SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document
in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
CASE NO: 18901/2023
In the matter between:
DANGEROUS GOODS INTERNATIONAL SA (PTY) LTD Applicant
and
JAG FREIGHT (PTY) LTD First Respondent
JASON ADRIAN GEYSMAN Second Respondent
Before: The Hon. Ms Acting Justice Mahomed
Heard: 15 May 2024
Delivered: 30 May 2024
JUDGMENT
___________________________________________________________________
MAHOMED, AJ:
[1] This is an application to place the first respondent into provisional liquidation on the
ground that it is “just and equitable ” to do so in terms of section 344( h) of the
Companies Act, 61 of 1973 ( hereafter “the Companies Act, 1973 ”), alternatively in
terms of section 81(1)(c)(ii) of the Companies Act, 71 of 2008 ( hereafter “The
Companies Act, 2008”).
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[2] The applicant seeks to wind -up the first respondent on the basis that the first
respondent is an alleged unlawful competitor of the applicant.
[3] The applicant seeks no relief from the second respondent , who was an employee of
the applicant from April 2015 to 9 October 2023.
[4] The respondents opposed the application and instituted a counter-application in which
they claimed a declarator that the application is an abuse of the court’s procedure
and/or is malicious and vexatious as contemplated in section 347(1A) of the
Companies Act, 1973 . During the hearing of the application, the respondents
withdrew the counter-application and tendered the applicant’s costs in respect thereof.
[5] The respondents persist with a claim for a punitive costs order against the applicant
should the application be dismissed.
THE ISSUES RAISED IN THE APPLICATION
[6] The issues raised in the application are as follows:
[6.1] Is unlawful competition a legal ground for a provisional winding-up order?
[6.2] Does the applicant have locus standi to bring the application?
[6.3] Has the applicant satisfied the requirements for a provisional winding -up
order?
[7] The question w hether the applicant ha d complied with the procedural requirements
for a winding -up order was also an issue, but was resolved at the commencement of
the hearing when the respondents indicated that they had no objection to the late filing
of the Master’s report.
RELEVANT PROVISIONS OF THE COMPANIES ACT, 1973 AND THE
COMPANIES ACT, 2008:
[8] The following statutory provisions are relevant to the application:
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[8.1] The Companies Act, 1973:
“344. Circumstances in which company may be wound up by Court A
company may be wound up by the Court if-
…
(h) it appears to the Court that it is just and equitable that the
company should be wound up.”
[8.2] The Companies Act, 2008:
“20. Validity of company actions:
...
(9) If, on application by an interested party or in any proceedings in
which a company is involved, a court finds that the incorporation
of a company, any use of the company, or any act by which or on
behalf of the company, constitutes an unconscionable abuse of
the juristic personality of the company as a separate entity, the
court may –
(a) declare that the company is deemed not to be a juristic
person in respect of any right, obligation or liability of the
company or of a shareholder of the company or, in the case
of a non -profit company, a member of the company, or of
another person specified in the declarator; and
(b) make any further order that the court considers appropriate
to give effect to a declaration contemplated in paragraph
(a).
...
81. Winding up of a solvent company by court order:
(1) A court may order a solvent company to be wound up if—
...
(c) one or more of the company’s creditors have applied to
the court for an order to wind up the company on the
grounds that—
...
(ii) it is otherwise just and equitable for the company to
be wound up;”
[8.3] Schedule 5 of the Companies Act, 2008, which states the following:
“9. Continued application of previous Act to winding-up and liquidations:
(1) Despite the repeal of the previous Act, until the date determined
in terms of sub-item (4), Chapter 14 of the Act continues to apply
with respect to the winding -up and liquidations of companies
under this Act, as if that Act had not been repealed subject to
sub-items (2) and (3).
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(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 Provision of Part G of
Chapter 2.”
MATERIAL FACTS:
[9] The applicant conducts business as a global logistics company speciali sing in the
transportation of hazardous goods worldwide and focus ing on nine classes of
dangerous goods.
[10] The applicant proved in evidence a copy of the first respondent’s website page ,
wherein the first respondent advertises itself as a “Specialist in the Logistics Industry”
which includes:
“1. National Road Freight;
2. Air Freight;
3. Sea Freight; and
4. Packing dangerous goods.”
[11] Despite this webpage, in the first respondent’s answering affidavit (deposed to by the
second respondent), the first respondent c ontends that it “ operates only as a broker,
also called a freight forwarder, does not handle or carry out the shipment itself, and
with its core focus on general cargo”.
[12] Somewhat confusingly, the first respondent has admitted that the second respondent’s
telephone number appeared on its aforesaid website page, but has baldly denied the
applicant’s general allegations relating to the first respondent’s website page and the
purported business of the first respondent as described therein as aforesaid.
[13] The respondents have provided no positive proof that the first respondent’s business
is that of a broker/freight forwarder and, save for the aforesaid bald denial which
contradicts its website page , have not positively refuted the existence of and the
contents of the first respondent’s aforesaid website page.
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[14] The applicant alleges that the second respondent utilised the first respondent as a
vehicle to compete unlawfully with the applicant, and the respondents have responded
that the first respondent does not operate in the same fields of “service rendering” as
the applicant but, again, have provided no positive proof of this.
[15] Based on the aforegoing, I reject the respondents’ bald denials and unsupported
allegation that it is only a broker/freight forwarder not in direct competition with the
applicant to the extent that the se conflict with th e allegations of the applicant , and
accept the applicant’s allegations to the contrary that the first respondent is a logistics
company as described on its website page, and is a direct competitor of the applicant.
[16] The “ Disclosure Certificate: Companies and Close Corporations” from the
Companies and Intellectual Property Commission (“CIPC”) dated 11 October 2023
as well as the first respondent’s financial statement for the year ending February 2022
both reflect that the second respondent is the sole director of the first respondent .
There is also no mention of a board of directors or other shareholders.
[17] The respondents have alleged that the first respondent is a “joint venture” with one
Lizette Andrew Miller (“Ms Miller”) but, again, have provided no positive proof of
this to discredit the aforesaid CIPC official documents.
[18] Based on the aforegoing , I accept that the second respondent is the sole director and
sole shareholder of the first respondent.
