IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT)

[REPORTABLE] 
CASE NO: 16168/2012

In the matter between:

CHRISTIAN FINDLAY BESTER N.O.				First Applicant
JOHANNES FREDERICK KLOPPER N.O.				Second Applicant
ABDOL WHAHEED BADRODIEN N.O.				Third Applicant

And
CORAL LAGOON INVESTMENTS 232 (PTY) LTD			Respondent

And

PATRICK THONISSEN N.O.					First Intervening Creditor

ROY TREVOR BOAST					Third Intervening Creditor

Judgment by	:	R.C.A. Henney, J
For the Applicant	:	Adv J A Van Der Merwe
For the First, Second and	:	Adv A Kantor 
Third Intervening Creditors
Date(s) of Hearing	:	4 December 2012
Judgment delivered on	:	20 February 2013

Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

[REPORTABLE] 
CASE NO: 16168/2012

In the matter between:

CHRISTIAN FINDLAY BESTER N.O.				First Applicant
JOHANNES FREDERICK KLOPPER N.O.				Second Applicant
ABDOL WHAHEED BADRODIEN N.O.				Third Applicant

And
CORAL LAGOON INVESTMENTS 232 (PTY) LTD			Respondent
And
PATRICK THONISSEN N.O.					First Intervening Creditor

ROY TREVOR BOAST					Third Intervening Creditor

JUDGMENT DELIVERED ON 20 FEBRUARY 2013

HENNEY, J

Introduction

Background Facts
[2] Ekosto, Spec Props Trust, Rusverdient Trust and one Roy Trevor Boast are all shareholders of Coral Lagoon Investments (“Respondent”), each entity owning a 25% share of the Respondent.
[3] The sole purpose of the establishment of the Respondent was to acquire a beach front property (“the property”) and to develop it into 8 luxury self-catering beach front apartments which would be sold for a profit. The property was acquired for a total price of R2 679 000,00 which consisted of an amount of R2 350 000,00 plus VAT thereon in the amount of R329 000,00. Transfer was effected into the name of the Respondent on 26 November 2007.

[5] The parties anticipated that once the necessary approvals had been obtained, the apartments would be sold and developed. Finance would be obtained from a financial institution to fund the development as well as the repayment of the mortgage bond pending the completion of the development.
[6] Until such time that the development finance had been obtained, the bond was to be serviced by the VAT refund obtained from the South African Revenue Services in respect of the purchase price. When the loan was made by the shareholders, who included Ekosto, to the Respondent, the Respondent did not have any assets or turnover.

According to the intervening creditors, this prompted the shareholders, including Ekosto, to enter into subordination agreements in order to preserve the Respondent’s solvency.

Subsequently Ekosto was placed under liquidation. At the time of its liquidation, it was owed R554 994,01 by the Respondent in respect of monies lent and advanced to the Respondent by Ekosto. This prompted the liquidators to demand payment of this outstanding amount in terms of section 345(1) of the Companies Act, Act 61 of 1973. This demand was made in a letter dated 2 April 2012. It needs to be mentioned that no such demand for payment was made by Ekosto before its liquidation.

[11] In opposing the Application, the intervening parties raise four main grounds of opposition:

11.2. There was no inability on the part of the Respondent to pay its debts because they had not become due and payable;
11.3. It is not just and equitable for the Respondent to be wound up;

[13] In terms of section 4(1 )(a)(i) the NCA is not applicable to a credit agreement where a consumer is a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined in terms of section 7(i), which is currently R1 million rand.

[18] They argue that a juristic person is related to another juristic person in terms of section 4(2)(d) if:
(i) One of them has direct or indirect control over the whole or part of the business or;
(ii) A person has direct or indirect control over both of them.

[20] In response to the argument of the Applicants that the loan agreement between Ekosto and the Respondent was not concluded at arm’s length, the intervening parties argued that this did not accord with the facts, which were that the agreement was purely a commercial venture in respect of which each shareholder would make a profit for himself. Further, it was contended that in light of the fact that the Respondent’s shareholding was equally vested in the four shareholders it was therefore not possible for Ekosto to hold a controlling interest in the Respondent.

Striking Out

[26] Issues for Determination

The Applicants rely on all the following, in arguing that the agreement is not subject to the NCA.

