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[2020] ZAGPJHC 381
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Poly-Bag Industries CC t/a Johnson Agencies v Trio Bags (Pty) Ltd (31872/2019) [2020] ZAGPJHC 381 (20 October 2020)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
1.REPORTABLE:
YES
/NO
2.OF INTEREST TO OTHER
JUDGES:
YES
/NO
3.
REVISED
CASE NUMBER: 31872/2019
In the matter between:
POLY-BAG INDUSTRIES CC t/a JOHNSON
AGENCIES
Applicant
And
TRIO BAGS (PTY)
LTD
Respondent
JUDGMENT
DIPPENAAR J
:
Delivered:
This judgment was handed
down electronically by circulation to the parties’ legal
representatives by e-mail. The date and
time for hand-down is deemed
to be 10h00 on the 20
th
October 2020.
[1]
The applicant sought the provisional
winding up of the respondent on three different grounds. Primarily,
on the basis that the respondent
is deemed to be unable to pay its
debts as envisaged by s345(1)(a) of the Companies Act
[1]
(“the Act”), pursuant to a letter of demand claiming
payment of an amount of R1 145 305.93 under the said section dated
16
July 2019 due, owing and payable in respect of goods sold and
delivered by it to the respondent(“the demand”). In
the
alternative, the applicant relied on s345(1)(c) of the Act in
contending that the respondent was commercially insolvent. Lastly,
reliance was placed on s344(h) of the Act in contending that it was
just and equitable to wind up the respondent.
[2]
The respondent opposed the application on
various main grounds, characterised as: (i) statutory non-compliance
with the provisions
of 346(4A)(a)(i) and (ii) and s345(1)(a) of the
Act; (ii) a bona fide challenge to the respondent’s
indebtedness, invoking
the so called Badenhorst principle
[2]
;
(iii) the existence of irresoluble factual disputes and (iv) no just
and equitable basis to wind up the respondent.
[3]
It was common cause that there had been no
service of the application on the employees of the respondent or any
trade unions representing
them as required by s346(4A)(a)(i) and (ii)
of the Act. It was further not disputed that the respondent had some
48 employees,
of which the applicant only became aware pursuant to
delivery of the respondent’s answering affidavit. The
respondent contended
that this failure rendered the application
fatally defective. The applicant on the other hand contended that it
was only seeking
a provisional winding up order and thus that the
application could be served on the employees and trade unions prior
to the return
date as service was only required prior to the granting
of a final winding up order.
[4]
The provisions of s346(4A)(4)(a) requires
service of the application on the employees and trade unions
representing them “
when an
application is presented to the court in terms of this section
”.
The normal position is that the application is to be served on these
parties prior to the hearing of the application so
that they are able
to assess their position. There may however be circumstances in which
a court may condone the failure to serve
the application on such
parties prior to the granting of a provisional order and it is not
impermissible for a court to do so if
a proper case is made out
[3]
.
Service must however be effected on the employees and any trade
unions representing them, prior to the granting of a final winding
up
order.
[5]
The applicant did not in its affidavits or
service affidavit advance any reasons why it should be excused from
complying with the
statutory requirements pertaining to service on
the respondent’s employees or the trade unions representing
them prior to
the granting of a provisional order. The applicant
further made no attempt in its papers to explain why service was not
effected
on the employees or the trade unions. It did not aver that
there were no employees and no facts were presented that there were
any difficulties with establishing the existence or whereabouts of
the respondent’s employees. Considering the nature of the
respondent’s business it would be reasonable to expect that the
respondent had some employees.
[6]
It would have been a simple matter for the
applicant to serve the application on the employees and trade unions
in accordance with
the methods stated in s346(4A)(a)(ii)(aa). The
application itself was not served on the respondent at its registered
address, as
required, but rather at its principal place of business
on one of its employees.
[7]
The application could further have been
served at any time prior to the hearing of the application, even
after the respondent alerted
the applicant to the issue in its
answering papers in November 2019. The applicant elected not to do
so.
[8]
In my view the applicant has not
established any reasons justifying this court to consider the
granting of a provisional order absent
the requisite service. The
applicant did not seek a postponement to rectify the service issue. I
am not however inclined to dismiss
the application on this basis
alone as there are other issues with the application which render it
necessary to deal with it on
its merits.
[9]
The relevant portion of s345(1)(a)(i)
provides:
“
A company … shall be deemed to be
unable to pay its debts if- a creditor, by cession or otherwise, to
whom the company is
indebted in a sum not less than one hundred rand
then due- has served on the company, by leaving the same at its
registered office,
a demand requiring the company to pay the sum so
due….and the company … has for three weeks thereafter
neglected
to pay the sum or to secure or compound for it to the
reasonable satisfaction of the creditor.”
