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[2021] ZAGPJHC 6
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OMV Proprietary Limited v Alleyroads Construction Proprietary Limited (2019/7213) [2021] ZAGPJHC 6 (2 February 2021)
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
Case No.: 2019/7213
In
the matter between:
OMV
PROPRIETARY
LIMITED
Applicant
and
ALLEYROADS
CONSTRUCTION PROPRIETARY LIMITED
Respondent
(Registration number
2013/097718/07)
JUDGMENT
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email and is deemed to
be
handed down upon such circulation.
Gilbert AJ
1.
The applicant seeks the winding up of the
respondent on the basis that the respondent is unable to pay its
debts. The applicant
asserts that the respondent is indebted to it
for a balance of R46 718.37 for “
goods
sold and services rendered by the Applicant to the Respondent”
,
and which balance remains unpaid notwithstanding the delivery of a
letter of demand in terms of section 345(1)(a) of the
Companies
Act, 1973.
2.
The applicant’s founding affidavit is
terse. The applicant does not specify what goods were sold and what
services were rendered.
Although a statement of account is attached
which reflects how the outstanding balance is calculated, after
deducting payments
made by the respondent over a period from invoiced
amounts over a period, that statement does not set out what goods
were sold
and delivered and what services were rendered. Notably, no
invoices are attached to the founding affidavit which presumably
would
have described the goods that were sold and delivered and the
services that were rendered. This omission by the applicant, as will
appear below, is significant.
3.
But what is clear on the applicant’s own
version is that it both sold goods and rendered services. This
appears from paragraphs
7 and 8.5 of the founding affidavit.
4.
The respondent, faced with this terse founding
affidavit, reciprocates with a similarly terse answering affidavit.
The respondent
asserts that “
[i]t was
a material term of the agreement concluded between the applicant
and the respondent that on conclusion of the installing
of the
concrete slabs, the applicant would supply the respondent with the
relevant certificates and specifications
”.
5.
The respondent continues that the applicant
failed to provide the respondent with the relevant certificates and
specifications.
6.
The
respondent continues in its answering affidavit that “[
t]he
slabs
installed
by the applicant
further suffers from a number of serious defects which, on face
value, would suggest that the applicant employed a combination
of
poor workmanship and/or substandard materials and/or incorrect
aggregate compounds, thus yielding a weak concrete which appears
to
be unfit for purpose.
”
[1]
The respondent attaches photographs of concrete slabs showing cracks.
7.
The applicant’s replying affidavit does
little to clarify the situation. Remaining elusive are any documents,
such as invoices,
to demonstrate what goods were sold and delivered
and what services were supplied by the applicant to the respondent.
8.
The applicant in its replying affidavit contends
that it is “
a materials supply company
.
Therefore, the Applicant supplied ready-mixed
concrete to the Respondent. There was no agreement or undertaking by
the Applicant
to design, construct or install concrete slabs
”.
The applicant therefore reasons it cannot be responsible for the
defects complained of by the respondent, such as the cracks
in the
concrete slabs.
9.
This response, for the applicant, has several
difficulties. On the applicant’s own version in its founding
affidavit, it did
more than sell materials to the respondent. As
appears above, on its own version it also rendered services to the
respondent. In
the absence of the applicant clarifying what those
services were, or even what goods were supplied, it cannot seek to
sidestep
the dispute raised by the respondent that the concrete slabs
that the respondent contends were supplied by the applicant were
defective.
As stated, on the applicant’s own version, it did
render services and in the absence of an explanation what those
services
were, the respondent’s version that those services
included the installation of the concrete slabs cannot be rejected.
10.
As I have already stated, the respondent does not
in its replying affidavit adduce any contemporaneous documents that
may be of
assistance, such as the invoices. The only documents
attached to the replying affidavit are three inspection reports. The
applicant
adduces into evidence these inspection reports to
demonstrate that the applicant is in possession of inspection reports
and that
these could be made available to the respondent. During
argument the applicant’s counsel submitted that these
inspection
reports also demonstrated that the goods were not
defective. An
ex facie
consideration of the inspection reports, which are technical in
nature, does not assist in demonstrating that such goods as were
supplied were not defective, or even what goods were supplied or what
services were rendered.
11.
The
applicant seeks that the respondent be placed under final winding-up.
Stripped of its nuances, the threshold that the applicant
would have
to cross to persuade the court to grant a final winding up order
(in contrast to a provisional winding up
order) is that of the
usual
Plascon Evans
approach
[2]
where the
respondent’s version is effectively to be preferred over that
of the applicant
[3]
unless
the respondent’s version can be rejected as far-fetched and
fanciful.
