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[2015] ZAWCHC 187
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Specialised Edible Oil and Fats (Pty) v Eezi Food Imports and Exports (Pty) Ltd (17349/2015) [2015] ZAWCHC 187 (10 December 2015)
THE HIGH COURT OF SOUTH
AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No: 17349/2015
In
the matter between
SPECIALISED
EDIBLE OIL AND FATS (PTY) LTD
APPLICANT
and
EEZI
FOOD IMPORTS AND EXPORTS (PTY) LTD
RESPONDENT
Coram
:
ROGERS J
Heard:
24 NOVEMBER 2015
Delivered:
10 DECEMBER 2015
JUDGMENT
ROGERS
J:
Introduction
[1]
This is the extended
return day of an order for the respondent’s provisional
liquidation. Mr van der Schyff appeared for the
applicant and Mr
Lawrence for the respondent.
[2]
The applicant issued
the application on 7 September 2015 for hearing on 11 September 2015.
It was opposed and postponed to 5 October
2015 with a timetable.
Answering and replying papers were filed. The matter was argued on 9
October 2015 before Fortuin J (sitting
in Third Division). She
granted a provisional order returnable on 30 October 2015. Reasons
for the provisional order have not been
requested or furnished. On 30
October 2015, and following the belated filing of supplementary
opposing papers, the return day was
by agreement extended to 24
November 2015 with a direction that the applicant file any
supplementary replying papers by 6 November
2015. The respondent’s
directors were ordered to pay the wasted costs. The applicant chose
not to file supplementary replying
papers.
Background
[3]
One
Liyaquat-Ali
Ebrahim
(‘Ebrahim’)
is a director of the respondent and the deponent to its opposing
papers. His brother is the other director.
The applicant’s sole
shareholder and managing director is one Haroon Essack (‘Essack’,
referred to in the papers
as Uncle Haroon). Essack’s son is
married to Ebrahim’s sister. Business dealings between Ebrahim
and Essack started
in early 2012. The details are contentious. It is
common cause, however, that Essack’s company, the applicant,
began supplying
rice to Ebrahim’s company, the respondent.
[4]
On 31 October 2014 the
applicant sought and obtained an ex parte order for the respondent’s
provisional liquidation (‘the
first liquidation application’).
The papers in that case are not before me but it appears that the
applicant alleged that
the respondent owed it R3,317 million in
respect of rice supplied. The respondent opposed the confirmation of
the order. Its directors
also brought an application that they be
authorized to conduct the respondent’s business pending the
finalisation of the
liquidation application. On 9 December 2014
Kuschke AK dismissed the relief sought by the directors and extended
the provisional
order to 25 February 2015.
[5]
On 11 February 2015
Ebrahim filed a supplementary answering affidavit in the first
liquidation application, stating that according
to his detailed
calculations, particulars of which he gave, the respondent owed the
applicant no more than R703 621. He alleged
that the respondent
had been in the process of settling this balance by payments of more
than R200 000 per month and that
but for the ex parte
provisional order the indebtedness would have been settled by the end
of January 2015.
[6]
The parties agreed to
argue the first liquidation application on 18 March 2015, which they
did before Riley AJ. On 6 May 2015 he
handed down judgment,
discharging the provisional order with costs.
[7]
On 2 June 2015 the
applicant’s attorneys dispatched two demands in terms of
s 345(1)(a) of the Companies Act 61 of 1973.
The one demand was
for R703 621 for rice allegedly supplied over the period
December 2013 to October 2014. The other demand
was for R2 481 244
for rice allegedly supplied over the period March 2012 to December
2013. The two demanded amounts
were in total the sum alleged in the
first liquidation application to have been owing.
[8]
The respondent’s
attorneys replied by letter dated 17 June 2015. They referred to
Riley AJ’s observation in his judgment
that the disputes
between the parties should be resolved by action proceedings. They
stated their instructions to be that, as a
result of the applicant’s
‘malicious application’, the respondent had suffered
substantial damages which it was
still in the process of quantifying
but which currently stood at R950 000. The respondent denied the
alleged indebtedness
of R2 481 244. In regard to the
indebtedness of R703 621, the counter-claim exceeded that sum by
an amount in excess
of R246 378. Finally, the respondent’s
attorneys reminded the applicant’s attorneys of Riley AJ’s
view that
the papers did not support a finding that the respondent
was unable to pay its debts. Accordingly, if the applicant considered
it had a claim, it should pursue it by way of action.
[9]
Undeterred, the
applicant issued the present application on 7 September 2015. The
applicant annexed and relied upon the statutory
demand for R703 621.
The correct
legal approach
[10]
Because we are
concerned here with a final rather than a provisional order, the
applicant must establish its case on a balance of
probabilities.
Where the facts are disputed, the court is not permitted to determine
the balance of probabilities on the affidavits
but must instead apply
the
Plascon-Evans
rule (
Orestisolve
(Pty) Ltd t/a Essa Investments v NDFT Investment Holdings Pty Ltd &
Another
2015 (4) SA
449
(WCC) para 9 and cases there cited).
[11]
The applicant’s
claim for R703 621 is not seriously disputed.
[1]
It is also common cause that the respondent did not, in response to
the statutory demand for that sum, pay it or secure or compound
for
it to the applicant’s reasonable satisfaction.
[12]
The respondent’s
answer to the second liquidation application is in essence (i) that
it has a counter-claim for damages
and for legal costs exceeding the
admitted claim of R703 621; (ii) that, to the extent that
it is currently unable to
pay the admitted claim (which the
respondent does not concede), the temporary inability has been
brought about by the disruption
following the first liquidation
application.
[13]
In terms of the
so-called
Badenhorst
rule, winding-up
proceedings should not be used as a way of enforcing payment of a
debt the existence of which is bona fide disputed
on reasonable
grounds (see
Orestisolve
para 8 and cases
there cited). The
Badenhorst
rule is not
directly implicated in the present case because the applicant’s
claim is admitted.
[14]
In
Ter
Beek v United Resources CC
1997
(3) SA 315
(C) Van Reenen J considered that South Africa should
follow the English practice, which he understood to be that the court
has
a general discretion to refuse a liquidation order where the
respondent asserts a genuine and serious counter-claim equal to or
exceeding the amount of the applicant’s claim. This general
discretion was more flexible than the
Badenhorst
rule because the liquidation application would not have to be
dismissed merely because the respondent asserted a
bona
fide
counter-claim
on reasonable grounds (at 333C-334C).
[15]
In
Absa
Bank Ltd v Erf 1252 Marine Drive (Pty) Ltd & Another
[2012]
ZAWCHC 43
Binns-Ward J said that the English cases did not recognise
the wide discretion assumed in
Ter
Beek
. The English
cases in effect applied our
Badenhorst
rule (which we adopted under the influence of English decisions) by
holding that, save in exceptional circumstances, a liquidation
application should be refused where the respondent
bona
fide
asserts on
reasonable grounds a counter-claim for damages equal to or exceeding
the applicant’s claim. Binns-Ward J considered
that there was
no reason to adopt this approach in South Africa. He concluded that
the
Badenhorst
rule did not apply to an illiquid counter-claim. He held that a
respondent is not entitled to have a liquidation application
dismissed
merely because it
bona
fide
asserts on
reasonable grounds a counter-claim for damages exceeding the amount
of the applicant’s claim (para 14):
‘
In my
view reliance by a respondent on a “genuine and serious”
unliquidated counterclaim to oppose an application for
its
liquidation is a quite distinguishable basis for resisting winding-up
from that premised on a
bona
fide
and reasonable dispute of an alleged indebtedness to a
creditor-applicant. As pointed out by Van Reenen J in
Ter
Beek
,
reliance by a respondent company on a counterclaim to avert a
winding-up order actually entails an admission by it of the alleged
indebtedness to the applicant relied upon by the creditor applicant.
The allegation of the existence of an unliquidated counterclaim
is
nothing more than the putting up by the respondent of a basis upon
which it is able to ask the court to exercise its discretion
against
making a winding-up order, notwithstanding that the applicant may
have satisfied the technical requirements to achieve
the remedy.
There is accordingly no basis in our law in such circumstances to
treat the application for winding-up as an inappropriate
procedure,
as a court would, applying the
Badenhorst
rule, in the circumstances of a claim for winding-up by a creditor
when the existence of the debt in question is reasonably and
bona
fide
disputed. For the same reason there is no reason in our law for a
court, as a matter of principle, to adopt a general disposition
against the granting of the remedy just because the existence of an
unliquidated counterclaim is alleged by the respondent.’
[16]
Binns-Ward J went on to
observe, however, that in most instances the difference in approach
would not affect the outcome:
‘
I
venture that in the majority of cases the distinction between the
English approach and ours will be notional rather than real,
certainly in respect of the result. A court will in the nature of
things be inclined to exercise its discretion against making
a
winding up order in a matter in which it appears that there is a
reasonable possibility that a counter-claim by the debtor company
will upon its determination extinguish the debt relied on by the
applicant in its application for a winding-up. The exercise of
a
broad discretion by South African courts in closely analogous
circumstances is well established, and as mentioned, in respect
of
actions, reflected in the provisions of rule 22(4). It is for the
respondent to persuade the court to exercise the discretion
in its
favour by showing on the papers that its counterclaim is what the
English judges would call a ‘genuine and serious’
one.
This requires more of a respondent than is needed if its basis for
opposition is the existence of a disputed indebtedness.
If the
respondent fails in this respect the court is unlikely to exercise
the discretion in terms of s 347(1) of the Companies
Act in its
favour.’
[17]
Except that Van Reenen
J in
Ter Beek
may
have erroneously assumed that the approach he espoused accorded with
English law, there seems to be little difference between
Ter
Beek
and
Marine
Drive
in regard to
the approach to be followed in South Africa. I would simply add, in
regard to the court’s discretion, a reference
to my
observations on this question in
Orestisolve
paras 17-21. There
are no inflexible limits on the court’s discretion. In para 21
of
Orestisolve
I
suggested that a circumstance which might favour an exercise of the
court’s discretion against winding-up was that, despite
a
deemed inability to pay debts created by s 345(1)(a), the
evidence showed that the company was not in fact commercially
insolvent; and that it might be relevant in that regard that the
company’s failure to pay was attributable to a genuine dispute
regarding the claim, even if the court considered the grounds of
dispute ill-founded.
The
counter-claim for costs
[18]
The first liquidation
application was dismissed with costs. Since there has been no appeal,
the costs order is final. The respondent
has not yet taxed a bill. In
the supplementary answering affidavit Ebrahim says that the
respondent has paid legal costs of R95 425.
Ebrahim has not
provided a breakdown of this sum so one does not know whether these
costs include those incurred in relation to
the ancillary proceedings
in which Ebrahim and his brother were ordered to pay the costs. It is
nevertheless obvious that the respondent
will be entitled to recover
some amount from the applicant in respect of costs and I doubt
whether it would be less than R50 000.
The
counter-claim for damages - legal basis
[19]
The proposed
counter-claim for damages arises from what is alleged to have been
the applicant’s malicious conduct in obtaining
an ex parte
provisional order in the first liquidation in circumstances where the
respondent’s liquidation was not warranted.
I was not addressed
on the legal basis for the proposed cause of action. The institution
of civil proceedings may, as in the case
of criminal proceedings,
constitute a delict giving rise to the
actio
injuriarum
. Although it
is customary to describe such conduct as malicious proceedings, it
appears that the plaintiff need not allege and
prove malice. What
must be alleged and proved is that the proceedings were instituted
without reasonable and probable cause (which
includes the lack
of a subjective belief that they are justified) and that the
defendant intended to injure the plaintiff
(see
Moaki
v Reckitt and Colman (Africa) Ltd & Another
1968
(3) SA 98
(A) at 103E-104D;
Young
v McDonald
[2010]
ZAWCHC 537
(WCC) para 17; Visser & Potgieter
Law
of Damages through the Case
2
nd
Ed p 475).
[20]
The actio injuriarum
assumes a claim for non-pecuniary damages. Pecuniary loss may
naturally be claimed in the same circumstances
under the lex aquilia.
Whether the lex aquilia lies where unjustifiable proceedings were
negligently instituted would depend on
policy considerations relating
to wrongfulness, a matter on which I need express no opinion.
