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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

 

IN THE HIGH COURT OF SOUTH AFRICA

NORTHWEST DIVISION, MAHIKENG

 

Case No.: M 621/2021

Reportable:                                YES / NO

Circulate to Judges:                                  YES / NO

Circulate to Magistrates:                    YES / NO

Circulate to Regional Magistrates:            YES / NO

 

In the matter between:       

 

K2016507276 (SOUTH AFRICA) (PROPRIETARY)                Applicant      

 

and

 

MAHIKENG PROPERTY INVESTMENTS                                Respondent

(PROPRIETARY) LIMITED                                                          

 

JUDGMENT 

 

Introduction

 

[1]     The applicant prays for an order in the following terms:

 

1.     The respondent is placed in provisional liquidation.

 

2.     A rule nisi issues calling upon the respondent and any interested parties to show cause, if any, on a date to be determined by the Court:

 

2.1         Why a final order of liquidation should not be granted; and

 

2.2    Why the costs of this application, on the scale as between      attorney and client, should be ordered to be a cost of administration in the liquidation.

 

3.    Service of the rule nisi is to be effected not less than 10 (ten) days before the return date thereof:

 

3.1    On the respondent at 5[...] V[...] W[...] Street, Rustenburg;

 

3.2    On the Master of the Court at University Drive, Mmabtho.

 

3.3 On the South African Revenue Service at 2[...] B[...] Street, Mmabatho Unit, 1[...] Mmabatho.

 

3.4    By one publication in the Star News newspaper.

 

4.    Granting the applicant such further and/or alternative relief as to the Court may seem fit.

 

The Applicant’s case.

 

[2]     What follows is the version of the applicant. The winding up of the respondent is sought on the grounds that it is unable to pay its debts as contemplated in s 344(f) of the Companies Act 61 of 1973 read with s 345(1) and s 345(3) of that Act and item 9 of Schedule 5 to the Companies Act 71 of 2008, and that it is just and equitable that the respondent be would up as contemplated in s 344(h) of the Companies Act 61 of 1973 read with item 9 of Schedule 5 to the Companies Act 71 of 2008.The respondent is indebted to the applicant in an amount of R 55,842,859.94 plus interest thereon calculated daily and compounded monthly from 1 June 2021 at the publicly quoted rate of interest per annum published by First National Bank from time to time as being its prime overdraft rate plus 17.5%.

 

[3]     The said amount and interest are owing, due and payable by the respondent to the applicant in terms of a written Loan Agreement concluded at Cape Town on 5 December 2016 between the applicant, represented by Kevin Clench and the respondent, represented by Sarel van Niekerk, a copy of which is annexure ‘’FA2’’  to the founding affidavit read with a written Addendum to Agreement concluded at Stellenbosch on 6 December 2019 between the applicant, represented by Kevin Clench and the respondent, represented by Sarel van Niekerk, a copy of which, without attachments, is annexure ‘’FA3’’, and a Certificate of Indebtedness dated 20 September 2021 by Kevin Clench, as contemplated in clause 15 of annexure ‘’FA2’’, attached to the founding affidavit as annexure ‘’FA4’’. No payment has been made by or on behalf of the respondent to or for the benefit of the applicant since the conclusion of annexure ‘’FA3’’.

 

[4]     Annexure ‘’FA5’’ is a copy of a letter dated 31 May 2021 addressed by the applicant’s attorneys, Strauss Daly, to the respondent at its registered address, in which payment is demanded of the amount then owing, due and payable by the respondent to the applicant under annexure ‘’FA2’’ read with annexure ‘’FA3’’. Accompanying the founding affidavit is an affidavit by Jocey Beatrice Duvak confirming delivery of the original of annexure ‘’FA5’’ at the registered address of the respondent on 31 May 2021. Notwithstanding the expiration of well over three weeks after such delivery, the respondent has neglected to make any payment to the applicant or to the applicant or to secure or compound for the indebtedness of which payment was claimed in annexure ‘’FA5’’.

 

[5]     Annexures ‘’FA7’’ and ‘’FA8’’ are copies of a Deeds Office Property   Report dated 10 September 2021 in respect of the respondent, reflecting the respondent as the registered owner of Erven 13511 and 113512 Ellisras Extension 123 Township Registration Division L.Q Limpopo Province under Deed of Transfer Number T[...]. The said properties are mortgaged to the applicant under Continuing Covering Mortgage Bond Number B 5[...]. The said properties were acquired by the respondent as vacant land for the purpose of township development. External services comprising roads and storm water, external water reticulation and external electrical reticulation are in place and the conditions of establishment have been approved. Although the respondent has completed the development planning for a proposed development of 396 title opportunities, the said properties remain unimproved save for the external services referred to above.

 

[6]     Kevin Clench believes the total current value of the said properties together to be in the region of R19 100 000,00. Copies of valuations of both properties dated 19 September 2021 are annexures ‘’ FA10 and ‘’FA11’’ to the founding affidavit. The applicant is not aware of any other property which forms part of the assets of the respondent. There are outstanding rates and taxes on the said properties which have not been pain and which Kevin Clench believes to be in the region of R229 315,05. Copies of the municipal accounts in respect of both properties are annexures ‘’FA12’’ and ‘’FA13’’ to the founding affidavit. In the premises, the indebtedness of the respondent to the applicant far exceeds the value of its assets and the assets of the respondent are in any event illiquid.

 

[7]     As far as Kevin Clench is aware the properties were purchased in    the name of the respondent, as a property holding company, and the respondent is not a commercially trading entity. The respondent is hopefully insolvent as it does not receive any income to service its debts. The respondent is clearly unable to pay its debts as contemplated in s 344(f) of the Companies Act 61 of 1973 read with s 345(1) and s 345(3) of that Act and item 9 of Schedule 5 to the Companies Act 71 of 2008. It is just and equitable that the respondent be wound up, as contemplated in s 344(h) of the Companies Act 61 of 1973, read with item 9 of Schedule 5 to the Companies Act 71 of 2008.

 

[8]     A liquidator would be in the best position after having investigated the affairs of the respondent, to institute appropriate proceedings to recover payments of undue preference to other parties, or related entities and to call upon the director of the respondent to provide a full account of money received from the applicant and how it was disbursed. Likewise a liquidator would be in a better position to recover any outstanding moneys due to the respondent for the benefit of its creditors. Accordingly, the respondent needs to be placed under liquidation as a matter of urgency. Save for the aforesaid mortgage bond, the applicant has no security as defined in terms of s 2 of the Insolvency Act 24 of 1936 for its claim against the respondent or any part thereof.

 

[9]     The applicant does, however, hold the following:

 

9.1    A limited suretyship in the amount of R35 000 000,00 from Sable Cape Besigheids Trust (Registration Number: IT 3[...]) and Artecel (Proprietary) Limited (Registration Number: 2010/007927/07) for liabilities of the respondent to the applicant from time to time.

 

9.2    A suretyship, limited to R14 million plus certain additional amounts, from G & T Bouprojekte CC (Registration Number:1999/043640/23) for liabilities of the respondent to the applicant from time to time secured by Mortgage Bond B[...] over Remainder of Portion 1[...] of the Farm Onverwacht 5[...], Registration Division L.Q. Limpopo Province.  

 

The respondent’s version.

 

[10]     To the best of the deponent to the answering affidavit (Van Niekerk) the applicant does not have the necessary financial resources to extend loans, such as the loans(s) allegedly extended to the respondent. The Applicant acts as an agent or accommodation party for its principal(s) who extend venture capital loans through the Applicant as its agent or front in return for usurious returns such as 19.5% above the prime lending rate of commercial banks. Further benefits such as ‘’ a monthly fee of R50 00,00’’, an ‘’upfront fee of R400 000,00’’ and a ‘’further fee of R350 000,00’’ as provided for in annexure ‘’FA2’’, are but a few benefits which befall these ‘’loan sharks’’ who operate outside the law to enrich themselves.

 

[11]     The effect of ‘’agreements’’ such as ‘’FA1’’ and ‘’FA2’’ upon which the Applicant relies, is that on 5 December 2016 when ‘’FA2’’ was signed, the loan amount was R15 200 000,00. This amount ‘’escalated’’ through fictitious charges, levies, fees and usurious interest to R28 411 266,91 on 6 December 2019 when the addendum (‘’FA3’’) was signed and even further to R59 641 735,49 when the so-called certificate of balance (‘’FA4’’) was signed on 20 September 2021.

 

[12]     The interest and charges have been levied on the purported loan at unconscionable usurious rates which cannot be sustained in law. Several payments have been made to the applicant, these payments, by virtue of the provisions of Section 89(5)(b) must be refunded, together with interest to the respondent. It is admitted that the properties are mortgaged in favour of the Applicant. These bonds were passed by the Respondent under the mistaken belief that the loan agreements, ‘’FA2’’ and ‘’FA3’’, are valid and binding before the being advised that they are unlawful and void. In these premises these bonds stand to be cancelled and are of no legal consequence of effect.

 

[13]     It is admitted that the properties were purchased by the Respondent as a property holding company. It is denied that the Respondent is not a trading entity, as it trades in the development and sale of properties, having sold numerous properties of which Kevin is acutely aware as he and the Applicant, whom he purports to represent (before the unlawfulness of the loan agreements were established), received fees in respect of each such sale.

 

[14]     The Respondent confirms that it is a solvent company, has the financial ability to settle its obligations as and when they arise or within a reasonable time thereafter. There are no pending actions against the Respondent in respect of its financial obligations or judgments entered against it. The Applicant is proceeding against the Respondent in terms of the incorrect legislative regime. The Applicant also has not made a case why it is just and equitable for the Respondent to be would up. The ‘’just and equitable’’ ground is not some kind of ‘’catch all’’ ground, it is rather a special ground under which certain features as to how a company is run or conducted can be questioned to the point of requesting a Court to wind it up.

 

[15]     Clearly, the Applicant in the founding papers has made very little, if any, attempt to meet the requirements for a finding that it is just and equitable for the Respondent to be wound up. As a result of the loan agreements upon which the Applicant rely, being unlawful and void ab initio, the underlying causa upon which the said ‘’securities’’ depend, is equally unlawful and void. As a consequence, these securities are also void and of no force and effect. The Respondent has already instructed its attorneys to take the necessary steps to cancel the said bond and release the relevant securities.

 

Points in limine.

 

[16]      The respondent raised the following three points in limine:

 

            16.1    Non-compliance with the National Credit Act.

 

16.2    Kevin has no authority to bring the proceedings on behalf of the plaintiff and therefore, Kevin has no locus standi in this matter.

 

16.3    An incorrect procedure has been adopted by the applicant.

On the date of the hearing of the matter the third point in limine was abandoned by the respondent. Two points were therefore argued.

 

The National Credit Act.

           

[17]      The respondent made the following submissions: The applicant makes no allegation in its founding affidavit that it is a registered credit provider. Secondly on any interpretation of the NCA and its regulations, the amount of the alleged loan on which the applicant relies far exceeds the threshold as determined by the Minister in terms of Section 42(1) of the NCA (the Act).  The loan agreement upon which the applicant relies to establish its locus standi are unlawful and void ab origine.

 

[18]      In Amler’s Principles of Pleadings, 9^th Edition from page 139 the author states:

 

‘’It would be prudent to make the following allegations when enforcing a credit agreement.’’

 

(a)   That the plaintiff is a credit provider registered with the National Credit Regulator;

 

(b)   The usual allegation concerning the agreement (attaching a copy of the agreement);

 

(c)   If the Act is not applicable, the reasons for its inapplicability (otherwise it will be assumed that the Act applies);

 

(d)   That the agreement complies with the Act;

 

(e)   That the consumer is in default for at least 20 days;

 

(f)     That section 130 has been complied with as indicated by attaching a copy of the Section 86(9) or Section 129(1) notice giving the consumer the required 10 days’ notice;____________’’

 

[19]     In its founding affidavit the applicant did not make the allegation referred to in paragraph (c) of Amler’s quoted work. In its replying affidavit the applicant however stated:

 

‘’5.2  The provisions of the National Credit Act, 34 of 2005 does not apply to the current proceedings;

 

5.2.1      Both parties to the agreement are juristic persons.

 

5.2.2      The agreements under discussion are in nature large agreements.’’

 

[20]      It is my view that the failure by the applicant to make the averment in the founding affidavit referred to in paragraph (c) of page 139 of Amler is not defective. Its failure only gives rise to a presumption that the NCA is applicable. Such a presumption is, in my view, a rebuttable presumption. In its replying affidavit, the applicant has accordingly rebutted the said presumption. By operation of the law such agreements are excluded from the provisions of the NCA. See in this regard Sections 4,5 and 6 of the Act. Consequently, in  Paulsen v Slip Knot Investments[1] the Court held that Section 40 and consequently Section 89 of the Act do not apply to agreements which have been excluded from the NCA in terms of Section 4. The first point in limine holds no water therefore and it falls to be dismissed.

 

Authority

 

[21]     The authority which is under challenge is that of Kevin to bring these proceedings on behalf of the applicant. It is common cause between the parties that Kevin is the sole director and shareholder of the applicant. It is trite law that the Court has held that it is irrelevant whether the deponent to an affidavit in support of an application on behalf of a company is authorised to deposed to an affidavit. What is relevant is that it is the institution of the proceedings and the prosecution thereof that must be authorised. See in this regard Ganes case[2]. In his replaying affidavit Kevin has attached the resolution of the plaintiff company which authorises him to launch these proceedings on behalf of the company. The second point in limine, also has no merit.

 

Merits

 

[22]     On the merits of the application the respondent has failed to raise any defence.

 

Order

[23]     Consequently the following order is made:

 

23.1      The respondent is placed in provisional liquidation.

 

23.2      A rule nisi is hereby issued calling upon the respondent and all interested parties to show cause, if any on Thursday, 23 May 2024 at 10H00 to this Court:

 

23.2.1        Why a final order of liquidation should not be granted; and

 

23.2.2        Why the costs of this application, on the scale as between attorney and client, should not be ordered to be a costs of administration in the liquidation.

 

23.3    Service of the rule nisi is to be affected not less than 10 (ten) days before the return day thereof:

 

23.3.1        On the respondent at 5[...] V[...] W[...] Street, Rustenburg;

 

23.3.2        On the Master of the High Court at University Drive, Mmabatho.

 

23.3.3        On the South African Revenue at 2[...] B[...] street, Mmabatho Unit 1[...] Mmabatho

 

23.3.4        By one publication in the Star News newspaper.

 

 

 

JUDGE SAMKELO GURA

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

NORTHWEST DIVISION, MAHIKENG

 

 

APPEARANCES

Date Of Hearing:	26 August 2022
Date of Judgment:	07 September 2023
For the Applicant:	Adv P.I. Oosthuizen
For the first Respondent:	Adv A.S De Villiers

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