Mighty O'Briane Homes CC v Ndlovu and Another (52639/2011) [2015] ZAGPPHC 898 (18 September 2015)

IN THE GAUTENG DIVISION HIGH COURT, PRETORIA

(REPUBLIC OF SOUTH AFRICA)

18/9/2015

Case Number: 52639/2011

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

In the matter between:

MIGHTY O'BRIANE HOMES CC PLAINTIFF

and

BHEKI SHADRACK NDLOVU FIRST

DEFENDANT

MICHAEL MOTSWALEDI WILSON RASEROKA SECOND DEFENDANT

JUDGMENT

MOLEFE J:

[1] The plaintiff claims the following from the defendants in its particulars of claim:

1.1. From the First Defendant:

a) In terms of the Trust claim R448 893, 90

b) In terms of the Nedbank claim R67 56 1, 85

c) In terms of the Bridge/ink claim R487 494, 04

d) Interest on the aforesaid amounts at 15,5% from the date of summons to date of payment.

1.2. From the Second Defendant:

b) In terms of the Nedbank claim R67 561, 85

c) In terms of the Bridge/ink claim R487 494, 04

d) Interest on the aforesaid amounts @ 15,5% from the date of summons to date of payment.

Background of Facts

[2] The plaintiff is a registered Close Corporation in terms of the Close Corporation Act 69 of 1984. Mr Mangweng Mighty Raseroka ("Raseroka") is the sole member of the plaintiff.

[3] Raseroka, the first and second defendants and Ms Tebogo Ruth Mzimba ("Mzimba") were equal members in Asibonge Liquor

Trading CC ("the Close Corporation"), established for the purpose of trading as News Cafe franchised restaurant. The Close Corporation had to pay R5,2 million towards the purchase of the News Cafe franchise. The members were to pay 50% of the R5,2 million franchise price as a deposit. As a result, the members were to raise R650 000, 00 each of the unencumbered amount of R2,6 million. The parties were unable to raise this amount in full and there was a shortfall.

[4] The Close Corporation entered into a medium term loan agreement with Nedbank Limited ("Nedbank") to raise the R2,6 million balance for the purchase price of the franchise and opened a current account. The four members executed deeds of suretyship to the liabilities of the Close Corporation towards Nedbank.

[5] The Close Corporation entered into a lease agreement for a commercial property with Karen Park Investment Trust ("the Trust") and leased the property in Karen Park, Pretoria to conduct the News Cafe restaurant. The shortfall of the unencumbered amount was financed by the Trust in an amount of R518 176, 00 and the four members executed deeds of suretyship with respect to the Close Corporation's liabilities to the Trust. Pursuant to the above-mentioned, the Close Corporation proceeded to trade as News Cafe Wonderboom ("the business").

[6] It is the plaintiff's submission that the members had an oral agreement in terms of which the plaintiff entered into a loan

agreement with Bridgelink (Pty) Ltd ("Bridgelink") for an amount of R850 000, 00 to assist the Close Corporation to finance

part of the franchise license of R5,2 million. The advanced amount was to be paid on demand to the plaintiff pro rata by the members. This submission is disputed by the defendants.

[7] The Close Corporation breached the terms and conditions of the lease agreement with the Trust and summons were issued against the Close Corporation and its four members as sureties for payment of R617 071, 20.

[8] The Close Corporation defaulted on its obligations towards Nedbank pursuant to the term loan agreement. As a consequence of the aforesaid, Nedbank issued an application for perfection of the Notarial Bond which served as security for the punctual performance

of the obligations of the Close Corporation. On 16 May 2011, punctual performance of the obligations of the Close Corporation. On 16 May 2011, Nedbank, the Close Corporation and its four members entered into a deed of settlement to settle the amount of R2 033 325, 52 in respect of the term loan and R20 690, 45 in respect of the current account.

[9] The business proved not to be successful and ran at a loss from the start. During March 2011 the members sold their members' interest in the Close Corporation to a third party due to its adverse financial position and losses incurred by the Close Corporation.

[10] At the commencement of the trial, the plaintiff abandoned the Nedbank claim as well as monies paid by the plaintiff to attorneys acting on behalf of the Close Corporation. Plaintiff proceeds only with the Trust and Bridgelink claims.

[11] The issues to be determined by this Court are the following:

11.1 Trust Claim

Whether plaintiff had authority to act on behalf of the defendants to make payments on their behalf from proceeds of sales of plaintiff's immovable properties for arrear rentals and whether an agreement existed in terms of which members of the Close Corporation would reimburse plaintiff pro rata for monies so paid by plaintiff.

11.2 Bridgelink Claim

Whether an agreement existed between the members of the Close Corporation and plaintiff that plaintiff should advance R850 000, 00 to the Close Corporation to be paid back to plaintiff by members pro rata or whether the amount of R850 000, 00 was Raseroka's own contribution to finance the purchase price of the franchise.

[12] The duty to begin was imposed upon the plaintiff and the plaintiff called two witnesses and the defendants gave evidence on their own behalf.

Plaintiff's Evidence

[13] Mr Mighty Raseroka testified that he was a sole member of the plaintiff with 100% interest and that he was approached by the first defendant with a business proposal to start News Cafe. The total purchase price of the News Cafe franchise was R5,2 million and an amount of R2,6 million had to be raised by the four members, the first and second defendants, Mzimba and Raseroka. The Close

Corporation traded under Asibonge Liquor Trading CC and the four members had equal interest of 25% of shareholding each.

[14] It was agreed that each members had to raise R650 000, 00 initially to contribute to the unencumbered R2,6 million part of the franchise price but all the members raised below R300 000. A series of meetings were held for the purposes of starting up the business and raising the franchise shortfall monies.

[15] The balance of the unencumbered deposit towards the purchase price was financed by the Trust and when the Close Corporation failed to repay the Trust, an acknowledgement of debt was signed by the four members wherein it was acknowledged that as at 13 May 2011, each of the four members acknowledged joint and several liability to the Trust in the amount of R1 479 979, 78[1]. This amount constituted the arrear rentals and the loan advanced by the Trust to the Close Corporation.

[16] The members orally agreed that the plaintiff would pay the Close Corporation Trust debts and that members would repay the plaintiff

their pro rata share to the debt in an amount of R252 500, 00 per member.

[17] Bridgelink advanced R850 000, 00 to the Close Corporation and the initial R850 000, 00 plus interest, (Usury Act not being applicable) amounted to a total amount of R1 750 000, 00. An affidavit on behalf of Bridgelink[2] acknowledged payments of R1 346 745, 13 by plaintiff towards this debt. Each member's liability in this regard amount to R399 186, 28 each.

[18] In cross-examination, it was put to Raseroka that the amount owed to Bridgelink was in respect of the plaintiff's properties in respect of which bridging finance had been paid to the transferring attorney. Raseroka denied this.

[19] Mr Vusimusi Raymond Mzimba testified that he acted on behalf of his wife Mziba in terms of a General Power of Attorney. He corroborated Raseroka's testimony that the members were unable to raise the unencumbered part of the franchise fee of R650 000, 00 each. The balance was made up by a loan from the plaintiff who obtained a loan from Bridgelink in an amount of R850 000, 00 and the shortfall was financed by the Trust in the amount of R518 176, 00 mentioned in the

agreement of leass[3] to add to a total of R2,6 million.

[20] Mzimba confirmed that the business ran at a loss from the start and that an agreement was reached that plaintiff would be reimbursed for payments he would make to the Trust and Brindgelink. He testified that he repaid the plaintiff his pro rata share as agreed.

Under cross-examination, it was for the first time put to Mzimba that the members of the Close Corporation had entered into another agreement in terms of which their interest holding were changed according to their contributions with the following percentages: 1st defendant: 19, 58%; second defendant: 16, 64%: Mzimba: 15, 81% and Raseroka: 47, 92%. This was denied by Mzimba.

The Defendants' Evidence

[21] Both the first and second defendants denied that they entered into any agreement with the plaintiff either in respect of the start-up contribution nor the subsequent payments. Both defendants denied that they agreed to repay plaintiff the R850 000, 00 nor that the plaintiff would be reimbursed by members pro rata to payments made by plaintiff to the Trust. They both did not dispute Raseroka's testimony about payments made by plaintiff to Bridgelink and to the Trust.

[22] Both defendants testified that there was a subsequent written agreement entered into by the members to adjust the shareholding in the Close Corporation with some sort of option to buy back when and if the business became profitable. They testified that this agreement was signed in ± 2009 but they both could not produce the agreement as it was left with their attorneys who could not locate the file as it

(the file) was old.

Defendant's counsel[4] however submitted that the defendants would not rely on this agreement.

Members interest in the Close Corporation

[23] Both defendants in their pleas admit equal shareholding in the Close Corporation and this was not placed in dispute by any of the defendants. The present documentation of CIPRO reflects the four members as having equal interest of 25% in the Close Corporation.

Both defendants, although highly educated, could not answer why they did not deny the equal shareholding in their pleadings. The

allegations relating to the change in membership is in my view an attempt by the defendants to evade liability by decreasing their

membership interest and their testimony is rejected.

[24] In casu, from the evidence given by the plaintiff's witnesses and the defendants, it is clear that the two versions are mutually destructive and to a large extend cannot be reconciled.

[25] The Supreme Court of Appeal in SFW Group Limited and Another v Martell Et Cie and Others 2003 (1) SA 11 (SCA) at page 141 - 15 E described the approach to be followed in situations such as the present one in the following terms:

''The technique generally employed by courts in resolving factual disputes of this nature may conveniently be summarized as follows. To come to a conclusion on the disputed issues a court must make findings on (a) the credibility of the various factual witnesses; (b) their reliability; and (c) the probabilities. As to (a), the court's finding on the credibility of a particular witness will depend on its impression about the veracity of the witness. That in tum will depend on a variety of subsidiary factors, not necessarily in order of importance, such as (i) the witness' candour and demeanor in the witness box, (ii) his bias, latent and blatant, (iii) internal contradictions in his evidence, (iv) external contradictions in his evidence, (v) external contradictions with what was pleaded or put on his behalf, or with established fact or with his own extracurial statements or actions, (vi) the probability or improbability of particular aspects of his version, (vii) the caliber and cogency of his performance compared to that of other witnesses testifying about the same incident or events. As to (b), a witness' reliability wilI depend, apart from the factors mentioned under (a) (ii), (iv) and (v} above, on (i) the opportunities he had to experience or observe the event in question and (ii) the quality, integrity and independence of his recalI thereof. As to (c), this necessitates an analysis and evaluation of the probability or improbability of each party's version on each of the dispute issues. In the light of its assessment of (a}, (b} and (c) the court wilI then, as a final step, determine whether the party burdened with the onus of proof has succeeded in discharging it. The hard case, which

will doubtless be the rare one, occurs when a court's credibility findings compel it in one direction and its evaluation of the general probabilities in another. The more convincing the former, the less convincing will be the latter. But when all factors are equipoised probabilities prevail".

[26] Both plaintiff's witnesses were in my view, credible, trustworthy and reliable. They did not contradict each other in relation to essential or relevant allegations and they both testified that the alleged agreements existed and were in fact entered into. I am of the view that their evidence is more convincing and should be accepted.

[27] Both defendants, on the other hand, highly educated businessmen were very evasive under cross-examination. They failed to answer questions and both of them kept on repeating that their properties were attached by the Sheriff. Both of them were in a dilemma to explain why the plaintiff would pay their debts. Both of them admitted to signing the acknowledgement of debt to the Trust's debt and not paying the Trust. They both alleged that they kept written minutes of meetings held by the members relating to matters of the Close Corporation but were both unable to produce such minutes and failed to explain why the minutes were not discovered. They both could not also produce the alleged written agreement to change the members' interest.

[28] The first defendant's version was on the one hand that the Close Corporation business was profitable and successful under his

management but on the other hand the same profitable business was not able to pay his salary.

The Second defendant pleaded that he kept part of his obligation under the acknowledgment of debt with the Trust but he testified that he made no payments towards the Trust debt. Their contradictions adversely impacts on their credibility.

[29] I find the defendants' versions to be unreliable and so improbable that it is unbelievable and is rejected as untrue.

[30] I am satisfied that no agreement existed or was concluded relating to the change in the interest of the members of the Close Corporation. At no stage during the trial was this put to Mr Raseroka when he testified and it was not pleaded by the first and second defendants.

[31] It is common cause that plaintiff was not a member of the Close Corporation and was not indebted to the Trust for any arrear rentals or other monies owing to the Trust by the Close Corporation. It is also not disputed that the four members (inclusive of the first and second defendants) signed an acknowledgement of debt in which as at 13 May 2011, they each acknowledge joint and several liability to the Trust in an amount of R1 479 978, 78. Both defendants admitted that they made no payments to the Trust in accordance with the acknowledgment of debt.

[32] The payment made by the plaintiff in respect of the Trust claim in an amount of R1 010 000, 00 was not substantially denied by the defendants.

Counsel for the defendants submitted that the plaintiff was not a surety, or a co­ principal debtor vis-a-vis the landlord's claim in terms of the acknowledge of debt and plaintiff did not therefore have obligations to the landlord. In this regard counsel relied on Gerber v Wolson 1955 (1) AD on page 158.

[33] When evaluating the probability or improbability of the parties' versions on disputed issues, it is in my view, highly improbable that plaintiff would agree to pay to the Close Corporation landlord, arrear rental and debts without an agreement that it be paid back pro rata by persons legally owing the Trust and who even acknowledge their indebtedness to the Trust.

[34] Regarding the Bridgelink claim, it is also highly improbable that Raseroka could have contributed the amount of R850 000, 00 in his personal capacity without insisting on an agreement for a change in interest holding of the members of the Close Corporation. It justifies on probabilities, Raseroka's version that the money was forwarded by and repayable to plaintiff pro rata by the members of the Close Corporation.

[35] It is evident that the franchise business was of substantial importance to all the parties and all four members were all anxious

to pay the franchise purchase price and to start the business running. Raseroka was obviously approached to be party to the project

due to the financial muscle he had in the plaintiff.

I therefore conclude that the defendants are liable to pay their pro rata share towards the Trust and the Bridgelink claims.

[36] In the circumstances, the following order is made:

(i) Judgment is granted against the First and Second defendants in the amount of R252 500, 00;

(ii) Judgment is granted against the First and Second defendants in the amount of R399 186, 28;

(iii) Interest on the aforesaid amounts at the rate of 9% from date of judgment to date of payment.

(iv) Costs of suit.

_________________________

D S MOLEFE

JUDGE OF THE HIGH COURT

APPEARANCES:

Counsel on behalf of Plaintiff : Adv. J Viljoen

Instructed by : Malan & Mohale Attorneys

Counsel on behalf of Defendants : Mr. B Whitter

Instructed by : Geo lsserow & T L Friedman INC.

Dates Heard : 25, 26, 27 and 28 August 2015

Date Delivered : 18 September 2015

[1] Page 210 of the record

[2] Exhibit A, P 241, pa r 13.2 and p 285

[3] Exhibit A, page 130

[4] Mr. B Whitter