Porterstraat 69 Eiendomme (Pty) Ltd v P A Venter Worcester (Pty) Ltd
Jurisdiction | South Africa |
Judge | Davis J |
Judgment Date | 29 May 2000 |
Citation | 2000 (4) SA 598 (C) |
Docket Number | 2676/2000 |
Counsel | P B Hodes SC (with him L Fichardt) for the applicant. I J Muller for the respondent. |
Court | Cape Provincial Division |
Davis J:
This is an application for a provisional winding-up order which has been opposed by respondent. Applicant claims that respondent is indebted to it in respect of an amount of R3 700 000, being in respect of moneys loaned and advanced by applicant to respondent at the latter's special instance and E request. This amount was to be repaid by respondent by way of 36 instalments. Respondent has not paid the instalments which have fallen due and consequently the full amount is now due and payable. In addition applicant claims that respondent is indebted in the amount of R77 337,60, being in respect of rental for the month of April 2000, F which amount is due and payable and which has remained unpaid. In the founding affidavit, Mr P A Venter, a director of applicant, submitted that respondent is 'hopelessly factually insolvent'; it has ceded its book debts to First National Bank SA Ltd (the bank) and the bank has a general notarial bond registered over the movable assets of respondent. Mr Venter avers that respondent is 'hopelessly commercially insolvent' in that it is unable to pay its debts in the G ordinary course of business as envisaged in terms of s 344(f) read with s 345 of the Companies Act 61 of 1973 as amended (the Act). Accordingly applicant has applied for an order of provisional liquidation.
In his preliminary answering affidavit Mr M W Palmer, director of H respondent, opposed the application essentially on the basis that respondent was neither in fact insolvent nor was it unable to pay its debts as contemplated in s 344(f) read together with 345 of the Act. In short respondent's assets 'handsomely exceed its liabilities'. He further submitted that respondent was not currently indebted to applicant and that applicant in fact was indebted to respondent in the amount of R3 000 000. I
In summary, respondent's opposition to the application is based upon its contention that applicant has no locus standi as a creditor because the alleged debt owed to applicant is bona fide disputed on reasonable or substantial grounds. J
Davis J
Dispute regarding the debt A
During August 1998 a written agreement of sale which was finally signed was presented to Messrs Venter and Palmer for signature. It is therefore necessary to examine this agreement in some detail as the interpretation thereof lies at the head of the dispute in the present case.
In terms of clause 5.1 applicant (as seller) sold to respondent B (as purchaser) a business as a going concern. The business was defined as the business conducted by applicant under the style 'P A Venter Worcester'.
In terms of clause 5.4 it was provided that the business
'will comprise of the following items: C
The goodwill of the business.
The assets.
All stock on hand as at the effective date.
All the office furniture, fittings and fixtures.
The right to use the business's name, including any trade D mark which incorporates the business name.
The seller's right, title and interest in and to any work in progress as at the effective date.
The list of clients and all marketing information relating to the business.
The debtors.
The liabilities. E
All technical drawings, reports, tenders and other copyright material pertaining to the business."Liabilities' were initially defined to mean 'the liabilities of the business for which the purchaser assumes liability in terms of this agreement as reflected in annexure A2'. Annexure A2, headed 'P A Venter Worcester (Pty) Ltd: Liabilities: 1 May 1998', lists the following liabilities:
Trade creditors |
817 563 |
Accrued expenses |
496 323 |
FNB loan |
1 041 189 |
VAT control |
322 647 G |
Sanlam pension |
58 903 |
PAYE |
193 363 |
Insurance |
33 827 |
UIF |
10 844 |
Building Industry Council |
32 093 |
Salary control |
H 67 429 |
|
R3 074 181 |
The signed agreement contains an amended definition of liabilities. Liabilities are defined to mean 'all the liabilities of the seller in respect of the business which have arisen in the ordinary normal and regular course of business other than those liabilities in annexure A hereto'. Annexure A specifies the following liabilities: I
P A Venter Childrens Trust R1 607 910
Minority shareholders R 881 247
All liabilities relating to the excluded assets in annexure H hereto. These exclusions are not relevant to the present dispute. J
Davis J
Of critical importance to the present dispute are the provisions of clause 6 of the agreement, which provides thus: A
'Purchase price
The purchase price payable by the purchaser to the seller for the business is the sum of:
B
R7 000 000; plus
an amount of R2 000 000 if the business achieves the budgeted pre-tax profit of the 1998 financial year and if there is a shortfall between the actual pre-tax profit and the budgeted profit, the amount of R2 000 000 shall be reduced by the same percentage (in other words, should be the actual pre-tax profit drop by 10%, the amount of R2 000 000 shall be reduced by 10%). The pretax profit shall be C determined by the auditors and directors of the purchaser by 1 April 1999; which shall be apportioned as follows:
Plant and equipment |
|
|
R2 981 894 |
Investments |
|
|
R 118 106 |
Office furniture and equipment |
|
|
R 220 000 |
D Vehicles less instalment sale |
R918 388 |
|
|
|
R238 388 |
|
R680 000 |
|
|
|
R4 000 000 |
Current assets |
|
R6 074 181 |
|
Current liabilities |
|
R3 074 181 |
R3 000 000 |
|
|
R7 000 000 |
And any balance shall be attributed to the business name and or trademarks.' E
The purchase price of R7 m was to be paid pursuant to the provisions of clause 7.
Of relevance is clause 7.3, which provides that the amount of R4 m
'shall be credited to a loan account in favour of applicant and in the books of account of respondent on 1 August 1998 . . . F such loan account shall bear interest at the lower of 18% or the prime rate of the bank and such loan account together with accrued interest shall be discharged by means of 36 equal successive monthly instalments, the first of which was to be paid on 1 August 1998'.
In terms of clause 12.2 applicant indemnified respondent G
'against and will be liable for and discharge
all claims which will be made against the purchaser after the effective date arising from the conduct of the business prior to the effective date, with the exception of the liabilities;
any loss of damage whatsoever suffered by the purchaser as a result of any breach by the seller or any of the warranties or H undertakings referred to above. In the event of a dispute as to the cause or extent of the loss or damage suffered by the purchaser, the matter shall be referred to Messrs M C Sheppard and P A Springett and their decision of the dispute shall be final and binding on the parties.'
Clause 15 provided that the respondent I
'assumes the liabilities and shall discharge those liabilities as and when same fall due for payment. However the purchaser shall not be responsible for any amounts in excess of the stated liabilities.'
Mr Muller, who appeared on behalf of respondent, submitted that it was never the intention of the parties that respondent would assume any J
Davis J
overdraft liability to the bank. In short the amount of R3 074 181 specified as current liabilities in A clause 6.2 of the agreement made no mention of any overdraft owing by the seller to the bank. Furthermore a comparison between a draft agreement of sale which was produced on 24 July 1998 and the signed agreement which was generated on 28 July 1998 together with certain handwritten alterations revealed that as late as 24 July B 1998 there was no indication that respondent would assume a liability for an overdraft. Clause 5.4.9 read with clause 2.8 of the draft agreement provided that only the liabilities reflected in annexure A2 were acquired with the business. Annexure A2 did not include a reference to an overdraft to the bank. C
Mr Muller also referred to a statement of Mr Venter in his replying affidavit that he had attended a meeting at the bank with Mr Palmer on 14 August 'to arrange for the transfer of the overdraft to the respondent and for the signature of all relevant documentation relating thereto'. Neither Mr Venter nor the bank manager, Mr Nothnagel, in his affidavit annexed any of this documentation which on their version of events was signed on 14 D August 1998. However, a document generated by the bank entitled 'Mandate by a company' was signed by both Mr Palmer and Mr Venter and this purported to inform the bank that respondent had resolved at a meeting of the directors to open 'a demand deposit account' at the Worcester branch of the bank. E
On the basis of this evidence Mr Muller sought to argue that as there was no evidence of documentation reflecting an assumption by respondent of the overdraft on the current account but there had been evidence of respondent's intention to open a new account at the bank. Thus it was reasonable to infer that the justification for the latter action was sourced in an absence of any other similar account F with the bank which would include the disputed overdraft. In other words, there could be no reason for respondent to have attempted to open a new account with the bank if, on Mr Venter's version, it already had such a facility by way of an assumption of the overdraft on the initial account.
Mr Muller referred to additional supporting evidence. Mr M C Sheppard, a...
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