IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)

Case Number: 15610 /2023

In the matter between:

GOLDEN LOOP TRADING 21 CC Intervening Party
(Registration No: 2006/060265/23)

IN RE:

MUTUAL HEIGHTS BODY CORPORATE Applicant

and

RED SOCKS INVESTMENTS (PTY) LTD Respondent
(Registration No: 2015/049720/07)


JUDGMENT DELIVERED ELECTRONICALLY ON 17 JANUARY 2025

MANGCU -LOCKWOOD, J

A. INTRODUCTION

[1] This is the extended return date of a provision al liquidation order which was
granted on 28 March 2024 for the winding up of the respondent ( ‘Red Socks’ ), as

well as an application by a third party, Golden Loop, to intervene in the proceedings
to oppose the granting of a final order.

[2] The applicant is a Body Corporate, in which Red Socks owns a property in
terms of a sectional title . The sole director of Red Socks is Mr Mark Kleynhans. He is
also one of the three trustee s of the Kleynhans Family Trust, which in turn is the sole
member of Golden Loop .

[3] The applicat ion for the provisional liquidation was opposed by Red Socks , and
the provisional order was granted per judgment of Pangarker AJ, as she then was,
and she found t hat the applican t had made out a prima facie case that Red Socks
was commercially insolvent and unable to pay its debts as and when they fell due.

[4] In terms of the provisional order, the return date was 31 May 2024. It was
initially extended to 15 August 2024, and later to 17 October 2024. The first
postponement was to allow Red Socks to file a further answering affidavit , and t he
second one was on account of the intervention application which was delivered t hree
days before the set down of 15 Augus t 2024.

[5] The intervention application , which is vehemently opposed by the applicant, is
brought on the basis of section 354 of the Companies Act 61 of 1973 ( ‘the
Companies Act’ ), and Golden Loop seeks, not only to oppose the granting of a final
order, b ut also that the provisional order should be discharged. Since the grounds on
which it is brought are virtually the same as those r elied upon by Red Socks in the
main application, it is convenient to deal with the intervention later.

B. THE FINAL ORDER OF L IQUIDATION

[6] In the first place, Red Socks repeats the grounds of opposition it relied upon
at the provisional stage of the proceedings, and they may be summarised as follows:
firstly, that the applicant failed to provide a reconciliation of the levies account to Red
Socks when requested to do so; secondly, an alleged disparate treatment of interest
charged on arrear levies; thirdly, the rejection o f a previous settlement offer which
was a conditional offer of security; and fourthly, an antagonistic relationship between
the parties, and mala fide intentions on the part of the applicant. These were all dealt
with comprehensively in the provisional jud gment, and were rejected. The
respondent raises nothing substantially new in that regard, and I have found no
reason to interfere with the reasoning of the court in that regard.

[7] The main ground relied upon for discharge of the provisional order is a
paym ent of R3 190 000 made by Kleynhans on 20 May 2024 into the applicant’s
account, ostensibly to satisfy the applicant’s full claim and interest. On the basis of
this payment, Red Socks and Golden Loop make several claim s: that the applicant’s
claim has been paid in full and the provisional order should be discharged ; that the
applicant has lost its locus standi to continue with liquidation proceedings ; the fact of
the payment shows that Red Socks is not commercially or factually insolvent ; and
that the appli cant has ulterior motives by pursuing these pro ceedings and by not
accepting the payment of 20 May 2024 .

[8] It is not in dispute that the payment was made after the granting of the
provisional order, and by the legal representatives of Red Socks on b ehalf of
Kleynhans, directly to the applicant ’s bank account . It was also made after the
provisional liquidator w as appointed by the Master . Kleynhans s tates that he made
the payment of R3 190 000 to settle Red Socks’ indebtedness which at that point,
was R 3 040 000 . According to the pa pers, on the day that Kleynhans made the
payment via his attorneys , they sent a letter to the applicant’s attorneys sett ing out
the basis for the payment, namely : (a) payment of arrears of R 3 040 000, which
were reflected in the May 2024 statement of account; (b) levies to be raised by the
applicant for June 2024 and July 2024; and (c) any interest that may have
accumulate d since receipt of the May statement. It is also common ground that after
payment of the money into the applicant’s bank account, a statement was generated
for Red Socks, reflecting it as payment.

[9] The response from the applicant’s attorneys , dated 22 May 2024, was an
acknowledgement o f receipt of the communication , including the attachment, which
was the proof of payment. The applicant’s attorneys stated that they were awaiting
the response of the provisional liquidator regarding how the payment was to be
approached. They opined that it was not competent for the company in liquidation to
enter into any agreements at that stage, and that, absent any explanation, the
reasonable assumption was that the pa yment was a donation which accrued to the
company in liquidation for distribution by the liquidator to the body of creditors. On 14
June 2024, the applicant’s attorneys advised that the money had been paid over to
the provisional liquidator to be held in a ccount until finalisation of the liquidation
proceedings .

[10] The first argument raised by Golden Loop and Red Socks is that , once the
payment was made, the applicant lost its locus standi to continue with these
proceedings . But, as the applicant points out, that argument is directly against the
authority of Express Model Trading 289 CC v Dolphin Ridge Body Corporate1, a case
emanating from the Supreme Court of Appeal (SCA). