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[2018] ZAGPPHC 962
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Tau Rollermeulle (Pty) Ltd v Murcus M Farming CC (63226/2018) [2018] ZAGPPHC 962 (19 March 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
Case No: 63226/2018 19/3/2018
In the matter
between:
Tau Rollermeulle (Pty) Ltd
Appellant
And
Murcus
M Farming CC
Respondent
JUDGMENT
Maumela
J.
1.
This matter came before court on the opposed motion roll. The
applicant is Tau Rollermeule (Pty) Ltd, a company incorporated
in
terms of the Companies Act of the Republic of South Africa with
registration number 2015/357344/44 with its registered address
situated at 2 Gearge Street, Leeudoringstad, North West Province. The
respondent is
Murcus M Farming CC,
registration
number 2008/091707/23, a close corporation duly registered in
accordance with the Close Corporation Act 1994: (Act
No 69 of 1994)
and which enjoys continued existence by virtue of the provisions of
the Companies Act, with its 603, Wingerhof,
169 Bourke Street,
Pretoria, Gauteng Province
.
2.
Before this court, the applicant instituted action
against the respondent under case number 84019/2016 for payment of an
amount
of R 5 395 962-30 in respect of chicken feed sold and
delivered by the applicant to the respondent.
BACKGROUND.
3.
On the 15
th
of August 2016, the parties entered into a written agreement which
was made an order of the court before the Honourable Molefe
J. When
the order was made, the respondent admitted indebtedness to the
applicant in the amount indicated under paragraph 2 above,
together
with interests calculated at the rate of 12% per annum from the 23
rd
of September 2016.
A “pending application” was
only served on the 20
th
of August 2019. This was two years
and nine months after the granting of the court order by Molefe J.
4.
The
Respondent made six payments in substantial amounts from July 2017,
until March 2018. That was subsequent to the court order.
Respondent’s sole director and its attorneys admitted the debt
on various occasions subsequent to the court order.
RESPONDENT’S
DEFENCES BASED ON THE NATIONAL CREDIT ACT
[1]
(“
NCA
”).
THE AGREEMENT SHOULD BE DECLARED RECKLESS.
5.
The
respondent argues that the claim by the applicant is predicated on
what the court should consider to be reckless credit. Part
D of
Chapter 4 of the Act deals with reckless credit. This section does
not apply to a credit agreement where the consumer is a
juristic
person [Section 78(1) of the Act].
[2]
as a result, such a defence is bad in law.
THE APPLICABILITY OF
SECTION 129 OF “THE ACT”.
6.
Section
129 of the National Credit Act
[3]
(NCA), addresses the aspect of applicability or otherwise of the NCA.
In that regard, the section provides that section 129 thus
not
apply:
(a). where the consumer is a juristic person whose asset
value or
annual turnover exceeds R1 million;
(b). where the
principal debt is R250 000 or more – even when
the juristic
person has an asset value or turnover of less than
R1million
[4]
.
(c). The
agreement in question is a large agreement (over R250
000).
Respondent submits that its immovable property alone is
worth R12 million. This property was bought in December 2010. (See
Land
Bank’s bond for R6,414858.00; Annexure
“FA8”,p.55).
RESCISSION OF COURT ORDER OF 15 NOVEMBER
2016
[5]
.
7.
The
Respondent raises the issue that the preceding application was not
served on it, alternatively that the application was served
by hand.
The parties agreed that their settlement be made an order of
court.
[6]
The Respondent made
various payments and in doing so, it admitted liability on various
occasions subsequent to the settlement.
Based on that, the applicant
argues that the Respondent therefore acquiesced in the judgment.
Applicant states that a Rule 42(1)
application has to be brought
within a reasonable time. It is trite that inordinate delay in itself
is a good reason for refusing
the relief.
[7]
WAS THE ORDER ERRONEOUSLY SOUGHT OR GRANTED?
8.
The
court has to determine whether the order was erroneously sought or
made. It has been shown in paragraph 4 above that the NCA
does not
apply. The court also has to determine whether or not there has been
compliance with section 346 (4A) of the old Companies
Act
[8]
where it regards service on employees.
9.
Applicant submits that it is not a
requirement that service be effected upon employees at the
commencement of the application. According
to the applicant, the
application must only be served on the employees, a reasonable time
before the hearing. It submits that the
test is merely whether
persons who are entitled to be furnished with papers had adequate
opportunity to consider the application
and to decide to intervene.
However, it contends that the application was served timeously on the
employees, in February 2019.
This is reflected in the service
Affidavit which is attached as Annexure “SA4” as
indicated on page 238 and Annexure
“SA6”, page 240.
10.
The Applicant makes the point that the fact
that Respondent opposed this application renders the aspect of
service to be academic.
It points out that the application was in any
event served both at the principal place of business, much as it was
served at the
registered address. See Service Affidavit, paragraph
2.3 and 2.7, p.229 and 230.
SECURITY BOND.
11.
The
applicant submits that the Master’s Certificate needs not
accompany the application when filed with the Registrar or when
served on the Respondent. It points out that the Master’s
Certificate must only accompany the application when it is heard
and
that it ought not be issued more than ten days before they date of
the Notice of Motion.
[9]
12.
In
motivating for the court to grant its application, Applicant pointed
out that the Respondent is unable to pay its debts
[10]
.
This can be proved on the basis of any facts which the court finds to
be satisfactory. An unpaid demand or a
nulla
bona
return merely constitutes an alternative means of proving inability
to pay debts.