[21]
In respect of
sequestration and liquidation proceedings, claims for pecuniary
damages have been given statutory recognition in
s 15
of the
Insolvency Act 24 of 1936
and
s 347(1A)
of the old Companies
Act. The latter provision reads:
‘
Whenever
the court is satisfied that an application for the winding-up of a
company is an abuse of the court’s procedure or
is malicious or
vexatious, the court may allow the company forthwith to prove any
damages which it may have sustained by reason
of the application and
awarded such compensation as the court may deem fit.’
I do not think it desirable, in the absence of argument,
to express a definite opinion on whether the statutory remedy is
wider
than the common law cause of action (the actio injuriarum)
though one can see an argument for that view.
The
counter-claim for damages - merits
[22]
The respondent refers
to various passages in Riley AJ’s judgment in support of an
assertion that it will be entitled to claim
damages for malicious
proceedings. These include the following findings: that Essack’s
basis for launching ex parte proceedings
(a supposed fear that the
respondent would conceal rice stocks) could not be true; that there
was merit in the respondent’s
contention that Essack had
adopted ex parte proceedings as a deliberate strategy to prevent the
respondent opposing the liquidation;
that Essack’s was
motivated by ‘bad faith and malice aimed at the respondent’s
director; that his conduct exhibited
‘elements of malice’
and was ‘clearly intended to cause prejudice to the respondent
and its directors’;
that the applicant amended its papers on
several occasions regarding the amount allegedly due and advanced
‘unacceptable
and improbable explanations’ for the
amounts in question; that Essack was ‘not exactly frank and
forthright’
when he deposed to the founding affidavit and was
‘extremely selective’; the applicant failed, in the ex
parte proceedings,
to disclose that the respondent was in the process
of making monthly payments of about R200 000; that if the court
which heard
the ex parte application had been placed in possession of
all the facts it would probably not have granted the provisional
order;
that Essack’s malice was demonstrated by his attendance
at the respondent’s premises when the sheriff served the
provisional
order and by his conduct in taking calls at the
respondent’s business premises during which he informed
customers that the
respondent was bankrupt and that he had liquidated
it; and that Essack had interfered with the provisional liquidator’s
discretion
by insisting that the respondent’s business
operations be shut down;
[23]
The papers in the first
liquidation application have not been placed before me. I am not in a
position to assess for myself whether
these various findings are
justified in all respects. I also need not determine to what extent
the applicant will be bound by any
of these findings in future
proceedings between the parties. (Essack says that the findings were
not warranted and that it was
only to avoid further delay and expense
that the applicant refrain from pursuing an appeal.) However, for
purposes of exercising
my discretion in relation to the alleged
counter-claim, I am entitled, I think, to accept that Riley AJ’s
remarks represent
at least one reasonable or plausible assessment of
the facts.
[24]
The requirement that
the allegedly malicious proceedings should have been finally
determined in the claimant’s favour is satisfied.
[25]
I thus consider that
the respondent has a reasonable prospect of making out its cause of
action on the merits.
The
counter-claim for damages - quantum
[26]
The respondent’s
initial answering affidavit identified various ways in which it had
suffered damages without (save in one
instance) quantifying their
financial effect. The malicious proceedings were said to have caused
damages as follows: (i) loss
of profit in the period of just
over six months during which the respondent was under provisional
liquidation; (ii) loss of
profit from two packaging contracts
which the respondent had recently won; (iii) forfeiture of a
deposit of R87 000 in
respect of a consignment of rice from
Bangkok; (iv) the costs of fumigating its premises and servicing
equipment after the
six-month shutdown; (v) spoilt stock (split peas
and beans); (vi) the difficulty in recovering amounts (many too small
to warrant
litigation) from pre-liquidation debtors whose
relationship with the respondent was broken by the liquidation or who
have sold
their businesses.
[27]
In regard to the
Bangkok shipment, Ebrahim alleged that the deposit of R87 000
was paid to the supplier,
Ameritec
,
at the end of September 2014, the shipment being scheduled to arrive
in November 2014. By the time the shipment arrived the respondent
was
under liquidation and it did not take possession of the rice.
(According to the respondent, Essack pressured the provisional
liquidator into not continuing with the respondent’s
business.)
