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[2017] ZAKZDHC 23
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Ameropa Commodities (Pty) Ltd v Salvage and Stockfeed Parcels CC (7882/2016) [2017] ZAKZDHC 23 (15 June 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, DURBAN
Case
no: 7882/2016
In
the matter between:
AMEROPA
COMMODITIES (PTY)
LTD
APPLICANT
versus
SALVAGE
AND STOCKFEED PARCELS
CC
RESPONDENT
JUDGMENT
MADONDO
DJP:
Introduction
[1]
The applicant seeks an order provisionally winding up the respondent
on the ground that it is unable to pay its debts to the
applicant, as
envisaged in sections 66(1) and 69(1)(c) of the Close Corporation Act
69 of 1984, read with section 344(f) of the
Companies Act 61 of 1973
(the 1973 Companies Act), together with section 9 of Schedule 5 of
the Companies Act 71 of 2008 (the 2008
Companies Act). On
8 July 2016
the sole member of the respondent, George Charalambus, signed a
certificate of balance in terms of which he admitted
the respondent’s
indebtedness to the applicant and confirmed that the amount of R26
405 500.99 contained therein was an outstanding
balance, which was
due and payable on that account by the respondent to the applicant,
as at 31 May 2016, for the wheat the applicant
sold and delivered to
the respondent.
[2]
The respondent opposes the liquidation application on the basis that
it is not indebted to the applicant in any amount claimed.
While the
respondent admits signing the certificate of balance in question it
avers that it signed such certificate of balance
in error, believing
that it was correct. As a counter application to the liquidation
application, the respondent seeks a stay of
the proceedings pending
the finalisation of the dispute resolution procedures by way of
arbitration.
Parties
[3]
The applicant is Ameropa Commodities (Pty) Ltd, a private company
with limited liability, duly incorporated in terms of the
laws of the
Republic of South Africa, with its principal place of business at
Unit 4, Rydal Vale Crescent, La Lucia, Durban. The
applicant is an
international company based in Switzerland and primarily a supplier
of wheat maize.
[4]
The respondent is Salvage and Stockfeed Parcels CC, Close Corporation
duly incorporated in terms of the laws of the Republic
of South
Africa, with its registered office at Unit 1, Broadmill Park, 6
Mountview Close, Broadlands. The respondent sells and
supplies its
wheat to its associate companies, namely Prograin (Pty) Ltd
(Prograin) which are millers that mill the wheat and pre-pack
the
finished product, namely flour, for sale and distributes it to their
various customers.
Factual
Background
[5]
Most of the facts in this matter are common cause with an exception
of a few facts and that will become more apparent later
in the
judgment. During the period between 5 October 2015 and 3 February
2016 the parties entered into three agreements of sale
in terms of
which the applicant sold wheat to the respondent on credit in terms
of a running account payable sixty days after invoice.
The purchases
were made on a running account which had commenced in 2014.
[6]
The wheat sold in terms of such sale agreements was delivered to
silos at a mill (storage facility) owned and operated by a
company
related to the respondent, Prograin. The respondent then on-sold all
wheat purchased from the applicant to Prograin: (George
Charalambus
is the sole member of the respondent as well as the sole director and
principal shareholder of Prograin).
[7]
All risk in respect of damage or loss to the wheat transferred to the
respondent on delivery to the storage facility, while
ownership and
title in and to the goods remained with the applicant until payment
was made.
[8]
The wheat was held under the custody of Drum Commodities Limited
(Drum) in terms of a collateral management agreement (the CMA)
entered into between the applicant and Drum. Drum is a company duly
incorporated under the laws of England and Wales and having
its
registered office at Comewell House, North Street, Horsham, West
Sussex, RH12 1 Rd, England and place of business at 18 Vallis
Way,
Frome, Somerset BA 11 3BJ, England.
[9]
The applicant appointed Drum on 26 June 2014 as a collateral manager
because the respondent was ordering more stock than its
credit limit
would allow. The CMA allows for wheat to be taken to the mill and
stored on-site, but only released to the respondent
when its credit
limit allows. According to the applicant the invoices were only
issued once release was authorised, not when wheat
was ordered. Drum
would not release or allow the release of any goods from the storage
facilities unless it had received written
instruction from the
applicant, stating the person or parts to whom the goods should be
released and the date and the manner of
such release.
[10]
Payment in respect of the wheat by the respondent was due within
sixty days of the respondent receiving an invoice from the
applicant,
and interest would accrue on any overdue amounts at a rate of the
Standard Bank’s prime overdraft rate plus two
precent per
annum.
[11]
Between 5 October 2015 and 30 April 2016 the applicant duly released
portions of the wheat sold in terms of the sale agreements
and held
under the CMA on the applicant’s instruction, and invoiced the
respondent. The respondent was invoiced for the wheat
released to it.
This was done in this fashion in order to ensure that the
respondent’s outstanding balance remained within
its credit
limit.
[12]
At the end of each month the respondent received a statement from the
applicant, showing each invoice the date of issue, the
amount and the
due date, the quantity of wheat sold, the price and the agreement
reference number. Although the respondent made
various payments
towards some of the invoices issued, the last payment the applicant
received from the respondent was made on 8
April 2016. However,
according to the respondent all the invoiced amounts have been paid
in full.
[13]
The amount invoiced for the quantity of wheat released as at 31 May
2016 was R26 405 500.99. On 8 July 2016 the respondent,
through its sole member, duly acknowledged its liability and
confirmed that the balance then owed for the wheat, sold and
delivered
by the applicant to the respondent, was due and payable by
the respondent to the applicant by signing a certificate of balance
annexure “NH5” to the applicant’s founding
affidavit. As per the terms of payment, the balanced owed from the
wheat sold became due and payable on 31 July 2016, being sixty days
from 31 May 2016.
[14]
On 5 July 2016 George Charalambus, the sole member of the respondent,
replied to an email from Janet Chattiar, one of the applicant’s
debtors clerks, requesting payment of the admitted balance, stating
that the respondent was responsible for the payment of the
account.
He went on to state that the respondent would make payment on receipt
of funds to be allocated to it by Prograin. The
reply by the
respondent is annexure “NH6” to the applicant’s
founding affidavit. He also stated that the company
would also use
the money, it expected to receive from the then pending BEE pay-out
of sixty percent shares, to liquidate all this
account.
[15]
Subsequently, the applicant discovered that the quantity of 4287.64
metric tons of wheat to the value of R17 862 228.85,
which
the applicant had sold to the respondent but not yet released it to
the respondent, had been misappropriated or disposed
of. Such wheat
had according to the applicant been released by either the respondent
or Drum or Prograin without its instruction
for such release. This
was over and above the wheat the applicant invoiced and released. The
applicant has since instituted action
proceedings for the recovery of
such wheat against Prograin. In any event, according to the
applicant, at that stage all the risk
in and to all the wheat had
already passed on to the respondent.
[16]
Several meetings were held between the applicant’s
representatives and the respondent during July and August 2016 in
order to discuss payment of the admitted balance and the provision of
security by the respondent for the debt. During such discussions
between the parties, the respondent provided its draft financial
statements and management accounts to the applicant allegedly
on a
without prejudice basis.
[17]
In July 2016 the parties orally agreed on a payment plan which was
later to be reduced to writing and signed. In the agreement
the
respondent undertook to pay the appellant the amount of
R26 714 740.99 which was then owing as at 30 June 2016, as
follows:
(a) the sum of
R22 000 000 on 17 August 2016;
(b) the collateral
management charges for July 2016 on the date of signature of the
agreement.
(c) twenty three monthly
instalments of R236 348.32 commending on 1 September 2016, and
(d) the outstanding
balance remaining as at 1 August 2016, on or before 1 August 2018.
[18]
The applicant’s attorneys of record drafted a written agreement
confirming these terms, for signature by the respondent.
When the
applicant requested the respondent for signature of the payment plan
and security to be forwarded by the related companies,
in an email
dated 25 July 2016 (“NH20”) the respondent’s
attorneys of record stated that the applicant’s
request was
being attended to but they were still waiting for the respondent’s
annual financial statements and reports from
the respondent’s
auditors. The respondent never disputed the debt and its quantum.
[19]
The respondent admits signing the certificate of balance on 8 July
2016 and avers that its sole member, George Charalambus,
unwittingly
signed the certificate of balance believing it to be correct, without
checking its correctness due to work pressure
and that the
applicant’s members of staff were also putting pressure on him
to sign. In the premises, the respondent denies
being indebted to the
applicant in any amount claimed.
[20]
The respondent alleges that it only became aware of the overcharging
errors, carrying cost, interest, CMA cost and storage
costs on 5
August 2016 alternatively when the applicant instituted the
liquidation application proceedings on 13 August 2016. On
30 August
2016 the respondent declared a dispute to the debt.
[21]
The respondent claims to have as from 7 September 2015 to 10 August
2016, paid a total sum of R24 770 432.38 to the
applicant
for the amount of wheat released to the respondent in terms of the
release instructions supplied by the applicant. In
actual fact,
according to the respondent, it has overpaid the applicant by an
amount of R20 414 263.90.
[22]
The respondent seeks to stay the liquidation application proceedings
on the grounds that it disputes the debt and seeks to
refer it for
arbitration. The respondent contends that it was, therefore, not open
for the applicant to launch the liquidation
application proceedings.
The respondent avers that the dispute between the parties has to be
dealt with following the arbitration
procedures.
[23]
The respondent states that for its claim the applicant relies on
three agreements (“NH3.1”, “NH3.2”
and
“NH3.3”) and claims an amount collectively against the
respondent. According to the respondent agreements, “NH3.1
and
NH3.2 incorporate the provisions of SAGOS and the agreement “NH3.3”
incorporates the provisions of the Grain and
Feed Trade Association
(GAFTA) agreements. In terms of both SAGOS and GAFTA agreements any
dispute between the parties shall first
be resolved by way of a
dispute resolution procedure and arbitration (clause 15.1 of SAGOS
and 21 (b) of SAFTA).
[24]
The respondent contends that the applicant has failed to comply with
the peremptory provisions of s 346(4A) of the 1973
Companies Act
which
require an applicant for a winding-up order to furnish a copy
of the application to certain parties, including the company’s
employees and the South African Revenue Services. As a
consequence, the respondent calls for the dismissal of the
liquidation
application with costs on the ground of non-compliance
with the peremptory provisions of s 346(4A)(a) of the 1973
Companies
Act read
with the provisions of
s 25
of the
Close Corporations Act 69
of 1984
. The applicant in its submission argues that there has been
compliance with the provisions of s 346(4A) of the 1973
Companies
Act. The
returns of service are attached to
s 346(4A)
affidavits by
Damian Bond of Straus Daly Attorneys and Hugo van Heerden of Hayes
Incorporated, the applicant’s attorneys
of record.
[25]
The respondent, further, asks that the three following procedural
issues be determined at the outset:
(a) A ruling that the supplementary
founding affidavit by the applicant is regarded as
pro non
scripto
;
(b) The striking out of various
paragraphs in the applicant’s replying affidavit read with the
supplementary founding affidavit;
(c) Leave should be granted to the
respondent to file a supplementary affidavit pursuant to the
respondent receiving confirmation
that the issues should be
arbitrated.
[26]
I propose to first deal with the preliminary issues relating to the
counter application (referral of the matter for arbitration),
non-compliance with peremptory provisions, and procedural issues
relating to the filing of more than three sets of affidavits.
(a)
Preliminary Issues
(i)
Arbitration
[27]
The respondent contends that the dispute between the parties has to
be dealt with following the arbitration procedures. For
this
contention, the respondent relies on the provisions of SAGOS and
GAFTA agreements. Both clauses 15.1 of SAGOS agreement and
21(b) of
GAFTA agreement provide that neither party to these agreements or any
person claiming under either of them shall bring
any action or other
legal proceedings against the other in respect of such dispute, or
claim until such dispute or claim has first
been heard and determined
by the arbitrators. In the light of the foregoing, the respondent
argues that it is not open for the
applicant to launch these
proceedings without exhausting the remedy of arbitration first. The
respondent therefore contends that
the applicant is not properly
before court.
[28]
It is common cause that the applicant never disputed its indebtedness
to the applicant before the institution of the liquidation
application proceedings. Instead, the respondent admitted its
liability to the applicant and confirmed that the balance owed, as
at
31 May 2016, was due and payable by it to the applicant by signing
the certificate of balance (“NH5”). Also the
respondent
admitted its liability in a letter (“NH6”) it addressed
to Janet Chattiar, an employee of the applicant,
in response to her
request for payment of the admitted balance. In an effort to reach
agreement on how the payment for the admitted
balance would be made
and to secure the respondent’s indebtedness to the applicant,
the parties held several meetings during
July and August 2016.
[29]
With the exception of claims, “NH3.1” and NH3.2” a
dispute with regard to contract AM 16-5-0035, concluded
on 3 February
2016 between the parties, was declared and referred for arbitration
on 28 October 2016. Under this agreement the
applicant never released
any wheat to the respondent and as a result no invoices were issued
to the respondent in this regard.
The liability of the respondent in
this regard arises from the risk it had with regard to the loss or
theft of wheat transferred
to Prograin Company. However, in respect
of the other two contracts, “NH3.1” and “NH3.2”,
the debt had
been established and admitted by the respondent, and
therefore, there was no dispute to refer for arbitration. Inevitably,
the
respondent’s counter application falls to be dismissed with
costs.
[30]
However, the respondent contends that the applicant cannot deal with
the matter in a piecemeal fashion. On one hand, instituting
liquation
proceedings and on the other hand, it is required to arbitrate on one
particular contract. According to the respondent
the applicant’s
acceptance that the contract “NH3.3” be referred to
arbitration supports the respondent’s
counter application that
the matter be stayed pending the finalisation of the arbitration
procedure in respect of all contracts
contended for by the applicant.
According to the respondent liquidation proceedings have a negative
effect on the respondent’s
business. In my view the contention
by the respondent in this regard does not hold any water since the
contract referred to arbitration
does not form part of the subject
matter of liquidation application, and in respect of the other two
contracts the applicant’s
claim is undisputed and therefore,
there is nothing further arbitration to decide. See also
Altech
Data (Pty) Ltd v MB Technologies (Pty) Ltd
1998 (3) SA 748
(W) at
754
.
(ii)
Non-Compliance with Peremptory Provisions
[31]
The respondent alleges that the applicant in serving the notice of
its intention to institute liquation proceedings it did
not comply
with the peremptory provisions of
s 346(4A)
read with s 25 of the
Close Corporation Act 69 of 1984 and Rule 6(5)(a) of the Uniform
Rules of Court in that, in particular, it
failed to serve the notice
on the respondent’s employees. For that reason, it has been
argued on behalf of the respondent
that the liquidation application
be dismissed on that ground alone. However, it does not advance
reasons for such allegation. On
the other hand, according to the
applicant, procedurally, all the requirements have been satisfied. In
support of its contention
the applicant relies on the affidavits by
Damian Bond and Hugo van Heerden.
[32]
In his affidavit, Bond states that in compliance with s 346(4A)(a)(i)
and (ii) the applicant caused a copy of the application
to be served
on any trade union representing the employees of the respondent. The
respondent’s employees, in turn, advised
the sheriff that there
was no trade union representing them. Bond personally served a copy
of the application on the South African
Revenue Service. The Master
of the High Court and the respondent were also duly served.
