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[2023] ZAFSHC 87
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Components only Proprietary Ltd v Joroy 0011 CC (4692/2022) [2023] ZAFSHC 87 (22 March 2023)
IN THE HIGH COURT
OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case No.:
4692/2022
Reportable: YES/NO
Of Interest to other
Judges: YES/NO
Circulate to
Magistrates: YES/NO
In the matter between:
COMPONENTS ONLY
PROPRIETARY LTD
Applicant
and
JOROY
0011 CC
Respondent
(REG. NO.
B2004/006273/230)
CORAM: VAN RHYN, J
HEARD ON:
23 FEBRUARY 2023
DELIVERED ON:
22 MARCH 2023
[1]
This is an application for the winding-up of the respondent on the
basis that it is
unable to pay its debts as envisaged in section
344(f) of the Companies Act
[1]
(the “Companies Act’), read with the provisions of
section 66(1) and 69(1)(a) of the Close Corporations Act
[2]
(the “CC Act”).
[2]
The applicant is Components Only Proprietary Limited, a private
company with limited
liability incorporated as such in Australia and
with its business situated at Queensland, Australia. The respondent
is JOROY 0011CC
trading as Ferro Sales & Service, a close
corporation with its registered address at Ribblesdale, Bloemfontein,
Free State
Province.
[3]
The application for its liquidation is opposed by the respondent on
the basis that
it acted as an agent for the applicant to purchase
goods from Hitachi Construction Machinery Africa (“Hitachi”),
the
manufacturer of the goods. Respondent’s indebtedness to the
applicant has therefore been disputed on
bona fide
and
reasonable grounds.
[4]
The following facts are either common cause or undisputed. On or
about 13 January
2022 the applicant placed a purchase order for two
traction motors at a unit price of R6 660 924.52 each with
the respondent.
The applicant paid the sums of R6 660 924.52
on 20 January 2022 and the amount of R6 660 549.52 on 7
March
2022 as payment for the two traction motors. The applicant
received one traction motor. The respondent failed to supply the
second
traction motor where after the applicant cancelled the
purchase order on 29 March 2022 and demanded repayment of the amount
paid
in respect of the second traction motor.
[5]
During January 2022 the applicant purchased three blower motors in
respect whereof
the respondent issued tax invoices in its name and
addressed to the applicant for the total amount of R 331 200.00.
Applicant
paid the amount as per the invoices for the three blower
motors to the respondent on 18 January 2022. Applicant received two
of
the blower motors. The respondent failed to deliver the third
blower motor to the applicant and has also failed to repay the amount
of R 110 400.00 in respect of the third blower motor to the
applicant.
[6]
The respondent undertook to repay the amount of R110 400.00 to
the applicant
in respect of the third blower motor. Shortly prior to
the hearing of this matter the respondent repaid the amount of
R110 400.00
in respect of the third blower motor. The parties
are
ad idem
that the claim in respect of payment in the amount
of R 110 400.00 in respect of the third blower motor has been
settled.
[7]
The only amount owing, as contended by the applicant, is the amount
of R6 660 549.
52 in respect of the second traction motor
which has not been delivered by the respondent.
[8]
The respondent’s main defence is that it acted as an agent on
behalf of the
applicant. The respondent alleges that it paid the
purchase price of the second traction motor to Hitachi, however
Hitachi refuses
to provide the second traction motor to the
respondent and refuses to repay the purchase price of the second
traction motor to
the respondent. On the basis that the respondent
acted as the applicant’s agent, it is contended that the
applicant should
institute action against Hitachi to recover payment
of the amount of R6 660 549.52.
[9]
Mr Lotz SC, counsel on behalf of the applicant argued that the onus
to prove that
a relationship of principal and agent existed between
the applicant and the respondent, rests upon the respondent. Not only
does
the respondent carry the onus on a balance of probabilities in
respect of the defence of agency but also to persuade the court on
a
balance of probabilities that it had indeed paid over the amount of
R6 660 549.52 to Hitachi.
[10]
As no delivery of the second traction motor was received nor
repayment in respect of the second
traction motor, applicant caused a
statutory demand
[3]
to be served
upon the respondent on 18 July 2022 in which it called upon the
respondent to pay its indebtedness to the applicant
within 21 days of
receipt of the demand. Despite the lapse of 21 days, no payment was
forthcoming or secured to the reasonable
satisfaction of the
applicant.
