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[2012] ZAECPEHC 81
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Platt v Umgamanzi Fishing (Pty) Ltd (3936/2011) [2012] ZAECPEHC 81 (16 November 2012)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE, PORT
ELIZABETH)
CASE NO: 3936/2011
Date
Heard: 21 June 2012
Date
Delivered: 16 November 2012
NOT REPORTABLE
In the matter between:
DERECK CECIL PLATT
............................................................................................
Applicant
and
UMGAMANZI FISHING
(PTY) LTD
.
.....................................................................
Respondent
______________________________________________________________________
JUDGMENT
______________________________________________________________________
GOOSEN, J:
The applicant, an
employee of the respondent, seeks the winding-up of the respondent
on the basis that the respondent is unable
to pay its debts and that
it is just and equitable that it be so wound up.
The respondent company
was established by the applicant and his wife in order to enable
them to engage in a business venture in
the fishing industry. The
respondent company acquired a fishing vessel and a fishing permit.
The shares in the company are presently
held by the applicant’s
wife (in the sum of 70%) and by the Faulkner Group (in the sum of
30%). The applicant is neither
a shareholder nor director of the
respondent. The applicant is employed by the respondent as a
shore-skipper, a position that
requires the performance of various
duties when the fishing vessel is in port.
The respondent and his
wife have become estranged and divorce proceedings are presently
pending between them on the basis that
their marital relationship
has irretrievably broken down. It is common cause between the
parties that the breakdown in the marital
relationship has resulted
in the business and employment relationship between the applicant
and the respondent breaking down.
It is against the background of
the breakdown of the marital relationship that this application is
brought.
The applicant, in
seeking the winding up of the respondent, alleges that the
respondent is indebted to him in respect of unpaid
salary as well as
in respect of certain amounts paid by him to creditors of the
respondent on the respondent’s behalf.
The applicant alleges
that the respondent is unable to pay its debts; that it is
commercially and factually insolvent and that
it would be just and
equitable that a provisional order winding up the respondent be
made. The application is opposed on several
grounds. Respondent
denies that the applicant is a creditor entitled to seek an order
winding up the company on the basis that
the applicant’s
claims are disputed on
bona fide
grounds. It is further alleged that the applicant and
his wife formed a universal partnership pursuant to their marriage
and that
the respondent company is an asset in such universal
partnership. It is also alleged that the applicant is precluded by
reason
of a
pactum de non petendo
from instituting any claim against the respondent and
that in any event, the respondent is not factually or commercially
insolvent.
On the basis of these defences it is further contended
that it is not just and equitable that the respondent be wound up
and
that the application ought to be dismissed and a punitive costs
order made.
As indicated the
respondent was established by the applicant and his wife for the
purposes of conducting a business to their mutual
benefit. This much
is common cause. The applicant alleges that the respondent was
capitalised by way of loans either provided
or procured by the A &
C Investment Trust, a registered trust in which both applicant and
his wife served as trustees. The
Trust’s funds are alleged to
have derived from an inheritance which the applicant received from
his late aunt. The Trust
procured a loan from Investec Bank which
was utilised to purchase a fishing vessel. The loan was secured by
way of a mortgage
bond registered against an immovable property
owned by the Trust. The respondent allegedly undertook to effect
payment of the
monthly mortgage bond repayments.
According to the
applicant he is no longer prepared to finance the respondent company
by way of making available his inheritance
via the Trust. The
applicant recently had his wife removed as a trustee of the Trust
and thereafter the Trust allegedly resolved
to call up its loan to
the respondent. On this basis it is alleged that the underlying
capital which was available to the respondent
is no longer so
available and that this fundamentally affects its financial
viability. It is furthermore alleged that the respondent’s
assets exceed its liabilities and that it is accordingly factually
insolvent. I shall deal hereunder with the allegations made
in this
regard. Before dealing with the particular issues raised in the
application it is appropriate to note that the respondent,
by way of
an affidavit deposed to by the applicant’s wife, disputes the
source of the underlying capital. It is admitted
that the Trust lent
money to the respondent in order to facilitate the purchase of the
fishing vessel. It is however denied that
the Trust funds are solely
those derived from the applicant’s inheritance. The respondent
points out that the inheritance
funds were utilised to acquire,
inter alia, a game farm which when sold realised a substantial
profit. This allegation is not
placed in dispute in reply. On the
contrary the applicant admits that he utilised his inheritance to
refurbish a fishing vessel
which he then owned and when this was
sold that he utilised the proceeds to acquire a game farm. The
proceeds of the sale of
this game farm were utilised by the A&C
Investment Trust to acquire certain assets and to provide capital
for the conduct
of the respondent’s business. The papers do
not set out when these various transactions occurred. What is clear
however
is that the source and ownership of the underlying capital
is in dispute.
The winding-up of a
company is regulated by the provisions of the Companies Act, 71 of
2008 (the new Act). The new Act draws a
distinction between
‘solvent’ and ‘insolvent’ companies.
Although a ‘solvent company’ is
not defined by the new
Act, section 4 sets out a solvency and liquidity test to be applied.
The section provides that a company
satisfies the solvency and
liquidity test if, at the time that the test is applied, considering
all reasonably foreseeable financial
circumstances, its assets
fairly valued equal or exceed its fairly valued liabilities and it
appears that the company will be
able to pay its debts as they
become due in the ordinary course of business for a period of 12
months after the date on which
the test is considered or the
distribution event.
Part G of Chapter 2
provides for the winding up and deregistration of solvent companies.
Section 79 (2) provides that the winding
up and liquidation
procedures for winding up a solvent company are governed by Part G
and, to the extent necessary Item 9 of
Schedule 5. The winding up
and liquidation of insolvent companies is governed by section 224(3)
of the new Act which provides
that the repeal of the previous Act
does not affect the transitional arrangements which are set out in
Schedule 5. The relevant
portions of Item 9 of Schedule 5 in turn
provide that,
Despite the repeal of
the previous Act, until the date determined in terms of sub item
(4), Chapter 14 of that Act continues to
apply with respect to the
winding up and liquidation of companies under this Act, as if that
Act had not been repealed subject
to items (2) and (3) below.
Despite sub-item (1),
sections 343, 344, 346 and 348 to 357 do not apply to the winding up
of a solvent company, except to the
extent necessary to give full
effect to the provisions of Part G of Chapter 2.
If there is a conflict
between a provision of the previous Act that continues to apply in
terms of sub item (1), and a provision
of Part G of Chapter 2 of
this Act with respect to a solvent company, the provision of this
Act prevails.
It was argued on the
basis of these provisions that since the applicant founds his
application upon the alleged inability of the
respondent to pay its
debts the applicant is required to first establish that the
respondent is an ‘insolvent’ company
to which the
provisions of Item 9 of Schedule 5 apply. Since the applicant has
failed to make out such a case the application
falls to be
dismissed.
It is clear from the
provisions of the new Act that section 344 of the previous Act only
applies if the company sought to be wound
up is an insolvent
company. I do not, however, consider that it is required that a
party seeking to wind up a company on the
basis that it is insolvent
must first establish that the company is insolvent before section
344 may be invoked. It is sufficient
if the party sets out
allegations which bring the application within the ambit of Item 9
of Schedule 5, read with the particular
provisions of the previous
Act. In other words it is sufficient if it is alleged that the
company to be wound up is or may be
insolvent inasmuch as it is
unable to pay its debts.
It is of course a wholly
different matter as to what must be proved in order for a company to
be wound up in terms of section
344. In this regard the new Act
specifically excludes the operation of the section in circumstances
where the company is solvent.
In my view it must follow that section
344 may only be applied if it is found that the company concerned is
in fact
insolvent notwithstanding the deeming provisions
provided for in section 345 of the previous Act (see
HBT
Construction and Plant Hire CC v Uniplant Hire CC
2012 (5) SA
197
(FB)).
In this matter the
applicant seeks to wind up the respondent on two grounds, namely
that it is unable to pay its debts and that
it is just and equitable
to do so. In order to succeed on the first ground the applicant must
prove that the respondent company
is as a matter of fact insolvent
and accordingly unable to pay its debts. In the absence of such
proof that the respondent is
insolvent, the only ground upon which
the respondent may be wound up is that contemplated in section
81(1)(c)(ii) of the new
Act, namely that it is just and equitable to
do so.
The respondent, as
indicated above, raised a number of defences to the application.
Foremost amongst these was a denial that that
the applicant is a
creditor whose claims may properly found an application for the
winding up of the respondent. It was submitted
in this regard that
the alleged indebtedness upon which the applicant relies is subject
to a
bona fide
and reasonable dispute and that the
application ought to be dismissed on this ground alone.
Liquidation or
sequestration proceedings are not designed for the resolution of
disputes as to the indebtedness of a debtor. Where
an applicant’s
claim against a respondent is disputed on
bona fide
and
reasonable grounds a winding-up order cannot be granted (see
Badenhorst v Northern Construction Enterprises Ltd
1956 (2)
SA 346
(T) at 348B;
Laeveldse Ko-operasie Bpk v Joubert
1980
(3) SA 1117
(W) at 1122;
Kalil v Decotex (Pty) Ltd and Another
1988 (1) SA 943
(A) 980 B- I).
The
onus
is upon
the respondent to establish, on a balance of probabilities, that its
dispute of the claim is reasonable and
bona fide.
It need not
be shown that the respondent is not indebted to the applicant, only
that the respondent has a reasonable basis upon
which to dispute the
indebtedness (
Kalil v Decotex (supra)).
A court is not
required to undertake an extended inquiry into the dispute or to
determine the dispute. It is sufficient if, having
regard to the
issues raised and the evidence presented that the court is able to
conclude that there is a dispute and that the
dispute is
bona
fide
.
