---

IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL DIVISION, PIETERMARITZBURG

 

NOT REPORTABLE

CASE NO: 1167/2019

 

In the matter between:

 

FIRSTRAND BANK LIMITED                                                        APPLICANT

(REGISTRATION NUMBER: 1929/001225/06)

 

and

 

GIGATRANS (PTY) LIMITED                                                        RESPONDENT

(REGISTRATION NUMBER: 2014/059525/07)

 

 

JUDGMENT

 

OLSEN J

 

[1]      On 3 February 2020, this court granted a provisional order for the winding-up of the respondent, Gigatrans (Ply) Limited. The applicant, Firstrand Bank Limited, now applies for a final order.

 

[2]      In view of the current pandemic, after heads of argument had been delivered the parties were offered the option of having this case decided without oral argument. They accepted the offer and delivered supplementary written argument in order to facilitate the process. This brief written judgment accordingly replaces the one which would have been delivered ex tempore had  the  hearing proceeded in the ordinary course.

 

[3]      Prior to the hearing of the application for a provisional order a Mr Osman Joosab, an employee of the respondent, asked for and was granted leave to intervene in the application for the purpose of opposing the winding­ up of the respondent. He stated that he was doing so in his personal capacity, but .with the support of certain other unnamed employees of the respondent, concerned like him about the fate of their employment if an order for the provisional winding-up of the respondent were to be granted. He raised certain legal issues concerning the law applicable to applications for the winding-up of companies, some of which were connected with constitutional rights, which had already been raised by the respondent in the course of its opposition to the relief sought by the applicant. However Mr Joosab has not appeared to oppose the grant of a final winding-up order.

 

[4]      The learned Acting Judge who granted the provisional order delivered a lengthy and carefully reasoned written judgment. Such are not usually delivered when granting provisional winding-up orders, as Judges are justifiably concerned that they do not appear to be anticipating the decision still to be made by the court hearing the application for the final order. However in this case the respondent (and the intervening party) raised issues of law which, had they been of merit, would have obstructed the grant of a provisional order to no lesser extent than they would have obstructed the grant of a final order. Those issues had to be decided (as they were) prior to the grant of a provisional order. It is not open to the respondent to ask that those legal questions be reargued at this time, unless, perhaps, it is argued that the decisions were so clearly wrong that l am not bound by them. In fact I am satisfied that the conclusions on the legal issues reached by the learned Acting Judge who granted the provisional order were correct, and I do not propose in this judgment either to regurgitate or place a gloss on the reasoning of the Judge who granted the provisional winding-up order.

 

[5]      The applicant applies for the winding-up of the respondent on the basis that the respondent is unable to pay its debts. It is unchallenged that the applicant is a creditor of the respondent. When the application was launched the respondent owed the applicant a capital debt of R489 750.82 on overdraft. The overdraft had been called up. In the ordinary course it was a debt repayable on demand. In its answering affidavit the respondent contended that the overdraft debt was not due, owing and payable. The respondent's grounds for that assertion strike me as incomprehensible. (At best for the respondent it may be that it has misread a provision in the overdraft agreement as to the giving of notice after the overdraft has been called up, before taking further steps.)

 

[6]      Concerning the overdraft I add two observations.

 

(a)      The claim undoubtedly gave the applicant the right to approach the court as an unpaid creditor.

(b)      Despite the applicant's protestation that it was not unable to pay its debts, by the time the opposed application concerning the grant of the provisional order was argued the overdraft debt had not been paid or reduced. (An affidavit has not been delivered claiming that the debt has since been paid.)

 

[7]      The applicant's second claim against the respondent arises out of an agreement of loan in terms of which the applicant lent the respondent R7 million to facilitate the purchase of certain immovable property from a close corporation known as Grangold Investments CC. It is not disputed that Grangold and the respondent signed a written sale agreement at a price of R11 million, R4 million to be paid by way of a deposit, and R7 million by way of a loan to be secured by a mortgage bond. (Those were the figures which prevailed after the agreement had been reinstated subsequent to it lapsing at an earlier stage.) Grangold went into liquidation and its liquidators instituted action against the respondent and the applicant (the latter in its capacity as bondholder) alleging, inter alia, that

(a)      the deposit of R4 million had never been paid; and

(b)      that the reinstatement of the agreement was invalid and void because it was a contract concluded by Grangold's membership after the winding­ up of Grangold had commenced.

 

The liquidators of Grangold claimed return of the property or, at worst, payment of the deposit of R4 million. It is the receipt of that summons that set the applicant on the trail of the respondent. The mortgage loan was called up upon the basis that events of default had occurred. There is no need to go into all the events of default upon which the applicant relies. The material one is that the respondent made an incorrect or untrue statement or representation in connection with the agreement of loan. I will revert to this shortly.

 

[8]      Furthermore, at the time that the application for a provisional order was argued, the instalments under the mortgage loan agreement had fallen into arrears. The only excuse offered by the respondent was that it was all the applicant's fault, because it had withdrawn the overdraft facility. Besides the fact that on the papers the applicant clearly had the right to call up the overdraft, the truth of the matter is that the failure of the respondent to continue paying the instalments due under the mortgage loan agreement is inconsistent with its contention (unsupported by its conduct) that it was all the time able to meet its debts as and when they fell due. The withdrawal of the overdraft facility made no difference as the account was already at or very near its limit when it was cancelled. With or without the facility, the respondent had to find the money for its bond instalments from generated income, and not from the bank.

 

[9]      The principal argument raised at this stage by the respondent is that this case must go to oral evidence to resolve a dispute of fact which has arisen between the respondent and the applicant over the conduct of the applicant's employee responsible for the primary administration of the mortgage loan agreement in terms of which R7 million was lent to the respondent. In response to the claim by the liquidators of Grangold that the deposit of R4 million was not paid, a Mr Essa, who deposed to the respondent's affidavits, has contended that the true purchase price of the property was the R7 million provided by the applicant. and not the sum of R11 million which was reflected in the reinstated agreement as the purchase price. That is the misrepresentation made in connection with the mortgage loan agreement upon which the applicant relies to justify its decision to call up the loan. The applicant's employee concerned in this matter is a Mr Harker who Mr Essa accuses of having devised the plan to reflect the price as R11 million, when it was in reality R7 million. Accordingly, argues the respondent, the applicant always knew the true position and there was no misrepresentation. It is now argued that this matter must go to oral evidence in order to resolve this issue, because Mr Harker denies these allegations made on behalf of the respondent.

 

[10]    In my view the combination of what has been stated on oath and the documentary evidence which dates from the time of conclusion of the mortgage loan agreement (emails, and so on) reveals that the respondent's denial that there had been any misrepresentation as to the true price of the property lacks credibility to the point where it may safely be rejected on paper. But there is no need to go that far. There is a prior question which has to be answered favourably to the respondent before there could in any event be a referral to oral evidence. An order referring an issue to oral evidence cannot be granted where the resolution of the dispute, one way or the other, cannot affect the outcome of the case. The present is such a case. The only reason offered on either side for falsely representing the purchase price as R11 million is that it was required internally by the applicant in order to justify a loan of R7 million. Assuming the truth of Mr Essa's version of his exchanges with Mr Harker, and concerning Mr Harker's conduct, the only conclusion to be drawn would be that the respondent joined with Mr Harker in order to misrepresent the position to Mr Harker's employer, the applicant. It is not open to the respondent, on its own version, to argue that there was no misrepresentation made to the applicant. There would have been no need to reflect an inflated price in the agreement if Mr Harker was authorised to grant or process the loan application at a disclosed price of R7 million. The purpose of the exercise was the making of a misrepresentation to those representatives of the bank who would not have sanctioned the transaction at a disclosed price of R7 million.

 

[11]     In those circumstances a referral to oral evidence of the issue of the alleged conduct of Mr Harker would be a pointless exercise.

 

[12]    For the rest, the submissions made on behalf of the respondent fall within the framework of its contentions that our current law of insolvency is in conflict with the Constitution; and that in the light of the provisions of the Constitution our courts should take a more liberal approach in favour of debtor companies (and their employees) who are threatened with liquidation; that is to say a more favourable approach than the ones supported and endorsed by judgments binding on this court. As mentioned at the outset, these issues of law have already been dealt with in the judgment which resulted in the grant of the provisional order.

 

[13]    Finally, and in case it should be supposed that I have overlooked it, I should deal with the contention that, certainly in so far as the mortgage loan is concerned, the applicant ought to have employed what the respondent's counsel calls the less "draconian" process of action and sale in execution. Putting aside the fact that it is not only the indebtedness under the mortgage loan which justifies the applicant's approach to this court for a winding-up order, the position is that the applicant simply cannot be faulted for insisting that the assets of the respondent be placed under the control of independent liquidators. The respondent's admitted conduct in misrepresenting the true purchase price of the property which is the principal asset of the respondent justifies the applicant's obvious and stated reluctance to leave the fate of the property and the respondent's business in the hands of its directorate.

 

 

I make the following order.

 

1.   A final winding-up order is granted.

 

 

OLSEN J

Date of Hearing:	Friday, 14 August 2020 (on the papers)
Date of Judgment:	This judgment was handed down electronically by circulation to the parties' representatives by email. The time and date for hand down is deemed to be 09h30 on the 19th day of August 2020.
For the Applicant:	Mr RM Van Rooyen
Instructed by:	Edward Nathan Sonnenbergs Inc
	Applicant's Attorneys
	c/o MASON INCORPORATED
	3rd Floor, Fedsure House
	251 Church Street
	Pietermaritzburg, KZN
	(Ref.:PK Coetzee/nm/15/E012/080)
	(Tel.: 033 - 345 4230)
EMAIL:	naven@masoninc.co.za
	alombard@ensafrica.com
For the Respondent/s:	Ms J Gates
Instructed by:	Vathers Attorneys
	Respondents Attorneys
	13 Prince Edward Street
	Pietermaritzburg, KZN
	(Ref. U J Vather/nikit/GIGATRANS
	(Tel.: 033 - 342 4099)
	EMAIL:         vathers@hotmail.com
	askaderattorneys@qmail.com

---