[11]
The winding-up of a close corporation is regulated by section 66 of
the CC Act. The applicability of
the Companies Act to the winding up
of close corporations is set out as follows in section 66 of the CC
Act:
“
(1) The laws
mentioned or contemplated in item 9 of Schedule 5 of the Companies
Act, read with the changes required by the context,
apply to the
liquidation of a corporation in respect of any matter not
specifically provided for in this Part or in any other provision
of
this Act.”
[12]
Section 69(1) of the CC Act provides that for the purposes of section
68(c), a corporation shall
be deemed to be unable to pay its debts,
if-
“
(a)
a creditor, by cession or otherwise, to whom the corporation is
indebted in a sum of not less than two hundred rand then due
has
served on the corporation, by delivering it at its registered office,
a demand requiring the corporation to pay the sum so
due, and the
corporation has for 21 days thereafter neglected to pay the sum or to
secure or compound for it to the reasonable
satisfaction of the
creditor; or
(b) any process issued on
a judgment, decree or order of any court in favour of a creditor of
the corporation is returned by a sheriff,
or a messenger of a
magistrate's court, with an endorsement that he or she has not found
sufficient disposable property to satisfy
the judgment, decree or
order, or that any disposable property found did not upon sale
satisfy such process; or
(c) it is proved to the
satisfaction of the Court that the corporation is unable to pay its
debts.
(2) In determining for
the purposes of subsection (1) whether a corporation is unable to pay
its debts, the Court shall also take
into account the contingent and
prospective liabilities of the corporation.”
[13]
In
order
to establish the requirement that the respondent is unable to pay its
debts, the applicant relied upon the respondent’s
inability to
pay its debt within the statutorily allowed period of 21 days after
receiving the statutory demand. Section 344 of
the Companies Act is
the source of authority that vests a court with the power to
liquidate a company.
[4]
Subsection 344(f) provides that a company may be wound up by the
court if it is unable to pay its debts as described in section
345,
which in turns provides, that:
“
345. (1) A company
or body corporate shall be deemed to be unable to pay its debts if-
(a)
a creditor, by cession or otherwise, to whom the company
is indebted
in a sum not less than one hundred rand then due-
(i)
Has served on the company, by leaving the same as its registered
office, a demand
requiring the company to pay the sum due; or
(b)
It is proved to the satisfaction of the court that the
company is
unable to pay its debts… “
[14]
In
Imobrite
(Pty) Ltd v DTL Boerdery CC
[5]
the Supreme Court of Appeal, with reference to the so-called
Badenhorst rule, summarised the principles to be applied in cases
where a debt is disputed as follows:
“
[14]
It is trite that, by their very nature, winding-up proceedings are
not designed to resolve
disputes pertaining to the
existence or non-existence of a debts. Thus, winding-up proceedings
ought not to be resorted to enforce
a debt that is bona fide
(genuinely) disputed on reasonable grounds.
That approach is
part of the broader principle that the court’s processes should
not be abused.
[15] A
winding-up order will not be granted where the sole or predominant
motive or purpose of seeking the winding-up
order is something other
than the bona fide bringing about of the company’s
liquidation.
[6]
It would also constitute an abuse of process if there is an attempt
to enforce payment of a debt which is bona fide disputed, or
where
the motive is to oppress or defraud the company or frustrate its
rights.
[7]
”
[15]
Subsequent to the applicant’s demand for return of the funds in
respect of the traction
motor on 29 March 2022, respondent replied,
per email dated 25 April 2022, that respondent had paid the monies to
Hitachi and provided
proof of such payment in an amount of
R1 160 924.52. On respondent’s version it should
therefore have still been
in possession of the balance, namely R
5 500 000.00. The following day, on 26 April 2022, the
applicant addressed an
email to the respondent stating the
aforementioned fact and requested repayment of the amount of R
5 500 000.00.
[16]
Respondent failed to reply to such request where after the applicant,
on 28 April 2022, addressed
a further email to the respondent
requesting a reply. On 28 April 2022 respondent replied and indicated
that it requested a refund
from Hitachi where after the monies will
be repaid to the applicant. Since 28 April 2022 the respondent has
not repaid the amount
of R5 500 000.00 nor has the amount of
R1 160 924.52 been refunded to the applicant.
[17]
Mr Lotz SC argued that the purchase orders by the applicant,
addressed to the respondent, is
indicative of a relationship of
purchaser and seller between the parties, both acting in their own
right as principals. Annexure
“AF4” to the founding
affidavit is the purchase order by the applicant dated 13 January
2022 addressed to Ferro Sales
and Service, the respondent, for the
two traction motors in the total amount of R13 321 849.04.
[18]
The purchase order provides that the purchase is subject to the terms
and conditions of purchase
which is available on the specified
website of the applicant. Clause 14.5 provides as follows:
“
5. The
relationship of the parties is one of principal and independent
contractor only”
Clause 5 reads as follows
“Warranties and Exclusion of Liability. 1. The seller warrants
that the goods when delivered to
Components Only will comply with any
description for the goods contained in the relevant Purchase
confirmation, the Standard Specifications
and with the information
otherwise provided by the Seller and the original equipment
manufacturer in respect of the goods. Components
Only is not required
to accept goods with any specifications or characteristics that are
outside any such description for the goods”.
[19]
In clause 6, regarding the indemnities and insurances, the terms and
conditions applicable to
the purchase provides that the seller shall
indemnify the applicant
inter alia
of the following: against
all costs, claims demands, expenses and liabilities of whatsoever
nature including claims of death and
personal injury. On behalf of
the applicant it was therefore argued that no agent would accept
these responsibilities if it acted
as an agent.
[20]
Subsequent to the statutory letter of demand the respondent replied
per email on 15 August 2022
that both companies knew the risks
involved to “… get parts from Hitachi South Africa and
that Hitachi can shut the
door or adjust the price at any time the
part is available at an adjusted price. However we at Ferro Sales
will return the funds
as soon as it is recovered from Hitachi, until
we have recovered the funds we can offer a R100 000.00 payment
per month until
the funds are returned.” The applicant contends
that in the event of an agency relationship the respondent would
have, already
at this stage during August 2022, responded to the
statutory demand that it acted as an agent and that the applicant
should proceed
to demand repayment from Hitachi and not from the
respondent, being the agent. The respondent would furthermore not
have made an
offer to repay the amount in instalment of it acted as
an agent.
[21]
Mr Groenewald, counsel on behalf of the respondent argued that the
respondent disputes the indebtedness
to the applicant on bona fide
and reasonable grounds. The applicant was desirous to purchase goods
from Hitachi in South Africa
because it was more affordable than
purchasing the goods from Hitachi in Australia. Due to the fact that
Hitachi does not allow
the purchase of goods by foreign companies
directly from Hitachi South Africa, the respondent acted as the
applicant’s agent.
Since November 2021 the applicant and the
respondent concluded several purchase deals on the basis that the
applicant places the
orders through the respondent to purchase goods
from Hitachi South Africa.
[22]
The respondent required upfront payment from the applicant of the
purchase price. The applicant
would then issue an invoice addressed
to the respondent where after the respondent would issue a tax
invoice for the purchase of
the goods. Each of the tax invoices
issued by the respondent was addressed to the applicant. As before,
the respondent issued two
tax invoices in respect of the two traction
motors on 13 January 2022, each in the amount of R6 660 924.52
with number
IN 10486 and IN 10487 respectively. Appended to the
respondent’s answering affidavit is annexure “OP13”,
the
sales quotation issued by Hitachi in Johannesburg to Ferro Sales
& Services at Bloemfontein (the respondent) dated 17 November
2021 in respect of one of the traction motors.
[23]
On 20 January 2022 the applicant paid the purchase price of the first
traction motors into the
Investec Bank account of the respondent.
According to the respondent the amount was paid in three payments to
Hitachi, namely an
amount of R 3 000 000.00 on 21 January 2022, an
amount of R2 500 000.00 on 24 January 2022 and the balance
in the amount
of R 1 160 924 .52 on 8 March 2022.
[24]
On 7 March 2022 the applicant paid the purchase price in respect of
the second traction motor
into the respondent’s bank account.
The respondent effected payment in the amount of R 6 660 924.52
in three payments
to Hitachi, namely R 3 000 000.00 on 13
January 2022, R660 924.52 on 17 January 2022 and R3 000 000.00
on 18 January 2022. According to the respondent Hitachi refuses to
deliver the second traction motor as it discovered that the
applicant
is the actual purchaser of the goods and now insists on a purchase
price of R11 000.000.00 in respect of the second
traction motor.
[25]
The application for liquidation of the respondent
was issued by the applicant on 26 September 2022. On 13
October 2022
the respondent issued summons against Hitachi under case number
5066/2022 in this court for recovery of the purchase
price of the
second traction motor. In respondent’s particulars of claim it
is alleged that during November 2022 the respondent,
represented by
Mr Thomas Ferreira and Hitachi concluded a partly written and partly
verbal agreement in terms whereof the respondent
purchased a motor
from Hitachi in the amount of R 6 660 924.52. No mention is
made of the agency agreement between the
applicant and the
respondent.
[26]
Mr Groenewald contended that the action against Hitachi was
erroneously instituted based on the
instructions received from Mr
Ferreira. Mr Ferreira was unaware of the legal implications of the
agency agreement which entailed
that the agent was not entitled to
recover the amount for the second traction motor from Hitachi. The
summons issued against Hitachi
has subsequently been withdrawn.
[27]
Mr Lotz SC argued that the institution of the legal action against
Hitachi would only have followed
after a detailed consultation with
the respondent’s legal representative. It can therefore be
assumed that Mr Ferreira did
not mention any agency agreement that
existed between the applicant and the respondent.
[28]
Whoever relies upon an agency must allege and prove its existence and
the scope thereof.
[8]
Clearly
the respondent did not indicate to Hitachi that it acted as the
applicant’s agent. If the version of a relationship
of
principal and agent was true, the respondent would have replied to
the statutory demand that it merely acted as an agent on
behalf of
the applicant and that the applicant had to institute action for the
recovery of the purchase price against Hitachi.
[29]
None of the purchase orders invoices issued by the applicant or any
of the tax invoices issued
by the respondent refer to the respondent
acting as an agent on behalf of the applicant. The same applies to
the sales quotations
issued by Hitachi and addressed to the
respondent. There is not a single
iota
of documentary evidence
submitted by the respondent to corroborate the version proffered by
the respondent that it acted as an
agent on behalf of the applicant.
[30]
I agree with the submission made on behalf of the applicant that, to
the contrary, all the documentary
evidence, which include the email
messages between the applicant and the respondent in respect of the
cancellation of the agreement
and repayment of the purchase price of
the second traction motor, points to the fact that the respondent did
not act as the applicant’s
agent. The respondent, apart from a
bald allegation that a relationship of agency existed, failed to
discharge the onus of proof
that it acted as the applicant’s
agent. I am of the view that the respondent acted as a principal in
its own right as provided
for in the terms and conditions of sale
which the applicant appended to the founding affidavit.
[31]
A further worrying aspect is the allegations by the applicant that
the respondent’s averments
that it had paid the amount of
R6 660 924.52 for the purchase of the second traction
motorto Hitachi is not only improbable
but patently untruthful. With
reference to the proof of payment documents tendered by the
respondent and appended as “OP18”,
“OP19” and
“OP20” in respect of the three payments made on 13, 17
and 18 January 2022 respectively, compared
to annexures “OP22.2”,
“OP22.3” and “OP22.4” as well as annexure
“AF7”, it is evident
that the Investec Bank account
number from which payment was allegedly made differs. Secondly, under
the heading “Transaction
Details” the reference changes
where it refers to “Hitachi” on “OP 22.2, OP22.3
and OP 22.4 while on “OP18”,
“Op19” and
“OP20” the reference is “Thomas Loan”. The
Investec Bank Logo, a zebra, is not displayed
on annexures “OP18”,
“Op19” and “OP20” compared to “Op12”,
“OP22.2”,
“Op22.3”, “Op22.4” and
“AF7”.
[32]
Further discrepancies appear on these statements
and annexures as comprehensively referred to by the applicant
in its
replying affidavit and highlighted by Mr Lotz SC during argument. Mr
Groenewald replied that it appears as if the payments
were made from
different bank accounts held by the respondent at Investec Bank.
[33]
The respondent was invited and challenged to disclose its bank
statements covering the period
from 12 January 2022 to 18 January
2022 but failed to do so. It furthermore appears that the respondent,
on its own version paid
over the purchase price for the second
traction motor almost two months prior to the applicant having made
payment to the respondent.
