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[2021] ZAGPJHC 472
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Lougot Property Investments (Pty) Limited v Group Five Coastal (Pty) Limited (A5004/2021) [2021] ZAGPJHC 472 (5 October 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES:
NO
REVISED:
Date:
5
th
October 2021
CASE
NO
:
A5004/2021
In
the matter between:
LOUGOT
PROPERTY INVESTMENTS (PTY) LIMITED
Appellant
and
GROUP
FIVE COASTAL (PTY) LIMITED
Respondent
Coram:
Matojane J, Adams J
et
Nichols AJ
Heard
:
18 August 2021 – The ‘virtual hearing’ of the Full
Court Appeal was conducted as a videoconference on
Microsoft
Teams
.
Delivered:
5 October 2021 – This judgment
was handed down electronically by circulation to the parties'
representatives
via
email, by being uploaded to
CaseLines
and by release to SAFLII. The date and time for hand-down is deemed
to be 11H00 on 5 October 2021.
Summary:
Company – Winding-up – Debtor company
disputing liability for debt relied on – Creditor relying on s
345 (1) (a)
(i) of Act 61 of 1973 – Debtor company entitled to
dismissal of liquidation proceedings if dispute
bona fide
–debtor must establish the grounds which they advance for the
company's disputing the Creditor’s claim are not unreasonable
–
ORDER
On
appeal from:
The Gauteng Local
Division of the High Court, Johannesburg (Dosio AJ sitting as Court
of first instance):
(1)
The applicant’s appeal against the order of the court
a quo
is dismissed with costs, including the costs of the application for
leave to appeal and the costs consequent upon the employment
of
Senior Counsel.
(2)
The order of the court
a quo
is confirmed.
JUDGMENT
Adams
J (Matojane J
et
Nichols AJ concurring):
[1]
The
appellant
[1]
appeals against the
Court
a
quo’s
dismissal of an application for the final liquidation of the
respondent
[2]
. The appellant
also seeks that this Court grants a final liquidation of the
respondent. The respondent's defence is that the debt
relied on is
disputed on
bona
fide
and reasonable grounds. Reliance is therefore placed by the
respondent on the so-called
Badenhorst
rule, derived from
Badenhorst
v Northern Construction Enterprises Limited
[3]
,
to
the effect that an application for liquidation is not a legitimate
means of seeking to enforce payment of a debt which is
bona
fide
disputed on reasonable grounds.
[2]
The source of the indebtedness claimed is
the costs portion of an arbitration award, handed down on 16 November
2018, in favour
of the appellant against the respondent for payment
of the sum of R878 196.21, being the costs of the reference
awarded on
the party and party High Court scale. The arbitrator’s
award was made an Order of the Western Cape Division of the High
Court,
Cape Town, on 22 January 2019.
[3]
The appellant’s cause of action in the
arbitration was based on a written Principal Building Agreement (‘the
agreement’),
which, according to the appellant, was concluded
between it (the appellant), as the employer, and the respondent, as
the contractor.
It is however the respondent’s contention that
the contractor was in fact a company related to the respondent,
namely Group
Five Construction (Pty) Limited (‘the Construction
Company’), and that in all its dealings with the appellant,
including
in the arbitration, the respondent was merely acting as an
agent on behalf of the Construction Company. And therein lies the
crux
of the dispute between the parties, which, according to the
respondent is a
bona fide
dispute based on reasonable grounds.
[4]
The appellant denies the respondent’s
claim that it was not a party to the agreement. The appellant also
persists with its
contention that the award by the arbitrator and the
subsequent court order based on that award was in fact against the
respondent,
and not against the Construction Company, as claimed by
the respondent. This, so the appellant submits, is evidenced by the
fact
that the capital amount of the award and other ancillary
charges, amounting to a total sum in excess of R8 million, was paid
without
demur. The respondent’s case is, however, that this
amount was in fact paid by the Construction Company and not by it.
[5]
Moreover, in support of their cause, the
respondent lays emphasis on the fact that the arbitrator was
appointed to determine a dispute
between the appellant and the
respondent, ‘as agent for Group Five Construction (Pty) Ltd’.