In this instance the
applicant alleges that the respondent is indebted to it in a sum in
excess of R171 000, which amount
is made up of several amounts
alleged to be due in respect of arrear salary, motor vehicle
expenses, telephone bills and payments
allegedly made to third
parties on behalf of the respondent. The respondent in its answering
affidavit has placed each of these
items in dispute. It points out
that the applicant, as shore skipper, was furnished with cash for
the payment of crew members
and for the purchase of numerous sundry
items. Any excess cash not spent on these items was, as a matter of
practice, retained
by the applicant. In respect of other items the
respondent has denied that there is any amount outstanding pointing
to payments
made to the third parties in this regard. These
allegations, not challenged in reply, suggest that the alleged
debts, including
the alleged arrear salary, have been paid.
I do not consider it
necessary to traverse the full detail of each and every item. I am
satisfied that the disputes raised by
the respondent are indeed
bona
fide
and that reasonable grounds are advanced upon which the
applicant’s claims are resisted and I accordingly find that
the
respondent has succeeded in establishing that the applicant’s
claims are subject to
bona fide
dispute. It follows therefore
that the application cannot succeed.
Even if I am wrong in
coming to this conclusion the application cannot succeed on other
grounds. In the first instance the applicant
has not established
that the respondent company is, as a matter of fact, insolvent and
therefore unable to pay its debts in the
ordinary course of
business. The applicant has therefore not established that the
respondent is an insolvent company to which
the provisions of
section 344 of the old Act may be applied. The applicant in this
regard relies upon the respondent’s
financial statements of
2010 and a schedule of assets and liabilities which purportedly show
that the liabilities of the respondent
exceed its assets. The
applicant has however not tendered evidence to establish that the
assets and liabilities are fairly valued.
The values are in any
event disputed by the respondent. The respondent points out that the
main assets of the company comprise
of fishing vessel together with
its equipment which is valued at approximately R6 million. Some
measure of support for this value
is to be found in a certificate of
insurance tendered by the respondent. In addition the respondent
holds a fishing permit to
which significant value (in excess of R2
million) attaches. In his founding affidavit the applicant does not
deal with this asset.
In reply it is admitted that the permit has
value but this value is presented as less than that claimed by the
respondent.
It is incumbent on the
applicant to prove on a balance of probabilities the fair value of
the respondent’s assets. This
he has failed to do. The same
may be said in regard to the alleged liabilities. The respondent
pertinently denies that it is
indebted to the creditors as alleged
by the applicant. It also denies that it has an overdraft with its
bankers and in this regard
supporting bank statements are provided.
Inasmuch as there is a dispute on the papers in regard to the
extent, if any, of the
respondent’s liabilities, the facts put
up by the respondent in this regard must be accepted.
Although it is common
cause that the respondent is indebted to the A&C Trust the
respondent disputes its liability to make
payment on the basis of an
alleged
pactum de non petendo
. It is however not necessary to
consider this issue in this regard. I am satisfied on consideration
of the evidence placed before
me that the applicant has not
established that the respondent is as a matter of fact insolvent or
that it is unable to pay its
debts in the ordinary course of its
business. It follows therefore that the applicant has not
established that the respondent
is an insolvent company which may be
wound up in terms of the provisions of the old Act.
Finally there is the
alternative basis upon which the applicant seeks the winding up of
the respondent, namely on the basis that
it is just and equitable to
do so. The approach to this question must be informed by the fact
that the respondent is a solvent
company. This requires that
consideration be given to the objects and purposes to be served by
the new Act, which seeks to foster
as far as may be possible the
financial rescue of companies in financial distress and which
recognises the particular role that
business entities play in the
growth and development of our national economy (see section 7 of the
new Act). What also falls
to be considered are the interests of
other parties, most notably employees of the respondent company who
are dependant for their
livelihoods on continued employment. Against
this must be weighed the interests served by the application and the
particular
circumstances in which it is brought.
As indicated the
applicant and his wife are presently embroiled in a hotly contested
divorce action in which the proprietary regime
and the proper
distribution of assets is a major point of dispute. The respondent
points out, by way of the applicant’s
wife who is a director
and major shareholder of the respondent, that the divorce action
will involve consideration as to whether
a universal partnership
came into existence between the applicant and his wife and whether
the A&C Trust served as vehicle
through which universal
partnership assets were held. It will also involve determination as
to whether the respondent company
is an asset of the universal
partnership.
It is not necessary (nor
indeed appropriate) to consider these issues in this application.
These are issues which are no doubt
best resolved at trial in the
pending divorce action. The fact that this is so, in my view,
militates decisively in my view against
a finding that it is just
and equitable that the respondent now be placed in liquidation.
In the light of this I
am of the view that the application cannot succeed on any of the
grounds advanced. Although it was suggested
that a punitive cost
order should be made against the applicant in the light of the
circumstances giving rise to this application
I do not consider that
such a cost order should be made. In the result I make the following
order:
The application is
dismissed with costs.
__________________________
GG GOOSEN
JUDGE OF THE HIGH
COURT
APPEARANCES
:
FOR THE APPLICANT
:
Mr Dyke, instructed by
Joyzel L Obbes Attorneys
FOR THE RESPONDENT
:
Mr Nepgen, instructed by
De Villers & Partners