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[2022] ZAECQBHC 18
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SA Securities Solutions and Technologies (Pty) Ltd v Modular Communications SA (Pty) Ltd (2796/2021) [2022] ZAECQBHC 18 (26 July 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, GQEBERHA
Case
No.: 2796/2021
Date
Heard: 5 May 2022
Date
Delivered: 26 July 2020
In
the matter between:
SA
SECURITIES SOLUTIONS AND
TECHNOLOGIES
(PTY)
LTD
Applicant
and
MODULAR
COMMUNICATIONS SA (PTY) LTD
Respondent
JUDGMENT
RONAASEN
AJ:
Introduction
[1]
The applicant seeks the provisional winding-up of the respondent on
the
grounds that it is unable to pay its debts as contemplated in
section 344 and 345 of the Companies Act, 61 of 1973, alternatively,
that it would be just and equitable for the respondent to be placed
under provisional winding-up.
[2]
The applicant contends that it has a liquidated claim against the
respondent
in the sum of R1 466 211.13 and that it thus has
the requisite legal standing to pursue this application. I shall
deal,
below, with the grounds on which the applicant makes this
contention.
[3]
The respondent, in essence, opposes the application on the basis that
winding-up proceedings are not appropriate to enforce payment of the
respondent’s alleged indebtedness to the applicant in
circumstances where such indebtedness is
bona fide
disputed by
the respondent on grounds which it alleges to be reasonable. Here
again I shall canvass more fully below the grounds
on which the
respondent founds its opposition.
The
applicant’s principal contentions
[4]
In December 2014 separate written agreements were concluded between
the
applicant and the three shareholders of the respondent in terms
of which the applicant purchased from the shareholders various
percentages of their shareholding in the respondent, resulting, so it
is alleged, in the applicant acquiring, in aggregate, 60%
of the
shareholding in the respondent (collectively,“the first
agreement”). One such agreement was attached to the
founding
affidavit.
[5]
In terms of a written agreement concluded in February 2017 the
respondent
purchased from the applicant the shareholding it had
allegedly acquired in the respondent, in terms of the first
agreement, for
a purchase consideration of R3 000 000.00
(“the second agreement”).
[6]
The second agreement provided that the purchase consideration for the
shares would be paid in two phases, namely:
6.1. the first phase
- for 30 ordinary shares the sum of R1 450 000.00 would be
redeemed from the applicant’s
loan account on 28 February 2017;
and
6.2. the second
phase - the balance of 30 ordinary shares for the sum of
R1 550 000.00, payable no later
than nine months from the
date of signature of the second agreement.
[7]
The second agreement was signed on 28 February 2017.
Contemporaneously
the sum referred to in paragraph 6.1, above was
redeemed from the loan account.
[8]
The applicant states that the sum referred to in paragraph 6.2, above
was reduced, by setting off an indebtedness of the applicant to the
respondent, to the sum of R1 466 211.13, i.e. the
applicant’s alleged liquidated claim against the respondent. It
is not in dispute that this sum has not been paid to the
applicant.
[9]
According to the applicant the respondent’s failure to pay the
balance
of the purchase consideration can be ascribed to its
inability to pay its debts, which inability can be gleaned from the
following:
9.1. the respondent,
after negotiations regarding its alleged indebtedness to the
applicant, attempted to compromise
such indebtedness in email
correspondence dated 6 December 2019. The applicant argues that this
correspondence is clearly indicative
of an inability by the
respondent to pay its debts as and when they fall due. Significantly
in this letter the respondent did not,
in terms, acknowledge being
indebted to the applicant in the sum claimed by the applicant;
9.2. on 2 July 2021
a letter of demand as envisaged in section 345 of the Companies Act,
1973 was delivered to
the respondent and this demand remains
unsatisfied. Thus, so it is contended, the respondent is deemed to be
unable to pay its
debts.
[10]
The applicant also says that it would be just and equitable for the
respondent to be placed
under provisional winding-up, as:
10.1. in terms of the second agreement
ownership in the shares sold remained vested in the applicant until
the full purchase consideration
had been paid;
10.2. despite the applicant thus still
being a majority shareholder in the respondent, the business of the
respondent was continuing
to be run to the detriment of the
applicant;
10.3. the respondent, through its
directors had resisted all attempts to convene a shareholders’
meeting or allow the applicant
any involvement in the running of the
respondent;
10.4. the respondent, in a letter
dated 29 June 2021, “inexplicably” disputed that the
applicant was, in fact, the majority
shareholder in the respondent
and would thus resist any attempt to arrange a shareholders’
meeting.
The
respondent’s grounds of opposition
[11]
The respondent’s main contention is that the suspensive
condition in clause 3 of
the first agreement regarding the submission
of a memorandum of incorporation in an agreed form to CIPC did not
occur. No demand
was ever made of the respondent to fulfil this
condition and it was never fulfilled. Thus, the suspended provisions,
which included
the sale and purchase provision in clause 4 of the
agreement and clause 5 relating to the amount of the purchase
consideration
in terms of its payment did not come into effect. The
effective date of the agreement (defined in the second agreement as
being
the third business day after the fulfilment of the suspensive
condition in clause 3) was accordingly never reached.
[12]
Obviously, if the first agreement remained incohate as result of the
non-fulfilment of
the suspensive condition, this would mean that the
applicant never acquired ownership of shares in the respondent,
which, in turn,
would have a bearing on the validity of the second
agreement. The applicant, for instance, would not have been in a
position to
warrant its ownership of the shares which were the
subject matter of the second agreement as it did in terms of that
agreement.
The respondent says that its case in this regard is
enhanced by the fact that no share certificates were ever delivered
to the
applicant.
