Novartis SA v (Pty) Ltd v Maphil Trading (Pty) Ltd, 2016(1) SA 518 (SCA), the court has this to say relative to the issue as to whether parties intended to bind themselves contractually:

‘[35] The argument that the words of the document, signed by Van Jaarsveld and Van der Spuy on 14 October 2004, must be examined only linguistically, and that the genesis of the document, subsequent conduct and other facts relevant to the conclusion of the contract be ignored, is directly contrary to the decisions of this court cited above, and many others. But, as I have said, the issue here is not what the parties intended their contract to mean, but whether they intended to bind themselves contractually. That inevitably requires an examination of the factual matrix – all the facts proven that show what their intention was in respect of entering into a contract: the contemporaneous documents, their conduct in negotiating and communicating with each other, and, importantly, the steps taken to implement the contract.’

[18]. Applying these principles in casu, I find myself in agreement with the submissions on behalf of the applicants. On or about the 28th of March 2018 the parties concluded a settlement agreement. In terms of this agreement, the first respondent owes the first applicant R14 million, R2.5 million of which is due and payable since at least January 2019. The first respondent refuses to pay this amount and the ineluctable conclusion to be drawn is that the first respondent is unable to pay this amount. In order to delay payment of its indebtedness to the first applicant, the respondents have embarked on a process of abusive and vexatious legal action against the applicants. Therefore, in my judgment, it is just and equitable that the first respondent be liquidated as a matter of urgency.

[19]. The applicant’s application for the final liquidation of the first respondent therefore should be granted.

Order

In the result, I make the following order:-

1. This application is urgent.

2. The first respondent be and is hereby placed under final winding up.

3. The costs of this urgent application shall be costs in the course of the liquidation.

_________________________________

L R ADAMS

Judge of the High Court

Gauteng Local Division, Johannesburg

HEARD ON: 17th July 2019 JUDGMENT DATE: FOR THE APPLICANT: 19th July 2019 Adv A F Arnoldi SC INSTRUCTED BY: Coetzee Martinuzzi Incorporated FOR THE RESPONDENT: Adv F Van Rensburg INSTRUCTED BY: Charl Van der Merwe Attorneys