[28]
According to letters
attached to the answering affidavit, the two packaging contracts were
with Surrey Field Packaging and Crystal
Foods. In terms of the
contracts the respondent was to package these clients’ bulk
rice into smaller packages. Ebrahim says
that the respondent secured
these contract in August 2014 and started packaging during September
2014. He alleges that when, after
the provisional liquidation, Essack
heard about these packaging contracts, he insisted that the
respondent’s doors be shut.
Ebrahim claims to have been told by
the provisional liquidator that Essack used profanities and swore at
him when the liquidator
enquired about continuing to trade. Ebrahim
says that as a result of the provisional liquidation the clients
awarded the packaging
contracts to other companies.
[29]
In the supplementary
answering affidavit Ebrahim annexed a summary of the respondent’s
alleged losses. Excluding the legal
costs of R95 425, which is
to my mind a separate claim arising from the costs order, the alleged
damages total R943 057
made up as follows:
·
loss of net
profit (R55 000 pm x 6) – R330 000
·
loss of Bangkok
deposit – R87 828
·
loss of contract
packaging (30 000 pm x 6) – R180 000
·
Wesbank finance
charges for six months – R62 314,74
·
Telkom –
R6056
·
Accounting –
R6270
·
Directors’
salaries – R240 000
·
Insurance
(R4134,44 x 6) – R24 788,64
·
licensing of
motor vehicles (x 3) – R5800
[30]
Ebrahim also attached
the respondent’s financial statements for the year ended 28
February 2015 and for the seven months from
1 March 2015 to 30
September 2015. The applicant did not file a supplementary replying
affidavit but in argument Mr van der Schyff
criticised the financial
statements because the accounting officer (Mr Samsodien of the
accounting firm S Samsodien & Associates)
reported that no audit
had been conducted and that no opinion was expressed on fair
presentation. The reason for the absence of
an audit is not, however,
sinister. In all probability the respondent, as a private company, is
not obliged by s 84(1)(c)
of the new Companies Act to have its
financial statements audited.
[2]
[31]
In the same report Mr
Samsodien stated that he had satisfied himself that the financial
statements were in agreement with the company’s
accounting
records and had been prepared in accordance with the requirements of
the Companies Act; that he had so satisfied himself
by adopting
procedures and conducting enquiries as he considered necessary in the
circumstances; and that he had reviewed the accounting
policies
applied in the preparation of the financial statements and considered
them appropriate to the business and in conformity
with generally
accepted accounting practice. Ebrahim said that Mr Samsodien was
meticulous in his preparation of the financial
statements and
required copies of all vouchers and related documents. I thus
consider that the financial statements have some evidential
weight in
these proceedings.
[32]
The financial
statements for the year ended February 2015 reflect a net profit of
R342 040, ie R28 503 per month. Included
in the computation
is depreciation of R280 218. Since depreciation is a fixed
non-cash item which is in effect funded as a
provision against gross
profit, it may well be that in assessing damages in the form of lost
profit the provision should be disregarded,
in which case the profit
per month would rise to R51 854.
[33]
The financial
statements for the seven months ended 30 September 2015 reflect a net
profit of R98 425. Because the respondent
was in provisional
liquidation until 6 May 2015, this would not be a fair indicator of
its true profitability – it only traded
for five of the seven
months but had expenses for the full period. Furthermore, the legal
costs of R95 425 have been included
in expenditure. Since the
legal costs are the subject of a separate claim and are a once-off
item, they should be disregarded
in assessing the respondent’s
profitability. The profit would thus be R193 850. Expressed as a
profit per month over
seven months, this is R27 692. If the
depreciation allowance of R209 961 is also reversed, this rises
to R57 687
per month. Since there were only five months of
trading but seven months of expenses, this might understate the
profit.
[34]
The figures in the
financial statements will obviously be interrogated in any future
proceedings between the parties. At this stage,
however, the
foreshadowed claim for loss of profit of R330 000, based on
R55 000 per month over six months, does not
strike me as
implausible. The computation, furthermore, assumes that there was no
loss of profit once trading resumed on or after
6 May 2015. Ebrahim
alleges that the respondent lost a number of customers following the
provisional liquidation and has been working
to regain market
presence. It had 13 employees at the time of its provisional
liquidation and has only been able to get back five
of them to date.
