Western Province Rugby Football Union v Western Province Rugby (Pty) Ltd; Ex Parte Van Zyl NO and Another (21739/2016; 22169/2016; 22594/2016) [2016] ZAWCHC 194 (20 December 2016)

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[2016] ZAWCHC 194
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Western Province Rugby Football Union v Western Province Rugby (Pty) Ltd; Ex Parte Van Zyl NO and Another (21739/2016; 22169/2016; 22594/2016) [2016] ZAWCHC 194 (20 December 2016)

Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Before: The Hon. Mr Justice Binns-Ward
Hearing: 12 December 2016
Judgment: 20 December 2016
Case No.s: 21739/2016 and 22169/2016
In the
matter between:
THE
WESTERN PROVINCE RUGBY FOOTBALL
UNION
Applicant
and
WESTERN
PROVINCE RUGBY (PTY)
LTD
Respondent
and
AERIOS
(PTY)
LTD
Intervening
Creditor
and
also in:
Case No. 22594/2016
In the
ex parte application of:
CHRISTOPHER
PETER VAN ZYL
N.O.
First
Applicant
DALLIE
VAN DER MERWE
N.O.
Second
Applicant
(in
their capacities as provisional co-liquidators of
Western
Province Rugby (Pty) Ltd (in provisional liquidation))
for an order in terms of section 386(5) of act
61 of 1973
JUDGMENT
BINNS-WARD
J:
[1]
The applicant, Western Province Rugby
Football Union, an affiliate of the South African Rugby Union (SARU),
is required in terms
of SARU’s constitution to conduct its
commercial activities through a corporate vehicle.  The
respondent, Western Province
Rugby (Pty) Ltd, is the company that was
incorporated for the purpose of compliance with the applicant’s
aforementioned obligation,
and also to be responsible for the
management of the professional rugby business of the applicant.
The applicant holds 75,1%
of the issued shares in the respondent
company, with the balance being owned by Remgro Sport Investment
(Pty) Ltd (RSI).
The applicant’s president has described
RSI as the applicant’s ‘so-called equity partner’.
RSI’s
shareholding in the respondent is held with the consent
thereto of SARU under clause 22 of the latter’s constitution.
[2]
On 7 November 2016 the applicant obtained
an order placing the respondent into provisional liquidation.
The provisional order
was returnable on 12 December 2016.  The
application (under case no. 21739/16) was brought by the
applicant, qua creditor
of the company, in terms of s 344(f)
read with s 345(1)(c) of the Companies Act 61 of 1973;  it
being alleged that
the respondent is actually and commercially
insolvent.  It is undisputed that the applicant has a claim on
loan account against
the company in the amount of at least
R4 325 557,62.  The principal matter for determination
in this judgment in
proceedings on the return day is whether the
provisional order should be made final or discharged.
[3]
Aerios (Pty) Ltd (formerly Kagiso Vantage
(Pty) Ltd and before that Kagiso Exhibitions and Events (Pty) Ltd),
which is also a creditor
of the respondent company, was granted leave
to intervene in the proceedings.  It is opposed to the winding
up of the respondent
company and contends that the provisional order
should be discharged.
[4]
Mr CP van Zyl and Ms D van der Merwe were
appointed by the Master as provisional co-liquidators.  They
applied, in terms of
s 386(5) of the Companies Act, for
authority to raise money on the security of the assets of the
respondent company and to
do various other things that they
considered necessary for the effective administration of the affairs
of the company in the period
before the second meeting of creditors.
On 23 November 2016, with the concurrence of Aerios, an order was
made by Ndita J
substantially acceding to that application.
The question of the powers sought in terms of sub-paragraphs 2.8 and
2.9 of the
notice motion in case no. 22594/16; viz.:
2.8 to elect not to continue with any contracts which were executory
as at the date of [the respondent company’s] winding
up; and
2.9 to sell the property of [the respondent company] by public
auction, public tender or private contract and to give delivery

