Joh-Air (Pty) Ltd v Rudman

• Jurisdiction: South Africa
• Judge: De Villiers J, Myburgh J and Nestadt J
• Judgment Date: 24 October 1979
• Court: Transvaal Provincial Division
• Hearing Date: 24 October 1979
• Citation: 1980 (2) SA 420 (T)

Myburgh J:

This is an appeal against the whole of the judgment and order of PHILIPS AJ, sitting in the Witwatersrand Local Division, dismissing with costs and application brought by the present appellant, to whom I shall refer as the applicant, against the present respondent who was B initially the first respondent in the Court a quo with one Ben Pitzer as the second respondent, against whom, during the proceedings, the application was abandoned. I shall refer to the present respondent as 'the respondent'.

The following relief was claimed:

'Take notice that Joh-Air (Pty) Ltd (hereinafter called 'the applicant') intends to make application to this Court for an order against the first and second respondents jointly and severally the one paying the other to be absolved for

(a)

payment of the sum of R5 375;

(b)

interest on the said sum at the rate of 11 per cent per annum a tempore morae ;

(c)

D costs of this application on the attorney and client scale;

(d)

alternative or other relief;... '

The concluding paragraph of the founding affidavit reads as follows:

'24. In the result I respectfully submit that the liability of Rudvian and Services to the applicant was incurred by first and second respondents E recklessly and within the meaning of s 424 (1) of the Companies Act 61 of 1973 as amended and that the first and second respondents should be declared to be jointly and severally liable to the applicant in the said amount of R5 375.'

It is to be noted, for reasons that will appear later, that applicant claims payment as final relief in the matter.

The applicant company carried on business as shipping, clearing and F forwarding agents at Johannesburg. The respondent was the managing director of both Rudvian (Pty) Ltd and Rudvian Freight Services (Pty) Ltd. Both these companies carried on business in competition with the applicant which included the delivery of goods from the Republic of South Africa to G various territories in Africa and particularly to Malawi until 4 July 1978 when both companies were placed in final liquidation by order of Court. The application for liquidation was brought by the respondent in his capacity as managing director of both companies. These two companies were closely associated and operated from the same premises. The reason for the application for liquidation was the companies' inability to pay their debts due to the fact that the road link to Malawi had been closed, resulting in loss of income.

H Concerning the liquidation of the companies on the application of the respondent, the judgment of the Court a quo found the following:

'On 10 May he realized that he had been the victim of a confidence trickster or, if that was stating it too high, that he was told that he had probably been the victim of a confidence trickster. He was persuaded by his attorney that the wisest step that he could take in the interests of the companies and in the interests of the companies' creditors, was to sign the resolutions for the winding-up of the two companies. I agree, because to me, so far from being reckless, that seems to have been a very responsible thing to have done to protect the interests of the general body of creditors by taking steps immediately for the liquidation of the

Myburgh J

companies. He was preserving the assets of the companies for all the creditors and ensuring that there would be no undue preferences.'

I refer to this part of the judgment for the purpose of showing that the A applicant's case was based on a single incident of alleged recklessness, namely incurring the debt of R5 375, the payment of which is claimed.

The application in the Witwatersrand Local Division was brought before the Court under s 424 (1) of the Companies Act 61 of 1973 which provides as follows:

'424. Liability of directors and others for fraudulent conduct of business.

(1) When it appears, whether it be in a winding-up, judicial management or otherwise, that any business of the company was or is being carried on recklessly or with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the Court may, on the application of the Master, the liquidator, the judicial manager, any creditor or member or contributory of the company, declare that any person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be personally responsible, without any limitation of C liability, for all or any of the debts or other liabilities of the company as the Court may direct.

(2) (a) Where the court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to the declaration and, in particular, may make provision for making the liability of any such person under the declaration a charge of any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge or any assets of the company held D by or vested in him or any company or person on his behalf or any person claiming or assignee from or through the person liable or any company or person acting on his behalf, and may from time to time make such further orders as may be necessary for the purpose of enforcing any charge imposed under this sub-section.'

E Sub-section (2) (b) and ss (3) and (4) deal further with the mode of giving effect to the declaration made in terms of ss (1).

The amount of R5 375 was the agreed price for conveying certain goods to Malawi at the instance and request and on behalf of the two companies prior to liquidation. Allegedly the request was reckless in the sense that the respondent knew at that stage that neither of the companies could pay F its debts. This is denied by the respondent by reason of the fact that he had been promised a loan of R150 000 on which he had already paid part of the raising fee. It was not suggested that respondent had acted fraudulently and the only issue that had to be decided, at the request of the parties, was whether respondent had recklessly carried on the business of Rudvian (Pty) Ltd and/or Rudvian Freight Services (Pty) Ltd prior to G liquidation, and with particular reference to the debt of R5 375 incurred at the relevant point of time. It was anticipated that the two companies in liquidation would pay a dividend to concurrent creditors of 50 cents in the rand.

Mrs Blum, who appeared in the Court a quo on behalf of the applicant, H made a number of submissions to the Judge a quo. The judgment deals fully and at length with the numberous arguments, based on the affidavits, addressed by Mrs Blum to the Court a quo in an effort to prove the balance of probabilities in favour of the applicant. After having considered all the averments on the affidavits and the submissions made, the Judge a quo came to the conclusion that the applicant had failed to establish, on a balance of probabilities, that the respondent had acted recklessly in the conduct of the business of the said companies and that suspicion of such conduct may have been aroused but no more than that.

Myburgh J

The application was, on that basis, dismissed with costs. The second respondent was ordered to pay certain wasted costs which is not relevant for the purposes of this judgment.

A In this appeal it was not contended that applicant had succeeded in proving its claim on a balance...