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[2023] ZAKZPHC 36
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ABSA Bank Limited v Afrifurn Manufacturing (Pty) Ltd (732/2022P) [2023] ZAKZPHC 36 (27 March 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
FLYNOTES:
WINDING UP AND DEFENCES
COMPANY
– Winding up – Unable to pay debts – Loan from
bank – Not keeping up with instalments –
Failing to
directly address allegations of failure to pay and quantum –
Not supporting denial of accuracy of certificate
establishing
total indebtedness – Clause in agreement entitling bank to
accelerated payment – Deemed to be insolvent
–
Provisionally wound up – Companies Act 61 of 1973, s
345(1)(a).
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 732/2022P
In
the matter between:
ABSA
BANK
LIMITED APPLICANT
and
AFRIFURN
MANUFACTURING (PTY) LTD RESPONDENT
(REGISTRATION
NO: 2[...])
Coram:
Mossop J
Heard:
14 March 2023
Delivered:
27 March 2023
ORDER
The
following order is granted:
1.
The respondent is provisionally wound up.
2.
A rule nisi is issued calling upon the respondent and all interested
parties to show cause to this court on 16 May 2023 at 09h30, or so
soon thereafter as the matter may be heard, why the respondent
should
not be finally wound up.
3.
The relief set forth in paragraph 1 of this order shall operate
as a
provisional order winding up the respondent with immediate effect.
4.
A copy of this provisional order is to be served upon the respondent
at its registered office, the Master of the High Court, the South
African Revenue Service and the respondent’s employees
and
trade unions.
5.
A copy of the provisional order is to be published on or before
28
April 2023, once in the
Government Gazette
and once in a daily
newspaper published and circulating in KwaZulu-Natal.
6.
The costs of this application shall be costs in the winding-up
of the
respondent.
JUDGMENT
MOSSOP
J:
[1]
This is an opposed application in which the applicant seeks an
order
provisionally liquidating the respondent. The grounds for the
relief claimed is that the respondent is deemed to be insolvent by
virtue of the provisions of section 344
(f)
, read with section
345(1)
(a)
and
(c)
, of the Companies Act 61 of 1973 (the
old Act), as read with item 9 of Schedule 5 of the
Companies Act 71
of 2008
.
[2]
The applicant was represented when the matter was argued by Mr
Pietersen
and the respondent was represented by Mr Kissoon Singh SC
who, I must point out, did not draw the respondent’s heads of
argument.
Both counsel are thanked for the assistance that they have
provided to the court.
[3]
The applicant is a major financial institution that operates
throughout
South Africa. The respondent is a private company based in
KwaDukuza, KwaZulu-Natal. On 19 June 2019, the parties concluded a
written
agreement, described on the face of that document as being a
‘Mortgage Backed Business Loan’ (the agreement), in terms
of which the applicant agreed to advance to the respondent a loan in
the amount of approximately R5 million. The parties agreed
that the
respondent was to repay the loan in 120 monthly instalments. In the
event of the respondent falling into arrears with
its payment
obligations, the parties further agreed that the applicant could
establish the quantum of its indebtedness to the applicant
by way of
a certificate of balance (the certificate) given by an authorised
employee of the applicant whose appointment and authority
did not
have to be proved. As security for the amount to be advanced to it,
the respondent was required to pass a mortgage bond
over certain
immovable property that it owns in KwaDukuza. It did so.
[4]
It is appropriate to mention at this juncture that there is an action
proceeding in this court for the repayment to the applicant of the
respondent’s alleged indebtedness to it. I was advised
from the
bar that the respondent has pleaded to the applicant’s
particulars of claim, that pleadings had closed and that
an amendment
was then introduced to the particulars of claim but that the
pleadings have now closed for a second time. The pleadings
in the
action have not been placed before this court.
[5]
It has not been directly disputed in the answering affidavit that the
applicant advanced the loan amount to the respondent. I shall
therefore regard the loan as admitted. The applicant alleges that
the
respondent fell into arrears with its instalment payments. As the
applicant bluntly puts it, the respondent ‘stopped
paying the
monthly instalments’, and as at 30 November 2021 was in arrears
with its repayment obligations in the sum of approximately
R730 000.
The total amount owing to the applicant was the sum of approximately
R5,9 million on that date. This was confirmed in
the certificate that
the applicant issued. The respondent appears to dispute all of these
allegations.
[6]
According to the applicant, as a consequence of the respondent’s
failure to make payments that it was obliged to make, a demand (the
demand) was delivered to the respondent’s registered
address by
the sheriff. It claims that it is a written demand as contemplated in
section 345(1)
(a)
of the old Act.
[7]
Section 345(1)
(a)
reads as follows:
‘
(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 at its registered
office, a demand requiring the company to pay the sum so due;
or
(ii)
in the case of any body corporate not incorporated under this Act,
has served such demand by leaving it at its main office
or delivering
it to the secretary or some director, manager or principal officer of
such body corporate or in such other manner
as the Court may direct,
and
the company or body corporate has for three weeks thereafter
neglected to pay the sum, or to secure or compound for it to the
reasonable satisfaction of the creditor’.
[8]
It is necessary to dwell for a moment on the content of the demand,
given
the excitement that it has generated in this matter. It plainly
reveals that it was delivered in accordance with the provisions
of
section 345(1)
(a)
of the old Act. It demanded the repayment
from the respondent of an amount of R5 894 028.43 within
the statutorily defined
period. It further stated the following:
‘
In this regard we
draw your attention to Section 345(1)(a) of the Companies Act 61 of
1973, as amended, which states …’.
What
thereafter appears in the demand is a verbatim narration of the
provisions of section 345(1)
(a)
of the old Act. The demand
goes on to state the following:
‘
8.
Should you therefore neglect to pay the said amount or to secure or
compound for it
[sic] to the reasonable satisfaction of our client
within TWENTY ONE (21) DAYS of receipt of this the demand, you will,
in terms
of the abovementioned Section, be deemed to be unable to pay
your debts.
9.
The effect of the abovementioned section is that our client will be
able to proceed
to apply for the liquidation of yourselves pursuant
to section 345(1)(a) on the basis of your deemed inability to pay
your debts.’
[9]
The demand elicited no reaction from the respondent, which did not
pay
the amount demanded of it nor did it secure or compound that
amount to the reasonable satisfaction of the applicant. Thus, so the
applicant contends, the law deems the respondent to be insolvent.
[10]
Multiple defences are raised by the respondent in its answering
affidavit. Not all
of
them were persisted with in argument. Those that were persisted with
are trenchantly set out in the heads of argument prepared
on the
respondent’s behalf. Each must be considered.
[11]
The first defence raised is that the applicant has failed to
establish a breach of the
agreement. It is submitted that the
applicant has not put up a schedule of the payments made by the
respondent from which a missed
payment or payments by the respondent
can be discerned. That may be correct. However, in terms of section
345(1)
(a)
of the old Act, all the applicant had to establish
was that the respondent was indebted to it in an amount not less than
R100.
It was not required to establish the respondent’s
indebtedness to it in granular detail.
[12]
The specific allegation that the respondent ‘stopped making
payments’ that
it was obliged to make and consequently fell
into arrears that totalled R730 000 by 30 November 2021 is a
statement of some
significance by the applicant. How that specific
allegation is addressed in the answering affidavit is, in my view,
also of some
significance when considering this specific defence.
[13]
In its
answer to this allegation, the respondent did not deny that it was in
arrears or that it had stopped making payments to the
applicant.
Instead, it raised other points of criticism of the applicant’s
case and then made an oblique reference to the
effects of the
Covid-19 pandemic, the high watermark of that reference being that it
was alleged that because of Covid-19, the
respondent’s
obligations ‘were suspended’. This is a legal conclusion.
