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[2017] ZASCA 24
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Afgri Operations Limited v Hamba Fleet (Pty) Limited (542/2016) [2017] ZASCA 24; 2022 (1) SA 91 (SCA) (24 March 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 542/2016
In the
matter between:
AFGRI
OPERATIONS LIMITED
APPELLANT
and
HAMBA
FLEET (PTY) LIMITED
RESPONDENT
Neutral
citation:
Afgri
Operations Ltd v Hamba Fleet Management (Pty) Ltd
(542/16)
[2017] ZASCA 24
(24 March 2017)
Coram:
Leach,
Theron, Petse, Willis and Dambuza JJA
Heard:
10
March 2017
Delivered:
24
March 2017
Summary:
Company law : application
for a final order of liquidation : underlying debt admitted by
the respondent : no allegation that
respondent solvent : respondent
not trading or conducting any business : respondent’s
indebtedness prima facie established
: onus on respondent
to show that indebtedness disputed on bona fide and reasonable
grounds : a counterclaim not in itself
a reason for refusing an order
for the winding up of the respondent : final order winding-up the
respondent granted.
ORDER
On
appeal from:
The Gauteng
Division, Pretoria (Mabuse J sitting as the court of first
instance).
(a)
The appeal is upheld.
(b)
The order of the High Court is
set aside and replaced with the following:
‘
The
respondent is placed under a final winding-up order in the hands of
the Master
.’
(c)
The appellant’s costs in
the appeal and in the application before the High Court are to be
costs in the liquidation of the
respondent.
JUDGMENT
Willis
JA (Leach, Theron, Petse and Dambuza JJA concurring):
[1]
The appellant, the applicant in the court a quo, applied for a final
order of liquidation of the respondent. That court (Mabuse
J)
dismissed the application with costs but granted leave to appeal to
this court.
[2]
The appellant had obtained a judgment for costs against the
respondent on 4 February 2014. These costs were, by agreement between
consultants employed by the parties, taxed in an amount of
R156 796.64. The respondent failed to discharge this debt owed
to the appellant. The appellant then brought an application to wind
up the respondent on the basis that the respondent was unable
to pay
its debts within the meaning of s 345(1)
(a)
,
read with s 344
(f)
of
the Companies Act 61 of 1973 (the old Companies Act). Other than to
present a bald denial that it is insolvent, the respondent
did not
dispute the underlying debt and that it had failed to pay it. In
addition, the issues of whether demand had been given
by the
appellant to the respondent in terms of s 345 of the old Companies
Act and the failure of the respondent to satisfy that
demand, were
not in dispute.
[3]
The court a quo dismissed the application for the winding-up of the
respondent solely on the basis that it had a counterclaim
against the
appellant. The counterclaim arises from allegedly unlawful transfers
in an amount in excess of R22 million that
the appellant had
made from the respondent’s bank account during the period 12
November 2003 to 22 March 2006. These transfers
were alleged to have
taken place while the appellant had been managing the affairs of the
respondent in terms of a ‘Management
Agreement’. The
summons in respect of this claim had been issued on 10 March 2009 but
had not been pursued by the respondent.
Not only is the claim
illiquid but also the summons was not even attached to the
respondent’s answering affidavit.
[4]
The respondent made no allegation that it was either factually or
commercially solvent. It is common cause that the respondent
was not
trading or conducting any business at the time of the application for
its winding-up. The respondent also admits that it
has no assets but
places the blame for this on the appellant. Most significantly, as
previously mentioned, the underlying debt,
giving rise to the
application for the winding-up of the respondent, was not in dispute.
Indeed, it was admitted by the respondent.
[5]
In dismissing the application for the winding-up of the respondent,
the court a quo relied upon the exercise of its discretion.
In its
judgment it said:
‘
To
conclude on this point I accept that in South African law, as in
English law, the power of the Court to grant a winding-up order
is
discretionary, irrespective of the grounds on which such order is
sought
.’
A
little later on, it said:
‘
Quite
clearly the applicant has a number of concerns against the
respondent’s action. I have noted those concerns but under
the
circumstances
this
Court is not at liberty to deal with them or the respondent’s
claims at this stage
and in this proceedings
.’
(Emphasis added.)
The
questions that therefore arise in this appeal are: (a) may this court
interfere with the exercise of its discretion and, if
so (b) should
it do so?
[6]
It is trite that winding-up proceedings are not to be used to enforce
payment of a debt that is disputed on bona fide and reasonable
grounds.
[1]
This is known as the so-called ‘Badenhorst rule’.
[2]
Where, however, the respondent’s indebtedness has, prima facie,
been established, the onus is on it to show that this indebtedness
is
indeed disputed on bona fide and reasonable grounds.
[3]
[7]
The existence of a counterclaim which, if established, would result
in a discharge by set-off of an applicant’s claim
for a
liquidation order is not, in itself, a reason for refusing to grant
an order for the winding-up of the respondent but it
may, however, be
a factor to be taken into account in exercising the court’s
discretion as to whether to grant the order
or not.
[4]
[8]
The court a quo was much influenced by a series of English cases in
which it has been held that a ‘genuine’ cross-claim,
the
equivalent of our counterclaim, is a matter which may justify
the exercise of a discretion against making a winding-up
order. It
relied, in particular, on
Re:
Portman Provincial Cinemas Ltd
[5]
and
Re: Bay Oil Seawind
Tankers Corp v Bay Oil SA
[6]
and the authorities therein cited. The difficulty is, of course,
encapsulated in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd,
[7]
with which every lawyer
must be familiar: how does one decide whether a disputed counterclaim
is ‘genuine’, when applications
for winding-up are, in
the ordinary course, brought by way of motion proceedings?
[8]
[9]
Indeed, it is precisely by reason of the fact that a court may first
make a provisional order of liquidation that in
Kalil
v Decotex (Pty) Ltd
,
[9]
a different test was applied from that in
Plascon-Evans
when setting out the circumstances that would be sufficient to
justify the making of such an order of liquidation.
[10]
It is that the affidavits must demonstrate a prima facie case in
favour of the applicant.
[11]
It may bear repeating that
Plascon-Evans
is the locus classicus as to the test in the factual enquiry before a
final
order can be made in motion proceedings.
[12]
[10]
Ms Stein, who appeared for the appellant, submitted that
Portman
Provincial Cinemas
had been
wrongly decided (in the sense that it did not correctly reflect the
position in English law) and that, in any event, it
would be
incorrect for a South African court to apply the English law in the
matter, as our law is already clear in this regard.
It is
unnecessary, in the present case, to decide either point because the
respondent does not even get past the post: its desultory
pursuit of
its counterclaim has the consequence that is has failed to discharge
the onus of satisfying the court of the ‘genuineness’
thereof.
[11]
As to the general principles concerning the exercise of a discretion
by a court, the
Constitutional
Court’s judgment in
National
Coalition for Gay and Lesbian Equality & others v the Minister of
Home Affairs
&
others
has made it clear
that an appeal court will not interfere with a lower court’s
discretion unless that court was influenced
by wrong principles or a
misdirection of the facts or if that court reached a decision the
result of which could not reasonably
have been made by the court
properly directing itself to all the relevant facts and
principles.
[13]
The court a quo was mindful of the fact that its discretion must be
‘exercised on judicial grounds’.
[12]
Notwithstanding its awareness of the fact that its discretion must be
exercised judicially, the court a quo did not keep in
view the
specific principle that, generally speaking, an unpaid creditor has a
right,
ex debito justitiae
,
to a winding-up order against the respondent company that has not
discharged that debt.
[14]
Different considerations may apply where business rescue proceedings
are being considered in terms of Part A of chapter six of
the new
Companies Act 71 of 2008
.