thereof
was,
however, postponed for determination on the return day of the
provisional order.
[1]
That is a subsidiary matter for determination in this judgment, along
with certain questions in respect of costs in that
application and in
the application (under case no. 22169/16) by Aerios for leave to
intervene and for certain related interim
interdictory relief.
The application under case no. 22594/2016 is also relevant
because there were various cross-references
to the papers in it in
the affidavits in the winding-up proceedings.
[5]
I shall set out the factual context in more
detail presently.  Suffice it to say by way of introduction that
the applicant
contends that it is evident that the respondent
company’s business has failed commercially and that it is
unable to continue
trading without the financial support of its
shareholders.  Part of the reason for the problem is what the
applicant contends
has been the disadvantageous effect of a contract
entered into by the respondent company with Aerios for the sale of
the company’s
advertising rights.  The identified
disadvantage pertains to the effect of the contract on the company’s
ability to
contract profitably for sponsorship by third parties,
which historically has been a significant source of its income.
(The
Aerios contract was concluded in October 2011, with various
addenda thereto executed thereafter, most recently on 13 June
2013.  It is apparent from the terms of the contract that it
would have come into effect incrementally, as existing sponsorship

agreements came to an end by effluxion of time.)  In the
affidavit in support of the provisional liquidators’
aforementioned
application in terms of s 386(5), the liquidators
observed that it appeared that ‘certain other contracts which
were
concluded between [the company] and third parties (in addition
to the Aerios agreements) … have also contributed to the
financial predicament of [the company]’.  The indications
suggest a pattern of poor business decisions by the company’s

management.  The applicant has averred, and RSI has confirmed,
that the shareholders are not willing to continue funding the

respondent’s operations in these circumstances.  A
decision to that effect was taken by the shareholders on 19 September

2016.  The applicant was able to meet its current liabilities
during October 2016 only thanks to a bridging loan extended
by RSI on
behalf of the shareholders.
[6]
It is quite evident, even if there has been
no express admission by the applicant to such effect on the papers,
that the plan is
for the respondent’s shareholders (perhaps
together with others) to acquire the respondent’s business as a
going concern
from the company in liquidation.  That is the only
conceivable reason for RSI to have advanced funding to the
provisional
liquidators to keep the business of the respondent afloat
pending the company’s final liquidation.  Moreover, it is
equally clear that the shareholders would wish to acquire the
respondent’s business free of the burdensome contract with
Aerios.  This much is apparent from public statements by the
applicant’s president, who was also the deponent to the

founding affidavit, suggesting that business will continue as usual
despite the respondent’s liquidation.
[7]
It is not seriously disputed that if a
final order were granted, it would indeed be in the interests of
concurrent creditors, including
Aerios, for the business of the
respondent company in liquidation to be disposed of by the
liquidators as a going concern.
That the liquidators would be
inclined to terminate at least the sale of advertising rights
contract with Aerios to enable that
object to be obtained is very
predictable having regard to the fact that, by virtue of SARU’s
constitution and the applicant’s
related position de facto as
the sole regulator of rugby in the Western Province, the only entity
practicably capable of purchasing
the business as a going concern
will be one in which the applicant has a proprietary interest.  It
is common ground that whatever
the fate of the respondent company,
the applicant will remain as the body effectively responsible for and
ultimately in control
of the game of rugby in the Western Cape.
[8]
Aerios opposes the application principally
on the basis that the alleged inability of the respondent company to
pay its debts in
the ordinary course has been engineered by the
applicant and is more apparent than real.  It also contends that
the application
has been brought, not with the bona fide object of
bringing about a
concursus creditorum
in which the applicant would be treated equally with the other
concurrent creditors, but rather as a means of terminating its
commercial arm’s contractual obligations to Aerios and
otherwise continuing as before.  Aerios contends that the
institution
of the winding up application by the applicant in those
circumstances is an abuse of process.
[9]
It is well established that a creditor is
ordinarily, subject to the possible effect of any opposing views by
its fellow creditors,
entitled
ex debito
justitiae
to execute its unpaid claim
against a company by means of winding-up proceedings.  It is
trite, however, that the court is
vested with a discretionary power
to withhold a winding-up order, which it will be disposed to exercise
if it is satisfied that
resort to the liquidation procedure in the
given circumstances amounted to an abuse of process; cf
Wackrill
v Sandton International Removals (Pty) Ltd and Others
1984 (1) SA 282
(W) at 293C-E and the other authority cited there.
The approach that is adopted in this regard is that if a proper case
for
winding-up has been made out, a court will generally refuse the
application on grounds of abusiveness only if the applicant’s

ulterior purpose is shown to have been the sole, or at least the
predominant, actuating factor in the bringing of the application.

