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[2021] ZAGPJHC 75
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Guardrisk Premium Finance (Pty) Limited v Buphe Management (Pty) Limited (39696/2019) [2021] ZAGPJHC 75 (3 June 2021)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
JOHANNESBURG
(1)
REPORTABLE: No
(2)
OF INTEREST TO OTHER JUDGES: No
Case No.:
39696/2019
In
the matter between:
GUARDRISK PREMIUM
FINANCE (PTY)
LIMITED
Applicant
and
BUPHE MANAGEMENT
(PTY) LIMITED
Respondent
JUDGMENT
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email.
Gilbert AJ:
1.
The
applicant seeks the winding-up of the respondent in terms of
section 344(f) as read with section 345(1)(a) and (c) of the
Companies Act, 1973.
[1]
2.
The applicant contends that it is a creditor of
the respondent and that the respondent is deemed to be unable to pay
its debts.
3.
It is unnecessary to detail the nature of the
indebtedness due by the respondent to the applicant as the respondent
has on its own
version, on at least two occasions, admitted an
indebtedness to the applicant in a sum of R706 198.11. Suffice
it to state
that the indebtedness arose from the applicant providing
a financing solution to the respondent in respect of short-term
insurance
premiums which the respondent collects from its clients on
a monthly basis.
4.
The
applicant contends that the respondent is deemed to be unable to pay
its debts because the respondent has for three weeks after
service
upon it in June 2019 of a demand in terms of section 345(1)(a)
neglected to pay the sum reflected in the demand, or to
secure or
compound for it to the reasonable satisfaction of the creditor
[2]
and that in any event it has been proven to the satisfaction of the
court that the respondent is unable to pay its debts.
[3]
The respondent disputes this, contending that it
bona
fide
disputed the indebtedness on reasonable grounds (more particularly
that the amount claimed in the demand of R933, 483.90 is incorrect)
and, as developed in argument before me, the respondent’s
failure to pay its admitted indebtedness is reflective of an
unwillingness
rather than an inability to pay its debts.
5.
It is appropriate to describe certain
developments that took place in court before argument commenced on
the merits of the application.
6.
The applicant previously in June 2020 launched an
interlocutory application to compel the respondent to deliver its
heads of argument
and practice note so that the matter could proceed
on an opposed basis. This is because the respondent had not done what
is required
of its procedurally to enable the matter to be enrolled
for hearing. The respondent did then belatedly deliver heads of
argument.
7.
The applicant proceeded to enrol the matter and
it came before Meyer J on 26 November 2020 on an opposed
basis. The matter
was again postponed that day, with the respondent
to pay the costs occasioned by the postponement on the opposed
attorney and client
scale. The court order expressly provides in
paragraph 3 that “
it is recorded
that this is the second time that the Respondent’s attorneys of
record withdrew at the eleventh hour before
the hearing of the
application
”.
8.
The respondent’s previous attorneys of
record were Strydom M & Associates.
9.
When
the matter was called before me on 31 May 2021, Ms Matlala
appeared for the respondent, having been instructed that morning
by
whom I told are new attorneys, Thompson Attorneys.
[4]
As Thompson Attorneys had not formally filed notice of appointment as
attorneys of record for the respondent, I stood the matter
down to
enable the respondent’s counsel to seek her instructing
attorney’s presence in court on the virtual platform
and to be
in a position to furnish her with instructions. Ms Thompson then
joined the court proceedings.
10.
Respondent’s counsel, after confirming her
instructions, informed the court that her primary instructions were
to make a settlement
proposal in open court. Respondent’s
counsel proceeded to propose in open court, i.e. on a with
prejudice basis, that
the respondent undertook to pay R300 000.00
by Friday, 4 June 2021, followed by instalments of R67 699.35
over the
next months, together with a tender of costs in relation to
the hearing of 31 May 2021. The total of the tendered amounts,
other than costs, was R706 198.11, corresponding with what the
respondent contends on its version is owing by it to the applicant.
11.
Mr Pocock, who appeared for the applicant, upon
instructions rejected the offer.
12.
Respondent’s counsel then sought for a
postponement of the application on behalf of the respondent. I
refused the application,
for the reasons set out in my
ex tempore
judgment.
13.
Respondent’s counsel indicated that her
instructions were to argue the main application on its merits.
14.
The matter then proceeded on in its merits.
15.
By reason of the respondent’s with
prejudice proposal made in court, the respondent had admitted its
indebtedness to the applicant
in the amount of R706 198.11. When
I enquired of respondent’s counsel what to make of the proposal
that this admitted
amount be paid over a period and so may be
indicative of an inability on the part of the respondent to pay its
debts, the submission
was that the tender to pay the admitted amount
over a period stemmed from an unwillingness rather than an inability
to pay the
full amount. I deal with this later in my judgment.
16.
Although the applicant initially sought a final
winding up order, during the course of argument and after
dealing with various
deficiencies in relation to the furnishing of
the application to employees as required in terms of
section 346(4A)(a)(ii)
of the Companies Act, 1973, the applicant
instead sought, at this stage, a provisional winding up order.
This is because in
the absence of substantial compliance with the
requirements of section 346(4A), a final order cannot be
granted.
17.
I refer to my judgment in
Bravura
Capital (Pty) Limited v Drive Path Trade & Invest (Pty) Limited
t/a Southern Energy
[2021] ZAGPJHC 3
(1 February 2021) in which I detailed what is required of an
applicant when furnishing a copy of the application
to employees as
envisaged in section 346(4A)(a)(ii). I refer in particular to
paragraphs 6 to 25 of that judgment.
18.
Although an affidavit was filed on behalf of the
applicant in terms of section 346(4A)(b) which sought to prove
that a copy
of the application had been furnished to employees, that
affidavit does no more than refer to returns of service that the
applicant
contends constitutes compliance with the requirement.
19.
The first return of service relied upon by the
applicant reflects that a copy of the application was “
served
by affixing it to the main gate in view of all the employees to see
”
at the “
employment address of the
employees
” at 17 Wolhuter Street,
Parkrand, Boksburg. But the preceding return of service attached to
the compliance affidavit
reflects that when the same deputy sheriff
attended at the same address one minute earlier in order to serve a
copy of the application
on the respondent itself at that address, she
was informed by the occupier of that address, a Mr Snyman, that he is
renting at
the given address and that the respondent is unknown to
him. The difficulty is evident – how can a copy of the
application
left at this address constitute substantial compliance
with the requirement that a copy of the application be furnished to
employees
where the deputy sheriff had just been informed by the
occupant of that address that the defendant is unknown at that
address.
It therefore follows that there can be no employees at that
address.
20.
The second return of service relied upon by the
applicant reflects that a copy of the application was served on the
employees at
a “
residence
”
in Highway Gardens, Germiston North by affixing a copy to the
principal door as the deputy sheriff found the premises locked
and
unattended. The sheriff describes in his return that this is “
the
given address on behalf of the employees of the respondent”
.
But nowhere is it explained why this address is of any relevance to
the employees. But what does appear as an annexe to the compliance
affidavit is another return of service reflecting that the same
deputy sheriff was able at exactly the same time to serve a copy
of
the application on the respondent by way of service on a Mr Kikomba,
a manager at that address, and which address is stated
to be the
respondent’s registered address. Again, how can the same
premises be simultaneously locked and unattended when
Mr Kikomba is
present. In any event, the address is not the registered address of
the respondent, which is stated in the founding
affidavit to be at
213 Rondebult Road, Farrarpark, Boksburg.
21.
The returns of service do not reflect substantial
compliance, if any compliance at all, with the statutory requirement
that a copy
of the application be furnished to employees. The
distinct impression is that little more than lip service was paid to
this requirement,
and serious questions arise as to the credibility
of what is stated in these returns of service, which remarkably are
signed by
different deputy sheriffs but with the same deficiencies.
22.
The question that
arises is the consequence of non-compliance with section 346(4A).
Wallis JA in
EB Steam Company (Pty)
Limited v Eskom Holdings SOC Limited
2015 (2)
SA 526
furnished the answer -
in those circumstances the court may still grant a provisional order.
In
EB Steam
a final liquidation order was sought and granted by the court
a
quo
. On appeal,
Wallis JA found in paragraph 26 that the court
a
quo
should instead
have granted a provisional winding-up order, giving directions if
necessary, on how the employees are to be served
with the papers.
23.
In the circumstances, it is not open to me to
grant a final winding up order and therefore it is unnecessary
for me to consider
whether the applicant has achieved the threshold
for the granting of a final winding up order.
24.
Has the applicant crossed the threshold for a
provisional winding up order?
25.
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. The various decisions, such as the oft-cited
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
[5]
and
Kalil
v Decotex (Pty) Limited,
[6]
and
the more recent pronouncements, are not entirely reconcilable.
Nonetheless, particularly useful is the judgment of Rogers J
in
Gap Merchant
Recycling CC v Goal Reach Trading 55 CC
,
[7]
from which the following can be extracted:
25.1.
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 the well-known
Plascon-Evans
test)?
[8]
25.2.
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,
[9]
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 demonstrates this, then the
application should (rather than necessarily must)
[10]
be dismissed.
[11]
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.
[12]
25.3.
Bona
fides
and
reasonableness are two distinct requirements.
[13]
25.4.
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
.
[14]
25.5.
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.
[15]
26.
