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[2011] ZAFSHC 90
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DNH Makelaars Bk v Kleinhans (A324/10) [2011] ZAFSHC 90 (26 May 2011)
FREE STATE HIGH COURT,
BLOEMFONTEIN REPUBLIC OF SOUTH AFRICA
Case No. : A324/10
In the appeal between:
D N
H MAKELAARS BK
…...................................................................
Appellant
and
J P
KLEINHANS
…...........................................................................
Respondent
CORAM:
EBRAHIM, J
et
MOLE
MELA, J
JUDGMENT
BY: MOLEMELA, J
DELIVERED
ON: 26 MAY 2011
[1]
This is an appeal against the final order of liquidation granted
by the
Magistrate, Kroonstad on the 30 August 2010.
[2] The salient facts
giving rise to the appeal can be summarised as follows. The appellant
is a close corporation that conducts
business as a brokerage firm.
The respondent is a member of the close corporation concerned and had
also entered into an employment
contract with it (the close
corporation). The respondent sued the appellant for arrear salary for
February 2010 and March 2010
in the Magistrate's Court under case no.
1456/10. The appellant opposed the action and filed a plea and
counterclaim.
[3] While the
afore-mentioned action was pending, the respondent, via his
attorneys, issued a letter of demand claiming payment
of his salary
for the months of April 2010 and May 2010 in the amount of R40
224.00. This letter was duly served on the respondent.
As the
appellant did not pay the arrear salary claimed within the 21 day
period stipulated in the letter of demand, the respondent
brought an
application for liquidation of the appellant. The respondent averred
that its letter of demand had been issued in compliance
with the
provisions of section 69(1 )(a) of the
Close Corporations Act 69 of
1984
and that the appellant's failure to pay the amount claimed
within the stipulated period was an indication of its inability to
pay
its debts.
[4]
The appellant opposed the application for liquidation. In its
answering affidavit it denied liability to the respondent in respect
of the salary claimed and averred that the respondent had on the 6
th
April
2010 advised the appellant that he was going to seek another job
elsewhere and had never returned to the workplace. It further
averred
that the respondent had assumed employment with another company on
the 1
st
May
2010, for which services he had already been remunerated by the said
company. The appellant asserted in the alternative that
should it be
found that the respondent was indeed entitled to a salary then it
re-iterated the averment made in its counterclaim
under case no.
1456/10,
viz
that
the respondent is indebted to the appellant in respect of a loan
advanced by the appellant to the respondent, which indebtedness
was,
according to the appellant due and payable. The appellant further
averred that it was solvent and attached its latest financial
statements as proof of its solvency.
[5]
Having listened to a detailed address both in support of and against
the granting of the liquidation application, the court
a
quo
delivered
a brief judgment in the following terms:
"Wel, soos die Hof
dit verstaan is die wet baie duidelik, gronde vir likwidasie en een
van die gronde is as die korporasie
nie in staat is om sy skulde te
betaal nie en dat daar - hier het die Hof dit voor horn - versoek
gerig is om aan hierdie eis te
voldoen om die skuld te betaal en dit
dan binne 21 dae nie gedoen kan word nie. In hierdie geval is dit nie
gedoen nie, want dit
gaan hier soos wat hier betoog is om nie om
Februarie en Maart se salarisse nie, maar vandag se aansoek is ten
opsigte van April
en Mei en daar is 'n aansoek gedoen, versoek is
gerig en dit is nie betaal nie. Daar is kennis gegee om te se daar is
'n kontantvloei
probleem so dit kan nie betaal word nie. So wat die
Hof aanbetref, is die BK nie in staat om dit te doen nie en word die
aansoek
toegestaan soos versoek, wor dit 'n finale bevel gemaak"
(sic).
[6]
Given the text of the court a
quo's
judgment,
the inference is irresistible that before delivering its judgment,
the court a
quo
did
not pay any regard to the financial statements submitted by the
appellant. I make this statement mindful of the fact that judgments
are often brief and that they are not always expected to be
all-encompassing. This does not detract from the fact that a judgment
is expected to deal with all the important issues that were raised
and which led to the finding that was made. In this particular
instance, the court a
quo
had
an opportunity to give reasons for its judgment but chose to confine
itself to the scanty reasons enunciated in its judgment.
In my view,
the financial statements were a very important factor to be taken
into account when assessing whether the appellant
was unable to pay
its debts or not. After all, the appellant did not merely make a bold
allegation of its solvency, it also attached
financial statements as
proof thereof. These financial statements were not disputed by the
respondent, who happens to be a member
of the appellant close
corporation and can thus be expected to have information on the
veracity of such statements. (See
PLASCON
EVANS PAINTS V VAN RIEBEECK PAINTS
[1984] ZASCA 51
;
1984
(3) SA 623
(A).
[7]
Considering that the appellant's solvency and financial statements
were canvassed at length in the closing arguments
submitted
to the court
a
quo,
it
is not far-fetched for one to infer that the reason why the court a
quo
failed
to, in any way, allude to such financial statements and/or the issue
of solvency was because it did not take them into account
before
giving judgment.
[8]
The importance of considering solvency is in a way borne out by
section 69(2)
of the
Close Corporations Act 69 of 1984
, which
enjoins the court to take contingent and prospective liabilities of
the corporation into account when making a determination
as to
whether a corporation is unable to pay its debts. In my view, there
ought to be something in the judgment that somehow
demonstrates
compliance with this important provision. I could not find even a
semblance of such compliance in the court a
quo's
judgment.
Given the peremptory tenor of this provision, non-compliance
therewith surely ought to constitute a material misdirection.
[8]
In
ABSA
BANK LTD v COOPER NO AND OTHERS
2001
(4) SA 876
(T), the financial statements did not form part of the
papers filed before the court, yet the court was not prepared to
find
that the close corporation in question was unable to pay its
debts. The court stated as follows:
"I
can find no reason to differ with the principle laid down in Taylor
v Koekemoer
(supra),
namely
that the inability of a company to pay its debts must be measured in
the context of its winding up, that is in a weighing
up of assets
and liabilities. Mere commercial insolvency is not sufficient."
In
casu
the
financial statements were indeed part of the papers supporting the
appellant's averment that it is solvent. The court a
quo
however
paid no regard to them and confined itself to commercial insolvency
relying on a letter, issued by the appellant two months
before the
application. In my view, the court a
quo's
failure
to take the financial statements into account constitutes a material
misdirection warranting the setting aside of its
finding in respect
of the appellant's inability to pay its debts.
[9]
Another misdirection relates to the failure of the court
a
quo
to
take into account the factual dispute regarding indebtedness. From
the content of its judgment, it can safely be concluded
that the
existence of a dispute pertaining to indebtedness was not taken into
account. It is evident from the respondent's own
letter (exhibit
"DD") that the respondent was aware of the appellant's
dispute (regarding cancellation of the employment
contract) before
it even issued a letter of demand, yet it nevertheless proceeded
with an application for liquidation. In KALIL
V
DECOTEX
(PTY)
LTD AND ANOTHER 1988(1) SA 943 (A) at 976H where the court stated as
follows: "Where the application for a provisional
order of
winding up is not opposed or where, though it is opposed, no factual
disputes are raised in the opposing affidavits,
the concept of the
applicant, upon whom the
onus
lies,
having to establish a
prima
facie
case
for the liquidation of the of the company seems wholly appropriate;
but not so where the application is opposed and real
and fundamental
factual disputes arise on the affidavits, for it can hardly be
suggested that in such a case the Court should
decide whether or not
to grant an order without reference to respondent's rebutting
evidence". At 980B-D the following was
stated: "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." Also see
WOLHUTER
STEEL V JATU CONSTRUCTION
1983(3)
SA 815 (0) AT 825G - 826A. If the court a
quo
had
taken the factual dispute and the full context of the appellant's
failure to pay into account, it would most probably have
realised
that the failure to pay was prompted by unwillingness to pay, rather
than inability to pay. See
PAYSLIP
INVESTMENT
HOLDINGS
CC
v
Y2K
TEC
LTD
2001
(4) SA 781
(C) at 788 A-C.
[10]
In
casu
the
respondent also relied on an alternative ground for seeking the
appellant's liquidation,
viz
"that
it is just and equitable that the appellant be wound up". There
is a paucity of averments in support of this ground
and the
respondent seems not to have pursued it in its arguments both in the
court a
quo
and
in this appeal. In any case, in view of the appellant's averments
regarding solvency as supported by the financial statements
and the
dispute regarding the appellant's alleged indebtedness, there was in
my view no justification, on any ground, for the
order of
liquidation. Accordingly, the court a
quo's
order
ought to be set aside.
[11] Although the
question of costs was not canvassed during the hearing of this
appeal, there is no reason why the costs should
not follow the
result.
[12] I would accordingly
make the following order:
1. The appeal is upheld.
2.
The order of the court
a
quo
is
set aside;
3.
The respondent is ordered to pay the costs of both
the
application for liquidation and the appeal.
M.B.
MOLEMELA, J
I
concur
S.
EBRAHIM
On
behalf of appellant: Adv. N. Snellenburg
Instructed
by: Naudes
BLOEMFONTEIN
On behalf of respondent:
Adv. S.J. Reinders
Instructed by:
Rosendorff Reitz Barry BLOEMFONTEIN