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[2010] ZAWCHC 568
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J F Hillebrand (South Africa) (Pty) Ltd v Silver Solutions 1688 t/a Global Commodities (9550/2010) [2010] ZAWCHC 568 (22 November 2010)
IN
THE HIGH COURT OF SOUTH AFRICA (WESTERN CAPE HIGH COURT, CAPE TOWN)
Case
no: 9550/2010
J
F HILLEBRAND (SOUTH AFRICA) (PTY) LTD
…......................................................
Applicant
v
SILVER
SOLUTIONS 1688 CC t/a GLOBAL COMMODOTIES
…............................
Respondent
(Registration
number: CK 1998/09904/07)
JUDGMENT
HANDED DOWN THIS MONDAY, 22 NOVEMBER 2010
CLEAVER
J
[1]
This is an application for the winding-up of a close corporation. In
the notice of motion a final order of winding-up is sought,
the
alternative prayer being for a provisional winding-up order. The
applicant alleges that the respondent is unable to pay its
debts.
This averment is based inter alia on the respondent's failure to
effect payment of an amount claimed by means of a statutory
demand on
the respondent in terms of s 69 of the Close Corporations Act 69 of
1984 ("the Act") on 9 March 2010.
[2]
The respondent's case is that two days before the application for
winding-up was brought, the amount alleged by the applicant
to be
owing to it was paid into the trust account of the its attorneys to
secure any amount which might be found to be owing by
it to the
applicant, pending the resolution of disputes between the parties in
respect of the amount claimed by the applicant.
[3]
The claims of the applicant against the respondent stem from a
sublease between the applicant as sublessor and the respondent
as
sublessee of certain storage facilities in Paarden Eiland. Although
the terms of the sublease were not recorded in writing,
the reasons
for this not being relevant for the purposes of this judgment, it is
common cause that the sublease was for a period
of one year from
December 2008 to November 2009. The amount claimed by the applicant
is made up as follows:
Outstanding
rental account R92 099.57
Outstanding
electricity account R37 892.53
Outstanding
freight forwarding account R15 921.43
Outstanding
damages / repairs account R10 975.47
R156
899.00
[4]
The averment by the applicant that the respondent had failed to
respond to demands made on it for payment is not entirely
accurate.
While it is so that payment was not made upon demand, the papers
reveal that in response to a letter of demand of 4
February 2010
addressed by the applicant's attorneys to the respondent to make
payment of the sum of R152 298.42, the respondent's
deponent spoke
telephonically to the financial manager of the applicant and raised
his concern that he required all relevant
invoices and source
documents from the applicant to enable him to reconcile the
statements which he had received. These averments
on behalf of the
respondent are borne out in an e-mail which was addressed to the
applicant on 16 February 2010. The receipt
by the respondent of the
statutory demand in terms of the act which was forwarded to the
respondent on 9 March 2010 elicited
a similar response, for the
respondent's attorneys requested a comprehensive breakdown of the
amount claimed. By this stage the
applicant's attorneys had taken up
the attitude that the respondent was simply trying to delay payment
of a debt which it knew
and had acknowledged to be due. The
respondent was accordingly informed that the applicant would be
proceeding with a liquidation
application which would be served
shortly. Further letters followed from the respondent's attorneys to
the applicant's attorneys,
the last of which contained the following
paragraphs which were relied upon by the applicant's counsel to
support his submission
that the respondent was unable to pay its
debts.
We
have
obtained instructions from our client who advises that he is
willing, in the interim, to settle part of the account in dispute
in
the amount of R92 099.57 in respect of arrear rent payable as per
the reconciliation statement provided by your client. The
remainder
of the account will then be settled after due consideration of the
municipal statements for electricity and the corresponding
quotations for logistic services rendered by your client.
Our
instructions are that the above amount of R92 099.57 is to be paid
in three equal monthly instalments directly into your client's
bank
account.'
[5]
On 12 May 2010 the respondent's offer was rejected in a letter from
the applicant's attorneys which concluded with an intimation
that a
winding-up application would be set down for hearing on Friday, 14
May 2010. An unissued copy of the application was enclosed
and the
issued version thereof was served on the respondent on the afternoon
of 12 May.
[6]
On 12 May 2010 the full amount alleged to be owing to the applicant,
namely R156 889 was paid into the trust account of the
respondent's
attorneys pending resolution of the disputes between the parties. On
13 May 2010 a member of the respondent's attorneys
telephonically
informed the applicant's attorney of the payment that had been
received and the basis on which the funds were
being held in trust,
namely to serve as security for any amounts found to be due to the
applicant.
[7]
The respondent's deponent says that when he reconciled the
documentation which he had received from the applicant with the
respondent's records, he ascertained that as a result of an
oversight, payment of the rental for September 2009 had not been
made. He also ascertained that the applicant had allocated payments
which had been remitted in respect of rental to other amounts
claimed by the applicant. The respondent holds the view that the
applicant was not entitled to allocate these payments to any
other
accounts. His reconciliation revealed that R51 783.44 was
outstanding in respect of rental and not R92 099.57 as set out
in
the founding papers; and also that R752.40 remained due by the
respondent in respect of services rendered to it by the applicant.
On 25 May 2010 the respondent's attorneys advised the applicant's
attorneys of the reconciliation and that the amount which the
respondent admitted to be outstanding would be paid to the
applicant. Details of the respondent's defences in respect of the
outstanding amount claimed were also made known to the applicant's
attorney who was reminded that in terms of the draft sublease,
provision had been made for arbitration in the event of disputes
arising between the parties. The applicant was requested to
follow
this route in order to settle the outstanding issues, but this
suggestion was rejected. On the following day, 26 May 2010,
the sum
of R52 535.84 (being the sum of R51 783.44 and R752.40) was paid
unconditionally to the applicant's attorney, with an
indication as
to how the amount was made up.
[8]
Counsel were agreed that with the payment of rental made on 26 May
2010, and on the basis that the payments which the respondent
had
made were to be allocated to the rental, all rental due by the
respondent for the period of the lease had been paid in full.
The
balance claimed is in dispute. A portion of the disputed balance is
an amount claimed for damages which it is clear can not
be utilised
as a basis upon which to bring a winding-up claim. As for the
remaining amounts claimed by the applicant, it is not
necessary for
the purposes of the judgment to detail the reasons the respondent
furnishes for placing these claims in dispute.
I am satisfied that
the respondent has raised a genuine and bona fide dispute in respect
of these claims and counsel for the
applicant did not address me at
all on this aspect. In the circumstances it is clear that the amount
held in trust for which
an undertaking has been furnished that
payment will be made in respect of any amounts found to be due and
owing to the applicant
secures the balance of the amount claimed by
the applicant.
[9]
In countering the allegations that the respondent is not able to pay
its debt, the respondent points out that
It
has a credit of some R191 000 in its bank account.
It
has monthly sales in excess of R400 000.
It
is owed approximately R450 000, payment of which is expected soon.
It
has easily realisable assets worth some R250 000.
[10]
Notwithstanding the fact that the applicant's attorneys were
informed on the day before the hearing that a sum equivalent
to the
amount claimed from the respondent had been paid in to the trust
account of the respondent's attorneys and that payment
of all
amounts for which the applicant admitted liability had been made by
26 May 2010, counsel for the applicant submitted that
the applicant
was still entitled to an order for the winding-up of the respondent.
Surprisingly, in view of the fact that the
main prayer in the notice
of motion was for a final winding-up order, he submitted that it was
necessary only for the applicant
to satisfy the requirements for a
provisional order in order. The reason advanced was that it is the
practice in this division
to grant provisional winding-up orders
before final orders are granted. It is so that it is the practice in
this division for
applicants to apply for provisional orders for
winding-up, but I know of no practice whereby a provisional order is
automatically
granted when the applicant has applied for a final
order. The fact is that the respondent came to court to deal with an
application
for a final order and in any event, as pointed out by
the respondent's counsel, there is nothing more which can be said
for either
the applicant or the respondent at this stage and no
purpose would be served by treating the application as one for a
provisional
order.
[11]
As far as the merits are concerned, the applicant's case is that I
should find that the correspondence between the parties
revealed
that the respondent had adopted delaying tactics in order to avoid
making payment and that from the letter which I referred
to in para
4, it was clear that the respondent was unable to pay its debts. In
the light thereof I was invited to have no regard
to the
respondent's attempts to establish a dispute in respect of the
applicant's remaining claims. This submission is difficult
to
understand since no submissions were advanced on behalf of the
applicant to counter the basis on which the respondent set
out its
dispute in respect of the outstanding claims. In any event, the
inference which applicant's counsel wishes me to draw
from the offer
contained in the letter referred to is not the only inference which
can be drawn. The letter can also be seen
as an attempt to settle
the outstanding issues. I have already recorded that I am satisfied
that the respondent raised a genuine
and bona fide dispute in
respect of the outstanding claims.
[12]
Ultimately, applicant's counsel was left with only one ground on
which to base his submission that a winding-up order should
be
granted. This was that since the respondent had made no tender in
respect of the applicant's costs either when the amount
in question
was paid into the trust account of its attorneys or thereafter, the
applicant was obliged to continue with the application
for
winding-up.
[13]
In my view the applicant's conduct militates against this
submission. To start with the application of which the respondent
was given less than 48 hours notice, contained no averment
whatsoever as to why the application was to be treated as one of
urgency, nor did it contain a prayer for condonation in respect of
the applicant's failure to comply with the rules of court.
The fact
that an application for winding-up may be regarded as urgent or
semi-urgent does not relieve an applicant of complying
with the
settled rule of practice that a case for urgency must be made out in
terms in the papers and that anappropriate application
must be made
for condonation in respect of non-compliance with the relevant rules
if these are not observed. Failure to make
out a case of urgency
will normally result in the matter being removed from the roll. In
this case however the respondent had
been placed on terms to file
its answering affidavit by 27 May 2010. In its answer, which was
filed on 28 May, the point was
taken that no grounds of urgency had
been made out, and in addition, the merits of the application were
also dealt with. The
applicant persisted with the application
thereafter by filing a reply and before me persisted with the
submission that the applicant
was entitled to a winding-up order. A
similar situation arose in the
Kalley
Flooring
case.
