Trustees for the time being Sparta Family Trust v Royal Gourmet Indian Cape CC (6993/2009) [2011] ZAWCHC 352 (10 August 2011)

IN THE HIGH COURT OF SOUTH AFRICA

WESTERN CAPE HIGH COURT, CAPE TOWN

CASE NO: 6993/2009

In the matter of:

THE TRUSTEES FOR THE TIME BEING

OF THE SPARTA FAMILY TRUST (IT 3472/2001) ….......................................................Applicant

and

ROYAL GOURMET INDIAN CAPE CC …..................................................................Respondent

JUDGMENT DELIVERED ON 10 AUGUST 2011

MANTAME A.J.

[1] Applicant herein is applying for the provisional winding up of Respondent as a result of its inability to pay its debts. Respondent is a Close Corporation registered in terms of Close Corporations Act 69 of 1984.

[2] Applicant was represented by Mr Cutler and Respondent was represented by Mr Basson.

[3] The common cause facts are that Applicant and Respondent entered into a commercial lease agreement on or about April 2007 to lease the property situated at Shop 6, Ground Floor, 14 Beach Boulevard, Table View. Though the agreement of lease was entered into between The Sparta Family Trust, herein referred to as "the Trust", as landlord and one Gusain Birender Singh, herein referred to as

"Singh" as tenant, the locus standi of Singh has not been put in question and the Applicant has explained the reasons as such. It seems that the said Singh was acting in his representative capacity of the Respondent as it would be gleaned from the cover page of the lease agreement that Respondent is only recognised by its registration number. I will therefore accept that parties are ad idem that this contract was entered into between Applicant and Respondent.

[4] The said lease agreement expired on the 31st October 2008 and there was no written lease agreement thereafter between the parties. As the Respondent was still in occupation of the premises, Applicant and Respondent entered into an oral agreement to extend the contract up until the 31st March 2009, on the same terms and conditions as contained in the lease agreement.

[5] During the period of extension of the lease agreement, Respondent was already in breach of the terms and conditions of the contract as their rentals were in arrears. Subsequent to that, Respondent requested a reduction of rental amount that was R13 440 at the time to R12 500 with effect from 1 July 2008.

[6] Though Respondent experienced some hardships in as far as keeping up with payments, Applicant nevertheless extended his lease agreement. As such, the arrear rentals accumulated and by the 2nd March 2009 the amount owing was R152 676.92. Applicant thereafter demanded payment in accordance with Section 69(1) (a) of the Close Corporations Act 69 of 1984 (as amended). The said letter of demand is dated 5 March 2009, and it gave Respondents 21 days to pay.

[7] On the 8 April 2009, Applicant issued an application for the provisional winding up of the Respondent. Copies of the said application were served on all the members of the Respondent, the Master of the High Court and the South African Revenue Services. At the onset of these proceedings Respondent elected not to oppose this application but rather enter into a settlement agreement on the 24th April 2009 with Applicant. The relevant clauses in the terms of the agreement were as follows:

"1.1 The debtors have agreed and acknowledged their indebtedness to the creditor in the amount of R237 494 in respect of inter alia rental obligations in arrears in terms of the lease agreement entered into between the parties on the 23rd April 2007 for the premises situate at Shop 6, Ground Floor, 14 Beach Boulevard, Milnerton (Clause 1)

3. The debtors hereby agree to pay the sum of R180 000 in settlement of the above dispute as follows:

3.1. R40 000 on or before 12h00 on the 24th April 2009;

3.2. R10 000 on or before the 15th day of each and every month commencing on the 15th May 2009;

3.3. In the event of the debtors defaulting in payment of any one of the above payments, the full balance of the debt in the amount of R237 494 plus interest at a rate of 15.5% per annum will immediately become due and payable without any further notice and the creditor or their attorney shall be entitled to proceed with legal proceedings against the debtors in any existing court action against the debtors, or at the choice of the creditors or their attorney, to institute fresh proceedings on this agreement".

[8] Since the matter was now being settled by the parties, the proceedings before court on 24th April 2009 were postponed sine die.

[9] Respondent then breached the terms of the settlement agreement in the months of February 2010 and March 2010. As a result of the said breach, Applicant invoked the acceleration clause mentioned in the extract 3.3 above.

[10] The court is called upon to determine whether Respondent should be wound up.

[11] Mr Cutler for the Applicants argued that the test to be applied in an opposed provisional liquidation was set out in Kalil v Decotex (Ptv) Ltd & Another1. There the court held that where the Applicant succeeds in showing that it has a claim against the Respondent the onus shifts to the Respondent to show that its indebtedness is disputed on bona fide and reasonable grounds.

