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[2014] ZAGPJHC 203
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Pilot Freight (Pty) Ltd v Von Landsberg Trading (Pty) Ltd (13/25839) [2014] ZAGPJHC 203; 2015 (2) SA 550 (GJ) (25 July 2014)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA,
GAUTENG
LOCAL DIVISION,
JOHANNESBURG
CASE
NO: 13/25839
DATE:
25 JULY 2014
In
the matter between:
PILOT
FREIGHT (PTY)
LTD
.....................................................................
Applicant
And
VON
LANDSBERG TRADING (PTY)
LTD
.............................................
Respondent
J
U D G M E N T
KAIRINOS
AJ
:
1.
The Applicant applies
for an order placing the Respondent in provisional or final winding
up in the hands of the Master of the High
Court and directing that
the costs be costs in the application.
2.
I shall deal with the
merits of the application in due course. However before I do so I
will deal firstly with the Applicant’s
failure to comply with
the provisions of section 346(4A)(b) of the Companies Act, 1973 (“the
old Act”) which is applicable
by virtue of the provisions of
item 9 of Schedule 5 of the Companies Act, 2008 (“the new Act”)
and which non-compliance
is in any event fatal to the application,
for the reasons set out below.
Non-compliance
with section 346(4A)(b)
3.
At the outset of the
hearing, I indicated to Ms Van Aswegen, who appeared for the
Respondent, that it did not appear from the papers
before me that the
Applicant had complied with the provisions of section 346(4A)(b) of
the old Act read with the provisions of
item 9 of Schedule 5 of the
new Act since no affidavit had been filed by the person who furnished
the application on the parties
referred to in the section, setting
out the manner in which section 346(4A)(a) had been complied with.
4.
Section 346(4A) of the
old Act, provides as follows:
“
(4A) (a) When
an application is presented to the court in terms of this section,
the applicant must furnish
a copy of the application—
(i) to every registered trade
union that, as far as the applicant can reasonably ascertain,
represents any of the employees of
the company; and
(ii) to the employees themselves—
(aa) by affixing a copy of the
application to any notice board to which the applicant and the
employees have access inside the
premises of the company; or
(bb) if there is no access to the
premises by the applicant and the employees, by affixing a copy of
the application to the front
gate of the premises, where applicable,
failing which to the front door of the premises from which the
company conducted any
business at the time of the application;
(iii) to the South African
Revenue Service; and
(iv) to the company, unless the
application is made by the company, or the court, at its discretion,
dispenses with the furnishing
of a copy where the court is satisfied
that it would be in the interests of the company or of
the creditors to dispense
with it.
(b) The applicant must, before or
during the hearing, file an affidavit by the person who furnished a
copy of the application
which sets out the manner in which
paragraph (a) was complied with.”
5.
The matter stood down
for Ms Van Aswegen to take instructions and thereafter she informed
me that the Applicant would furnish the
Court with an affidavit in
compliance with the provisions of section 346(4A)(b) of the old Act.
In terms of the provisions of section
346(4A)(b), such an affidavit
would have to be by person who furnished a copy of the application
(
in casu
the Sheriff of this Court) setting out the manner in which paragraph
346(4A)(a) had been complied with.
6.
The parties then
proceeded to argue the merits of the matter. During the course of the
argument, an affidavit was handed up from
the Bar. It was an
affidavit headed “Service Affidavit”. It was deposed to
by Ms Natasha-Ann Do Rego, an adult female
attorney employed by the
Applicant’s attorneys of record. In the affidavit, Ms Do Rego
confirmed that the application had
been lodged with the Master of the
High Court and the South African Revenue Services (“SARS”)
as required by section
346(4A). That much was in any event evident
from the notice of motion which bore the stamps of the Master and
SARS. She also confirmed
that the application was served on the
Respondent. That too was in any event common cause. However there was
no affidavit from
the person who has so furnished SARS with a copy of
the application.
7.
However in paragraph 6
of the affidavit, Ms Do Rego states as follows:
“
I furthermore caused a copy
of the applicant’s application herein to be served upon the
respondent’s employees by the
Sheriff of the above Honourable
Court, which was so served on the 24
th
of July 2013 as appears from the Sheriff’s return of service
dated 24 July 2013, attached hereto as annexure “B”.”
8.
Upon reading annexure
“B” however, things become somewhat more problematic and
raised further concerns as to whether
the employees had been
furnished with the application.
9.
Annexure “B”
to the service affidavit is a return of service by the Acting
Sheriff, Sandton South, Mr JDH Du Bruyn,
in which he states that he
affixed the notice of motion, founding affidavit and annexures “FA1”
to “FA9”
to the main entrance of Vinking/V-Kingm Shop
U38, Hyde Park Shopping Centre, corner Jan Smuts Avenue & William
Nicol Drive,
“being the place of employment of the employees of
Von Landsberg Trading (Pty) Ltd”. He then states that no
employee
could be found to ascertain if they were members of any
trade union.
10.
There is no indication
on oath, whether in the founding affidavit or the service affidavit,
that the address at Vinking/V-Kingm
Shop U38, Hyde Park Shopping
Centre, corner Jan Smuts Avenue & William Nicol Drive, is indeed
the main place of business of
the Respondent. Furthermore there is no
service affidavit by the Sheriff or even a confirmatory affidavit by
the Sheriff attached
to the service affidavit of Ms Do Rego, which
sets out that the abovementioned address is in fact the principal
place of business
of the Respondent, where one would expect the
employees of the Respondent to be found.