Compare
Millward v Glaser
1950
(3) SA 547
(W) at 551, and
Wackrill
supra, at 293E-F.  Graphic examples of the exercise of the
discretion in such circumstances against applicants for winding-up

are provided in
Re a company (No 001573
of 1983)
[1983] BCLC 492
,
1 BCC 937
and
in
Tucker's Land and Development
Corporation (Pty) Ltd v Soja (Pty) Ltd
1980
(3) SA 253
(W).
[10]
In
Re a company
supra, the respondent company was in an admittedly parlous financial
state.  The petitioner for its winding-up relied on a
costs
order in its favour against the company to seek its liquidation.
The amount of the costs had not yet been determined
by agreement or
taxation.  Indeed, the petition was served on the very afternoon
of the day on which costs order had been
granted, and without any
demand for payment having been directed to the company.  It was
clear on the facts that the application
had been made not for the
purposes of obtaining payment to the petitioner and the other
creditors of the company, but
only
to enable the petitioner to take over the lease of a Scottish
coalmine held by the company.  The landlord had previously
agreed with the petitioner that should a petition for the company’s
winding-up be presented before a certain date, it would
cancel its
contract with the company and conclude a lease with the petitioner.
The obvious purpose of the presentation of
the petition was to obtain
the benefit of the petitioner’s agreement with the landlord,
rather than payment of its claim
for costs rateably with the
company’s other creditors.
[2]
Harman J reasoned his decision to dismiss the petition as
follows (at pp. 495-6 of the BCLC report):
On a petition in the Companies Court in contrast with an
ordinary action there is not a true
lis
between the petitioner
and the company which they can deal with as they will. The true
position is that a creditor petitioning
the Companies Court is
invoking a class right (see
Re Crigglestone Coal Co
[1906] 2
Ch 327)
, and his petition must be governed by whether he is truly
invoking that right on behalf of himself and all others of his class
rateably, or whether he has some private purpose in view.  …
The question for me, therefore, is
whether I am satisfied that the petitioner seeks this winding up for
the benefit of his class.
I am not concerned with his motives or with
the past conduct of the company …
the
only proper purpose for which a petition can be presented is for the
proper administration of the company's assets for the benefit
of all
in the relevant class.
The question, therefore, is not ‘does the
petitioner genuinely wish to wind up this company’, as counsel
for the petitioner
(Mr Littman) submitted. It would be hard for me to
find that this petitioner, which has taken all regular steps to
prosecute its
petition and which plainly has reasons to desire the
winding-up of this company, since that must put beyond much cavil the
future
of the company's lease, does not in truth desire to wind up
the company. In my judgment the true question is ‘for what
purpose
does the petitioner wish to wind up this company’. A
judge has to decide whether the petition is for the benefit of the
class
of which the petitioner forms a part or is for some purpose of
his own. If the latter, then it is not properly brought.
If the petitioner can show that he
and his class stand together and will benefit or suffer rateably,
then his ill motive is nothing
to the point. But here it is plain
that no such even-handedness exists. If the petition is properly
brought, then the petitioner
stands to get a valuable asset for
itself and the rest of the class of creditors are likely to get
nothing. If the petition is
not properly brought, so that in Scotland
the company’s lease remains un'irritated'
[
[3]
]
(and I have no certainty that this
will be so) then the class of creditors including the petitioner may
all have some hope of payment
or will at least suffer rateably.
[11]
In
Tucker’s
Land and Development Corporation
, the
court declined to make a winding-up order in circumstances in which
it was apparent that the application had been brought
by the
company’s sole creditor only to stifle a pending appeal by the
company.  The applicant’s claim was founded
on a judgment
debt in the matter that was subject of the appeal.  It was
common cause that the company was unable to pay the
debt.  In
fact, leave having been granted to the applicant to execute the
judgment pending the determination of the company’s
appeal, a
return of
nulla bona
had been rendered.  If the appeal were to be upheld, however,
the company would be entitled to repayment of monies paid towards
the
purchase of certain fixed property and would be restored to
solvency.  The court found that in the circumstances there
was
an irresistible inference ‘that the applicant's motives [were]
not to bring about the liquidation for its own sake, but
for the
ulterior motive of putting an end to the appeal, and by so doing of
eliminating, once and for all, any prospect of having
to repay the
moneys paid in on account of the purchase price of the stands’.
[12]
In
both the aforementioned examples it was evident that the applicants
in instituting the proceedings were not motivated by anything
other
than their ulterior purposes.  They had no genuine desire to
avail of the winding-up remedy for the purposes for which
it is
provided.  If, however, the applicant has a genuine interest in
seeking the remedy for a proper purpose, it is not sufficient
for a
party opposing an application for the winding-up of a company on the
grounds of abuse of process merely to show that the
applicant has
other, perhaps more important, motives for bringing the proceedings
than to bring about a
concursus
creditorum
.  So, for example, in
Ebbvale
supra,
[4]
Lord Wilson accepted that the petitioner for the
company’s winding up in the Bahamas had an ulterior interest
connected with
the conduct of litigation pending between himself and
the company in the English courts.  The company had argued that
the
winding up proceedings were an abuse of process instituted by the
applicant (Mr Hosking N.O.) ‘to replace the direction
of
the company’s defence of the English action by its directors
with that of a liquidator who might prove to be a weaker
opponent,
and thereby to secure for himself an unfair advantage in the
litigation’.  The applicant admitted that he
harboured the
idea of putting the company’s conduct of the English litigation
in the hands of liquidators.  He argued,
however, ‘that a
liquidator would be likely to be not a weaker opponent but one who
would direct the defence in a manner
more responsive to the true
interests of the company, whether such would be to pursue it if it
was clearly likely to succeed, to
abandon it on the least
unfavourable terms if it was clearly likely to fail or to seek
compromise on more favourable terms if the
likely result was not
clear-cut. Such (ran his argument) would be for the benefit of all
those genuinely connected to the company,
whether, like himself, as a
creditor or indeed as a contributor’.
[5]
Lord Wilson disposed of the point as follows:
…
(b) There is no doubt that Mr Hosking's purposes in
presenting the petition for the company to be wound up were
intimately related
to the English action.
(c) It is indeed probably the case that Mr Hosking
regarded a winding-up order as likely to be of advantage to him in
his capacity
as the claimant in the English action as well as in his
capacity as the petitioning creditor. For the company's continued
defence
of the action was leading him to incur very substantial costs
in its continued prosecution and was thus generating a potential
increase in its total liability to him and a corresponding increase
in the risk that such could not be met. In his capacity as claimant