[33]
Van Heerden in his further affidavit in terms of s 346(4A) of the
1973
Companies Act, regarding
service of the application on the
employees and trade union, states that the application was served on
the respondent’s employees
at Broad Mill Park, 6 Mountain
Close, Broadlands, Durban, KwaZulu-Natal. When the respondent in its
opposing affidavit denied that
such service had taken place, the
sheriff served a copy of the Notice of Motion on the respondent’s
employees at 110 South
Coast Road, being the respondent’s
physical address. On enquiring whether such employees were members of
a trade union, the
sheriff established that they were members of AMCU
and he served a copy of the notice on the representative of the said
trade union,
one Mr Sanjay. Copies of the returns of service on the
respondent’s employees and the representative of the trade
union are
annexed to the affidavit, marked “HVH1” and
“HVH2” respectively.
[34]
In
EB
Steam Co (Pty) Ltd v Eskom Holdings Soc Ltd
2013
(2) SA 526
(SCA) para 17 – 19 the Supreme Court of Appeal was
called upon to decide whether
s 346(4A)(a)
was peremptory and it held
that the requirement to furnish the application to the person
specified in
s 346(4A)
was peremptory, but the methods stipulated in
s 346(4A)(a)(ii)
for furnishing the application to employees were
merely directory, alternative effective means may be adopted were
those stipulated
in the section would be impossible. In other words,
the methods for furnishing employees with the application papers as
set out
in
s 346(4A)(a)(ii)
are no more than guides. If other more
effective means are adopted and reflected in the affidavit filed in
terms of
s 346(4A)(b)
then, provided the court is satisfied that the
method adopted was reasonable likely to make the application paper
accessible to
the employees, there has been compliance with the
section. To ‘furnish’ the application means to make it
available
in a manner that is reasonably likely to have it accessible
to the named persons. It is not a requirement that the papers, as a
matter of fact, came to the knowledge of those persons. It follows
that when the court is satisfied that the method adapted by
the
applicant to furnish the application paper to the employees, there is
no reason to refuse a winding-up order, whether provisional
of final,
merely because they were not furnished to the employees in one of the
ways indicated in
s 346(4A)(a)(ii).
Nor should the court refuse an
order merely because it is not satisfied that the application papers
have come to the attention
of all employees. That is not what the
section requires.
[35]
In the circumstances the means employed in the present case as set
out in the affidavits of Bond to furnish the notice of motion
to the
named person, more particularly, the respondent’s employees and
the trade union, were in, my view, satisfactory. Accordingly,
I find
that there was compliance with the provisions of
s 346(4A)(a)(ii).
(iii)
Filing more than three sets of Affidavits
[36]
In the present case, seven sets of affidavits have been filed. With
regard to the number of affidavits that may be filed in
an opposed
application the court in
Standard Bank of SA Ltd v Sewpersadh and
another
2005 (4) SA 148
(C) at 149 held:
‘
The ordinary rule is that three
sets of affidavits are allowed, i.e. supporting affidavits, answering
affidavits and replying affidavits.
The court may in its discretion
permit the filing of further affidavits:’
[37]
The court will exercise its discretion to admit further affidavits
only if there are special circumstances which warrant it
or if the
court considers such a cause advisable. There must furthermore be
proper and satisfactory explanation as to why the information
contained in the affidavit was not put up earlier and what is more
important, the court must be satisfied that no prejudice is
caused to
the opposite party that cannot be remedied by an appropriate order as
to costs. See also
Dickinson
v South African General Electric Co. (Pty) Ltd
1973
(2) SA 620
(A); Rule 6 (5)(e) of the Uniform Rules of Court.
[38]
The court’s discretion to admit further affidavits must be
exercised judicially upon a consideration of the facts of
each case
and basically it is a question of fairness to both sides. See
Milne,
NO v Fabric House (Pty) Ltd
1957
(3) SA 63
(N). However, a court will only exercise its discretion in
this regard when there is good reason for so doing. See
Hano
Trading CC v J R 209 Investments (Pty) Ltd and another
2013
(1) SA 161
(SCA). The lack of prejudice has been identified as one of
the prime considerations in the exercise of the court’s
discretion
in favour of the applicant. See
Business
Partners Ltd v World Focus 754 CC
2015
(5) SA 525
(KZP) at 528.
[39]
As indicated above, in this case the parties have filed more than
permissible affidavits. After the respondent had filed the
answering
affidavit, the applicant without the leave of court filed a
supplementary founding affidavit together with its replying
affidavit. The respondent contends that the applicant’s
supplementary founding affidavit ought to have been regarded as
pro
non scripto
.
The applicant avers that by its supplementary founding affidavit it
intended to correct errors in its founding affidavit. In its
replying
affidavit, according to respondent, the applicant has simply
incorporated the allegations made in the supplementary affidavit
and
relied on the same to cure defects in its founding papers.
[40]
In
Transvaal Racing Club v Jockey Club of South Africa
1958
(3) SA 599
(W) at 602A-B William J said:
‘
If
a party to an application files and serves certain affidavits and
before the other party has replied thereto he files additional
affidavits, either because he had not had time to complete the whole
of his affidavits before a fixed time or because new matter
has been
discovered or for any other good reason, I do not think a Court
would reject such affidavits solely upon the basis
of any alleged
rule of practice against the filing of more than one set of
affidavits.
’
[41]
On conclusion of the replying address, at the opposed application
hearing on 17 February 2017, the applicant’s counsel
handed up
a copy of another of applicant’s further affidavits. The
respondent argued that such an affidavit should not be
allowed and if
it would be allowed the respondent should also be offered an
opportunity to respond thereto. With the leave of court,
it is open
for the applicant to correct or amend its founding affidavit, if it
so desires, by means of a supplementary affidavit.
However, if the
applicant files such supplementary affidavit without having obtained
the leave of court, it must ask the court
for authorisation. In the
present case, before filing a supplementary affidavit the applicant
did not obtain the leave of the court
to do so. Nor did it ask for
condonation. There is nothing to suggest that the respondent was
prejudiced by the applicant’s
filing of a supplementary
founding affidavit. If there was any prejudice caused to the
respondent, it was caused by allowing the
respondent to respond to
the applicant’s supplementary affidavit, dated 15 February
2017.
[42]
The consideration of justice and equity have in the present case
dictated that the respondent should be given an opportunity
to
respond to the applicant’s recent further affidavit, and the
respondent availed itself of such opportunity on 27 March
2017. The
circumstances of this case are such that the need exists to ensure
that parties are afforded an ample and equal opportunity
to
adequately present their cases so that both will have proper
ventilation of their cases and which will enable this court to
decide
the real issues between the parties. See also
Bader and another v
Weston and another
1967 (1) SA 134
(C) at 138
.
However,
certain allegations that do not support the applicant’s case
should be disregarded.
(b)
Issues
[43]
The facts of this case raise the following issues:
(i) whether the applicant
has established that it is the creditor of the respondent;
(ii) whether the
respondent
bona fide
disputes the debt on reasonable grounds;
and
(iii) whether the
respondent is commercially insolvent.
The
onus is on the applicant to establish that it is a creditor with
locus standi
to bring the application. See
Common Wealth
Shippers Ltd v Myland Properties (Pty) Ltd
1978 (1) SA 70
(D) at
71 – 72. The creditor must show that the unsatisfied demand
against the respondent is for payment of a due debt of
at least R100.
The amount ‘due’ means that it must be due and payable.
See
Barclays Bank (DCO & O) v Riverside Dried Fruit Co (Pty)
Ltd
1949 (1) SA 937
(C) at 948.