[4]
12.
In my view, the respondent’s version cannot
be rejected as far-fetched and fanciful, and a final order cannot be
granted.
The respondent contends that the applicant installed
defective slabs and the photographs show defects in the slabs.
13.
Has
the applicant crossed the threshold for a provisional winding up
order?
[5]
14.
It is
not altogether a simple exercise in delineating precisely what
threshold needs to be satisfied to enable a provisional liquidation
order to be granted. A consideration of the various decisions that
traverse the standard, such as the oft-cited
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
,
[6]
and
Kalil
v Decotex (Pty) Limited,
[7]
and
the more recent pronouncements, reveals that they are not entirely
reconcilable. Nonetheless, particularly useful is the judgment
of
Rogers J in
Gap Merchant
Recycling CC v Goal Reach Trading 55 CC
,
[8]
from which the following can be extracted:
14.1.
If
there are factual disputes relating to the requirements for a
winding-up
other
than respondent’s liability to the applicant, has the applicant
established those requirements on a
prima
facie
basis, i.e. on a balance of probabilities with reference to all
the affidavits (without employing
Plascon-Evans
).
[9]
14.2.
If
there are factual disputes concerning the respondent’s
liability to the applicant and the applicant shows
prima
facie
its claim on a balance of probabilities with reference to all the
affidavits,
[10]
then the onus
is on the respondent to show that the debt is
bona
fide
disputed on reasonable grounds, i.e. the
Badenhorst
rule comes into play. If the respondent does demonstrate this, then
the application should (rather than necessarily must)
[11]
be dismissed.
[12]
This means
that even if the applicant can demonstrate its claim on a balance of
probabilities, a provisional winding-up order can
be refused if the
respondent nevertheless demonstrates that the debt is
bona
fide
disputed on reasonable grounds.
[13]
14.3.
Bona
fides
and
reasonableness are two distinct requirements.
[14]
14.4.
As to
whether the indebtedness is
bona
fide
disputed, the court must look to the respondent’s subjective
state of mind. Bald allegations lacking particularity are unlikely
to
persuade a court that the respondent is
bona
fide
.
[15]
14.5.
As to
whether indebtedness is disputed on
reasonable
grounds
,
the court looks to whether there are facts, if proven at trial, that
would constitute a defence. This requires more than bald
allegations
lacking in particularity.
[16]
15.
Generally,
a referral to oral evidence has more of a role to play at the final
stage than at the provisional stage.
[17]
16.
If at
the provisional stage a
prima
facie
case is not made out on a balance of probabilities with reference to
all the affidavits, the application should be dismissed, unless
the
applicant seeks a referral to oral evidence. In that event, the more
the balance on the probabilities is tipped in favour of
the
applicant, the more likely the referral and vice versa. It would only
be in rare cases that a court would order oral evidence
where the
preponderance of probabilities on the affidavits favours the
respondent.
[18]
17.
At the
provisional stage, the court is not likely to refer the matter to
oral evidence where the probabilities favour the applicant,
and a
prima
facie
case is made out (as it is only necessary at the provisional stage to
make out a
prima
facie
case with reference to all the affidavits). The court may grant a
provisional order as the matter can be referred to oral evidence
at
the final stage if so requested by the respondent.
[19]
18.
At the
final stage, although the cases do refer to the court being required
to be satisfied on a balance of probabilities before
granting a final
order, the
Plascon-Evans
approach remains applicable.
[20]
It is not about assessing whether on all the affidavits the applicant
has established its claim (as was the assessment at the provisional
stage), but on the application of the
Plascon-Evans
approach where the respondent’s version is effectively
preferred.
19.
It
nonetheless remains open for the parties to seek a referral to oral
evidence at the final stage,
[21]
and that is where a referral would be more commonplace than at the
provisional stage. If at the final stage the probabilities favour
the
applicant, a referral to oral evidence is particularly apposite where
viva
voce
evidence has reasonable prospects of disturbing the probabilities
already in favour of the applicant. If at the final stage the
probabilities favour the respondent, the court should dismiss the
application rather than refer to oral evidence, particularly
as
liquidation proceedings are not the forum to determine
bona
fide
disputed
claims and where the
Plascon-Evans
approach effectively prefers the respondent’s version.
20.
Applying these principles to the present matter,
the first step in considering whether a provisional order may be
granted is to
consider whether the applicant has shown
prima
facie
its claim on a balance of probabilities
with reference to all the affidavits.
21.
In my view, the applicant fails at the first
hurdle. It does not succeed in demonstrating that it
prima
facie
has a claim on a balance of
probabilities after considering all the affidavits. As set out above,
the applicant hardly, if at all,
gets out the starting blocks in
demonstrating that an indebtedness is owing to it given the paucity
of the evidence adduced by
it in support of its claim in the founding
affidavit. As sparse as the answering affidavit may be, it does, in
my view, raise sufficient
of a dispute that it would have been
expected of the applicant to deal comprehensively with that dispute
in a replying affidavit
(assuming that the applicant could have
overcome a challenge that it may then be making out its case in a
replying affidavit) so
as to be able to persuade a court that upon a
consideration of all the affidavits it has
prima
facie
established its claim.
22.
The applicant had two opportunities, in the
founding affidavit and then in the replying affidavit, to set out its
claim fully but
failed to do so. The invoices that would presumably
have shed light on what goods were supplied and what services were
rendered,
and so enable an assessment of the respondent’s
assertion that the applicant installed concrete slabs (and did not
only supply
ready-mixed cement) and that those slabs were defective,
could have been assessed.
23.
As the applicant has failed in its application,
the respondent should be awarded costs.
24.
Applicant’s counsel submitted that given
the terseness of the answering affidavit that each party should be
ordered to pay
their own costs should the liquidation application
fail. Although an eyebrow could be raised at the terseness of the
answering
affidavit, upon reflection it may be unfair to fault the
respondent for the terseness of its answering affidavit if the
applicant
in the first instance hardly, if at all, made out any a
case in its founding affidavit.
25.
What remains is the scale of the costs to be
awarded against the applicant. The respondent sought a punitive costs
order.
26.
It is trite that a liquidation application is not
be used
in terrorem
to
enforce a debt that is
bona fide
disputed
on reasonable grounds. There is no evidence that the respondent
responded to the statutory section 345 letter served
upon it in
December 2018 and that therefore the applicant should have been
forewarned not to institute liquidation proceedings
two months later,
in February 2019. The applicant cannot be faulted for having done so
to such an extent that it should be ordered
to pay costs on a
punitive scale.
27.
Once the answering affidavit was filed, the
applicant persisted in its liquidation application. Respondent’s
counsel pointed
out that the respondent in its answering affidavit
stated that it had made payment into its attorney’s trust
account on 10
May 2019 coupled with a tender that the monies will be
held as security pending the resolution of the dispute between the
parties
provided that the applicant instituted proceedings with
thirty days. Respondent’s counsel submits that that in
light
of this tender, the applicant’s persistence in the
liquidation proceedings constituted an abuse. I agree.
28.
The applicant must have been alive to the dispute
and that it should be resolved by way of a trial action. If the
dispute was not
bona fide
asserted by the respondent on reasonable grounds, this should have be
rebutted by the applicant with sufficient detail in its replying
affidavit. The replying affidavit does not seek to substantively
address the dispute that is raised by the respondent, or to seriously
engage with the tender.
29.
In my view, the use of liquidation proceedings,
or at the very least the persistence in liquidation proceedings after
receipt of
an answering affidavit, should be discouraged where a
suitable tender has been made by a respondent that will enable the
dispute
to be determined with security in place and which may avert
liquidation proceedings that may otherwise drag out for many months
placing the respondent in a precarious position. In the
circumstances, a costs order on an attorney and client scale after
the
tender was made is appropriate.
30.
The following order is made:
30.1.
The application is dismissed.
30.2.
The applicant is to pay the costs of the
application, on a party and party scale until 10 May 2019 and
thereafter on an attorney
and client scale.
Gilbert AJ
Date of
hearing:
27 January 2021
Date of judgment:
2 February 2021
Counsel for the
Applicant:
Mr A M Viviers
Instructed
by:
Theron Jordaan & Smit (Klerksdorp)
c/o Couzyns
Attorneys
Counsel for the
Respondent:
Mr Mostert
Instructed
by:
Kyriacou Inc
[1]
The
emphasis is mine.
[2]
Paarwater v South
Sahara Investments (Pty) Limited
[2005] 4 All SA 185
(SCA) para [3] and [4].
