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[2010] ZAWCHC 166
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Velocity Freight Services (Pty) Ltd v Digi Plastix (Pty) Ltd (23352/09) [2010] ZAWCHC 166 (2 August 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
CASE
NO: 23352/09
In
the matter between:
VELOCITY
FREIGHT SERVICES (PTY) LTD
Applicant
v
DIGI
PLASTIX (PTY) LTD
Respondent
JUDGMENT
DELIVERED ON THIS 2
nd
DAY OF AUGUST 2010
FORTUIN,
J: INTRODUCTION
[1]
This is an application for the winding up of respondent on the basis
that it is unable to pay its debts as and when they fall
due.
Applicant was placed under an order of provisional liquidation on 10
November 2009.
FACTS
[2]
It is common cause that, during September 2007, Applicant rendered
freight services to respondent in respect of a container
of garlic
imported from the Peoples Republic of China Respondent entered into a
draft agreement with BD Trading to act as its agent.
The garlic was
released from the port of Cape Town to Respondent's leased premises
at the Epping Market. Subsequent to the sale
of the garlic to
Respondents clients, the garlic discoloured in such a way so as to
result in most of the garlic being destroyed.
An account of R295
364.14 was rendered to Respondent for the freight services.
Respondent failed to make payment.
[3]
Respondent denied that it is liable to Applicant on the following
basis:
3.1. Applicant
had a statutory and contractual obligation to ensure that the
imported garlic was irradiated in terms of requirement
set out by the
Department of Agriculture;
3.2. Applicant
intentionally, alternatively negligently, failed to comply with these
obligations;
3.3. As
a result of Applicant's actions, Respondent denies that an amount of
R295 364.14 is owing, alternatively. Respondent has
a counterclaim
against Applicant for an amount of R444 901.40 in respect of damages.
[4]
Respondent denied that it is commercially insolvent.
[5]
From the papers, the following is evident:
5.1. Respondent,
during January or February 2008. confirmed that he would be selling a
property and would pay the account from the
proceeds thereof;
5.2. Two
cheques, both for the amount of R50 000, drawn by Respondent in
favour of the Applicant, was dishonoured by the bank for
lack of
funds;
5.3. During
February 2008, Respondent raised the issue of the quality of the
garlic and asked for a discount of R150 000. Applicant
denied being
responsible for the quality of the goods, but agreed to a R75 000
discount, which discount was paid.
5.4. On
or about 24 June 2009, Respondent acknowledged his indebtedness to
Applicant;
5.5. The
defence with regard to the irradiation of the garlic was raised for
the first time in Respondent's answering affidavit
THE
ISSUES
[6]
The issues to be determined in
casu
are
the following:
6.1. Whether
Applicant established that it is a creditor of Respondent
(locus
standi):
6.2. whether
Respondent is unable to pay its debts as and when they fall due; and
6.3. whether
there was a statutory and contractual obligation on Applicant lo
ensure that the garlic was irradiated
THE
LAW
[7]
Section 344 of the Companies Act 61 of 1973 ("the Act")
determines the court's power to wind up a company. Section
344(f) in
particular deals with situations where the company is unable to pay
its debts as described in section 345 of the Act.
The section lists
three situations in which a company is "deemed" to be
unable to pay its debts, i.e.
7.1
statutory demand;
7.2. nulla
bona,
and
7.3. the
company proved to be unable to pay its debts.
[8]
The law with regards to when a company is proved to be unable to pay
its debts is contained in sec 345(1 )(c). A company is
unable to pay
its debts when it is commercially insolvent. In
Koekemoer
v
Taylor
& Steyn
1981
(1) SA 267
(W) 271, Goldstone J said the following:
"For
the purpose of s.345 of the Act, a company is one unable to pay its
debts,
inter
alia
if
it is unable to meet current liabilities
...
as
they
become due"
The
law relating to the difference between 'commercial" and
'factual" insolvency is trite. It is undisputed that what
is
envisaged in sec 345 is commercial insolvency. The test to be applied
by the court is very clearly laid down in the Act. The
Act requires
the court to take into account the contingent and prospective
liabilities of the company In this regard, see sec 345(2).
