FirstRand Bank Limited v Nomic 153 (Pty) Limited

• Jurisdiction: South Africa
• Judge: Yekiso J, Zondi J and Cloete J
• Judgment Date: 20 February 2014
• Docket Number: A165/2013
• Hearing Date: 29 January 2014
• Court: Western Cape High Court, Cape Town

Cloete J:

Introduction

[1]

This is an appeal with the leave of the court a quo against the dismissal of an application by the appellant ('the bank') for the provisional winding-up of the respondent company.

[2]

The grounds of appeal are as follows. First, the court a quo conflated the bank's locus standi with the grounds relied upon by the latter for the winding-up, namely s 344(f) as read with s 345(1)(a) and s 345(1)(c) of the Companies Act 61 of 1973 ('the Act'). Second, the court a quo erred in finding that the so-called Badenhorst rule applied and that the bank's claim was disputed on bona fide and reasonable grounds (Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (TPD) at 348A-B). Third, it was wrong in finding that the application was an abuse of the court process.

[3]

For purposes of this appeal the respondent concedes that the bank has locus standi 'by virtue of its status as a contingent or prospective creditor' in respect of monies loaned and advanced to the respondent by the bank under a written mortgage loan agreement ('the agreement') concluded on 22 April 2005 and secured by the registration of a first mortgage bond over Erf 15671 Somerset West ('the property').

[4]

The respondent however contends that the debt to the bank is not due and payable, and further that the quantum of the claim is disputed, although it is

2014 JDR 0305 p3

Cloete J

common cause that if the respondent's defences fail, its indebtedness is more than R100 as envisaged in s 345(1)(a) of the Act. It is also common cause that the respondent has not made any payments to the bank since January 2009.

Background

[5]

On 17 March 2009 the bank issued summons against the respondent, as first defendant, and Mark William Atkinson ('Atkinson' – the sole director of the respondent, in his capacity as surety) as second defendant ('the defendants'), for payment of some R2 million, being the full balance allegedly due and payable under the agreement ('the action'). It was defended and the bank's subsequent application for summary judgment was refused on 10 June 2009, with the defendants being granted leave to defend. There is no indication before us of the basis of the respondent's opposition to the summary judgment application since the opposing affidavit is not part of the appeal record, nor is there any indication why that application was refused by the presiding judge.

[6]

The defences raised were contained in a plea and amended plea filed on 17 November 2009 and 23 July 2012 respectively.

[7]

The main defences raised in the plea were as follows. First, the bank had failed to furnish proper notice of interest rate variations as required, with the domino effect that the instalments had been incorrectly calculated, were thus not due and payable, and breach triggering the acceleration clause as a result of non-payment could not be relied upon by the bank. Second, in December 2008 the bank chose not to demand payment of the full balance owing under the bond on

2014 JDR 0305 p4

Cloete J

the respondent's default in payment, but instead gave the respondent the opportunity to bring the arrears up to date within a four month period, that is by the end of April 2009. The bank however in breach thereof issued summons prematurely in March 2009 for the full amount outstanding on the bond. Because the bank had already made its election, its subsequent institution of action for recovery of the full amount within the four month period (translating into an election to rather call up the full amount of the bond) was not competent. It is this latter defence which was focussed upon during the appeal.

[8]

During the course of 2011 the respondent found a purchaser for the property and made an offer of settlement, but the bank accepted it a day later than the deadline stipulated. Because timeous acceptance by the bank was a suspensive condition of the sale of the property, the settlement offer fell away.

[9]

On 12 January 2012 the bank, through its attorneys, caused a letter of demand to be delivered to the respondent in terms of s 345(1)(a) of the Act, claiming payment of some R2.6 million, being the full balance allegedly due and payable under the agreement by that stage. The respondent contended that the letter was neither 'competent [nor] appropriate in the circumstances' given that 'the matter is not only lis pendens but the claim itself is in dispute'. The bank disagreed and launched the winding-up proceedings on 4 April 2012. The action instituted in March 2009 was not withdrawn and is still pending in this court.

[10]

Notwithstanding the general requirement relating to the procedure in motion proceedings as set out inter alia in Bader and Another v Weston and Another

2014 JDR 0305 p5

Cloete J

1967 (1) SA 134 (C) at 136E-137C, the respondent initially opposed the application only on certain grounds set out in a notice in terms of rule 6(5)(d)(iii) of the uniform rules of court. The respondent failed to file an affidavit dealing with the merits of the application at that stage.

[11]

Instead, the respondent delivered a short affidavit deposed to by Atkinson, which was not an answering affidavit, the gist of which was to complain that the bank was abusing the process of court in persisting with the application, given that the respondent was engaged in negotiations to settle the dispute with a different attorney who acted for the bank in the action. Atkinson disclosed that:

'The respondent has received a written cash offer to purchase the property… the respondent has accepted the offer… subject to a condition precedent that the [bank] agrees to cancel the bond against payment of the sum of R2.1 million… I am advised that if agreement is reached… in regard to the sale of the property but the [bank] is successful in liquidating the respondent, the result will be that the sale agreement will not be able to be given effect to in the light of the provisions of Section 345(2) as read with Section 348 of the Companies Act, 61 of 1973… the respondent is thus placed in an invidious position by the...