[10]
The debate centered around whether
substantial compliance with the requirements of s345(1)(a) of the Act
was sufficient
[4]
or whether service had to be effected strictly in compliance with the
provisions of s345(1)(a) of the Act. The applicant in its
papers
provided no reasons why the statutory requirements of s345(1)(a)(i)
were or could not be complied with.
[11]
In
BP and JP
Investments (Pty) Ltd v Hardroad (Pty) Ltd
[5]
,
Moll J held that the provisions of s345(1)(a)(i) must be strictly
complied with. On appeal, Margo J, writing for the full court
stated:
“
But to avail himself of the
benefit of the deeming provisions contained in para (a)(i) of 345(1),
an applicant must at least comply
with the requirements stated by the
Legislature therein. There is no justifiable basis evident for me for
substituting for the
words, ‘by leaving the same at its
registered office’ some other words such as ‘by
delivering it to the company’”
.
[6]
On the facts of that matter, the full court found it unnecessary to
decide the issue of substantial compliance because there was
no proof
that the remand was received by the respondent.
[12]
In the present instance, the applicant made
no attempt to explain why it did not even attempt to comply with the
requirements stated
by the Legislature. The requirements are clear
and the applicant neither served the application on the respondent
nor served it
at its registered office. Instead, the demand was
simply sent via email to the respondent at office@triobags.co.za.
Although it
was common cause that the demand was received by the
respondent and responded to by its attorney of record, there was no
attempt
by the applicant to comply with the statutory requirements of
the section at all. The majority of the authorities favour strict
compliance with the statutory requirements of s345(1)(a)
[7]
.
It is however not necessary to decide the issue in this application
as the applicant in any event falls short of the mark in illustrating
the substantial compliance contended for.
[13]
It follows that the applicant is not
entitled to rely on the deemed insolvency of the respondent as
envisaged by s345(1)(a) of the
Act. It remains to be determined
whether the applicant has proved to the satisfaction of the court
that the company is unable to
pay its debts as envisaged by
s345(1)(c) of the Act.
[14]
In its answering affidavit, the respondent
admitted the applicant’s locus standi. It is bound by that
admission. It however
challenged the amount of the applicant’s
claim and challenged the applicant to provide the purchase orders,
delivery notes
and invoices. It further disputed the repayment terms
of the agreement averred by the applicant.
[15]
It was common cause that the agreement
between the parties was oral and initially the payment terms were
cash on delivery. It was
also common cause that the repayment terms
were orally varied by the parties during or about August 2018. The
applicant averred
that the repayment terms were varied to be 30 days
from date of invoice, whereas the respondent contended that the
parties agreed
that payment would be due when the respondent received
payment from its customers. The amount claimed by the applicant was
also
in dispute. In its replying papers, the applicant provided
substantial documentation pertaining to invoices, delivery notes and
statements, although not all the relevant documents were provided.
The respondent correctly pointed out that documentation was
inconsistent and contradictory and that the aggregate value of these
documents yielded different amounts and did not correlate
with the
amount claimed by the applicant.
[16]
The applicant argued that the respondent’s
version regarding the repayment terms should be rejected on the
papers as untenable,
as its version was not businesslike and
improbable and no documentary evidence was provided corroborating its
version.
[17]
The respondent argued that it disputed
applicant’s claim on bona fide and reasonable grounds,
specifically that there was
any indebtedness due and payable to the
applicant, invoking the so-called Badenhorst
[8]
principle
[9]
.
It was further argued that there were irresoluble disputes regarding
the indebtedness, which should result in dismissal of the
application.
[18]
Considering the respondent’s
admission of the applicant’s locus standi as creditor I am not
persuaded that the respondent’s
reliance on the Badenhorst
principle avails it. However, whilst it was not incumbent on the
applicant to prove its precise claim
in the present proceedings and
its locus standi as creditor admitted, the disputes of fact regarding
such indebtedness and the
inconsistencies in the documentation
presented by the applicant are relevant in considering whether the
applicant has established
that the respondent is unable to pay its
debts and is commercially insolvent, as it alleged.
[19]
The applicant’s own documentation did
not support its version inasmuch as its own invoices referred to the
repayment terms
as cash on delivery and were inconsistent and
contradictory in respect of the amount allegedly due and payable by
the respondent.
Respondent averred that the applicant was its only
creditor. This was not controverted by the applicant. As the
respondent’s
liability to the applicant is central to its
financial position and insolvency, the applicant had to illustrate
that the respondent
is factually insolvent. It was undisputed that
commercial insolvency of the respondent would be sufficient for
purposes of the
application
[10]
.