(i)
Is the Applicant the Creditor for the Respondent
[44]
A bald allegation that the applicant is a creditor for a particular
amount, without a description of the cause of the indebtness,
is
insufficient. See
Du
Preez v Boetsap Stores (Pty) Ltd
1978
(3) SA 560
(NC). For its liquidation application the applicant relies
on the certificate of balance the sole member of the respondent
signed
on 8 July 2016 and in terms of which the respondent admitted
its liability to the applicant and affirmed that the amount of
R26 405 500.99,
stated therein as the balance owing as at
31 May 2016, was due and payable by the respondent to the applicant.
The respondent denies
that the applicant is a creditor in the amount
of R27 043 190.75, which the applicant claims, being the
balance of the
purchase price, plus interest and charges for wheat
the applicant sold and delivered to the respondent, and avers that it
signed
the certificate of balance in error.
[45]
For the respondent to succeed on a defence of a mistaken belief, such
mistake must be
iustus
.
The respondent must prove that its mistake was due to a
misrepresentation, whether innocently or fraudulently, by the
applicant.
See
George
v Fairmed (Pty) Ltd
1958
(2) SA 465
(A) at 471A – D
.
[47]
On 6 July 2016 Janet Chattiar, an employee of the applicant,
forwarded an email (“NH13”) to the respondent’s
sole member, and to which a statement (spread sheet), showing all
transactions from the commencement of trade between the applicant
and
the respondent and listing all payments received and invoices up to
31 May 2016 (“NH15”), were also attached. This
spread
sheet was forwarded to the respondent together with statement showing
the computation of the balance owing, and giving the
details of the
invoices making the sum owing. In the email Janet had invited Mr
Charalambus to check the attached statement and
confirm that he
agreed with the outstanding balance reflected thereon. The
certificate of balance itself had an inscription on
it that both
parties had audited it, meaning that they had checked it against
their own records and the calculations and satisfied
themselves that
all was correct. Mr Charalambus took time to consider those documents
and he only returned the signed confirmation
of balance (“NH5”)
to the applicant after two days, on 8 July 2016.
[48]
Mr Charalambus claims that at the time he signed the certificate of
balance he was under immense pressure in various work commitments
and
the applicant’s member of staff were also putting pressure on
him to sign the document. As a consequence, he unwittingly
and in
trust of Mr Hannan, the applicant’s financial officer, signed
the document on 8 July 2016 without verifying the correctness
thereof. He then emailed it back to the applicant. Mr Charalambus
goes on to allege that “NH5” is a fallacy since no
audit
had been done by either party. The parties did not compare the
alleged audits at all. The respondent misrepresented to the
respondent as to the amount owed.
[49]
It is highly improbable that Mr Charalambus an experienced and astute
businessman would simply sign the document, confirming
the
correctness of the balance then owing, without having satisfied
himself that it was correct. The respondent had twenty two
staff
members and two of whom (Prishani and Tashni) in Charalambus version
were dealing with this account. In addition, the respondent
had
auditors and attorneys attending to its financial affairs and who
were aware of this debt. If Mr Charalambus was as busy as
he claims,
he could reasonably have delegated this task to any of them. The
respondent was in receipt of monthly statements by
the applicant
setting out the details of purchases and, payments made as well as
the balance due. Apart from that, the respondent
was in possession of
the records in terms of sale agreements as to the existence of such
debt including delivery notes and invoices
of wheat released. In the
circumstances, a mistaken belief and trust that what Mr Hannan (the
applicant’s financial officer)
was saying was correct could not
have arisen at all. The applicant specifically asked the responded to
look into its own records
and verify whether the amount stated on the
certificate of balance was correct and due. The evidence, therefore,
shows that the
applicant in this regard did not make any
misrepresentation to the respondent whether innocently or
fraudulently, by which a reasonable
man in the position of Mr
Charalambus (the sole respondent’s member) would have been
misled an acted upon it. Nor has the
respondent’s sole member
demonstrated as to how the applicant’s members of staff
pressurised him to sign the certificate
of balance. The certificate
itself stated that the parties had both audited it. This also makes
it difficult for me to believe
Mr Charalambus allegation that in the
circumstances he simply signed the certificate without satisfying
himself of the correctness
of the contents thereof, and his version
in this regard is not only implausible but also improbable.
Accordingly, it falls to be
rejected as such. Each party had been
afforded an opportunity to go through all of the invoices, released
instructions and the
monthly statements in order to verify the amount
due.
[50]
According to the applicant Mr Charalambus asked for a split of the
accounts, not because he disputed the amount owing, as he
wanted to
see how much of the accounts related to wheat only and how much
related to ancillary charges i.e. interest, carrying
cost; storage,
CMA charges and penalties, which the applicant was entitled to charge
in terms of each of the sale agreements. The
applicant denies that
the respondent had at any stage asked for the provision of invoices
or proof of delivery as the amount and
existence of the debt had been
agreed between the parties. The only reason for the meetings was to
discuss how and when the respondent
would make payment of its
indebtedness, which was then long overdue.
[51]
The respondent never disputed the debt and the quantum thereof. This
is also evident from the conduct of the respondent’s
sole
member before and after the signing of the certificate of balance. In
response to the demand for payment addressed to the
respondent by
Janet
,
the applicant’s debtors clerk, Charalambus in an email dated 5
July 2016 (“NH6”) admitted liability and
committed
the responded to paying the admitted balance, once it had received
its funds from Prograin. However, the respondent denies
the
correctness and validity of “NH6” notwithstanding the
fact that the respondent had drafted such document. After
the signing
of the certificate of balance several meetings were held between the
parties in an effort to make arrangements for
a payment plan and
provision of security of the debt. In settlement of its indebtedness
to the applicant, the respondent in July
2016 orally offered to pay
to the applicant an amount of R22 000 000 and to liquidate
the balance in twenty three months.
All this, militates against the
respondent’s allegation that based on the misrepresentation by
Mr Hannam of the applicant,
it sought to settle the purported
indebtness in good faith.
[52]
Nor had the respondent signed the certificate of balance under
protest, without admitting liability on the grounds that due
to the
work pressure and the pressure the applicant’s members of staff
exerted on its sole member to sign the certificate
of balance coupled
with the applicant’s alleged failure to make all the necessary
accounting information available to it,
its sole member had been
unable to verify the correctness of the amount specified in the
certificate of balance as owing, due and
payable by the respondent to
the applicant before signing the certificate. See also
Helderberg
Laboratories CC and others v Sola Technologies (Pty) Ltd
2008
(2) SA 627
(C).
[53]
The debt upon which the applicant’s
locus
standi
to seek liquidation is founded, is the payment of the sum of
R27 043 190.76 by the respondent. The computation of that
sum is reflected in annexure “NH4” to the applicant’s
founding affidavit and annexure “NH21” to the
applicant’s
supplementary founding affidavit. According to the applicant the sum
of R27 043 190.76 relates only
to the wheat it supplied to
the respondent. The applicant avers that the last payment it received
from the respondent was made
on 8 April 2016.
[54]
Up until the institution of the liquidation application proceedings
the existence of the debt and the
quantum
thereof were common cause between the parties. During all the
correspondence and meetings between the parties in July and August
2016, the respondent accepted that it owed the plaintiff the sum of
R26 405 500.99 and it never questioned this. Respondent
conceded that the amount the applicant was then claiming, was due and
sought time to pay it. The respondent claims to have only
become
aware of the overcharging errors, carrying costs, interest, CMA cost
and storage costs on 5 August 2016 alternatively when
the applicant
instituted the liquidation application on 13 August 2016. On the same
day, the respondent alleges that it requested
the applicant to
provide invoices and proof of delivery so that the debt could be
established. It also asked the applicant to split
the account into
wheat price and costs. The respondent further contends that the
applicant does not have supporting documents to
the tune of
R27 043 190.76. The applicant denies that the respondent
had ever asked it for the invoices and proof of
delivery and states
that it was only the respondent’s attorneys who, after the
applicant had given notice of its intention
to bring a liquidation
application, in the letter dated 5 Augusts 2016 the respondent
alleged that there were errors and overcharges
on the account and
that the claim was not properly quantified. They then asked for the
documentation including invoices and delivery
notes so that their
accountants could conduct an audit.
[55]
It is not in dispute that on 8 July 2016 the respondent signed a
certificate of balance in terms of which it admitted liability
to the
applicant in respect of the balance stated therein and accepted that
it was correct, owing, due and payable by it to the
applicant. Also,
the computation of the applicant’s liquidated claim against the
respondent is reflected in annexures “NH4”
and “NH21”
respectively to the applicant’s papers. Therefore, it could not
be true that the applicant has not
produced any supporting document
for its claim. Further, on the respondent’s version the
applicant furnished it with all
the relevant release instructions
pertinent to the agreements on which the applicant relies to prove
its claim (respondent’s
answering affidavit para 38.4). In
addition, the respondent’s attorneys in the letter, they
addressed to the applicant on
25 July 2016, did not dispute the
existence of the debt and its
quantum
.
Instead, they undertook to pay the amount then due on receipt of
certain documentation from the respondent’s auditors.
[56]
The respondent denies that it owes the applicant the amount of
R27 043 190.76 and avers that it has overpaid the
applicant
by an amount of R20 414 263.90. The respondent alleges that
in the period between 7 September 2015 and 10 August
2016 it paid the
applicant the total sum of R24 770 432.38 for the amount of
wheat the applicant released to it. According
to the respondent the
total quantity of wheat the applicant sold and delivered to it, is
1263.795 metric tons, with a total purchase
price of R4 355 808.00.
However, the respondent falls short of explaining how it happened
that it paid the applicant
the amount which exceeded the amount it
owed to the applicant by such a far amount.
[57]
Notwithstanding all this, the respondent on 8 July 2016 signed a
certificate of balance confirming that outstanding amount
stated
therein was then owing, due and payable by it to the applicant, after
having been afforded an opportunity to verify such
amount. On 20 July
2016 the respondent once again offered to make a down payment of
R22 000 000 and settle the balance
by twenty three monthly
instalments. Respondent’s attorneys on 25 July 2016 never
brought to the attention of the applicant
that instead of owing the
applicant the respondent had in fact overpaid the applicant by
R20 414 263.90. If it is true
that this was the position
the respondent’s attorneys would reasonably be expected to have
raised it with the applicant.
At some stage, in its papers the
respondent alleges that the applicant overcharged it by more than
R46 000 000 but it
did not realise this, and inexplicably
signed the document confirming that the balance was correct. This, in
my view, is in sharp
contrast with the claim that the respondent has
overpaid the applicant by R20 414 263.90.
[58]
However, four payments, dated 7 September 2015, 18 September 2015 and
17 October 2015 respectively, totalling R4 550 000.00
fall
outside the ambit of the applicant’s claim, as they fall
outside the period of the three agreements upon which the applicant’s
claim is based. The amount should therefore, be subtracted from the
amount the respondent allegedly paid. If the amount the respondent
allegedly paid is deducted from the amount, R26 405 500.99,
which was as at 31 May 2016 outstanding, this leaves the
balance of
R6 185 068.61, after deduction of the amount of
R4 550 000.00, falling outside the ambit of the
applicant’s
claim. Even if such amount is added back, on the respondents version,
it has paid the amount of R24 770 432.38
which still falls
short of the amount claimed R27 043 190.76, by
R2 272 758.38.
[59]
In addition, the respondent contends that the applicant should have
invoiced it for 12,706.867 tons as opposed to 19,690,896
metric tons
as reflected in annexure “NH21”. If that is multiplied by
R3 773, it give the total of R74 293 750.60.
The
respondent claims to have paid its total amount of R60 751 905.91,
leaving the balance of R13 541 844.69
which is according to
the respondent could have been more than sufficient to cover any
other incidental costs levied by the applicants
regarding storage
costs, interest etc. However, the respondent does not give the amount
of incidental costs and it is not clear
in respondent’s version
whether such costs were indeed settled.
[60]
The quantity of 7078.530 metric tons at R3 611.55 per metric
tons which equals to R25 564 465.02 was according
to the
respondent never received by Prograin Mill, but the applicant
invoiced the respondent for it. In addition, the applicant
alleges
that an amount of 4287.643 tons of wheat was stolen from Prograin
silo, which according to the respondent could only hold
1,960 tons.
In the respondent’s version, the amount of the purported debt
in respect of misappropriated wheat is R27 043 190.76.
[61]
However, it is common cause that the applicant instituted an action
against
Prograin
for theft of wheat. It could not therefore claim the misappropriated
wheat from the respondent. The applicant’s version,
in this
regard, is that the amount for the misappropriated wheat was not
taken into account when computing the amount owing, due
and payable
by the respondent to the applicant. This finds support in the fact
that the applicant had instituted an action against
Prograin for the
recovery of the amount for the misappropriated wheat.
[62]
At this junction what is essential to determine, is whether or not
the respondent is indebted to the applicant. If it is indebted,
whether the amount owed is at least R100, and the payment of which is
due. See
Body Corporate of Fish Eagle v Group Twelve Investments
(Pty) Ltd
2003 (5) SA 414
(W) at 428B – C. If the amount
owed is at least R100, that is sufficient to establish that the
applicant is a creditor to
the responded. The respondent claims to
have paid the total sum of R24 770 432.38 and this amount
still falls short of
the amount claimed. According to above
calculations the difference between the amount claimed and the amount
the respondent has
allegedly paid, exceeds R100 by far. For now, it
is not necessary for this court to adjudicate the amount on each and
every claim.
The debts will later be referred to the liquidators who
will, in turn, determine the existence of such debts and actual
quantum
thereof. In my judgment, the applicant has
prima facie
established that it is a creditor to the respondent in an amount in
excess of R100.
(ii)
Bona fide
Dispute of Debt on Reasonable Grounds
[63]
The respondent disputes its indebtedness to the applicant in any
amount claimed. The respondent may only avoid liquidation
on this
basis if it can show that it disputes the debt both
bona
fide
and
on reasonable grounds. See
Hülse
– Reuter and another v HEG Consulting Engineers (Pty) Ltd (Lame
and Fey NNO Intervening)
1998
(2) SA 208
(C)
.
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 the
winding-up is not designed for the resolution of disputes
as to the
existence or non-existence of a debt. See
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956
(2) SA 346
(T) at 347 – 348;
Kalil
v Decotex (Pty) Ltd and another
1988
(1) SA 943
(A) at 980.
[64]
The rule that winding-up proceedings should not be resorted to as a
means of enforcing payment of a debt, the existence of
which is
bona
fide
disputed on reasonable grounds, is part of the broader principle that
the court’s processes should not be abused. The rule
is
generally known as the “
Badenhorst
rule”
,
after one of the leading cases on the subject. See
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
see
at 347H – 348C.
[65]
In order to succeed on the ground that it disputes the applicant’s
debt
bona
fide
and
on reasonable grounds, the respondent must genuinely wish to contest
the claim and genuinely believe that it has reasonable
prospects of
success. According to the applicant the respondent’s dispute is
a fictitious one, manufactured in order to avoid
liquidation.
[66]
I propose to start by first defining the meaning of, ‘
bona
fide
disputed on reasonable grounds’. ‘
Bona
fide
’
relates to the respondent’s subjective state of mind –
that it believes its factual statement to be true, while
‘disputed
on reasonable grounds’ requires that objectively the defence
raised be supported by the facts alleged. Bald
allegations lacking in
particularity would not satisfy the requirement, and might even
indicate that the respondent is not
bona
fide
.
See
GAP
Merchant Recycling CC v Goal Reach Trading 55 CC
2016
(1) SA 261
(WCC) at 268I/J – 269C and 269G – I.
Bona
fide
actually means to allege facts which, if proved at a trial, would
constitute a good defence to the claims made against the respondent
close corporation.
[67]
Bona
fides
have to do with the belief on the part of the litigant as to the
truth or falsity of his factual statements. It is related to the
state of the defendant’s mind. See
Standard
Bank of SA Ltd v EL-Nadaa F and another
1999
(4) SA 779
(W) at 784G – 785B. In
Breitenbach
v Fiat SA (Edms) Bpk
1976
(2) SA 226
(T), Colman J stated that the requirement of
bona
fides
is separate from the requirement that the defendant ‘discloses
fully the nature and grounds of the defence and the material
facts
relied therefor.’
[68]
The
GAP Merchant
case at 269 para 26 Rogers J said the
following:
“
Bona
fides
relates
to the respondent's subjective state of mind, while reasonableness
has to do with whether, objectively speaking, the facts
alleged by
the respondent constitute in law a defence. The two elements are
nevertheless interrelated because inadequacies
in the statement of
the facts underlying the alleged defence may indicate that the
respondent is not bona fide in asserting those
facts.
”
[69]
The respondent has to satisfy me that the grounds which it advances
for disputing the applicant’s claims are not unreasonable.
To
do that it is not necessary for it to adduce on affidavit, or
otherwise, the actual evidence on which it would rely, it is not
required to establish on the balance of probabilities that it will
succeed on the action the applicant might bring to enforce a
claim as
in the summary judgment proceedings, where a defendant who resists
such an application is required by an affidavit to
satisfy the court
that he has a
bona
fide
defence to the action and to disclose fully in his affidavit or
affidavits the material facts upon which he relies for such defence.
Where such facts are not within its personal knowledge, it is enough
for it, to set out in the affidavit the basis on which it
makes such
allegations of fact, provided it does not do so badly, but with
adequate particularity. See
Hulse-Reuter
case at
219F – 220C
.
But, it
is only sufficient for it to allege facts which if proved at a trial,
would constitute a good defence to the applicant’s
claim.
[70]
The statement of material facts should simply be sufficiently full to
persuade the court that what the defendant has alleged,
if it is
proved at the trial, will constitute a defence to the plaintiff’s
claim. See
Breitenbach
case at
228B – E;
GAP
Merchant
case
para 24. Bald allegations lacking in particularity are unlikely to be
sufficient to persuade a court that the respondent is
bona
fide
.
[71]
The requirement of
bona
fides
is satisfied if the company genuinely wishes to contest the claim and
believes it has reasonable prospects of success. Lack of
bona
fide
will
usually go hand-in-hand with an intention to delay, which would in
turn indicate that the company is unable to pay its debts
and
militate with the exercise of the discretion in its favour. See
Orestisolve
(Pty) Ltd t/a Essa Investment Holdings (Pty) Ltd and another
2015
(4) SA 449
(WCC) at 450.
[72]
The
Badenhorst
rule states that a court will refuse an application for the
liquidation of the company where the company
bona
fide
disputes
the applicant’s claim on reasonable grounds. The first ground
on which the respondent disputes its indebtedness to
the applicant is
that it signed the certificate of balance in error. I have adequately
dealt with this part above, and I propose
to reserve my pronouncement
on it until later in the judgment.
[73]
The second ground is that the applicant seeks to introduce three
additional agreements of sale in the supplementary founding
affidavit
with reference numbers AM15-5-0089, AM15-5-0104 and AM15-5-0121,
marked “NH10”, “NH11” and “NH12”
respectively. According to the respondent such averments by the
applicant should be regarded as
pro
non scripto
or be struck out. The applicant states that while it is true and
correct that since 2014 various agreements have been concluded
between the parties in terms of which the applicant sold and
delivered wheat to the respondent on credit in accordance with a
running account payable sixty days after invoicing. For its claim the
applicant relies on the three agreements, namely “NH3.1”,
“NH3.2” and “NH3.3”, respectively, which are
the subject of the liquidation application. According to the
applicant the sum of R27 043 190.76 relates only to wheat
supplied and invoices issued in respect of the agreements in
issue.
It does not relate to the sale contracts which were concluded between
2014 and September 2015 as they are not relevant to
this application
since the purchase prices of sales related thereto have been paid in
full.
[74]
The agreements in issue are those concluded on 5 October 2015,
bearing reference number AM016-5-0124 (“NH3.1”),
on 29
January 2016, AM16-5-0034 (NH3.2) and on 3 February 2016, AM-05-0035
(“NH3.3”) respectively. In terms of the
first agreement
3000 metric tons of Russian milling wheat was purchased and sold at
the contract price of R3 776.50 per metric
tons. In terms of the
second agreement 200 metric tons of Russian milling wheat was
purchased and sold at US$ 217 (United States
dollars) per metric ton
plus R180 port charge and R911.17 duty. In terms of the third
agreement 300 metric tons of Argentinian
milling wheat was purchased
and sold at a contract price of US$ 192 per metric ton plus R180 port
charge and R911.17 duty.
[75]
The respondent admits the conclusion of the agreements in question
between the parties in the period between 5 October 2015
and 3
February 2016, save the part performance by the applicant that it
would deliver by way of substitution 723.698 tons. However,
the
respondent denies the sale of 3000 tons of Russian wheat took place
between it and the applicant, but the applicant sold such
quantity of
wheat to a third party, Sesifikile. Such third party substituted the
respondent as the purchaser. The respondent had,
therefore, no
obligation in terms of this agreement. According to the respondent an
amount of R11 329 500.00 must be
deducted from the
purported claim by the applicant.
[76]
The respondent avers that in respect of the wheat transferred into
the silos at Prograin premises in respect of “NH3.2”
under the control of Drum Commodities Ltd (Drum) in terms of
Collateral Management Agreement (CMA) Drum is liable to the applicant
in respect of any loss. However, in respect of other two agreements
the risk passed onto the respondent on receipt of the stock.
Respondent would receive stock once Drum had given a release
instruction.
[77]
The third ground on which the respondent disputes its debt to the
applicant is that the applicant’s invoices do not correspond
with the release instructions the applicant gave to Drum. Therefore,
the respondent avers that the applicant relies on a debt which
is not
due and payable.
[78]
The fourth ground is that on 1 July 2016 the applicant represented to
the respondent that the total amount of wheat held by
Drum in
Prograin’s silo was 4501.438 metric tons. According to the
respondent that was a fraudulent misrepresentation since
the silos at
Progrian could only hold a maximum capacity of 1,960 metric tons. The
respondent further avers that Russian wheat
in the tonnage of
3707.700 was never released to it but the applicant claimed interest
thereon, which is not entitled to.
[79]
In the fifth ground, the respondent contends that annexure “NH21”
reveals that the applicant has overcharged it
because the total
tonnage invoiced is greater than the total tonnage released out by
Vallis Drum out in terms of the CMA. According
to the responded it
was overcharged for 573.08. The respondent bases such allegation on
the fact that the tons were taken back
to the CMA after having been
released and invoiced. The respondent states that the tons should
have gone to Prograin instead. In
the version of the applicant the
respondent was correctly invoiced for the amount of wheat released,
as is reflected in annexure
“NH24”.
[80]
Also, the respondent alleges that the applicant had in certain
instances double charged it. Annexure “NH25” indicates
that as early as February 2015 the applicant was overcharging it for
wheat and had received payment in the sum of R2 966 006.40
for wheat
it could not possibly have delivered.
[81]
On the whole the respondent’s sole member alleges that he
signed the certificate of balance in error without having verified
and confirmed the correctness of the contents thereof. This creates a
dispute of fact and so as to the appropriateness of the invoicing
and
charging of the respondent for the wheat the applicant sold and
delivered to the respondent as well as the quantity of wheat
released
and delivered to the respondent on the instruction of the applicant.
[82]
When the application is opposed and factual disputes are raised, the
question is whether on the evidence contained in all the
affidavits a
prima facie
case for the grant of such order has been
established on a balance of probabilities. See
Kalil v Decotex
(Pty) Ltd
1988 (1) SA 943
AD at 976 – 979;
Paarwater v
South Sahara Investments (Pty) Ltd
[2005] 4 All SA 185
(SCA). In
this event, Corbett JA in
Kalil
case at 979 said:
‘
save
in exceptional circumstances, the Court should not accede to an
application by the respondent that the matter be referred to
the
hearing of
viva
voce
evidence. This does no lasting injustice to the respondent for he
will on the return day generally be given the opportunity, in
a
proper case and where he asks for an order to that effect, to
present oral evidence on disputed issues
.’
[83]
In
Ter
Beek v United Resources CC
1997 (3) SA 315
(C) at 336 the court decided that an application
might be decided on the affidavits if it is satisfied that there is
no real and
genuine dispute of fact; that the respondent’s
allegations are so far-fetched and untenable that they warrant
rejection merely
on the papers or that
viva
voce
evidence will not disturb the probabilities appearing from the
affidavits. In certain instances the denial by a respondent of a
fact
alleged by the applicant may not be such as to raise a real, genuine
or
bona
fide
dispute
of fact.
[84]
In an opposed application for provisional liquidation in order to
succeed in its claim the applicant must establish its entitlement
to
an order on a
prima
facie
basis, meaning that the applicant must show that the balance of
probabilities on the affidavits is in its favour. See
Kalil
case at
975J – 979F. Even if the applicant establishes its claim on a
prima
facie
basis, a court will ordinarily refuse the application if the claim is
bona
fide
dispute on reasonable grounds. See
Badenhorst
case at
347H – 348C. The onus is on the respondent to show that it
bona
fide
disputes the debt on reasonable grounds. See
Hülse
– Reuter and another
at
218D – 219 C.
[85]
However, the test for a final order of liquidation is different. The
applicant must establish its case on a balance of probabilities.
Where the facts are disputed, the court is not permitted to determine
the balance of probabilities on the affidavits and must instead
apply
the
Plascon-Evans
rule.
See
Paarwater
case,
para 4.
[86]
If there are genuine disputes of fact regarding the existence of the
applicant’s claim at the final stage, the applicant
will fail
on ordinary principles unless it can persuade the court to refer the
matter to oral evidence. The court cannot, at the
final stage, cast
an onus on the respondent of proving that the debt is
bona
fide
disputed on reasonable grounds merely because the balance of
probabilities on the affidavit favours the applicant. At the final
stage, therefore, the
Badenhorst
rule is
likely to find its main field of operation where the applicant, faced
with a genuine dispute of fact, seeks a referral to
oral evidence.
The court might refuse the referral on the basis that the debt is
bona
fide
disputed on reasonable grounds and should not be determined in
liquidation proceedings.
[87]
In the present case, the application before court is for a
provisional liquidation and this court must, therefore, confine
itself to it. In my judgment none of the issues in this matter cannot
be resolved on paper. This will become more evident in my
dealing
with such issues below. It is common cause that the respondent signed
a certificate of balance and in terms of which the
respondent
admitted its indebtedness to the applicant and confirmed that the
balance stated therein was then owing, due and payable
by the
respondent to the applicant. It is not in dispute that when Janet
Chattiar gave the certificate of balance to the respondent’s
sole member for signature, she requested such member to audit and
verify the correctness of the certificate of balance. Further,
the
respondent’s sole member was in possession of the records
relating to the release instructions and invoices issued by
the
applicant to it. In determining whether the applicant is the creditor
to the respondent above, it has been adequately demonstrated
that the
respondent’s allegation that it signed the certificate of
balance in error is so far-fetched that it warrants to
be rejected
out rightly on the papers.
[88]
While it is true that the applicant has made reference to certain
agreements, it relies on three agreements for its claim,
not on such
additional agreements as the respondent claims. In its further
affidavit the applicant has referred to the following
agreements:
AM15-5-0089, AM15-5-0121 and AM15-5-0124 which do not relate to the
amount claimed, R27 043 190.76. Therefore,
reference to
such agreements in the papers is regarded
pro
non scripto
,
as having no bearing on the amount claimed. That the applicant only
relies on the three agreements, outlined above, is quite evident
from
the fact, which is common cause, that the settlement negotiations
were only in respect of annexure “NH3.1”, “NH3.2”
and “NH3.3”. However, agreement “NH3.3” was
referred to arbitration by the parties for determination on
28
October 2016.
[89]
On that the invoices do not correspond with the release instructions,
the applicant states that it never released any wheat
under contract
AM16-5-0035 and accordingly no invoices were issued to the responded
under such contracts. In any event, the respondent
is expected to pay
on the invoices issued, and such invoices must tally with the
released instructions. Both parties are in possession
of such records
“NH16” and “NH21”. Reconciliation showing
both direct deliveries to the respondent and
the CMA releases is
contained in annexure “NH24”. The actual amount owed will
any way be determined by the liquidators.
It is also common cause
between the parties that under AM16-5-0035 relating to 3000 metric
tons of Argentinian milling wheat, concluded
on 3 February 2016, the
applicant did not deliver any wheat to the respondent in this regard.
[90]
According to the applicant the debt of R27 043 190.76 does
not, therefore, relate to the sale contract AM16-5-0035.
This sale
contract is only relevant to the issue of the misappropriated wheat,
in respect of which the respondent bore the risk
of loss. The value
of the misappropriated wheat in the amount of R17 862 228.85
does not form part of the amount claimed,
which according to the
applicant has been due, owing and payable since 31 July 2016 and
which the respondent’s is unable
to pay. On 8 August 2016 the
applicant instituted an action against the respondent for the
recovery of the value of the misappropriated
wheat. The content was
by consent between the parties referred to arbitration on 28 October
2016, as indicated above.
[91]
With regard to the quantity of 4501.438 which Mr Hamman purported to
have been stored in Prograin`s silos, the applicant states
that the
wheat sold was not released in one tranche but bit by bit to the
respondent in accordance with the balance outstanding
on the
respondent’s credit limit with the applicant. The respondent
denies that the quantity of wheat as contended for by
the applicant
could possibly have been stored at Prograin’s silos since the
holding capacity of the silos was 1960 metric
tons. According to the
applicant the wheat was not stored at once in the silos. It was
continuously released from silos at Prograin
to the respondent and
milled and then on sold.
[92]
It is quite strange and improbable too that Mr Charalambus being the
sole director and principal shareholder of Prograin, presumably
well-knowing the maximum holding capacity of grain, would not
investigate the matter and simply accept the
ipse
dixit
(say so) of Mr Hamman, the applicant’s representative,
regarding the quantity of wheat which was allegedly in the silo. Such
allegation by Hamman would reasonably be expected to have soon
alerted the respondent to the fact that the applicant’s claim
was somehow bogus. In the premises, a reasonable man in the position
of Mr Charalambus, the respondent’s sole member, would
not have
been misled by such purported misrepresentation.
[93]
With regard to the wheat allegedly sold to a third party the
applicant states that reference to a third party was a typographical
error. The wheat was sold to the respondent and that finds support in
the contracts itself. The addendum to “NH3.1”
the
respondent refers to was according to the applicant merely concluded
in order to fix the wheat price in South African currency.
It also
appears in “NH3.2” that the respondent was the buyer. In
fact, the respondent was the purchaser in all three
agreements. The
applicant’s version is more plausible and probable.
Accordingly, the respondent’s version in this regard
falls to
be rejected as not only being improbable but also false, on the
balance of probabilities.
[94]
The respondent argues that the financial records it tendered at the
settlement negotiations, at the instance of Mr Hamman and
Mrs Suna de
DeBruyn representing the applicant, held on a without prejudice basis
with a view to resolving the disputes before
any threat of litigation
or liquidation application, are accordingly information that falls
under the ambit of the privilege and
do not fall within the exception
as determined by one court. As a result, the respondent requests this
court to strike out paragraphs
31 to 41 of the Notice of Motion
including the supplementary affidavit in its entirety. In
Lynn
& Main Inc v Naidoo and another
2006
(1) SA 59
(N) at 65D – E the court held that in insolvency
proceedings where an offer is made without prejudice during
settlement negotiations,
such offer is nevertheless admissible in
evidence as an act of insolvency.
[95]
This principle was affirmed in
Absa Bank Ltd v Hamerle Group
2015
(5) SA 215
(SCA) para 13 and the Supreme Court of Appeal went on to
hold that:
“
Where a
party therefore concedes insolvency, as the respondent did in this
case, public policy dictates that such admissions of
insolvency
should not be precluded from sequestration or winding-up proceedings,
even if made on a privileged occasion
.”
[96]
In the present matter the existence and quantum of the debt were
common cause between the parties at the settlement meetings.
As it
was the fact, it was then due and payable, there was no privilege
attached to these meetings or communications. The only
reason for the
meeting was to discuss how and when the respondent would make payment
of its debt, which was long overdue, or secure
its payment.
[97]
It is trite that where
prima facie
the indebtedness exits the
onus is on the respondent’s company to show that it is
bona
fide
disputing the debt on reasonable grounds. As a rule, the
respondent has set out in its affidavits the basis on which it makes
such
allegations. Though it can be said that the respondent has done
so not baldly but with particularity, its version is improbable
and
implausible as compared to that of the applicant. The version of the
applicant finds support in the parties’ papers and
supporting
documents thereto. As a consequence, contentions by the respondent do
not hold any water. In the circumstances, the
respondent has failed
to discharge the onus resting on it to prove on the balance of
probabilities that it
bona fide
disputes the debt on
reasonable grounds.
(iii)
Commercial Insolvency
[98]
The company is commercially insolvent if it is unable to pay its
debts as they fall due, this situation may prevail even though
the
value of the company’s assets exceeds its liabilities. However,
the fact that a company which is commercially insolvent
has assets
which in value exceed its liabilities may be a relevant circumstance
in the exercise of the court’s residual discretion
to refuse a
winding-up order. See
Johnson
v Hirotec (Pty) Ltd
[2000] ZASCA 131
;
2000
(4) SA 930
(SCA) para 6.
[99]
Section 344(f), states that a company may be wound up by the court if
‘the company if unable to pay its debts as described
in section
345 of the 1973
Companies Act.’ As
the statutory demand, a
company is not deemed to be unable to pay its debts merely because an
established claim has not been paid
or secured. What must be shown is
that the company has ‘neglected’ to pay or secure the
claim.
[100]
A company’s inability to pay its debts may be proved in any
manner. Evidence that a company has failed on demand to
pay a debt
payment of which is due, is cogent
prima
facie
proof of inability to pay its debts. In
Kalk
Bay Fisheries Ltd v United Restaurants Ltd
1905
TH 22
it was held that the court might properly find that the company
was unable to pay its debts where it had admitted to its creditors
that it could not pay or had failed to adhere to an agreement in
monthly instalments. The mere fact that the value of a company’s
assets may exceed the amount of its liabilities does not preclude a
finding that the company has any funds with which to meet current
demands, the company is ‘commercially insolvent’.
[101]
In determining whether a company is unable to pay its debts, the
court shall also take into account the contingent and prospective
liabilities. To date, according to the applicant, the respondent has
failed to make payment of the balance due in terms of the
certificate
of balance, it signed on 8 July 2016, when it fell due on 31 July
2016 in the ordinary course of its business. The
respondent denies
that it is unable to pay its debts and claims to have to date paid
the applicant a total sum of R24 770 432.38.
[102]
The applicant does not simply claim payment for 8000 tons of wheat
delivered in terms of the three agreements in question.
Its claim
pertains to wheat released as well as interest and ancillary
expenses. The applicant goes on to state that the payment
the
respondent allegedly made related to deliveries and invoices which
are not part of the claim upon which it (the applicant)
relies in
this application. In the light of its failure to pay such balance the
applicant argues that the respondent is unable
to pay its debts.
[103]
The respondent’s indebtedness to the applicant in the amount
claimed was not disputed. This was a clear admission of
both the
respondent’s liability and its inability to pay its debts. See
Absa
Bank Ltd v Hamerle Group
case
para 8. In addition, the respondent’s sole member sent an email
to the applicant on 5 July 2016, “NH6”, stating
that the
respondent would pay the debt once a related company, Prograin (Pty)
Ltd, allocated funds to it based on its purported
indebtedness to the
respondent. This, once again constitutes an admission on the part of
the respondent of its inability to pay
its debt.
[104]
Further, the respondent stated that Hakan Agro SA (Pty) Ltd (Hakan)
was in the process of purchasing the assets of Prograin
and Proflour
and that the proceeds would then be paid to the respondent in
settlement of its loan account and the respondent
would, in turn, use
the proceeds to liquidate its debt to the applicant. The respondent
also stated that there was a pending BEE
buyout of shares which would
assist to liquidate its account. Over and above all this, the
respondent undertook to pay to the applicant
the amount of R22 000
000 and to settle the balance by twenty three monthly instalments.
[105]
The respondent contends that its assets exceed its liabilities. The
application for a winding-up order can be refused if the
facts show
that there are liquid assets or readily realisable assets available
out of which the company is in fact able to pay
its debts. See
Rosenbach
& Co. (Pty) Ltd v Singh’s Bazaars
1962
(4) SA 593
(D) at 597. According to the applicant the Prograin mill
does not hold any raw materials for milling purposes due to the
misappropriation
of wheat as set out in paragraph 21 of the
applicant’s founding affidavit. The respondent’s total
assets is reflected
in “NH8”, as being R42 612 896,
is R12 823 274 less than the respondent’s
liabilities.
[106]
The final statements of Prograin, from which the respondent needs to
obtain the funds with which to pay its debt, show that
it is
hopelessly insolvent and its assets, if released, are nowhere near
sufficient to pay the respondent’s debt due and
payable to the
applicant. According to the applicant Prograin will never be in a
position to repay this loan.
[107]
In the premises, I am satisfied that the applicant has succeeded to
establish that the respondent is unable to pay its debts
in that it
is unable to meet, current demands upon it, its day to day
liabilities in the ordinary cause of its business, and that
its
liabilities exceed the value of its assets. The
ex debito
justitiae maxim
conveys that once a creditor has satisfied the
requirements for a liquidation order, the court may not on a whim
decline to grant
the order.
Order
[108]
In the result I make the following order:
(a)
The counter
application by the respondent is dismissed with costs;
(b)
The
respondent is placed under a provisional liquidation order in the
hands of the Master of the High Court;
(c)
A rule
nisi
is issued calling upon the respondent and all interested parties to
show cause, if any, on 16 August 2017 at 9.30 am, why the provisional
liquidation order should not be made final;
(d)
The cost of
this application are costs in the liquidation;
(e)
The
provisional liquidation order shall be served by the sheriff on:
(i)
The
respondent;
(ii)
Any
employee of the respondent at the principal place of business of the
respondent by affixing a copy of the provisional order
to any notice
board to which the employees have access inside the debtor’s
premises, or if there is no access to the premises
by the employees,
by affixing a copy to the front gate, where applicable, failing which
to the front door of the respondent’s
principal place of
business;
(iii)
A trade
union representing the employees of the respondent, if any;
(iv)
The South
African Revenue Services;
(f) The provisional
liquidation order shall be published in one edition respectively of
the Daily News and “Die Beeld”
newspapers.
_______________
MADONDO
DJP
Date
reserved: 17 February 2017
Date
delivered: 15 June 2017
For
Applicant: Adv L Mills
Instructed
by: Hayes Incorporated
Locally
represented by:
Strauss
Daly Attorneys
Ref:
Mr Damian Bon/Heidi Scholl
For
Respondent: Adv A E Potgieter SC
Instructed
by: Motala & Associates
Ref:
SSP/M.Motala