11.
It is undisputed that
the Respondent has four employees. This is so since the Respondent in
paragraph 20.2 of its answering affidavit
states that the Respondent
has four employees with families that will be affected by the winding
up of the Respondent. In paragraph
16 of its replying affidavit the
Applicant merely notes this allegation and does not appear to dispute
that the Respondent indeed
has four employees.
12.
However annexure “B”
to the service affidavit, being the Sheriff’s return of
service, states that “no employees
could be found to ascertain
if they are members of any trade union”. The return of service
does not indicate whether the
Sheriff found the premises closed or
open for business. The return also indicates that he attempted
service on the employees at
09:26 on 24 July 2013, being a Wednesday.
The time indicated on the return of service appears to be business
hours on a business
day. Where then were the four employees that it
is common cause the Respondent employed?
13.
It is because of this
very situation that the Legislature requires the filing of an
affidavit “by the person who furnished
a copy of the
application to the employees”. Who better to answer precisely
what the Sheriff found when he attended upon
the purported main place
of business of the Respondent than the Sheriff himself? Ms Do Rego
correctly does not purport to state
in the service affidavit that she
is the person who furnished the application and she correctly merely
confirms that she “caused”
a copy of the application to
be served upon the Respondent’s employees, in other words she
merely instructed the Sheriff
to do so. It is not within her personal
knowledge what exactly transpired when the Sheriff arrived at that
address.
14.
The service affidavit
is therefore not an affidavit in compliance with the provisions of
section 346(4A)(b) of the old Act. There
was no request to postpone
the application to obtain an affidavit from the Sheriff even though
it was indicated to the parties
in the hearing that the Court would
require an affidavit from the Sheriff since it was apparent that the
Sheriff was the person
who purported to furnish the application to
the employees.
15.
Furthermore it is not
clear that the Sheriff in any event furnished the application to the
employees of the Respondent by affixing
the application to the door
of the aforementioned address, since, as set out above, there is no
evidence whatsoever that the aforementioned
address is indeed the
address of the Respondent. Even a perusal of the annexures to the
various affidavits does not reveal the
main place of business of the
Respondent.
16.
There is no evidence to
prove that the Sheriff left the application at a place which it would
come to the attention of the employees
of the Respondent.
17.
In
EB
Steam Company (Pty) Ltd v Eskom Holdings Soc Ltd
[2014] 1 All SA 294
(SCA) [22]
, Wallis
JA (
Mthiyane AP,
Cachalia, Pillay and Willis JJA concurring) held as follows:
“
In order for the court to
perform this function properly it will be necessary for applicants,
in the founding affidavit or the affidavit
in terms of
section 346(4A)(b), to deal with whether the respondent has
employees and if so where those employees are working
or are likely
to be found. It is only in the light of this information that the
court hearing the application can decide whether
there has been
compliance with the requirements of the section. If there is reason
to believe that the respondent does not have
employees then this and
the grounds for it must be stated.
”
18.
Neither the founding
affidavit nor the service affidavit indicated whether there were in
fact employees of the Respondent and if
so, where the main place of
business of the Respondent was where such employees were employed.
There is therefore no way for this
Court to ascertain from the
affidavits before it that there has been compliance with the
provisions of section 346(4A)(a)(ii) of
the old Act and that the
employees are indeed aware of the application for the winding-up of
their employer and the Court is therefore
unable to perform its
function properly as set out in above quoted extract from the
EB
Steam
judgment.
19.
There was previously
some controversy in the case law as to whether the provisions of
section 346(4A)(b) were intended to have been
complied with when the
application was launched or whether it was sufficient to do so before
the hearing. In
Corporate
Money Managers (Pty) Ltd v Panamo Properties 49 (Pty) Ltd
2013 (1) SA 522
(GNP)
, Van
Loggerenberg AJ held that the provisions were peremptory and had to
be complied with when the application was launched. In
this Division,
Gautschi, A AJ in
Sphandile
Trading Enterprise (Pty) Ltd and Another v Hwibidu Security Services
CC and Others
2014 (3) SA 231
(GJ)
, differed and
whilst finding that the provisions of section 346(4A) were indeed
peremptory, he held that they need not be complied
with prior to the
launching of a liquidation application, as long as the court was
satisfied that they had been complied with a
reasonable time before
the hearing and the requisite affidavit was before the Court before
or during the hearing.
20.
Gautschi, A AJ held as
follows at paragraph 18 of the aforesaid judgment:
“
I accordingly hold that,
whilst the furnishing of a copy of the application to SARS, and proof
of such furnishing by way of affidavit,
are peremptory, s
346(4A)(a)(iii) does not require the furnishing of the copy to SARS
to occur at any particular time. The purpose
of the section is met if
such furnishing takes place within a reasonable period of time prior
to the hearing of the application,
and the affidavit is filed before
or during the hearing.”
21.
The controversy and the
divergent judgments have in any event now been laid to rest by the
Supreme Court of Appeal in the matter
of
EB
Steam
(supra)
.
In the
EB Steam
matter the Supreme Court held that the judgment in
Corporate
Money Managers (Pty) Ltd v Panamo Properties 49 (Pty) Ltd
2013 (1) SA 522
(GNP)
was
incorrectly decided in regard to the issue of whether it was
necessary to furnish a copy of the application on the parties
referred to in section 346(4A) prior to the launching of the
application and by implication held that the judgment in
Sphandile
Trading Enterprise (Pty) Ltd and Another v Hwibidu Security Services
CC and Others
2014 (3) SA 231
(GJ)
was correct in this
regard.
22.
In the
EB
Steam
matter,
the Supreme Court of Appeal
held
that whilst the provisions of section 346(4A)(b) were indeed
peremptory, the failure to have furnished a copy of the application
on the employees (if any), trade unions (if any), SARS and the
company is not necessarily fatal and the methods of furnishing the
application to the aforementioned are merely directory and a Court is
entitled to furnish directions as to how the application
should be
“furnished” upon such parties.
23.
Wallis JA held as
follows at paragraphs [23] – [24] of the judgment:
“
[22]
In order for the court to perform this function properly it will be
necessary for applicants, in the founding
affidavit or the affidavit
in terms of section 346(4A)(b), to deal with whether the
respondent has employees and if so where
those employees are working
or are likely to be found. It is only in the light of this
information that the court hearing the application
can decide whether
there has been compliance with the requirements of the section. If
there is reason to believe that the respondent
does not have
employees then this and the grounds for it must be stated.
[23]
To sum up thus far, the position is as follows. The requirement that
the application papers be
furnished to the persons specified in
section 346(4A) is peremptory. It is not however peremptory,
when furnishing them to
the respondent’s employees, that this
be done in any of the ways specified in section 346(4A)(a)(ii).
If those modes
of service are impossible or ineffectual another mode
of service that is reasonably likely to make them accessible to the
employees
will satisfy the requirements of the section. If the
applicant is unable to furnish the application papers to employees in
one
of the methods specified in the section, or those methods are
ineffective to achieve that purpose and it has not devised some other
effective manner, the court should be approached to give directions
as to the manner in which this is to be done. Throughout,
the
emphasis must be on achieving the statutory purpose of so far as
reasonably possible bringing the application to the attention
of the
employees.
”
24.
It was precisely
because of the aforesaid exposition of the requirements of section
346(4A) that I allowed Ms Van Aswegen to take
instructions on how the
Applicant intended proceeding with the matter, i.e. whether the
Applicant sought a postponement of the
matter to comply with the
provisions or whether the Applicant would rather proceed and hand up
in due course an affidavit in terms
of section 346(4A). The Applicant
indicated that it would provide an affidavit purporting to comply
with section 346(4A) and the
hearing proceeded on this basis.
25.
I have already set out
the difficulties with the affidavit provided by the Applicant,
including the failure to indicate on oath
what the principal place of
business of the Respondent was at the relevant time, whether the
premises were open or closed and whether
anybody was present at the
premises, whether employees or otherwise (such as a director for
example). The affidavit therefore falls
short of fulfilling the
purpose for which the legislature inserted section 346(4A)(ii) into
the Old Act and as explained in the
EB
Steam
judgment,
namely to satisfy the Court that the Applicant has achieved “the
statutory purpose of so far as reasonably possible
bringing the
application to the attention of the employees”.
26.
A further aspect which
requires attention is the issue of who precisely must depose to such
affidavit. This issue is not pertinently
dealt with in any reported
judgment of which I am aware. It is so that section 346(4A)(b)
requires that the applicant must furnish
the affidavit to the Court
hearing the liquidation application but the section pertinently
states that such affidavit must be “by
the person who furnished
a copy of the application which sets out the manner in which
paragraph (a) was complied with”.
27.
It is not clear whether
the Legislature intended to refer to the person who took steps to
arrange that the application was furnished
to the relevant parties
(which in most cases would be the applicant’s attorneys of
record) or whether it must be an affidavit
by the person who
physically took the steps to furnish the application to the relevant
parties.
28.
As set out above, only
the person who physically furnished the application on the relevant
parties, such as a messenger, courier
or if service by Sheriff was
used, then the Sheriff or deputy-Sheriff who carried out service, is
a person who can depose to the
affidavit setting out precisely what
occurred and how the application was furnished to the relevant
parties.
29.
The furnishing to SARS
is usually uncontroversial and an affidavit from the person who
delivered the application to SARS together
with the stamp from SARS
on the notice of motion acknowledging receipt thereof, would
constitute sufficient proof that the application
was furnished on
SARS.
30.
However when it comes
to employees and/or trade unions the situation becomes more
problematic. In the
EB
Steam
matter,
Wallis JA thoroughly analysis section 346(4A) and explains it
purpose, particularly in relation to the requirement that
a copy of
the application be furnished on employees as follows:
“
[6]
The
Labour Relations Amendment Act 12
of 2002
effected substantial amendments to the LRA particularly
in relation to the issue of security of employment. Among these was
the
introduction of
section 197B
, which dealt with the employer’s
obligation to disclose information concerning insolvency. The section
obliges an employer
facing financial difficulties that might
reasonably result, if it is a corporate body, in its winding-up, or,
if they are a natural
person or unincorporated entity, in their
sequestration, to advise any consulting party with which the employer
is obliged to consult
over employment issues in terms of
section 189(1)
of the LRA of that fact. Furthermore, if an
employer applies to be wound-up or sequestrated they are obliged at
the time of making
the application to provide a consulting party with
a copy of the application. Conversely, if they receive an application
for winding-up
they are obliged to supply a copy of the application
to any consulting party within two days of receipt, or if the
proceedings
are urgent, within 12 hours. Similarly, if the employer
is a natural person or unincorporated entity and receives an
application
for their sequestration, the same notice must be given.
Bearing in mind that parties facing winding-up or sequestration may
be
in a state of administrative disarray the Legislature, at the same
time and in the same amending Act, introduced the provision quoted
above into the 1973 Act and similarly worded provisions into the
Insolvency Act 24
of 1936
. This was done with a view to ensuring, so far as
reasonably feasible, that employees become aware of an application
for the winding-up
of a company or an application for the
sequestration or voluntary surrender of a natural person or
unincorporated entity’s
estate.
[7]
These provisions were introduced simultaneously into the LRA, the
1973 Act and the
Insolvency Act, by
way of a statute directed at the
topic of labour relations and protecting the interests of employees.
It must, therefore, be accepted
that their purpose was to ensure, so
far as reasonably feasible, that applications for winding-up,
voluntary surrender or sequestration
come to the attention of the
employees of the employer in question and their representatives so
that the interests of the employees
can be protected. Their purpose
is to enable the employees of an employer, facing winding-up or
sequestration, or their representatives,
to engage the employer and
possibly the creditors with a view to protecting the position of the
employees, insofar as it is reasonably
possible to do so. They must
be construed in the light of that purpose.
”
31.
The requirement that
the application for liquidation be furnished to the employees is
therefore to enable the employees to protect
their interests and the
provisions of
section 346(4A)
should therefore be construed taking
into account this purpose.
32.
Interpreting
section
346(4A)(b)
with this purpose in mind and bearing in mind that a Court
may give directions if it is not satisfied with service on the
employees,
the Court would require something more detailed than the
usual cryptic return of service from a Sheriff. An affidavit in
compliance
with
section 346(4A)(b)
would have to set out precisely
what the person who furnished the affidavit did when he came to the
place of employment of the
employees, what circumstances that person
found there, what steps were taken to bring the application to the
notice of the employees
(if any) and what steps were taken to
ascertain whether the employees belonged to any trade union. The only
person who would have
personal knowledge of these facts would be the
person who physically attended upon the premises. The applicant
and/or the attorney
of record would not necessarily have personal
knowledge, unless they were the person who physically attended upon
the premises
and furnished the application to the relevant parties as
required by
section 346(4A).
20
0%">
33.
It appears that too
often the requirements of
section 346(4A)(b)
are overlooked by
applicants for the winding up of companies. However as set out above
they are peremptory and can in appropriate
circumstances therefore be
fatal to an application for the winding up of a company.
34.
Whilst it is so that
Wallis JA indicated in paragraph 8 of the
EB
Steam
judgment
that the requirements of
section 346(4A)
are not meant to constitute
a technical defence to a respondent without a defence to the merits,
the fact remains that if an applicant
does nothing further to attempt
to comply with the provisions of
section 346(4A)(b)
, a court cannot
grant an order winding up a company, if it is not satisfied that the
purpose of
section 346(4A)
has been met, namely to, as far as
reasonable, inform the employees and/or trade unions of the
application.
35.
A rather strange
anomaly in the section is the requirement in
section 346(4A)(a)(iv)
,
that unless the company is making the application or the court
dispenses with the furnishing to the company, the application must
also be “furnished” to the company. One would have
imagined that this requirement is superfluous since in initiating
an
application for the winding up of a company, inevitably the company
would be a respondent in such application and the Sheriff
would have
served on the company at is principal place of business or registered
office in accordance with the provisions of Rule
4(1)(a)(iv) of the
Uniform Rules of Court read with Rule 6(2) of the said Rules. However
it is possible that the Legislature realising
that often an
application for the winding up of a company is served by the Sheriff
at a registered office, which has long since
been abandoned by the
auditor of the company, and the application does not come to the
attention of the company. In such circumstances
it appears that the
Court may be entitled to direct that the application be furnished to
the company at its principal place of
business (not necessarily via
service by the Sheriff) in addition to the service by the Sheriff on
the registered office. In such
circumstances it is conceivable that
the Court has in the court file a return of service of the
application by the Sheriff and
in addition an affidavit in terms of
section 346(4A)(b) by the person who also furnished the application
to the company in addition
to service by the Sheriff on the
registered office. It is also possible that the Legislature
contemplated situations of informal
furnishing of the application on
a company in instances of urgent applications for the liquidation of
a company and in such instances
the mere furnishing of the
application to the company by a person other than the service may
indeed be sufficient in the circumstances.
However I am not called
upon to determine the provisions of section 346(4A)(a)(iv) and what
type of “furnishing” (whether
by formal service or
otherwise) is required in such instance and I refrain from doing so.
36.
What is clear from
section 346(4A)(b) is that whomever furnishes the application on any
of the parties referred to in the section,
must depose to an
affidavit which sets out the manner in which section 346(4A)(a) was
complied with.
37.
This was not done in
the present matter. In the circumstances and having regard to the
fact that even if there had been compliance
with the provisions of
section 346(4A)(b), I am not inclined to grant the order for the
winding up of the Respondent on the merits,
for the reasons set out
below, the application must fail on this ground alone. If I am wrong
in this regard and the non-compliance
is not fatal to the application
in the circumstances as set out above, then the application in any
event must fail on the merits
for the reasons set out below.