For it to be upheld, the facts entitling
this conclusion to be drawn
must be revealed. The respondent has, however, been rather coy in
doing so. The respondent has not
specifically stated that it did not
make all the required instalments. It rather prefers the court to
infer that this is the case.
This is presumably because it could not
dispute that it was potentially in arrears if it conceded that it had
not paid all the
prescribed instalments. I can conceive of no need to
make reference to the blight of Covid-19 if all payments due by the
respondent
to the applicant had been made. The inclusion of this
allegation ineluctably drives one to the conclusion that it was
mentioned
because not all the required instalments had been made by
the respondent. Without disclosing the facts establishing the legal
conclusion
advanced by the respondent it is not possible to determine
that the respondent has a bona fide defence to the applicant’s
allegations. The principle established in
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
[1]
accordingly does not avail the respondent.
[14]
The applicant’s allegations regarding the failure to pay and
the quantum of the respondent’s
arrears needed, in my view, to
be directly addressed by the respondent if this ground of defence was
to be sustained. It did not
do so.
[15]
The respondent did, however, make the following statement in its
answering affidavit:
‘
I dispute that the
amount the applicant claims to be in arrears is correct in all
material respects. The applicant has not alleged
or proved what
amounts constitutes the monthly instalments, for which amounts the
respondent was allegedly in breach and how the
sum it claims to be
the total arrear amount has been calculated.’
Significantly,
in this statement the respondent did not deny the fact of the
arrears, but merely that it was not correct ‘in
all material
respects’. That means that in certain material respects it is
correct. What the incorrect aspects were was not
identified. The
further allegation that the applicant had not alleged or proved the
amount of each instalment was incorrect. This
was established by the
applicant in at least three ways:
(a)
In the founding affidavit, where the applicant stated that each
instalment was in the sum of
R70 302.72
per month;
(b)
In the commercial terms
part of the agreement where the amount of the instalment is stated to
be R70 302.72 per month; and
(c)
By way of attaching a
schedule to the agreement reflecting, inter alia, the date, day of
the week, interest rate and amount of each
instalment as from 7
January 2023: the figure of R70 302.72 appears in the last column
throughout the schedule.
[16]
The
respondent also denied the accuracy of the certificate relied upon by
the applicant to establish the respondent’s total
indebtedness
to it. No explanation was forthcoming for this denial: the respondent
chose merely to dispute the accuracy of the
certificate but gave no
hint as to why it contended that it was inaccurate. It did not state,
for example, that it had made payments
to the applicant that had not
been accounted for by the applicant.
It
is settled law that where parties have agreed to the use of a
certificate of balance, they may agree that it constitutes
prima
facie
proof
of what is stated therein. In
Ex
parte Minister of Justice: In re R v Jacobson and Levy,
[2]
Stratford JA stated:
‘“
Prima
facie
” evidence in its more usual
sense, is used to mean
prima
facie
proof of an issue the burden
of proving which is upon the party giving that evidence.’
If
the
prima
facie
evidence
or proof remains unrebutted at the close of a case, it becomes
‘sufficient proof’ of the fact or facts (on
the issues
with which it is concerned) which are required to be established by
the party bearing the onus of proof.
[3]
[17]
To baldly deny something
without disclosing the reason for such denial does not, in my view,
create a genuine dispute of fact.
As
was stated in
Wightman t/a JW
Construction v Headfour (Pty) Ltd and another:
‘
A
real, genuine and bona fide dispute of fact can exist only where the
court is satisfied that the party who purports to raise the
dispute
has in his affidavit seriously and unambiguously addressed the fact
said to be disputed. There will of course be instances
where a bare
denial meets the requirement because there is no other way open to
the disputing party and nothing more can therefore
be expected of
him. But even that may not be sufficient if the fact averred lies
purely within the knowledge of the averring party
and no basis is
laid for disputing the veracity or accuracy of the averment.
When the facts averred are such that the disputing
party must
necessarily possess knowledge of them and be able to provide an
answer (or countervailing evidence) if they be not true
or accurate
but, instead of doing so, rests his case on a bare or ambiguous
denial the court will generally have difficulty in
finding that the
test is satisfied
.’
[4]
The
respondent, which bore the onus of disturbing the accuracy of the
certificate, has not, in the circumstances, done so. I must
therefore
conclude that the respondent is indebted to the applicant in an
amount of approximately R5,9 million. There is accordingly
no merit
in the first ground of defence.
[18]
The second ground of defence is that the provisions of the agreement
did not allow for
the full indebtedness then in existence to
immediately fall due on the occurrence of a breach of the agreement.
In other words,
there was no provision permitting the applicant to
claim the accelerated payment of the total indebtedness upon the
occurrence
of a breach by the respondent.
[19]
Clause 22 of the standard terms applicable to the agreement is headed
‘Events of
Default’. The preamble to the clause reads as
follows:
‘
Each of the events
or circumstances set out in this Clause 22 is an Event of Default
(save for clause 22.15 (consequences of default))’.
Clauses 22.1 to 22.14
then appear below the abovementioned words, each sub clause being
linked by the conjunction ‘or’.
The fifteenth sub-clause
under this heading is not linked by that conjunction and reads:
’
22.15
any event occurs in relation to a Relevant Party in any jurisdiction
which is substantially
similar to any of the events specified in
clause is 22:1 to 22.14 above then, in any such case the Bank may, in
addition to any
other rights it may have in law, on written notice to
the Borrower:
(a)
review the Facility;
(b)
cancel the Available Facility;
(c)
increase the Interest rate Margin by a further 2% per annum for so
long
as the default continues;
(d)
declare that all or any part of the Loan become immediately due and
payable;
(e)
claim immediate payment of all or any part of any amounts outstanding
under any Finance Document;
(f)
exercise its rights under any Security;
(g)
cancel this Agreement; and/or
(h)
institute action for damages.’
[20]
Clause 22 accordingly does contain an acceleration clause. The
respondent contends, however,
that based upon the wording of that
clause, the applicant only had the right to accelerate payments
insofar as any event of default
arose in respect of a ‘relevant
party’.
[21]
At first blush, that argument held some attraction, as this is what
the agreement, on a
simple reading thereof, appeared to state.
However, to maintain this attraction, it would be necessary to
overlook the fact that
it was passing strange that the applicant, who
drew the agreement, only afforded itself the right to accelerate the
payment of
amounts due to it if an event of default occurred in
relation to a ‘relevant party’ and not to the respondent
itself.
Could this, possibly, be so?
[22]
The answer is to be found in the definition of the term ‘relevant
party’. On
the first page of the agreement, it is defined as
follows:
‘
The Borrower and
The Guarantor(s) and their Subsidiaries and any other person who has
given a guarantee or a Security Interest in
relation to the
Facility.’
The
agreement defines the respondent as ‘the Borrower’. The
respondent is thus both the borrower and a relevant party.
The right
to take any of the actions mentioned in clause 22.15 of the agreement
accordingly applies to the respondent as well.
The applicant thus did
have the right to accelerate the respondent’s payments. The
second ground of defence must also fail.
[23]
The third and final ground of defence hinges on an allegation that
the statutory demand
relied upon by the applicant, namely the service
of the demand, is defective and does not permit the applicant to rely
upon the
deemed ground of insolvency found in section 345(1)
(a)
of the old Act. The basis for this is that despite the explicit
content of the demand, the deponent to the founding affidavit
asserted in that affidavit that the demand had been served in terms
of section 69 of the Close Corporations Act 69 of 1984 (the
Close
Corporations Act) and
not in terms of
section 345
of the old Act. In
its replying affidavit, the applicant acknowledged that it had
referred to the incorrect Act in its founding
affidavit. The
respondent, nonetheless, argued that the applicant had not made out a
case for the relief that it claimed in its
founding affidavit by
virtue of the incorrect reference to the applicable Act.
[24]
The
respondent is plainly a private company and not a close corporation.
