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IN THE SOUTH GAUTENG HIGH COURT

JOHANNESBURG

CASE NO: 2013/20119

REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

In the matter between:

PETER KENNEDY GAIN	Applicant
and
MAWELA PROPERTIES PROPRIERTARY LIMITED	Respondent

JUDGMENT

SATCHWELL

1. This is an application for the provisional winding-up of the respondent in terms of section 344(f) of the Companies Act. It is no longer in dispute that respondent is indebted to applicant or that respondent is unable to pay this debt. Instead, respondent has raised two interesting technical defences: that a pactum de non petendo with a third party precludes applicant’s initiation of these, or any other proceedings and that the matter is lis pendens by reason of another trial action.

2. Applicant lent and advanced the sum of R 7 million to respondent during 2007 and two further sums amounting to a further R 7 million. The terms of these loans have been recorded in a detailed loan agreement, Annexure ‘A’, dated 5^th February 2009. Repayment of all these loan amounts was  undertaken to be paid in full by  the end of June 2009.Respondent has not repaid these loans and respondent is unable so to do by reason of “certain financial constraints”[1].

3. Accordingly, there is no doubt that  respondent is unable to pay this debt at the present time.

4. The first defence raised by the respondent is that the debt is not due since applicant had entered into a pactum de non petendo with one of the directors of the respondent.[2] In essence, respondent claims that the applicant and this director of respondent, Khumalo, agreed “during June 2009 and May 2009” that the applicant would “not claim or institute the amounts in view of the financial constraints of the defendant”. Applicant undertook not to institute an action against respondent “pending the successful sale of the foreign mines in which Mr Mzilikazi Godfrey Khumalo had an interest” it being “anticipated that the mines would be sold by the end of 2013”. This “pact not to litigate until such sale had become effective and where Mr Khumalo had received sufficient monies to pay the loan was done in light of the various problems that Mr Mzilikazi Godfrey Khumalo had experienced….. [3]. This defence is more succinctly stated in the Answering Affidavit as an undertaking by applicant not to institute action “pending the successful sale of the foreign mines in which Mr Mzilakazi Godfrey Khumalo had an interest”.[4]

5. Applicant denies the existence of any such agreement.

6. I see no dispute of fact concerning this alleged pactum which even begins to meet the principles set  out in Plascon Evans[5]. Indeed I am satisfied that  the facts alleged by  respondent do not begin to raise “a real, genuine or bona fide dispute of fact”.

7. The terms of the alleged pactum are neither consistent with past commercial and legal practice concerning this loan nor in accordance  with commercial common sense:

a. Applicant was at pains to procure the loan agreement  of  February 2009 comprising some nine pages  detailing terms and dates of  repayment.  This   suggests that applicant would hardly be prepared to subject the fate of this  agreement to an informal, verbal, unrecorded and  entirely  open-ended   pactum as alleged.

b. The terms of the alleged pactum  allege that  applicant agreed  that he would not litigate  for repayment  on an indefinite basis.  There is no finite  conclusion to  this undertaking to wait patiently.    There is no postponement of payment to a fixed date.  Instead, what is alleged is that legal action can only be initiated  once  two events have occurred - firstly,  the “sale of foreign mines”  which   secondly must be a   “successful sale”. There is no definition of ‘success’ either as to sale price,  terms of sale, receipt  of funds from the sale. That it was “anticipated that the mines would be sold by the end of 2013 provides no more than a hope for a “successful sale”  since it is not averred that the  sale must be finally concluded and funds  received by the end of 2013. This is a commercially absurd proposition.

c. The answering affidavit opposing this winding-up liquidation is noticeably silent on the details of this alleged pactum.  There is no mention of exactly when or where it was concluded and   why it was not recorded in writing,   the   nature and value of the of the “interest” which Khumalo  has or had in these mines,  the location and  status of these mines, why (if the mines are in Zimbabwe) they are exempt from  any threats of indigenisation,  what steps have been taken to procure a sale of these interests as 2013 approaches the calendar  year end,  whether potential purchasers have indicated any interest or  made any offers,  the possible sale price which may be achieved for such interests,  the terms of any sale.  In short,  there is no indication whatsoever that there every was or is any prospect of funds emanating from the possible sale of these mining interests which would have induced  applicant to  agree that he would never pursue his claim against respondent.