[9]
The terms "contingent" and 'prospective" liabilities
are liabilities which by way of a legal obligation creates
a right
enforceable in a court of law. A company's inability to pay can be
proved in any manner. Even a demand which does not comply
with sec
345(1 )(a) may be used as evidence that the company is unable to pay
its debts. In
Kalk
Bay Fisheries Ltd
v
United
Restaurants Ltd
1905
TH 22
it was held that the court was justified in regarding a company
as being unable to pay its debts where, for e.g., it admitted that
it
could not pay. failed to make payments after agreeing to pay, etc. A
clear exception to this general rule is where a part of
the amount
claimed is disputed on substantial grounds.
APPLICATION
OF FACTS TO THE LAW
[10]
The fact that Applicant offered a discount for the quality of the
garlic and the fact that Respondent accepted the discount
of R75 000,
which offer was made with the understanding that Applicant did not
take responsibility for the quality of the garlic,
i.e. negotiations
between the parties with respect to the discount, points to the fact
that Respondent accepted that Applicant
had
locus
standi
as
his creditor.
[11]
The next issue to be determined is whether there was a statuary or
contractual obligation on Appellant to irradiate the garlic.
[12]
During argument, when Mr Atkins, for Respondent, was asked to point
out the statute which places such an obligation on Applicant,
the
court was referred to the Agricultural Pests Act 36 of 1983, and in
particular sec 3 of the
Act.
[13]
Section 3 reads as follows:
"3.
importation of controlled goods. - (1)
Subject
to the provisions of subsections
(4),
(5)
and
(6)
no
person shall import into the Republic -
(a)
any plant, pathogen, insect exotic animal, growth medium, infectious
thing, honey, beeswax or used apiary equipment;
(b)
anything determined by the Minister by notice of the
Gazette,
except
on the authority of a permit
(2)
A
person importing controlled goods into the Republic on the authority
of a permit-
(a)
shall do so only through a prescribed port of entry, except where
an executive officer has determined some other place;
(b)
shall present them at that place to the executive officer concerned
for such inspection as he deems necessary:
(c)
shall not remove them from that place before the executive officer
concerned has consented in whting thereto.
(3)
An
executive officer may, on application by a person importing
controlled goods and against payment of the prescribed fees -
(a)
carry out an inspection contemplated in subsection (2) (b) at a time
other than during the official office hours of such executive
officer; or
(b)
perform any other function in respect of such controlled goods.
(4)
The
Minister may by notice in the
Gazette
determine
that any controlled goods or class of controlled goods be imported
into the Republic without a permit, subject to conditions
set out in
that notice.
(5)
The
Minister may import into the Republic exotic animals of a
specified
kind or pathogens or insects of a kind not indigenous to the
Republic, if he is of the opinion that the presence thereof
in the
Republic -
(a)
is desirable in order to combat the occurrence of plants, pathogens,
insects or exotic animals of a specified kind in the Republic;
(b)
is otherwise in the interest of a specified branch of agriculture.
(6)
The
Minister may by notice in the
Gazzette
determine
controlled
goods or a class of controlled goods in respect of
which a penult
for their importation into the Republic may not be
issued."
[14]
A proper reading of this section shows that it does not relate to the
irradiation of imported goods It refers to the permit.
The permit
annexed to Respondent's answering affidavit as 'H52', mentions
Respondent as the importer. The obligations placed by
sec 3 of the
Act, are therefore those of Respondent
[15]
At the end of the hearing of the matter, with the permission of the
court, Respondent was allowed to place a Supplementary
Note before
the court, which, in short, attempts to amplify its argument on the
statuary obligation placed on Applicant. In this
Supplementary Note,
another Act is quoted as the relevant piece of legislation. This
time, Respondent submitted that the statutory
obligation is contained
in the Customs and Excise Act No 91 of 1964 ("the customs and
Excise Act").