The demand itself, as previously set out in this judgment,
only makes
reference to section 345(1)
(a)
of the
old Act. There is no reference whatsoever to the
Close Corporations
Act in
the demand. In substance, the demand complies with the
requisites of the old Act. The fact that the deponent to the
affidavit refers
to the incorrect Act does not detract from the
efficacy of the demand or its consequences. To hold that the demand
was compromised
by an incorrect description of the Act would be to
elevate appearance over form.
[5]
When the demand was received by the respondent, it could not have
been clearer to anyone reading it that it was being delivered
in
terms of section 345(1)
(a)
of the
old Act. What was required of the respondent was made explicit by the
narration of the provisions of that section. The respondent
was not
at liberty to ignore the demand based upon an expectation that the
Act that the demand was predicated on would later be
misdescribed in
a future liquidation application. The demand was sent with the
requisite intent and knowledge of the consequences
of non-compliance
with it and that intent cannot be eroded by an error in description
made at a later date.
[25]
It was further argued by Mr Kissoon Singh that another demand may
well have been sent in
terms of the
Close Corporations Act and
that
the founding affidavit may thus be correct when it makes reference to
that Act. I fail to see the relevance of this. If another
demand was
sent in terms of the
Close Corporations Act, it
would have no legal
effect as the respondent is not a close corporation. But one can be
reasonably confident that this is not what
occurred: if a second
demand had been delivered to the respondent in terms of the incorrect
Act it would surely have been attached
to the answering affidavit. It
was not.
[26]
As pointed out in the replying affidavit, this ground of defence is
entirely opportunistic
in its nature. The argument that the applicant
did not make out its case in the founding affidavit cannot be
sustained. The third
ground of defence to the application must
accordingly fail.
[27]
I accordingly find that the applicant has established that it is a
creditor of the respondent
in excess of the statutory threshold
amount, that it served a demand upon the respondent in terms of the
provisions of section
345(1)
(a)
of the old Act and that the
respondent failed to pay the amount demanded, or to secure or
compound it to the reasonable satisfaction
of the applicant, and is
thus deemed to be insolvent. The respondent has not demonstrated the
existence of a bona fide defence
to the applicant’s claim.
[28]
I therefore grant the following order:
1.
The respondent is provisionally wound up.
2.
A rule nisi is issued calling upon the respondent and all interested
parties to show cause to this court on 16 May 2023 at 09h30, or so
soon thereafter as the matter may be heard, why the respondent
should
not be finally wound up.
3.
The relief set forth in paragraph 1 of this order shall operate
as a
provisional order winding up the respondent with immediate effect.
4.
A copy of this provisional order is to be served upon the respondent
at its registered office, the Master of the High Court, the South
African Revenue Service and the respondent’s employees
and
trade unions.
5.
A copy of the provisional order is to be published on or before
28
April 2023, once in the
Government Gazette
and once in a daily
newspaper published and circulating in KwaZulu-Natal.
6.
The costs of this application shall be costs in the winding-up
of the
respondent.
MOSSOP
J
APPEARANCES
Counsel
for the applicant
Mr.
W. J. Pietersen
Instructed
by:
Johnston
and Partners
Locally
represented by:Stowell and Co
295
Pietermaritz Street
Pietermaritzburg
Counsel
for the respondent
Mr
A. K. Kissoon Singh SC
Instructed
by
Kevesh
Singh and Company
Locally
represented by:
Anand
Pillay Incorporated
37
Henrietta Street
Pietermaritzburg
Date
of Hearing
: 14 March 2023
Date
of Judgment
: 27
March 2023
[1]
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346 (T).
[2]
Ex
parte the Minister of Justice: In re Rex v Jacobson and Levy
1931
AD 466
at
478.
[3]
Salmons
v Jacoby
1939
AD 588
at 593.
[4]
Wightman
t/a JW Construction v Headfour (Pty) Ltd and another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) para 13.
[5]
Goncalves
and another v Franchising to Africa (Pty) Ltd t/a Gold Brands
[2016]
ZAGPPHC 960 para 28.