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[2013] ZAKZPHC 42
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Gidizela Construction CC v HKB Construction CC (1575/2012) [2013] ZAKZPHC 42 (29 May 2013)
11
IN THE KWAZULU-NATAL HIGH COURT,
PIETERMARITZBURG
REPUBLIC OF SOUTH AFRICA
CASE NO: 1575/2012
In the matter between:
GIDIZELA CONSTRUCTION CC
.
...........................................................
APPLICANT
and
HKB CONSTRUCTION CC
................................................................
RESPONDENT
JUDGMENT
SISHI J
Introduction
[1] This is an application for the
provisional winding up of the respondent on the basis that:
The respondent is unable to pay its
debts and commercially insolvent as contemplated by section 69(1)(a)
and section 69 (1)(c) of
the Close Corporation Act 69 of 1984 (“the
Close Corporation Act”) alternatively:
[2] It is just and equitable that the
respondent be wound up as contemplated by section 81(c)(ii) of Act 71
of 2008 (“the
Companies Act”).
Background
[3] The respondent was awarded a
tender by the KZN Department of Transport which was for the
construction of earth works, layer
works and drainage at kilometres
11.0 to 14.0 on the main road E21A/P2710 situated at Mungulwane area
neat Mungulwane General Hospital.
[4] A contract was concluded between
the applicant and the respondent in terms whereof the applicant was a
sub-contractor.
[5] It was agreed that progress
payments received from the Department of Transport were to be paid
into a joint account opened at
Standard Bank, Ballito from where the
monies would be transacted or paid. This agreement was to be operated
by the party’s
joint signatures. The applicant was entitled to
97% of the monies received from the Department in respect of the work
actually
executed by it and the respondent was to 3% thereof.
[6] No serious disputes aroused in
respect of the first two payments received from the Department of
Transport. The dispute arose
when the sum of R578 362,21 was
paid by the Department of Transport of which the respondent paid the
sum of R160 000,00
to the applicant and the balance thereof
retained by the respondent. The applicant alleges that he has been
short paid by approximately
R405 000,00.
[7] According to the applicant, the
amount due to it will be calculated as follows:
97% of R578 362,21 = R561 000,
011-34 less 160 000 paid to the applicant by the respondent,
leaving the balance of
R401 000,00 which is allegedly due owing
and payable to the applicant.
[8] The respondent contends that the
amount of R578 362.21 was obtained from the department by
improper means and that the
value of the work actually done by the
applicant was 160 000,00.
[9] The respondent has alleged that
without its knowledge and consent, Mr Ntuli of the applicant
persuaded that site agent to approach
the Engineer, one Dalaan of SSI
(Pty) Ltd to focus a projection of the value of work which could be
executed over a period of time
and which was to be projected up to 15
December 2011. This amount is to R578 362,21. This “projecting”
certificate
was then without the respondent’s approval
submitted to the department for payment and the aforesaid amount was
then paid
into the Standard Bank account.
[10] According to the respondent, the
amount of R401 000,00 is not due, owing and payable to the
applicant. The respondent
contends that as the principal constructor,
its legally obliged to fulfil its obligations to the Department of
Transport. The allegations
referred to are of course disputed by the
applicant.
[11] The respondent submitted that the
amount allegedly due to the applicant is disputed, which dispute is
bona fide and which is
borne out by the response annexure “B10”
and “B11” to the founding affidavit, that is the letter
of demand
and the denial of the amount due by the respondent
respectively. According to the respondent, the only interpretation of
the aforesaid
response, that is, annexure “B11” to the
founding affidavit is that the respondent disputed or disagreed with
the contents
of annexure “B10” since the inception of the
matter.
Whether the respondent is unable
to pay debts
[12] Section 69 of the Close
Corporation Act provides as follows:
“
(Subsection
1) For the purposes of section 68(1)(c) repealed by section 224(2) of
the New
Companies Act 71 of 2008
) a corporation shall be deemed to be
unable to pay its pay is debts if –
A creditor, by session or otherwise,
to whom the corporation is indebted in a sum of not less than
R200,00 then due has served
on the corporation by delivering at its
registered office a demand requiring the corporation to pay the sum
so due and, and the
corporation has twenty one days thereafter
neglected to pay the sum or to secure or compound for it to the
reasonable satisfaction
of the creditor; or
…
It is proved to the satisfaction of
the court that the corporation is unable to pay its debts.
(2) In determining for the purposes of
subsection (1) whether a corporation is unable to pay its debts, the
court shall also take
into account the contingent and prospective
liabilities of the corporation.”
[13] Annexure “B10” to the
founding affidavit which according to the applicant is a letter of
demand does not comply
with the statutory requirements prior to
liquidation. The matter does not comply with the demand as envisaged
in section 69(1)(a)
of the Close Corporation Act 69 of 1984 prior to
liquidation proceedings and therefore cannot form the basis of this
application.
