IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Case number: 20167/23
In the application between:
CHARL ELECTRICAL ENGINEERING CC Applicant
and
INTEGRATED PROJECTS CONSTRUCTION (PTY) LTD Respondent
Before: The Hon. Mr Acting Justice Montzinger
Hearing: 12 August 2024
Judgment Delivered electronically: 11 November 2024
JUDGMENT
Montzinger AJ
Summary Introduction
1. This is an opposed application for the provisional winding -up of the
respondent.
2. The applicant, ("Charl Electrical"), instituted this application, alleging that the
respondent, ("Integrated Projects"), is unable to pay its debts as envisaged by
s 344(f) read with s 345 of the 1973 Act1. It is further alleged that Integrate d
Projects is deemed insolvent by virtue of its failure to comply with a demand
issued in terms of s 345(1)(a)(i) of the 1973 Act. Lastly, Charl Electrical
alleged that given the facts and circumstances of this case, it would in any
event be just and equitable for the court to order Integrated Projects’
provisional winding-up in terms of s 344(h) of the 1973 Act.
3. By the time the matter was assigned to me for hearing, several interlocutory
procedural issues remained unresolved. These includ ed an objection to the
urgency of the application, an opposition to Charl Electrical’s request for
condonation for the late filing of its replying affidavit, and Integrated Projects’
interlocutory application to file a further answering affidavit in terms of uniform
rule 6(5)(e). At the commencement of the hearing , Mr. Engela for Charl
Electrical and Mr. Walters for Integrated Projects informed me that these
issues had been resolved. Consequently, the objection to urgency was no
longer pursued, Integrated P rojects’ request to file an additional answering
affidavit was no longer contested, and Charl Electrical’s condonation
application for the late filing of the replying affidavit, was no longer opposed.
An order that provides for these results will be issued.
Charl Electrical’s claim against Integrated Projects
4. Charl Electrical operates in the construction industry, regularly acting as a
consultant and subcontractor to provide electrical services for property
development projects. In November 2022, it alleged to have entered into a n
agreement with Integrated Projects to serve as its electrical subcontractor for
the Kings Corne r residential property development. The value of the contract
to render the electrical services was allegedly R1,244,088.48. The Kings
Corner project was developed by Prospekt (Pty) Ltd ("Prospekt"), with
Integrated Projects the main building contractor.
1 Companies Act 61 of 1973 (the “1973 Act”)
5. Charl Electrical alleged that under the subcontractor agreement it performed
electrical work at the Kings Corner development from December 2022 to June
2023. During this period, it issued six invoices to Integrated Projects totalling
R522,327.11, of which only an amount of R103,623.30 was paid.
6. Due to the non-payment of its invoices, Charl Electrical in August 2023 served
Integrated Projects with a demand in terms of s 345 of the 1973 Act for
payment of R418,703.81. Integrated Projects failed to satisfy the demand and
on 13 November 2023 the liquidation application was launched.
7. Mr. Engela, argued that Charl Electrical have established the prima facie
existence of a debt as well as the other requirements for liquidation . He also
argued that the de fences raised in opposition to the application are without
merit. According to Mr. Engela the denial by Integrated Projects of the
existence of the sub contractor agreement is baseless as the evidence
overwhelmingly shows that a contractual relationship exist ed. He argued that
since all the other requirements for a liquidation have been complied with, I
should grant provisional winding-up order and not exercise my discretion
against doing so.
8. In response to my concerns about disputes of facts in particular on the issue
of Integrated Projects ’ liability, Mr. Engela urged me to "see the wood for the
trees," and to disregard any attempt to create factual disputes.
The basis for opposing the liquidation application
9. The case for Integrated Projects is that the evidence clearly shows there was
no privity of contract between it and Charl Electrical and that if an agreement
existed, it was between Charl Electrical and Prospekt, the property developer.
In support of its contention Integrated Projects claims that the written part of
the alleged agreement, on which Charl Electrical relies, is an Occupational
Health and Safety agreement, wh ich has no relevance to the electrical work
for which payment is claimed.
