Firstrand Bank Limited v Stand 638 Kyalami Estates (Pty) Ltd (44573/2020) [2024] ZAGPJHC 819 (22 August 2024)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, JOHANNESBURG

Case Number: 44573/2020

1. REPORTABLE: NO

2. OF INTEREST TO OTHER JUDGES: NO

3. REVISED: YES

22 August 2024

In the matter between:

FIRSTRAND BANK LIMITED trading, inter alia RMB PRIVATE BANK and as FNB Applicant AND STAND 638 KYALAMI ESTATES (PTY) LTD Respondent

This judgment was handed down electronically by circulation to the parties’ legal representatives by e-mail and released to

SAFLII. The date and time for hand-down is deemed to be 10h00 on 22 August 2024.

Key words: application for the winding-up order bank pursuant to section 344(f) read with section 345 of the Companies Act 61 of 1973.

Order: The respondent is placed under provisional liquidation.

JUDGMENT

Mudau, J:

Introduction

[1] This is an application for the winding-up order of the respondent company by FirstRand Bank Limited (“FirstRand”), a registered commercial bank pursuant to section 344(f) read with section 345 of the Companies Act[1] (“the Act”). The respondent, Stand 638 Kyalami Estates (Pty) Ltd (“Stand 638”) initially sought a postponement of the liquidation application brought by FirstRand, pending the outcome of a rescission application. However, at the hearing of this matter, the application for postponement was abandoned.

[2] Based on the approach for example, in the case of Rosenbach & Company (Pty) Ltd v Singh's Bazaars (Pty) Ltd[2], evidence that a company has failed to pay a debt, payment of which is due, is cogent prima facie proof of inability to pay its debts, for, so it is stated by Caney J at 597 of the report in the Rosenbach case: “A company which is not in financial difficulty ought to be able to pay its way from current revenue or a readily available resource.”

Background facts

[3] The background facts are largely common cause. On 26 November 2009, Mr Frank Paul Van den Berg (“the principal debtor”) entered into a facility agreement with FirstRand subject to the usual relevant standard terms and conditions. The respondent, represented by the principal debtor, has signed a letter of suretyship in favour of FirstRand in respect of the debts of the principal debtor. The suretyship was signed on behalf of respondent by Mr Van den Berg in his capacity as the sole director of respondent. Accordingly, the respondent bound itself in favour of FirstRand, as surety in solidum for and co-principal debtor, jointly and severally with the principal debtor for the due and punctual payment by the principal debtor of all and any sums of money which the principal debtor might then or may thereafter become owing by the principal debtor, to the applicant in terms of the facility agreement; (Clause 1 and 1.1 of annexure AR7, the suretyship agreement).

[4] The principal debtor defaulted as at the launch of this application in the sum of R3 598752.67, and for interest thereon at the rate of 7.3% per annum calculated daily and compounded monthly in arrears from 28 April 2020 to date of payment, and accordingly breached the facility agreement resulting in FirstRand calling up the facility. The full balance outstanding became due and payable. In a separate application, FirstRand brought an application against the principal debtor under Case No. 20/44571 (“the money judgment application”) since settled by consent (the subject of the rescission application which is not before me), and this liquidation application against the surety.

[5] It is common cause that the respondent has registered two mortgage bonds in favour of the applicant over Erf 6[…] Kyalami Estate (“the immovable property”) in the amounts of (a) R1 800000,00, and an additional amount of R360 000.00 and (b) R2 200 000.00 and an additional amount of R440000.00, as security for the indebtedness. It is common cause that, the respondent owns the immovable property over which bonds have been registered in favour of FirstRand as security for the indebtedness.

[6] In terms of the facility agreement, the principal debtor agreed that the facility would be an ad hoc term facility and that the outstanding balance would be repayable over the term of the facility by means of a monthly debit order with a minimum repayment; (Page 1, Facility Terms read with clause 4.2, page 2- Special Conditions read with Clause 4.1.2 of the Terms and Conditions to the facility).

[7] It was agreed ,inter alia, that if the principal debtor failed to pay any amount owing to FirstRand when due, and failed to remedy such breach within 7 days of written notice to remedy the breach, the principal debtor would be in default and FirstRand could then withdraw the facility and claim immediate repayment of the full outstanding balance or terminate the facility without affecting any of its other rights (Clause 13.3.1.1 read with Clause 13.3.2 and 13.3.4.1).

[8] It was also agreed that a certificate signed by any authorised employee of First Rand (whose appointment and authority it shall not be necessary to prove) would constitute prima facie evidence of the outstanding balance owing and/or due and payable by the principal debtor to the applicant and/or the rate of interest payable by the principal debtor (Clause 13.6).

[9] It is not in dispute that the respondent has failed to pay this indebtedness or any portion thereof, notwithstanding that FirstRand has served on the respondent's registered address, a notice in terms of section 345 of the Act calling for payment of this indebtedness on 30 October 2020. Notwithstanding that a period more than twenty-one (21) days has passed since the date of service of the notice aforesaid, the respondent has neglected to pay the aforesaid sum.

[10] FirstRand contends that it is just and equitable that the respondent be wound up in that, a liquidator will be able to investigate the affairs of the respondent; and will distribute the proceeds of the assets of the respondent on the basis that all creditors are treated in accordance with the correct preferences. Also, that a winding up order will prevent one creditor from being preferred above another. FirstRand contends’ that, the immovable property can be liquidated to pay creditors. A residential valuation report in respect of the immovable property conducted by R J Britz on 25 January 2020, reflected that the market value then of the immovable property to be R6 200 000.00.

[11] In terms of the settlement Court Order, the immovable property registered in the name of the respondent namely Erf 6[...] Kyalami Estates (“Erf 638”) and a second property owned by the principal debtor, situated at 44 Aintree Crescent, Kyalami Estates (“44 Aintree”), were to be sold by 15 October 2021, failing which FirstRand would be entitled to sell the properties by public auction or private treaty in settlement of the principal debtor's and the respondent's indebtedness to FirstRand. It is common cause that, the property situated at 44 Aintree has since been sold in execution on 28 February 2023.

[12] Subsequently, on 25 May 2022, Ms Harrison deposed to an answering affidavit regarding this matter. According to her, she bought 50% of the shares Mr Van den Berg held in the respondent at the time and paid R3 500 000.00 to him in exchange for 50% of the shares, to reside permanently in the property. On her version, she had no idea that Mr Van den Berg concluded a suretyship agreement with the bank, or that two mortgage bonds were registered over the property owned by the respondent and if she knew, she would not have agreed to buy the shares. The thrust of the defence raised by Ms. Harrison is that the obligations to make periodic payments of

the principal debt owing by Mr. Van den Berg is only repayable in 180-months’ time i.e. after 15 years with no obligation to make periodic payments.

[13] However, that the debt is only repayable in 180-months after 15 years with no obligation to make periodic payments was countered in the replying affidavit. There, reference is made to annexure “RA3”, a letter dated 12 December 2019 addressed to Mr Van den Berg by FirstRand. In this letter, it is pointed out at para 2.2.3 that:

“As per the Banks records as of 12 December 2019 the Facility Sum mentioned in 1. above is in arrears by an amount of R100 208. In

terms hereof this amounts to an event of default as per clause 15.3.1.1of the terms and condition of the Loan Agreement”.

The suggestion that the debt is only repayable in 180-months or after 15 years is clearly untenable and not in accordance with the terms of the facility agreement. Copies of the monthly statements were also availed to the respondent’ attorneys.

[14] Conspicuously, and as counsel for FirstRand pointed out, in the answering affidavit Ms Harrison does not allege that she is a director of Stand 638. Ms Harrison does not allege that she has deposed to the answering affidavit for and on behalf of the company. In the circumstances, on face value it would seem, that Ms. Harrison is not authorised by the respondent company to instruct attorneys to oppose the liquidation application as the applicant contended also in the absence of a resolution to that effect. To rule firmly in this regard is unnecessary considering my conclusion at para 13 above.

[15] It was not suggested Ms. Harrison has sufficient personal knowledge to depose to the allegations she makes in the answering affidavit. This is against the backdrop that, in the founding affidavit in the postponement application deposed to by Mr. van der Berg on 14 June 2021, he stated that he was the sole shareholder and director of the respondent in the liquidation application regarding this matter. Significantly, and as counsel for FirstRand pointed out, Mr. Van den Berg has not deposed to a confirmatory affidavit to the allegations made by Ms Harrison and accordingly all the allegations made by Ms. Harrison in respect of the relationship and dealings between FirstRand and Mr. van der Berg on behalf of the respondent, which FirstRand contends, constitute hearsay, ought to be struck from the affidavit.

[16] The respondent sought to introduce a fourth affidavit which is vehemently opposed by the applicant. The purpose of this affidavit is to address what is alleged to be the new material contained in the replying affidavit on the basis that, the bank is purported to rely on a settlement agreement it concluded with Mr. Van den Berg (Van den Berg) on 17 June 2021 (the settlement agreement) and the order of this Court by which the settlement agreement was made an order (the order), also on 17 June 2021. At the hearing, counsel for FirstRand made it clear that they were not relying on the settlement agreement and resultant court order. Accordingly, the issue of the fourth affidavit need not detain this court as it fell on the wayside and was an academic exercise.

[17] Nevertheless, there are normally three sets of affidavits in motion proceedings. It is trite that, the court will exercise its discretion in permitting the filing of further affidavits against the backdrop of the fundamental consideration that a matter should be adjudicated upon all the facts relevant to the issues in dispute.[3] Since the settlement agreement is no longer relied upon by the applicant, it is accordingly unnecessary to exercise that discretion

regarding this matter.

[18] The core legal principle underlying consideration of matters of this nature is that a company's factual insolvency, while not the sole determinant, is a relevant and material factor in deciding whether to grant a winding-up order based on the company's inability to pay its debts as intended in section 344(f) read with section 345 of the Act. The court must consider the company's overall financial position, including its liquidity and the ability to meet current demands, to determine commercial insolvency.

[19] In this matter, FirstRand relies on the deeming provision in section 345 of the Companies Act as its cause of action in respect of which there is deafening silence on the part of the respondent. Essentially, these relevant allegations are not disputed by the respondent. This court remains none the wiser regarding the respondent's financial statements. Accordingly, in the exercise of my discretion, I make the following order.

[20] Order:

20.1 The respondent is placed under provisional liquidation.

20.2 A rule nisi be issued calling upon all persons interested to appear and show cause, if any, to the Court on 14 April 2025 why;

a. the respondent should not be placed under final liquidation;

b. the costs of the application should not be costs in the liquidation on the attorney and client scale.

20.3 Service of this order be effected by

a. The sheriff of the High Court on:

i.the respondent at is registered offices alternatively its principal place of business;

ii.The respondents’ employees and or Trade Union if any; and

iii.the South African Revenue Services;

b. By one publication in the following newspapers:

i.The Star or

ii.The Citizen.

c. By publication in the Government Gazette.

TP MUDAU

JUDGE OF THE HIGH COURT

GAUTENG DIVISION, JOHANNESBURG

Date of Hearing: 13 August 2024 Date of Judgment: 22 August 2024 APPEARANCES Counsel for the Appellant: Instructed by: Adv. R Shepstone Hertzberg Attorneys Counsel Respondent: Instructed by: Adv. HF Van der Merwe Senekal Simmonds Inc.

[1] 61 of 1973.

[2] 1962 (4) SA 593 (T).

[3] see Dickinson v South African General Electric Co (Pty) Ltd 1973 (2) SA 620 (A) at 628F; Cohen NO v Nel 1975 (3) SA 963 (W) at 970B; Dawood v Mahomed 1979 (2) SA 361 (D) at 365H; Nampesca (SA) Products (Pty) Ltd v Zaderer 1999 (1) SA 886 (C) at 892J–893A; Dhladhla v Erasmus 1999 (1) SA 1065 (LCC) at 1072D.