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2024
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[2024] ZAFSHC 260
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SP Impact (Pty) Ltd v ENM Trading CC (2459/2024) [2024] ZAFSHC 260 (29 August 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable
/ Not reportable
Case
no: 2459/2024
In
the matter between
SP
IMPACT (PTY) LTD
APPLICANT
(Registration
no: 2018/392779/07)
And
ENM
TRADING CC
RESPONDENT
(Registration
no: 2002/086504/23)
Coram:
MHLAMBI, J
Heard:
22 August 2024
Delivered:
This judgment was handed down electronically by
circulation to the parties’ representatives by email and
released to SAFLII.
The date and time for hand-down is deemed to be
09h30 on 29 August 2024.
JUDGMENT
[1]
The applicant seeks an order in which the
respondent is placed under final winding up in the hands of the
Master of the High Court,
and the costs of this application be in the
winding up of the respondent. The applicant contended that the
respondent had been
hopelessly insolvent for some time.
[2]
The primary grounds for the winding up are
that the respondent is unable to pay its debts. Alternatively, the
respondent is deemed
unable to pay its debts and is therefore
commercially insolvent as provided for in section 69 (1)(a) of the
Closed Corporation
Act read with the provisions of the Company's Act
61 of 1973 and the Company's Act 71 of 2008. The respondent opposes
the application
on the grounds that it would not be just and
equitable to grant the application as it is not insolvent.
[3]
It is common cause that the respondent and
the applicant entered into a written loan agreement on 19 May 2022,
in terms of which
the applicant advanced R3 500 000 to the
respondent, repayable by 31 August 2022. The respondent failed to
repay the loan as agreed.
On 1 September 2022, the respondent still
owed the applicant R2 070 840.37.
[4]
On 31 May 2023, A default judgment was
granted against the respondent in which the respondent was ordered to
pay the applicant R2
496 259.12, together with interest and costs.
The respondent failed to pay the judgment debt. The respondent
undertook to pay the
judgment debt through 8 monthly instalments
commencing on 13 November 2023, the final instalment of R196 259.12
payable on 30 June
2024. The respondent only made three payments of
R220 000 on 13 November 2023 and 27 March 2024. The applicant
contended that the
respondent neither disputed that the applicant
caused to be delivered to its registered address on 8 April 2024, a
section 69(1)(a)
notice as provided for in the Close Corporation Act,
nor the respondent’s failure to pay, secure or compound for its
debt
thereafter.
[5]
The respondent contended that it was not
commercially insolvent or susceptible to liquidation. It was in a
stable and growing financial
state. It undertook to pay its debt to
the applicant. It was trading and able to meet its financial
obligations and/or to pay its
debt. It proposed a future payment
method to the applicant, but the latter failed to respond. Its
financial projections proved
that it was indeed commercially solvent,
and audited financial predictions were produced by financial experts
and/or qualified
accountants.
[6]
Its version was that, at the time of the
assessment, the projections showed that it might have a turnover of
R14 736 644 by the
end of 2024. Moreover, the accountant concluded
that a joint venture was expected to pay the respondent R10 000
000.00 by the end
of this year. Therefore, its cash flow was evidence
enough to show that it was solvent and able to meet its financial
obligations.
[7]
Relying
on
Scania
Finance Southern Africa Pty Ltd v Thomi Gee Road Carriers CC; Absa
Bank Limited v Fernofire Bethlehem CC,
[1]
the
respondent submitted that an applicant could no longer rely solely on
a debtor’s failure to respond to a section 69
[2]
demand
for the winding up of the close corporation as that section was no
longer held to be a deeming section. It was contended
that the
applicant failed to prove that it was just and equitable for the
respondent to be wound up for being commercially insolvent.
A close
corporation that is trading and able to meet its financial
obligations cannot be liquidated. Such liquidation can only
take
place in exceptional circumstances.
[8]
The
respondent referred to the dictum in
Herman
and another v Set-Mak Civils,
[3]
that
the just and equitable ground would have to be construed more widely
to cater for a situation where a close corporation or
a company, even
if it cannot be proved to be factually insolvent, continues to trade
in dire financial circumstances and/or with
total disregard to the
rights and claims of its creditors and/or is shown to be unable to
pay its debts in certain circumstances.
[9]
However, it was stated in the same case
that: “
it might have been argued
with success that the respondent's inability to settle its debts,
which I indicated earlier is not the
case in casu, should be taken
into consideration to prove that it is just and equitable to be wound
up. If such a finding could
be made, a winding-up order might have
been issued even if it was found that the respondent is solvent.
However, no acceptable
evidence is available to make such a finding
in casu. The applicants have not made out a case for winding-up based
on the ground
of just and equitable or any other ground.’
[10]
The applicant referred to the words of
Innes CJ in
De Waard v Andrew and
Thienhaus, Limited
1907 T.S. 727
that
‘
the best proof of solvency is
that a man should pay his debts; and therefore, I always examine in a
critical spirit the case of
a man who does not pay what he owes."
An unpaid creditor has a right, ex debito justitiae, to a winding-up
order against the
respondent company that has not discharged that
debt. The common cause facts, it was contended, proved that the
applicant was a
creditor of the respondent and the judgment debt was
due and payable
.’ I agree.
[11]
I agree with the applicants' contentions
that, despite the respondents' allegations that it was not insolvent,
it failed to honor
its undertaking to liquidate the judgment debt
through monthly instalments. Its allegations relating to the R130
000.00 monthly
payments did not assist its cause, as the repayment
terms required several larger monthly payments, as proposed by the
respondent.
It failed to prove that it could pay the total judgment.
[12]
Regarding the respondent's commercial
future, its averments were purely speculative and not substantiated
by any facts. The respondent
failed to provide its current financial
statements or balance sheet. The supposed growth of its business was
not underpinned by
factual or proper financial documentation or
evidence. The application must, therefore, succeed.
[13]
As a result, the following order issues:
Order:
1.
The respondent is placed under final
winding up by the Master of the High Court.
2.
The costs of this application will be costs
in the winding up of the respondent.
MHLAMBI,
J
Appearances
For
the Applicant:
Adv
B Van der Merwe
Instructed
by:
Hill
McHardy & Herbst Inc
Hill,
McHardy & Herbst
7
Collins Road
Arboretum
Bloemfontein
For
the Respondent:
Adv
A Mabentsela
Instructed
by:
Thebe
Attorneys Inc
Suite
18, Kellner Park
65
Kellner Street
Westdene
Bloemfontein
[1]
[2016]
JOL 35385 (FB).
[2]
[2]
Close
Corporations Act.
[3]
[2013]
JOL 31053
(FB) para 14.