Ter Beek v United Resources CC an Another

• Jurisdiction: South Africa
• Judge: Van Reenen J
• Judgment Date: 13 December 1995
• Citation: 1997 (3) SA 315 (C)
• Docket Number: 6233/95
• Hearing Date: 27 November 1995
• Counsel: P De B Vivier for the applicant G D Van Schalkwyk (with him CW Rosenthal) for the respondents
• Court: Cape Provincial Division

Van Reenen J:

Desai J, on 1 September 1995, granted a provisional winding-up order returnable on Monday, 27 November 1995, in respect of the first respondent. The cover of the Court file reflects the following handwritten note:

'At first respondent's instance noted that order granted on both grounds, viz unable to pay debts and "just and equitable".' H

A timeously lodged request for written reasons in terms of Rule 49(1)(c) has not been complied with as yet.

First respondent on 24 November 1995, delivered and filed a supplementary affidavit for the purpose of showing that first respondent's assets exceed its liabilities. I

Prior to the matter being called on 27 November 1995, Mr Vivier, who appeared for the applicant, filed an application for the postponement of the matter so as to have enabled his client to deal with the averments in the aforementioned affidavit. He, in addition, contended that the matter did not fall within the ambit of the provisions of Court Notice 11, which J

Van Reenen J

regulates the set-down and the hearing of urgent and semi-urgent matters in this A Division. Mr Van Schalkwyk SC, who with Mr Rosenthal appeared for the respondent, when faced with the prospect of a postponement, withdrew the aforementioned affidavit. Accordingly the question whether or not the applicant is entitled to a final order of winding-up has to be decided on the papers originally filed. B

The applicant and second respondent on 27 January 1994 entered into a written agreement in terms of which the latter, with effect from 1 February 1994, sold to the former, for an amount of R250 000, a 25% share of the members' contribution in first respondent (hereinafter referred to as the agreement of sale). Clause 7 of the said C agreement specifically provides that second respondent will, upon signature thereof, deliver to the applicant or his agents, in trust, pending fulfilment of the obligations imposed thereby upon the parties to the said agreement: (a) the member's certificate in respect of the member's interest sold to the applicant; (b) transfer deeds in negotiable form in respect thereof; and (c) any authorities and consents necessary to enable the D applicant to register transfer of the member's interest purchased by him into his own name or that of his nominee.

In terms of clause 9 of the said agreement, second respondent undertook to have prepared and delivered to the applicant, by not later than the last day of the sixth week E after the effective date, an audited balance sheet and profit and loss account of the first respondent for the period ending on the effective date. It further provided that 'the financial statements' had to be prepared by first respondent's auditors with due regard to the terms of the agreement of sale and in accordance with sound and generally accepted accounting principles and that the balance sheet had to represent a true and F fair value of the first respondent and the profit and loss account had to represent a true and fair view of first respondent's profit and loss for the period ending on the effective date.

As regards default, " clause 8 of the agreement of sale provides as follows:

'8 Default G

8.1

Should either party fail to comply with his/her obligations in terms of this agreement and remain in default notwithstanding the receipt of written notice calling upon such party in default to rectify such default within 14 days of receipt of such notice then the party not in default shall be entitled either to claim specific performance or to cancel this contract and to claim such damages as may be allowable in law. H

8.2

Interest at the rate of 20% per annum shall be payable on all overdue amounts.

8.3

In the event of a cancellation of this transaction, the purchaser shall retransfer all the member's interest and contributions to the seller or his nominees and forfeit all amounts paid.'

The agreement of sale, furthermore, contains the following special provision: I

'17.1

If after a period of six months as from the effective date the purchaser wishes to withdraw from the close corporation for any reasons, he may do so as follows:

17.1.2

He must notify the accounting officer of his intention to do so by no later than 30 June 1994. J

Van Reenen J

17.1.2

Should he fail to notify the accounting officer by the A aforementioned date, the repurchase option contained in this paragraph shall fall away.

17.1.3

In the event that he does exercise his option to withdraw from the close corporation, then the close corporation shall repurchase his member's contribution for a consideration of R250 000 plus B interest calculated at prime overdraft rates from 1 February 1994 until the full repurchase consideration has been settled.

17.1.4

Payment of the repurchase price shall be made by the close corporation from their normal trading activities as and when funds become available.' C

On the same date which the agreement of sale was entered into, namely 27 January 1994, first respondent, second respondent, the applicant and Henry van Noort entered into an association agreement as provided for by s 44 of the Close Corporations Act 69 of 1984.

As regards the making of payments to members the said association agreement provides as follows: D

'12. Payments to members and reserves

12.1

The members shall decide on the payments to members each year but may from time to time make such interim payments as appear to them to be justified by the profits of the corporation.

12.2

The members shall be entitled to monthly salaries as set out in schedule II to this agreement. E

12.3

The members shall further be entitled to an incentive bonus based on net profits as set out in schedule II to this agreement.

12.4

Payments to members may be made in no circumstances other than -

12.4.1

if, after such payments are made, the corporation's assets, fairly valued, exceed all its liabilities; F

12.4.2

if the corporation is able to pay its debts as they become due in the ordinary course of its business; and

12.4.3

if such payment will in the particular circumstances not render the corporation unable to pay its debts as they become due in the ordinary course of its business.

12.5

Any payment made to and received by a member in contravention of G the provisions of the preceding subclause and of s 51 of the Act shall be recoverable by and repayable to the corporation as security for which the corporation may invoke its lien over a member's interest in the corporation.'

As regards members' salaries, schedule II to the Association Agreement provides as follows: H

'4. Members' salaries

The members shall be entitled to the following monthly salaries.

	As Employees	As members
J Cohen	R5 000	To be decided
B ter Beek	R5 000	To be decided
H van Noort	R5 000	To be decided.'

The applicant on 6 June 1994 addressed a letter in the following terms to the other members of the first respondent:

'In terms of our agreement of sale dated 31 January 1994, I hereby exercise my option to withdraw as a member with effect from 30 June 1994. J

Van Reenen J

The terms of repayment of my member's interest plus interest is dependent A upon funds derived. Kindly furnish me with an anticipated repayment schedule at your earliest convenience.'

The applicant on 22 June 1994 addressed a further letter in the following terms to second respondent: B

'I refer to the agreement dated 27 January 1994 in terms of which I acquired a member's contribution in United Resources from you.

I give notice in terms of clause 8.1 that you have failed to comply with your obligation (sic) in terms of clauses 7 and 9 of the agreement, and I call upon you to rectify such default within 14 days.' C

Messrs H van Noort and Associates on 23 June 1994, in response to the aforementioned letter, addressed a letter in the following terms to the applicant:

'Your letter addressed to Josy Cohen delivered to our offices refer (sic).

The contents thereof have been noted and our client advises that he will remedy the breach within the period stipulated.' D

Messrs H van Noort and Associates on 28 June 1994, addressed a further letter in the following terms to the applicant:

'Your letter dated 6 June 1994 electing to withdraw as a member from the above close corporation refers. The remaining members have elected to accept and enforce the contents thereof. E

Accordingly, we enclose herewith the following documentation for your immediate attention:

1.

Sale agreement between yourself and United Resources CC -

—

this agreement should be signed in duplicate in black ink together with 2 witnesses. F

—

on completion of signature, same should be returned to our offices for signature by the corporation.

2.

CK 2 forms (in triplicate) and letter of resignation.

—

these should be signed in black ink and delivered to Messrs J L Martinsen and Co - Attorneys, 717 Grand Parade Centre, Adderley Street, for the attention of Mr Morris Stern. G

Please note that the repayment schedule requested in your letter as per "annexure A" of the said sale agreement.

We trust that the above meets with your approval and await your reply.'

The applicant on 13 July 1994 and 11 August 1994, respectively, addressed two further letters to second respondent. Second respondent on 23 August 1994, responded thereto as follows: H

'I am in receipt of your letter dated 11 August 1994.

I am at a loss to understand why you say that we have not met our obligation to you. You are fully aware of the situation in the company as on each occasion that you enumerate, we immediately came back to you with all details...