in the action Mr Hosking therefore probably considered it
advantageous to secure a winding-up order which might lead to his
saving
of some such costs.
(d) But a winding-up order was also,
objectively, likely to be of substantial advantage to him in his
capacity as the petitioning
creditor; and to secure such an advantage
was the other of his purposes. It is not necessary that it should
have been his principal
purpose: see
In
re Millennium Advanced Technology Ltd
[2004] EWHC 711
(Ch),
[2004] 1 WLR 2177
[also
reported at [2004] 4 All ER 465]
at
para 42 (Michael Briggs QC sitting as a deputy High Court judge).
(e) For Mr Hosking, as trustee, was a large creditor of
the company; his debt was contingently unsecured and he was not even
in
receipt of interest. It was in the interests of the insolvent
company, and in particular of himself in that capacity, that, before

it proceeded, from some source or other, to incur yet further
indebtedness with which to fund the maintenance of its defence at
a
trial estimated to last for seven or eight days, a professional
decision should be taken on its behalf about the further conduct
of
the defence and, in the light of the latter's apparent strength or
otherwise, about the terms of any compromise which it would
be
commercially sensible for it to propose to Mr Hosking.
(f) In its defence of the winding-up
petition the company therefore failed to establish that Mr Hosking's
petition represented an
abuse of the process of the court and failed
to displace his entitlement to an order.
[6]
In my
judgment the reference in
Millward v Glaser
supra loc.
cit. to an applicant’s ‘
predominant motive
’
falls to be understood accordingly.  For the application to be
stigmatised as an abuse of process, the ‘predominance’
of
the motive must be such as to practically negate the existence of any
genuine interest by the applicant in obtaining a winding-up
for the
proper purposes of the remedy.
[13]
It is appropriate first to consider whether
it has been established on a balance of probability that the
respondent is indeed unable
to pay its debts.  The onus in this
regard is on the applicant.  If it is found that the applicant
has discharged the
onus, Aerios bears the burden of persuading the
court that, in the exercise of its discretion, it should nevertheless
dismiss the
application by reason of it being an abuse of process.
I refrain from characterising Aerios’s burden of persuasion as