The merits
of the application
38.
The founding affidavit
is the modicum of brevity and is devoted largely to setting out that
there has been or will be compliance
with the statutory service
requirements and that proper security has been established for the
costs of the winding up.
39.
Very little is said
about the Respondent’s indebtedness other than one paragraph,
which in essence states that the Respondent
is indebted to the
Applicant in the sum of R1 878 462.11 in respect of
clearing and forwarding services rendered by the
Applicant to the
Respondent and for the purchase of imported goods, for the period 29
September 2011 to 30 April 2013 (“the
period”) as set out
in a statement attached as annexure “FA3”. A perusal of
annexure “FA3” does not
reveal an opening balance and one
must assume from the statement that the amount claimed was incurred
during the period.
40.
Even more startling is
that there is in fact no allegation that the Respondent is unable to
pay its debts. It appears that the Applicant
believes that this must
be assumed from the fact that a statutory demand was made and the
Respondent failed to make payment within
21 days thereafter. However
there is no allegation that the Respondent is either factually
insolvent or commercially insolvent.
41.
If an applicant relies
on a company’s inability to pay its debts it must not only make
this allegation but also support such
allegation with facts from
which a Court can surmise that the company is at least
prima
facie
unable to pay
its debts.
42.
The failure to make the
required allegation is however not necessarily fatal to the
application since in the present matter the
Applicant did set out
that it had served a demand for payment within 21 days on the
Respondent’s registered office and the
Respondent had failed to
pay, secure or compound for the amount claimed in terms of section
345(1)(a) of the old Act. The Court
would be entitled in such
circumstances to deem the Respondent unable to pay its debts, unless
the Respondent showed otherwise.
43.
This the Respondent
attempted to do in its answering affidavit by denying any
indebtedness to the Applicant and in essence the Respondent
revealed
the following three defences:
43.1
The Respondent alleged
that it had made payments during the period in the total amount of
R3 048 861.52 and that it had
therefore overpaid the
Applicant in the amount of R718 776.34;
43.2
The Respondent alleges
that the Applicant charged interest on the amounts claimed at the
rate of 5% per month, which was not only
excessive but also not
agreed and if such interest was deducted from the amount claimed,
there would be no indebtedness to the
Applicant;
43.3
The Respondent relied
on an alleged illiquid counterclaim for damages in the amount of
R1 594 852.00 arising from the
cancellation of a revolving
credit facility.
44.
The Applicant then
delivered a slightly lengthier replying affidavit of some ten pages
in which it now appeared that the Applicant’s
claim was not
limited to the period set out in the founding affidavit but that
there were also monies due from before that period.
45.
The Applicant now for
the first time informed the Court that there had in fact been a
meeting on 9 October 2012, attended by the
deponent and Allan
Malherbe on behalf of the Applicant and the father and mother of the
Respondent’s sole director. At this
meeting alleges the
Applicant, the parties reached an agreement that the Respondent was
indebted to the Applicant in the sum of
R2 100 701.53 and
such amount would be paid in monthly instalments of R50 000.00
and interest from 1 April 2013
at 1,5% per month or 18% per annum.
46.
The amount claimed in
the founding affidavit as being owed to the Applicant by the
Respondent of R1 878 462.11, was calculated
as the amount
of R2 100 701.53, less R250 000.00 payments made since
that date and plus accrued interest of R27 760.58.
47.
This version was only
made out in reply. This is a classic case of new material or indeed a
new cause of action being made out in
a replying affidavit. In the
founding affidavit the indebtedness was based on clearing and
forwarding services and goods sold and
delivered. The reliance on a
settlement agreement in the replying affidavit is a different cause
of action, namely a compromise
and therefore a novation of the
original debt.
48.
The Respondent on a
previous occasion cried foul and launched an application for the
striking out of the offending new material
in the replying affidavit.
The matter came before Weiner J. She took the practical approach and
postponed the matter and allowed
the Respondent to deliver a
supplementary answering affidavit to deal with the new material.
49.
The Respondent availed
itself of this opportunity and delivered a supplementary answering
affidavit in which it stated that whilst
the meeting had indeed taken
place, the deponent’s mother and father were not authorised to
bind the Respondent to any agreements
and the Applicant was aware
that they were no longer directors of the Respondent and had resigned
in 2010, a few years before the
meeting. On the Respondent’s
version they were to merely discuss the exhorbitant interest
apparently levied by the Applicant
on its charges of some 60% per
annum.
50.
The Applicant did not
raise ostensible authority or state on oath that it thought the said
parents were authorised to bind the Respondent.
In argument Ms Van
Aswegen merely referred to the fact that the father had signed
cheques in the past. Apparently he had been an
authorised signatory
on the Respondent’s cheque account. In my view this does not
necessarily imply that he is entitled to
bind the Respondent to
agreements. One often finds in commerce that a particular person,
such as a bookkeeper, is an authorised
signatory for cheques of a
company but this does not imply that the bookkeeper can bind the
company to agreements.
51.
Therefore even if I
take into consideration the new material in the replying affidavit,
the Respondent still discloses a defence,
i.e. lack of authority,
which if proved at a trial, would constitute a defence to the
Applicant’s belated reliance on an
agreement.
52.
