Automated Summary
Key Facts
The court determined that payments totaling R2,493,000 made by the Corporation to the first respondent (Ashraf Akbur) and the second respondent (GSC Trading CC) within six months prior to its liquidation constituted voidable preferences under Section 29 of the Insolvency Act. These dispositions occurred between 26 July 2013 and 7 October 2013, with the Corporation's liabilities exceeding its assets at the time. However, the applicants failed to establish on a common cause basis whether the dispositions were made to the first or second respondent, leading to the appeal being upheld and the application dismissed with costs.
Issues
- Whether the dispositions of property by the Corporation to the first or second respondent constituted voidable preferences under Section 29 of the Insolvency Act 24 of 1936, given that the liabilities of the Corporation exceeded its assets at the time of these dispositions.
- Whether the applicants properly discharged their onus to prove the dispositions were not made in the ordinary course of business and were intended to prefer one creditor over another, despite material factual disputes.
- Whether the evidence presented in the founding affidavit, including summaries from a confidential commission of enquiry, was admissible and sufficient to establish the required elements for voidable preferences in motion proceedings.
Holdings
- The application is dismissed with costs.
- The appeal is upheld with costs.
Remedies
- Directing that the first and second respondents pay the costs of this application on a party and party scale, jointly and severally the one paying the other to be absolved.
- The order of the court a quo is set aside and substituted with 'The application is dismissed with costs'.
- Directing the first respondent, alternatively, the second respondent, or further alternatively, the first and second respondents, jointly and severally, to repay the amounts (R2 493 000.00) with interest at 9% per annum a tempore morae to the date of payment.
- The appeal is upheld with costs. The order of the court a quo is set aside and substituted with 'The application is dismissed with costs'.
- Declaring that the amounts paid by the Corporation to the first respondent and/or the second respondent constitute voidable preferences under Section 29 of the Insolvency Act, as read with Sections 32, 31, 30(1)(2) and 26(1)(b).
- Declaring it competent for the applicants to recover from the first respondent, alternatively, the second respondent, or further alternatively, from the first and second respondents, jointly and severally, the one paying the other to be absolved, the amounts reflected in 1.1 to 1.7 above.
Legal Principles
- The court emphasized that in motion proceedings, the applicant must establish their case in the founding affidavit, not in reply. The applicants failed to meet this burden as they relied on inadmissible evidence and did not address factual disputes adequately.
- The court ruled that evidence from a confidential commission of enquiry under s 417(7) of the Companies Act could not be used in the application. Summarized witness testimony in the founding affidavit constituted inadmissible hearsay without confirmation.
Precedent Name
- Law Society, Northern Provinces v Mogami and Others
- National Director of Public Prosecutions v Zuma
- Cooper and Another NNO v Merchant Trade Finance Ltd
Cited Statute
- Law of Evidence Amendment Act 45 of 1988
- Insolvency Act No. 24 of 1936
- Companies Act No. 61 of 1973
Judge Name
- Bezuidenhout J
- Koen J
- Poyo Dlwati J
Passage Text
- Any factual dispute must therefore be decided on the version of the first and second respondents. On that basis the Applicants failed to discharge the onus on all the issues in respect of which they bore the onus. The application accordingly could not succeed.
- The applicants did also not, in our view, establish on a common cause basis in whose favour the dispositions were made. The contention advanced by the applicants, based mainly on inadmissible evidence contained in the founding affidavit, is that the dispositions were made to the first respondent.
- Motion proceedings, unless concerned with interim relief, are all about the resolution of legal issues based on common cause facts. Unless the circumstances are special they cannot be used to resolve factual issues because they are not designed to determine probabilities.