an ‘onus’ advisedly, because it seems inapposite to
conceive of there being an onus on a party in respect of how a
court
should exercise its discretionary power.  Scope for the exercise
of a judicial discretion in the final determination
of a litigious
issue becomes afforded only after any pertinent onus on a party has
been discharged.
[7]
[14]
The applicant put in evidence the audited
annual financial statements for the company (and its subsidiaries
[8]
)
for the year ended 31 October 2015.  The information contained
in the financial statements has not been placed in dispute
by Aerios.
[15]
The financial statements reflect the
following:
·
That the company’s liabilities
exceeded its assets by over R6,3 million.  Included in the
computation of the company’s
liabilities was an amount of over
R23 million in respect of amounts received in advance for suite
hire and season tickets
in respect of events to be staged during the
coming year.  This, together with the fact that the applicant’s
loan account
(described below) had no fixed terms for repayment,
would suggest that the company’s state of actual insolvency at
the end
of October 2015 was not, of itself, a reason to believe that
it would be unable to pay its debts as and when they arose for
payment.
·
That the company sustained an after
tax operating loss of over R4,1 million in 2014 and over
R12,7 million in 2015.
The company’s accumulated
losses at that date were reported as R40 419 889.
·
That, as at 31 October 2015, the
company was indebted to the applicant on loan account in the amount
of R7 840 630, which
was subsequently capitalised, as
explained below.  (A note to the financial statements recorded
that the loan bore no interest
and was interest free.  A further
note in the Directors’ Report indicated (s.v. ‘Events
after the reporting
period’) that, in terms of a resolution
adopted on 8 February 2016, the authorised share capital of the
company was increased
and the applicant decided on the same date to
subscribe for additional shares to the value of R11 265 000,
which the
deponent to the founding affidavit explained amounted to a
capitalisation of the company’s debt to it as at that later
date.
The Directors’ Report also indicated that on 11
February 2016 RSI subscribed for additional shares to the value of
R3,735
million.)  The balance sheet reflects no amount having
been due to shareholders on loan account in respect of the 2014
financial
year.  (The company’s current loan account debt
to the applicant in the aforementioned amount of over R4,3 million

has therefore been incurred in the period post February 2016.)
·
That the company was indebted to
First National Bank on overdraft in the amount of R4 697 335,
although it held R7 449 434
in cash and cash equivalents.
Its overdraft facility was reported as being R19 855 000.
The company had also
taken out a loan of R10 million from First
National Bank (apparently in 2008) that was repayable over 10 years
in monthly
instalments with interest at the bank’s prime rate.
The final instalment is due in July 2018.  The outstanding

balance on this loan had been reduced from R5 063 844 to
R3 906 680 during the reporting period.
·
That the directors believed ‘that
the … company ha[d] adequate financial resources to continue
in operation for the
foreseeable future … . The directors
[had] satisfied themselves that the … company, subject to an
additional share
issue after year-end, [was] in a sound financial
position and that it [had] access to sufficient borrowing facilities
to meet its
foreseeable cash requirements.  The directors [were]
not aware of any new material changes that [might] adversely impact
the
… company’.
·
That the auditors considered that
the ability of the company to continue as a going concern was
dependent on ‘a number of
factors.  The most significant
of these was that the shareholders of the company subscribe for
additional shares in order
to rectify the insolvent situation.
The fact that the total liabilities exceed[ed] the assets [had] not
hindered the …
company’s ability to pay its debts as
they [became] due in the normal course of business’.
[16]
It is evident, however, that the respondent
company’s financial position deteriorated during the 2016
financial year.
In the founding affidavit the applicant’s
president, who is also a director of the respondent, pointed out the
overdraft
debt had risen to R19,855 million; the extent of the
excess of its liabilities over its assets had grown to approximately
R12,5 million; an operating loss of R42 million was
expected for the year ended 31 October 2016 and over R57 million

in the 2017 financial year.  A loan from RSI had been required
to pay salaries and the claims of suppliers due at the end
of October
2016.
[17]
Aerios has criticised the evidence
concerning the respondent’s financial situation in the
applicant’s founding papers
as rather thin in obvious
respects.  I think that criticism was justified.  It was
not explained, for example, why the
company’s operating loss
was expected to rise from just over R6 million in August to
R42 million by the end of
October and extend to a R57 million
loss in the following year.  One might have expected the
deponent to be able to give
a more detailed and up to date indication
of the company’s actual state when he deposed to his affidavit
on 7 November
2016.  This was all the more so, considering
that bringing the winding-up application had probably been under
consideration
for some weeks prior to the launch of the proceedings.
[18]
The deteriorating financial condition of
the company was nevertheless borne out in the management accounts for
the month of August
2016, which were put in as the papers developed.
These showed that the company’s gross income for the financial
year
to 25 August 2016 had been approximately R20 million
below budget.  This was mainly due to 36 corporate suites having

been unsold and a significant drop in public ticket sales.
[19]
The allegedly expected operating loss of
R42 million referred to in the founding papers remained
expressly unexplained.
It was apparent, however, that the
company faced a claim of about R70 million by Aerios in respect
of amounts allegedly due
in terms of their contractual relationship.
The dispute about this had been referred to arbitration.  There
had also
been litigation between Aerios and the company during 2016,
in the course of which Aerios had obtained interdictory relief
prohibiting
the company from acting in breach of its contractual
obligations, and subsequently contempt proceedings arising from the
company’s
non-compliance with the interdict.  Aerios
described that there had been settlement talks and alleged that
agreement on a
resolution of the dispute had been reached in
principle with the company’s negotiators, subject only to
confirmation by the
company’s board.  Details of the
contemplated settlement are not available.  It may be that the
anticipated loss
included provision for a substantial unbudgeted
contractual liability by the company to Aerios.  One does not
know.
[20]
The provisional liquidators have shown that
they required to borrow money in order to keep the company afloat as
a going concern.
Aerios appears to have accepted that much, for
it agreed to an order investing the liquidators with authority to do
that.
In my view this bears out the applicant’s
allegation that the company is unable to meet its day-to-day
financial commitments
without outsider funding.  That has
hitherto been provided by the shareholders.  But, as mentioned,
they are not willing
to expose themselves further.
[21]
Aerios appears to consider that the
applicant is duty-bound to finance the company’s trading.
It has failed to put up
a cogent basis for its argument.  Its
contention that the company is effectively the applicant’s
alter ego, and that
there cannot be a winding-up of the one without
the other, does not bear scrutiny.  The applicant rugby union is
a legal personality
that is able to conduct its business through a
company just as a natural person may do.  The essential object
that any person
has in deciding to carry on an enterprise through a
company rather than personally is to obtain the benefits of the
resultant separation
of personality for legal purposes, viz. limited
liability.  I am unable to distinguish the argument that Aerios
appears to
advance in this regard from that which was famously
discounted by the House of Lords in the leading case of
Salomon
v Salomon & Co Ltd
[1896]
UKHL 1, [1897] AC 22.
[9]
[22]
The applicant will not be able to continue
the respondent company’s business as a going concern as if the
respondent had never
existed.  It will be obliged to purchase it
at fair value.  The liquidators would owe a duty to all the
creditors, including
Aerios, to ensure that the business was not
disposed of below fair value.  Determining the fair value in the
peculiar circumstances
of the current case may well be a challenging
undertaking.  The aforementioned expressions by the applicant’s
president
in public statements uttered after the provisional order
had been made that everything would go on as before, save for the
Aerios
contracts, fall to be understood in the context of the
objective effect of the company’s liquidation.  They
plainly
oversimplified the factual position.
[23]
The notion propounded by Aerios that the
company’s inability to meet its current liabilities was
engineered and that its illiquidity
could have been addressed by
negotiating an increase in its overdraft facility is fanciful.
There is no reason to disbelieve
the evidence by the company’s
banker that it would be unwilling to increase the overdraft facility
without assurance that
the company was able to service any increased
indebtedness.  The applicant and RSI, having decided not to
increase their own
direct exposure as creditors of the company, would
logically have no wish to allow the company to increase its debt
levels by further
borrowing on overdraft.  The funding
assurances that the bank would reasonably require would therefore not
be forthcoming.
Moreover, the company’s audited financial
statements reflect that its bank borrowings are secured, amongst
others,
by an unlimited suretyship given by the applicant and
mortgage bonds over the applicant’s fixed properties.  Any
increase
in the company’s overdraft would therefore
automatically constitute an equivalent increase (contingently at
least) in the
applicant’s exposure.
[24]
I also find nothing untoward, as suggested
by Aerios, in the application of the amount borrowed from RSI to
cover the company’s
October current expenses, to pay not only
player and staff remuneration, but also an amount it admitted to
owing Aerios.
Aerios appeared to imply that the payment to it
was part of a strategy to create illiquidity.  In my view a more
likely reason
in the circumstances for the payments was to avoid any
possibility of a situation in which allegations of undue preference
might
arise after the company’s liquidation.  Such an
eventuality could hold potentially adverse consequences for some of
the company’s creditors with whom the applicant and RSI might
wish to keep on good terms in any business they might conduct
through
another vehicle acquired to take over the respondent’s
enterprise.  Whatever the reason, the very fact that
the company
needed to borrow the money to meet its commitments confirms the
allegations concerning its inability to meet its obligations
without
shareholder support.
[25]
The inability of the respondent company to
pay its debt has been adequately established on the papers.
Aerios indicated that
if the court were inclined to arrive at that
conclusion, it sought to have the matter referred to oral evidence,
if only to establish
its allegations of abuse of process.  That
avenue was not vigorously pursued in oral argument, advisedly so.
There is
nothing to indicate that oral evidence or cross-examination
of the deponents to the affidavits in support of the applicant’s