[15]
Those considerations are not relevant to these proceedings. The court
a quo also did not heed the principle that, in practice,
the
discretion of a court to refuse to grant a winding-up order where an
unpaid creditor applies therefor is a ‘very narrow
one’
that is rarely exercised and in special or unusual circumstances
only.
[16]
[13]
As mentioned above, mere recourse to a counterclaim will not, in
itself, enable a respondent successfully to resist an application
for
its winding-up. Moreover, as set out above, the discretion to refuse
a winding-up order where it is common cause that the respondent
has
not paid an admitted debt is, notwithstanding a counterclaim, a
narrow and not a broad one. In these respects the court a quo
applied
‘the wrong principle[s]’. There must be no room for any
misunderstanding: the onus is not discharged by the
respondent merely
by claiming the existence of a counterclaim. The principles of
which the court a quo lost sight are: (a)
as set out in
Badenhorst
and
Kalil
,
once the respondent’s indebtedness has prima facie been
established, the onus is on it to show that this indebtedness is
disputed on bona fide and reasonable grounds and (b) the discretion
of a court not to grant a winding-up order upon the application
of an
unpaid creditor is narrow and not wide.
[14]
Mr Omar, who appeared for the respondent, accepted that this was a
correct statement of the law. In other words, he accepted
that once
the appellant had demonstrated that the respondent was prima facie
indebted to it, it was for the respondent to establish
that it
disputed that indebtedness on bona fide and reasonable grounds. He
also accepted that, once the respondent’s indebtedness
to the
appellant had been shown, the discretion to refuse a winding-up order
was a narrow one. He submitted, however, that by reason
of the Bill
of Rights in the Constitution and, in particular s 22 (the right to
trade) and s 34 (the right to a fair hearing before
a court)
contained therein, it would be ‘unconstitutional’ for a
court to apply a narrow discretion, rather than a
broad one, when it
comes to deciding whether or not to grant a final order of
liquidation. For the reasons that follow it is unnecessary
to reach a
decision on the issue.
[15]
There may indeed be cogent reasons for the doors of the courts to be
wide open when it comes to any matter affecting human
rights. One
searches the respondent’s affidavit in vain, however, for any
human right that may be adversely affected by the
grant of a final
order for its liquidation. It does not appear to be trading. There is
not even an allegation that jobs will be
lost as a result of its
liquidation. Indeed, in its answering affidavit, the respondent did
not assert any of the rights contained
in the Bill of Rights.
[16]
In coming to its conclusion, the court a quo was influenced by
Ter
Beek v United Resources CC & another
.
[17]
In that case, the court affirmed that the applicant bore the onus of
showing that the respondent was indebted to it and that the
respondent bears the onus of demonstrating that the indebtedness was
disputed on bona fide and reasonable grounds.
[18]
It then went on to find that it was not satisfied that the
applicant had discharged the onus of showing that the
respondent
should be wound up on the basis that it was just and
equitable but nevertheless granted a final order of liquidation.
[19]
To the extent that
Ter
Beek
is inconsistent with the reasoning in this judgment, it should not be
followed.
[17]
The question of onus is indeed critically relevant in a case such as
this. It bears repeating that once the respondent’s
indebtedness to the applicant for a winding-up order has, prima
facie, been established, the onus is on it, the respondent, to
show
that this indebtedness is indeed disputed on bona fide and reasonable
grounds.
[20]
If one accepts the test set out in the English cases upon which the
respondent has relied, the respondent would have to show that
its
counterclaim was ‘genuine’.
[18]
As mentioned earlier, in this particular case the inertia of the
respondent in pursuing its right of action alleged in the
counterclaim generates a considerable sense of unease about the
genuineness of its contestation. There are other relevant factors
too: the illiquidity of the claim, the failure even to attach the
summons, the failure to respond to the s 345 demand, the lack
of any
indication that the respondent may be solvent and the fact that the
respondent does not appear to be trading. It has therefore
failed to
discharge the onus of demonstrating that its indebtedness to the
appellant has indeed been disputed on bona fide and
reasonable
grounds. This court is therefore entitled to interfere with the
discretion exercised by the court a quo. The correct
order would have
been to have placed the respondent in liquidation.
[19]
There was a short debate before us as to whether it would have been
the better exercise of its discretion for the high court
to have
preceded the making of a final order of liquidation with a
provisional one. Incontestably, the appellant had established
a prima
facie case for the liquidation of the respondent and therefore a
right to a provisional order. As to the extent to which
the courts
will incline to taking the precaution of first granting a provisional
order of liquidation, rather than a final one,
it would seem that
there is some degree of regional variance and that the matter is
perhaps even affected by the individual preferences
among judges.
[21]
The passage of time since the original hearing of this matter and the
full ventilation of the issues that has since taken place
render it
inappropriate for this court now to substitute the order of the high
court with a provisional order. Above all, the appellant
has
satisfied the requirements for the grant of a final order of
liquidation, which was the relief that it had sought in the first
instance. Following
Johnson
v Hirotec (Pty) Ltd
,
[22]
it will be appropriate for this court to direct the issue of a final
order.
[20]
Ms Stein asked that the costs of two counsel be allowed, in the event
that the appeal was successful. The matter is not complex.
The record
is short. The amount in question is not particularly large. A fair
exercise of the discretion in regard to costs would
not be to allow
the costs of two counsel.
[21]
The following order is made:
(a)
The appeal is upheld.
(b)
The order of the High Court is set aside and replaced with
the
following:
‘
The
respondent is placed under a final winding-up order in the hands of
the Master
.’
(c)
The appellant’s costs in the appeal and in
the application
before the High Court are to be costs in the liquidation of the
respondent.
______________________
N
P WILLIS
Judge
of Appeal
APPEARANCES:
For
Appellant:
S Stein SC (with her L Sisilana)
Instructed by:
Fluxmans Inc, Johannesburg
Lovius
Block, Bloemfontein
For
Respondent:
Mr Z Omar
Instructed
by:
Zehir Omar Attorneys,
c/o
Liebenberg Malan Liezel Horn Inc, Pretoria EG Cooper
Majiedt Attorneys, Bloemfontein
[1]
See
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at 347-348 and
Kalil
v Decotex (Pty) Ltd & another
1988
(1) SA 943
(A) at 980D.
[2]
Ibid. See also
‘
Winding-up
proceedings ought not to be resorted to in order by means thereof to
enforce payment of a debt, the existence of which
is
bona
fide
disputed
by the company on reasonable grounds; the procedure for winding-up
is not designed for the resolution of disputes as
to the existence
or non-existence of a debt
.’
P M Meskin et al;
Henochsberg
on the
Companies
Act 5 ed
Vol 1 at 693-694.
[3]
See for example
Kalil
v Decotex
(
supra
)
at 980C;
Meyer
NO v Bree Holdings (Pty) Ltd
1972 (3) SA 353
(T) at 354-355;
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
(
supra
)
at 348B;
Machanick
Steel & Fencing v Wesrhodan (Pty) Ltd; Machanick
Steel & Fencing v Transvaal Cold Rolling
(Pty) Ltd
1979
(1) SA 265 (W) at 269B;
Kyle
v Maritz & Pieterse Inc
[2002] 3 All SA 223
(T) at 226;
Exploitatie-
en Beleggingsmaatschappij Argonauten 11 BV & another v Honig
2012
(1) SA 247
(SCA) at para 11 and
Ricoh
South Africa (Pty) Ltd v Bula Document Solutions (Pty) Ltd
(31095/2012) [2014] ZAGPPHC 187 (2 April 2014) para 22.
