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[2021] ZAGPJHC 371
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ATLAS COPCO Compressor Technique v Nugen Technologies (Pty) Ltd (17889/2019) [2021] ZAGPJHC 371 (27 May 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 17889/2019
REPORTABLE:
/NO
OF
INTEREST TO OTHER JUDGES: /NO
REVISED:
/NO
DATE:
27/5/2021
In
the matter between:
ATLAS
COPCO COMPRESSOR TECHNIQUE
Applicant
A
DIVISION OF ATLAS COPCO INDUSTRIAL
SOUTH
AFRICA (PTY) LTD
and
NUGEN
TECHNOLOGIES (PTY)
LTD
Respondent
JUDGMENT
Delivered:
By transmission to the parties via email and uploading onto Case
Lines the Judgment is deemed to be delivered. The date for hand-down
is deemed to be 27 May 2021
SENYATSI
J:
[1]
This is an opposed application
for the final winding up of the respondent in terms of the
provisions
of s 334, and s 345 of the Companies Act 61 of 1973 (“the 1973
Act”)
[2]
The applicant avers that it is a bona fide creditor of the respondent
in the undisputed
amount of R4 196 918.08 which it alleged arose out
of breach of the respondent’s payment obligations towards the
applicant
in terms of a written agreement. The obligations
furthermore, are in relation to goods sold, delivered, and
commissioned in terms
of the said agreement pertaining to the two
Eskom projects, namely Medupi and Kusile.
[3]
The respondent was contracted by Eskom to provide power generation
capacity systems
to it. This capacity covers mechanical, electrical,
civil, and structural engineering areas and in particular power
transformers
and power generators including auxiliary solutions.
[4]
The respondent was contracted to construct, commission, and complete
the Kusile Power
Station in Emalahleni, Mpumalanga, and the Medupi
Power Station near Lephalale, Limpopo. The respondent in turn
procured goods
and services from the applicant in terms of the said
written agreement.
[5]
The respondent would be bound by the applicant’s standard in
terms and conditions
of trade attached to the agreement concluded
between the parties. The respondent would place orders or goods from
time to time.
Payment to the applicant for the goods purchased would
be within 30 days from the date of the tax invoice for the goods sold
and
delivered by the applicant to the respondent.
[6]
The respondent purchased and was supplied with goods by the applicant
with an aggregate
value of invoices amounting to R14,5 million. Of
this amount, the respondent paid R10.7 million. This was in respect
of the Medupi
project and the balance is R3.8 million.
[7]
In respect of the Kusile project, goods were also sold and delivered
to the respondent
by the applicant aggregating the sum of R15, 5
million in total invoices of which R14.8 million was paid by the
respondent leaving
the balance of R676 000.
[8]
The applicant contends that as of 6 March 2019 and in breach of the
agreement, the
respondent was in arrears in the aggregate amount of
R4.5 million.
[9]
The Applicant sent a demand letter for payment through its lawyers,
for payment on
3 February 2019 in terms of section 345 (1)(a)(1) of
the Companies Act of 1973 read with item 9 of Schedule 5 of the
Companies
Act 2008 calling on the respondent to make payment to the
applicant of the full amount outstanding in relation to the Medupi
Project.
The amount demanded was R3.8 million. The demand letter
advised the respondent that if it failed to make payment within three
weeks
of the receipt of the letter, the respondent would be deemed to
be unable to pay its debts.
[10]
In opposition to the application, the respondent contends that the
application amounts to an
abuse of court process. The basis for the
contention is that winding-up proceedings are not a debt collection
mechanism. It furthermore
contends that the debt relied on to pursue
these proceedings is disputed on bona fide and reasonable grounds. It
further contends
that the original service of the section 345 letter
of demand on the respondent, its employees, and trade unions was
defective.
[11]
The respondent furthermore contends that the terms of the contracts
between the parties are in
dispute and also that the invoices were
issued prior to the hand-over commissioning and that the amount was
not due, owing and
payable in terms of the agreement. It furthermore
contends that certain payments were made subsequent to the s 345
letters of demand
and these were tendered by the respondent as the
only payments, in fact, due and payable. These payments, so contends
the respondent
were accepted by the applicant in its supplementary
affidavit.
[12]
The respondent also contends that each project for which goods were
sold and delivered, a 10%
retention amount…. This is the fee
that, will be retained for a period after the hand-over and
commission of each project
for the latent defects. In respect of the
Kusile project, the retainer of 10% was the sum of R 1 192 188.06
in total.
