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[2024] ZAMPMBHC 54
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Scania Finance Southern Africa (Pty) Ltd v Lekgawutsane Close Corporation (A06/2024) [2024] ZAMPMBHC 54 (14 August 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION
·
,
MBOMBELA
APPEAL
CASE NO: A06/2024
(1)
REPORTABLE:
YES
/NO
(2)
OF INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED:
YES/
NO
DATE:
14 August 2024
SIGNATURE:
In
the matter between: -
SCANIA
FINANCE SOUTHERN AFRICA
(PTY)
LTD
Appellant
vs
LEKGAWUTSANE
CLOSE CORPORATION
Respondent
Heard
on:
17 May
2024
Delivered:
14 August
2024. This judgment was handed down electronically by circulation to
the parties' representatives by email. The date for
hand-down
is
deemed to be
14 August 2024.
JUDGMENT
MAZIBUKO
AJ (Mashile J and Oosthuizen-Senekal AJ concurring)
INTRODUCTION
[1]
The litigation
culminating in this appeal was launched in the court a
quo
by the
appellant (
"
Scania
Finance
"
),
which sought a provisional winding up of the
respondent
("Lekgawutsane")
following
the
respondent's failure to make due
p
a
y
m
e
nts
arising from a financial lease agreement. The court a
quo
refused
provi
s
i
o
nal
w
i
nding
up order as sought.
Aggrieved
by the court a
quo
'
s
decision
,
the appellant
appealed the order and judgment.
FACTUAL
BACKGROUND
[2]
According to
Lekgawutsane, in 2019 it entered into an instalment sale agreement in
terms of which it purchased a truck from Scania
Southern Africa (Pty)
Ltd
("Scania
SA
"
)
,
subject to
finance approval. It signed an offer to purchase two trucks in March
2020, even though it ultimately settled for one.
Lekgawutsane states
further that it purchased the truck for R1 890 000 plus VAT of R283.
500. It paid an amount of R543
,
375.00
in addition to the finance charges and interest due.
[3]
Lekgawutsane does not
dispute its indebtedness to Scania Finance
,
albeit that
insofar as it is concerned, such indebtedness emanates from an
instalment sale agreement and not a lease agreement.
To this end
,
it has
attached an invoice raised by Scania SA showing a sale of the truck
to Scania Finance.
[4]
The
agreement on which Scania Finance founded these liquidation
proceedings is a lease finance, which Lekgawutsane signed when the
truck was delivered to it. When Lekgawutsane defaulted on its monthly
payments, Scania Finance delivered a Section 69(1)(a) demand
as
envisaged in the Close Corporations Act
[1]
("The Close Corporation Act
"
).
Despite the delivery of the demand and expiry of 21 days,
Lekgawutsane failed to satisfy the demand. In consequence of the
aforesaid,
Scania Finance terminated the lease agreement and
repossessed the truck. Scania Finance subsequently embarked on these
current
proceedings.
THE
DECISION OF THE COURT
A QUO
[5]
What was before the
court a
quo
was that
Lekgawutsane and Scania Finance concluded a lease agreement, which
the parties signed. The question was whether Scania
Finance had made
a prima facie case for the liquidation of Lekgawutsane.
[6]
Scania Finance based
its winding-up application on:
6.1
Lekgawutsane
was unable to pay its debts in terms of section 69(1)(a) of the Close
Corporation Act
[2]
('The Close
Corporation Act') read with item 9 of Schedule 5 of the Companies
Act;
6.2
Lekgawutsane
was unable to pay its debts in terms of section 69(1)(c) of the Close
Corporation Act
[3]
read with
item 9 of Schedule 5 of the Companies Act.
[7]
The court a
quo
refused
the application on the basis that the claim was genuinely disputed by
Lekgawutsane on reasonable grounds because there
was
lack of consensus on the nature of the transaction when the parties
concluded the lease agreement.
ASSERTIONS
[8]
It was argued on
behalf of Scania Finance before the Court a
quo
that
despite the delivery of the demand and expiry of 21 days,
Lekgawutsane had failed to make payments in terms of the lease
agreement.
As such, it was proper that Lekgawutsane be deemed unable
to pay its debts as contemplated in the Close Corporations Act.
Lekgawutsane
was represented by a seasoned and astute businessperson
who, it should be assumed, had perused the documents given to him
prior
to appending his signature.
[9]
Lekgawutsane argued
that it purchased the goods in terms of the instalment sale
agreement. It signed the instalment sale agreement
with Scania SA.
Subsequently, it realised that it was in arrears on a lease agreement
when it received the demand in terms of the
Close Corporation Act
from Scania Finance. It refused to pay, arguing that the agreement it
concluded with the appellant resulted
from a misrepresentation by
Scania Finance
.
Lekgawutsane
sought, it maintained, to purchase the truck from Scania SA based on
an instalment sale agreement and not a lease agreement.
ISSUES
[10]
The issue before this Court is whether the court a
quo
was
correct to refuse the provisional application to liquidate
Lekgawutsane, especially given that Scania Finance needed to
demonstrate
a
prima facie
case only.
LEGAL
PRINCIPLES
[11]
It
is a well-established principle that an appellate court may interfere
with the
exercise
of discretion in the true sense by a court of the first instance only
if it can be demonstrated that the latter court exercised
its
discretion capriciously or on a wrong principle or has not brought an
unbiased judgment
to
bear
on the question under consideration, or has not acted for substantial
reasons.
[4]
[12]
In
order to succeed with a provisional winding-up application, Scania
Finance was required to establish a
prima
facie
case
in terms of Section 69 of the Close Corporation Act,
[5]
read with item 9 of Schedule 5 of the Companies Act. Scania Finance
only needs to satisfy the court that it has a claim of more
than
R200.00 against Lekgawutsane, which has remained unpaid for more than
21 days after demand.
[13]
It
is trite that, by their very nature
,
winding-up
proceedings are not designed to resolve disputes about a debt's
existence or non-existence. Put differently, winding-up
proceedings
ought not to be resorted to enforce a debt that is genuinely disputed
on reasonable grounds. That approach is part
of the broader principle
that the court's processes should not be abused.
[6]
[14]
Section
69 of the Close Corporation Act,
[7]
read with item 9 of Schedule 5 of the Companies Act, reads:
"
(1)
For the purposes of section 69(1),
a
corporation
shall be deemed to be unable to pay its debts if-
(a)
a
creditor,
by cession or otherwise
,
to whom
the corporation is indebted in
a
sum of not
less than two hundred rand then due has served on the corporation by
delivering it at its registered office,
a
demand
requiring the corporation to pay the sum so due
,
and the
corporation has for 21 days thereafter neglected to pay the sum or to
secure or compound for it to the reasonable satisfaction
of the
creditor
.
(b)
..
.
(c)
'it is proved to
the satisfaction of the Court that the corporation is unable to pay
its debts.
"
DISCUSSION
[15]
According to Scania
Finance, the appeal is based on three key grounds, which are as
follows:
'
(a)
There is no bona fide dispute
,
as the
common intention of both parties was always to enter into and
conclude the financial lease agreement.
(b)
The offer to
purchase and tax invoice was executed to Scania SA
,
a
distinct
and independent juristic entity to
,
and
(c)
Scania Finance
established
a
prima facie
case for provisional winding-up against the respondent.'
BONA
FIDE
DISPUTE
[16]
Scania Finance stated
that it knew nothing about the sale agreement, and it is not its case
that it received an application for
a lease agreement from Scania SA
on behalf of Lekgawutsane. It contends that Lekgawutsane signed the
lease agreement and is therefore
liable.
[17]
Lekgawutsane disputes that
the common intention of both parties was always to enter into and
conclude the lease agreement. It argued
that the finance application
that it sought was for the purchase of the truck and not to lease.
Given that the purchase price was
similar to the total lease amount,
it would
not
have concluded a lease agreement when it had an opportunity to own
the truck at the expiry of the period and at the same amount.
[18]
It needs to be
highlighted that reference to Scania SA in this judgment is
inappropriate because it is not a party to this application.
Accordingly, how the offer to purchase was converted into a different
document cannot be entertained without Scania SA, which has
a direct
and substantial interest, being part of these proceedings. The
concern of this Court is the agreement that was concluded
between the
parties and that is the lease agreement.
[19]
It is unclear from
the papers of Lekgawutsane why it signed the financial lease
agreement if it was concluding an instalment sale
agreement. Also,
what actions it took upon finding out that it had signed a lease
agreement instead of an instalment sale agreement.
Ordinarily, a
claim arising from an instalment sale agreement differs from that of
a lease agreement due to its natural terms and
conditions. An
instalment sale agreement would culminate in Lekgawutsane acquiring
ownership of the
truck,
whereas,
in
the
case of
the lease agreement, the truck will return to Scania Finance as the
owner and lessor.
[20]
In paragraph 24 of its
judgment, the court
a
quo
was
satisfied
that
the claim of
Scania Finance was
bona
fide
disputed
on reasonable grounds as there was a lack of consensus regarding the
nature of the transaction when the parties concluded
the lease
agreement. The existence or non-existence of consensus cannot be
attributed to Scania Finance. Scania Finance has always
been
conscious that the parties were executing a lease agreement. If
Lekgawutsane thought it was something else then it has itself
to
blame. The lease agreement has been properly signed by both parties,
and no case of impropriety has been canvassed on behalf
of
Lekgawutsane.
PRIMA
FACIE
CASE
[21]
It is trite that for
a provisional winding-up application
,
the court
needs to be satisfied that an applicant has made out a
prima
facie
case
.
It is not in
dispute that:
21.1
Lekgawutsane fell
into arrears in terms of the lease agreement;
21.2
Lekgawutsane failed
to pay when the demand was made
;
21.3
Lekgawutsane remains
indebted to Scan
i
a
Finance and does not dispute its indebtedness.
[22]
Having regard to the
contents of the preceding paragraph, it is manifest that Lekgawutsane
is unable to pay its debts as and when
they arise. It is consequently
commercially insolvent as intended in the Close Corporation Act. The
discretion that the Court a
quo had was limited in the sense that it
was obliged to exercise it in favour of Scania Finance by granting
provisional liquidation.
The Court a quo
'
s
exercise of the discretion not to grant the provisional liquidation
was therefore premised on incorrect principle
.
[23]
In view of what I
have canvassed above, I propose that the appeal be upheld and that
the following order be made
:
1.
The order granted by
the court
a
quo
is set
aside and substituted for the following
:
a.
The appeal is upheld with
costs.
b.
The provisional
winding-up application against the respondent is granted.
c.
The respondent is
called upon to show cause in the above Honourable court on the date
to be arranged by the parties in consultation
with the Registrar as
to why a final liquidation order should not be granted against the
respondent.
N.
MAZIBUKO
ACTING
JUDGE OF THE HIGH COURT
MPUMALANGA
DIVISION, MBOMBELA
I
agree,
B.
MASHILE
JUDGE
OF THE HIGH COURT
MPUMALANGA
DIVISION, MBOMBELA
I
agree,
pp
C. Oosthuizen-Senekal
C.
OOSTHUIZEN-SENEKAL
ACTING
JUDGE OF THE HIGH COURT
MPUMALANGA
DIVISION, MBOMBELA
Appearances:
Counsel
for the appellant:
Adv.
M.V.R Potgieter SC
Instructed
by:
Cilliers
Attorneys
Counsel
for the respondent:
Adv.
D Williams
Instructed
by:
Ramarumo
Attorneys
Date
heard:
17
May 2024
Date
of Judgment:
14
August 2024
[1]
Act
69 of
1984
.
[2]
Act
69
of
1984
[3]
Number
1
,
supra.
[4]
Trencon
Construction Pty (Ltd) v Industrial Development Corporation of South
Africa Limited and Another
.
[2015]
ZACC 22
;
2015
(5) SA 245
(CC);
2015 (10)
BCLR
1199
(CC)
para
88-89; Hotz and Others v University of Cape Town
[2017] ZACC 10
;
2017 (7) BCLR 815
(CC);
2018 (1) SA 369
(CC) para 28.
[5]
Number
1,
supra.
[6]
lmobrite
(Pty) Ltd v DTL Boerdery
CC
[2022] ZASCA 67
(May 2022).
[7]
Number
1
,
supra.