One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty) Ltd and Another

• Jurisdiction: South Africa
• Judge: Rogers J
• Judgment Date: 17 June 2015
• Citation: 2015 (4) SA 623 (WCC)
• Docket Number: 20028/14
• Hearing Date: 02 June 2015
• Court: Western Cape Division, Cape Town
• Counsel: GW Woodlands SC for the applicant. No appearance for the respondent. L Buikman SC for the intervening creditor (the CRL Trust).

Rogers J:

Introduction E

[1] The applicant (OSF) applies for the provisional liquidation of the respondent (Neffensaan). The application is opposed by an intervening creditor, the CRL Trust (CRL). The only matter in dispute is OSF's locus standi as a creditor. OSF asserts three claims: (i) a claim of R1,35 million F in terms of a suretyship signed by Neffensaan on 2 March 2011 (the suretyship) for money advanced by OSF to the Molco Development Trust (Molco) in terms of a written agreement of the same date (the Molco loan agreement); (ii) a claim of R150 000 for money lent by OSF to Neffensaan in terms of a loan agreement dated 24 December 2011 (the first Neffensaan loan agreement); (iii) a claim of R233 420 for money G advanced by OSF to Neffensaan in terms of a loan agreement dated 5 March 2012 (the second Neffensaan loan agreement).

[2] Neffensaan has at all material times had three directors, namely Messrs HS Coetzee, AS Moller and R Bock, to whom I shall refer by their surnames. The suretyship and the two Neffensaan loan agreements H were purportedly signed on Neffensaan's behalf by Moller, who also signed the Molco loan on Molco's behalf. Coetzee signed the first Neffensaan loan agreement as a witness. It can be accepted on the evidence that he knew of and approved the suretyship and the loan agreements. If the suretyship and loan agreements are enforceable against Neffensaan, the amounts in question fell due on 9 May 2011 (the suretyship), I 31 January 2012 (the first loan agreement) and 30 April 2012 (the second loan agreement).

[3] Discussions took place during the latter part of 2013 and during 2014 regarding the settlement of Neffensaan's indebtedness under the suretyship and loan agreements. Neffensaan was represented in these J discussions by Moller and Coetzee.

Rogers J

[4] The application for provisional liquidation was launched on A 7 November 2014. Neffensaan filed a notice of opposition. On 14 November 2014 the application was postponed to 12 March 2015 for hearing on the semi-urgent roll. During December 2014 and March 2015 there were further settlement discussions in which Bock for the first time participated. Bock, apart from being a director of Neffensaan, is one B of CRL's trustees. With the failure of these discussions, Neffensaan withdrew its opposition (this may have been because of the untenable position in which Moller and Coetzee found themselves) but CRL brought an application for leave to intervene to oppose. On 12 March 2015 CRL was granted leave to intervene and the application for provisional liquidation was further postponed to 2 June 2015. The order C granted leave to CRL to file supplementary opposing papers by 10 April 2015. CRL failed to do so. OSF filed its replying papers on 11 May 2015. On 21 May 2015 CRL belatedly delivered supplementary opposing papers. OSF did not object or seek leave to file a supplementary reply. OSF was represented at the hearing by Mr Woodland SC and CRL by Ms Buikman SC. D

The legal approach

[5] In an opposed application for provisional liquidation the applicant must establish its entitlement to an order on a prima facie basis, meaning E that the applicant must show that the balance of probabilities on the affidavits is in its favour (Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 932 (A) at 975J – 979F). This would include the existence of the applicant's claim where such is disputed.

[6] Even if the applicant establishes its claim on a prima facie basis, a F court will ordinarily refuse the application if the claim is bona fide disputed on reasonable grounds. The rule that winding-up proceedings should not be resorted to as a means of enforcing payment of a debt the existence of which is bona fide disputed on reasonable grounds is part of the broader principle that the court's processes should not be abused. In the context of liquidation proceedings, the rule is generally known as the G Badenhorst rule from the leading eponymous case on the subject, Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) at 347H – 348C, and is generally now treated as an independent rule not dependent on proof of actual abuse of process (Blackman et al Commentary on the Companies Act vol 3 at 14-82 to 14-83). A distinction must thus be drawn between factual disputes relating to the respondent's H liability to the applicant and disputes relating to the other requirements for liquidation. At the provisional stage, the other requirements must be satisfied on a balance of probabilities with reference to the affidavits. In relation to the applicant's claim, however, the court must consider not only where the balance of probabilities lies on the papers but also I whether the claim is bona fide disputed on reasonable grounds; a court may reach this conclusion even though on a balance of probabilities, based on the papers, the applicant's claim has been made out (Payslip Investment Holdings CC v Y2K Tec Ltd 2001 (4) SA 781 (C) at 783G – I). However, where the applicant at the provisional stage shows that the debt prima facie exists, the onus is on the company to show that it is J

Rogers J

A bona fide disputed on reasonable grounds (Hülse-Reutter and Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO Intervening) 1998 (2) SA 208 (C) at 218D – 219C).

The facts

B [7] CRL opposes the application on the basis that Moller and Coetzee were not authorised to sign the suretyship and loan agreements on behalf of Neffensaan. It appears that during July 2007 CRL sold a property in Paarl to Neffensaan for a price of R6 million. Part of the purchase price was to be satisfied by an issue of shares by Neffensaan to CRL. The shareholding in Neffensaan is regulated by a subscription agreement C dated 31 July 2007. Following implementation Neffensaan's shares were to be held as follows: 63,12 % by Kruismansbaai Ontwikkelings (Pty) Ltd (Kruismansbaai), being an entity represented by Moller; 26,24 % by CRL; 0,71 % by Molco (represented by Moller); and 4,965 % each by two other persons. It appears that Neffensaan's business was to develop the property in Paarl with a view to erecting residential dwellings and D selling subdivided erven.

[8] The subscription agreement includes the following provisions: (i) The shareholders were forthwith to take steps to alter Neffensaan's memorandum and articles of association so as to reflect the provisions of E the subscription agreement. In the meanwhile, and in the event of conflict, the subscription agreement was to prevail (clause 7). (ii) Each shareholder holding more than 20 shares is entitled to appoint one director (clause 9 — only Kruismansbaai and CRL so qualified). (iii) A quorum for a directors' meeting is two, one of whom must be a director appointed by Kruismansbaai and one of whom must be a director F appointed by CRL (clause 10). (iv) Resolutions of directors must, in order to be valid, be approved by a majority of the directors present at a meeting (clause 13.1). (v) A resolution signed by all the directors shall be valid and effective as if it had been adopted at a duly convened meeting (clause 13.2). (vi) Save for the authority granted to Moller to purchase G the Paarl property on Neffensaan's behalf, none of the directors, shareholders, officers or employees of Neffensaan has authority to bind Neffensaan to resolutions or transactions of the kind listed in clause 13.9, and the directors and shareholders are prohibited from taking steps to propose, authorise or permit the company to become bound by any such resolution or transaction unless it has received the unanimous prior H written approval of all the shareholders. (vii) Among the matters listed in clause 13.9 are 'the incurring of long-term debts, other than loan finance to execute the development of the property', and the issuing of guarantees or suretyships 'of any unusual nature'.

I [9] The Molco loan agreement required suretyships to be furnished by Neffensaan, Moller and Coetzee. The agreement recorded that the Paarl property had been sold by Neffensaan in terms of an agreement dated 9 December 2010. Molco was required to procure a letter of undertaking from the conveyancing attorneys for payment of the sum of R1,35 million to OSF against transfer. (There is no evidence in the papers regarding J this alleged sale. It is clear that no such transfer occurred.)

Rogers J

[10] The first Neffensaan loan agreement required Moller, Coetzee and A Molco to furnish suretyships. Whether they did so does not appear. Attached to the agreement is what purports to be a resolution of Neffensaan's directors passed at a meeting held at Paarl on 24 December 2011 that the company borrow the money in question and that Moller be authorised to negotiate the terms and sign all documentation. The B purported resolution was signed by Moller and Coetzee. Also attached to the agreement is a resolution of Molco's trustees authorising Moller to negotiate and sign the suretyship. This resolution, again signed by Moller and Coetzee, bears the typed date 24 December 2011 but the handwritten date 24 December 2012. (One can infer from the latter resolution that Moller and Coetzee were Molco's trustees.) C

[11] No resolutions were attached to the second Neffensaan loan agreement.

[12] In each of the contracts signed by Moller he warranted his authority to represent Neffensaan. D

[13] Bock says that he had no knowledge of the Molco loan agreement, the suretyship and the Neffensaan loan agreements until after the launching of the liquidation application. Those transactions were not considered at any meeting of the directors and there was no resolution signed by all three directors authorising the transactions. The transactions were not approved by Neffensaan's shareholders. E

[14] OSF, which was represented in the...