[13]
The retainer for the Medupi project was also 10% which amounted to R
1 471 965.03. However, it
must be maintained at this stage that in
both projects, the 10% retention was related to the respondent who
contracted directly
with Eskom. The contract forming the basis of
this winding-up application had no such provision. For that reason,
it was not applicable
to the applicant and consequently bears no
relevance to the rights and obligations created by the agreement
forming the subject
of this applicant. I say so because, in a letter
dated 1
st
October 2018 by the respondent to the applicant,
the respondent states that it has issued a notice of the dispute to
Eskom (Medupi),
this is a result of several disagreements in terms of
the contract interpretation thereof and payment restraints, as a
result of
this. The letter apologised for the disruption but it is
common fact between the parties that this dispute did not involve the
applicant.
[14]
The legal principles applicable in this application are trite.
Section 345 of the (“1973
Act”) provides as follows:
“
345.
When company deemed unable to pay its debts.-
(1)
A company or body corporate shall be deemed to
be unable to pay its debts if-
(a) a creditor, by
cession or otherwise, to whom the company is indebted in a sum not
less than one hundred rand then due-
(i) has served on the
company, by leaving the same at its registered office, a demand
requiring the company to pay the sum so due;
or
(ii) in the case of
any body corporate not incorporated under this Act, has served such
demand by leaving it at its main office
or delivering it to the
secretary or some director, manager or principal officer of such body
corporate or in such other manner
as the Court may direct, and the
company or body corporate has for three weeks thereafter neglected to
pay the sum, or to secure
or compound for it to the reasonable
satisfaction of the creditor; or
(b) any process issued
on a judgment, decree or order of any court in favour of a creditor
of the company is returned by the sheriff
or the messenger with an
endorsement that he has not found sufficient disposable property to
satisfy the judgment, decree or order
or that any disposable property
found did not upon sale satisfy such process; or [Para. (b)
substituted by s. 26 of Act No.
59 of 1978.]
(c) it is proved to
the satisfaction of the Court that the company is unable to pay its
debts.
(2) In determining for
the purpose of subsection (1) whether a company is unable to pay its
debts, the Court shall also take into
account the contingent and
prospective liabilities of the company."
It
is without doubt that once so served with the letter of demand for
payment, if the company neglects or fails to make payment
within 21
days, then it is deemed unable to pay its debts.
[15]
In applying the test whether a company is unable to pay its debts the
court in
Boschpoort
Ondernemings Pty Ltd v ABSA Bank Ltd
[1]
held as follows:
[16] For decades
our law has recognised two forms of insolvency: factual insolvency
(where a company’s liabilities exceed
its assets) and
commercial insolvency (a position in which a company is in such a
state of illiquidity that it is unable to pay
its debts, even though
its assets may exceed its liabilities).
[17] That a company's
commercial insolvency is a ground that will justify an order for its
liquidation has been a reality of law
that has served us well through
the passage of time. The reasons are not hard to find: the valuation
of assets, other than cash,
is a notoriously elastic and often highly
subjective one; the liquidity of assets is often more viscous than
recalcitrant debtors
would have a court believe; more often than not,
creditors do not have knowledge of the assets of a company that owes
them money
- and cannot be expected to have, and courts are more
comfortable with readily determinable and objective tests such as
whether
a company is able to meet its current liabilities than with
abstruse economic exercises as to the valuation of a company's
assets.
Where the test for solvency in liquidation proceedings to be
whether assets exceed liabilities, this would undermine there being
a
predictable and therefore effective legal environment for the
adjudication of the liquidation of companies: one of the purposes
of
the new Act set out in s 7(1) thereof.
[18] In view of the
long established and well-settled practice in our courts that
commercial insolvency justifies the liquidation
of a company, it must
be presumed that the legislature was aware of this fact. The
principle that Parliament is presumed to be
acquainted with the
interpretation of earlier legislation by the court, applies where
there has been a settled and well-recognised
judicial interpretation
before the relevant legislation was passed.
[19] It has also
long been a construction of interpretation of statutes that, in the
absence of express wording to the contrary,
the legislature did not
intend to alter the law as it had previously stood. Accordingly,
it must be presumed that the legislature
deliberately refrained from
defining ‘solvency’. It must have done so with a view to
ensuring that the well-oiled machinery
of the courts in matters of
company liquidations should not stall. The legislature must have been
content that prevailing judicial
interpretations of solvency and
insolvency respectively should continue to have effect. The meaning
of those terms must be one
that leads to a sensible and business-like
result. See Natal Joint Municipal Pension Fund v Endumeni
Municipality.