10. Furthermore, it is Integrated Projects’ case that any work performed by Charl
Electrical was carried out under the instructions of Prospekt and that Charl
Electrical mistakenly sent its invoices to Integrated Projects . The explanation
for making the payments totalling R103,623.30 to Charl Electrical was done at
Prospekt’s request.
11. Mr. Walters argued that Charl Electrical failed to prima facie establish the
existence of its claim. He added that even if a prima facie claim could be
established, it is disputed on bona fide and reasonable grounds, warranting a
dismissal of the application.
The relevant legal principles
12. A creditor seeking a winding -up order of an insolvent company must do so in
terms of the provisions of the 1973 Act 2. In addition to the aforementioned a n
applicant must convince the court that: (i) it is a contingent or prospective
creditor of the company to be liquidated 3 (i.e. the locus standi requirement);
(ii) the respondent company’s registered address is situated in the Court’s
jurisdictional area 4; (iii) it has established one of the grounds listed in s
344(1)(a – h) read with s 345 (1)(a – c) of the 1973 Act.
13. The Constitutional Court h as confirmed that the overarching objective behind
liquidation proceedings is that it is designed to bring about a concurrence of
creditors to ensure an equal distribution of the insolvent estate between them .
It is for this reason that liquidation proceed ings are inappropriate to resolve a
dispute as to the existence of a debt 5. The Court, in the majority judgment,
stated the position, with reference to the Badenhorst principle6, as follows:
2 In terms of item 9(1) of Schedule 5 of the 2008 Companies Act, the provisions of Chapter XIV of the
1973 Act continue to apply to the winding -up of companies under the 2008 Companies Act until the
Minister, by notice in the Gazette, determines a date on which it shall cease to have effect.
Accordingly, in terms of section 343 of the 1973 Act, a company may still be wound -up either by the
Court, or voluntarily by way of a creditors’ or a members’ voluntary winding -up, except for “solv ent”
companies mentioned in item 9(2) of Schedule 5 of the 2008 Companies Act.
3 S 346(1)(b) of the 1973 Act
4 S 1, dealing with the definition of court read with 12(1) of 1973 Act; Wild & Marr (Pty) Ltd v Intratek
Properties (Pty) Ltd 2019 (5) SA 310 (GJ) at pars [13] and [14]
5 Trinity Asset Management (Pty) Ltd v Grindstone Investments (Pty) Ltd 2017 (12) BCLR 1562 (CC)
“…That principle is less of a principle than a sensible rule of practice. It
says that if you want to claim a debt you know is disputed, you should
not bring liquidation proceedings to do it. You should claim the debt by
way of action – and only once your claim has been established may
you, if necessary, seek to liquidate or sequestrate.”7
14. With regards to the threshold an applicant seeking the provisional liquidation
of a respondent company must clear, the position is that t he applicant must
establish its entitlement to an order and the existence of its claim 8, where it is
disputed, prima facie on a balance of probabilities with reference to the
affidavits9.
15. However, a court should draw a distinction between disputes regarding the
respondent company ’s liability to the applicant and ‘other disputes’ 10. The
‘other disputes’ is a reference to the rest of the requirements to succeed with
a liquidation application, apart from the prima facie existence of the claim. The
test to resolve a dispute with regards to t he ‘other requirements’ is whether
the balance of probabilities favours the applicant's version on the papers. If
the liability of the respondent is not established, it matters not that the
applicant has established the ‘other requirements’.
16. In respect of the meaning of the words ‘prima facie ’ the court in Kalil v
Decotex explained that it does not mean the same as th e term is normally
used i.e.: in the absence of re-butting evidence. The requirement ‘prima facie’
rather means : “…as denoting a balance of probabilities on all the
par 145 (“Trinity”)
6 This rule states that w inding-up proceedings are not to be used to enforce payment of a debt t hat is
disputed on bona fide and reasonable grounds. Badenhorst v Northern Construction Enterprises (Pty)
Ltd 1956 (2) SA 346 (T) at 347 – 348
7 Trinity par 86
8 Orestisolve (Pty) Ltd T/A Essa Investments v NDFT Investments Holdings (Pty) Ltd and Another
2015 (4) SA 449 (WCC) (“Orestisolve”) par 7
9 Kalil v Decotex (Pty) Ltd 1988 (1) SA 932 (A) at 975J-979F(“Kalil v Decotex”)
10 Payslip Investment Holdings CC v Y2K Tec Ltd 2001 (4) SA 781 (C) at 783G -I (“Payslip
Investment”)
affidavits…”11. It therefore means that a court having to decide a contested
liquidation application, at the provisional order stage, does not call into aid the
help of the so-called Plascon-Evans rule, which requires a court to accept the
allegations by the respondent unless they constitute bald or uncreditworthy
denials or are palpably implausible, far -fetched or so clearly unt enable that
they could safely be rejected on the papers 12. Although the Plascon-Evans
rule is available to the court at the final order stage of the liquidation
proceedings13.