[14] The applicant submitted that
annexure “B10” to the applicant’s founding
affidavit is a written demand as
contemplated by section 69(1)(a) of
the Close Corporation Act aforesaid and materially complies with all
the requirements. Although
the aforesaid demand was faxed and not
delivered to the respondent’s registered offices contemplated
by the Close Corporation
Act, the applicant submitted that the
responded received the notice on the strength of the respondent’s
reply to the aforesaid
demand inviting the applicant to take legal
action. This response is referred to as annexure “BN11”
to the applicant’s
founding affidavit.
[15] In Nathania
and Alpha Efthymakies Properties v Hasersbeer Spreit Landgood CC
(1996)(2) All SA 317 T (A case dealing with section
69 (1) (a) of the
Close Corporation of 1984). The Court (after distinguishing the
Phase
case
1
on the basis of its
having been decided under the deference Act, i.e. (the 1926
Companies
Act) and
the
Hadrot
case
2
on the basis that
consideration had been given to
section 345(1)(a)
as a whole and that
the Appeal Court had left open the issue of substantial compliance),
concluded “at 323” that strict
compliance with the
relevant provisions was not required provided that the Close
Corporation had in fact received the demand, on
the basis that to
hold otherwise “would elevate form above substance” and
would mean that “a demand which is
delivered at the registered
office but not received by the management of the Close Corporation is
effective, but a demand received
by the management but not delivered
at the registered office is ineffective. This would be absurd”.
In the result the court
held that “the requirement that the
demand must be served on the corporation is perentry but that the
requirement that it
be done at the registered office is not and that
substantial compliance will in that respect surfice” see
Henesburg 708 (1).
[16] I align myself with the approach
inunciated in the above case.
[17] In my view, in the present case,
there has been substantial compliance with the provisions of section
69(1)(a) of the Close
Corporation Act.
[18] However, where
an applicant seeks to rely on the inability of a Corporation to pay
its debts by showing that a demand (although
not delivered to its
registered address) was in fact received by the corporation and that
it failed to respondent to that demand
within a reasonable time, the
application for winding up could be brought under the provisions of
section 69(1)(c). For the deeming
provisions of subsection (1)(a) to
apply there must be service at the registered office
3
.
In this matter, it is common cause that the so-called demand was
faxed to the respondent’s attorneys and not delivered at
the
respondent’s registered offices as contemplated by the Act.
[19] Section 69(1)(c) provides that
for the purposed of section (68)(c), a Close Corporation shall be
deemed to be unable to pay
its debts if – (c) it is proved to
the satisfaction of the court that the Corporation is unable to pay
its debts.
[20] The respondent has contended that
the sum of R405 000,00 rise at its disposal which is more than
adequate to meet the
alleged claim of the applicant.
[20] What is evident form the papers
is that, the respondent disputed its indebtedness to the applicant
even before the launching
of this application. The grounds upon which
the debt is disputed had been set out above.
[21] Apart from the fact that the
respondent has failed to pay the amount which the applicant alleges
the respondent owes, there
is nothing in the papers to suggest that
the respondent is unable to pay its debts. On the contrary, in his
opposing affidavit,
Buthelezi denies that the respondent is
commercially insolvent and states that the sum of … at the
companies disposal which
is more than adequate to meet the alleged
claim of the applicant. This allegation has not been seriously
disputed by the applicant.
[22] The applicant only assumes that
the respondent has other creditors and also assumes that the
respondent utilised monies from
the joint account between the
respondent and applicant to settle other creditors of the respondent.
The respondent has submitted
correctly in my view that these are mere
assumptions without any foundation and are being made to booster and
enhance the applicant’s
application. Other than this bold
allegation assuming that there are other creditors, apart from the
applicant, the applicant has
not shown that the respondent has any
other creditors.
[23] In order to
obtain a provisional order of liquidation an applicant is required to
establish a prima facie case. Where the application
is opposed, the
necessary prima facie case is established only when the applicant is
able to show that on a consideration of all
the affidavits placed
before court, a case for liquidation has established on a balance of
probabilities
4
.
Where, however, the respondent shows on a balance of probabilities
that its indebtedness to the applicant is disputed on bona
fide and
reasonable grounds, the application will be refused. In Kalil’s
case
5
,
Cobet JA as he then was, has the following to say in this regard:
“Consequently, where the respondent shows on a balance
of
probability that the indebtedness to the applicant is disputed on
bona fide and reasonable grounds, the court will refuse a
winding up
order. The onus on the respondent is not to show that it is not
indebted to the applicant, it is merely to show that
the indebtedness
is disputed on bona fide and reasonable grounds
6
.
[24] In all the circumstances of this
application, I am satisfied that the applicant has not established on
the balance of probabilities
that the respondent is unable to pay its
debts. I am also satisfied that the respondent has succeeded in
showing on the balance
of probabilities that its indebtedness to the
applicant was disputed on bona fide and reasonable grounds.
[25] Section 81(1) of the new
Companies Act 71 of 2008
set out the grounds upon which a court may
order a solvent company to be wound up. It reads:
(i) A Court may order a solvent
company to be wound up if –
(a) The company has-
…
One or more of his company creditors
have applied to court for an order to wind up the company on the
grounds that –
…
..
(ii) it is otherwise just an equitable
for the company to be wound up.”
[26] In Rand Air
case
7
dealing with the
Oil
Companies Act, the
court enunciated and discussed five broad
categories of cases that may be brought under it. These are
following:
1. Disappearance of the Companies
substructum;
2. Illegality of the objects of the
company and fraud in connection therewith;
3. A deadlock in the management of the
companies affairs which can only be resolved by winding it up;
4. Grounds analogous to those for the
dissolution of partnership and ;
5. Oppression.
In this case, the
court held that the just and equitable bases referred to in Section
344(h) of the Oil
Companies Act has
become rather a special ground
under which only certain features of the way in which a company is
being run can be questioned.
The court in this case fully described
what it meant by illegality of the objects of company and fraud
committed in connection
therewith. In describing this phrase, the
court stated that if a company is promoted in order to perpetrate a
serious fraud or
deception on the persons who are invited to
subscribe for its shares, it is the kind of case in which the persons
who are defrauded
in that fashion can take the promoters to court
and, provided the circumstances demand that, ask that the company be
wound up”
8
.
[27] Although there are allegations of
fraud and theft against the respondent, in the present matter, these
are not the ones contemplated
in paragraph 2 of the grounds referred
to in this case. The court went on to say that the just and equitable
ground is not some
catch all ground for winding up a company.
[28] In Budge &
Others case
9
,
the court held that just and equitable basis for the winding up of a
solvent company in terms of
section 81(1)
D (iii) should not be
interpreted so as to only include matters
euisdem
generis
the
grounds in
section 81.
The
euisdem
generis
rule
was in applicable to section 81(1)(d)(iii) of the New
Companies Act.
[29
] Consequently in the present
matter, I am satisfied that there are insufficient grounds to justify
liquidation on this ground.
[30] The issue which now remains is
whether the matter should be referred for the hearing of oral
evidence in order to enable the
applicant to attempt to establish
that the respondent is unable to pay its debts on a balance of
probabilities and other issues.
In my judgment, I am satisfied that
the case has not been made out for the referral of this matter for
the hearing of oral evidence.
On the information of the affidavits, I
am satisfied that there is nothing to suggest that the applicant will
be in a position
to achieve these objectives for this matter to be
referred to the hearing of oral evidence. Consequently, the request
that the
matter be referred for the hearing of oral evidence cannot
be upheld.
[31] Finally, on the totality of the
information placed before me, I am satisfied that the case has not
been made out for the winding
up of the respondent. Having reached
this conclusion, I am satisfied that the application should be
dismissed with costs.
[32] In the result, the following
order is made:
The application is dismissed with
costs.
________
SISHI J
APPEARANCES
Date of hearing : 15 November 2012
Date of judgment : 29 May 2013
Counsel for the Applicant : C. HATTING
Applicant’s Attorneys : LISTER &
LISTER
1
st
Floor, Suite 101
161 Pietermaritzburg Street
PIETERMARITZBURG
Tel No.: 033 345 4530
Fax No.: 033 342 2377
Ref:
NTULI11/0001/05/N052/001/AH/CR
Counsel for the Respondent : J.
NXUSANI
1
st
& 2
nd
Respondent’s Attorneys : Messrs Ngwenya & Zwane Attorneys
C/O Yashica Chetty Attorneys
Suite 1, 365 Longmarket Street
PIETERMARITZBURG
(Ref: Ms Y Chetty/ N6793
1
Phase
Electric Company (Pty) Ltd v Zinman’s Electrical Sales (Pty)
Ltd
1973 (3) SA 914
W
2
BP
and JP Investment (Pty) Ltd v Hadrot (Pty) Ltd
1977 (3) SA 753
W
3
Henesburg
of the Close Corporation Act Miskien (3) Kom-(2)(14)(1)
4
Kalil
v Decotex (Pty) Ltd & Another
1988 (1) SA 943
(A) at 987 D-E,
979 B-C and E-F
5
S
upra
,
at 980, C-D
6
Van
Zyl NO v Look Good Clothing CC 1996(3)SA 523 (SE) at 530 A-D).
7
Rand
Air (Pty) Ltd v Ray Bester Investment (Pty) Ltd 1985 (2),
8
Rand
Air case, supra, page 350, paras D-A.
9
Budge
& Others NNO v Midnight Storm Investments 256 (Pty) Ltd &
Another
2012 (2) SA 28
(GSJ) at paras 3 & 9.