[3]
Final relief can only be granted on motion if the facts as stated by
the first respondent, together with the admitted facts
in the
applicant’s affidavits, justify the granting of the relief:
Plascon-Evans Paints
Limited v Van Riebeeck Paints (Pty) Limited
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634 E G, as reaffirmed in
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009
(2) SA 277
(SCA) at 290 D-G. Effectively, any factual disputes ought
to be resolved by accepting the respondents’ version, save
where
such version is “
so
far-fetched or clearly untenable that the court is justified in
rejecting (it) merely on the papers”: Botha v Law Society,
Northern Provinces
2009
(1) SA 277
(SCA) at para 4, with reference to
Plascon-Evans
Paints
.
[4]
Once the respondent’s version is rejected as far-fetched and
fanciful, there would only be one version before the
court, namely
that of the applicant and therefore the
Plascon-Evans
approach does not
come into play as there are no longer conflicting factual versions.
[5]
The
exposition in the following paragraphs appears in my judgment handed
down on 1 February 2021 in
Bravura
Capital (Pty) Limited v Drive Path Trade & Invest (Pty) Limited
,
case number 29755/2019, Gauteng Division , Johannesburg.
[6]
1956 (2) SA 346
(T) at 347H – 348C, and from which comes the
often referred to ‘Badenhorst rule’.
[7]
1988 (1) SA 943 (A).
[8]
2016 (1) SA 261 (WCC).
[9]
Para 20.See also para 7 and 8 of
Orestisolve
p/l t/a Essa Investments v NDFT Investment Holdings p/l
2015 (4) SA 449
(WCC)
;
para 9 of
Afgri
Operations Ltd v Hamba Fleet (Pty) Ltd
[2017]
ZASCA 24
(24 March 2017)
[10]
The
Full Bench of this Division in
Total
Auctioneering Services and Sales CC t/a Consolidated Auctioneers v
Norfolk Freightways CC
[2012] ZAGPJHC 211 (30 October 2012), para 13 describes this as an
exception to the general reluctance of the court in motion
proceedings to decide disputes of fact purely on the basis of the
probabilities, citing
Kalil
v Decotex
at 979G-H. See also
Reynolds
NO v Mecklenberg (Pty) Ltd
1996 (1) SA 75
(W) at 80G to 81A.
[11]
See
the discussion in
Kalil
v Decotex
at 980G-I as to whether the Badenhorst rule (
namely
that where the respondent disputes liability for a debt “
bona
fide en op redelike ground”… “dan
moet
die aansoek afgewys word
”)
is
inflexible, or is applicable only where it appears that the
applicant is abusing the winding-up procedure as a means of putting
pressure on a company to pay a debt that is
bona
fide
disputed. This discussion features in
Hannover
Group Reinsurance (Pty) Ltd and another v Gungudoo and another
[2011] 1 All SA 549
(GSJ) para 11 to 16, where the court expresses,
in effect, doubt whether the Badenhorst rule is immutable, as
contrasted to the
court, at the provisional stage, doing “
its
best to decide the probabilities by taking into account the full
conspectus of allegations and denials as they appear in the
affidavits, read as a while, placed before it.”
[12]
Para 20, citing
Hulse-Reutter
and another v HEG Consulting Enterprises
1998 (2) SA 208
(C) at 218D – 219C. See also
Orestisolve
paras 7 and 8;
Afgri
Operations
paras 6,
14, 17.
[13]
Payslip Investment
Holdings CC v Y2K Tec Ltd
2001 (4) SA 781
(C) at 783I.
[14]
Para
23,
Standard
Bank of SA Ltd v El-Naddaf and another
1999 (4) SA 779
(W), at 748G-895B, which in turn cites
Badenhorst
.
[15]
Para
24 to 26, citing
Badenhorst
and
El-Naddaf.
[16]
Para 26; citing
Hulse-Reutter
.
[17]
In
Provincial
Building Society of South Africa v Du Bois
1966 (3) SA 76
(W), the court at 79H to 80E expressed a somewhat
firm view that save in exceptional circumstances, a referral to oral
evidence
should not be resorted to at the provisional stage, and
that a provisional order should be granted. Subsequent support for
this
approach by our Full Bench is found in
Total
Auctioneering
above,
para 14.
[18]
Kalil
ay 979E-I.
[19]
Kalil
at 979B-E.
[20]
See
Paarwater
above,
para 3 and 4.
[21]
Uniform
Rule
6(5)(g) expressly allows for such a referral. See also
Kalil
at
979B-E, citing
Wackrill
v Sandton International Removals (Pty) Ltd
1984
(1) SA 282
(W) at 285H – 86A.