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[2013] ZAKZDHC 42
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Ithala Development Finance Corporation Ltd v Concrescore Vehicle Repair Specialists (Pty) Ltd (101/2013) [2013] ZAKZDHC 42 (28 August 2013)
3
In the KwaZulu-Natal High
Court, Durban
Republic of South Africa
Case
No : 101/2013
In
the matter between :
Ithala
Development Finance Corporation Ltd
.....................................................
Applicant
and
Concrescore
Vehicle Repair Specialists (Pty) Ltd
.
........................................
Respondent
___________________________________________________________________
Judgment
___________________________________________________________________
Lopes J
[1] The applicant in this
matter, Ithala Development Finance Corporation Ltd, seeks a
provisional order of liquidation of the respondent,
Concrescore
Vehicle Repair Specialists (Pty) Ltd, on the grounds that the
respondent is insolvent and unable to pay its debts in
terms of the
provisions of ss 344 and 345 of the Companies Act, 1973 (‘the
old Companies Act’) read with item 9 of
schedule 5 of the
Companies Act, 2008 (‘the new
Companies Act&rsquo
;).
[2] The following are
common cause :
(a) during April and June
of 2011 the applicant loaned and advanced to the respondent :
(i) the sum of R4 222 309
for the financing of the respondent’s purchase of equipment;
(ii) R1 600 000
for working capital;
These loans were
effectively to finance the running of a vehicle repair shop by the
respondent;
(b) the respondent
breached its obligations to repay the amounts of those two loans and
the applicant issued summons out of this
court under the cases
numbered 7518/12 and 12368/12 respectively;
(c) the actions are
defended by the respondent and I understand that summary judgment has
been refused in both actions;
(d) there was, in
addition, a further debt owed to the applicant in respect of a lease
agreement concluded between the parties.
This was also the subject of
an action between the parties. That action has been settled in terms
of a settlement agreement dated
the 23
rd
August 2013 which
was coupled by a consent to judgment by the respondent in the sum of
R2 400 000. The consent to judgment
can, however, only be
lodged by the applicant in the event that the respondent fails to
make certain payments in respect of the
lease agreement debt;
(e) the applicant relies
upon the respondent’s failure to make payments in respect of
the two loans reflected above and submits
that the failure to pay
those amounts, which in total exceeds R6 000 000,
demonstrates the factual insolvency of the
respondent together with
the fact that it is unable to pay its debts in the normal course of
its commercial dealings;
(f) a Deeds search
conducted in the Deeds Office in Pietermaritzburg reflected that the
respondent does not own any immovable property;
(g) the applicant also
relied upon a letter addressed by three persons regarding the present
financial standing of the respondent.
One of those persons was the
deponent to the respondent’s answering affidavit. It is clear
from the contents of that letter
that the authors regard the
respondent as being in a dire financial position and the letter
reposes no confidence in the reader
that the respondent would be able
to pay its debts. The letter records :
‘
At
the moment the business is not even breaking even, and the legal
actions have exacerbated the situation. It (sic) evicted the
business
will not be able o (sic) function without a space. Effectively it
will have to shut down. Ironically, the only way Ithala
stands some
chance to get its money back is when the business is trading because
only then can it be able to repay its debts. The
nature of the
equipment and machinery which was brought is fitted on the ground and
therefore removing it will damage it which
will make it catch close
to nothing if sold. Individual directors who are sureties for the
debts have no asserts (sic) of value
to even consider executing upon
to recover the debts. In essence, if the business is closed, except
to crush the directors’
dreams of transforming the automobile
industry and putting 30 employees out of work, the debts will remain
unpaid, perhaps forever.
We do not believe that what is happening now
is at any of the party’s best interests’;
(h) in
what can only be described as an extremely short and vague answering
affidavit, the deponent, Mr Makhanya refers to the fact
that the
letter put up by the applicant was signed not only by himself but
also by one Khumbulani Lembede, a fellow director of
the respondent.
[3] I accept without
hesitation that an application for liquidation should not be resorted
to in order to enforce a claim which
is bona fide disputed by a
respondent company. In regard to the requirement of a defence to a
liquidation application, I refer
to the dicta of Corbett JA in
Kalil
v Decotex (Pty) Ltd and another
1988 (1) SA
943
(A) at 980 B -C as follows :
‘
Consequently,
where the respondent shows on a balance of probability that its
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.’
[4] All that the
respondent has stated as the basis for its defence is that the claims
of the applicant under the loan agreements
are defended. The deponent
simply records that the applicant cannot seek an order to liquidate
the respondent on claims which are
disputed.
[5] Mr
Troskie
SC who appears for the applicant submitted that the
advance of the loans is not denied and no explanation has been given
regarding
the non-payment of the instalments in respect of those
loans. He submitted that on the basis of the loans and the failure to
pay
by the respondent,
both the actual insolvency
and the inability of the respondent to pay with the resulting
conclusion of commercial insolvency,
are
established.
[6] Mr
Sibisi
who
appeared for the respondent submitted that as the lease agreement had
been settled between the parties it could not be taken
into account
by the court in concluding whether or not the respondent was
insolvent. This is because the first payment in terms
of the
settlement agreement of the lease payments is only to be paid on the
1
st
October 2013. Purely for the purpose of this
application I record that I have not taken into account the
indebtedness of the respondent
in respect of the lease agreement,
despite the fact that the compromise which the respondent reached
provides strong evidence of
the respondent’s inability to pay
its debts. Ultimately, Mr
Sibisi
had to rely upon the fact
that both the loan agreements are the subject of defended actions. In
the light of the test as laid out
in
Kalil
and the
respondent’s failure in any way to deal with the respondent’s
defences to its failure to pay the loans advanced
by the applicant, I
have no doubt that the applicant has established the requisites for a
provisional order of liquidation of the
respondent.
[7] In the premises I
make the following order :
1. a rule nisi is hereby
issued calling upon all persons to show cause, if any, to this court
on the 18
th
October 2013 at 9.30am or so soon thereafter
as the matter may be heard, why the respondent should not be finally
wound-up;
2. this order is to
operate with immediate effect as a provisional order winding-up the
respondent;
3. service of this order
is to be effected :
(a) by publication on or
before the 4
th
October 2013 in both the Government Gazette
and a daily newspaper published and circulating in KwaZulu-Natal;
(b) as required by the
provisions of the Companies Act, 1973.
Date
of hearing : 26
th
August 2013
Date of judgment : 28
th
August 2013
Counsel for the Applicant
: A J Troskie SC (instructed by Ndwandwe& Associates)
Counsel for the
Respondent : M Sibisi (instructed by Mhlanga Incorporated)