[19] The following are common cause facts regarding the relationship between the
applicant and the second respondent:
[19.1] Prior to the applicant suspending him on 9 October 2023, the second
respondent had been in the employ of the applicant since 7 April 2015 and,
since 16 May 2019, as the Branch Manager of its Cape Town operations.
[19.2] The second respondent’s contract of employment with the applicant contains
the following clauses:
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[19.2.1] Clause 4.1: As an employee of the company the employee shall:
(1) Clause 4.1.3 : abide by bona fide work practices in his
relationship with the company and/or its clients;
(2) Clause 4.1.4 : devote the whole of his time, attention and
abilities during business hours to the discharge of his duties
under this agreement;
(3) Clause 4.1.5: use his best endeavours properly to conduct,
improve, extend, develop, promote, protect and preserve the
business interests, reputation and goodwill of the company
and carry out his duties in a proper, loyal and efficient
manner.
[19.2.2] Clause 4.2: The applicant shall not be entitled to be directly or
indirectly employed by any other person or business concern
whatsoever without the knowledge and prior written consent of the
company.
[19.2.3] Clause 13. Disclosure:
Clause 13.1: The employee is required to disclose and declare all
outside or other interests which are or may be in conflict with the
interest of the company. The company may require the employee to
refrain from the activities, which request he is obliged to observe.
[19.3] As an employee of the applicant, the second respondent bore a fiduciary duty
towards the applicant, as his employer.
[19.4] The second respondent breached the terms of his employment contract, in that:
[19.4.1] He never disclosed his interests in the first respondent to the
applicant, particularly his role as the sole director of the first
respondent.
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[19.4.2] The applicant never approved the second respondent’s use of the
first respondent’s services as a broker or intermediary on behalf of
the applicant
[20] It is trite that when an employee joins a company, the employee has an obligation to
the employer to behave in a trustworthy manner and, specifically, may not:
[20.1] Put himself in a position where his interests conflict with th ose of the
employer;
[20.2] Make a secret profit at the expense of the employer.
[20.3] Misuse the employer’s trade secrets and confidential information; and
[20.4] Tell lies to the employer.
[21] According to the applicant:
[21.1] On or about 25 September 2023, one Mr Jared Barnes , informed the applicant
that the second respondent had been conducting himself dishonestly and in
breach of his employment contract and common law duties to the applicant by
promoting the interests of the first respondent above those of the applicant.
[21.2] The applicant then launched a n investigation into the first and second
respondents (hereafter “the investigation”) and discovered that for some time
the second respondent, as an employee of the applicant, had been enabling the
first respondent to unlawfully compete with the applicant in the following two
ways (hereafter collectively referred to as “ the alleged unlawful
competition”):
[21.2.1] Firstly, the second respondent had unlawfully referred queries which
the applicant had received from its customers (and from potential
customers) to the first respondent , which enabled the first
respondent to potentially service th ose customers and potential
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customers in the place and stead of the applicant , to whom th ose
queries had initially been directed; and had thereby effectively and
unlawfully abus ed his position as an employee of the applicant to
misappropriate the applicant’s corporate opportunities . For ease of
reference, this first form of alleged unlawful competition on the part
of the first and second respondents is referred to hereafter as “ the
unlawful appropriation of the applicant’s business opportunities”.
[21.2.2] Secondly, the second respondent had unlawfully interposed the first
respondent as a broker or intermediary between the applicant and its
service providers without the knowledge or authority of the
applicant, which resulted in the applicant making a series of
unnecessary payments of secret commissions to the first respondent
which, for the period from July 2019 to date, amount ed to
R1 049 662.60 in total. For ease of reference, this second form of
alleged unlawful competition on the part of the first and second
respondents is referred to hereafter as “ the unlawful payment of
secret commissions to the first respondent”.
[22] On or about 9 October 2023, and pursuant to the investigation the applicant
suspended the second respondent pending an investigation into his conduct and also
suspended the following two further employees whom, the applicant suspected , had
either acted unlawfully in concert with the second respondent or had been negligent in
the discharge of their duties to the applicant:
[22.1] Reva Symons, the applicant’s business development executive; and
[22.2] Jasper Petrus Cornelius van der Westhuizen , a director of the applicant and
also its country manager.
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[23] During argument the respondents’ counsel conceded that the second respondent owed
the applicant a fiduciary duty and intimated that the second respondent may have
breached these fiduciary duties.
[24] As proof of the aforesaid alleged unlawful competition, the applicant attached to the
founding affidavit certain emails transmitted during the period from 2019 to February
2022, which it had unearthed during the investigation (and which it buttressed with
invoices in the replying affidavit).
[25] These e -mails contained inter alia the following examples of what the applicant
described as the unlawful appropriation of the applicant’s business opportunities by
the respondents (which examples were not exhaustive):
[25.1] On 17 April 2019, Sea Freight Import Controller, an existing client of the
applicant, addressed an e -mail to one Mr Alric Jacobs at the applicant
requesting an estimate for a shipment of stainless -steel cleaner to be shipped
from Durban to Dar Es Salaam. On 10 May 2019, the second respondent
forwarded that request for an estimate to the first respondent.
[25.2] On 2 March 2020, the applicant received a request for a quote from an existing
client, Globe Flight and on 6 March 2020, the second respondent forwarded
that request for a quote to the first respondent.
[25.3] On 9 March 2020, a prospective client of the applicant,
Lumière Technologies, addressed a request for a quote to the second
respondent at the applicant for services to be provided by the applicant. On
the same day, the second respondent forwarded that request for a quote to Ms
Miller at the first respondent.
[25.4] On 18 March 2020, another prospective client of the applicant, Cat Walk
Cosmetics, requested a quote from the applicant for the transport of a palette
of aerosols and oil to Medsure Pharmaceuticals in Zimbabwe. On the same
10
day, the second respondent forwarded th at request for a quote to the first
respondent.
[25.5] On 17 April 2020, an existing client of the applicant for whom the applicant
had historically rendered services, Skyline Global Logistics, requested a quote
from the applicant to move a container of firearms and ammunition from Cape
Town Port to 5 […] Bamboesvlei, Ottery. On the same day, the second
respondent replied to that request for a quotation by stating “Please see below
from jay@ [...] [the email address of Ms Miller’s address at the first
respondent] she is cc you can take it from there”, and also copied such reply to
sales@[....]a
[25.6] On 17 July 2020, the applicant received a request from an existing client, ACT
Logistics (Pty) Ltd for a quote to transport 30 x 1000 litres flowbins of hand
sanitiser from Gingindlovu to Postmasburg Municipality. On the same day,
the second respondent forwarded th is request for a quote to Ms Miller at the
first respondent.
