Slip Knot Investments 777 (Pty) Ltd v Basenzi Properties and Developers CC (46134/13) [2015] ZAGPPHC 904 (15 December 2015)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

15/12/15

Case Number: 46134/13

In the matter between:

SLIP KNOT INVESTMENTS 777 (PTY) LTD

(Registration number: 2001/0120265/07)

APPLICANT

and

BASENZI PROPERTIES AND DEVELOPERS CC

(Registration number: 2007/120491/23)

RESPONDENT

Coram: HUGHES J

JUDGMENT

HUGHES J

[1] In this application the applicant seeks a final winding up order against the respondent. The ground's upon which this order is sought are that the respondent is unable to pay its debts as envisaged in section 66(1) read with section 69(1)(a) and/ or 69(1)(c) of the Close Corporation Act 69 of 1984 (the CC Act) as further read with section 344(f) and 345(1)(a) and/or 345(1)(c) of the Companies Act 61 of 1973 ( the 1973 Act) to be read with the provisions of the Companies Act 71 of 2008 (the 2008 Act) in particular section 224(2) read with item 7 and 9 of Schedule 3 and 5, and it is just and equitable in the circumstances to wind up the respondent as envisaged in section 66(1) of the CC Act read with section 344(h) of the 1973 Act and/or section 81(1)(c)(ii) of the 2008 Act.

[2] On 23 March 2015, this application was initially dealt with on an opposed basis and a provisional winding up order was granted. Tlhapi J, of this court, placed the respondent under provisional winding up, this is the return date for all interest parties to advance reasons why a final order should not be granted.

[3] The judgment of Tlhapi J made certain findings and the duty lies with the respondent to upset these findings and demonstrates that these were wrong to overturn the order granted and resist a final order.

[4] Briefly, the applicant entered into an express and/or tacit agreement with the respondent, where it provided guarantees issued by Investec Bank and Standard bank for the purchase of a property 'Schweickerdt' (the property).

[5] On 4 August 2008 the applicant concluded a sales agreement for the property with the respondent. On the same day the parties also concluded a memorandum of understanding. These agreements were concluded in order to attain the property that was to be leased to the Department of Public Works (DPW) and later sold to DPW.

[6] The guarantees presented totalled an amount of R8 256 582.52. The agreement was for the respondent to purchase the property with the guarantees provided by the applicant. Thereafter, the applicant would sell the property to a BEE­ purchaser of it's choose. However, the later did not materialise. The property was bought by the respondent and it is now the registered owner of the property.

[7] On the version advanced by the respondent to resist the final order being granted .The respondent, in its answering affidavit para 5.5, confirms that it required the guarantees from the applicant to purchase the property in question:

''The Schweikerdt Building was to be purchased by the Respondent and the purchase consideration in respect thereof would be facilitated and funded by the Applicant. Once the Schweikerdt Building was purchased, a lease would be entered into between the Respondent and the DPW...lt was at no time agreed that the Respondent would be liable to the Applicant in respect of the purchase consideration paid by the Applicant for the Schweikerdt Building ..."

[8] Therein lays the concession that the respondent received the guarantees for the property so purchased. According to the respondent

this was necessary for the purchase of the property, which was ultimately purchased and is now owned by the respondent.

[9] Further, on the respondent's own version the property was never transferred as intended to a purchaser of the applicant's choose. The respondent contends that the agreement was for the property to be sold to a BEE-purchaser of the applicant's choose and that purchaser will be liable to pay back the guarantees. In the respondent's answering affidavit it contends that the applicant has fictitiously created a liability upon it.

[10] I cannot understand how the respondent submits that the liability is fictitious, when on its own version it made payments to the applicant to recoup that which was paid to purchase the property:

"...resulted in the Respondent represented by myself making payment to the Applicant in order that the Applicant could attempt to recoup the amount paid by it for the acquisition of the Schweikerdt Building." (See 5.12 of the respondent's answering affidavit)

[11] In my view this is yet another concession by the respondent that there were payments made to the applicant in order to pay back the applicant for the guarantees it had outlaid for the property. How could the liability then be labelled fictitious?

[12] It is abundantly clear to me that the applicant has demonstrated that it is a creditor of the respondent. What the respondent has attempted to do was having the benefit of the property being purchased for it by the applicant, this to me indicates that the respondent was not bona fide when it's presented it dispute of indebtedness to the applicant.

[13] The approach adopted by the Supreme Court of Appeal (SCA) is that the applicant need only prove commercial insolvency (See Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd 2014 (2) SA 518(SCA) at para [23] and [24]).

[14] The respondent argues that it is solvent and to this end it refers to the property in question having a value of R21 million, as it has attained a bond from Nedbank Ltd over the property to the tune of R21 million. The respondent further submits that it has a right over the rentals paid by DPW and that in turn generates income for the CC. The argument goes that having regard to the aforesaid the respondent is factually solvent and not commercially insolvent as it has sufficient assets to realise and meet any potential claim by a creditor.

[15] The applicant, rightfully I may add, in light of Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd supra, argues that the fact that the respondent tries to demonstrate that it is factually solvent is of no moment as it is commercially insolvent and that is the test to be applied. The only asset that the respondent places reliance upon is the property in question which it has bonded to Nedbank Ltd to purchase another property.

[16] This means that the property is not readily available to be realised to pay even the current creditor, being the applicant. The property having been bonded creates a situation where the rental relied upon by the respondent in terms of the lease to DPW is not guaranteed. These factors alone illustrate the inability of the respondent to pay its debts.

[17] A demand in terms of section 69 of the CC Act was sent by the applicant and the respondent has not denied that it received same. In the face of this demand and the lapse of the requisite 21 days no payment was forth coming from the respondent. Further, the respondent did not make any attempts to secure or compound this indebtedness. This in itself renders the respondent unable to pay its debt which was due whilst the respondent had no bona fide reason to deny the debt. To me, this yet again illustrates that it is unable to pay its debts.

[18] Furthermore, the deeming provision section 345 of the 2008 Act read with section 69 of the CC Act comes into operation in the

circumstances of this case. The respondent has admitted receiving the guarantees for the property, no bona fide reason exist in denying the indebtedness. The respondent by its conduct in making payments towards this indebtedness illustrates that it had no bona fide reason to deny the debt, demand having been made, the respondent failed to pay its debt. In my view, these circumstances indicate that the respondent is deemed to be unable to pay its debt.

[19] I deem it unnecessary to address whether it is just and equitable having regard to the finding made above.

[20] The issue of compliance with the service of the notifications in terms of section 346(4A) of the 1973 Act in my view is non-consequential in these circumstances, as it is evident that substantial compliance has been demonstrated by the service affidavits put up by the applicant. The service was undertaken by a candidate attorney of the attorneys for the applicant personally. The sheriff also conducted service by affixing on the main entrance of the registered office of the respondent. The respondent does not take issue that there was no service but rather that the service effected was not good enough. The deficiency in service, if any, does not negate the fact that there was substantial compliance to serve and as such service is deemed to have taken place.

[21] Consequently the following order is made:

[21.1] The respondent Basenzi Properties and Developers CC (Registration number: 2007/120491/23) be and is placed under final winding-up.

[21.2] The costs of the application shall be costs in the administration of the winding­ up.

[21.3] The costs of the opposition are not to be regarded as costs in the winding-up.

___________________________

W. Hughes Judge of the High Court