If the new material is
not taken into consideration, then the situation is that the
Applicant claims a debt for a specific period
and the Respondent
contends and proves that it has made an overpayment in respect of
that period and furthermore alleges that the
amount claimed by the
Applicant includes excessive interest charges which were not agreed
to. Both would constitute a defence if
proved at a trial.
53.
The Applicant’s
counsel in argument attempted valiantly to persuade me that although
both the above defences are good defences
in law if proved at a
trial, they were however not
bona
fide
. For this
submission the Applicant’s counsel relied largely on the fact
that the Respondent had not raised such defences
in answer to the
letter of demand but the Respondent’s attorney rather sought an
extension in order to allow them to obtain
instructions from the
Respondent and requested that the Applicant stay any proposed action
until they were in a position to respond
to the demand. The
contention is that since the Respondent consulted with its attorneys
on 10 July 2013, the letter seeking a pending
of any action should
have set out the defence. The contention is therefore that the
defences are an afterthought. I am not persuaded
that this is indeed
the case or that the failure to raise the defences is necessarily
indicative of a lack of
bona
fides
.
54.
The Respondent explains
that the attorneys on the day it consulted, sought documentary proof
of the payments to the Applicant and
therefore the letter was couched
in that fashion. I cannot in a liquidation application reject such
version on affidavit and neither
can I make a finding on the
probabilities.
55.
The law relating to the
test in liquidation applications is clear. Winding-up proceedings
ought not to be resorted to in order by
means thereof to enforce
payment of a debt, the existence of which is
bona
fide
disputed by
the company on reasonable grounds since the procedure for winding-up
is not designed for the resolution of disputes
as to the existence or
non-existence of a debt
[1]
.
56.
The aforesaid is known
as the “Badenhorst rule” after
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T)
347H–348C
,
where it was held as follows in this regard:
“
Die maatskappy betwis die
geldigheid van die vordering van £120,
en
wanneer 'n skuld te goeder trou betwis word, moet 'n likwidasie
aansoek geweier word. Hierdie proses is nie bedoel vir die beslissing
van twyfelagtige skulde nie
.
(In re Gold Hill Mines
(1883) 23 Ch. 210
(C.A.) en Re Welsh Brick
Industries Ltd.,
1946 (2) A.E.R. 196
(C.A.)).
'n Gerieflike opsomming is die volgende,
uit Buckley on Companies, 11de ed., bl. 357:
'
A
winding-up petition is not a legitimate means of seeking to enforce
payment of a debt which is bona fide disputed by the company
.
A petition presented ostensibly for a winding-up order but really to
exercise pressure will be dismissed and under circumstances
may be
stigmatised as a scandalous abuse of the process of the Court. Some
years ago petitions founded on disputed debts were directed
to stand
over till the debt was established by action. If, however, there was
no reason to believe that the debt, if established,
would not be
paid, the petition was dismissed. The modern practice has been to
dismiss such petitions. But, of course, if the debt
is not disputed
on some substantial ground, the Court may decide it on the petition
and make the order.'
Die respondent betwis die geldigheid van
die beweerde skuld, en
ek is van oordeel dat die juiste benadering
is om te oorweeg of respondent die Hof op 'n balans van
waarskynlikheid oortuig het,
nie dat die beweerde skuld nie opeisbaar
is nie, maar dat dit bona fide en op redelike gronde betwis word
.
As hy dit doen ten opsigte van so 'n gedeelte van die beweerde skuld
dat die onbetwiste gedeelte daarvan (as daar is) minder as
£50
word, dan moet die aansoek afgewys word.”
(My emphasis)
57.
In
Wackrill
v Sandton International Removals (Pty) Ltd
1984 (1) SA 282
(W)
293C-E
, it was held
as follows:
“
In the case of
sequestration proceedings the principle is clearly established that
the Court has a discretion to refuse a sequestration
order if the
application is not made for the bona fide purpose of bringing about a
concursus creditorum and a distribution of the
respondent's assets by
a trustee in insolvency, but is made mala fide and with an ulterior
and improper motive. Such a mala fide
application is an abuse of the
process of the Court. See Berman v Brimacombe
1925 TPD 548
; Amod v
Khan
1947 (1) SA 150
(N) at 152 and on appeal in
1947 (2) SA 432
(N)
at 439; and Millward v Glaser
1950 (3) SA 547
(W) at 551. In my view,
there is no reason for not adopting the same rule in the case of
proceedings for a winding-up order, if
only for the reason that a
mala fide application made with an ulterior and improper motive is an
abuse of the process of the Court.
See Tucker's Land and Development
Corporation (Pty) Ltd v Soja (Pty) Ltd
1980 (3) SA 253
(W) at 257H.”
58.
In
Hülse-Reutter
and Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO
Intervening)
1998 (2) SA 208
(C)
at 219F - 220A
it
was held as follows:
“
Apart from the fact that
they dispute the applicant's claims, and do so bona fide, . . . what
they must establish is no more and
no less than that the grounds on
which they do so are reasonable.
They
do not have to establish, even on the probabilities, that the
company, under their direction, will, as a matter of fact, succeed
in
any action which might be brought against it by the applicants to
enforce their disputed claims
.
They do not . . . have to prove the company's defence in any such
proceedings.
All
they have to satisfy me of is that the grounds which they advance for
their claims and the company's disputing these claims
are not
unreasonable
. To do
that, I do not think that it is necessary for them to adduce on
affidavit, or otherwise, the actual evidence on which they
would rely
at such trial. This is not an application for summary judgment in
which . . . a defendant who resists such an application
by delivering
an affidavit or affidavits must not only satisfy the Court that he
has a bona fide defence to the action, but in
terms of the Rule must
also disclose fully in his affidavit or affidavits ''the material
facts relied upon therefor''. . . .
It
seems to me to be sufficient for the [respondents] in the present
application, as long as they do so bona fide, . . . to allege
facts
which, if proved at a trial would constitute a good defence to the
claims made against the company
.”
(My emphasis)
59.
In
Robson
v Wax Works (Pty) Ltd
2001 (3) SA 1117
(C)
1122B-H
, it was
held as follows:
“
The applicant was aware
prior to the institution of the application that his money claims
against the first respondent were disputed.
It is trite that winding
up proceedings are inappropriate when brought by a creditor whose
claims are reasonably and bona fide
disputed. See Badenhorst v
Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) and
the many subsequent cases in which the so-called Badenhorst rule has
been applied (some of which are collected in Kalil
v Decotex (Pty)
Ltd and Another
1988 (1) SA 943
(A) at 980D - F).
The
institution by a creditor of winding up proceedings in such
circumstances has on occasion been stigmatised as an abuse of
process
.
...
A lack of bona fides is not
readily inferred
.
There is nothing in the papers which leads me to conclude that the
second and third respondents, as directors of the first respondent,
do not genuinely dispute the claims of the applicant.
In the circumstances it is not necessary
for me to analyse and decide the question of whether the first
respondent is able to pay
its debts.”
(My emphasis)
60.
Where
prima
facie
the
indebtedness exists the onus is on the company to show that it is
bona fide
disputed on reasonable grounds
[2]
.
61.
Where this onus is
discharged, the application should fail even if it appears that the
company is nevertheless unable to pay its
debts
[3]
.
62.
Where the debt is
disputed, and hence the applicant’s
locus
standi
as a
creditor, the application will be dismissed (if the dispute is
bona
fide
and on
reasonable grounds), not because the applicant lacks
locus
standi
, but because
winding-up proceedings are inappropriate for the purpose of
determining whether or not he does.
63.
That is precisely the
situation in the present matter in regard to the aforesaid defences.
64.
The Respondent also
referred to an illiquid counterclaim. However this was set out in
such vague terms that, but for the aforesaid
defences, it would not
have passed muster.
65.
In regard to illiquid
counterclaims as a defence to a liquidation application it was held
as follows in
Ter
Beek v United Resources CC and Another
1997 (3) SA 315
(C)
wherein Van Reenen J after an exhaustive analysis of the case law
(both South African and foreign) concluded that an illiquid
counterclaim may in certain circumstances constitute a defence to a
liquidation application (albeit it in the context of a close
corporation but nothing turns on this)
[4]
.
66.
Van Reenen J held as
follows in regard to the illiquid counterclaim defence:
“
The
second of the aforementioned defences is the existence of an
unliquidated claim which exceeds any amount that first respondent
owes to the applicant. It is trite that an unliquidated claim for
damages is incapable of being set off against an admitted liquidated
obligation. The provisions of Rule 22(4) and a practice under common
law permit the suspension of judgment on an admitted liquid
claim in
convention pending finalisation of an illiquid claim in reconvention.
Although Rule 22(4) applies only to proceedings
brought by way of
action, it has not modified the common law which applies to such
proceedings as well as proceedings brought by
way of motion. The
Court has a discretion to deviate from that practice. (See Truter v
Degenaar
1990 (1) SA 206
(T) at 211D-E.)”
[5]
67.
Van Reenen J, whilst
stating that he could not find authority for the proposition, held
that the provisions of Rule 22(4) whereby
a claim may be stayed
pending determination of an illiquid counterclaim should be similarly
applicable in winding-up proceedings.
68.
However in such
circumstances he held that “
as
the existence of the applicant's claim is not challenged the
respondent should bear the onus of showing why the Court should
exercise a discretion not to grant a winding-up order in his
favour
”.
[6]
69.
Van Reenen J then held
as follows in this regard:
“
Accordingly
there exists, in my opinion, no reason why the same approach should
not be followed in South African law, subject to
the qualification
that, by reason of the fact that the 'defence' of a counterclaim
recognises the enforceability of the obligation
on which the
applicant's locus standi is founded, (a) there is no room for an
argument that an applicant is seeking to enforce
a disputed debt by
means of winding-up proceedings (compare Kalil v Decotex (supra at
982F)); and (b) as the existence of the applicant's
claim is not
challenged the respondent should bear the onus of showing why the
Court should exercise a discretion not to grant
a winding-up order in
his favour (compare Meyer NO v Bree Holdings (Pty) Ltd
1972 (3) SA
353
(T) at 355B; Commonwealth Shippers Ltd v Mayland Properties (Pty)
Ltd (United Dress Fabrics (Pty) Ltd and Another Intervening)
1978 (1)
SA 70
(D) at 72D).”
70.
It therefore appears
that the reliance on an illiquid counterclaim, whilst not
constituting a defence
per
se
to the
Applicant’s claim and not extinguishing it, may in the
appropriate circumstances constitute a factor upon which a
Court may
exercise its discretion to refuse a winding-up order, if such
illiquid counterclaim is
bona
fide
, genuine and
reasonable.