[25.7] On 3 November 2021, the applicant received an instruction from AME
Administrative Support to collect a consignment of promotional items and
hand sanitiser from Africanos Country Estate and to deliver same to Corteva
Agriscience. On the same day, the second respondent forwarded th is
instruction to the first respondent to arrange collection.
[26] These e -mails also contained what the applicant described as an example of the
second respondent unlawfully interposing the first respondent as a broker or
intermediary between the applicant and its service providers without the knowledge or
authority of the applicant, which resulted in the unlawful payment of secret
commissions to the first responden t. This was an e -mail dated 23 February 2022
which the second respondent sent to various employees of the applicant in which he
instructed such employees to ad dress requests for quotations to Althea Arendse and
Ronelle Walker, both representatives of Blue Line Express. In this e -mail, the second
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respondent also advised the applicant’s employees that: “ DGI [the applicant] do [sic]
not have an account, this account belongs to Jag Freight, as always cc info@[...]a
when booking collections.”
[27] During the investigation , the applicant also found documents of the second
respondent at its premises, which included invoices which the first respondent had
issued to Titan Helicopters (Pty) Ltd . The applicant prepared a schedule of these
invoices, which reflect that the first respondent had billed Titan Helicopters a total
amount of R32 391 460.62. The applicant made the following further allegations
regarding the Titan Helicopters invoices captured on its aforesaid schedule (in its
replying affidavit):
[27.1] These Titan Helicopters invoices related to dangerous goods as well as the
transport of spares required for the repairs/maintenance of aircraft , all of
which form part of the applicant’s business , being business which the
applicant had allegedly lost as a result of the alleged unlawful competition of
the respondents.
[27.2] The invoices which the first respondent had issued (by the second respondent
as its sole director) were also fraudulent in that th e second respondent had
used the address of the applicant on these invoices as well as the applicant’s
stationery.
[28] The respondents’ responses to the investigation and the findings thereof included the
following:
[28.1] The queries which the applicant had received from its customers (and from
potential customers) and which the second respondent forwarded to Ms Miller
of the first respondent were forwarded so that Ms Miller could provide him
with assistance. In that regard, I note that the respondents failed to explain
why they failed to attach any positive proof of any alleged assistance provided
by Ms Miller.
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[28.2] The s econd respondent alleged that he could not recall certain of the
shipments and stated that he was therefore unable to confirm or elaborate.
[28.3] The second respondent denied that a particular client, who wanted to have
solar panels moved, was a prospective client of the applicant for two reasons;
firstly, that these were not “dangerous goods” and, secondly, as no client
would pay a 60% mark-up fee; and stated that he had therefore diverted that
work to the first respondent.
[28.4] The first respondent had quoted the applicant on certain shipments , allegedly
in order to save the applicant and its clients’ money, thereby prevent ing a
souring of the relationship between the applicant and its client.
[28.5] Some of the requests for quotes were received during the Covid-19 period
when the applicant had minimal resources, so he had diverted these to the first
respondent.
[28.6] The first respondent stepped in where the applicant’s agents were not readily
available and where shipments had to be sent off due to extreme urgency.
[28.7] The s econd respondent admitted that he instructed the employees of the
applicant, a Ms Leona Reddy, Mr Mahan Govender, Mr Gerrit Steyn and Mr
Mothusi Mokae to use the first respondent’s account because they negotiated
below/market-related rates.
[29] The applicant alleged that the second respondent breach ed the fiduciary duties which
he owed the applicant while employed by it (which fiduciary duties were admitted by
the respondents) by utilising the first respondent to unlawfully compete with the
applicant in the two ways mentioned in paragraph 21.2 above.
[30] Regarding the second respondent’s unlawful interposition of the first respondent as a
broker or intermediary between the applicant and its service providers without the
knowledge or authority of the applicant, the applicant elaborated that this had resulted
13
in the applicant making a series of unnecessary payments of secret commissions to the
first respondent totalling R1 049 662.00 during the period from July 2019 to 9
October 2023. The applicant alleges that as a result, the first respondent is indebted to
the applicant in at least this amount.
[31] The applicant alleges further that it is apparent from the aforegoing that:
[31.1] The business of the first respondent is unlawful , and the first respondent’s
only purpose and raison d’ etre is to compete unlawfully with the applicant,
and it serves no other purpose.
[31.2] The second respondent utilises the first respondent to compete unlawfully with
the applicant.
[31.3] The business of the first respondent is constituted solely by the business of the
applicant being unlawfully diverted to it by the second respondent.
[31.4] The applicant is a creditor of the first respondent on the basis that whatever
profits the first respondent has made belong to the applicant and the first
respondent is obliged in law to disgorge the se profits and pay them over to the
applicant.
[31.5] The first respondent is also obliged to repay the applicant the aforesaid
amount of R1 049 662.60 as money which it was fraudulently induced to pay
the first respondent as secret commissions.
[31.6] Once a liquidator is appointed to wind -up the affairs of the first respondent,
the applicant will be able to establish th e amount of the losses it has suffered
and pursue the appropriate action against the second respondent and/or any
other entities and/or individuals who acted unlawfully with the second
respondent.
[32] The respondents admitted that the second respondent from time to time caused the
applicant to ma ke use of the services of the first respondent but alleged that was
14
limited and for the benefit of the applica nt, and that as a result the applicant did not
suffer any loss but in fact saved money.
[33] The respondents neither admitted nor denied that they were a competitor of the
applicant but denied that the first respondent’s business was ever fraudulently
conducted. In addition, and based on the first respondent’s financial statements for
the year ending February 2022, they alleged that only one -tenth of the first
respondent’s business was generated from business done with the applicant.
[34] When the respondents ’ counsel was pressed as to why the first respondent was
involved at all in offering any services to the applicant, h is response was that the first
respondent saved the applicant money on courier services.
IS U NLAWFUL COMPETITION A L EGAL GROUND FOR A PROVISIONAL
WINDING-UP ORDER?
[35] The legal basis which the applicant relies upon for the provisional winding -up
application is the alleged unlawful competition by the first respondent with the
applicant, instigated by the second respondent1.