[20] I
referred earlier to the fact that s 345 of the old Act was retained
in terms of subitem 9(1) of schedule 5 of the new
Act. Subitem 9(2)
provides that s 344 of the old Act shall not apply to the liquidation
of ‘solvent’ companies, ‘except
to the extent that
it is necessary to give full effect to the provisions of Part G of
Chapter 2’. Part G of chapter two of
the new Act, more
particularly ss 79 to 81 thereof, relate to the winding-up of solvent
companies. As we have seen, s 344(f) and
s 345 of the old Act are
fastened together by the clasp in s 344(f) that refers to a company
being unable to pay its debts ‘as
described in s345’. The
seeming anomaly may be resolved if one recognises that s 345 was
retained in subitem 9(1) to enable
a determination to be made in
terms of s 79(3) of the new Act that a company ‘is or may be
insolvent’ - even though
the application was made in terms of
either s 80 or 81 for its winding-up as a so-called ‘solvent’
company. The deeming
provisions concerning the inability to pay its
debts, contained in s 345 of the old Act may be used to establish the
insolvency
of a company. In this regard, I agree with King AJ in
Standard Bank of SA Ltd v R-Bay Logistics CC.
[21] This conclusion
is significant in determining what is meant by a ‘solvent
company’. The retention by the legislature
in the context of a
winding-up of a solvent company in the new Act, of the deeming
provisions as to when a company is unable to
pay its debts as
contained in s 345 of the old Act, is a clear indication of what is
meant by an insolvent company in the new Act.
It can only mean a
company that is commercially insolvent. It therefore follows that a
solvent company must be the converse, namely
a company that is
commercially solvent.
[22] Consequently, in
order for a solvent company to be wound-up in terms of either s 80 or
81 of the new Act, it must be commercially
solvent. If it is
commercially insolvent it may be wound-up in accordance with chapter
14 of the old Act, as is provided for in
subitem 9(i) of schedule 5
of the new Act.
[23]
The confusion which has arisen as to when a company may be wound
up in terms of the new Act or in terms of the old Act
is thus
eliminated. The so-called factual solvency of a company is not, in
itself, a determinant of whether a company should be
placed in
liquidation or not. The veracity of this deduction may be
illustrated, as in the present case, where the issue has arisen
as to
whether a company which is factually solvent, but commercially
insolvent, is to be wound-up in terms of the new Act or the
old Act.
To attribute so-called ‘factual solvency’ to the meaning
of the term ‘solvent company’ in the
new Act would lead
to an unbusiness-like result that would not make sense.”
[16]
It is therefore now settled that a company is unable to pay its debts
when it is unable to meet
current demands on it or its day-to-day
liabilities in the ordinary course of business. The test is not
whether the company's liabilities
exceed its assets, for a company
can be at the same time commercially insolvent and factually
insolvent.
[2]
It follows that
the defence by the respondent that it is solvent is of no
consequence.
[17]
I now deal with the other defences raised by the respondent in regard
to the contention that
the letter of demand did not comply with the
requirements of s 346 of the 1973 Act, I hold the view that this
defence has no legal
basis as the applicant sent subsequent demand
letters to the registered addresses of the respondents. The defence
is in my view
simply technical and intended to delay these
proceedings.
[18]
The respondent also raised a defence by disputing the terms of the
agreement. There is no factual
or legal basis for this contention.
The payments were made relating to both Medupi and Kusile projects
totalling over R30 million
to the applicant. These were all based on
the agreement and the standard terms and conditions of the applicant.
The fact that the
respondent had declared a dispute with Eskom has no
bearing on its contractual obligations with the applicant. The
defence based
on the alleged disputed agreement must therefore fail.
[19]
The respondent averred that the application ought to be dismissed due
to a dispute of fact. I
am not in agreement with this submission in
that the debt itself cannot be disputed. The bone of contention by
the respondent is
that because of the 10% retainer between itself and
Eskom, the applicant is not entitled to raise invoices as it did. As
already
stated above, there is no legal basis to tie up the applicant
to the relationship the respondent has with Eskom. This is not borne
out by any evidence from the agreement between the applicant and
respondent.
[20]
Consequently, I am of the view that the respondent is unable to pay
its debts within the purview
of s 345 of the 1973 Act. It follows
that the respondent stands to be wound up due to commercial
insolvency.
ORDER
[21]
The following order is made:
(a)
The respondent is placed under final liquidation in the hands of the
Master
of this Court;
(b)
The costs of this application are costs in liquidation of the
respondent.
SENYATSI
ML
Judge
of the High Court of South Africa
Gauteng
Local Division, Johannesburg
REPRESENTATION
Date
of hearing: 08 October 2020
Date
of Judgment: 27 May 2021
Applicants
Counsel: Adv P Lourens
Instructed
by: Werksmans Attorneys
Respondent’s
Counsel: Adv JP Snijders
Instructed
by: Cox Yeats Attorneys
[1]
2014 (2) SA 518
(SCA) at
para [16] to [23]
[2]
See Murray and Others
NNO v African Global Holdings (Pty) Ltd (306/2019)
[2019] ZASCA 152
(22 November 2019)