In the matter between:

and

JUDGMENT

There are two opposed applications for the provisional winding up of two corporate entities being Erf 15461 Brackenfell CC and Anthony Karmis Properties (Pty) Ltd. It is common cause that the factual matrix upon which the applications are predicated are the same, the legal arguments are the same and accordingly I shall deal exclusively with argument with regard to Erf 15461 Brackenfell. The analysis is equally applicable to Anthony Karmis Properties (Pty) Ltd.

The background to this dispute can be summarised thus. The applicant advanced R82 million to a principal debtor, Olympian Developing Company (Pty) Ltd ("Olympian"), which Olympian then used to purchase and commence a development of a property (Zeekoe property). Applicant extended the funding in terms of two loan agreements, one referred to as the senior loan agreement in the amount of R58 million, another referred to as the mezzanine agreement in an amount of R24 million. These loan agreements required security and limited suretyship from the respondent (as mentioned earlier I am hereby referring to Erf 15461 Brackenfell CC).

The full amount owing by Olympian by the applicant in terms of the senior loan agreement, had a repayment period of 12 months. It fell due for payment on 5 November 2008. At this stage Olympian could not pay this amount. This, in turn, led to a settlement agreement between the applicant, Olympian and the respondent. It was concluded on 19 December 2008. Olympian and the respondent acknowledged that, as at 1 December 2008, the former was indebted to the applicant to the amount of R80 124 174,15. In terms of clause 4.3 thereof, the parties agreed that the full amount would be due and payable on the signature date, that is 22 December 2008.

In terms of this settlement agreement, applicant was authorised to sell Olympian's property and if those proceeds were insufficient, to settle the indebtedness of Olympian to applicant. The latter was authorised to sell respondent's property which had been mortgaged to security for its obligation.   The settlement agreement was subject to various suspensive conditions, which are no longer central to the dispute between the parties. The applicant's attempt to sell Olympian's property in July 2009, was opposed by Olympian, which issued interdictory proceedings.

This application was dismissed with costs on 26 November 2009. On 11 December 2009, and prior to the registration of the property into the name of the purchaser, as I have already mentioned, Olympian was provisionally wound up. The final order was granted on 29 January 2010, on the basis that Olympian was commercially insolvent. As at the date of its liquidation, Olympian had failed to discharge its indebtedness to the applicant in the amount of R88 931 493,77. This does not appear to be in dispute. The applicant has, therefore, in terms of clause 15 of the suretyship agreement, established Olympian's indebtedness by way of a certificate.

"A petition presented ostensibly for a winding up order, but really to exercise pressure, will be dismissed and under circumstances may be stigmatised as a scandalise abuse to the process by the Court. Some years ago, petition founded on disputed debts, were directed to stand over till the debt established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petition, but, of course, if the debt is not disputed on some substantial ground, the Court may decide it on the petition and make the order."

"As a general proposition, prejudice caused to a surety can only release a surety (whether totally or partially) if the prejudice is the result of a breach of some or other legal duty or obligation. The prime sources of a creditor's rights, duties and obligations are the principal agreement and the deed of suretyship. If, as is the case here, the alleged prejudice was caused by conduct falling within the terms of the principal agreement or the deed of suretyship, the prejudice suffered was one which the surety undertook to suffer."

It is difficult to divine the precise basis of this argument from the opposing affidavit in that, as I shall note presently, the opposing affidavit opposed to by Mr Karmis, is hardly precise about the value of the properties. In other words, whilst Mr Karmis contends that the provisions of clause 11.1 were not complied with strictly and, therefore, the lack of cover for the loans acted to his prejudice, he is also keen to inform the Court that the property values are much higher than would be required in terms of clause 11.1. This forms the basis now for an argument that applicant has prejudiced the respondent by seeking to sell properties at a price vastly lower than that which they might fetch. For example, in paragraph 48 of the answering affidavit he says:

"As mentioned above, I am convinced that this property generates far more than the 88 million outstanding on the bond. It should be noted that the applicant failed to provide the Court of any valuation by a property specialist or local reputable agency, would no doubt have placed a much higher value on the property than the R70 million mentioned by the applicants."

This then forms the basis for the general argument that the ratios has not been made in terms of clause 11.1 of the agreement. At para 54 of his affidavit he says:

"In my view the properties are worth more than 100 million and if properly marketed, and not just to a few friends and the bank, generally enough for the sureties to be absolved from any liability."

In the applicant's replying affidavit, mention is made of Mr Karmis' allegation that the property is worth some R240 million.   It is difficult, therefore, to understand precisely the factual basis upon which his defence is predicated.

"In the event that the ratio in 11.1 has exceeded, you undertake (you being Olympian) within 20 business days a receipt of a notice from us advising you that the afore-mentioned ratio has been exceeded, to offer additional properties to us as security. The identity of such properties to be agreed upon by both of us."

For these reasons, therefore, and given that both the applications, that is for erf 15461 Brackenfell CC and Anthony Karmis Properties (Pty) Ltd were predicated on the same arguments and the same facts, I am justified in granting the order as sought.

DAVIS, J