- This case dealt with an appeal to the Supreme Court of Appeal from the Gauteng Local Division. The High Court held that a sole shareholder and member of the company was correct in challenging the Master’s decision in relation to section 44(1) of the Insolvency Act, not applying to companies in liquidation. This section affects time frames for the lodging go claims and setting of costs and the payment thereof in respect of late claims.
- The Supreme Court of Appeal however found that the words ‘mutatis mutandis’ in section 336(1) read with (2) of the 1973 Companies Act (The Old Companies Act) did not exclude section 44(1) of the Insolvency but rather section 104(1) of the Insolvency Act which dealt with late proof of claims, holding that such an exclusion facilitated distributions under the accounts of a company in liquidation.
- In this case an unregistered lender had given undated blank cheques for repayment which included participating profit shares to be stipulated by the borrower. These cheques were however dishonoured upon presenting them for payment.
- The question before the court was therefore whether loan agreements constituted credit agreements in terms of the National Credit Act? The court held that loan agreements are not credit agreements in terms of section 1 of the Act and that profit shares are not ‘charges’ under section 8 of the Act.
- Rather these cheques constituted distinct contracts in writing. The holder for value of these cheques was not obliged when suing the borrower for provisional sentence to comply with section 40(1) and section 129 read with 130 of the Act. Therefore provisional sentence was competent.
- The North Gauteng High Court granted a default judgment ordering that the applicant was liable in terms of section 424(1) of the Companies Act because of his reckless conduct despite no such evidence of reckless conduct being led before the court.
- An application by the applicant to rescind this order was dismissed as the court found there was prima facie proof of such allegations and that he had been in wilful default.
- On appeal, the Supreme Court of Appeal however held that there has to be evidence of such on a balance of probabilities before such an order could be granted and in the absence of such, the applicant could not be liable under section 424(1) of the Companies Act.
- This case dealt with the concepts insider trading and the disclosure of inside information. The issues before the court were whether the information obtained constituted inside information as defined in the Security Services Act which requires it to be ‘specific and precise information not yet made available to the public’.
- The appellants contend that the information did not constitute precise or specific information, as the loan in question was only granted in “principle” and was thus not final, and thus did not believe that they had inside information.
- The court rejected such a defence and held that the event in question need not be final in order for such information to be specific and precise. Furthermore the test of whether the information is ‘price sensitive’ is determined by asking whether the reasonable investor would regard such information as relevant in coming to a decision in dealing with those shares.
- A bona fide belief that known information is not inside information will only be a defence where it is based on reasonable grounds which , in this case, it was not.
- The applicant claims its claim is not bona fide disputed on reasonable grounds by the respondent and contends that in terms of section 69(1)(c) of the Close Corporation Act, the respondent is deemed to be unable to pay its debts and is in any event commercially insolvent.The respondent claims it has a bona fide dispute and furthermore denies that it is commercially insolvent.
- The court noted that the rule that winding-up proceedings should be avoided as a means of enforcing payment in instances where the existence of such is bona fide disputed on reasonsble grounds is known as the Badenhorst rule and is part of the principle that court processes should not be abused.
- The court held that bona fides relates to ones subjective state of mind but is interrelated with reasonableness as unreasonableness present in the facts underlying ones state of mind could render it that the person is not bona fide in asserting those facts.
- The court held further that all the factors relied on by the respondent in attempting to discharge that it was bona fide disputed were not reasonable and thus such could not be bona fide. One of the factors relied on by the respondent was that the applicant was not a registered credit provider in accordance with the National Credit Act. The court held that no attempt had been made to explain why the applicant would fall into one of the exclusions of the National Credit Act.
- The court therefore ordered a provisional liquidation of the respondent.
Disclaimer: All information contained herein does not constitute legal advice in any form or manner nor is it intended. All legal advice must be obtained or gained from a consultation with a qualified lawyer. The views and opinions expressed are those of the cited authors and not those of the publishers of iGazette. iGazette accepts no liability for any information which may be incorrect.
© Rui Lopes. All Rights Reserved.
All images have been obtained through pixabay.com unless otherwise cited.