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[2014] ZAGPPHC 187
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Ricoh South Africa (Pty) Ltd v Bula Document Solutions (Pty) Ltd (31095/2012) [2014] ZAGPPHC 187 (2 April 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
CASE NO: 31095/2012
DATE:
2/4/2014
In
the matter between:
RICOH
SOUTH AFRICA (PTY)
LTD
Applicant
and
BULA
DOCUMENT SOLUTIONS (PTY)
LTD
Respondent
J U
D G M E N T
AVVAKOUMIDES, AJ
INTRODUCTION
AND SUMMARY OF ISSUES
1.
The
applicant seeks an order for the winding up of the respondent
pursuant to the transitional provisions of section 9 of Schedule
5 of
the Companies Act, 71 of 2008 (“the new
Companies Act&rdquo
;)
read with
sections 344(f)
and (h) and section 345 of the Companies
Act, 61 of 1973 (“the old Companies Act”)
alternatively
pursuant to section 81(c) (ii) of the new Companies Act.
2.
The
winding up of the respondent is sought on the basis that the
respondent is unable to pay its debts and that it is just and
equitable that the respondent be wound up.
3.
The
applicant has the exclusive rights to distribute Ricoh equipment in
South Africa having been appointed as the distributor of
Ricoh
equipment for Ricoh Europe SCM and Ricoh ESP for inter alia the
territories of South Africa, Namibia, Botswana, Swaziland,
Lesotho
and Mozambique.
4.
On
10 May 2011 the applicant and the respondent concluded a written
agreement in terms of which the applicant appointed the respondent
on
a non-exclusive basis to sell Ricoh equipment to customers in the
Republic of South Africa. The written agreement was called
the
“Enterprise Development Agreement” (“the EDA”)
dated 1 September 2009. The duration of this agreement
was two
years, with an option to renew, which the parties did indeed renew.
5.
On
1 September 2009 the parties also concluded a “Cession and
Pledge of Customer Base” in terms of which the respondent,
as
security for the due and punctual payment and performance of all its
debts and obligations to the applicant, (who was then known
as “NRG
Gestetner South Africa (Pty) Ltd”), ceded and delivered in
pledge to the applicant all its rights under agreements
with its
customers (“the customer base”) as continuing covering
security for the due and proper payment on demand and
the due and
proper performance of the secured indebtedness subject to the terms
and conditions contained in the cession.
6.
It
is common cause that in essence the relationship between the parties
regarding payments would operate as follows:
6.1
The respondent would conclude sales contracts with a variety of
customers for the supply
of photocopying machines;
6.2
The respondent would also conclude service contracts in respect of
the photocopying machines
with the customers;
6.3
Thereafter the respondent would place an order with the applicant for
the supply of the
copiers;
6.4
The applicant would provide the services referred to in the service
contracts to the customers,
as agent for the respondent;
6.5
The applicant would then deliver the copiers directly to the customer
and email an “upload
file” to the respondent before close
of business on the 3rd business day of each month;
6.6
The respondent would then use the upload file on its system to
generate an invoice from
the respondent to the customer;
6.7
The applicant would thereafter invoice the respondent the same amount
as the respondent
had invoiced the customer by the last day of each
month;
6.8
The respondent would then invoice the applicant for the rebate being:
6.8.1
12.5% of turnover in respect of sales of equipment up to R2 million;
6.8.2
7.5% of turnover in respect of sales of equipment in excess of R2
million;
6.8.3
20% of turnover in respect of service contracts, where the applicant
provided
the services;
6.9
The applicant would make payment to the respondent of the rebate
within 21 business days
from receipt of the respondent’s
invoice;
6.10
The respondent in turn would be liable to pay to the applicant the
purchase price of the photocopying equipment
supplied by the
applicant to the respondent’s customers regardless of whether
the customers paid the respondent;
6.11.
The respondent would make payment of the amounts due to the applicant
for the sale of the equipment by the applicant
to the respondent
within 60 (sixty) days after delivery of the equipment to the
customer;
6.12
In essence the customer would pay the respondent within 30 days from
invoice and the respondent (irrespective
of whether it had received
payment from the customer) would be liable to make payment of such
amount to the applicant within sixty
days of invoice;
6.13
Thereafter the respondent would invoice the applicant in respect of
the rebates and applicant would make
payment of such invoiced rebate
amount to the respondent within 21 days of invoice.
7.
In
practice the amounts owing by the parties to each other were paid by
means of applying set-off from time to time.
8.
The
respondent duly concluded both sales and service contracts with its
customers and the applicant duly delivered equipment to
the customers
on the respondent’s behalf and the applicant serviced the
customers. It is common cause that after 1 March
2012 no further
sales or service contracts were concluded.
9.
The
respondent, on numerous occasions breached the EDA in that it did not
make payment of the amounts so invoiced within sixty days
of the
delivery of the equipment to the customer or at all as agreed and as
required by the provisions of the EDA and the Applicant
cancelled the
EDA.
10.
The
respondent disputed that it was indebted to the applicant in the
amount claimed and disputed that the applicant was entitled
to cancel
the EDA and as a result these disputes were referred to arbitration.
11.
The
arbitrator ruled and awarded that the applicant was entitled to have
cancelled the EDA and was entitled to take cession of all
the
respondent’s claims against the customers and this award was
made an order of court. This is not disputed by the respondent.
12.
The
applicant contended that the respondent is indebted to the applicant
as at end of February 2012 in an amount of R18 722 062.44
and
provided a schedule reflecting the computation of this amount.
13.
The
applicant contended that the respondent is unable to pay its debts as
and when they fall due and is factually and commercially
insolvent.
14.
The
respondent disputed the indebtedness to the applicant on essentially
the following grounds:
14.1
On
a proper interpretation of the relevant provisions of the EDA,
the applicant is indebted to the respondent for the 20%
turnover of
the service contracts after the cancellation of the EDA and that such
amount (estimated by the respondent at some R30
million) has not been
taken into account by the applicant and that if such are taken into
account, the applicant is in fact indebted
to the respondent (“the
20% of turnover issue”);
14.2
Even
if not taking the post EDA 20% rebates into account, the applicant’s
reconciliation is in any event incorrect and that
upon a
reconciliation conducted by Mr Peterson of the respondent, the
applicant was indebted to the respondent in the amount of
R826 885.83
(“the reconciliation issue”);
14.3
The
applicant issued incorrect upload files thereby precluding the
respondent from properly invoicing the customers (“the
upload
files issue”).
15.
The
respondent filed a counter application late (but not objected to)
for:
15.1
A
declaratory order that the respondent’s right to receive 20% of
the turnover of the service contracts survives the cancellation
of
the new EDA concluded on 10 May 2011;
15.2
An
order that the applicant furnish the respondent with all the
necessary documentation and upload files pertaining to the service
contracts;
15.3
An
order that the respondent be ordered to render an account with
substantiating documents to the applicant within two months from
the
date of the order reflecting the indebtedness of the respondent to
the applicant or vice versa;
15.4
That
such account should be debated within three months of rendering such
account.
THE
LAW
16. Schedule 5 to the new
Companies Act deals with transitional arrangements. Item 9 thereof
deals with the continued application
of the old Companies Act to the
winding-up and liquidation of companies. It reads as follows:
“
(1)
Despite the repeal of the previous Act,
until the date determined in terms of sub-item (4), Chapter
14 of
that Act continues to apply with respect to the winding-up and
liquidation of companies under this Act, as if that Act had
not been
repealed subject to sub-items (2) and (3).
(2)
Despite sub-item (1), sections 343, 344, 346, and 348 to 353 do not
apply to the winding-up
of a solvent company, except to the extent
necessary to give full effect to the provisions of Part G of Chapter
2.
(3)
If there is a conflict between a provision of the previous Act that
continues to apply in
terms of sub-item (1), and a provision of Part
G of Chapter 2 of this Act with respect to a solvent company, the
provision of this
Act prevails.
(4)
The Minister, by notice in the Gazette, may —
(a)
determine a date on which this item ceases to have effect but no such
notice may be given
until the Minister is satisfied that alternative
legislation has been brought into force adequately providing for the
winding-up
and liquidation of insolvent companies; and
(b)
prescribe ancillary rules as may be necessary to provide for the
efficient transition from
the provisions of the repealed Act, to the
provisions of the alternative legislation contemplated in paragraph
(a).”
17.
Section
344(f) of the 1973 Act provides that a company may be wound up by the
Court if it is unable to pay its debts as described
in section 345 of
the Act.
18.
Section
345(1)(a) of the Act in turn provides as follows:
“
(1)
A company or body corporate shall be deemed to be unable to pay its
debts if—
(a)
a creditor, by cession or otherwise, to whom the company is indebted
in a sum not less than
one hundred rand then due—
(i)
has
served on the company, by leaving the same at its registered office,
a demand requiring the company to pay the sum so due; or
(ii)
in the case of anybody corporate or 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.”
19.
The
court’s power to grant a winding-up order is a discretionary
power, irrespective of the ground upon which the order is
sought.
(See F & C Building Construction Co (Pty) Ltd v Macsheil
Investments (Pty) Ltd
1959 (3) SA 841
(D) at 844 and SAA Distributors
(Pty) Ltd v Sport en Spel (Edms) Bpk
1973 (3) SA 371
(C) at 373).
Such discretion must be exercised on judicial grounds (See Irvin &
Johnson Ltd v Oelofse Fisheries Ltd
1954 (1) SA 231
(E) at 244). In
its exercise the court should have regard to the grounds and the
reasons for the proposed winding-up (See Leca
Investments (Pty) Ltd v
Shiers
1978 (4) SA 703
(W) at 705). The circumstances under which
such an order was granted in other cases can serve as a guideline
only. (See Kyle
v Maritz & Pieterse Inc
[2002] 3 All SA 223
(T) at 225)
20.
Winding-up
proceedings ought not to be resorted to in order to enforce payment
of a debt, the existence of which is bona fide disputed
by the
company on reasonable grounds. The procedure for winding-up is not
designed for the resolution of disputes as to the existence
or
non-existence of a debt. (See The “Badenhorst rule” after
Badenhorst v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA
346
(T) at 347–348 and authorities there cited; Kalil v Decotex
(Pty) Ltd
1988 (1) SA 943
(A) at 980; Securefin Ltd v KNA Insurance
and Investment Brokers (Pty) Ltd
[2001] 3 All SA 15
(W) at 48)
21.
Even
though the court has a discretion to refuse a winding-up order in
these circumstances it is one which is limited where a creditor
has a
debt which the company cannot pay. In such a case the creditor is
entitled, ex debito justitiae, to a winding-up order. (See
Absa Bank
Ltd v Rhebokskloof (Pty) Ltd
1993 (4) SA 436
(C) at 440F–441A;
and Nedbank Ltd v Migolie Investments CC
[2007] JOL 19341
(T) at para
42)
22.
Where
the indebtedness exists prima facie the onus is on the company to
show that such indebtedness is bona fide disputed on reasonable
grounds. (See Meyer NO v Bree Holdings (Pty) Ltd
1972 (3) SA 353
(T)
at 354–355; Machanick case supra at 269; Payslip Investment
case supra at 788; Kyle v Maritz & Pieterse Inc
[2002] 3 All SA
223
(T) at 226)
23.
However,
if the dispute on the papers concerns the existence of the
applicant's claim, upon which the applicant relies for its locus
standi as a creditor, the onus rests upon the respondent to show, on
a balance of probabilities, that its dispute in regard to
that
indebtedness is bona fide and founded upon reasonable grounds. The
respondent is not required to prove that it is not indebted
to the
applicant: it must merely show that the indebtedness is genuinely
disputed upon reasonable grounds. (See Kalil v Decotex
(Pty) Ltd
1988
(1) SA 943
(A) 980)
24.
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: “for
a concern which is not in financial difficulties ought to be able to
pay its way from current revenue or
readily available resources”.
(See
Rosenbach
& Co (Pty) Ltd v Singh’s Bazaars (Pty) Ltd
1962 (4) SA 593
(D) at 597 per Caney J)
25.
It
is no answer to the application that the company has a counterclaim
against the applicant which, if established, would result
in a
discharge by set-off of the applicant’s claim; but that there
is prima facie a genuine counterclaim which the company
intends to
enforce should be taken into account by the court in exercising its
discretion whether or not to wind up. (See Re LHF
Wools Ltd
[1970] Ch
27
(CA);
[1969] 3 All ER 882
and cases therein considered; compare
further Ter Beek v United Resources CC
1997 (3) SA 315
(C) at
333–334)
26.
Mr
Kairinos who appeared for the applicant submitted that the onus is on
the respondent company to prove that the discretion should
be
exercised in its favour and referred me to apparently the only South
African authority which has dealt with the proposition
whether an
illiquid counterclaim constitutes a defence to a liquidation
application, namely the case of Ter Beek v United Resources
CC and
Another
1997 (3) SA 315
(C) wherein Van Reenen J after an exhaustive
analysis of the case law (both South African and foreign) concluded
that an illiquid
counterclaim may in certain circumstances constitute
a defence to a liquidation application.
27.
The
first of the defences raised in that matter was a reliance on the
exception de non adimpleti contractus. It is important to
note that
the respondent in the present matter does not rely on such defence
and it is therefore irrelevant.
28.
The
learned judge held as follows in regard to the second defence (the
illiquid counterclaim):
“
The
second of the aforementioned defences is the existence of an
unliquidated claim which exceeds any amount that first respondent
owes to the applicant. It is trite that an unliquidated claim for
damages is incapable of being set off against an admitted liquidated
obligation. The provisions of Rule 22(4) and a practice under common
law permit the suspension of judgment on an admitted liquid
claim in
convention pending finalisation of an illiquid claim in reconvention.
Although Rule 22(4) applies only to proceedings
brought by way of
action, it has not modified the common law which applies to such
proceedings as well as proceedings brought by
way of motion. The
Court has a discretion to deviate from that practice. (See Truter v
Degenaar
1990 (1) SA 206
(T) at 211D-E)”
29.
The
learned judge went further to state that he could not find authority
for the proposition, held that the provisions of Rule 22(4)
whereby a
claim may be stayed pending determination of an illiquid counterclaim
should be similarly applicable in winding-up proceedings.
30.
However
in such circumstances the learned judge held that “as the
existence of the applicant's claim is not challenged the
respondent
should bear the onus of showing why the court should exercise a
discretion not to grant a winding-up order in his favour”.
31.
Van
Reenen J then held as follows: “Accordingly there exists,
in my opinion, no reason why the same approach should
not be followed
in South African law, subject to the qualification that, by reason of
the fact that the 'defence' of a counterclaim
recognises the
enforceability of the obligation on which the applicant's locus
standi is founded, (a) there is no room for an argument
that an
applicant is seeking to enforce a disputed debt by means of
winding-up proceedings (compare Kalil v Decotex (supra at 982F));
and
(b) as the existence of the applicant's claim is not challenged the
respondent should bear the onus of showing why the Court
should
exercise a discretion not to grant a winding-up order in his favour
(compare Meyer NO v Bree Holdings (Pty) Ltd
1972 (3) SA 353
(T) at
355B; Commonwealth Shippers Ltd v Mayland Properties (Pty) Ltd
(United Dress Fabrics (Pty) Ltd and Another Intervening)
1978 (1) SA
70
(D) at 72D).”
32.
It
therefore appears that the reliance on an illiquid counterclaim,
whilst not constituting a defence per se to the applicant’s
claim and not extinguishing it, may in the appropriate circumstances
constitute a factor upon which a court may exercise its discretion
to
refuse a winding-up order, if such illiquid counterclaim is bona
fide, genuine and reasonable.
33.
In
the English case of Re Bayoil SA
Seawind
Tankers Corp v Bayoil SA
[1999]
1 All ER 374
the Court of Appeal held as follows: “Where a
company had a genuine and serious cross-claim which it had been
unable to litigate,
in an amount exceeding the amount of the
petitioner’s debt, the court should, in the absence of special
circumstances, dismiss
or stay the winding-up petition in the
exercise of its discretion under s 125(1)a of the Insolvency
Act 1986.”
34.
It
was this English law which His Lordship Mr Justice Van Reenen applied
in the Ter Beek case. The important issue however is that
the claim
must be genuine and serious and in addition one which the company has
been unable to litigate.
35.
In
the present application the court must establish whether the
respondent’s reliance upon its counterclaim is genuine,
serious,
bona fide and reasonable.
36.
The
applicant submitted that since the respondent’s counterclaim is
exclusively based on the respondent’s reliance on
the
contention that it is entitled to 20% of the turnover of all the
service contracts in terms of the provisions of the EDA, after
cancellation of the EDA, one must interpret the provisions of clause
15.7 thereof and determine whether indeed the respondent has
a claim
for payments post the cancellation of the EDA and whether any such
future claim for payment of the 20% of the turnover
constitutes a
defence to the current indebtedness.
THE
20% OF TURNOVER ISSUE
37.
Mr
Wilson who appeared for the respondent submitted that upon a proper
interpretation of clause 15.7 of the EDA, the respondent
is still
entitled to the 20% of turnover rebate on all service contracts until
their respective expiries. Most of these contracts
have to date
expired in any event as set out in the answering affidavit in the
counter-application. The respondent did not contend
otherwise.
38.
The
respondent did not contend that the applicant has not made payment of
any rebates due to it prior to the cancellation of the
EDA and that
this issue was raised pertinently in respect of the payment of the
20% rebate after the cancellation of the EDA.
39.
Mr
Wilson argued that if the provisions of clause 6.1.2 of the EDA which
provide for the payment of the 20% rebate survive the cancellation
of
the EDA, then the respondent will in the future become indebted to it
for an estimated total of some R30 million and that such
must be
taken into account in determining whether the respondent is indebted
to the applicant and whether the respondent is insolvent.
40.
The
applicant submitted that even if the 20% rebate did survive the
cancellation of the EDA such claim is a contingent claim and
cannot
be set off against the amounts owed to the applicant as at the date
of the liquidation application.
41.
In
Rosenbach & Co (Pty) Ltd v Singh's Bazaars (Pty) Ltd
1962 (4) SA
593
(N) 597G - H Caney J stated that:
“
a
concern which is not in financial difficulties ought to be able to
pay its way from current revenue or readily available sources.”
42.
Mr
Kairinos submitted that future claims for a 20% rebate of whatever
the turnover happens to be in the future on the service contracts
can
hardly be “current revenue” or “readily available
sources”. He argued that these future claims cannot
therefore
be taken into account in determining whether the respondent is able
to make payment of the amounts which it has been
invoiced by the
applicant for sales and service contracts since they do not establish
whether the respondent has funds at its disposal
to make payment of
these due and payable invoices.
43.
The
fact that the respondent may have claims in the future for 20%
rebates as and when they fall due, is a prospective claim which
the
liquidator can take into account and the liquidator can sell such
prospective claims at a public auction.
44.
The
applicant submitted that it is not an answer to the APPLICANT’S
current claim against the respondent and does not assist
the
respondent in proving that it is now able to pay its debts as and
when they fall due.
45.
It
is for this reason that section 345(2) provides that “In
determining for the purpose of subsection (1) whether a company
is
unable to pay its debts, the Court shall also take into account the
contingent and prospective liabilities of the company.”
Section
345(2) refers to contingent and prospective “liabilities”
and not contingent and prospective “claims”.
46.
The
applicant submitted that the 20% rebate on turnover of service
contracts as provided for in clause 6.1.2 does not survive the
cancellation of the EDA. The debate concerns the proper
interpretation of clause 15.7 of the EDA. Clause 15.7 of the
EDA
provides as follows:
“
15.7
In the event that Ricoh becomes entitled to cancel this Agreement BDS
shall be entitled to continue to
exercise its rights in terms of any Service Contract
,
(my emphasis) provided that:
15.7.1
BDS shall comply with all of its obligations in terms of such Service
Contract;
15.7.2
BDS shall, by not later than the 7th (seventh) day of each calendar
month following the
date upon which this Agreement is cancelled,
furnish Ricoh with a written report, setting out:
15.7.2.1
the names and contact details of all Customers that are party to any
Service Contract that is then in effect;
15.7.2.2
details of any Service rendered under such Service Contract during
the immediately completed calendar month;
15.7.2.3
details of any communications received from the Customer during the
immediately completed calendar month in which any complaint is made
that BDS has failed to render any Services, either in accordance
with
the terms of the Service Contract or at all; and
15.7.2.4
details of the steps that BDS has taken to remedy the cause of such
complaint.”
47.
Mr
Wilson relied on the emphasised portion of clause 15.7 above to show
that it shall be entitled to continue to exercise its rights
in terms
of any Service Contracts, notwithstanding the cancellation of the
EDA.
48.
On
a proper interpretation of the emphasised portion of clause 15.7 it
is clear that the respondent only has the right to continue
to
exercise its rights in terms of the Service Contracts, not in respect
of the EDA. Thus any rights of the respondent in the Service
Contracts survive the cancellation of the EDA and not its rights
arising from the EDA.
49.
The
rights in terms of the Service Contracts which would survive the
cancellation of the EDA are for example its right to invoice
the
customers in terms of the provisions of the Service Contracts and to
seek payment from the customers.
50.
The
right to a 20% rebate is not a right in terms of the Service
Contracts and is a right arising from the provisions of clause
6.1.2
of the EDA and there is nothing in the EDA to suggest that any rights
arising from the EDA survive the cancellation of the
EDA.
51.
The
applicant submitted that the reason that the EDA provides for the
survival of the respondent’s rights arising from the
Service
Contracts is so that it can continue claiming the payments from the
customers, since without a cession of such rights,
the customers
would persist in paying the contracting party, namely the respondent.
52.
Clause
15.7 merely entrenches and confirms that position and does not
entitle the respondent to breach the EDA, have such EDA cancelled,
but continue to profit from the 20% rebate on the Service Contracts,
which the applicant is servicing and in respect of which the
respondent is doing nothing. It was submitted that such a state of
affairs could never have been contemplated by the parties and
it is
therefore not a commercially sensible interpretation of the EDA.
53.
The
applicant contended that the respondent appears to have conveniently
ignored the fact that its entitlement to exercise the rights
in the
Service Contracts is in any event subject to its compliance with the
provisions of clauses 15.7.1 to 15.7.3 of the EDA.
54.
The
respondent has not only failed to allege compliance with clauses
15.7.1 to 15.7.3 but has failed to prove any such compliance.
This
despite the applicant’s contention that it has not complied
with such clauses.
55.
The
applicant argued that under the circumstances the issue of the 20%
rebate on turnover of service contracts does not assist the
respondent since the respondent is not entitled to any rebate after
the cancellation of the EDA. In any event any such rebate would
constitute a contingent future claim which cannot be set off against
a current indebtedness and does not therefore show that the
respondent is able to pay its current debts as and when they fall
due.
56.
The
respondent has not alleged or proved that it has complied with the
proviso in clause 15.7. For these reasons the applicant submitted
that the respondent’s counter-application also falls to be
dismissed since the respondent’s interpretation of clause
15.7
is incorrect and in any event it has not alleged or proved compliance
with the proviso in clause 15.7. The respondent is therefore
not
entitled to the declarator or statement and debatement it seeks.
THE
RECONCILIATION ISSUE
57.
The
applicant relied upon its reconciliation schedule to show that the
respondent is indebted to it in the amount of R18 772 062.44.
58.
The
respondent disputed the applicant’s reconciliation and argued
that Peterson’s reconciliation shows that in fact
the applicant
is indebted to the respondent in the amount of R826 885.83.
59.
The
applicant in essence contends that the respondent is commercially
insolvent and is unable to pay its debts. In Absa Bank Ltd
v
Rhebokskloof (Pty) Ltd
1993 (4) SA 436
(C) 440G-441A, Berman J held
as follows in this regard:
“
The
primary question which a Court is called upon to answer in deciding
whether or not a company carrying on business should be
wound up as
commercially insolvent is whether or not it has liquid assets or
readily realisable assets available to meet its liabilities
as they
fall due to be met in the ordinary course of business and thereafter
to be in a position to carry on normal trading - in
other words, can
the company meet current demands on it and remain buoyant? It matters
not that the company's assets, fairly valued,
far exceed its
liabilities: once the Court finds that it cannot do this, it follows
that it is entitled to, and should, hold that
the company is unable
to pay its debts within the meaning of s 345(1)(c) as read with s
344(f) of the Companies Act 61 of 1973
and is accordingly liable to
be wound up.
60.
As
Caney J said in Rosenbach & Co (Pty) Ltd v Singh's Bazaar (Pty)
Ltd
1962 (4) SA 593
(D) at 597E-F: '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 realisable assets available
out of which,
or the proceeds of which, the company is in fact able
to pay its debts.”
61.
Notwithstanding
this the Court has a discretion to refuse a winding-up order in these
circumstances but it is one which is limited
where it has a debt
which the company cannot pay; in such a case the creditor is
entitled, ex debito justitiae, to a winding-up
order. (see
Henochsberg on the Companies Act 4th Ed volume 2 at 586; Sammel and
Others v President Brand Gold Mining Co Ltd
1969 (3) SA 629
(A) at
662F)
62.
I
have had regard to the references in the affidavits to the
respondent’s bank accounts and the relatively small amounts.
It
would appear that if I do find that the respondent is indebted to the
applicant in the amount claimed, the respondent is unable
to make
payment of this amount and will not be able to stay afloat.
63.
An
example hereof as pointed out by Mr Kairinos is that only when the
applicant delivered a supplementary affidavit setting out
the
respondent’s inability to pay the taxed bill of costs,
arrangements were made by the respondent for these costs to be
paid.
Mr Kairinos submitted that despite such belated payment, the fact
remains that all warrants served stated that there were
insufficient
funds or assets to satisfy the judgment debt.
64.
The
taxed costs, after service of the supplementary affidavit, were paid
by the respondent from an unknown source. The source is
not the
respondent’s bank account. The inference is that there were
insufficient funds therein to cover the taxed costs on
both
occasions. Mr Kairinos submitted that it is probably common cause
that if one ignores the purported future claims to 20% rebates
in the
alleged sum of R30 million, the respondent does not have the
resources to make payment of the amount claimed by the applicant
if
the court finds that this amount is due. The respondent does not
contend otherwise.
65.
The
respondent has not established any other resources from whence it
would be able to make payment of the amount of some R18 million
if
this is found due. On its own version its resources are solely the
amounts found in its bank accounts from time to time.
66.
Furthermore
it appears from the papers that the respondent is depleting such
accounts in order to pay other creditors, such as its
landlord, and
is therefore unable to pay the applicant. It was submitted that the
respondent is sued periodically for unpaid debts
such as its rental
obligations.
67.
The
respondent’s contention is solely that it is attacking the
applicant’s locus standi as a creditor, namely that it
denies
that it owes any amount whatsoever to the applicant.
68.
Consequently
and correctly submitted by Mr Kairinos the sole issue to determine
before me is whether the applicant has established
that the
respondent is indebted to it for an amount in excess of R100. If this
is established the respondent has not proved any
cogent reason why it
has not made payment of whatever is due to the applicant.
69.
The
question is whether the applicant’s calculation and
reconciliation is correct or whether the respondent has bona fide
disputed the indebtedness on reasonable grounds.
70.
The
respondent appears not to have bona fide disputed the indebtedness on
reasonable grounds. I say so because Mr Peterson, who
is not said to
be qualified to conduct a forensic audit, purportedly prepared a
reconciliation of the account between the applicant
and the
respondent and on his version the applicant owes the respondent
monies. It is however inexplicable how Peterson conducted
any audit
whatsoever when on the respondent’s own version, the source
documents were sought from the applicant pursuant to
Rule 35(12)
notices, as they could not be produced by the respondent.
71.
The
reconciliation by Peterson can therefore not be accepted as bona fide
or reasonable disputing of the applicant’s claim
for the
following reasons:
71.1
Peterson
did not feature in the arbitration and the accounts were not debated
with him at all. Throughout the arbitration proceedings
the
applicant’s expert produced summaries and reconciliations
during December 2011 and January 2012 and these were debated
at
length with Nola Rae ("Rae") the respondent’s
accountant at the time.
71.2
At
no stage did Peterson during the arbitration proceedings make the
allegations he now makes concerning the reconciliations.
Rae,
being the respondent's accountant since May 2010, did not at any
stage of the arbitration proceedings raise the allegations
raised by
Peterson in the answering affidavit. These allegations appear to be
opportunistic and an attempt to stave off liquidation.
71.3
Peterson
is not in possession of all the documentation allegedly relied upon
by him to make the allegations in the answering affidavit
as appears
from the respondent’s failure to produce such for inspection
pursuant to the provisions of Rule 35(12). This failure
makes his
version of events in the answering affidavit untenable in my view.
71.4
Peterson
only took up employment with the respondent on 1 November 2011, a
period of approximately 5 months after cancellation of
the new EDA.
He was not personally involved in the business relationship between
the parties and has no knowledge of the various
issues that
transpired during that time to which he refers to in the answering
affidavit.
71.5
Mr
Makobe, the previous managing director of the respondent deposed to
an affidavit in support of an application for the postponement
of the
arbitration and a replying affidavit wherein he confirmed on the
respondent’s behalf that the respondent was indebted
to the
applicant in the amount of R965 639.72 in respect of arrears. He on
behalf of the respondent undertook to make payment of
this amount
without attaching any conditions thereto. This is crucial and Mr
Wilson was unable to explain why this amount, despite
the undertaking
to pay, was not paid.
71.6
Makobe
referred to the applicant’s expert’s report and his
findings with apparent approval. There is no explanation
in
Peterson’s affidavit why the report of the applicant’s
expert, Mr Sabagh, is now incorrect, despite being accepted
by
Makobe. The only dispute at that stage was the opening balance of the
accounts between the parties upon which Sabbagh had predicated
his
report.
71.7
There
is no explanation by Peterson why this amount confirmed on oath by a
director of the respondent and confirmed by its accountant
on oath
(Nola Rae) is incorrect or whether Rae had incorrectly calculated the
amounts.
71.8
The
aforesaid affidavits now stand in stark contrast to Peterson’s
version and his reconciliation.
71.9
An
analysis of Peterson’s reconciliation evidences the mala fides
of such version since there were material inconsistencies
in
Peterson’s reconciliation as appears from the replying
affidavit.
71.10
It
is apparent from the analysis of Peterson’s reconciliation
together with the fact that upon an inspection of the documentation
in the respondent’s possession (pursuant to the rule 35(12)
notice) that the respondent was in fact in possession of much
of the
documentation referred to by Peterson. It is therefore inexplicable
how Peterson could have correctly reconciled the account
or show that
the applicant’s reconciliation is incorrect.
71.11
Furthermore
the respondent acknowledges that it cannot reconcile the account when
in its counter-application it seeks production
of the applicant’s
documents and upload files to enable it to draft a statement and
debatement thereof. The question arises
as to how Peterson carried
out the reconciliation referred to in the respondent’s
answering affidavit and the only answer
is that he could not.
