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[2018] ZALMPPHC 12
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ASA Metals (Pty) Ltd v Vardocap (Pty) Ltd (5630/2017) [2018] ZALMPPHC 12 (17 April 2018)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
LIMPOPO DIVISION,
POLOKWANE
CASE
NO: 5630/2017
Not
reportable
Not
of interest to other judges
Revised.
17/4/2018
In
the matter between:
ASA
METALS (PTY)
LTD
APPLICANT
AND
VARDOCAP
(PTY)
LTD
RESPONDENT
JUDGMENT
KGANYAGO
J
[1]
The applicant has brought an application seeking an order to wind up
the respondent in terms of section 346 read with section
344(f) and
section 345 of the Companies Act 71 of 1973 (“the old Act”).
The basis of the applicant’s application
is that the respondent
is unable to pay its debts. The respondent is opposing the
applicant’s application.
[2]
According to the applicant, on the 9
th
December 2016, the parties concluded a partly written and partly oral
agreement in terms of which the applicant sold to the respondent
sasol green pitch coke and that the purchase price due and payable by
the respondent amounted to R849 244-94. The respondent has
failed
and/or refused to pay the outstanding amount.
[3]
On the 30
th
of May 2017 the applicant’s attorney addressed a letter to the
respondent in terms of section 345(1) (a) of the old Act demanding
payment of the full amount within 21 calendar days of receipt of the
said letter. According to the applicant, the period of 21
calendar
days has lapsed without the respondent paying the full amount or a
portion of it. Based on that, the applicant is of the
view that the
respondent is unable to pay its debt as contemplated in section
345(1) of the old Act.
[4]
The respondent has filed its answering affidavit. In its answering
affidavit the respondent alleges that the applicant’s
liquidation application constitute an abuse of Court processes. The
respondent states that the applicant is fully aware of the
fact that
the goods underlying the dispute were materially defective and have
caused the respondent significant damage. The respondent
further
alleges that on the 30
th
June 2017 through its attorneys it wrote a letter to the applicant
tendering the return of the defective product.
[5]
The respondent contends that it has replied to the applicant’s
section 345 notice, and in its reply it has vehemently
contested the
validity of the applicant’s claim. The respondent denies that
it is insolvent and/or commercially insolvent.
The respondent
contends that the reason for not paying the applicant’s invoice
is not due to its inability to pay but as
a result of the dispute
which it is having with
the applicant. The
respondent further alleges that it is having a counter-claim in the
excess of the applicant’s claim. The
respondent further alleges
that it is having a significant positive net asset of value that
significantly exceeds its liabilities.
The applicant did not file a
replying affidavit to the respondent’s answering affidavit
[6]
The applicant is relying on its section 345 letter as the basis of
alleging that the respondent is unable to pay its debt. The
question
which this Court must determine is whether the respondent is unable
to pay its debts and also whether the respondent’s
denial of
the applicant’s claim is based on
bona
fide
grounds.
[7]
Part G of Chapter 2 of the Companies Act 71 of 2008 (“the new
Companies Act&rdquo
;) and chapter XIV of the old Act regulates the
winding up of a company, read with the applicable laws relating to
insolvency. The
old Act continues to apply by virtue of the
provisions of item 9 of Schedule 5 notwithstanding its repeal which
was with effect
from 1
st
May 2008. The provisions of the chapter XIV of the old Act will
continue to apply until the Minister, by notice in the Government
Gazette determine a date on which it shall cease to have effect.
However, in terms of item 9(2) of Schedule 5 , ss 343, 344,
346
and 348 to 353 of the old Act does not apply to the winding up of an
solvent company except to the extent necessary to give
effect to the
provisions of Part G of Chapter 2 of the new Act. The winding up of
solvent companies is dealt with in ss 79 to 81
of the new Act.
[8]
In this case the application has been initiated in terms of section
344(f) and 345 of the old Act. In terms of the old Act,
a company is
deemed unable to pay its debts if a creditor to whom the
company is indebted in the sum of money of not less
than one hundred
rand then due has served the company with a letter demanding
payment of the amount due, and the company
has for three weeks
neglected to pay the sum, or to make a reasonable arrangement to the
satisfaction of the creditor. The company
will also be deemed to be
unable to pay its debts if it is proved to the satisfaction of the
Court that it is unable to pay its
debts.
[9]
It is settled law that our law recognizes two forms of
insolvency, and that is factual insolvency, where a company’s
liabilities exceed its assets, and commercial insolvency, a state
illiquidity where a company is unable to pay its debts even though
its assets may exceed its liabilities ( See
Ex
Parte de Villiers & Another NNO: In Re Carbon Developments
1993 (3) SA 493 (A) and Johnson v Hirotect (PTY) Ltd 2000
(4) SA 930
(SCA)).
[10] In
Standard Bank
of SA v R-Bay Logistics 2013 (2) SA 295
(KZD)
at para 24
the Court said:
“
Nothing
in the new
Companies Act has
changed any of the provisions of ch 14
of the old
Companies Act. Accordingly
, for the purpose of winding up
an insolvent company,
s344
thereof must still regulate the basis upon
which it can be wound up. Of particular relevance in this case is
s
344(f)
which requires an applicant to prove that the respondent
company is unable to pay its debts, as contemplated in
s 345
of the
Companies Act.”