[16]
Sec 1 of the Customs and Excise Act defines "importer" as
follows:
"importer
includes
any person who, at the time of importation -
(a)
owns any goods imported;
(b)
carnes the risk of any goods imported;
(c)
represents that or acts as if he is the importer or owner of any
goods imported;
(d)
actually
brings any goods into the Republic;
(e)
is beneficially interested in any way whatever in any goods imported.
(f)
acts on behalf of any person referred to in paragraph (a), (b), (c),
(d), or(e);"
This
section, similarly to section 3 of the Agricultural Pests Act. does
not place any obligation on Applicant to irradiate the
garlic.
[17]
In its supplementary note. Respondent also referred to Annexure
'HS11', the
SARS
Customs Release Notification,
which
states that Applicant is the agent and BD Trading is the importer. In
Respondent's answering affidavit, it states that
BD
Trading
was
its agent. Should Respondent argue that obligations are placed on the
importer in terms of the SARS Customs Release notification,
it is
clear from annexure "HS11" that such obligation is placed
on BD Trading and not on Applicant In any event, this
annexure does
not point to any obligation on Applicant to irradiate the garlic
[18]
It is indeed so that the correspondence as well as the conduct
between the parties established that the amount was due and
payable,
e.g. between the period September 2007, when the goods were released
to Respondent, to December 2009. when the answering
affidavit was
delivered. Respondent acknowledged its liability to Applicant.
[19]
Whether Respondent is unable to pay its debts as and when they fall
due, can be gathered from the conduct of Respondent prior
to the
issuing of the Notice of Motion, i.e.
19.1. Mr
Suliman's telephone call in September 2007. indicating that he was
experiencing cash flow problems;
19.2. Mr
Suliman's undertaking during January/February 2008 that he will be
paying the account from the proceeds of a house sale;
19.3. The
fact that two cheques, drawn in favour of Applicant, was dishonoured
for lack of funds; and
19.4. Mr
Suliman's e-mail of 24 June 2009, indicating his
indebtedness and his inability to pay.
[20]
In bank statements annexed to Respondent's answering affidavit, as
well as the averments with regards to assets, it does in
fact
indicate that Respondent, taking into account its contingent and
prospective liabilities, is not able to pay its debts as
and when
they fall due. It is clear from the papers that the account was due
and that it remained unpaid, even after it was claimed.
This court is
therefore entitled to conclude that Respondent is unable to pay its
debts in terms of section 344(f), read with section
345(1)(a) of the
Companies Act 61 of 1973.
[21]
The issue that needs to be decided is whether Respondent is entitled
to, after acknowledging its indebtedness on numerous occasions,
dispute its indebtedness only in its answering papers. In
casu,
Respondent,
at all material times prior to issuing of the Notice of Motion,
acknowledged his indebtedness. It can therefore be accepted
that
Respondent owed Applicant the amount for services rendered.
[22]
Applying the test laid down in
Kalk
Bay Fisheries Ltd
v
United
Restaurants Ltd,
supra,
this court is justified in regarding Respondent as being unable to
pay its debts as and when they become due for the following
reasons:
22.1. The
undertaking by Mr Suliman to pay;
22.2. The
returned cheques i.e. the failure to pay; and
22.3. The
contingent and prospective liabilities gleaned from the bank
statements.
[23]
The next step this court will have to take is to determine whether
the facts of this case make it an exception to the general
rule, i.e.
whether the amount claimed is disputed on substantial grounds.
[24]
It is the finding of this court that the claim by Applicant is not
disputed on substantial grounds as there was no statutory
or
contractual obligation on Applicant to irradiate the garlic. It is
further the finding of this court that, in terms of section
345(1
){c) of the Act, and taking into account the contingent and
prospective liabilities of Respondent, the company is unable
to pay
its debts as and when they fall due.
[25]
In the circumstances, the application is granted.
The
application is granted; and
Costs
to be costs in the administration of Respondent's estate.
FORTUIN,
J