IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

CASE NUMBER:							14425/2007
DATE:								6 NOVEMBER 2008
In the matter between:

and

						JUDGMENT

Applicant seeks the winding up of respondent's close 15 corporation, which was incorporated in terms of the Close Corporations Act 69/1984. The provisions of the Companies Act, Act 61/1973 are applicable to these applications, save where excluded by the Close Corporations Act.

The respondent has been the subject of a provisional order of liquidation and in effect the provisions to which I have made reference, are now applicable in order to determine whether a final order of liquidation should be granted. In essence the applicant's case is that it is owed significant amounts of money which have not been repaid to it.   The thrust of applicant's case is captured in the founding affidavit deposed to by Mr Hoskins on behalf of the applicant in which the following appears:

"To the best of my knowledge and belief, respondent's financial position as at 30 August 2007 is as set out hereunder:

In essence applicant contends that these monies were paid over   to  respondent   pursuant   to   two   contracts   or   more  accurately, an agreement and an addendum to the agreement. In the principal agreement it was entered between applicant and respondent, together with Mr Hilton (the clear force behind the opposition to this application) and Mr Orrie, which was entered into on 1 April 2004. The applicant made certain  undertakings to respondent, including the procuring of the issue of guarantees (clause 4), and that it would undertake to provide to respondent by way of a loan, 100% of the capital requirements of the respondent which was set in the amount of approximately R1 million (clause 7 of the agreement).

Furthermore in the addendum to the agreement, there is an indication  of further funds which were  made available  by applicant to the respondent, in essence as the respondent required more capital.   In this particular regard the addendum, again entered into between applicant, respondent, Mr Hilton
and Mr Orrie, on 30 September 2004, corded:

"The capita! requirements for the completion of various contracts have increased." (At clause 3.1).

In the founding affidavit it is averred that applicant had given respondent 30 days notice pursuant to the contract to which I have made reference to repay the sum of R1 million. The 30 day   period   expired   and   it  was   averred   further  that  the respondent had not paid any of the amount to apt. The support for this averment is to be found in the attachment to the founding affidavit, being a letter from applicant's attorneys, which was addressed to respondent for the attention of Mr Hendricks and Mr Hilton, dated 27 August 2004 in which the following appears:

"It is our instructions to demand, as we hereby do, in terms of the provisions of clause 7.2.2 of the said agreement, repayment of the loan in the sum of R1 million... to Unipalm on or before 1 October 2004."

In the first of the answering affidavits, Mr Hilton says, in relation to these averments:

"Behalwe   om   te  erken   dat   respondent   nie  die bedrag van R1 miljoen aan die applikant betaal het nie, word die inhoud hiervan ontken."

As with much of this case, the denials are couched with 10 exquisite enigma, so that it becomes exceedingly difficult to know quite what is being denied and why. I presume, as Mr Coetzee, who appeared on behalf of the respondent, urged me that I should infer that somehow the Letter of Demand was never received, certainly not by Mr Hilton. I leave the matter 15 there, because it is probably not on its own a determinative case.

Mr Coetzee further submitted that a further R600 000 of the applicable amount could not be taken into account either withregard to the computation of any alleged liability owed by respondent to applicant. The reason for this submission was briefly that applicant had sought to claim some 49% of the R600 000 from the Mr Hilton personally by way of a default judgment.   Therefore, without unnecessary examination of the default judgment proceedings, the thrust of Mr Coetzee's submission was that if applicant considered that ultimately the R600 000 was owed by Mr Hilton personally and not by respondent, it was now no longer open for the applicant to make use of that alleged debt to justify its argument that it was a credit.

repaid.      In   particular   the   following   passage   from   the respondent's additional answering affidavit deposed to by Mr Hilton was critical to Mr Coetzee's submission:

"Die balans van bogemelde deposito's ten bedrae van R17 240 333,97 was betalings ten opsigte van gemelde drie konstruksie kontrakte. Ek was in beheer van die fisiese uitvoering van gemelde konstruksie kontrakte en was veronderstel om 'n salaris van R30 000 per maand te ontvang. Behalwe dat ek vanaf November 2004 geen salaris ontvang het nie, het ek nie my voile salaris vir die periode Maart tot Oktober 2004 ontvang nie. Aanhangsel B2 is 'n opgawe van die betalings wat aan my gemaak was gedurende gemelde periode in die totale bedrag van R231 387,43. Behalwe gemelde betalings, het ek geen sent uit die vermelde bankrekening ontvang nie, behalwe bogemelde bedrag van R452 399,87 waarop applikant geen aanspraak hoegenaamd het nie, beloop die gewaarborgde wins op die inkomste wat vanaf Suid-Kaapstad ontvang is R4 310 083,49 synde 25% van die bedrag van R17 240 333,97. Toe die bankrekening deur applikant gesluit was op2 Februarie 2006, het die kredietbalans op gemelde rekening   R2 959,75,   welke   bedrag   volgens   die bankstate   aan   applikant   se   huidige   prokureurs oorbetaal was.  Applikant se bewering dat die voile inkomste    uit    die    drie    konstruksie    kontrakte aangewend  was  om  die  uitgawes verbonde  aan sodanige kontrakte betaal, is met eerbied belaglik."

To sum up, therefore, Mr Coetzee's argument was in effect 10 that of the two million, R400 000 had been repaid (common cause), R600 000 or applicable percentage thereof had been pursued against Mr Hilton individually by way of a default judgement which, therefore, by reasoning, could not have been on applicant's own view an amount owed by respondent and 15 the balance of the R1 million had manifestly been taken out of the profits which had been earned in the amount of R4 310 083,49 and accordingly the remaining part of the obligation had been discharged. On that basis, on the probabilities, reading the papers as they should have been, Mr 20 Coetzee's essential argument was that those sums of money no longer constituted debts owing by respondent to applicant and accordingly there was no justification for granting the final order.

In this particular case, without having to decide each and every point that has been taken by respondent, there are two responses that clearly seem to have remained unanswered, responses which were generated in the submissions of Mr Van Heerden, who appears on behalf of the applicant. Mr Van Heerden submitted that to the extent that R600 000 was owing to applicant, the only question for determination was the identity of the entity which owed applicant that sum.    He submitted that simply because the applicant may well have employed an incorrect procedure in proceeding directly against Mr Hilton, did not constitute a complete defence as to whether the sum of R600 000 was paid pursuant to an agreement to which I've made reference and accordingly stood to be repaid.

It is clear on any reasonable inference that amounts were paid by applicant to respondent. It is clear that those amounts were paid because an agreement had been entered into, in which I might add Mr Hilton was a party, pursuant to which 25    these amounts were paid over by applicant to respondent. The
foundational point is this, other than to suggest that applicant
may have been unwise to proceed by way of default judgment
against Mr Hilton, no other concrete basis put up by the
respondent to suggest that the R600 000, (1) was not paid
    over, (2) was not owing to applicant, and (3) is, therefore,
pursuant to the agreement, not owed by the respondent.

To the extent as is necessary to go further in order to establish that monies are owing, it is necessary then to turn to respondent's own version. In respondent's own version a schedule is set out of payments which were made by it to applicant. These amounts, inclusive of the R400 000 which is common cause was repaid by respondent to applicant, amount in total over the applicable period to R821 657,41.    That clearly on its own, would indicate that further funds are still owing by respondent to applicant. No says Mr Coetzee. Why? Because these were amounts in which Mr Hilton was able to crawl through respondent's bank statements and identify payments   that   had   been   made   by   name   to   applicant. Therefore, given that there were a multitude of cash payments beyond these, Mr Coetzee would have the Court accept that it was a reasonable inference to conclude that the balance of the amounts would have been paid by way of cash payments.

Given the findings which I have come to, there is perhaps no reason to enter into any further analysis as to whether any profit was indeed made by respondent which would have justified the submission made of a profit beyond R4 million.   It is, however, a submission that seems to fly directly in the fact of a letter generated by Mr Evans, acting on behalf of the City of Cape Town, in which he writes to respondent setting out the basis of a settlement of the relationship between the parties, which clearly indicates that to a very considerable degree the contracts which had been entered into, were never completed, but in fact was subject to a settlement.

As I have mentioned earlier, however, save to say that that evidence itself raises questions as to whether there was any 25    proof of any profit having been made, which is central to the balance of R1 million and whether it is owed or not, I do not need to determine this given the findings to which I have
come.

There is then a further offence raised about claims that 5 respondent has against applicant. As I have noted, applicant denies that respondent made any profit out of the contracts collectively. Mr Hilton's allegation of a guaranteed 25% on the profit on contracts, therefore, does not appear to have evidential substance attached thereto. As noted two of the 10 contracts were cancelled. The probabilities certainly dictate on the evidence that no significant profits were generated there from.

Furthermore, applicant has put up evidence to suggest that 15    respondent suffered losses in the contracts they concluded with the City of Cape Town and had to pay damages.   The question of the profit, of course, is relevant to whatever claim respondent might have, but it appears that these claims are speculative and are not necessarily based on any significant fact.     Furthermore, when  Mr  Hilton  claims  an  amount of R452 397,87, it appears that that amount may well be owed to him, as is clearly provided for in clause of the agreement to which I have made reference. That, therefore, is a claim which Mr Hilton must bring, it is neither liquidated nor does it fall    within the scope of these proceedings and accordingly, it can be ignored for the purposes of the computations which are necessary to justify a final application.

But in this case one is faced with respondent, which on any  version, can hardly be considered to be in the peak of health. Indeed there is an averment in the replying affidavit of Mr Hoskins which itself was answered by Mr Hilton, but without any comment in the following passage, in which the following the averment is made:

"The respondent has ceased trading since December 2005 when the contracts with the City of Cape Town were terminated."

	"...postulates on facts, but only a broad conclusion of law, justice and equity is a ground for winding up."

The fact is even an inquiry is even compounded by a further dispute as to precisely who are the members of this particular corporation. There is an argument raised by Mr Hilton that Mr Hendricks own 51% in the respondent. That notwithstanding that in sequestration proceedings on  13 October 2007, Mr Hilton recognised that the applicant, through Hendricks, had obtained 51% of the member's interest in respondent, in where he stated:
			"Applicant obtained 51% member's interest held on behalf of 	the applicant by Peter Hendricks. 			The necessary CK2 forms 	having been duly completed to this effect, management and financial 			control was taken over by applicant."

Mr Coetzee submits somehow that I cannot take any account of that particular averment, because it was not to be employed within this context. Maybe so, but it raises doubts in the discretion of this Court as to quality of this particular kind of argument and the fact that it was Mr Hilton who had to sign the necessary CK2 forms to give effect to the registration of membership.

It is not in dispute that, it appears to me, is of substantial evidential weight sufficient to in effect to refuse to grant this application. This is a case which cries out for an independent liquidator to examine the full affairs of the respondent, which it appears to be undenied, no longer trades and to make a determination which would be in the best interest of all the competing stakeholders.   The fact that every single possible objection to this application has been taken without, in many cases, much more evidence than a trawling through of all applicable cases, only compounds the difficulty experienced by this Court. In the final analysis, however, it is clear that this, on a certainly just and equitable basis, is an application that should be granted.