In that matter, the liquidation of Kalley Flooring Co (Pty) Ltd had
been sought on the basis that it could not pay its debts.
A dispute
was raised in respect of the amount claimed and in addition the
company furnished its balance sheet from which it was
clear that it
was in a sound financial position. The following extracts from the
judgment are apposite to the case before me.
'It
seems to me that, once the balance sheets and the financial position
of the company were disclosed, President Carpet Manufacturers
Ltd
(the
applicant)
must
have realised that there was no question that Kalley Flooring could
not pay and hence no need to secure its alleged hghts.
The question
then is, why did it persist in opposing the interdict and filing all
these affidavits indicating that it was entitled
to proceed with the
application for liquidation of the company?'
1
and
'After
the affidavit setting out the financial position of Kalley Flooring
was filed, it is clear that President Carpet Manufacturers
Ltd
persisted when it knew or ought to have known that Kalley Flooring
was not insolvent and that the application for liquidation
would not
be granted. If thereafter it persisted because it merely wanted to
recover its costs, then it was a simple matter to
say so and it
would have limited the relief prayed accordingly. In that event I
might have had a certain amount of sympathy.
But it persisted with
the main application and it seems to me that it persisted solely to
embarrass Kalley Flooring and, in doing
so, it was abusing the
process of Court.
2
I
hold a similar view in respect of the applicant's conduct in this
matter.
[14]
Since it is clear that the applicant has failed to substantiate its
claim that the respondent is unable to pay its debts,
the
application must fail.
[15]
On behalf of the applicant it was submitted that in the event of the
application being dismissed, the applicant should be
awarded its
costs up to and including the filing of the respondent's answering
affidavit. In my view the applicant's conduct
in continuing with the
application when it was clear that it was bound to fail, coupled
with the fact that the application was
defective in respect of the
urgency aspect, is sufficient to disallow an order for costs to
which the applicant might otherwise
have been entitled. In dealing
with the question of costs, regard must also be had to two
interlocutory applications which were
dealt with prior to the
hearing. When the matter was called in the course of the motion
court roll on 14 May 2010, there was
no appearance for the
respondent and a provisional order of liquidation was taken. Counsel
for the applicant had been told to
expect an appearance on behalf of
the respondent and indeed the name of the respondent's counsel had
been furnished to him, hut
when there was no appearance for the
respondent, he moved for the provisional order. However, when it
became apparent shortly
thereafter that counsel had been briefed for
the respondent, both counsel attended on the judge who had granted
the order and
by agreement the order was rescinded and a timetable
for the filing of affidavits was agreed upon. The fact is that
notice of
opposition had been served on the applicant's attorneys on
13 May 2010 and this should have been brought to the attention of
the presiding judge when the matter was called. Had this been done,
the judge would not have granted the provisional order. Counsel
for
the applicant advised me that he was unaware of the fact that
opposition had been noted, but his attention should have been
drawn
to this by his instructing attorneys. In the circumstances I
consider that the respondent is entitled to the costs incurred
in
having the provisional order rescinded. The matter was thereafter
set down for hearing on 10 June 2010, but on 8 June 2010
an
application was enrolled for hearing on 10 June in which leave was
sought to postpone the hearing to the semi-urgent roll
on 17
November 2010. Leave was also sought for the applicant to file its
replying affidavit on or before 15 June 2010. The postponement
was
sought because the applicant's financial manager had left South
Africa for Dubai on 30 May 2010 and was therefore not able
to attest
to the applicant's replying affidavit when the respondent's
answering affidavit was delivered on 28 May 2010. It would
seem that
the gentleman in question returned to South Africa only on 7 June,
thus prompting the request contained in the notice
of motion. The
respondent, while filing an affidavit in answer to the application,
did not oppose the application for condonation
or the application
for the postponement of the trial. The affidavit was furnished in
order to deal with certain allegations made
in the founding
affidavit for the postponement. Counsel for the applicant conceded
that the respondent was entitled to its wasted
costs for the day, as
the applicant had sought an indulgence, but submitted that such
costs ought not to include the costs of
counsel in respect of
matters relating to the application for the postponement. I do not
agree. In my view, all costs incurred
by the respondent as a result
of the application for postponement and condonation should be borne
by the applicant.
[16]
The application is accordingly dismissed with costs which costs are
to include all costs incurred by the respondent on 14
May 2010 and
on 10 June 2010.
RB
CLEAVER
1
Kalley
Flooring v President Carpeting Ltd
1982
(4) SA 681
(CPD) at 683E-F.
2
Kalley
Flooring {supra)
at
683H-684A; and quoted with approval in
Alton
Coach Africa CC v Datcentre Motors t/a CMH Commercial
2007
(6) SA 154
at 165E-I.