This fact is undisputed
and unchallenged and it is confirmed by a
written communiqué from the arbitrator dated 28 May 2018, in
which the arbitrator
confirmed in as many words that the arbitration
which had been referred to him was between the appellant and ‘Group
Five
Coastal (Pty) Limited acting as Agents for Group Five
Construction (Pty) Limited’.
[6]
There is merit in the respondent’s
contention in that regard. That is the contextual basis on which the
arbitrator was nominated
and accepted his appointment to determine a
dispute between the aforementioned parties. His jurisdiction and the
ambit of authority
was prescribed by that fact. This then means, as
argued on behalf of the respondent, that the respondent was not a
party to the
agreement or to the arbitration, in any capacity other
than as agent.
[7]
Moreover, so the respondent contends, its
capacity as agent of the Construction Company is common cause as
between all the parties
including the legal representatives for the
appellant who were present at the preliminary meeting with the
arbitrator. The appellant
was fully aware of that fact since it had
caused its bank to issue a payment guarantee in favour the respondent
but as agent for
the Construction Company.
[8]
The case against the respondent is that it is
deemed not to be able to pay its debts, because it did not do so
despite receipt of
a letter duly dispatched in terms of section 345
of the 1973 Companies Act. Section 345 (1) (a) provides as follows:
‘
345
When company deemed unable to pay its debts
(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;’
[9]
The respondent denies liability in any amount.
As already indicated, it raises the defence that it acted as an agent
for the Construction
Company when it concluded the agreement as well
as the arbitration agreement. This is so despite the fact that the
agreement, as
well as the arbitration agreement, expressly provide
that same were concluded between the appellant and the respondent and
no reference
in any of these written instruments are made to the
respondent acting as agent for and on behalf of the Construction
Company. Therefore,
so the argument on behalf of the respondent goes,
the arbitration award was against the Construction Company, which is
the entity
owing the debt to the appellant.
[10]
The appellant argues that the respondent is the entity that owes it
the amount of the referral
costs as it was the defendant in the
arbitration against whom the award was made. The
Principal
Building Agreement was expressly entered into between the appellant
and the Contractor which is described in the agreement
as ‘Group
Five Coastal (Pty) Limited’, which is in fact the respondent.
Additionally, following a dispute arising between
the contracting
parties, the Arbitration proceedings were instituted against
Respondent, which, after the evidence and the arguments
were
completed before the Arbitrator, was ordered to pay
inter
alia
the costs of the reference to
be taxed. It is these taxed costs that form the subject matter of the
appellant’s claim in
the application for the winding-up of the
respondent.
[11]
The appellant does not accept that the defence
raised by the respondent to the winding-up application is
bona
fide
. The said defence, so the
appellant contends, is an unmeritorious afterthought, because in the
pleadings in the Arbitration the
respondent formally admitted that
the agreement was concluded between the appellant and the respondent.
The respondent did not
plead that it acted as an agent for the
Construction Company. The appellant does not accept as plausible the
respondent’s
explanation for such admission in its answering
affidavit in the winding up application, which reads as follows:
‘
The
dispute proceeded to arbitration and in the applicant’s
statement of claim the defendant was cited as [the respondent].
There
was no cause for concern, as the respondent could be cited as the
defendant in those proceedings and could act in its own
name, given
the recorded agency known between the parties. If needs be this is an
issue to be tested by oral evidence (unfortunately
to include that of
the legal representatives)’.
[12]
The appellant also points out that, prior to
the conclusion of the arbitration and subsequent thereto, there has
been no attempt
by respondent to withdraw the admission. What is
more, so the appellant contends, when it (the appellant) brought an
application
for the Arbitration Award to be made a Court Order, the
respondent did not oppose such application and the Arbitration Award
was
duly made a Court Order on 22 January 2019.
[13]
It was only on 28 August 2019 (shortly before
the taxation of the costs award on 27 September 2019) that the
respondent’s
attorney – for the first time, so the
appellant contends – addressed a letter to the arbitrator
requesting him to change
the citation of the defendant to reflect the
Construction Company as the defendant. The purpose of this request
was to rectify
and correct the award on the basis that the respondent
had in fact been acting as agent for the Construction Company. The
Arbitrator
declined the request and on 7 November 2019 the respondent
formally brought an application to the Arbitrator to rectify the
Award.