[35]
Ebrahim has explained
how the Bangkok deposit of R87 828 was lost. Prima facie this
represents a legitimate component of the
damages.
[36]
Ebrahim has not
provided details regarding the lost packaging profit of R180 000
over six months. Since the first packaging
only started in September
2015, the profits from these two contracts would not be reflected in
the financial statements (ie there
is no risk of double-counting). It
is fair to assume that the respondent would not have undertaken the
contracts unless it expected
to make profit from them. The letters
attached to the answering papers indicate that the provisional
liquidator was willing to
continue with the contracts (Ebrahim says
Essack put a stop to this). Furthermore, by limiting the computation
to six months, the
respondent is disregarding any loss flowing from
the fact that the two packaging clients have taken their business
elsewhere. I
will thus take into account that some profit has been
lost, bearing in mind, however, that evidence of its extent is
deficient.
[37]
The other components of
the damages represent various expenses allegedly incurred by the
respondent. Where a company has fixed expenses
which it must cover
whether or not it is trading, those expenses represent loss
additional to a claim for lost net profit since,
but for the
interruption in trading, the expenses in question would have been
funded from gross profit. The largest such item is
the claim of
R240 000for the salaries of Ebrahim and his brother. Although
they are the respondent’s controllers, I
do not see why their
legitimate salaries, which would in the ordinary course have been met
out from the company’s gross profit,
should not represent a
loss to the company. Ebrahim and his brother are not obliged, by
virtue of their control of the company,
to waive their right to their
reasonable salaries. According to the financial statements the
directors’ salaries totalled
the R360 000 for the year
ended February 2014 and R300 000 for the year ended February
2015. The lower figure for
2015 may be explicable on the basis that
because of the provisional liquidation the directors were not paid
for the months November
2014 to February 2015. The 2014 figure
equates to a monthly salary for each director of R15 000, which
is not unreasonable.
Although the papers refer to a monthly salary of
R20 000, I shall use the lower figure of R15 000, which
translates to
R180 000 for the two directors over the six-month
period of the provisional liquidation.
[38]
The amounts discussed
thus far (R330 000 for lost profit, R87 828 for the lost
deposit and R180 000 for wasted salary
expenditure) total
R597 828. An assumed recoverable amount of R50 000 in
respect of legal costs takes one to R647 828.
This leaves a
shortfall of R55 793 on the capital of the admitted claim of
R703 621. Although the respondent has provided
inadequate
evidence of the quantification of its lost profit on the two
packaging contracts, its claim in that respect and for
the other
miscellaneous items of wasted expenditure which I have not
specifically addressed (some of which are in line with the
financial
statements, others of which appear to be on the high side) may well
take its claim above the admitted capital. There
are also the
fumigation and servicing costs, spoilt stock and irrecoverable
debtors which have not yet been factored into the quantification.
[3]
[39]
Mr van der Schyff
criticised the respondent for not having yet instituted its claim for
damages. Mr Lawrence responded that the
family connection made this
an awkward exercise for the respondent. Ebrahim said in his answering
affidavit that the institution
of proceedings might have an adverse
effect on his sister and children who reside in Durban (the sister is
married to Essack’s
son). I am not particularly impressed with
this excuse for inaction. However, the delay has not been very great.
The first liquidation
application was dismissed on 6 May 2015. Less
than a month later the applicant issued statutory demands
foreshadowing a second
liquidation application. The second
liquidation application followed on 7 September 2015, only four
months after the dismissal
of the first application. Since time and
expense on legal proceedings might have been futile if the respondent
were liquidated,
it was not unreasonable for the respondent to await
the outcome of the second application. The provisional order was
granted on
9 October 2015. Once the respondent was under provisional
liquidation, Ebrahim and his brother could not cause action to be
taken
in its name.
Commercial
insolvency
[40]
The respondent denies
that it is commercially insolvent. This is a relevant factor in the
exercise of my discretion. According to
the financial statements
previously mentioned, the respondent was factually solvent as at
February 2015 and September 2015 (its
assets exceeded its
liabilities). As at February 2015 its current liabilities
(R1 009 249) exceeded its current assets
(R853 663)
but as at September 2015 its current assets (R 1 162 382)
slightly exceeded its current liabilities
(R1 109 438). The
greater part of the current liabilities comprises the applicant’s
claim of R703 621. Ebrahim
says that the respondent has a
currently unutilised credit line with a Mr Parker, whom he describes
as a partner in the business.
[4]
[41]
Most of the
respondent’s current assets take the form of stock and
receivables. While these might be able to be converted
quite quickly
to cash, the respondent would need to apply a significant part of
that cash to meet its expenses and acquire new
stock in order to
continue trading. I doubt whether, without borrowing money, the
respondent could promptly pay the applicant’s
claim and remain
in business. However, since the respondent is apparently a profitable
enterprise, it may well be able to raise
finance from Mr Parker or
elsewhere. According to the respondent, it is not paying the
applicant because it believes it has a counter-claim
exceeding
R703 621.
[42]
There is no evidence
that the respondent has defaulted on its commitments to any other
creditors. If I were to make the provisional
order final, I would be
terminating the life of an apparently viable enterprise.
Conclusion
[43]
In summary, the
respondent alleges on reasonable grounds that it has a counter-claim
against the applicant. That counter-claim could
plausibly exceed the
applicant’s claim. On the evidence before me the respondent is
operating profitably though if pressed
it might battle to pay the
applicant’s claim promptly unless it could borrow money for
that purpose. The present application
was preceded by a statutory
demand issued less than a month after the applicant’s previous
application was dismissed with
costs. As a matter of common sense,
the six-month period of provisional liquidation would have disrupted
the respondent’s
trade relations, making its position in the
second half of 2015 more challenging than it would otherwise have
been.
[44]
In all the
circumstances, I consider it just to exercise my discretion against
confirming the respondent’s provisional liquidation.
It is
essential, however, that the respondent should now pursue its claim.
It cannot sit back and wait. While I do not intend to
give any
directions (even if I could), I would expect a court to have little
sympathy for the respondent in any future liquidation
proceedings if
it has not by the end of January 2016 issued summons (unless by then
the applicant has issued summons, in which
case the respondent could
pursue its claim in reconvention).
[45]
Insofar as costs are
concerned, I take into account that I will be refusing a final order
in the exercise of my discretion and despite
the fact that the
applicant has established its claim and the respondent’s deemed
inability to pay its debts arising from
the unsatisfied statutory
demand. On the other hand, the applicant was heavily criticised in
the previous proceedings and has rushed
into a second application
after being forewarned that the respondent would allege a
counter-claim exceeding the admitted indebtedness.
I thus think the
fairest order is for the parties to bear their own costs.
[46]
I make the following
order: (i) The provisional order of liquidation is discharged
and the application is dismissed. (ii) Save
for the costs of 30
October 2015, in respect whereof an order has already been made, the
parties shall bear their own costs.
______________________
ROGERS
J
APPEARANCES
For
Applicant
Mr
JA van der Schyff
Instructed
by
AR
Wilkinson
10
First Avenue
Fairways
For
Respondent
Mr
A Lawrence
Instructed
by
SP
Attorneys
4
Leinster Crescent
Ottery
[1]
Mr Lawrence did not press or develop the
allegations in para 49.3 of the answering affidavit where Ebrahim
says that his calculation
of R703 621 did not take into account
that Essack had over-charged for rice supplied. It is not apparent
why, if the over-charging
complaint was sound, Ebrahim would have
ignored it in his previous calculations. Ebrahim also refers to a
salary claim against
the applicant of R260 000 but this claim
(if justified) vests in Ebrahim and his brother, not the respondent.
Mr Lawrence
likewise did not rely on Ebrahim’s allegation in
para 51 that the indebtedness of R703 621 was not payable on
demand
but as and when the respondent on-sold the supplied rice and
received payment from its customers.
[2]
Only private companies whose 'public interest
score' exceeds certain thresholds have to prepare audited financial
statements (regulation
28(2)(c) read with regulation 26(2)). The
attached financial statements suggest that the respondent's public
interest score is
well below 100.
[3]
I leave out of account the respondent’s
heavily disputed allegations regarding supposed passing-off
perpetrated by the applicant.
[4]
See also para 20 of Riley AJ’s judgment
where reference is made to this gentleman.