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[2019] ZAFSHC 201
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Trade First 2124 CC v ENM Trading CC (3133/2019) [2019] ZAFSHC 201 (31 October 2019)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case number
:
3133/2019
In
the matter between:
TRADE
FIRST 2124 CC
Applicant
and
ENM TRADING CC
Respondent
HEARD
ON
:
17 OCTOBER
2019
JUDGMENT
BY
:
LOUBSER, J
DELIVERED
ON
:
31 OCTOBER 2019
[1] This
is an application for the provisional liquidation of the Respondent
close corporation.
The application is made in terms of Section 345
(1)(a)(i) and (ii) of the Companies Act 61 of 1973, read with
Schedule 5, Item
9 of the new
Companies Act 71 of 2008
. The
Respondent strongly opposes the application.
[2]
Section
345
provides that a company or a body corporate shall be deemed to be
unable to pay its debts if a creditor to whom the company is
indebted, has served on the company a demand requiring the company to
pay the sum so due, and the company has for three weeks thereafter
neglected to pay the sum to the creditor. Section 344 of the Act
provides that a company may be wound up by the court if,
inter
alia
, the company is unable to pay its debts as described in
Section 345, or it appears to the court that it is just and equitable
that
the company should be wound up. Section 345(2) provides that,
where the Court has determined the inability to pay the debts on the
basis of a demand for payment and the neglect to pay for three weeks,
the Court shall also take into account the contingent and
prospective
liabilities of the company.
[3] The
Applicant relies solely on the fact that he has made more than one
demand for payment
in terms of Section 345, and that the Respondent
has neglected to pay for a period of three weeks after each of the
demands. No
information requiring the contingent and prospective
liabilities of the Respondent has been placed before the Court by any
of the
parties, with the result that the Court is unable to comply
with the provisions of Section 345(2).
[4]
The background facts of the matter are as follows: The Respondent was
a partner in the Siyathunya Joint
Venture, which Joint Venture was
appointed by the Ngwathe Local Municipality to design and implement a
new stormwater system. Subsequent
to this appointment, the
Applicant was appointed by either the Respondent or the Joint Venture
to build the stormwater system
as a sub-contractor. The Respondent
admits that the project was completed, but asserts that the Applicant
was paid for its services
and that it owes the Applicant nothing
more.
[5]
It is common cause between the parties that the Applicant was relying
on the non-payment by the Respondent
of three different amounts at
the time of the filing of the application. These amounts were the
following: R
192 193-00 for the
Z414 Road project, R 212 409-62
for the Jouberton/NWPL
Project, and then an amount of R 1 098 765-00
for the stormwater system of the Ngwathe Local Municipality. It is
common
cause that the first two amounts have been paid by the
Respondent since, and the non-payment thereof is no longer relevant
to the
application. It is only the last amount that remains relevant.
[6]
It is also common cause between the parties that the amount remaining
relates to additional work done
by the Applicant by way of variation
orders. It is the case for the Applicant that the instructions to do
the additional work,
came directly from the Respondent, and therefore
the Respondent is liable for the payment thereof. The Respondent, on
the other
hand, denies that it ever issued instructions for such
additional works, and that it was the Municipality who itself had
given
the Applicant the instructions directly. The Respondent
therefore maintains that the Municipality is liable for the payment
to
the Applicant.
[7]
In an attempt to resolve the dispute, the Applicant and the
Respondent held talks on 9 April 2019, which
talks culminated in a
written Settlement Agreement concluded by them on the same day.
Pertaining to the claim of R 1 098 765-00
for the Ngwathe
Local Municipality project, the parties recorded the agreement in the
following words:
“
Resubmitting
to Ngwathe Municipality with all the VO and extra cost for the
payment by both ENM and Trade First 2124.”
The
“VO” that had to be resubmitted, obviously refers to
“variation orders”. According to the Applicant,
he was
not in possession of the variation orders and invoices for the extra
costs, as he was only a sub-contractor of the Respondent.
In his
Founding Affidavit, the only member of the Applicant referred to the
Settlement Agreement and explained that, in terms thereof,
the
payment (by the Respondent) “was subject to the”
resubmitting of the documents to the Municipality.
[8]
In its opposing papers the Respondent gives a different explanation.
It says that it only undertook
to assist the Applicant to
progress its claim against the Municipality, insofar as certain
municipal officials had improperly
given instructions to Applicant in
the absence of the Respondent’s knowledge or approval. Despite
this dispute in the interpretation
of the agreement, it is evident,
however, that both parties were looking at the Municipality for
payment of the R 1 098 765-00,
be it directly to the
Applicant or be it to the Applicant via the Respondent. What is also
evident, is that the Respondent has
nowhere admitted that it was
owing that amount to the Applicant. If it had indeed given the
instruction for additional work, it
was obviously waiting for the
Municipality to pay before it could be in a position to pay the
Applicant. The question therefore
still remains whether the
Municipality had given direct instructions to the Applicant, or
whether the instructions went to the
Respondent, who in turn
instructed the Applicant.
[9]
The Municipality is not a party to these proceedings, and there is no
affidavit by the Municipality
in the papers before me to clarify this
question. Despite the silence on the part of the Municipality, I am
nevertheless of the
view that the balance of probabilities and the
evidence favour the Applicant. I can think of no reason why the
Municipality would
instruct the Applicant directly while it has no
contract with the Applicant at all. In its Replying papers, the
Applicant has also
attached an affidavit by the Senior Quantity
Surveyor of the Respondent at the time, confirming that he had
forwarded the new scope
of work to the Applicant for pricing. On
receipt of the new pricing, the Respondent approved same, and a new
order was then issued
by the Respondent to the Applicant, he says. He
further states that all the certificates for the additional work
done, was issued
by himself according to the now approved budget and
scope of the additional work. The work was given by the Respondent to
the Applicant,
he declares.
[10]
In addition, the Applicant has also submitted a number of emails
showing that the above-mentioned quantity surveyor
had requested
quotations from the Applicant for certain additional works in order
for the Respondent to do a formal variation order
to proceed with
such additional work. Also included in the papers is a Contractors
Claim sent by the Respondent to the Municipality
after the work was
done for payment of R 1 098 765-00 to the Respondent. That
is the amount now claimed by the Applicant
from the Respondent.
[11]
Another document needs mentioning. It is a letter from the Respondent
to the Municipal Manager of Ngwathe, dated 3 December
2018. It bears
the heading Final Payment Certificate Koppies Stormwater Drainage and
is signed by a Mr. Lionel Naude of the Respondent.
The letter reads
as follows:
“
Herewith
ENM Trading Siyathunya JV’s payment certificate for your
approval and action. Amount now claimed R 1 098 765-00.”
In
the application papers Applicant admits having drafted this letter
itself, and that it submitted the draft to Mr. Naude for his
signature. The Respondent, however, denies that Mr. Naude had any
authority to sign the letter on behalf of the Respondent. Be
it as it
may, the question remains why Mr. Naude would have signed the
letter if the contents thereof were not reflecting
the correct
position.
[12]
In the premises, I find that the Applicant performed the additional
work in the amount mentioned on the instructions
of the Respondent,
and not on the direct instructions of the Municipality. The evidence
on the papers is overwhelming to this effect.
It is also clear, on
the other hand, that the Applicant was aware all along that the funds
for the payment in this amount had to
come from the Municipality.
That is the reason why the Applicant was assisting the Respondent in
obtaining the payment from the
Municipality, so that he could be paid
in turn by the Respondent. The question then arising is whether it
would be prudent to place
the Respondent in provisional liquidation
only because the Municipality is dragging its feet in paying for the
additional work,
or even refusing to make any payment.
[13]
In this respect I need to mention that there is no information before
me pertaining to the assets, liabilities
or the general financial
position of the Respondent. What appears from the Answering Affidavit
filed by the Respondent, is that
the Respondent is one of the
subsidiaries of a holding company by the name of ENM Holdings (Pty)
Limited. No further information
about the Respondent has been
disclosed in the papers.
[14]
In applications for provisional liquidation the Court has a
discretion to grant the relief or not. One of the grounds
on which
the Court may exercise its discretion in favour of an Applicant for
liquidation in terms of Section 344, is when it appears
to the Court
that it is just and equitable that the company should be wound up.
Although the Applicant has met all the requirements
of a demand in
terms of Section 345, and although the Respondent has failed to pay,
I hold the view that it would not be just and
equitable to wound up
the Respondent in the overall circumstances of this case. There can
be little doubt that it is in fact the
Municipality which is not
honouring its obligations to pay for the additional works. If the
Respondent is now placed in provisional
liquidation as a result
thereof, such a step could have dire consequences for the Respondent,
it’s staff and it’s business
in general. The interests of
justice therefore demand that the Respondent not be placed in
provisional liquidation in the special
circumstances of this case.
[15]
The following order is made:
1.
The Application for provisional liquidation of the Respondent is
dismissed with costs.
_________________
P.J. LOUBSER, J
For the
Plaintiff
:
Adv. C. Hendriks
Instructed
by:
Noordmans Attorneys
Bloemfontein
For the Defendant
:
Adv. A.E
Ayayee & Adv. R.Peterson
Instructed
by
:
Majavu
Attorneys, Johannesburg
c/o Rampai Attorneys
Bloemfontein