[11]
In order to
obtain an order declaring insolvency against a party, an applicant is
not obliged to prove that the defendant committed
an “act of
insolvency”. Inability to satisfy a warrant is merely one
factor, coupled with Respondent’s own admission
that it is
unable to pay its debt.
DOES RESPONDENT HAVE SUFFICIENT ASSETS TO
SATISFY A WARRANT AND JUDGMENT?
13.
Among
others, in order to determine whether to grant or refuse the
application
for
the Winding-up of the Respondent, the court is to determine whether
the respondent has sufficient assets with which to satisfy
a warrant
emanating from the judgment against it.
No valuations are attached by the Respondent. The Applicant relies on
the simple fact that the Respondent has failed to settle
indebtedness
since at least November 2016. Respondent’s major asset has been
sold. The land Bank obtained judgment against
Respondent for plus or
minus R8 million
[12]
plus
interest.
14.
The
application was not triggered when Respondent reneged on the article.
Article: right promises to pay. Even if it was, the immovable
property is the only asset of value. If it gets sold, there will be
almost nothing left to execute upon. There is no proof of collusion
between Eagles the four core is not with 24
the
Applicant. Eagles wants property and the Applicant wants its money.
The sale agreement is not confidential. It features in other
court
papers in the public domain. There is no reason why the Applicant
would cut off rental payments in order to sue the Respondent
because
it was servicing the debt.
[13]
The Applicant is fully entitled to sue the surety as it is liable
jointly and severally in terms of suretyship.
BONA
FIDE
DEFENCE.
15.
The
court has to determine whether the defendant has a
bona
fide
defence, against the claim or not. The Applicant submits that the
High Watermark in this case is that the Chicken Feed “
may
have been contaminated”
.
[14]
The Defence never raised this before filing the Answering Affidavit.
No letters or emails were sent about this. The test results
got known
on the 24
th
of November 2016.
[15]
It is
submitted that the Applicant relies on hearsay evidence. No affidavit
from an expert was submitted to prove the results.
A question arises
about why the Respondent entered into a settlement whereupon he
subsequently made six substantial payments if
he was unhappy with the
quality of the merchandise. The Chicken-Feed was already sold in
2016. Any potential counterclaim has long
prescribed. The Applicant
contends that the defence the Respondent raised is
mala
fide
and
contrived.
IS RESPONDENT INSOLVENT?
16.
In
order to decide whether or not to grant this application, the court
has to determine whether the Respondent is still solvent
or not. The
Respondent states that its property is worth R12 million. But such is
only the amount of mandate to sell allowed by
the Landbank. There has
been no valuation done in order to prove market or forced sale value
of the assets. It is submitted that
the only yardstick is the sale to
Eagles for R9 million. The Applicant points out that on the
Respondent’s own version, it
has debts totalling over R15
million.
[16]
Pending
litigation suspending sale agreement, the proceeds will not
materialise shortly.
17.
The court also has to determine whether the Respondent’s
defence against the claim is
bona fide
. That defence has to be
premised on reasonable grounds. It is trite that the
onus
is
on the Respondent to prove that it has a
bona fide
dispute
against the claim. The Respondent signed a settlement and it paid
various amounts. It only raised its “defence”
after the
liquidation application was served. The application for rescission
was only launched on the 20
th
of August 2019, which was
almost three years after the settlement was made an order of the
court. In doing so, the Respondent made
various admissions of
liability.
18.
Respondent
admits that it cannot pay the Applicant at the present moment.
[17]
If the Respondent had liquid or readily realisable assets, it would
have realised them in order to extinguish the debt. A liquidation
application was already served as far back as September 2018. The
Applicant is owed a substantial debt of R 5,070 963-40. The
Respondent has made no payments since March 2018. Its major asset was
sold for a sum less than the total of Applicant’s and
the Land
Bank’s debt. The Applicant argues that this is indication that
the Respondent is unable to pay its debts. It also
contends that
there is no merit in Respondent’s application for rescission.
It contends that the court ought to grant the
order liquidating the
Respondent.
19.
The
Respondent
submits that the court ought to dismiss this Application,
alternatively that the application be suspended pending the
finalization of the Application between the Respondent and the
Applicant in terms of which the Respondent sought an order setting
aside the Judgment and the Settlement Agreement upon which the
liquidation application is premised. It submits that based on the
points
in limine
alone, the Court has to dismiss the Application without considering
the merits of the case.
20.
The first point
in
limine
revolves around the fact that
there is a pending application for a declarator and for rescission of
judgment.
As indicated under paragraph 2
above, t
he Respondent launched an
application under case number 84019/16, applying for an order
providing
inter alia
,
that:-
20.1.
A
declaratory order be granted to the effect that the
underlying
Agreements to the Judgment (upon which the
Liquidation
Application is premised):-
(i). Constitute a Credit
Agreement to which the provisions
of the
NCA
apply;
(ii).
Imply
that the Agreements should be
declared reckless
in terms of Sections 80 (1)(a) or
80(1) (b) (i) or 80 (1) (b)
of the
NCA
;
and
(iii). Have the effect of
setting aside all or part of the
Respondent’s rights and obligations under the
Agreements.
21.
The
Agreements referred to are the following: -
22.1.