17. In determining the probabilities on all the affidavits I follow the well-established
approach as set out in Govan v Skidmore 14 to: “…select a conclusion which
seems to be the more natural, or plausible, conclusion from amongst several
conceivable ones, even though that conclusion be not the only reasonable
one”. This being motion proceedings I also stay clear from any credibility
findings to determine the probabilities. This is consistent with the approach
that was endorsed in National Employers 15 where the court held that it is
possible to arrive at a decision si mply on the probabilities without having to
make specific findings on the credibility of the witnesses16.
18. If an applicant can prima facie establish its claim a respondent can dispute the
claim bona fide and on reasonable grounds 17. With regards to evaluating the
bona fides and reasonableness of a respondent’s opposition to an applicant’s
claim, the legal position is that bona fides in the (true) sense of good faith has
nothing to do with the matter, as bona fides (genuineness) is on any
reckoning not on its own sufficient to make a finding that the claim is disputed
on substantial (i.e. reasonable) grounds18.
11 Kalil v Decotex par 60
12 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634D-635D
13 Orestisolve par 9
14 Govan v. Skidmore, 1952 (1) S.A. 732 (N) at p. 734 ; Also Ocean Accident and Guarantee
Corporation Ltd v Koch [1963] 3 All SA 329 (A)
15 National Employers’ General Insurance Co Ltd v Jagers 1984 (4) SA 437 (ECD (“National
Employers”))
16 National Employers 440 G - H
17 Orestisolve par 8
18 Orestisolve par 13
19. Therefore a court faced with an opposed liquidation application first determine
whether the respondent is indeed indebted to the applicant . If so, it would
mean that the applicant has prima facie established the claim. Thereafter, the
court considers whether the claim is bona fide disputed on reasonable
grounds with reference to the Badenhorst rule19. If the claim ca nnot be
disputed in terms of the applicable test, the rest of the requirements for a
liquidation is then considered. However, should a court find that the applicant
could not prima facie establish its claim because there is a real and genuine
factual dispute regarding the respondent’s indebtedness, an applicant can ask
the court to refer the disputed issues to oral evidence 20. However, if a court
finds that the applicant should have anticipated the factual dispute21 a referral
to oral evidence would not serve any purpose and dismissal of the application
will be the most likely result22 as the applicant would have no locus standi to
further pursue the liquidation application.
20. In concluding on the applicable legal prin ciples, Mr. Walters submitted that
while it is generally accepted that the applicant, in a liquidation application,
bears the onus of establishing its claim prima facie, there is uncertainty and
conflicting authority regarding how a court should resolve disputes of facts at
the provisional order stage. I do not find it necessary to engage in this debate
or contribute to any perceived uncertainty , to the extent that there is such a
debate. In my view the approach articulated in Kalil v Decotex remains the
guiding framework how a court should determine whether an applicant has
established its claim prima facie . Th is approach has been confirmed, with
minor adjustments, in various subsequent judgments23.
21. Accordingly, I understand the approach at the provisional stage to be, where
the respondent’s indebtedness is disputed, that a court should take a holistic
view of all the allegations and supporting evidence presented in the affidavits
to make a finding on the probabilities whether the applicant has prima facie
19 Note 6
20 As per Kalil v Decotex
21 Adbro Investment Company Ltd v Minister of Interior 1956 (3) SA 345 (A) at 350A
22 Freshvest Investments (Pty) Ltd v Marabeng (Pty) Ltd (1030/2015) [2016] ZASCA 168 (24
November 2016) par 11
23 Afgri Operations Ltd v Hambs Fleet (Pty) Ltd 2022 (1) SA 91 (SCA)
established the respondent’s indebtedness. Only once a court is satisfied on
the probabilities that the respondent’s liability to the applicant exists do es it
consider whether the responde nt has raised a bona fide dispute of its liability
to pay and did so on reasonable grounds24.
Evaluation
22. After reviewing the various affidavits filed in this matter, I am of the view that
the application has to fail having regard to at least two hurdles that Charl
Electrical fail ed to clear. Firstly, it has failed to establish a prima case of
Integrated Projects’ liability in its founding affidavit. Secondly, even if the first
hurdle could be cleared, it has failed to establish, on the probabilities, a prima
facie case demonstrating that it has a claim against Integrated Projects.
Case not made out in the founding affidavit
23. Since, I am dealing with an opposed motion , as per Room Hire 25 and
Telcordia26, the applicant must still make out a case in the founding affidavit.
In this matter the founding affidavit presented a case that the parties allegedly
concluded a partly written, partly verbal agreement for electrical work to be
performed at the King’s Corner development for the total sum of
R1,247,088.48, payable by way of monthly progress claims. Reliance was
placed o n invoices that were issued to Integrated Projects, by a quantity
surveyor, to the value of R522,327.11 and of which an amount of
R103,623.20 was paid.
24. Integrated Projects filed a comprehensive answering affidavit. It disclosed
information which was withi n the knowledge of Charl Electrical and which
should have formed part of the allegations in the founding affidavit. In its
replying affidavit, which was filed significantly late, the reason for the late filing
24 Hülse-Reutter & Another v HEG Consulting Enterprises (Pty) Ltd 1998 (2) SA 208 (C) at 218D -
219C as endorsed in Orestisolve par 8
25 Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1115 (T) at p 1163. (“Room
Hire”)
26 Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) at par 32 (“Telcordia”)
was because Charl Electrical : “… was not aware of the mammoth task that
would be involved in preparing its replying affidavit and also because its
attorneys had to: “…consult not only Prospekt and its attorney, but to consult
with other professional s on the project in order to obtain documentary
evidence which illustrates the extent of the contrived position adopted in the
answering affidavit…” Charl Electrical ultimately filed a detailed replying
affidavit, which prompted Integrated Projects to apply for leave to submit a
supplementary answering affidavit. This, in turn, led to Charl Electrical filing
an additional replying affidavit.
25. The consequence of all the affidavits filed was that Charl Electrical relie d on
allegations and evidence not included in its founding affidavit to persuade the
court that it has a prima facie claim against Integrated Projects. From the
contents of the replying affidavit, the written heads of argument, and oral
submissions, it is cl ear that Charl Electrical requires the court to accept at
least the following to establish its claim against Integrated Projects:
25.1 The existence of the JBCC agreement and that all sub -contractors
would have been appointed by Integrated Projects.
25.2 Also, that the JBCC agreement provides that there shall be no privity of
contract between Prospekt and a subcontractor appointed by
Integrated Projects.
25.3 a WhatsApp message from Mr Heunis (obo Prospekt) to Mr Cloete of
Quansur on 15 December 2022 that presupposes an obligation on
Integrated Projects to pay Charl Electrical when it is appointed as a
sub-contractor.
26. The JBCC agreement therefore emerged as a central document in this case.
Charl Electrical placed considerable reli ance on it, not only to counter the
defences raised by Integrated Projects but effectively to "complete its cause of
action." Charl Electrical with hindsight advanced the case that the JBCC
agreement imposed an obligation on Integrated Projects to appoint
subcontractors and precluded any direct contractual relationship between a
subcontractor and the developer (Prospekt).
27. All this means that Charl Electrical has presented its case in a manner that left
Integrated Projects unclear about the case it needed to answer. This is
evident from the multiple sets of affidavits filed.