(a) a credit agreement in terms of which the consumer is- 

Furthermore, Section 4(2)(b)(i) reads as follows:

.....
(b) in any of the following arrangements, the parties are not dealing at arm’s length:

(iv) any other arrangement -
(aa) in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction";

At page 805G - 806A

"... I find it difficult to conceive why a statute should be so interpreted as to attach a meaning to a word like 'minerals' narrower than that assigned to it in a number of statutes especially concerned with minerals and the rights associated therewith."

At548F-H
The answer to the question must be sought in the first instance in the wording of the provision itself. If that is not sufficiently unambiguous to be conclusive, it must be interpreted in the light of its context and of the intention of the Legislature as derived from the statute as a whole. Further assistance may be afforded by the manner in which similar provisions in other statutes have been interpreted, provided they are in pari materia.

At 7311 -732B

'Guidance by contrast or analogy may sometimes be derived from a provision of a statute other than that under consideration although there is no question of the two of them being in pari materia, but there is no obligation on the Judge to consider such statutes as there is in the case of those in pari materia.'

[35] I will now deal with other statutes which also refer to terms “controlling interest” and “direct and indirect control” as contained in the NCA.

(i) more than 50 per cent of the issued share capital of the company;
(ii) more than half of the voting rights in respect of the issued shares of the company; or 

(a) beneficially owns more than one half of the issued share capital of the firm;

(d) is a holding company, and the firm is a subsidiary of that company as contemplated in section 1 (3) (a) of the Companies Act, 1973 (Act No. 61 of 1973);
(e) in the case of a firm that is a trust, has the ability to control the majority of the votes of the trustees, to appoint the majority of the trustees or to appoint or change the majority of the beneficiaries of the trust;
(f) in the case of a close corporation, owns the majority of members’ interest or controls directly or has the right to control the majority of members’ votes in the close corporation; or

[37] This concept of control is largely carried over into the new Companies Act. The relevant provisions of the new Companies Act read as follows:

	.....

(i) either	of them directly or indirectly controls the other, or the business of the other, as determined in accordance with

(ii) either is a subsidiary of the other; or
(iii) a person directly or indirectly controls each of them, or the business of each of them, as determined in accordance with

(aa) directly or indirectly able to exercise or control the exercise of a majority of the voting rights associated with securities of that company, whether pursuant to a shareholder agreement or otherwise; or

[42] Whilst the director or shareholders of the Respondent might be shareholders and directors in these companies, these companies cannot merely on this basis be regarded as related person having a direct or indirect controlling interests in the Respondent, to the extent that it would be able to have an influence in the affairs of the Respondent either due to a majority shareholding, which they clearly or by any other means as discussed above.

In terms of Section 40 (1)(b) of the NCA:

a)	the total principal debt owed to that credit provider under all outstanding credit agreements other than incidental credit agreements exceeds the threshold prescribed in terms of section 42(1)”.
Such threshold today stands at R500 000,00. The amount advanced by Ekosto to the Respondent is R554 994,04, which exceeds the threshold for which a person may advance credit without being a registered credit provider.

[47] Given that the loan agreement was void, such loan cannot be said to be due and payable, and the demand made in terms of section 345(1) of the 1973 Companies Act must be of no force and effect. In such circumstances, the Applicants cannot base their claim for the liquidation of the Respondent on section 344(f) of the 1973 Companies Act, i.e. on the alleged inability of the Respondent to pay its debts.

[49] I hold therefore that the Applicant has failed to establish that the loan was due and payable, and hence, has failed to prove that the Respondent is unable to pay its debts as described in section 345 of the Companies Act 61 of 1973.
Just and Equitable
[50] Even if I should be wrong in my conclusion that the agreement was invalid, if regard is to be had to the facts of this matter, I am of the view that in exercising my discretion, it would not be just and equitable to grant a final order of liquidation of the Respondent.

*

[53] Apart from the debt owing to Absa, the only other major creditors of Respondent are the other shareholders (intervening parties). The bond is being serviced it seems to the satisfaction of the major secured creditor, who has not sought to intervene in these proceedings.

[56] In this instance the reason for the existence of the Respondent was purely for the commercial benefit of the shareholders, who sustained the Respondent in order to protect their commercial interests. Therefore, in exercising my discretion in terms of Section 344 of the 1973 Companies Act, I am of the view it is not just and equitable to wind up the Respondent and grant a final order for its liquidation.
[57] In the result therefore I make the following order:
1) The Application for the winding up of the Respondent is dismissed with costs.

HENNEY, J
Judge of the High Court