8. This alleged pactum appears to be an afterthought  when one has regard to the correspondence and pleadings which preceded emergence of this defence. The existence of this pactum was initially unknown to the director of respondent,  Mkhwanazi, who has deposed to all affidavits and apparently given instructions to respondent’s legal representatives in this and other litigation.

a. Summons was issued and served claiming payment of the outstanding amounts  during May 2012 .  Mkhwanazi, as one of three directors of the respondent,   personally wrote[6] to applicant after receipt of summons  suggesting a continuation of settlement discussions and setting out a proposal that applicant take over Khumalo’s personal residence with respondent to pay the balance owing in cash.  The author of the letter must have consulted with Khumalo before offering  possession of Khumalo’s  private residence yet Khumalo apparently failed to inform his co-director of the alleged pactum resulting at this time.   Indeed the letter went further to state that “Mzi will in due course be speaking to you about timing of this implementation as it is dependant on a cash transaction to be concluded by the group in due course”.    Not only is there no reference to the pactum allegedly concluded some three years  earlier  but there is also  clear indication that  Khumalo would be discussing the timing of the  payment of the balance owing when it is allegedly Khumalo who had already concluded the open-ended pactum.

b. Respondent initially pleaded, as defendant in the civil action,   that it “denied” the existence of the loans or payment of any monies by applicant to respondent.  At that stage of the plea there was no mention of a pactum as now set out.  The reason given for this denial of the indebtedness and failure to refer to the pactum is that,  although  one of three directors of this company,  Mkhwanazi  had  neither knowledge of the loans or the pactum .  This is a disconcerting admission because it  suggests that this director of the company has either not  read  the financial statements of the company or that these financial statements fail to correctly record the affairs of the company or that such records are not kept. It therefore makes it difficult to rely upon any deposition made by this director with regard to respondent’s affairs.

9. I have no hesitation in concluding that  there is no pactum de non petendo which could or would preclude applicant from instituting these or any other proceedings.

10. The second defence raised by the respondent is that  of lis alibi pendens  on the grounds that  applicant, as plaintiff, issued summons against respondent, as defendant,   under another case number for repayment of the R 15 million. The action is defended and the parties apparently await a trial date.

11. The principle underlying the lis pendens defence is to  preclude  the vexation to a defendant/respondent and to the court of a duplication of  litigation  in respect of the same subject matter.  Either court has a discretion whether or not to uphold such a plea.

12.  In the earlier action  there is no more than an action for payment of a sum of money whilst in the present application there  is an application for the provisional sequestration of the debtor.   The relief sought is very different. The consequences of success in the two cases  are   significantly  disparate.  The civil action can do no more than bring satisfaction in a monetary amount for this  one creditor  while the liquidation application  may result in  an investigation into the affairs of the company and complete or partial satisfaction for a number of as yet unknown creditors.   In any event there is authority that lis pendens cannot  be raised  in every case but only where  claim is laid to a specific res[7] - that is the position in the civil action but not in the liquidation application.

13. It was argued on behalf of the respondent that  this application is an abuse of the court brought because applicant is ‘disgruntled’ with lack of success in it’s earlier application for summary judgment and that the application should be dismissed,  inter alia, on this basis. Applicant has justified both forms of litigation – the civil action was instituted to interrupt prescription which this application cannot do whilst the liquidation application is based upon the  averment that the company is commercially insolvent.

14.This is certainly not an application brought in terrorem of respondent.   There is no dispute at all concerning the indebtedness and the inability to pay and there is no bona fide dispute  about the existence of this pactum.

15. Reference was made in the founding affidavit to other litigation in which Khumalo was been involved which suggest financial difficulties and uncertainties.  All of these have been described by respondent as resolved save for the attachment of Khumalo’s assets by the Reserve Bank where respondent states “there is a review of this decision which is currently still before the Court”[8].Such review has apparently not yet been concluded and therefore Khumalo’s assets  still remain attached. This casts some doubt upon the rescue attempts of Khumalo on behalf of respondent.

16. Respondent further complains that applicant should not confuse the separate legal personae of Khumalo and the respondent. However, it is respondent’s case is that Khumalo will meet respondent’s obligations to applicant out of his own personal assets - not respondent’s assets [9] . The commercial fate of respondent appears to be inextricably bound with that of Khumalo. And, as I have already remarked, there is absolutely no information as to when and how the ‘successful sale’ of Khumalo’s mining interests will rescue respondent.

17. In the result I take the view that this is an appropriate matter for this court to exercise its discretion and grant an order for the winding-up of the respondent.

18. An order is made as follows:

a. The respondent is hereby placed under provisional winding-up.

b. All persons who have a legitimate interest are called upon to put forward their reasons why this court should not order the final winding up of the respondent on the 25^th day of February 2013 at 10h00.

c. A copy of this order is be forthwith served on the respondent at its registered office and be published in the Government Gazette and in a daily newspaper which circulates throughout the Witwatersrand.

d. A copy of this order is to be is to be forthwith forwarded to each known creditor by registered post or by electronically receipted transmission.

e. Costs of application reserved for return day.

Dated at Johannesburg on this day the 18^th of November 2013.

K. SATCHWELL

Counsel for Applicant: Adv. A. Subel SC

Counsel for the Respondent: Adv. A. Bava SC

Attorneys for Applicant: Baker & McKenzie

Attorneys for Respondent: Shepstone & Wylie

Date of hearing: 13^th November 2013

Date of Judgment:20^th November 2013

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