...In (with) regard to locus standi as a creditor, it has been held, following certain English authority, that an application for liquidation should not be resorted to in order to enforce a claim which is bona fide disputed by the company. Consequently where the respondent shows a balance of probability that its indebtedness to the applicant is (C) disputed on bona fide and reasonable grounds, the court will refuse a winding-up order. The onus on the respondent is not to show that it is not indebted to the applicant: it is merely to show that the indebtedness is disputed on bona fide and reasonable grounds....

[12] Mr Basson for the Respondent argued that this application as a whole is peppered with factual disputes, as the amount claimed from the Respondent can by no stretch of imagination be regarded as liquid.

[13] He submitted that Applicant was cited incorrectly and as such had no locus standi to bring this application. Furthermore Applicant had not complied with the provision of Section 69(1) of the Close Corporations Act 69 of 1984. Applicant had failed to cite the trustees of the Applicant properly in terms of the Uniform Rules of the Court. Applicant rather belatedly appended a resolution to their replying affidavit purporting to grant the deponent authority to institute the application. Respondent does not accept this ex post facto resolution or the authenticity thereof.

[14] Mr Cutler argued that the point of locus standi stands to fall as the principle on citation of parties was decided in the case of Cupido v Kings Lodge Hotel2. It was held that Rule 14 of the Uniform Rules was introduced in order to simplify the method of citation in respect of a number of situations where a business or businesses were being conducted or bore names which were descriptive of them. It was a procedural remedy enacted to ensure that a Plaintiff's claim was not defeated by technical defences regarding the citing of a Defendant, and had nothing to do with the substantive law concerning the nature or status of a Defendant.

[15] Further submissions were made by the Applicant's counsel that it is sufficient to cite the Applicant as "The Trustees for the time being of the Sparta Family Trust (IT 3472/2001)" - it was made clear that it is the trustees bringing the application for the winding up of the Respondent and the full trust details are given. Reference was given to Cyberscene (Pty) Ltd and Others v i-kiosk Internetand Information (Pty) Ltd3, where it was held that in motion proceedings by a company, where proof of authority of person purporting to represent it is absent, the court has a discretion to permit evidence in replying affidavit of retrospective notification of relevant conduct unless that could be prejudicial to the Respondent. Mr Cutler made further reference to Smith v Kwanonqubela Town Council4, where it was held that where a person (wrongly) believed that he had the necessary authority to act on behalf of a town council and his intention had been to act on behalf of the town council and not on his own behalf, the general rule of agency that such act of an "unauthorized agenf could be ratified with retrospective effect applied.

[16] Mr Basson made reference to Cyberscene and Smith (supra) and submitted that Applicant cannot rectify its lack of authority without establishing that the deponent had in fact de facto authority at the time of the bringing of the application. Such rectification would prejudice Respondent. No mention was made of how this rectification would prejudice Respondent.

[17] Applicant made further reference to Desai - Chilwan No v Ross5, where it was held that while it was preferable that all the trustees should be cited in legal proceedings, where one of them had not been properly cited, the omission ought not to non-suit the Trust where there was clear authority to institute the proceedings. It was held further that the court retained a discretion to condone a defect in citation, more so where the defect was highly technical, as was the case in this matter. In the circumstances of the present matter, it would have beenunconscionable for the court to shut its doors to the Applicant on a mere technicality.

[18] Counsel for the Respondent contended that the decision in Desai (supra) is no authority for the non citation of the Trustees. Firstly, in this case proper authorisation was appended to the founding

affidavit; secondly, the authority to act on behalf of the Trust was clearly established; thirdly, there were two Trustees of which one was cited; fourthly, the non citation of one of the Trustees was based on the de facto authorisation of the one Trustee to act for and on behalf of the Trust; fifthly, a trust has no legal personality (therefore no locus standi) and has to act through authorised functionaries; however, one trustee was "enough" to activate locus standi; sixthly, the court regarded the objection to locus standi in the light of the aforementioned circumstances; and lastly, the oversight was condoned in terms of the inherent discretion of the court.

[19] Mr Cutler further submitted that the grounds that can activate the court's discretion are absent before this court. The defect cannot be cured because the Trust has no legal personality. The court cannot grant any relief because it is as if the Trust is not before court.

[20] Mr Cutler further argued that on the point of dispute of fact raised by Respondents, in Wightman t/a JW Construction v Headfour (Pty) Ltd and Another6, it was held that a real, genuine and bona fide dispute of fact can only exist where Respondent has in its affidavit seriously and unambiguouslyaddressed the facts said to be disputed.

Where the facts averred are such that Respondent must necessarily possess knowledge of them and be able to provide an answer (or

countervailing evidence), if they be true or accurate, but instead of doing so, rests its case on a bare or ambiguous denial, the court will generally have difficulty in finding that the test is satisfied.