71.12
If
this is so then the respondent cannot dispute the applicant’s
reconciliation on reasonable and bona fide grounds.
72.
The
respondent has not set out precisely what it owes the applicant or
and set out how the applicant’s reconciliation schedule
in
respect of the respondent’s indebtedness is incorrect.
73.
The
court, in determining whether the respondent is genuinely and bona
fide disputing its indebtedness to the applicant on reasonable
grounds must consider the fact that the respondent had repeatedly
stated that it intended to conduct a forensic audit of the account.
This was repeatedly referred to in the respondent’s answering
affidavit.
74.
That
affidavit was signed by the deponent thereto on 6 July 2012. Since
then the respondent has still not conducted any forensic
audit
despite being given access to the applicant’s documentation.
The only inference that I can draw is that the forensic
firm OMA that
were scheduled to conduct the forensic audit were never placed in a
position by the respondent to conduct the audit
and this was merely a
delay tactic.
75.
The
inescapable inference is that the respondent has not bona fide and on
reasonable grounds disputed the applicant’s claim
and is merely
seeking to delay the inevitable. This much is evident from the
respondent’s bank accounts from time to time.
76.
Furthermore
the respondent has not stated that if the applicant’s claim is
established then the respondent is in the financial
position to make
payment thereof. The reason is simply that the respondent cannot do
so. The only logical inference is that the
respondent is unable to
pay its debts.
THE
UPLOAD FILES ISSUE
77.
The
respondent submitted that the so called upload files it was sent by
the applicant to enable the respondent to generate invoices
to the
customers, were incorrect.
78.
How
Peterson became aware of any such alleged errors appears to be
unclear because he was not involved at the time when the upload
files
were sent to the respondent.
79.
Peterson
does not explain how he acquired knowledge of the alleged errors or
from whom and no reference to specific errors has been
made or
substantiated. Other than a reference to the issues pertaining to two
customers of the respondent, namely Rotek and the
Department of
Higher Education, the respondent has not shown any errors in the
upload files.
80.
By contrast it is the applicant who in its replying affidavit shows
the disingenuousness of Peterson’s reference to the
Rotek and
Department of Higher Education disputes. Rotek changed machine models
which led to an alteration in the billings as a
result of the pay per
page calculations (the charges) and the service charges having to
change. The Rotek dispute is therefore
taken out of context and the
respondent fails to disclose all the relevant facts. Peterson was
furthermore not employed by the
respondent when this issue arose and
has no personal knowledge of such dispute. In fact this aspect only
arose after the cancellation
of the EDA.
81.
In
regard to the Department of Higher Education, it is clear from the
respondent’s attorney’s correspondence relating
to the
Department issue, that such issue related to arrear rentals due by
the respondent to the applicant in terms of the rental
agreement and
was not an issue of allegedly incorrect information or incorrect
invoices for service billings and did not therefore
relate to
incorrect upload files or an inability to generate invoices.
82.
The
vague and inaccurate manner in which Peterson has dealt with the
alleged errors leads to the only inference that his version
is not
bona fide and that in fact there are no errors.
COMPLIANCE
WITH SECTION 346 (4A) (ii) (aa) or (bb) OF THE COMPANIES ACT 1973
83.
At
the commencement of the application I enquired from Mr Kairinos as to
the affidavit that is required to be handed in in compliance
with the
provisions of section 346 (4A) of the Companies Act. Mr Kairinos
submitted that the application had been served upon all
the
interested parties as required but that he would nevertheless prepare
and affidavit dealing with the requirements of the relevant
provision
and deliver such affidavit prior to judgment. Mr Wilson for the
respondent had no objection such affidavit being handed
in prior to
judgment.
84.
I
have had sight of the affidavit and considered the contents. I am
satisfied that there has been compliance with the relevant section
of
the Act.
CONCLUSION
85
.
In
the circumstances I am satisfied that the applicant has made out a
proper case for the relief sought. The respondent’s
counter application holds no merit under the circumstances.
Consequently the respondent’s counter-application is dismissed.
86.
Accordingly
I order that:
86.1
The
respondent is placed under final liquidation in the hands of the
Master of the High Court.
86.2
That
the costs of this application shall be costs in the liquidation.
________________________________
AVVAKOUMIDES, AJ
JUDGE
OF THE HIGH COURT
Representation for the
Applicant:
Counsel
Adv: G Kairinos
Instructed
by
Hogan Lovells (South Africa)
Representation for
Defendant:
Counsel
Adv: R Wilson
Instructed
by:
Glover Incorporated