case would disturb the probabilities as they appear from the papers.
[26]
A winding-up of the respondent company
would not, of itself, result in the termination of its contractual
obligations to Aerios.
Aerios would not have the right to
compel specific performance, but the liquidators would have to decide
whether to abide by the
contracts or to terminate them.  The
liquidators would have a duty to make their decision with
conscientious regard to the
best interests of the creditors.  An
election by a liquidator to terminate the Aerios contracts would be
regarded as equivalent
to repudiating them.  In such an event
Aerios would be entitled to claim damages against the company in
liquidation.
The relevant law was recently rehearsed in
Ellerine Brothers
(
Pty
)
Ltd v McCarthy Limited
2014 (4) SA 22
(SCA) at para.s 11-12.  There is accordingly no substance in the
contention by Aerios, also not pursued by its counsel in
oral
argument, that a winding-up order at the instance of the applicant
would result in an unconstitutional infringement of its
property
rights.
[27]
As noted at the outset of this judgment, it
seems clear that the applicant was to a material degree motivated to
institute the proceedings
as a means to eventually being placed in a
position to continue the company’s business without some of its
current encumbrances.
That does not derogate, however, from its
genuine intention to bring about a
concursus
in which its claims against the respondent company will be treated
rateably with those of all other creditors in its class.

Effecting its intention in the latter respect is objectively liable
to be of material advantage to it in the context of the company’s

demonstrated inability to pay its way as a going concern.
Applying the principle elucidated in
Ebbvale
supra,
[10]
I have therefore not been persuaded that the court’s
discretionary power should be invoked to dismiss the application as