[4]
See
Re:
LHF Woods Ltd
[1970]
Ch 27
(CA);
[1969] 3 All ER 882
(CA);
Ter
Beek v United Resources CC & another
1997 (3) SA 315
(C) at 333H and
Ricoh
v Bula Document Solutions
(
supra
)
para 25.
[5]
Re: Portman Provincial Cinemas
Ltd
(1964)
108 SJ 581, CA.
[6]
Re
:
Bay Oil Seawind Tankers Corp v Bay
Oil SA
(1969)
3 All ER 882.
[7]
Plascon-Evans Paints Ltd v Van
Riebeeck Paints
(Pty)
Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634-635. See also
Fakie
NO v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) para 55;
Thint
(Pty) Ltd v National Director of Public Prosecutions & others;
Zuma v National Director Public Prosecutions & others
2009
(1) SA (CC) paras 8 to 10;
Zuma
National Director of Public Prosecutions
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) para 26.
[8]
See also
Paarwater
v South Sahara Investments (Pty) Ltd
[2005] 4 All SA 185
(SCA) para 4.
[9]
Kalil v Decotex (Pty) Ltd
1988 (1) SA 943
(A).
[10]
At 979.
[11]
Ibid.
[12]
At 634H-I.
[13]
National Coalition for Gay and
Lesbian Equality & others v Minister of Home Affairs
& others
2000 (2) SA 1
(CC) para 11.
[14]
See
De
Waard v Andrew & Thienhaus Ltd
1907 TS 727
at 733;
Service
Trade Supplies ltd v Dasco & Sons Ltd
1962 (3) SA 424
(T) at 428B-D, to which reference was made,
with approval, by this court in
Sammel
& others v President Brand Gold Mining Company Ltd
1969 (3) SA 629
(A) at 662F.
Ex
debito justitiae
means ‘as a right arising out of the justice of the matter’.
As Rogers J said in
Orestisolve
(Pty) Ltd t/a Essa Investments v NDFT Investment Holdings (Pty) Ltd
& another
2015 (4) SA 449
(WCC) para 18, a court ‘does not sit under a
palm tree’ - per Warner J in
Re
Cade & Son Ltd
[1992] BCLC 213
at 227.
[15]
See for example
Absa
Bank Ltd v New City Group (Pty) Ltd
(45670/2011);
Cohen
v New City Group (Pty) Ltd and Another
(28615/2012)
[2013] 3 All SA 146
(GSJ) . See also
Richter
v Absa Bank Ltd
2015 (5) SA 57
(SCA).
Safari
Thatching Lowveld CC v Misty Mountain
Trading
2 (Pty) Ltd
2016 (3) SA 209
(GP) at para 16;
Standard
Bank of South Africa v A-Team Trading CC
2016
(1) SA 503
(KZP) para 14.
[16]
See for
example
Service
Trade Supplies (Pty) Ltd v Dasco & Sons (Pty) Ltd
1962 (3) SA 424
(T) at 428B;
First
Rand Bank Ltd v Evans
2011 (4) SA 597
(KZD) para 28;
Orestisolve
(
supra
)
para 18 and
Victory
Parade Trading 74 (Pty) Ltd t/a Agri-Best Sa v Tropical Paradise 93
(Pty) Ltd t/a Vari Foods
(13641/2006)
[2007] ZAWCHC 32
;
[
2007]
JOL 200096
(C) para 28.
[17]
Ter Beek v
United Resources CC & another
1997
(3) SA 315
(C).
[18]
At 337I-J.
[19]
At 341C-D.
[20]
See, for example,
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
(
supra
)
at 347-348
Kalil v
Decote
x
(
supra
)
at 980B-C.
[21]
See
Johnson
v Hirotec (Pty) Ltd
[2000] ZASCA 131
;
2000
(4) SA 930
(SCA) para 9.
[22]
Johnson v
Hirotec (Pty) Ltd
[2000] ZASCA 131
;
2000
(4) SA 930
(SCA) para 9. See also
Kalil
v Decotex
(
supra
)
at 976A-B.