Generally,
a referral to oral evidence has more of a role to play at the final
stage than at the provisional stage.
[16]
27.
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.
[17]
28.
At the
provisional stage, the court is unlikely 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 then by the respondent.
[18]
29.
There can be no
bona fide
dispute on reasonable grounds in the present
instance that the respondent is indebted to the applicant, at least
in the admitted
amount of R706 198.11. This amount was tendered
in open court, and in any event is admitted by the respondent in its
answering
affidavit after compiling its own reconciliation.
30.
What remains is to consider whether the applicant
has established on a
prima facie
basis,
i.e. on a balance of probabilities with reference to all the
affidavits that the respondent is unable to pay its debts.
31.
Malan J (as he then was) in
Body
Corporate of Fish Eagle v Group Twelve Investments (Pty) Limited
2003 (5) SA 415
(W) at 428B stated:
“
The
deeming provision of section 345(1)(a) of the Companies Act creates a
rebuttable presumption to the effect that the respondent
is unable to
pay its debts (Ter Beek’s case supra at 311F). If the
respondent admits a debt over R100,
even
though the respondent’s indebtedness is less than the amount
demanded in terms of section 345(1)(a) of the Companies
Act
,
then on the respondent’s own version, the applicant is entitled
to succeed in its liquidation application and the conclusion
of law
is that the respondent is unable to pay its debts
”
(my emphasis).
32.
This dictum was affirmed and applied by the
Supreme Court of Appeal in
Lamprecht v
Klipeiland (Pty) Limited
[2014] 4 All SA
279
(SCA) in paragraph 16.
33.
In
Lamprecht
the
Supreme Court of Appeal was satisfied that the deemed inability to
pay debts was triggered even where the full extent of the
indebtedness was not known but where the respondent had admitted a
debt of at least over R100.00.
[19]
A
fortiori
in
the present instance the respondent has admitted an indebtedness in a
specific amount, namely R706 198.11. That the applicant’s
demand in terms of section 345(1)(a) was for a larger amount (R933,
483.90) and that the respondent disputes its indebtedness for
such
larger amount does not in and of itself destroy the rebuttable
presumption of the respondent’s deemed inability to pay
its
debts as brought about by section 345(1)(a).
34.
It is therefore necessary to consider whether on
a balance of probabilities with reference to all the affidavits the
respondent
has rebutted the presumption that it is deemed to be
unable to pay its debts arising from it having neither paid the
amount claimed
in the section 345 demand nor secured or compounded it
to the reasonable satisfaction of the applicant.
35.
The respondent in open court tendered to pay its
admitted indebtedness but over a period. The respondent does not
state under oath
that it was unwilling to pay the indebtedness, as
contrasted to an inability to pay the admitted indebtedness. It was
rather the
respondent’s counsel during argument that proffered
the submission that the respondent was unwilling, rather than unable,
to pay the admitted indebtedness.
36.
In any event absent an explanation under oath why
the respondent is unwilling rather than unable to pay an admitted
amount, this
is a factor indicative of the respondent’s
inability to pay its debts.
37.
At all material times the respondent has accepted
that it is indebted to the applicant in at least a significant sum.
The respondent
in its answering affidavit deposed to as long
ago as March 2020 admits that on its version its owes the applicant
R706 198.11.
But no payment is made towards this amount,
although it is over a year later and where it would have been
expected of the respondent
to have settled the admitted indebtedness
by now. Instead, as described above, the respondent went about in a
dilatory fashion
in its opposition to the liquidation application,
including changing attorneys at the last minute and seeking various
indulgences
of the court in relation to postponements of the
application. This too is not indicative of a respondent who is able
to pay its
debts.
38.
The reaction of the respondent to the applicant’s
demand in terms of section 345 when served in June 2019 is also
telling.
Having received the demand, the respondent sent an email to
the applicant in which the receipt of the demand is acknowledged and
records that “
as discussed during the
meeting, we shall engage GPF [the applicant] and arrange a payment
accordingly
”. It is unclear as to
whether this is to arrange payment of the full amount or only a
portion thereof, but in either event
no payment is subsequently
made.
39.
On 8 August 2019 in a further email the
respondent seeks confirmation of the status of its account in a
particular amount but again
does not make any payment.
40.
The respondent attaches to its answering
affidavit a bank statement which reflects that as at 31 December
2018 it only had
R55.76 in its bank account. The respondent’s
counsel proffered as an explanation as to why this must not be taken
into account
as indicative of an inability to pay was that the bank
statement was years old. But this is hardly a satisfactory answer
where
the respondent could have sought to file a supplementary
affidavit placing fresh evidence before the court that its position
had
changed and that it was now sufficiently cash flush to make
payment of the admitted indebtedness.
41.