28. The application must therefore fail because Charl Electrical has not made out
a case in its founding affidavit. It appears that Charl Electrical mistakenly
relied on the principle that a court must determine whether an applicant has
established its entitlement to an order and the existence of its claim 27 on a
balance of probabilities with reference to the affidavits. However, in the
context of an opposed liquidation application, "referenc e to affidavits" does
not absolve an applicant from the obligation to set out its case fully in the
founding affidavit. The notion that a party can present an incomplete case in
its founding papers, supplement it through an extensive replying affidavit, an d
then rely on the court's duty to consider "all the affidavits" is untenable. Such
an approach would undermine the purpose of liquidation proceedings,
allowing for an endless exchange of affidavits in an attempt to build a claim
retroactively, and would ultimately make a mockery of the process.
29. I am therefore not persuaded that Charl Electrical has made out its case in the
founding affidavit. Consequently, this on its own justifies a dismissal of the
application.
The existence of a prima facie claim
30. Considering, my finding on the deficient founding affidavit I do not have to
continue any further to consider the application. However, to the extent that I
may be wrong, or be criticised for a strict application of the Room Hire and
Telcordia requirement in motion proceedings, I in any event will now consider
27 Orestisolve par 7
all the affidavits and consider whether Charl Electrical has establi shed on the
probabilities whether it has a claim against Integrated Projects.
31. Charl Electrical must make out a prima facie case on the probabilities that a
subcontractor agreement was concluded between it and Integrated Projects. I
am not convinced that the probabilities support such a conclusion.
32. Firstly, i t was alleged that a ‘partly written, partly, oral agreement’ was
concluded between the parties in November 2022. The allegations in respect
of the agreement did not have regard to how an agreement is ordinarily
pleaded28 as provided for in uniform rule 18(6). It was not clear which terms of
the agreement w ere ‘written’, and which w ere ‘oral’. There were also no
allegations throwing light on who represented the parties at the time the
agreement was concluded during November 2022 and or June 2023 , or
where the alleged oral and written parts of the agreement were respectively
concluded.
33. I am mindful of the fundamental distinction between a cause of action29 for the
recovery of a debt and the factual basis required to establish an enforceable
claim for the liquidation of a compa ny30. However, in this case, where liability
is not admitted and the court must be guided by the probabilities to determine
whether the applicant’s claim has been prima facie established, Charl
Electrical’s failure to adequately set out the facts supportin g the existence of
the alleged subcontractor agreement in its founding affidavit is detrimental to
its case.
34. Secondly, the written portion of the agreement was concluded on 15 June
2023. It seems to me that on the probabilities this document is rather intended
28 A party who in his or her pleading relies upon a contract shall state whether the contract is written
or oral, and when, where and by whom it was concluded, and if the contract is written a true copy
thereof or of the part relied on in the pleading shall be annexed to the pleading.
29 As per Abrahmse & Sons v SA Railways and Harbours 1933 CPD 626 at 633: Which requires a
party to allege: the entire set of facts which give rise to an enforceable claim and includes every fact
which is material to be proved to entitle a plaintiff to suc ceed in his claim. It includes all that a plaintiff
must set out in his declaration to disclose a cause of action”
30 The Standard Bank of South Africa Ltd v Tsheola Dinare Tours and Transport Brokers (Pty)
Ltd (22011/2021) [2022] ZAGPJHC 311 (6 May 2022)
to regulate Charl Electrical’s obligations in terms of the Occupational Health
and Safety Act, 85 of 1993 (the “OHSA”), if regard is had to the following:
34.1 The document is identified as an agreement on occupational health and
safety in terms of the provisions of s 37(2) of the OHSA.
34.2 The purpose of the document is described as follows:
“The Contractor acknowledges that this agreement constitutes an
agreement in terms of Section 37(2) of the OHSA, whereby all
responsibility for health and safety matters relating to the work the
Contractor and its workers or sub -contractors to perform on the
premises in terms of the scope of work shall be the obligation of the
Contractor.”
34.3 The only reference that may be helpful to Charl Electrical is the fact that
the document identifies the scope of work as ‘Electrical Installation’.
However, the remainder of the document does not support a conclusion
that it has anything to do with a sub -contractor agreement to render
electrical consultant services at the Kings Corner development.
34.4 There is no reference to the alleged contract value of R1,244,088.48
and the payment terms.
34.5 Although the document is not counter signed it does appear to
envisage a signature by the ‘client’. Integrated Projects alleged that the
‘client’ was Prospe kt, the developer. On the probabilities this seems
correct as otherwise it would have rather made mention of ‘the
contractor’.
35. Third, on 26 June 2023, Ms. Marieda Olivier (“Olivier”), acting on behalf of
Charl Electrical, sent an email to representatives of Integrated Projects
requesting payment of outstanding invoices. This was just 11 days after the
alleged conclusion of the wri tten portion of the agreement between Charl
Electrical and Integrated Projects. Notably, the email makes no reference to
the existence or conclusion of the subcontractor agreement, nor does it
mention that such an agreement had allegedly been formalised 11 days
earlier.
36. Fourth, the full context of an email dated 14 August 2023 was not provided.
The founding papers include only an email from Mr. Chris Heunis (“Heunis”)
of Prospekt to Olivier, in which Heunis states that “CE was appointed by the
builder.” The re is no explanation as to why Heunis felt the need to clarify
Charl Electrical’s appointment. It appears that Olivier sought clarification from
Heunis, and he responded accordingly. If an agreement had been concluded
in November 2022 and formali sed in Jun e 2023, there would have been no
need for such clarification. Moreover, the probative value of Heunis’s
statement that Charl Electrical was appointed by Integrated Projects, as the
builder, is significantly diminished by his immediate confirmation that he had
instructed his PA to contact Charl Visser, representing Charl Electrical, to
arrange for payment , clearly on behalf of Prospekt. This indicates that
Prospekt acknowledged a responsibility or liability for payment to Charl
Electrical.
37. Fifth, the existen ce of the JBCC Principal Building Agreement, concluded
between Prospekt and Integrated Projects on 8 August 2022, was not
disclosed in the founding affidavit. Moreover, Charl Electrical’s role as a party
or signatory to that agreement, whether as an agent or an electrical service
consultant, was also omitted. Charl Electrical should have disclosed this
agreement and clarified its relevance to its claim of being appointed as a
subcontractor two months later. The only reasonable inference from its failure
to disclose the JBCC agreement in the founding affidavit, which was within its
knowledge, is that Charl Electrical anticipated difficulties in reconciling its
alleged subcontractor relationship with Integrated Projects while
simultaneously maintaining a direct relationship with Prospekt.
38. Sixth, Charl Electrical failed to disclose in its founding affidavit that it had
submitted a direct design and costing quote for the Kings Corner development
to Prospekt. This omission suggests that Charl Electrical was concer ned that
revealing this information might support Integrated Projects’ contention that a
direct contractual relationship existed between Charl Electrical and Prospekt
for the electrical work.
39. Seventh, Charl Electrical failed to disclose the minutes of the site meetings,
which indicate that it was far more involved in the construction project than its
claimed role as a subcontractor suggests. The disclosure would have cast
doubt on Charl Electrical’s assertion of being a subcontractor, as according to
the JBCC agreement subcontractors are not required to attend site meetings
unless invited.
40. The seven difficulties outlined above, which are by no means exhaustive, are
sufficient to cast doubt on Charl Electrical’s case. Therefore, having regard to
the probabilities, and without making any credibility findings either way, I find
that the most natural, plausible, and reasonable concl usion from the range of
conceivable ones is that Charl Electrical did not have a subcontractor
agreement with Integrated Projects. It has therefore failed to establish that it
has a prima facie claim and therefore lacks locus standi to pursue Integrated
Projects’ liquidation . The application must therefore fail. I see no reason to
deviate from the general rule that, having been unsuccessful, Charl Electrical
should bear the costs.
Conclusion
41. For all the reasons set out above, I make the following order:
41.1 The late filing of Charl Electrical’s replying affidavit is condoned.
41.2 Integrated Projects’ application for leave to file a supplementary
answering affidavit is granted.
41.3 The application for the provisional winding -up of Integrated Projects is
dismissed with costs, including the costs of counsel on scale B from 12
April 2024.
____________________________
A MONTZINGER
Acting Judge of the High Court
Appearances:
Applicant’s counsel: Mr. R Engela
Applicant’s attorney: Enderstein Malumbete Inc.
Respondent’s counsel: Mr. A Walters
Respondent’s attorney: Kemp Nabal Inc.