[36] The applicant seeks to wind up the first respondent on the basis that the first
respondent was formed with the specific fraudulent intention of unlawfully competing
with the applicant and that it is therefore just and equitable to wind -up the first
respondent.
[37] The question which arises is whether the applicant is entitled, in law, to a provisional
winding-up order against the first respondent solely on the basis that the first
respondent is unlawfully competing with it?
[38] In this regard, the respondents submitted that:
1 See the following pages and paragraphs in the record, where this is common cause: p. 7 paras 9 & 11; p.
13para 25.1 & 26; p. 145 para 23.
15
[38.1] It is puzzling what the applicant’s motive was for applying to wind-up the first
respondent.
[38.2] The process for winding-up is not designed for the resolution of disputes as to
the existence or non-existence of a debt2; and
[38.3] As a general proposition , interdict proceedings would have been more
appropriate in these circumstances , for which they relied on Atlas Organic
Fertilizers v Pikkewyn Ghwano3.
[39] The court, in Atlas Organic Fertilizers (supra) stated that:
“…our law has … been firmly set on the path of recognition of a general
action for unlawful competition based on the lex Aquilia .” [emphasis
added]
[40] It is settled law that unlawful competition gives rise to two causes of action, namely a
delictual claim for damages and/or a claim for interdictory relief; and the applicant is
obviously at large to pursue those remedies against the respondents if so minded. In
this regard, t he locus classicus on the remedies available in cases of unlawful
competition is Dun and Bradstreet (Pty) Ltd v S.A Merchants Combined Credit
Bureau4, where the court stated the following:
“Reverting to the position in our law and without attempting to define generally the
limits of lawful competition, it seems to me that w here, as in this case, a trader has by
the exercise of his skill and labour compiled information which he distributes to his
clients upon a confidential basis (i.e. upon the basis that the information should not be
disclosed to others), a rival trader who is not a client but in some manner obtains this
information and, well knowing its nature and the basis upon which it was distributed,
uses it in h is competing business and thereby injuring the first mentioned trader in his
business, commits a wrongful act vis -à-vis the latter and will be liable to him in
damages. In an appropriate case, the plaintiff trader would also be entitled to claim an
interdict against the continuation of such wrongful conduct.” [emphasis added]
[41] To the best of my knowledge, South African law has, to date, not recognised unlawful
competition as a ground for the granting of a winding -up order on the just and
equitable ground. I am of the view that a proven debt owed to an applicant arising
2 Kalil v Decotex (Pty) Ltd 1988 (1) SA 943 (AD) at 98
3 1981 (2) SA 173 (TPD)
4 1968 (1) SA 209 (C) at 221C-E
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from the delict of unlawful competition might conceivably form a basis for such a
winding-up order provided, of course, that the just and equitable ground is satisfied
and that all other established requirements for a winding -up application are also
satisfied.
[42] I now turn to consider those requirements.
DOES THE APPLICANT HAVE LOCUS STANDI TO BRING THE APPLICATION?
[43] I now consider whether, o n the facts of th e matter, the applicant ha s the necessary
locus standi to bring the application.
[44] The legal principles applicable to locus standi are all well established and are set out
below:
[44.1] In Gross & Others v Pentz5, Harms JA said that:
“The question of locus standi is in a sense a procedural matter, but it is also a
matter of substance. It concerns the sufficiency and directness of interest in the
litigation in order to be accepted as a litigating party.”
[44.2] The SCA in Public Protector v Mail & Guardian6, held that:
“The common law has no fixed rule that determines whether a party has
standing to bring litigation, and the courts have always taken a flexible and
practical approach. The right to bring litigation before the courts is restricted
for various reasons: the courts are not there to pronounce upon academic
issues; they are not there to pronounce upon matters that have no significant
consequences for the initiating party; they are not there for the benefit of
busybodies who wish to harass others; and so on. Thus the courts have always
required that an initiating litigant should have an interest in the matter. The
interest that is required has been expressed in various forms that are collected in
Cabinet of the Transitional Government for the Territory of South West Africa v
Eins It has been expressed as 'an interest in the subject matter of the dispute
[that] must be a direct interest', and as 'an interest that is not too remote', and as
'some direct interest in the subject -matter of the litigation or some grievance
special to hims elf', and as 'a direct interest in the matter and not merely the
interest which all citizens have'. …”
[44.3] In Firm-O-Seal CC v Prinsloo & Van Eed en Inc and Another 7, the SCA
held that:
5 1996 (4) SA 617 (A) at 632C
6 2011 (4) SA 420 (SCA) at para [29]
7 (483/22) [2023] ZASCA 107 (27 June 2023) at para [6]
17
“Locus standi in iudicio is an access mechanism controlled by the court itself.
Generally, the requirements for locus standi are these: the applicant must have
an adequate interest in the subject matter of the litigation, usually described as a
direct interest in the relief sought; the interest must not be too remote; the
interest must be actual, not abstract or academic; and, it must be a current
interest and not a hypothetical one. Standing is thus not just a procedural
question, it is also a question of substance, concerning as it does the sufficiency
of a litigant’s interest in the proceedings. The sufficiency of the interest depends
on the particular facts in any given situation. The real enquiry being whether the
events constitute a wrong as against the litigant.” [footnotes omitted].
[45] It is common cause that the applicant is neither a director nor a shareholder of the first
respondent, and that to qualify as having the necessary locus standi to bring the
application the applicant must establish that it is a “creditor” of the first respondent.
[46] The applicant has accepted this both in the papers and in argument and has alleged (in
its founding and replying affidavits) and has contended (in its heads of argument) that
the applicant is a contingent or prospective creditor and that it therefore has the
necessary locus standi to wind up the first respondent. The authority it relies upon for
the terms “contingent or prospective creditor” is Rogal Holdings (Pty) Ltd v Victor
Turnkey Projects (Pty) Ltd8.
[47] I did not understand the respondents to argue that section 81(1)(c)(ii) of the
Companies Act, 2008 should be read expansively , so as to exclude contingent or
prospective creditors , even though this section, unlike section 346 (1)(b) of the
Companies Act, 1973, does not expressly refer to prospective and contingent
creditors.
[48] In Gillis-Mason Construction Company v Overvaal Crushes 9, Trengove, J stated
the following regarding contingent or prospective creditors:
“It seems to me, in light of these authorities, that a contingent or
prospective creditor may be defined as one who by reason of some
existing vinculum iuris has a claim against a company which may ripen
into an enforceable debt on the happening of some future event or on
some future date.”
8 2022 JDR 1031 (GP) at paras [12] to [20]
9 1971 (1) SA 524 (TPD) at 528C-C
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[49] In the absence of a direct debtor-creditor relationship between the applicant and the
first respondent arising from a contract or otherwise, the question arises whether there
is a sufficient existing vinculum iuris (legal tie that binds one person to another,
creating an obligation or legal bond) between the applicant and the first respondent to
clothe the applicant with the necessary locus standi to wind up the first respondent.
[50] In this regard, t he applicant relies on the following two grounds to establish the
necessary vinculum iuris between itself and the first respondent:
[50.1] The law of attribution; or
[50.2] Vicarious liability of the first respondent for the wrongs of the second
respondent.
The law of attribution:
[51] In summary, the applicant submits that the aforesaid alleged unlawful competition of
the second respondent , which caused it to suffer loss , can be attributed to the first
respondent for the following reasons:
[51.1] The second respondent’s fraudulent and unlawful conduct, in breach of his
contractual and common law fiduciary duties to the applicant, and in favour of
the first respondent, included the following:
51.1.1 He fraudulently interposed the first respondent between the applicant
and Blue Line Express (Pty) Ltd, one of the applicant's courier service
providers.
51.1.2 He f raudulently forward ed details of the applicant's clients and
prospective clients to the first respondent and thereby st ole, and
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conspired with others to steal, corporate opportunities belonging to the
applicant.
51.1.3 He fraudulently used the applicant's premises, address and stationery in
its unlawful transactions with Titan Helicopters.
[51.2] All revenues and profits which the first respondent earned as a consequence of
the aforesaid unlawful conduct of the second respondent were earned as a
direct result of such unlawful conduct as the second respondent was obliged ,
by virtue of his employment as the applicant's branch manager, to retain
and/or procure such revenue and profits for the benefit of his employer, the
applicant.
[51.3] The second respondent is personally liable to the applicant for any loss he
caused the applicant as a result of such unlawful conduct , and the first
respondent is also liable to the applicant for such loss on the basis that the
unlawful conduct of the second respondent can be attributed to the first
respondent.
[52] In that regard, the applicant submitted that when the s econd respondent unlawfully
diverted the applicant’s corporate opportunities to the first respondent and caused the
applicant to pay the first respondent so -called secret commissions, he did so as an
employee of the applicant (its branch manager ) and while he was also the sole
director and sole shareholder of the first respondent and, as such, the controlling will
and mind, or alter ego, of the first respondent. On this basis, the applicant alleges that
the wrongful conduct of the second respondent can be attributed to the first
respondent.
[53] In my view, the applicant has established the following on the probabilities, and I find
accordingly:
[53.1] The first and second respondents competed unlawfully with the applicant in
the two ways set out in paragraph 21.2 above.
20
[53.2] The unlawful conduct on the part of the second respondent , in diverting
corporate opportunities of the applicant to the first respondent and in causing
it to allegedly pay so-called secret commissions to the first respondent , in
direct competition with his employer, can be attributed to the first respondent.
[53.3] In that regard, there is a direct vinculum iuris between the applicant and the
second respondent as the second respondent was an employee of the applicant
when he conducted himself in this way.
[53.4] Insofar as the second respondent was the sole director and sole shareholder of
the first respondent when he conducted himself in this way, I accept that this
wrongful conduct of the second respondent can be attributed to the first
respondent and that it was clearly his alter ego.
[54] In amplification of my aforesaid findings, I state the following:
[54.1] I am of the view that the following principles enunciated by the SCA in
Consolidated News Agency (Pty) Ltd (in liquidation) v Mobile Telephone
Network (Pty) Ltd 10 are applicable to this matter , in which the second
respondent held a senior position at the applicant, namely branch manager of
the applicant’s Cape Town operations, and was also simultaneously the sole
director, sole shareholder and controlling mind of the first respondent:
“[31] The authorities relied upon by the parties are not in conflict. Each must of
course be read in context. In each case the court strives to determine whether
it is the company which has spoken or acted to a particular effect through the
voice or conduct of a human agency and is thereby to be held to the
consequences, or whether that agency was engaged in an activity which
cannot fairly be attributed to the company. Each case raises different facts
and the eventual conclusion must depend upon inference and probability in
the absence of express evidence of adoption of the statements or conduct as
the company’s own. Respondents’ counsel referred us to the following dictum
from Re Bank of Credit and Commerce International SA (in liquidation) (No
15): Morris v Bank of India [2005] 2 BCLC 328 (CA) as to the kind of factors
that a court would look at in determining whether a particular natural person
is the directing mind of the company for a particular act or state of mind. The
rules of attribution would-
10 [2010] 2 All SA 9 (SCA) at para [31]
21
‘typically depend on factors such as these: the agent’s importance as seniority in
the hierarchy of the company: the more senior he is, the easier it is to attribute. His
significance and freedom to act in the context of a particular transaction: the more
it is “his” transaction, the more he is effectively left to get on with it by the board,
the easier it is to attribute. The degree to which the board is informed, and the
extent to which it was, in the broadest sense, put upon enquiry: the greater the
grounds for suspicion or even concern or questioning, the easier it is to attribute, if
questions were not raised or answers were too readily accepted by the board.’”
[54.2] I also consider the following dicta of the (then) Appellate Division in
Commissioner for Inland Revenue v Richmond Estates (Pty) Ltd 11 to be
directly in point in attributing the intention of the second respondent to the
first respondent:
“A company is an artificial person with no body to kick and no soul to damn and the
only way of ascertaining its intention is to find out what its directors acting as such
intended. Their formal acts in the form of resolutions constitute evidence as to the
intentions of the company of which they are directors…where a company has only one
director, who is also the managing director and the sole beneficial owner of all its
shares, I see no reason in principle why it should be incompetent for him to give
evidence as to what was the intention of the company at any given time”.
[54.3] In arriving at my aforesaid finding s, I have drawn the following inferences
from the facts:
54.3.1 The second respondent is the sole director of the first respondent,
which implies that there was no board of directors to play any role in
the decision-making of the first respondent, which in turn implies that
the actions of the second respondent can be attributed to the first
respondent.
54.3.2 The second respondent is the sole shareholder of the first respondent
and therefore, presumably, the sole beneficiary of the proceeds of any
dividends or other benefits earned by the first respondent consequen t
upon the unlawful competition. In that regard, I have not accepted tha t
the first respondent i s a joint venture with Ms Miller as this allegation
is contrary to its CIPC documents and has not been established by
positive evidence.
11 1956 (1) SA 602 (AD) at 606G-H
22
54.3.3 As such, the first respondent was aware of the second respondent’s
unlawful conduct and participated therein with unlawful intent; and its
employees (Ms Miller and the like) acted in accordance with his
instructions.
[54.4] At least eight requests for quotations were directed to the applicant by its
customers or potential customers, constituting business opportunities of the
applicant, which were unlawfully diverted by the second respondent to the
first respondent and appropriated by the first respondent. This caused or had
the potential to cause the applicant to suffer loss or harm to its business.
[54.5] The respondents at no stage directly denied that the first respondent is the alter
ego of the second respondent. They alleged that if the applicant was of the
opinion that the first respondent was the alter ego of the second respondent,
the applicant should have made use of section 20(9) of the Companies Act,
2008.
[54.6] The applicant’s response was that section 20(9) of the Companies Act, 2008
will result in a declaration that the first respondent is deemed not to be a
separate juristic person, and that is not the applicant’s case.
[54.7] The respondents did not address this issue in argument.
[54.8] In applying the principles laid out in Consolidated News Agency (supra), I
find that the only reasonable inferences to be drawn are the following:
53.8.1 The first respondent was formed as a direct and unlawful competitor of
the applicant.
53.8.2 The first respondent is, in fact, the alter ego of the second respondent ,
an allegation that was not pertinently denied by the respondents.
23
53.8.3 The second respondent is responsible for directing the will and mind of
the first respondent in respect of the unlawful conduct perpetrated
against the applicant; and
53.8.4 The actions of the second respondent can therefore be directly
attributed to the first respondent.
[55] Based on the aforegoing findings, I am satisfied that the wrongful conduct of the
second respondent can be attributed to the first respondent and that the applicant has ,
accordingly, established a vinculum iuris or legal tie to the first respondent . I
therefore find that the applicant has locus standi to bring the application.
[56] Given this finding, it is unnecessary to address the second legal ground , being that of
vicarious liability.
HAS THE APPLICANT SATISFIED THE REQUIREMENTS FOR A PROVISONAL
WINDING-UP ORDER?
The so-called “Badenhorst Rule”
[57] In Orestisolve (Pty) Ltd t/a Essa Investments v NDFT Investment Holdings (Pty)
Ltd12 the court stated the following regarding the so-called ‘Badenhorst Rule’:13
“[8] Even if the applicant establishes its claim on a prima facie basis, a court will
ordinarily refuse an application if the claim is bona fide disputed on
reasonable grounds. 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. In the context of liquidation
proceedings the rule is generally known as the Badenhorst Rule , from the
leading eponymous case on the subject, Badenhorst v Northern Construction
Enterprises (Pty) Ltd 1956 (2) SA 346 (T) at 347H -348C, and is generally now
treated as an independent rule, not dependant on proof of actual abuse of the
process… a distinction must thus be drawn between the factual disputes relating
to the respondents liability to the applicant and the disputes to the other
requirements for liquidation. At the provi sional stage the other requirements
must be satisfied on a balance of probabilities with reference to the affidavits. In
relation to the applicant's claim, however, the court must consider not only
where the balance of probabilities lies on the papers but also whether the claim
is bona fide disputed on reasonable grounds. A court may reach this conclusion
even though on a balance of probabilities (based on the papers) the applicants
claim has been made out (Payslip Investment Holdings CC v Y2K Tec Ltd 2001
(4) SA 781 (C) at 783G -I). However, where the applicant at the provisional
12 2015 (4) SA 449 (WCC)
13 At para [8]
24
stage shows that the debt prima facie exists, the onus is on the company to
show that it is bona fide disputed on reasonable grounds (Hulser-Reutter and
Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO
Intervening) 1998 (2) SA 208 (C) at 218D-219C.” [emphasis added]
[58] In brief summary, the Badenhorst Rule states that even if the applicant establishes its
claim on a prima facie basis, a court will ordinarily refuse an application for the
winding-up o f a company if the company bona fide disputes the existence of the
alleged debt on which the applicant’s claim is based on reasonable grounds.
The test at the provisional stage of a liquidation application
[59] The test for provisional liquidation applications is set out in Orestisolve (supra)14,
where Rogers J (as he then was) made reference to the case of Kalil v Decotex
(supra), and stated that , in an opposed application for provisional liquidation, the
applicant must establish an entitlement to an order (for the provisional liquidation of
the first respondent) on a prima facie basis, meaning that the applicant must show that
the balance of probabilities on the affidavits is in its fav our and that this would
include the existence of the applicant’s claim where such is disputed.
[60] For this purpose, the applicant alleges that the first respondent owes it the following
two alleged debts:
[60.1] Firstly, and arising from the unlawful appropriation of the applicant’s
business opportunities , it alleges that it has a claim against the first
respondent for damages which it has allegedly suffered as a result of the
unlawful theft/appropriation of such opportunities, being the revenue which
the first respondent earned from such business opportunities and which the
applicant ought to have earned . During argument, counsel for the applicant
clarified that this constitutes a claim for damages suffered as a result of the
diversion of the applicant’s business to the first respondent and the potential
lost corporate opportunities . It is apparent from Atlas Organic Fertilizers
(supra) that this would be a claim for delictual damages based on the delict of
unfair competition.
14 2015 (4) SA 449 (WCC) at para [7]
25
[60.2] Secondly, and arising from the unlawful payment of secret commissions to
the first respondent, it alleges that it has a claim against the first respondent
for the repayment of such secret commissions in the aforesaid amount of
R1 049 662.60. During argument, counsel for the applicant clarified that this
constitutes a claim for the disgorgement of so-called “secret profits”.
[61] It bears mentioning that in the applicant’s affidavits and heads of argument , the
concepts of damages and disgorgement of profits were conflated. The above
exposition of the two alleged debts which the applicant relies upon is the exposition
thereof as clarified by the applicant’s counsel during argument.
[62] The respondents deny that either of these claims is cognisable as a debt or claim for
the purposes of granting a provisional winding-up order against the first respondent.
The claim against the first respondent to disgorge so-called “secret profits”
[63] As set out above , it is alleged that the first respondent interpos ed itself between the
applicant and its service providers and allegedly earn ed secret profit s from the
applicant in the aforesaid amount of R1 049 662.60; and the applicant contends that it
enjoys a claim against the first respondent in this amount for the disgorgement of
secret profits.
[64] As stated, the respondents deny that this claim is cognisable as a debt or claim for the
purposes of granting a provisional winding-up order against the first respondent. They
contend that any claim which the applicant may or may not have for disgorgement of
secret profits, lies against the second respondent in his personal capacity and not
against the first respondent
[65] In this regard, it is clear on the facts that the second respondent, in his capacity as the
applicant’s branch manager for the applicant’s Cape Town operations, is the person
who interposed his company , the first respondent , between the applicant and its
service providers for the apparent purpose of making a secret profit at the expense of
the applicant.
26
[66] Although the respondents admit the allegation of interposing, one of their grounds of
dispute is that such interposing saved the applicant and its clients’ money on courier
costs, and they have accordingly denied that any secret profit was made. Furthermore,
the respondents submitted, if the first respondent earned these alleged secret profits,
that any claim which the applicant enjoys for the disgorgement of such profits lies
against the second respondent in his personal capacity and not against the first
respondent.
[67] As authority for this contention, the respondents referred to the judgment of Bozalek,
J in this division in the case of Sime Darby Hudson and Knight (Pty) Ltd v
Lerena15 which dealt with the issue of disgorgement of profits and where Bozalek, J
set out the principles applicable to claims for disgorgement of profits as follows:
“[95] In order to succeed in its claim for a disgorgement of profits the plaintiff must
establish that the defendant owed it a fiduciary obligation ; that in breach of
that obligation the defendant placed himself in a position where his duty and
his personal interest were in conflict and, finally that the defendant made a
secret profit out of corporate opportunities belonging to the plaintiff.”
[68] Applying these principles to the facts of this case, it is common cause that the second
respondent owed the applicant a fiduciary duty in his capacity as its employee; that he
breached such duty; and, that he placed himself in a position where his duty and
personal interests conflicted . It follows that he is the person who would be liable to
the applicant in a claim to disgorge the alleged secret profits.
[69] The applicant, therefore, cannot pursue a claim to disgorge these alleged secret profits
against the first respondent as it is clear on the facts that the first respondent did not
owe the applicant any fiduciary duty.
[70] The authorities are clear on this point, the applicant’s claim for disgorgement of
profits lies against the second respondent personally.
15 [2018] 4 All SA 446 (WCC) at para [95]
27
[71] I, therefore, find that the dispute raised by the respondent s in relation to a claim
against the first respondent for the disgorgement of secret profits is both bona fide and
based on reasonable grounds.
The claim against the first respondent for damages
[72] As set out above, t he applicant’s second claim arises from the second respondent
having unlawfully referred queries which the applicant had received from its
customers (and from potential customers) to the first respondent , which enabled the
first respondent to potentially service those customers and potential customers in the
place and stead of the applicant , to whom th ose queries had initially been directed;
and had thereby effectively and unlawfully abus ed his position as an employee of the
applicant to misappropriate the applicant’s corporate opportunities.
[73] It is a claim for such delictual damages which the applicant may have suffered, as a
consequence of the unlawful appropriation by the first and second respondents of its
business opportunities, that forms the basis of the applicant’s second claim.
[74] As stated, the respondents deny that this claim is cognisable as a debt or claim for the
purposes of granting a provisional winding-up order against the first respondent. They
contend that the applicant’s claim for damages against the first respondent is an
illiquid claim for damages based in delict and that the applicant cannot rely on such
an unliquidated claim for the purposes of winding-up the first respondent.
[75] In that regard, t he respondents have pointed out that in the founding affidavit the
applicant simply alleges that once a liquidator is appointed to wind up the affairs of
the first respondent, the applicant will be in a position to establish the amount of the
losses it has suffered and to pursue appropriate action . They contend that t his is
insufficient for the purposes of establishing a debt and an entitlement to the order
sought.
[76] To counter this argument, the applicant’s counsel referred me to the following further
passage in Gillis-Mason (supra):
28
“Similarly, a person who has a valid claim for damages for breach of contract against
a company also has a claim which arises from an existing vinculum iuris if this claim
is prospective or contingent in the sense that the exact extent of the loss still has to be
determined. The mere fact that the claim may still be unliquidated at the time of the
filing of a winding up petition, should not in itself disqualify such an applicant from
petitioning for winding up. Thus, in the instant case, if it is clear that the applicant has
suffered damages as a result of the respondent’s breach of contract, the objection to the
applicant’s locus standi must fail. It becomes necessary therefore, to consider whether
the applicant has established that it has suffered damages as a result of the respondents
admitted breach of contract.”16
[77] The applicant’s counsel also referred to Irvin and Johnson Ltd v Basson 17, where
Trengove J held as follows:
“However the evidence in the instant case establishes prima facie that the applicant has
a claim of at least R103 925.49 against the respondent. This is an amount which the
applicant can claim immediately and its right to do so is not conditional in the sense in
which that expression is ordinarily understood. For the present purposes it is of no
consequence, in my view, that the full extent of the respondent ’s liability may
eventually prove to be in excess of the amount of R103 925.49. The evidence, as it
stands, if it is accepted, establishes a liability of not less than the amount to which I
have referred . Then, there is also the evidence that the respondent confessed or
admitted to having misappropriated a fixed sum of R16 000.00. On that basis , and
without expressing any views as to the conclusion to which a court might come to when
all the affidavits are eventually considered, I am satisfied that, for the present purposes,
the applicant has established that it has locus standi”. (emphasis added)
[78] In response, the respondents’ counsel pointed out, however, that the aforesaid passage
from Irvin & Johnson (supra) is distinguishable from the present case as the court
there was addressing the issue of damages that had become sufficiently liquid by the
time of the insolvency proceedings to constitute a debt . In that regard, I was referred
to Kleynhans v Van der Westhuisen18, where one of the questions for consideration
was whether a claim for damages, based on theft of monies could be regarded as a
liquidated claim and Wessels JA stated the following:
“Ek behandel vervolgens ’n alternatiewe betoog wat namens die appellant ter
oorweging gegee is nl., dat volgens gevestigde praktyk sekere kategorie van vorderings,
waaronder een vir skadevergoeding as ongelikwideerde vorderings beskou word. Die
aangehaalde gewysdes staaf nie die betoog nie. Dat die vordering vir skadevergoeding,
waar die bedrag nie bepaal is nie, ‘n ongelikwideerde vorderings is, behoef geen betoog
nie. Meerendeels sou vorderings vir skadevergoeding uiteraard ongelikwideerde
vorderings wees, ongeag of dit uit kontrakbreuk of in delik voortspruit . In hierdie
verband is verwys na S.A. Fire and Accident Insurance Co. Ltd v Hickman 1955 (2) SA
131 (C), waar ‘n aansoek o p vonnis by verstek afgewys is omdat die vordering vir
betaling van sodanige bedrag as wat na debattering van a rekening betaalbaar sou blyk
te wees, nie as ‘n gelikwideerde vordering geag is nie. In die uitspraak se Regter
OGILVIE THOMPSON die volgende op bl. 133A:
16 At 528G-H
17 1977 (3) SA 1067 (TPD) at 1071H to 1072B
18 1970 (2) SA 742 AD at 749
29
‘In the present case, the amount of the claim in issue manifestly cannot be
calculated today: it will only emerge after debate of the account has been
concluded. It is true that the claim itself is specific enough: but then so is a
claim for damages, which, by common consent, constitutes an unliquidated
claim.’