This is particularly so where the respondent in
its answering affidavit in paragraph 15 expressly admitted that
during 2019 it had
experienced cash-flow restraints. But, it
contends, it was still able to meet its obligations to its creditors.
But if this was
so, why then has the respondent not paid the admitted
amount owing by it to the applicant . Even now, in its tender
in court,
the respondent seeks to pay its admitted indebtedness over
a period.
42.
The respondent in its answering affidavit refers
to been a significant increase in its cash-flow in the first two
months of 2020
and that it was expected to receive a surplus of
R6 million by the end of July 2020. But supporting detail in
relation thereto
is negligible as is its explanation as to why it
expected such a change in its financial fortunes. The respondent does
not take
the court into its confidence by filing a supplementary
affidavit explaining what had become of its financial position since
the
answering affidavit was deposed to during March 2020,
particularly in the wake of the hard lockdown brought about by the
COVID 19
pandemic and whether the anticipated R6 million
surplus expected by the end of July 2020 materialised.
43.
The respondent states that it is owner of an
unencumbered immovable property situated in Edenvale with a value of
approximately
R1.4 million and that this is indicative of its
solvency. That the respondent may have an unencumbered property, and
that
it may be factually solvent in that its assets exceeds its
liabilities (which the applicant in any event disputes) does not
assist
when what is relevant is its ability to pay its debts that are
due (i.e. its commercial insolvency).
44.
I am satisfied that such evidence as is before
the court does not rebut the presumption of the respondent’s
inability to pay
its debts but to the contrary demonstrates that the
respondent is unable to pay its debts Accordingly, upon a
consideration of
all the affidavits I am satisfied that the applicant
has
prima facie
established on a balance of probabilities its entitlement to a
provisional winding up order.
45.
In doing so, I did not consider the respondent’s
replying affidavit, which was not commissioned and therefore did not
serve
as evidence. The applicant’s counsel confirmed that
no reliance can be placed upon the replying affidavit.
46.
Section 346A of the Companies Act, 1973
regulates the service of the provisional order, including on
employees and trade unions,
if any. Presumably the applicant will
take heed of what is stated in this judgment to ensure effective and
compliant service of
the provisional order, including upon employees
and any registered trade unions. During the course of argument,
the respondent’s
counsel took instructions and informed the
court that there were four employees situated at in Edenvale,
providing an address where
they could be found.
47.
The following order is made:
47.1.
The respondent is placed under provisional
winding up in the hands of the Master of the High Court,
Johannesburg.
47.2.
All persons who have a legitimate interest are
called upon to put forward on a date to be obtained from the
Registrar at 10h00 or
so soon thereafter as counsel may be heard such
reasons as they wish, if any, why this court should not order the
final winding-up
of the respondent and that the costs of this
application be costs in the winding up of the respondent.
47.3.
A copy of this order is to be served on the
various persons as provided for in section 346A of the Companies Act,
1973 and is to
be published once in the Government Gazette and once
in a newspaper circulating in Gauteng.
47.4.
A copy of this order is to be furnished to each
creditor and shareholder known to the applicant, either per email,
per telefax or
per registered post.
Gilbert AJ
Date of
hearing:
31 May 2021
Date of judgment:
3 June 2021
Counsel for the
Applicant:
Mr W Pocock
Instructed
by:
Fluxmans Inc
Counsel for the
Respondent:
Ms K Matlala
Instructed
by:
Thompson Attorneys
[1]
As read with item 5 of schedule 9 of the
Companies Act, 2008
.
[2]
Section
345(1)(a) of the Companies Act, 1973.
[3]
Section
345(1)(c) of the Companies Act, 1973.
[4]
It
appears from the electronic file that a firm called Thompson
Attorneys have been on record as correspondent attorneys.
[5]
1956 (2) SA 346
(T) at 347H – 348C, and from which comes the
often referred to ‘Badenhorst rule’.
[6]
1988 (1) SA 943 (A).
[7]
2016 (1) SA 261 (WCC).
[8]
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)
[9]
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.
[10]
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.”
[11]
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.
[12]
Payslip Investment
Holdings CC v Y2K Tec Ltd
2001 (4) SA 781
(C) at 783I.
[13]
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
.
[14]
Para
24 to 26, citing
Badenhorst
and
El-Naddaf.
[15]
Para 26; citing
Hulse-Reutter
.
[16]
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.
[17]
Kalil
ay 979E-I.
[18]
Kalil
at 979B-E.
[19]
In
Lamprecht
,
the respondent had expressly admitted that the applicant had
locus
standi
in terms of section 345(1)(a) and had further in earlier court
proceedings consented to a court order that specifically
recorded
that the applicant had
locus
standi
.
But this does not affect the affirmation by the court of the
operation of the deeming provision in section 345(1)(a).