A
Credit Application dated 17
th
October 2013
[18]
concluded
between the
Respondent and the Second Applicant;
21.2. A Suretyship signed by
the First Applicant in favour of the
Respondent dated the 10
th
of March 2016; and
21.3. A Settlement Agreement
[19]
dated
the 27
th
of September
2016.
22.
In
terms of the pending Declaratory Application, the Respondent sought
an order to the effect that in the event that the Court does
not
declare the Agreements referred to above as reckless, then the
Applicant should be ordered to comply with the provisions of
Section
129 (1)
[20]
as read with
Section 130 of the
NCA,
prior
to enforcing the Agreements.
23.
The Applicant supplied the Respondent with
goods on credit in the sum of R 5 395 962.30. The Respondent
submitted in its Declarator
Application that the granting of credit
to the Respondent in the aforesaid sum of R5 395 962.30 is itself a
reckless credit. At
the time of the conclusion of the Credit
Agreement, the Applicant failed to conduct an assessment as required
by Section 81(2)
of the
NCA
;
alternatively, the Applicant having conducted an assessment as
required by Section 81 (2), entered into the Credit Agreement with
the Respondent despite the fact that the preponderance of the
information available at the disposal of the Applicant indicated
that
–
23.1. The Respondent and its directors did not generally
understand or appreciate the risks, costs or obligations
under the proposed loan agreement; or
23.2. Entering into the
credit agreement would make the Second
Applicant to be
over-indebted.
24.
The defendant contends that the
Applicant
failed to comply with the provisions of Section 81 in that it could
have prevented the reckless credit being made by way
of following a
proper assessment in terms of Section 81 (2). The Respondent
requested the Court to set aside all or part of the
Respondent’s
rights and obligations under the Credit Agreement as it may deem
to be just and reasonable in the circumstances;
alternatively that
the court should suspend the force and effect of the Credit Agreement
in accordance with Section 83 (b) (i)
of the
NCA
.
25.
Respondent submits that similar submissions
were made in respect of the Suretyship and the Settlement Agreement.
It further contends
that flowing from the above, the Liquidation
Application cannot be heard pending the finalization of the
declaratory application.
RESCISSION OF THE COURT ORDER OF 15
th
NOVEMBER 2016.
26.
Respondent
launched an application for rescission of the Court Order in terms of
Uniform Rule 42 (1) of the Court, alternatively,
based on the common
law for rescission. Following the conclusion of the Written
Settlement Agreement, (preceded by a letter of
demand
[21]
),
and on the 25
th
of October 2016, the Applicant brought an Application seeking an
order declaring the Settlement Agreement to be an order of court.
A
copy of the Application is attached to the Declaratory Application.
That Application was not served on the Respondent in terms
of the
Rules relating to service of court process. The Respondent points out
that no Notice of Set down was served on it. It submits
that it was
not represented in court, in person or by a legal representative. The
Application for Rescission is based upon this
failure to serve.
27.
In
the Rescission Application, the Respondent submitted that the Court
Order was erroneously sought or erroneously granted as envisaged
in
Rule 42 (1) (a) of the Rules of the Court and that the Order of Judge
Molefe should be viewed by this Court because one of those
orders
amounted to a failure of justice
[22]
.
This is more so when placed in the
NCA
context,
which imposes a duty upon the Court to ensure that those requirements
are observed prior to any order being granted.
28.
In its
Rescission
Application, the Respondent submits that Judge Molefe ought to have
satisfied herself that: -
28.1. The Settlement Agreement did not
constitute a credit
agreement in terms of which the
provisions of the National
Credit Act apply; and/or
28.2.
The underlying agreement, (the Credit Application for the
supply
of goods), did not constitute a credit agreement in
terms
of which the provisions of the
NCA
apply; and/or
28.3.
T
hat the Section 129(1) notice in terms of
the
NCA
should
h
have been delivered by the Applicant to the Respondent
before
the granting the Order.
29.
The Respondent argues further that this
is
more so because the Settlement Agreement was not preceded by any
summons or court application. More importantly, the Respondent
was
not legally represented before the Court at the time the Settlement
Agreement was concluded and/or at the time the Application
to make
the Agreement an order of court was launched and/or at the time the
Order was granted. The Respondent points out further
that it was not
even in court at the hearing and it was not even aware that the
matter was enrolled for a hearing.
30.
Respondent is adamant that non-compliance
with Sections 129 and 130 of the
NCA
renderes the process to be void. Thus, while s 129
(1) (b) prohibits the commencement of legal proceedings altogether,
(‘may
not commence’), Section 130 makes it clear that
where action is instituted without prior notice, the action is not
void.
The proceedings have life, but a court ‘must’
adjourn the matter, and make an appropriate order requiring the
credit
provider to complete specified steps before resuming the
matter.
31.
The Respondent contends that flowing
from
the above, Judge Molefe’s failure to satisfy herself in regard
to that compliance, rendered her order to be a nullity
or to be
susceptible to rescission. In essence, the Respondent submits that
the Liquidation Application cannot be adjudicated upon
and/or be
granted whilst the basis of the Liquidation Application itself is a
subject of a pending rescission and declaratory application.
A copy
of the Respondent’s Application for a Declaratory order has
been made available to the Court, contained in a separate
bundle.
SECOND POINT IN LIMINE: NON-COMPLIANCE WITH SECTION 346(4A).
32.
The respondent charges that Applicant has
failed to comply with certain prerequisite and peremptory statutory
requirements in this
Application and that this renders the
Application to be irregular. It argues that by conduct, the Applicant
has conceded that the
points
in limine
have merit. It states that this is demonstrated by the attempt on the
part of the Applicant to correct the irregularities post
the
Application. Section 346(4A) of the Companies Act of 1973 (“the
Companies Act”), requires that an Applicant furnishes
a copy of
the Application to registered trade unions, (if any), employees, the
South African Revenue Services and to the Respondent
company. It also
requires the filing of an affidavit by the person who furnished a
copy setting out compliance.
33.
The respondent avers that Applicant failed
to comply with the provisions of Section 346(4A) in the following
respects:-
(i). It is common cause between the parties that the
Respondent’s
place of business is
at Portion 51 of the Farm Modderfontein,
188 registration division I.P in the district of Ventersdorp,
Province of North-West (“the Farm”). The Respondent has,
at
all material times, operated its
chicken business at the Farm.
The
Applicant delivered chicken feeds to the Respondent at
the Farm and was at all times well aware that the
Respondent’s employees are at the Farm;
(ii). Despite the
above knowledge, the Applicant delivered or
served a copy of its Application at the Respondent’s
registered address namely, 603 Wingerdhof, 169 Bourke
Street, Muckleneuk, Pretoria. It has to be noted that the
Respondent’s registered address is located at the block of
flats where the Respondent’s
Director resided at the time the
Respondent was established and registered.
34.
In
February 2019, post the Application, the Applicant in an attempt to
correct the irregularity and non-compliance with the provisions
of
Section 346 (4A), delivered the Application to the Respondent’s
employees on the 18
th
February 2019
[23]
. This is not
in compliance with the provisions of the Companies Act which requires
that the Application be furnished to the employees
at the time the
application is presented to court.
35.
Furthermore,
the Applicant has failed to serve the Application on the Respondent
itself as required by Section 346(4A) (iv). The
Application was
instead served on one Mr. Erasmus of Eagles Valley Poultry
[24]
.
Mr. Erasmus had no authority or mandate to accept service of court
process on behalf of the Respondent. This is borne out by the
fact
that no such mandate is attached to the papers. The Liquidation
Application ought to have been served at the Respondent’s
registered address. Service at the registered address was only made
on 16
th
February 2019
[25]
. The
respondent argues that based on the above facts, the court has to
find that the Application was not properly served and that
this
should render the Application to be irregular because of
non-compliance with the provisions of the Companies Act and more
specifically, the provisions of Section 346 thereof.
THIRD POINT
IN LIMINE: SECURITY BOND
36.
Section
346 (3) of the Companies Act requires a bond of security to be
obtained which is not older than 10 (ten) days prior to the
date of
the notice of motion. The Applicant has failed to comply with these
provisions in that: -
(i). The Notice of Motion was issued by the
Registrar of the above
Court on the 30
th
of August 2018; and
(ii). The Bond of Security (Annexure
“FA9
[26]
”) was
obtained by the
Applicant on the
3
rd
of September 2018.
37.
The Bond of Security was not obtained 10
(ten) days prior to the date of the Notice of Motion. In fact, the
Bond of Security was
obtained at least two (2) days following the
date of the Notice of Motion. The Respondent submits that the bond of
security must
precede the date of the Notice of Motion as required by
Section 346(3) of the Companies Act. It is on this basis that
Respondent
contends that the Application be found to be irregular. It
submits that the application must be set aside because of non-
compliance
with the Companies Act. It makes the point that on this
basis alone, the Application should be dismissed, with costs.
POINT
IN LIMINE 4: NO
NULLA BONA
RETURN OBTAINED BY THE APPLICANT.
38.
The
Respondent makes the point that no
nulla
bona
return had been obtained by the Applicant or the Sheriff of the Court
as contemplated in Section 345 (1) (b) of the Companies Act.
It
argues that Annexure “FA6
[27]
”
to the Application does not constitute a
nulla
bona
return. Annexure “FA6” does not indicate that the
Respondent has failed to satisfy the Judgment or that the Respondent
has failed to show any disposable property. As such the respondent
argues that Annexure “FA6” does not satisfy the
requirements of the provisions of Section 345 (1) (b) of the
Companies Act.
39.
This Application is ostensibly premised on
the basis that the Respondent has committed an act of insolvency in
that upon the demand
of the officer whose duty it is to execute the
Judgment, the Respondent failed to satisfy the Judgment or to offer
to that officer
disposable property sufficient to satisfy the debt.
This is provided for in Section 8 of the Insolvency Act as read with
Section
345 (1) (b) of the Companies Act of 1973. Simply put, the
sheriff of the Court has never presented the Applicant’s
Judgment
to it for its satisfaction. In other words, the Respondent
was never asked by the Sheriff of the Court to show any disposable or
sufficient property to satisfy the Judgment.
40.
The Respondent states that the Applicant
was made aware that the Respondent is no longer operating at the Farm
Property and that
it is occupying the Farm Property on a rental
basis. This acknowledgment on the part of the Applicant is confirmed
in paragraph
6.3 of the Application. It is pertinently clear that the
Applicant was well aware, at least since May 2017, that the
Respondent
will not be found at the Farm Property. Despite this
knowledge, the Applicant proceeded to instruct the Sheriff to go to
the Farm
to execute the Judgment/Writ at the Farm. This was in the
absence of the Respondent.
41.
The
Applicant’s attorney who has been in contact with the
Respondent’s Director and who was communicating with him
through telephone and WhatsApp [communication is confirmed in
paragraphs 6 – 14 of the Founding Affidavit
[28]
)
had an obligation to enquire around the whereabouts of the Respondent
so as to ensure that the Writ or Judgment is executed on
the sole
Director of the Respondent.
42.
Respondent
contends that it owns, and has sufficient assets at its disposal to
satisfy the Applicant’s Warrant of Execution
and Judgment. It
makes the point that it has been in business since 2010 and has
during its operations acquired a list of assets,
movables and
immovable. The lists include,
inter
alia
,
a truck, tractors, vehicles, operating machines, generators. The
Assets were removed from the Farm in order to make way for the
tenant
at the Farm. Annexure “LM8
[29]
”
is Eagles’ request that the assets be removed. The respondent
submits that the assets were then moved from the Farm
and that is the
reason why the Sheriff found no assets belonging to the Respondent at
the Farm.
APPLICATION CONSTITUTES AN ABUSE OF PROCESS.
43.
The
Respondent contends that this Application for the winding up of the
Respondent constitutes an abuse of process. It submits that
it has
demonstrated this point fully in its Affidavit and in the
Supplementary Affidavit. The Respondent submits that this application
was triggered by a pending Sale Agreement concluded between it and a
company known as Eagles Valley Poultry (“Eagles”).
Eagles
is copied in this Application as it appears in the Notice of
Motion
[30]
. It makes the point
that there is no basis whatsoever to cite or copy the Liquidation
Application to Eagles other than for reasons
set out in the its
Affidavits.
44.
Both
Eagles and the Applicant are in the same chicken production and/or
chicken product industry or business in the North-West and
are, from
time to time, represented by associated legal representatives or law
firms. The respondent points out that this alone,
confirms that there
is collusion between Eagles and the Applicant to liquidate the
Respondent in order to ensure that a favourable
liquidator is
appointed by the Applicant who will then execute the suspended Sale
Agreement to finality. A copy of the Sale Agreement
is attached to
the Application and marked as Annexure “FA7
[31]
”.
The respondent states that it is unclear how a copy of the
confidential Sale Agreement fell into the hands of the Applicant.
It
figures that the reason is in the fact that Eagles and the Applicant
are in cohorts to ensure that it is liquidated in order
to safeguard
the interests of both Eagles and the Respondent. The respondent
points out that a favourable liquidator can ensure
that both its
interests in those of Eagles are served.
45.
The
Respondent is adamant that this Court is duty-bound to prevent such
an abuse. It referred to a letter by its attorneys of record,
Ndobe
Inc. Attorneys (“Ndobe”), addressed to the Applicant’s
attorneys, De Kocks Incorporated (“De Kocks”).
This was
consequent to a telephone conversation held between Ndobe and De
Kocks, which telephone conversation was held prior to
the launch of
this Application. A copy of the letter is marked as Annexure
“LM1
[32]
”.
46.
During the telephone conversation, De Kocks
indicated the following to Ndobe:-
(i). Eagles’ attorney of
record, Mr Henk Strydom (“Mr Strydom”) of
Strydom Bredenkamp Attorneys is a well-known experienced
insolvency attorney and a liquidation expert;
(ii). Mr Strydom
has, from time to time, and in conjunction with De
Kocks, successfully launched liquidation proceedings against
various parties.
A COLLUSSION BETWEEN EAGLES AND THE APPLICANT.
47.
On
the 22
nd
of January 2018, Eagles and the Respondent concluded an ‘Offer
to Purchase’ in terms whereof the Respondent sold the
Property
to the Applicant, as per Annexure “FA7
[33]
”.
In terms of the Addendum to the Sale Agreement, the sale and transfer
of the Property cannot be effected pending finalization
of the Appeal
or the Court Litigation between the Respondent and Land Bank,
alternatively, pending a formal termination of the
litigation process
(by agreement between the Respondent and Land bank). A copy of the
Addendum to the Offer to Purchase is “Annexure
LM3
[34]
”
(“Addendum”).
48.
The
respondent submits that Eagles is currently frustrated by the
condition (Addendum) it itself introduced to the Sale Agreement.
The
respondents submits that Eagles has since indicated its intention to
renege from the Addendum and on or about the 29
th
of June 2018, Eagles launched an Application
[35]
to Court, seeking a relief to declare that the Addendum amounts to an
extension and/or indulgence extended by the Applicant to
it, (the
Respondent); alternatively, that the Addendum should be declared
invalid; further alternatively, that the Addendum was
premised on a
misrepresentation.
49.
Eagles’ Application was heard on the
30
th
of July 2019 and a Court Order dismissing the Application was granted
on the 2
nd
of August 2019. The Respondent suggests that a strategy was hatched
between Eagles and the Applicant that the rental payments should
be
cut off to enable the launching of this Application on the basis that
the Respondent is no longer in a position to liquidate
its
indebtedness to the Applicant.
50.
To further demonstrate the collusion, the
Applicant and Eagles proposed that the Liquidation Application be
heard simultaneously
by the above Court on the same date the Eagles’
Declaratory Application was to be heard. The Applicant’s
attorneys
addressed a letter to the Acting Deputy Judge President.
The letter is contained in a separate bundle filed in this
Application.
The respondent points out that Eagles now seeks the
assistance of the Applicant through this liquidation process because
it is
now aware that the Court Litigation between the Respondent and
the Land Bank may take years to complete considering that the Court
Litigation is still at Summary Judgment stage.
51.
