When wide boys David Taylor and Andre le Roux acquired a majority shareholding in Tiffindell Ski in 2007, they then ensured that the company sold the land and assets to their own outfit, Tiffski, with the promise of further developing the resort, which they would lease back to Tiffindell Ski.
But Tiffski paid only 50% of the R22 million purchase price and then, overnight, upped Tiffindell Ski’s rental from R10 000 to R370 000 a month.
On the basis of that fraudulent lease, the State Bank of India lent Tiffski R19m against the security of a bond registered against the property on the date of transfer (see nose119).
In October 2008 a creditor of Tiffindell Ski applied to liquidate the company and the liquidators then brought a high court application to set aside the sale to Tiffski, and to declare the bond in favour of the Indian bank void – because the winding up, which was deemed to occur on the application date, was within six months of the transfer of the property.
The court application was opposed by Tiffski and the State Bank of India. The bank claimed it had acted in good faith without any knowledge of Tiffindell Ski’s financial difficulties, and claimed the registration of a bond gave it real security. The bank also argued that if the bond were declared void it would amount to a deprivation of property in breach of section 25 (1) of the Constitution.
The matter went all the way to the Supreme Court of Appeal, which handed down its judgment on 30 September this year. The main issue was whether the six-month period within which land transfers can be set aside runs from the sale-contract date or the date of registration of transfer.
This was critical – the contract was dated 17 July 2007 (more than six months prior to the liquidation date), whereas the transfer was registered on 16 September 2008 (just one month before liquidation date). Tiffski and the bank obviously argued it should be from the date of contract.
The Supreme Court of Appeal held that the critical date was that of registration of transfer, and that any other finding would render ineffective the protection given by Section 34 to creditors against the fraudulent disposal of assets by traders who are going bust.
The bank’s defence failed because no property had been acquired because of the illegality.
The court held that the bond had to be cancelled because no legal consequences can flow from a void act.
So the land’s been recovered by the liquidators, and the bank is out of pocket to the tune of some R19m.
Perhaps it will try to recover the money from Taylor and Le Roux. But even if it does, this case won’t do much to persuade foreign companies, who are still shaking their heads at the Walmart fiasco, that this is a place to invest – not only are our unions and government departments totally unpredictable, but many of our businessmen are pretty dodgy too.
Copyright © 2016 www.noseweek.co.za