The application was unsuccessful, because the Arbitrator was
of the view that the award could not be amended as it had by then
already been made an Order of Court.
[14]
The net effect of the sum total of all of the
aforegoing, so the appellant argued, is that the respondent is
indebted to the appellant
in the amount claimed, namely R878 196.21,
and that the respondent had neglected to pay same. Therefore, so the
argument on
behalf of the appellant is concluded, the Court
a quo
ought to have found that there were no valid and
bona
fide
factual disputes.
[15]
To my mind, the defence raised by the
respondent to the claim is such that it cannot be said to be
unreasonable.
[16]
It seems to me that the one reference in the
documents to the fact that the respondent was acting as an agent for
and on behalf
of the Construction Company, makes the claim by the
respondent very plausible. That reference is contained in a letter
from the
Arbitrator even before the commencement of the arbitration
proceedings. So how can it be said that the respondent’s
version
is an afterthought when it was acknowledged a long time
before it became necessary for the respondent to place reliance on
that
fact.
[17]
The respondent also confirms that the capital
amounts and the related costs were in fact paid by the Construction
Company. In all
events, the contention by the respondent that its
version is very probable is not without merit.
[18]
The
proper approach to be taken by a court when it evaluates whether a
debt is
bona
fide
disputed on reasonable grounds was set out in
Hulse-Reutter
and Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO
intervening)
[4]
,
where the court held:
‘
I
think it is important to bear in mind exactly what the trustees have
to establish in order to resist this application with success.
Apart
from the fact that they dispute the applicants' claims, and do so
bona fide
... what they must establish is no more and no less
that the grounds on which they do so are reasonable. They do not have
to establish,
even on the probabilities, that the company, under
their direction, will, as a matter of fact, succeed in any action
which might
be brought against it by the applicants to enforce their
disputed claim. They do not ... have to prove the company's defence
in
such proceedings. All they have to satisfy me of is the grounds
which they advance for their and the company's disputing these claims
are not unreasonable ... it seems to me to be sufficient for the
trustees in the present application, as long as they do so ...
to
allege facts which, if proved at trial, would constitute a good
defence to the claims made against the company.’
[19]
Generally, if a defence is reasonable, it is
likely to have been raised in good faith. That, in my view, is the
case in this matter.
As I indicated above, the explanation of the
respondent for them not raising the defence earlier than they did, is
a plausible
one.
[20]
The defence in issue is raised in good faith
and is arguable.
[21]
For all of these reasons the appeal must fail.
Costs
of Appeal
[22]
The general
rule in matters of costs is that the successful party should be given
his costs, and this rule should not be departed
from except where
there are good grounds for doing so. See:
Myers
v Abramson
[5]
.
[23]
I can think of no reason to deviate from the general rule. The
appellant should therefore
pay the respondent’s costs of the
appeal.
Order
[24]
In the result, the following order is made: -
(1)
The appellant’s appeal against the order of the court
a quo
is dismissed, with costs, including the costs of the application for
leave to appeal.
(2)
The order of the court a quo is confirmed.
L R ADAMS
Judge of the High
Court
Gauteng
Local Division, Johannesburg
HEARD
ON: 18
th
August 2021 – in a ‘virtual hearing’ during a
videoconference on the
Microsoft Teams
.
JUDGMENT
DATE: 5
October 2021 – judgment handed down electronically
FOR THE
APPELLANT: Advocate
J L Kaplan
INSTRUCTED
BY: Ian
Levitt Attorneys, Sandton
FOR
THE RESPONDENT:
Advocate Indhrasen Pillay SC
INSTRUCTED
BY: Cox
Yeats Attorneys, Umhlanga Ridge
[1]
Applicant in the Court
a
quo.
[2]
Also respondent in the Court
a
quo
.
[3]
Badenhorst
v Northern Construction Enterprises Limited
1956
(2) SA 346 (T).
[4]
Hulse-Reutter
and Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO
intervening)
1998(2) SA 208 (C) at 219E- 220A.
[5]
Myers v
Abramson
,1951(3)
SA 438 (C) at 455