The Respondent submits that the Application
for its winding up is an abuse of court process to favour both the
Applicant and its
associate, Eagles. Following the filing its
Application seeking an order placing the Respondent into provisional
liquidation, the
Applicant instituted a Court action in the
Magistrate’s Court for the District of Ventersdorp under Case
Number 193/2018
against a director of the Respondent personally. In
terms of the Summons, the Applicant is claiming payment in the amount
of R4,
753, 735.70 based on the alleged suretyship.
52.
The Respondent states that the summons and
the claim against the director of the Respondent is premised upon the
same Court Order
or Judgment upon which the liquidation Application
is premised. It submits that the Summons and this Application
constitute an
abuse of process. At the time of the sale of the
chicken feed by the Applicant to the Respondent, the latter lodged a
formal complaint
about the quality of the chicken feed products
supplied by the Applicant to the Respondent. The Respondent, had at
the time, lost
revenue due to the ineffectiveness of the Applicant’s
chicken feed sold and supplied to the Respondent by the Applicant.
53.
The
Respondent consulted with Nutritional and analytical Chemistry
experts to inspect and advise whether its suspicions about the
quality of the Applicant’s products are founded. The
Applicant’s products were tested
[36]
for mycotoxin contamination. It submits that usually, when chicken
feed has mycotoxin contamination, chicken tend not eat the feed
or if
they are really hungry, they will eat, resulting in them falling ill.
The term “Vomitoxin” has been given to
Deoxinovalenol, (a
common mycotoxin) for this reason. Also, there can be microbial
growth which cause the chicken not to eat the
feed. Nutritional
analysis would not pick this up. The Respondent states that it
appears from the test that the Applicant’s
chicken feed may
have been contaminated with some antibiotic residues which caused the
chicken to not eat the feed because they
either smell the residues or
do not respond to medication.
54.
The Respondent submits further that the
Applicant had failed to provide it with a full accounting record
reflecting all the payments
it made against the purchase orders,
delivery notes and Invoices. The Applicant is obligated to render a
debasement of an account.
IS THE RESPONDENT COMMERCIALLY
INSOLVENT?
55.
The
respondent is adamant that it is not commercially insolvent. The
Landbank proposed that the Farm be placed again in the market
and be
sold for a minimum value of R12 Million. The Landbank has been given
a mandate to proceed to market the property with a
view to obtain a
higher price in the market. A Power of Attorney was executed by the
Respondent in favour of Landbank
[37]
.
The objective of the Power of Attorney is to ensure that the sale
proceeds are sufficient to cover other Respondent’s debts
such
the Applicant’s Judgment. The Power of Attorney is also
referred to in the Application in paragraph 6.30.
56.
The Respondent believes that the Farm will
attract higher prices than that offered by the Eagles. The respondent
points out that
the proceeds of the sale of the Farm Property are
sufficient to cover any indebtedness of the Applicant, (in the event
that the
Declaratory Application is not successful). This does not
include the monies owed to the Respondent by the Applicant’s
associated
company, Eagles, in respect of the rental owed which is in
excess of R1.7 Million.
57.
It is clear from the facts before this
Court that with the exception of the Land Bank’s mortgage bond
the Respondent does
not owe any other entity. The Land Bank’s
mortgage bond payment obligations are covered by the proceeds of the
sale of the
Farm Property. As a result the respondent submits that
there is simply no basis to place the Respondent under liquidation in
the
circumstances.
CASELAW.
The
Badenhorst Rule
.
58.
Given
that sequestration or liquidations deal with the status of persons or
entities, the bar for obtaining a provisional order
is set higher
than that which applies in applications for interim interdictory
relief. The question whether the requirements are
met on a
prima
facie
basis is determined by assessing whether the balance of probabilities
on the affidavits favour the Applicant’s case
[38]
.
The test can be traced back to the well-known Judgment of Corbett JA
(As he then was) in
Kalil
v Decotex (Pty) Ltd
[39]
.
In
that matter; Corbett JA held that a Court can hardly decide an
application for the provisional winding up of a company without
reference to the respondent’s rebutting evidence. Corbett JA
then explained that the term “
prima
facie
”
case means that the balance of probabilities on all the affidavits
should favour the granting of the application for provisional
liquidation (or sequestration)
[40]
.
59.
As
far as the first requirement is concerned, i.e. whether the Applicant
has a claim against the respondent, the SCA added in Kalil
that an
application for liquidation should not be resorted to in an attempt
to enforce a claim which is
bona
fide
disputed. In respect of this requirement, the onus on the
respondent is not to show that she is not indebted to the Applicant
but she must merely show that the indebtedness is disputed on
bona
fide
and
reasonable grounds
[41]
.
This is known as the Badenhorst rule
[42]
.
In short, an application for provisional sequestration should not be
used as a means of putting pressure on the respondent
to pay a debt
which is
bona
fide
disputed. The Respondent submits that it has demonstrated that the
debt is
bona
fide
disputed
[43]
, (and on
reasonable grounds) and as a matter of fact, the debt may be set
aside by the court hearing the Rescission and Declaratory
Application.
60.
The
legal principle which suggest that the Applicant must establish its
entitlement to an order on a
prima
facie
basis was also emphasized by the courts in
One
Stop Financial Services (Pty) Limited v Neffensaan Ontwikkelings
(Pty) Limited
[44]
and
Orestisolve
v NDFT Holdings
[45]
.