[13]
The respondent contends further that the applicant was substantially
indebted to it in
respect of what the respondent described as trade
debts and that this indebtedness was the genesis of the second
agreement, which
envisaged a set-off arrangement in respect of the
applicant’s indebtedness to the respondent when calculating the
purchase
consideration for the shares in terms of the second
agreement.
[14]
Thus, says the respondent if the applicant had instituted action
against it for the recovery
of the alleged indebtedness relating to
the non-payment of the purchase consideration for the shares the
respondent would have
had a clear defence against such a claim.
[15]
Furthermore, so argues the respondent, the applicant’s claim
against it has been
extinguished by prescription. Payment of the
balance of the purchase consideration in respect of the shares, on
the applicant’s
version, was due in November 2017 and the
respondent at no stage acknowledged liability in any amount to the
applicant.
[16]
It is against this background that the respondent argues that the
existence of any indebtedness
by it to the applicant is
bona fide
disputed on reasonable grounds and that winding-up proceedings are
not appropriate to determine the disputes between the parties.
Legal
principles
[17]
There is a wealth of authority to the effect that winding-up
proceedings ought not to be
resorted to and by means thereof to try
to enforce payment of a debt the existence of which is in good faith
disputed by the company
on reasonable grounds.
[18]
The procedure for winding-up is not designed for the resolution of
disputes as to the existence
or non-existence of a debt - the
so-called “Badenhorst rule”, following the decision in
Badenhorst v Northern Construction Enterprises (Pty) Ltd
1956
(2) SA 346
(T) at 347-348.
[19]
The legal position which will inform my decision in this matter, with
reference to a long
line of authority, is appositely stated in the
following terms in
Kalil v Decotex (Pty) Ltd and Another
1988
(1) SA 943
(AD) at 980 B-C:
“
As in the present case, the
disputes which arise on the affidavits may relate to the
locus
standi
of the applicant, either as a member or creditor, or as to
whether proper grounds for winding-up have been established. In
regard
to
locus standi
as a creditor, it has been held,
following certain English authority, that an application for
liquidation should not be resorted
to in order to enforce a claim
which is
bona fide
disputed by the company. Consequently,
where the respondent shows on a balance of probability that its
indebtedness to the applicant
is disputed on
bona fide
and
reasonable grounds, the Court will refuse a winding-up order. The
onus on the respondent is not a show that it is not indebted
to the
applicant: it is merely to show that the indebtedness is disputed on
bona fide
and reasonable grounds.”
Application
of legal principles
[20]
On the papers before me the following disputes are apparent:
20.1. the existence or non-existence
of any indebtedness by the respondent to the applicant;
20.2. if there is indeed an
indebtedness by the respondent to the applicant, the extent of such
indebtedness;
20.3. whether or not the suspensive
condition in clause 3 of the first agreement was fulfilled or whether
fulfilment thereof could
be and was waived by the applicant and/or
the parties to the various agreements providing for the sale of
shares in the respondent
to the applicant;
20.4. whether, in fact, the applicant
ever became a shareholder in the respondent, which will be dependent
on a determination of
the issues referred to in the preceding
sub-paragraph;
20.5. the
locus standi
of the
applicant which, in turn, is dependent on the existence of an
indebtedness by the respondent to the applicant and/or the
applicant
being a shareholder in the respondent;
20.6. the validity of the second
agreement, which will be determined by resolution of the disputes
referred to in the preceding
sub-paragraphs;
20.7. the possibility that the debt on
which the applicant relies has been extinguished by prescription.
[21]
In my view the present proceedings are not the appropriate
proceedings for resolving the
abovementioned disputes. The onus on
the respondent is merely to show that the alleged indebtedness is
disputed on
bona fide
and reasonable grounds. I am satisfied
that it has met this onus.
[22]
I accept that the principal ground of dispute, namely the fulfilment,
or not, of the suspensive
condition in the first agreement, was not
canvassed in correspondence preceding this application and, in fact,
was only raised
and covered in detail in the respondent’s
opposing affidavit. It was only alluded to in the letter from the
respondent’s
attorneys of 29 June 2021 in which it was recorded
that the respondent disputed that the applicant was the majority
shareholder
in the respondent. The fact that this ground of dispute
was raised at a late stage, no doubt on the basis of legal advice
received,
does not mean that the respondent, in raising it, was not
acting in good faith or that the debt relied on by the applicant was
not being disputed on reasonable grounds.
[23]
Thus, on the strength of the authorities referred to I must refuse to
grant an order of
provisional winding-up in respect of the
respondent.
Costs
[24]
The first agreement was given effect to in part. So too was the
second agreement partially
implemented.
[25]
Although I have found that the principal ground of opposition
revolving around the fulfilment
of the suspensive condition in the
first agreement was raised by the respondent in good faith and
constituted a reasonable ground
of dispute it was nevertheless only
fully raised in the respondent’s opposing affidavit. The
applicant, in bringing the application
for the provisional winding-up
of the respondent, was oblivious to this ground of opposition until
it was raised in the opposing
affidavit.
[26]
Given that this is not a case where the applicant pursued winding-up
proceedings in the
face of a dispute of which it was aware all along,
I consider that this is an appropriate case where each party should
be ordered
to pay its own costs of the application.
Order
[27]
I thus make the following order:
1.
The application is dismissed.
2.
Each party is ordered to pay its own costs of the application.
O
H RONAASEN
ACTING
JUDGE OF THE HIGH COURT
Appearances
:
For
Applicant:
Adv R Bhima
Instructed
by:
Pagel Schulenburg
Inc
c/o
Greyvensteins Incorporate
For
Defendant:
Adv JG Richards
Instructed
by:
Kaplan Blumberg Attorneys
Date
Heard:
05 May 2022
Date
Delivered:
26 July 2022