an abuse of process.
[28]
In the result, a final order will be made.
[29]
Aerios’s counsel conceded in oral
argument that if the winding-up were made final, there would be no
reason why an order should
not be granted in terms of paragraphs 2.8
and 2.9 of the notice of motion in case no. 22594/16.  That
concession was
reasonably made.
[11]
Such an order will follow.  It seems unlikely that Aerios’s
opposition to that part of the application in proceedings
before
Ndita J on 23 November 2016 could have contributed significantly
to the co-liquidators’ costs.  An order
was taken by
agreement.  I therefore propose to make no further order as to
costs in that matter.  Any costs incurred
by the liquidators in
those proceedings that might not have been determined in terms of
para. 7 of the order made by Ndita J
shall be costs in the
winding-up.
[30]
The costs of the Western Province Rugby
Football Union and (if any) of the provisional co-liquidators in case
no. 22169/2016
shall follow the result of the winding-up
application.
[31]
The costs reserved for determination in
terms of the order made by Hlophe JP on 21 November 2016 under
case no. 21739/2016
in respect of an application for the
enrolment of proceedings on the return date on the fourth division
roll shall be costs in
the winding-up.
[32]
The following orders are made:
I. In case no.s 21739/2016 and 22169/2016:
a.
The respondent, Western Province Rugby
(Pty) Ltd (registration no. 1996/003264/07), is placed into
final liquidation in the
hands of the Master.
b.
The applicant’s costs of suit in case
no. 21739/2016 and any costs incurred by it and the provisional
liquidators in
case no.
22169/2016
shall be allowed as costs in the
winding-up, including the costs of two counsel.
c.
The costs reserved for determination in
terms of the order made in chambers by Hlophe JP on 21 November
2016 under case no. 21739/2016
shall, insofar as such were
incurred by the applicant and/or the provisional liquidators, also be
costs in the winding-up.
II. In case no. 22594/16:
a.
Further to the order made by this Court on
23 November 2016, the applicants are hereby also authorised, in terms
of s 386(5)
of the Companies Act 61 of 1973 read with item 9 of
schedule 5 to the
Companies Act 71 of 2008
, to exercise the following
additional powers in relation to the administration of Western
Province Rugby (Pty) Ltd (in liquidation)
(‘
WPR
’):
i.
to
elect not to continue with any contracts that were executory as at
the date of the commencement of
WPR
’s
winding-up; and
ii.
to
sell the property of
WPR
by public auction, public tender or private contract and to give
delivery thereof.
b.
Any costs incurred by the applicants that
might not have been determined in terms of para. 7 of the
aforesaid order of 23 November
2016 shall be costs in the winding-up.
Save as aforesaid, there shall be no further order as to costs.
A.G. BINNS-WARD
Judge
of the High Court
APPEARANCES
Applicants’
counsel in case no.s 21739/2016 and 22594/2016 and for the
respondents in case no. 22169/2016:
B.J.
Manca SC
assisted by
K.
Reynolds
Applicants’
attorneys in case no.s 21739/2016 and 22594/2016 and for the
respondents in case no. 22169/2016: Edward Nathan
Sonnenbergs
Inc., Cape Town
Intervening
creditor’s counsel:
C.M. Eloff
SC
assisted by
A.
Morrissey
Intervening
creditor’s attorneys: Dadic Attorneys, Sandton
Lamprecht
Attorneys, Cape Town
[1]
Paragraph 3 of the notice of motion had in any
event provided that ‘
the exercise
of the powers sought in paragraphs 2.8 and 2.9 above are suspended
pending the hearing of the return day of the final
order of
liquidation on 12 December 2016
’.
[2]
In
Ebbvale Ltd v
Hosking (Bahamas)
[2013] UKPC 1
at
para. 28, Lord Wilson described the facts in In re a Company as
‘extreme’.
[3]
‘
Irritated
’
is apparently a term in Scots Law that in the relevant context means
what we would understand by the word ‘forfeited’.
[4]
Note 2
above.
[5]
Ebbvale
supra,
at para. 29.
[6]
At para. 33.  The law on point as declared
by the Board in
Ebbvale
has subsequently been applied in the Chancery Division; see the
judgment of Rose J in
Maud v Aabar
Block S.A.R.L. & Anor
[2015] EWHC
1626
(Ch) at para. 28.
[7]
I have not found the ‘shifting burden
analysis’ referred to in
Goode
Concrete (In Receivership) v Companies Acts
[2012]
IEHC 439
at para. 18-19 and also by the bankruptcy registrar in
Aabar Block SARL & Anor v Maud
[2015] EWHC 3861
(Ch) at para.s 69 and 80 that were cited by
Aerios’s counsel persuasive.  It seems to me, with
respect, to confuse
the materially distinct concepts of onus of
proof and burden of persuasion. The distinction is illustrated in
the discussion
concerning the import of
s 3(4)(b)
of Act 40 of
2002 in
Madinda v Minister of Safety
and Security
[2008] ZASCA 34
;
2008 (4) SA 312
(SCA) at
para. 8, for example.
[8]
Club Newlands (Pty) Ltd (wholly owned) and
Western Province Rugby Institute (Pty) Ltd (held as to 49% of the
issued shares and
classified as a subsidiary ‘due to the
influence of [the respondent company] over its daily operations’.
[9]
The relevant essence of the decision is captured
in the following statement in the speech of Lord McNaghten
concerning the effect
of the Companies Act, 1862: ‘
The
company is at law a different person altogether from the subscribers
to the memorandum; and, though it may be that after incorporation

the business is precisely the same as it was before, and the same
persons are managers, and the same hands receive the profits,
the
company
is
not in law the agent of the subscribers or trustee for them. Nor are
the subscribers as members liable, in any shape or form,
except to
the extent and in the manner provided by the Act.
’
[10]
See para. [12]
above.
[11]
I think that Aerios’s opposition to the
relief was reasonable at the stage when it was not certain that a
final order would
be made.  However, paragraph 3 of the notice
of motion had made it clear that the authority sought in terms of
para.s 2.8
and 2.9 would not vest before the return day of the
provisional order.