Company deemed unable to pay its debts and Section 345 Requirements
not met by the Applicant. Although the founding papers is
unclear if
the Application premised on Section 344 and/or Section 345 of the old
Companies Act, 61 of 1973, the Respondent has
demonstrated in its
papers that the Respondent is not a company deemed unable to pay its
debts as contemplated in the aforesaid
provisions.
61.
The grounds for the final winding-up of a
close corporation are the same as those that are applicable for the
winding-up of companies.
An Applicant for the winding-up of a close
corporation must rely on the grounds set out in Section 344 and 345
of the Companies
Act. Section 344 indicates circumstances under which
a company can be wound up. Sub-section (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. This section determines circumstances under
which a company can be deemed to be an able to pay its debts. In that
regard, this section provides the following:-
“
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 as its registered
office, a demand requiring the company to pay the sum due; or
(ii).
in the case of any bod- 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;
or
(iii). any process
issued on a judgment, decree or order of any court in
favour of a creditor of the company is returned by the sheriff or the
messenger with an
endorsement that he 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
(iv). It is proved to the satisfaction of the Court that the
company is
unable to pay its
debts.”
62.
The Tespondent argues that from obtaining
the facts, the Applicant has not met the requirements for the
application for a final
winding up to be granted. The Applicant is
resisted on the basis that the Respondent is commercially solvent and
is able to meet
its day to day liabilities in the ordinary course of
business. It is also contended that the Respondent has liquid assets
or readily
available assets at its disposal. It is contended therefor
that out of the proceeds of such assets, the Respondent is able to
pay
its debts. The respondent points out that the fact that no
nulla
bona
return was obtained by the
Applicant is also an indication that it is not unable to pay its
debts. The Respondent raised the point
that it was never asked by the
Sheriff of the court to show the assets in its possession which
assets were removed from the Farm
when the tenant took possession of
the Farm.
63.
In
the case of
Absa
Bank Ltd v Rhebokskloof (Pty) Ltd
[46]
the court stated the following:
“
As
Caney J said in Rosenbach & Co (Pty) Ltd v Singh's Bazaar (Pty)
Ltd
[47]
:
'If the company is in fact solvent, in the sense of its assets
exceeding its liabilities, this may or may not, depending upon
the
circumstances, lead to a refusal of a winding-up order; the
circumstances particularly to be taken into consideration against
the
making of an order are such as show that there are liquid assets or
readily realizable assets available out of which, or the
proceeds of
which, the company is in fact able to pay its debts.”
64.
It
is trite that in considering and application for winding up, it is
the court which is to exercise its discretion on the basis
of the
available facts. Also underpinning this point, in the matter of
Standard
Bank of South Africa v R-Bay Logistics
[48]
,
the
court stated the following
:-“
The
possible actual solvency of the respondent company is usually only
relevant to the exercise of the Court's residual discretion
as to
whether it should grant a winding-up order or not, even though the
applicant for such relief has established its case under
Section
344(f)
.”
The respondent argues further that the jurisdictional requirements
set out in Section 345 (1) (a) have not been met in
this matter in
that the Applicant has never delivered a demand contemplated in
Section 345 (1)(a)
[49]
. It
maintains that the Judgment in itself does not suffice and that the
Applicant ought to have delivered the demand in order to
meet the
requirements of Section 345.
65.
It
is trite that where a Respondent’s proven to be unable to
satisfy a demand for a debt amounting to a sum not less than
R100,
the
court is entitled to grant the application for
final
winding-up
.
In the case of
Lamprecht
v Klipeiland (Pty) Ltd
[50]
,
the
following was stated:
“
[
16]
I have already found that the agreement [that] was made an order of
court by Kruger AJ was valid. This leads me to find that
the
respondent conceded that the appellant had locus standi, that he was
a creditor for a sum no less than R100 and further that
it was due
and payable. There is no dispute that although the section 345(1)(a)
demand was served on the respondent, it has not
paid any amount nor
secured or compounded any amount to the reasonable satisfaction of
the appellant. To my mind, the jurisdictional
requirements set out in
section 345(1)(a) have been met
.
66.
Malan
J (as he then was) stated the following in the case of
Body
Corporate of Fish Eagle v Group Twelve Investments
[51]
:
"
The
deeming provision of s 345(1)(a) of the Companies Act creates a
rebuttable presumption to the effect that the respondent is
unable to
pay its debts (Ter Beek's case supra at 331F). If the respondent
admits a debt over R100, even though the respondent's
indebtedness is
less than the amount the applicant demanded in terms of s 345(1)(a)
of the Companies Act, then on the respondent's
own version, the
applicant is entitled to succeed in its liquidation application and
the conclusion of law is that the respondent
is unable to pay its
debts
."
67.
However, in this case, the facts advanced
by the Applicant fall short of proving that the Respondent is unable
to pay its debts.
The Respondent has demonstrated that it has a
bona
fide
defense against the claim brought
by the Applicant against it. Considering that the standard of proof
required for purposes of
demonstrating
bona
fide
defense is lower, the court find
that the submission advances by the Respondent suffices in
constituting a
bona fide
defense on reasonable grounds. The court also takes into
consideration that a possibility obtains that upon application for
rescission,
the Respondents may succeed.
68.
The Respondent avers strongly that it
stands to succeed in its application for rescission of the judgment
in the top by my sister
Molefe J. It is trite that at this stage, the
Respondent is not obliged to prove that it will indeed succeed.
However, if that
were to be the case, (if the Respondent succeeds in
its application for rescission), granting this application will have
unduly
overtaken valuable events. Consequently, the application for
final winding up does not stand to be granted. In the result, the
following order is made:
ORDER.
1.
The Provisional Winding-up order is hereby
discharged.
2.
The Application for the Winding-up of the
Respondent is
hereby dismissed with costs and such costs to
include those consequent upon the employment of
counsel.
____________
T.A.Maumela.
Judge of the High Court
of South Africa.
REFERENCES
For
the Applicant:
Adv.
F J ERASMUS SC
Instructed
by:
De Kocks Attorneys
For
the Respondent:
Adv. X Mofokeng
Instructed
by:
Ndobe Inc.
[1]
.
Act Number 34 of 2005.
[2]
.
See
also Scholtz & Others: Guide to the National Credit Act, Volume
1, p.11 – 13; Gestalt Fund
Managers (Pty) Ltd
v Secura Systems Security (Pty) Ltd, 2015 JDR 1284 (GJ), par 15.
[3]
.
Supra.
[4]
.
Section
4(1)(a) of the Act read with GN 713 in GG 28893 of 1 June 2006.
See also Guide to National
Credit Act, Volume 1,
p.4-7 – 4-9.
[5]
.
Respondent’s
Heads, par 13 - 22.
[6]
.
Clause
2.2 and 3.7 of the settlement: Annexure “FA3”,
p.26.
[7]
.
Erasmus
Superior Court Practice, Volume 2 at D1 – 576;
Roopnarain
v Kamalapathy
,
1971 (3) SA 3
(D).
[8]
.
Act number 61 of 1973.
[9]
.
Joffe
et
al
:
High Court Motion Procedure: A Practical Guide at p.5 –
14; Henochsberg, Volume 2,
APPI-79.
[10]
.
Founding
Affidavit, par 6.35, p.16; Section 344 read with Section 345(1)(c)
and (2) Companies Act 61
of 1973.
[11]
.
Joffe
op
cit
,
p.5 – 11.
[12]
.
Founding
Affidavit, par 6.18, p.13; Answering Affidavit, par 24, p.74.
[13]
.
Paragraph
54, Respondent’s Heads.
[14]
.
Answering
Affidavit, par 69, p.89.
[15]
.
Annexure
“LM11’, p.137 – 145.
[16]
.
Annexure
“JHV5”, p.225 last paragraph.
[17]
.
Answering
Affidavit, par 33, p.77.
[18]
.
Annexure
“LM14” of the Supplementary Affidavit, p 195.
[19]
.
Annexure
“FA3”, p 25.
[20]
.
Of the NCA.
[21]
.
No
Summons was issued by the Applicant.
[22]
.
The Respondent will rely on
S
v Moodie
1961 (4) SA 752
(A) at 759 A-D, and Oliver v Attorney-
General, Cape Provincial Division
1995 (1) SA 455
(C ) at 460. The
Judgments were recently followed
in an
unreported Judgment of Boqwana J in the matter of Jiyana vs Absa
Bank Limited (Western
Cape Division,
Cape Town). A copy is made available.
[23]
.
Service
Affidavit, Annexure “SA4”, p 238.
[24]
.
Service
Affidavit, p 229, at para 2.2.
[25]
.
Service
Affidavit, Annexure “SA3”, p 237.
[26]
.
Page
62.
[27]
.
Annexure
“FA6”, p 38.
[28]
.
P
9 – 12.
[29]
.
Annexure
“LM8”, p 132.
[30]
.
Page
4.
[31]
.
P
41 – 54.
[32]
.
P
102 – 103.
[33]
.
P
41-54.
[34]
.
P
105 – 107.
[35]
.
P
108 – 111.
[36]
P137
- 145
[37]
.
P 146- 147.
[38]
.
Investec
Bank Ltd v Hugo Amos Lambrechts N.O Case No. 6570/2014 (unreported
Judgment
delivered by Rodgers J on 27
November 2014 at para 15). This Judgment was referred to by De Waal
AJ in Standard Bank of South Africa Ltd v
Sauer (unreported Judgment on 12 March 2019 at para 4).
[39]
.
1988
(1) SA 943 (A).
[40]
.
Kalil v Decotex (Pty) Ltd, at 979 A.
[41]
.
Kalil v Decotex (Pty) Ltd, at 980B – D.
[42]
.
With reference to the decision in Badenhorst v Northern Construction
Enterprises (Pty) Ltd 1956 (2)
SA 346 (T) at 347H – 348B.
[43]
.
Hulse-Reutter
v HEG Consulting Enterprises (Pty) Limited
1998 (2) SA 208
(C ) at
218D-219C
[44]
.
Unreported
Judgment by Rodgers J handed down on 17 June 2015 under Case Number
2002/28/14
(Western Cape Division, Cape
Town.
[45]
.
2015
(4) SA 449 (WC).
[46]
.
1993 (4) SA 436
at 440F.
[47]
.
1962 (4) SA 593
(D) at 59 7E-F.
[48]
.
2013 (2) SA 295
at 300 – 301, paragraph 27.
[49]
.
(1) A company or body corporate shall be deemed to be unable to pay
its debts if‒has served on the
company, by leaving the same as its registered office, a demand
requiring the company to pay the
sum
due.
[50]
.
[2014] JOL 32350
(SCA), para 16.
[51]
.
2003 (5) SA 414
(W) at 428B-C.