71.
It was aptly stated as
follows in the English case of
Re
Bayoil SA
Seawind
Tankers Corp v Bayoil SA
[1999]
1 All ER 374
:
“
Where a
company had a genuine and serious cross-claim which it had been
unable to litigate, in an amount exceeding the amount of
the
petitioner’s debt, the court should, in the absence of special
circumstances, dismiss or stay the winding-up petition
in the
exercise of its discretion under s 125(1)
a
of the Insolvency Act 1986.
”
[7]
72.
It was this English law
which Van Reenen J applied in the
Ter
Beek
case.
However it is important to note that such states that the claim must
be genuine and serious and in addition one which the
company has been
unable to litigate.
73.
It does not appear that
the illiquid counterclaim raised by the Respondent in this matters is
genuine and serious or one which has
been unable to litigate. However
since the other defences appear
prima
facie
to constitute
good defences in law, the fact that the illiquid counterclaim is set
out in a bald, sketchy and vague manner without
any indication how
the amount is calculated or why damages were suffered, is irrelevant.
74.
The application for the
winding up of the Respondent on the merits can therefore not succeed
since the Respondent has set out defences,
which if proved at trial
would constitute good defences in law and I cannot on the fact set
out in the affidavits find that they
are not
bona
fide
.
75.
Lastly there is the
issue of the costs of the application. Ordinarily the costs would
follow the result and this would mean that
the Applicant would pay
the Respondent’s costs occasioned in opposing the application.
76.
However in the present
matter, the Respondent appears to have played its cards very close to
its chest and from its conduct lured
the Applicant into launching an
ultimately unsuccessful application for liquidation. I say this since
it appears that when the
Applicant launched the application for the
winding up of the Respondent, it did so in the belief that the
capital amount outstanding
and interest thereon had been settled at
the meeting on 9 October 2012. Indeed the Respondent appears to have
made payments of
R50 000.00 per month thereafter, apparently in
accordance with such agreement. When the payments were no longer
made, the
Applicant sent a demand in terms of section 345(1)(a) of
the old Act to the Respondent affording the Respondent twenty-one
days
to appropriately respond thereto. The Respondent did not at that
stage or at any stage prior to the delivery of its answering
affidavit
raise the issue that the parents of the deponent to the
answering affidavit, who purportedly had represented the Respondent
at
such meeting, had not been authorised to conclude the purported
settlement agreement. No doubt had this issue been raised the
Applicant
would not have proceed by way of a liquidation application.
In the circumstances it would be appropriate to order that the
Applicant
pay the Respondent’s costs in opposing the
application from the date when the Respondent delivered the answering
affidavit
and each party to bear its own costs in respect of all
costs occasioned by the application prior to the date that the
answering
affidavit was delivered. To avoid any confusion the costs
prior to the delivery of the answering affidavit are also to include
the costs occasioned by the preparation of the answering affidavit.
77.
In the circumstances I
make the following orders:
77.1
The application for the
winding up of the Respondent is dismissed;
77.2
The parties are to
respectively bear their own costs occasioned by the application prior
to the date of delivery of the answering
affidavit;
77.3
The Applicant is to pay
the Respondent’s costs occasioned by the application from the
date after the delivery of the answering
affidavit to date.
For
the Applicant:
Adv
Van Aswegan
instructed
by
Marais
Stephens Attorneys
For
the Respondent:
Adv
Grundlingh
instructed
by
Nothnagel
Attorneys
Dates of Hearing: 22 July 2014
Date
of Judgment: 25 July 2014
[1]
Gillis-Mason Construction Co (Pty) Ltd v
Overvaal Crushers (Pty) Ltd
1971
(1) SA 524
(T) 529–530
;
Walter
McNaughtan (Pty) Ltd v Impala Caravans (Pty) Ltd
1976 (1) SA 189
(W) 191
;
Machanick Steel & Fencing (Pty) Ltd
v Wesrhodan (Pty) Ltd
1979
(1) SA 265
(W) 269
;
Kalil
v Decotex (Pty) Ltd
1988
(1) SA 943
(AD) 980
; Securefin Ltd v
KNA Insurance and Investment Brokers (Pty) Ltd
[2001]
3 All SA 15
(W) 48
;
Robson
v Wax Works (Pty) Ltd
2001 (3) SA
1117
(C)
;
SMM
Holdings (Pvt) Ltd v Southern Asbestos Sales (Pty) Ltd
[2005] 4 All SA 584
(W) 591–592
[2]
Meyer NO v Bree Holdings (Pty) Ltd
1972 (3) SA 353
(T) 354–355
;
Commonwealth Shippers Ltd v Mayland
Properties (Pty) Ltd
1978
(1) SA 70
(D) 72
;
Hülse-Reutter
v HEG Consulting Enterprises (Pty) Ltd
1998 (2) SA 208
(C)
;
Porterstraat 69 Eiendomme (Pty) Ltd v
PA Venter Worcester (Pty) Ltd
2000
(4) SA 598
(C)
;
Kyle
v Maritz & Pieterse Inc
[2002]
3 All SA 223
(T) 226
[3]
cf
Mann v Goldstein
[1968] 2 All ER 769
(Ch) 773–775
[4]
See 333C-334C
[5]
See 333C-D
[6]
See 334C
[7]
I refer to the
headnote