[34]
What appears from the respondent’s bank
statements is that at the stage when the applicant paid the
sum of
R6 660 924.52 into the respondent’s bank account on
20 January 2022, as payment for the first traction motor,
the
respondent had an amount of R 8 819.38 in its bank account. The
respondent paid R5 500 000.00 to Hitachi for
the first
traction motor and then, save for an amount of R43 000.00
proceeded to use the balance of the amount paid by the
applicant, to
make payments to third parties. The conduct of the respondent in
failing to make payment of the applicant’s
monies to Hitachi,
is not reconcilable with it acting as an agent on behalf of the
applicant.
[35]
I am convinced that the respondent did not act as an agent on behalf
of the applicant and that
the respondent is liable to the applicant
in the amount of R6 660 924.52, alternatively R6 660
549.52 in respect
of the monies paid by the applicant to the
respondent. In any event the respondent repaid the monies in respect
of the third blower
motor without any reliance upon an agency
agreement.
[36]
The respondent’s only response to the applicant’s letter
of demand in terms of section
69(1)(a) of the CC Act, for repayment
of the amount of R6 660 924.52, was an offer to repay the
applicant in instalments
of R100 000.00 per month. The applicant
rejected the offer. I am satisfied that the respondent’s
indebtedness has,
prima
facie
,
been established. Furthermore, once the respondent’s
indebtedness to the appellant had been shown, the discretion to
refuse
a winding-up order was a narrow one
[9]
.
[37]
The exercise of discretion in favour of not granting a liquidation
order must be based on a solid
factual foundation. The respondent
failed to present such a factual foundation and did not raise a
bona
fide
defence to the applicant’s claim.
[38]
In the result it is ordered that
:
1.
The respondent is hereby placed under PROVISIONAL LIQUIDATION
in the
hands of the Master of the High Court.
2.
A PROVISIONAL LIQUIDATION ORDER is hereby issued calling
upon all
interested parties to show cause, if any, to the court on the 4th day
of May 2023 at 09h30 why a FINAL ORDER OF LIQUIDATION
should not be
granted against respondent close corporation.
3.
Service of this rule
nisi
and a copy of the notice of motion
and annexures shall be effected on the respondent close corporation
at its registered office
or its principal place of business within
the court's jurisdiction.
4.
This order shall, without delay, be published once in a daily
newspaper circulating in Bloemfontein and in The Government Gazette.
5.
The sheriff shall ascertain whether the employees of the respondent
are represented by a trade union and whether there is a notice board
on the premises to which the employees have access.
6.
A copy of the provisional liquidation order shall be served on -
6.1
Every registered trade union that as far as the Sheriff can
reasonably ascertain, represents any of the employees
of the
respondent close corporation.
6.2 The
employees of the respondent close corporation by affixing a copy of
the application and provisional liquidation
order on any notice board
to which the employees have access inside the respondent close
corporation’s premises or if there
is no access to the premises
by the employees, by affixing a copy to the front gate or front door
of the premises from which the
respondent close corporation conducted
any business.
6.3 The
South African Revenue Services.
7.
The costs of the application shall be costs in the liquidation
proceedings.
VAN
RHYN, J
On behalf of the
Applicant:
ADV G M E LOTZ SC
Instructed
by:
KRAMER WEIHMANN ATTORNEYS
BLOEMFONTEIN
On behalf of the
Respondent:
ADV W GROENEWALD
Instructed by
SYMINGTON & DE KOK ATTORNEYS
BLOEMFONTEIN
[1]
Act 61 of 1973.
[2]
Act 69 of 1984
[3]
Notice in terms of section 69 of the Close Corporation Act read with
item 9 of schedule 5 of the Companies Act.
[4]
Ex Parte Muller NO: In
Re
P L Myburgh (EDMS) Bpk
1979 (2) SA 339(N)
at 340.
[5]
(1007/20)
[2022] ZASCA 67
(May 2022), paras 14 and 15.
[6]
Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA
346 (T).
[7]
Henochsberg on the Companies Act Issue 23 at 694.
[8]
Terblanche v Notnagel 1975 (4) SA 405 (C).
[9]
Afgri Operations Limited v Hamba Fleet (Pty) Ltd
[2017] ZASCA 24
;
2022 (1) SA 91
(SCA) para 12-13.