[11]
The applicant’s application is based on its
section 345
notice
which was sent to the respondent. The applicant contends that the
respondent has failed to comply with the demand as stated
in its
section 345
notice and has also failed to respond to that letter. The
respondent contends that it did respond to the applicant’s
section
345 notice, and in its reply it has vehemently contested the
validity of the applicant’s claim.
[12]
The respondent has attached to its answering affidavit a copy of a
letter dated 30
th
June 2017 which it alleges that it is a reply to the applicant’s
section 345(1) notice. In that letter the respondent denies
being
indebted to the applicant for any amount of whatever nature. In that
letter the respondent specifically state the reasons
for disputing
the applicant’s claim. The respondent also warn the applicant
that any application for their liquidation will
be
mala
fide
and will be opposed and it will
seek a punitive cost order against the applicant. The respondent
further advises the applicant
that should they wish to
institute legal action against them they are invited to serve summons
and that it will file a counter-claim
against the applicant’s
claim.
[13]
Despite being warned not to proceed by way of motion proceedings, the
applicant proceeded to issue its notice of motion on
the 17
th
August 2017. On receipt of the respondent’s answering
affidavit the applicant did not file its replying affidavit.
The
respondent’s reply to the applicant’s section 345 notice
clearly raises a real, genuine and
bona
fide
dispute of fact.
[14] In
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA
277
(SCA)
at para 26 Harms DP said:
“
Motion
proceedings, unless concerned with interim relief, are all about the
resolution of legal issues based on common cause facts.
Unless the
circumstances are special they cannot be used to resolve factual
issues because they are not designed to determine probabilities.
It
is well established under the Plascon Evans rule that where in motion
proceedings dispute of fact arise on then affidavit, a
final order
can be granted only if the facts arrived in the applicant’s (Mr
Zuma) affidavits, which have been admitted by
the respondent (the
NDPP), together with the facts alleged by the latter, justify such
order. It may be different if the respondents
written version
consists of bad or untrustworthy denials, raises fictitious disputes
of fact, is probably implausible, farfetched
or clearly
untenable that the court is justified in
rejecting them entirely on the papers.
[15] Since the applicant
has failed to file its replying affidavit, the version of the
respondent remains uncontroverted. At the
time when the applicant
issued its notice of motion it was aware or ought to have foreseen
that a dispute of fact will arise based
on the reply it received from
the respondent. In that letter the respondent has advised the
applicant to proceed by way of action,
but it has deliberately
ignored that advice. It is clear that this matter will not be
determined on papers only based on the real,
genuine and
bona fide
dispute of fact raised by the respondent. In my view, the
respondent’s denial of the applicant’s claim is based
on
bona fide
grounds. On that point alone the applicant’s
application stands to fail.
[16]
I now turn to the issue of costs. A costs order on attorney and
client scale is an extraordinary one which should not be easily
resorted to, and can only when by reason of special considerations,
arising either from the circumstances which gave rise to the
action
or from the conduct of the party, should a court in a particular case
deem it just, to ensure that the other party is not
out of pocket in
respect of the expenses caused to it by the litigation. As such, the
order should not be granted lightly, as Courts
look upon such orders
with disfavour and are loath to penalize a person who has exercised a
right to obtain a judicial decision
on any complaint such a
party may have. (See
SS
v VVS
[2018] ZACC 5
(1
st
March 2018
).
[16]
On receipt of the respondent’s reply to its
section 345
notice,
it was clear to the applicant that a dispute of fact is going to
arise which could not be resolved on papers. The respondent
also gave
the applicant a friendly advice that should it decides to institute
legal proceedings against it, it must proceed by
way of action. This
was simply to inform the applicant that motion proceedings will not
be able to resolve this matter as a dispute
of fact will definitely
arise. The respondent went further to warn the applicant that should
it proceed with its liquidation application
that application will be
mala fide,
and
it will oppose it and ask for a punitive cost order. The applicant
has ignored all these warnings.
[18]
It is clear that the applicant wanted to take a shortcut by using the
liquidation application as debt collecting tool which
might scare the
respondent to pay immediately. It knew that should it proceed by way
of action, that litigation will probably take
some time before the
matter is finalized. However, in motion proceedings it will be much
quicker. This type of litigation should
be stopped in its infancy
before it develops into practice. This in my view is a clear abuse of
Court processes and this is the
kind of matter where a punitive order
of costs would be justified.
[19] In the result I
make the following order:
19.1) The applicant’s
application is dismissed
19.2)
The applicant is to pay the respondent’s
costs on an attorney and client scale.
_______________________
MF
KGANYAGO
JUDGE
OF THE HIGH COURT
OF
SOUTH AFRICA, LIMPOPO DIVISION
LIMPOPO
DIVISION, POLOKWANE
APPEARANCES
1.
FOR THE APPLICANT
: M Bresler
2.
INSTRUCTED BY
: Hogan Lovells inc
3.
FOR THE RESPONDENT
: WJ Roos
4.
INSTRUCTED BY
: Herman Potgieter Attorneys
5.
DATE OF ARGUMENT
:
13 March 2018
6.
DATE OF JUDGMENT
: