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2024
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[2024] ZAFSHC 240
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Anthill Development (Pty) Ltd v Redant Developments (Pty) Ltd and Another (3834/2023) [2024] ZAFSHC 240 (12 August 2024)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates:
YES/NO
Case
Number: 3834/2023
In
the matter between:
ANTHILL
DEVELOPMENTS (PTY) LTD
Applicant
and
REDANT
DEVELOPMENTS (PTY) LTD
Respondent
STELERO
(PTY) LTD
Intervening
Respondent
JUDGMENT
BY:
REINDERS, J
HEARD
ON:
18 APRIL 2024
DELIVERED
ON:
12
AUGUST 2024
This
judgment was handed down in open court and distributed to the parties
via electronic mail communication.
[1]
This is the extended return day of a provisional order of liquidation
granted by this court on
10 August 2023 against the first respondent,
Redant Developments (Pty) Ltd (Redant). The applicant, Ant Hill
Developments (Pty)
Ltd (Anthill) moves for a final order of
liquidation. Redant does not oppose the confirmation of the
provisional order. However,
the application is opposed by the
intervening respondent Stelero (Pty) Ltd (Stelero) having
successfully applied for an order to
intervene.
[2]
The deponent to Anthill’s founding and replying affidavit is
its co-director Mr AH Erasmus.
It is common cause that Redant’s
present directors are Mr HJ de Beer, Mr JHS Le Roux and Mr AH Erasmus
(Jnr). The shareholders
of Redant is Anthill (as a holder of 50% of
the issued shares) and Stelero (as a holder of 50% shares). Mr le
Roux (the deponent
to Stelero’s answering affidavit) is also a
co-director of Stelero. Redant is the owner of several erven
which form
part of the Red Rock Estate development situated in close
proximity to the Woodland Hills Wildlife Estate in Bloemfontein. The
ownership of the said erven was initially held by Stelero Trust (the
Trust) of which Mr Le Roux is a trustee. In short, Redant’s
ownership of the erven was as a result of an Agreement of Sale
concluded in 2015 between the Trust and the entity now known as
Redant, with Anthill to be required to invest further funds in Redant
for the development of Red Rock Estate. A Shareholders Agreement
and
Memorandum of Incorporation (the MOI) were likewise concluded.
[3]
Anthill obtained a provisional order of liquidation averring amongst
others that it is a creditor
of Redant in an amount of R 6 995
156-00, having demanded payment for the amount in terms of the
Companies Act, 61 of 1973 (the
Act). It is stressed in the papers
that Anthill prosecutes this application in its capacity as a
creditor of Redant and not as
a shareholder thereof. Anthill further
avers that Redant conducts business in a state of commercial
insolvency and is factually
insolvent as envisaged in sec 345(1)(c)
of the Act. It submits that it would be just and equitable that
Redant be finally wound-up
in terms of sec 344(h) of the Act, based
thereon that a deadlock exist between the directors and shareholders
and that Redant’s
substratum has disappeared (in that it cannot
take such further steps as are required for the development of Red
Rock Estate or
any other investment activities). It is submitted that
Redant has no secured creditors and as such all of its creditors,
including
both Anthill and Stelero, stands to receive a sizeable
dividend which is a demonstrateable advantage to Anthill, Redant and
other
possible creditors.
[4]
Stelero resists the final relief claimed, relying thereon that
Redant’s indebtedness to
Anthill is disputed on bona fide
grounds. As a point of departure it submits that Anthill is not a
creditor of Redant and consequently
does not have the necessary locus
standi to bring this application. Stelero is of the view that a
material factual dispute exists
regarding the computation of the
indebtedness which ought to have been forseen by Anthill. Moreover,
so the argument goes, the
application for liquidation is not bona
fide, constitutes an abuse of process and has been lodged with an
ulterior motive to force
a sale of Anthill’s shares in Redant.
Stelero denies that Redant is commercially or factually insolvent and
submits that,
even if court should find that Redant is commercially
insolvent, regard should be had thereto that Redant’s assets
exceeds
it liabilities in value.
[5]
In
Orestisolve
(Pty) Limited t/a Essa Investments v NDFT Investment Holdings (Pty)
Limited and Another
[1]
,
the court having discussed the test to be applied at the provisional
stage, proceeded as follows in paragraph [10] of the judgment:
“
The test for a
final order of liquidation is different. The applicant must establish
its case on a balance of probabilities. Where
the facts are disputed,
the court is not permitted to determine the balance of probabilities
on the affidavits but must instead
apply the
Plascon-Evans
rule (
Paarwater
v South
Sahara Investments (Pty) Ltd
[2005] 4 All SA 185
(SCA) para
4;
Golden Mile Financial Solution CC v
Amagen
Development (Pty) Ltd
[2010] ZAWCHC 339
paras 8-10;
Badge & Others NNO v Midnight Storm Investments 265 Pty Ltd
& Another
2012 (2) SA 28
(GSJ) para 14).”
and held further:
[2]
If, on the other hand,
and with due regard to the application of the
Plascon-Evans
rule, the court is satisfied at the final stage that there is no
genuine factual dispute regarding the existence of the applicant’s
claim, there seems to be limited scope for finding that the debt is
nevertheless bona fide disputed on reasonable grounds.
[6]
The Supreme Court of Appeal in
Imobrite
(Pty) Ltd v DTL Boerdery CC
[3]
,
the summarised the principles to be applied in insolvency cases where
a debt is disputed, as follows:
“
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
debt. 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.
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”.
[7]
An unpaid creditor’s right
ex
debito justitiae
,
to a winding-up order against a company that has not discharged its
debts, however, remains undisturbed.
[4]
The court exercises a narrow discretion when deciding on a
liquidation application as found in
Boschpoort
Ondernemings (Pty) Ltd v Absa Bank Limited
[5]
in illustrating why a court will not be easily swayed towards
exercising its discretion in favour of a debtor that has not
discharged
its debts:
“
[17]
That a company’s commercial insolvency is a ground that will
justify an order for its liquidation has been
a reality of law which
has served us well through the passage of time. The reasons are not
hard to find: the valuation of assets,
other than cash, is a
notoriously elastic and often highly subjective one: the liquidity of
assets is often more viscous than recalcitrant
debtors would have a
court believe; more often than not, creditors do not have knowledge
of the assets of a company who owes them
money – and cannot be
expected to have; and courts are more comfortable with readily
determinable and objective tests such
as whether a company is able to
meet its current liabilities than with abstruse economic exercises as
to the valuation of a company’s
assets.
”
[8]
It is not necessary to prove actual
insolvency for the purposes of section 344 (f) of the Companies
Act.
In
Standard
Bank of South Africa v R-Bay Logistics CC
[6]
it was held that “
if
there was evidence that the respondent’s company is
commercially insolvent (ie cannot pay its debts when they fall due)
that is enough for a Court to find that the required case under
section 344 (f) has been proved
”.
However, a discretion in favour of not granting a liquidation order
in circumstances where a company is commercially insolvent,
must be
based on a solid factual foundation.
[9]
In
Orestisolve
it was held that the fact that a company’s investment
operations ran at a loss, does not mean that it was commercially
insolvent.
Provided a company has resources from which to meet
current demands, it matters not, when one is considering solvency,
whether
its operations in any particular year are or are not
profitable.
[7]
[10]
In Anthill’s founding affidavit the deponent explains that
Redant’s indebtedness to Anthill is
evident from its financial
statements for the year ending 28 February 2022 which was signed by
both Mesrs De Beer and Mr Le Roux,
being co-directors of Redant.
Anthill avers that Redant’s indebtedness reflected as a
loan account in the amount at
the time of R 6 995 156.00 is expressly
and unambiguously recorded, and there cannot exist any dispute that
Mr Le Roux signed these
statements. It concludes therefore that
Redant’s failure to respond to the demand in any way
whatsoever, is by operation
of law deemed to be unable to pay its
debts and is therefore in a state of insolvency. Moreover, the
insolvency is apparent from
its financial statement which reflects
losses for the financial years ending February 2021 and 2011. The
respondent is not in a
position to liquidate its assets (in the form
of erven), rendering it just and equitable that Redant be wound-up.
[11]
In a single paragraph dealing with his signature, Mr Le Roux in his
opposing affidavit avers that he was
pressured continuously by Mr de
Beer to sign this financial statement which he did under protest,
averring that “by appending
my signature to the financial
statements, I did not agree that Anthill’s loan account was
correct.”
[12]
It is common cause that the 2015 agreement recorded that pursuant to
Redant being created, Anthill and Stelero
would not only hold equal
shareholding in Redant, but would also be holders of equal loan
accounts against Redant in the amount
of R4 million, being the sum of
R 3 600 000.00 and R 400 000.00. Moreover, Anthill agreed to make
payment of Anthill’s indebtedness
to the Standard Bank of South
Africa in the amount of R 1 025 553.39 (exclusive of interest). This
payment was however made on
the condition that that a
reduction/credit of Stelero’s loan account against Redant would
decrease by the aforementioned
amount.
[13]
Anthill submitted that Redant had at no relevant time whether on bona
fide grounds or at all disputed its
indebtedness to Anthill, and
Stelero in opposing the application could not place any evidence
before court in the form of a single
piece of communication in
whatsoever form to show that Redant’s indebtedness to Anthill
in respect of the loan account (despite
Redant being legally
represented all throughout) is disputed, more specifically at the
time when the demand for payment was made
by Anthill. The only
enquiry by Stelero dealt with the reduction of Stelero’s loan
account against Redant (which was explained
by Mr De Beer) but at no
stage whatsoever did Stelero deal with the extent of Redant’s
indebtedness on the loan account.
In fact, the denial of the
indebtedness as well as the allegations that signing of the
statements was done under duress, came to
light for the first time in
Stelero’s opposition to the relief claimed for a final order of
liquidation. Anthill urged me
to find that Stelero failed to adduce
the necessary averments to establish that it had signed the statement
under duress in order
to void the same.
[8]
[14]
In 2019 Anthill, Stelero and Redant concluded a
Sale of Shares Agreement. Counsel appearing for Anthill
argued that
Stelero failed to take the court into its confidence that such
agreement was in truth not only signed by Stelero but
in terms of the
agreement Stelero sought to purchase Anthill’s shares and loan
in the amount of R 6 995 156-00 being the
exact amount of Redant’s
agreed indebtedness to Anthill in respect of its loan account at the
time of the conclusion of the
latter agreement. This conduct, so the
argument went, raises the rhetorical question that if Redant was not
indebted to Anthill
and Stelero denied this indebtedness, why would
it conclude an agreement for the purchase of the exact same amount of
its indebtedness
at the time. Anthill ultimately submitted that none
of the defences raised by Stelero in opposition to the final relief
claimed
was ever raised in the string of communication as annexed to
Anthill’s founding affidavit, thus illustrative thereof that
these purported grounds are not made bona fide and does not meet the
threshold of being disputed on reasonable grounds.
[15]
In submission before me counsel for Stelero hinted that Mr Le Roux’s
signature is in fact irrelevant,
ostensibly on the basis that the
claimed amount was never a loan account in the first place. In reply
to Anthill’s submission
that Redant is both factually and
commercially insolvent, Stelero argues that even should the court
find the existence of a loan,
Anthill is not entitled to simply call
up a shareholder’s loan and seeks to rely thereon to advance
its case that Redant
is commercially insolvent. According to Stelero,
the MOI records (clause 6.6.3.3) that any amount reflected under a
loan account
of a shareholder shall be re-payable only in the event
of the winding-up of Redant, or if Redant is placed under business
rescue,
or if the shareholders resolve to re-pay such loan of any
portion thereof by way of special resolution. In addition, so the
argument
went, the Shareholders’ Agreement provides for
compulsory dispute resolution mechanisms as envisaged in clause 7,
which Anthill
had failed to pursue.
[16]
Anthill in reply alludes thereto that on a
purposeful interpretation of the said clause 6.6.3.3 it is evident
that in the absence of any agreement by the shareholder and the
company of terms for repayment of shareholder’s loans, such
payments would be repayable on demand. It furthermore submitted that
clause 7 in turn is only applicable in the event of breach,
which is
not pleaded by Stelero.
[17]
Apart from its denial of any indebtedness by Redant to Anthill,
Stelero adds that it is not competent in
law (in terms of sec 346(2)
of the Act) for a shareholder of a company to apply for the
liquidation of such company on the grounds
of an alleged inability to
pay its debts and/or factual insolvency. As mentioned, Anthill moves
for the relief it claims in its
capacity as a creditor of Redant, and
there is thus no merit in this ground of opposition in my view.
[18]
It is my considered view that there is no genuine factual dispute
regarding the existence (and correctness)
of the Anthill’s
claim. Put differently, I have not been convinced that the debt is
bona fide disputed on reasonable grounds
by Stelero. I am satisfied
that Anthill has proven on a balance of probabilities that it has the
necessary locus standi as creditor
of Redant to have petitioned to
this court, that Redant is indebted to it in the amount as claimed,
is unable to make payment thereof
despite demand ,and that there
would be an advantage to the general body of creditors. In my view
Anthill has made out a case for
a final order of liquidation.
[19]
Having reached the immediate aforementioned
conclusion, it is in my view not necessary to deal with the
rest of
the grounds upon which Anthill places reliance for the winding-up of
Redant.
19.1
However, and in the event that I be wrong in such conclusion, Anthill
also relies thereon that Redant is
factually insolvent. In opposing
this contention, Stelero argued that should the loan (the amount of
debt) be taken out of the
equation for purposes of determining
Redant’s solvency, it’s assets by far exceeds its
liabilities, thereby negating
a conclusion that Redant is factually
insolvent. No independent expert valuations of the erven were
proffered by Stelero, safe
to state that the purchase price of the
erven at the time was R 7,2 million and adding that it was sold for
less than its actual
value. As I have concluded, the debt was proven
by Anthill.
19.2
Moreover, Anthill also submitted that Redant is commercially
insolvent. Redant’s inability to have
paid its debt towards
Anthill, is unassailable and indicative thereof that it is in a state
of commercial insolvency. Anthill in
my view demonstrated that, apart
from the loan amount, it had also contributed and paid for several
other expenses of Redant. Stelero
pressed on me that Anthill stands
in a fiduciary relationship with Redant, a factor which this court
should take into account in
exercising its discretion not to grant a
final order of liquidation. Anthill’s reply thereto was a
confirmation that the
application is brought by Anthill as a
creditor, and not as a shareholder. I do not deem it necessary to
deal with the final ground
relied upon by Anthill, namely that it
would be just and equitable for Redant to be wound-up. In this regard
counsel for Stelero
invited my attention to the judgment of
Bester
and Others v Coral Lagoon Investments 232 (Pty) Ltd
[9]
wherein Henney J declined to
exercise his discretion for the granting of a final order of
liquidation in favour of the applicant.
Although it was submitted
that the judgment is on all fours with this application, it ought to
be noticed that the applicant was
unsuccessful in its ground of the
respondent’s inability to pay its debts in view of the voidness
of the loan agreement relied
upon, unlike in this instance where
Anthill was successful in not only proving the indebtedness of
Redant, but also its factual
and commercial insolvency. In my
discretion, Anthill is entitled to a final order of liquidation.
[20]
Anthill duly complied with the order for the provisional liquidation
of Redant in respect of service thereof.
[21]
Having reached the conclusions as I did herein above, I make the
following order:
21.1
The respondent company Redant Developments (Pty) Ltd is placed under
final liquidation in the hands of the
Master of the High Court (Free
State Provincial Division).
21.2
The costs of this application shall be costs in the administration of
the liquidated estate.
C
REINDERS, J
On
behalf of the Applicant:
Adv S
Tsangarakis
Instructed
by:
Honey
Attorneys
BLOEMFONTEIN
On
behalf of the Intervening Respondent:
Adv R
van der Merwe
Instructed
by:
McIntyre
Van der Post Incorporated
BLOEMFONTEIN
[1]
2015
(4) SA 449 (WCC).
[2]
At
para [11].
[3]
(1007/20) [2022] ZASCA 67.
[4]
Afgri
Operations Limited v Hamba Fleet (Pty) Ltd
2022
(1) SA 91
(SCA) at para [12].
[5]
2014 (2) SA 518
(SCA).
[6]
2013 (2) SA 295 (KZD).
[7]
Orestisolve
supra at par [74].
[8]
Arend
and Another v Astra Furnishers (Pty) Ltd
1974
(1) SA 298
(C).
[9]
2013 (6) SA 295
(WCC)