Na my mening staaf die aangehalde passasie nie appellant se betoog nie . Dit blyk uit
die samehang dat die geleerde Regter ’n vordering van die skadevergoeding, waarvan
die bedrag nog nie betaal is nie, in gedagte gehad het.” [emphasis added]
[79] As I understand the respondents’ argument, it is that the applicant is required, in terms
of the case law, to quantify its damages claim against the first respondent which it has
failed to d o. The applicant needs to show that it, in fact, suffered such damages in a
quantified amount in order to establish the debt owed to it by the first respondent.
[80] The applicant , on the other hand, contends that there is no difference , in principle ,
between an unliquidated claim for breach of contract and the unliquidated claim for
damages upon which the applicant relies in this application to establish its locus
standi. Based on the case law referred to above, I am of the view that this contention
is not correct.
[81] During argument in reply, and arising from the applicant’s replying affidavit, the
applicant’s counsel pointed out that that in order to bring liquidation proceedings, one
needs to show that there is a potential debt that exceeds R100.00. He further
contended that in light of the invoices issued by the first respondent to Titan
Helicopters, which was a potential client of the applicant, which were in the region of
R32 million, the applicant has, at the very least, established a claim for damages
which exceeds R100.00.
[82] However, in neither the founding nor replying affidavits , does the applicant refer
specifically to the R32 million earned by the first respondent from Titan Helicopters
as damages (or potential damages) suffered by the applicant. This is mentioned in the
context of what the applicant discovered during the course of its investigation.
[83] The applicant, in its replying affidavit , and in response to the respondents ’ allegation
that it has not quantified its claim for damages, seems to rely on the amount of
R1 049 662.60 as liquidated damages.
30
[84] However, on the applicant’s own version, this amount reflects the “secret profits”
earned as a result of the i nterposing of the first respondent between the applicant and
its service providers and for which the applicant’s claim for disgorgement of profits
lies against the second respondent.
[85] The claim for damages, as I understand it, arises from the diverting of the applicant’s
work to the first respondent and usurping of the applicant’s contracts in favour of the
first respondent. As such, the applicant cannot rely on the amount of R1 049 662.60 to
prove that it has a liquid claim for damages arising from the unlawful diverting of
work from the applicant to the first respondent.
[86] Based on what is set out above, I am of the view that that the applicant’s claim for
unliquidated damages was disputed bona fide on reasonable grounds by the
respondents.
[87] Even though the applicant established its entitlement to claim damages on a prima
facie basis, these claims against the first respondent (disgorgement of profits and an
unliquidated claim for damages), were both disputed bona fide on reasonable grounds.
[88] In these circumstances, based on the Badenhorst Rule, a court will ordinarily refuse a
provisional liquidation application, and I intend to do so.
THE JUST AND EQUITABLE REQUIREMENT:
[89] Given that I intend to dismiss the application, it is not necessary for me to go further
and consider the just and equitable requirement in this case.
CONCLUSION:
[90] In the circumstances, I conclude that the application should be refused.
31
[91] Regarding the issue of costs, t he respondents referred to the SCA case of Imobrite
(Pty) Ltd v DTL Boerdery CC19, where the SCA held as follows:
“[14] It is trite that, by their very nature, winding-up proceedings are not designed to
resolve disputes pertaining to the existence or non -existence of a debts. Thus,
winding-up proceedings ought not to be resorted to enforce a debt that is bona
fide (genuinely) disputed on reasonable grounds. That approach is part of the
broader principle that the court’s processes should not be abused.
[15] A winding-up order will not be granted where the sole or predominant motive
or purpose of seeking the winding -up order is something other than the bona
fide bringing about of the company’s liquidation. It would also constitute an
abuse of process if there is an attempt to enforce payment of a debt which is
bona fide disputed, or where the motive is to oppress or defraud the company
or frustrate its rights.” (Footnotes omitted).
[92] After evaluating the facts and, particularly, the conduct of the first and second
respondents in their dealings with the applicant, I am of the view that the respondents
are not entitled to any kind of punitive cost order against the applicant.
[93] I accordingly make the following order:
(a) The applicant’s application to place the first respondent under provisional
liquidation is refused.
(b) The applicant shall pay the respondents ’ party and party costs of such
application on Scale B.
(c) The respondents shall pay the applicant’s cost of their counter-application on
Scale B, which counter -application was withdrawn during the course of
argument.
_________________________
The Hon. Ms Acting Justice Mahomed
of the Western Cape High Court
APPEARANCES:
19 (1007/20) [2022] ZASCA 67 (13 May 2022)
32
Applicant’s Counsel: Adv S Miller (SC)
Instructed by: Werksmans Attorneys
Respondents’ Counsel: Adv F Ferreira
Instructed by: BDP Attorneys