[21] Mr Basson argued that in Hulse-reutter and another v Hep Consulting Enterprises (Pty) Ltd (Lane and Fey NNO intervening)7, the test to be applied when a party is challenging an application for the winding-up of a company as an abuse of the process of the court on the grounds that the applicant's claim against the company is disputed must show:

21.1. that the claim is disputed;

21.2. that it is bona fide disputed;

21.3. that the grounds for disputing the claim are reasonable.

It does not have to be established even on the probabilities that the company would as a matter of fact, succeed in any action which the Applicant might bring to enforce the disputed claim.

[22] On the merits, Respondent asserts that as at 14 June 2010, the amount of R180 000 has been paid in full in terms of the settlement agreement. Respondent has therefore complied with its obligation in terms of the settlement agreement and Applicant has accepted payment without querying the breach.

[23] Respondent "does not admit the accuracy of the applicant's claim that it is indebted to the Applicant in the amount of R237 494 or R54 494 for that matter, as there is no breakdown as to how these amounts are determined. Besides, they contend further that during February 2010 when they

"unintentionally defaulted" in their payment, an agreement was reached in terms of which the Respondent would pay double

instalment together with interest. Applicant therefore agreed to the new terms of the agreement. Therefore there is a factual dispute

regarding whether or not the Applicant can in law competently rely on the provisions of clause 6 of the "settlement agreement' or whether the subsequent agreement entered into between attorneys of the Applicant and Respondent respectively circumvents the Applicant's right to rely on the said clause 6 more especially seen in the light of the fact that Applicant accepted the new payment arrangement and accepted the terms thereof.

[24] Applicant's counsel submitted that the coup de grace in respect of Respondent version has been delivered in the form of clause 13 of the settlement agreement which provides that "any indulgences which the creditor may grant to the debtors shall not in any way be construed as a waiver of, nor prejudice any of the creditors right." Further, Respondent's defences overlook further the fact that clause 14 of the settlement agreement contains a so called "shifren clause" which recorded that the document constituted the whole agreement between the parties and that no agreement at variance with the terms and conditions of the acknowledgementwould be binding on the Applicant unless reduced to writing and signed by the creditor and debtors. See SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren8

[25] Firstly, I will deal with defences raised by the Respondent in this application. Respondent argued that this application is peppered with factual disputes but failed to enlist them and support that allegation with relevant authorities. I am inclined to agree with the test as applied in Hulse-reutter (supra). Respondent in citing this defence, has failed to convince this court on whether it has met the aforementioned requirement. The facts that are said to be in dispute have not been properly ventilated on the affidavit.

[26] In furtherance of this point, Respondent's counsel argued that they do not owe applicant any money. Firstly, the amount claimed cannot by any stretch of imagination be regarded as a liquid claim. Secondly, Respondent denies liability because he relies on a "new agreement" entered into with the Applicant. The reason for non payment is not because he is unable to pay its debts, but rather he has fulfilled all his obligations to the Applicant. The fact that there is a debt in existence remains contentious. In Rich and Others v Lagerwey9 the court explained what constitutes a liquid document, that it should be an unconditional acknowledgment of indebtedness in an ascertained amount. I fail to understand Respondent's assertion that this claim is not a liquid claim and as such I regard it as a liquid claim. Further, the "new agreement1 that Respondent relied on has not been disputed by the Applicant. Nevertheless, Applicant argued that even if that might be the case clause 13 of the settlement agreement addresses such situations happening, and that Respondent shall not in any way construe any indulgences given as a waiver of, nor prejudice any of the Applicant's rights.

[27] Both Applicant and Respondent do not dispute the fact that they entered into a written settlement agreement on the 24th April 2009. The strange thing about these parties is that Respondent only relies on this agreement in his argument that he satisfied its entire financial obligation by payment of amount of R180 000 as at 14 June 2010 in terms of the agreement. For purposes of these proceedings I will keep on referring to the settlement agreement because that is the document that precipitated these proceedings and further gave life to the initial application that was postponed sine die.

[28] Respondent further argued that Applicant has no locus standi as he lacks legal personality, and no trustees were cited amongst other requirements. Applicant's argued further that the court has a discretion to decide on this point. It is trite law that the court has a discretion to condone non-compliance and more especially taking into account the provisions of Rule 14 of the Uniform Rules of court. Any counter-argument to this point has no foundation in law. I agree with Applicant's argument in this regard.

[29] Further, there was a submission by Respondents that Applicant has not complied with the provisions of Section 69(1) of the Close Corporation Act. Section 69(1) reads as follows:

"69. Circumstances under which corporation deemed unable to pay debts

(1) For the purposes of section 68(c) a corporation shall be deemed to be unable to pay its debts, if:-

(a) a creditor by cession or otherwise, to whom the corporation is indebted in a sum of not less than two hundred rand then due has served on the corporation, by delivering it at its registered office, a demand requiring the corporation to pay the sum so due, and the corporation has 21 days thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) any process issued on a judgment decree or order of any court in favour of a creditor of the corporation is returned by a sheriff, or a messenger of a magistrate's court, with an endorsement that he has not found sufficient disposable property to satisfy the judgment, decree or order, or that any disposable property found did not upon sale satisfy such process; or

(c) it is proved to the satisfaction of the court that the corporation is unable to pay its debts."

It is therefore not in dispute whether Applicant issued a demand in terms of the Close Corporations Act. Though the demand is very much express that it was made in terms of the Close Corporations Act, the only dispute is that it was not delivered at the "Respondent's registered office". In the absence of any dispute or allegation on whether the demand was not received, I will assume without necessarily deciding the point that Respondent received the demand but failed to raise the issue at that particular point in time. Gleaning from the signed documents, i.e. the lease agreement, affidavit filed on record and correspondences, no 315 Main Road, Sea Point has always been the registered address of the Respondent and not the leased premises representing "office" as per the

requirements of the Close Corporations Act. For purposes of these proceedings, I will continue to recognise this address as the registered address of Respondent. It does not make sense to dispute an address which has been used throughout the existence of the lease agreement.

[30] Secondly, the Master of the High Court has filed his report as required by law, and no issues have been raised therewith in as far as this application is concerned. The Master further confirmed the receipt of the bond of security for the prosecution of the winding - up proceedings.

[31] Thirdly, on the merits Applicant argued that Respondent breached the terms of the settlement in that he failed to meet the financial obligations when they became due. Respondents, though they dispute being indebted to the Applicant, later on in the proceedings do not dispute the fact that there was a default on their part, but rather elected to refer to it as "unintentional default' and that immediately Respondent discovered such discrepancy, Respondent contacted Applicants attorneys and the "new agreement' was reached. Clauses 13 and 14 of the said settlement agreement are very much specific in as far as "any indulgences" are concerned. It is my judgment that this was not a new agreement as Respondent refers to it but rather "an indulgence" as referred to in clause 13 of the settlement agreement.

[32] In my view if there is a default regarding the terms of the agreement, it goes without saying that the acceleration clause kicks in. In any event the settlement agreement contained a non-variation clause. It is rather mischievous for Respondent to argue that they have settled the settlement amount in terms of the agreement. Applicant was in my mind justified in taking further legal steps as stipulated in his demand. Further, it was not for the Respondent to dictate to the Applicant which cause of action to take. As aggrieved parties, they are at liberty to seek any legal recourse in terms of the law. For Respondent to argue amongst other things that they have not issued summons to recover the debt is tantamount to dictating terms to the Applicant.

[33] In my view, if Respondent was able to meet its debts, it could have never defaulted in terms of the settlement agreement. Furthermore, whether Respondent is fully operational, is not relevant at this stage as they failed to comply with the terms of the settlement agreement.

[34] I will not deal with the Respondent defence on the onus of proving advantage to creditors as same was subsequently withdrawn.

[35] I have no doubt that Applicant has fully made his case before this court and as such make the following order:

35.1. Respondent's points in limine are dismissed;

35.2. Respondent's is placed under provisional liquidation;

35.3. A rule nisi be issued calling upon all persons interested to appear and show cause, if any, to the above Honourable Court on the 01 September 2011 why:

35.3.1 the Respondent should not be placed under Final liquidation; and

35.3.2 the costs of this application should be costs in the liquidation, on the scale as between attorney and client;

35.4 Service of this order be effected by:

35.4.1. the sheriff of the High Court at;

35.4.2. the registered address of Respondent at 315 Main Road, Sea Point, Cape Town; and

35.4.3. on The South African Revenue Services

35.5 By one publication in the following newspapers:

35.5.1. The Cape Times; and

35.5.2. Die Burger

35.6. On the employees of Respondent as follows:

35.6.1. at 315 Main Road, Sea Point, Cape Town

35.6.2. at Shop 6 Ground Floor, 14 Beach Boulevard, Table View.

MANTAME AJ

11988(1) SA 943A at 979B-980C

21999(4) SA257

32000(3) SA 806 (C)

41999(4) SA 947 (SCA)

52003(2) SA 644 (C)

62008(3) SA 371 (SCA) at par 13

71998(2) SA 208 (C)

8 1964 (4) SA 760 (A)

9 1974 (4) SA 748 (A)