[20]
In argument, the applicant placed great
reliance on a letter from the respondent’s attorney dated 6
August 2019, pursuant
to its demand. In the letter, the attorney
stated: “
Nonetheless, I understand
your client’s contention- and although our client is indebted
to yours, our client is not insolvent
and the problem is short term.
There is certainly a plan forward and instructions to settle which is
not before me now…”
. It
was argued that this constituted an acknowledgment of liability and
an indication of commercial insolvency
[11]
.
[21]
I agree that the letter does acknowledge an
unidentified indebtedness to the applicant. It was common cause that
the applicant is
a creditor of the respondent. However, insofar as
the letter may be an indication of commercial insolvency, it does not
of itself
constitute sufficient proof of such insolvency for purposes
of s345(1)(c) of the Act.
[22]
On the respondent’s version, it
denied its insolvency and averred that its debtor’s book of
some R1.5 million exceeded
the alleged amount of applicant’s
claim, which if its version of the repayment terms were to be
accepted, would negate any
commercial insolvency. The aggregate
amounts of the invoices and delivery notes produced by the applicant
are inconsistent
and at variance with the amount claimed. Considering
the inconsistencies in the applicant’s case, its criticism of
the respondent’s
lack of documentary corroboration for its
version, lacks merit.
[23]
In my view, there are factual disputes on
these issues which cannot be resolved on the papers insofar as it
relates to the respondent’s
commercial insolvency and the
respondent’s version cannot be rejected as palpably false
[12]
.
[24]
I am thus not persuaded that the applicant
has illustrated on a preponderance of probabilities even on a prima
facie basis that
the respondent is commercially insolvent as
envisaged by s345(1)(c) of the Act
[13]
.
[25]
In my view, the applicant’s reliance
on s344(h) of the Act is misconceived and it has presented no facts
which would render
it just and equitable, as envisaged by the said
section, to wind up the respondent. Although not a
numerus
clausus
, the section does not create
some “catch all” ground for relief
[14]
.
The grounds advanced by the applicant do not render the section
applicable and no case for relief on this basis has been made
out.
[26]
For these reasons, it follows that the
application cannot succeed.
[27]
The normal principle is that costs follow
the result. There is no reason to deviate from this principle.
[28]
I grant the following order:
The application is dismissed with costs.
EF
DIPPENAAR
JUDGE OF THE
HIGH COURT JOHANNESBURG
APPEARANCES
DATES OF HEARING
: 13
October 2020
DATE OF JUDGMENT
: 20
October 2020
APPLICANT’S
COUNSEL
:
Adv. G.V. Meijers
APPLICANT’S
ATTORNEYS
:
Pienaar Kemp Attorneys
RESPONDENT’S
COUNSEL
:
Adv. A. Laher
RESPONDENT’S
ATTORNEYS
:
Wessels & Vorster Inc
[1]
61 of 1973, applicable in terms of item 9 of
schedule 5 of the
Companies Act 71 of 2008
[2]
Badenhorst v Northern Construction Enterprises
Ltd
1956 (2) SA 346T
at 348A-B
[3]
EB Steam (Pty) Ltd v Eskom Holdings SOC Ltd
2015
(2) SA 526
SCA at paras 11-12, 17 and 24-26
[4]
Relying
on Nathaniel & Efthymakis Properties v Hartebeestpoort Landgoed
CC
[1996] 2 All SA 317T
, pertaining to the
Close Corporations Act
[5]
1977 (3) SA 573(W)
and the appeal judgment
1978
(2) SA 481
(T)
[6]
At 487 A-B
[7]
A similar view was expressed by Moleko J in Afric
Oil (Pty) Ltd v Ramadaan Investments CC
2004 (1) SA 35
(N) at 44 A-C
[8]
Fn 2 supra at 348A-B
[9]
The principle is: “
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 stigmatized 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.”
[10]
Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd
2014 (2) SA 528 (SCA)
[11]
Absa Bank Ltd v Hammerle Group 2015 (5) SA 215
(SCA)
[12]
Buffalo Freight Systems (Pty) Ltd v Crestleigh
Trading (Pty) Ltd and Another
2011 (1) SA 85
(SCA)
[13]
Kalil v Decotex
1988 (1) SA 943
(A) at 979E-980F
[14]
Thunder Cats Investments 92 (Pty) Ltd and Another
v Nkonjane Economic Prospecting & Investment (Pty) Ltd and
Others
2014 (5) SA 1
(SCA) par [16]; Rand Air (Pty) Ltd v Ray Bester
Investments (Pty) Ltd
1985 (2) SA 345
(W) 349A-G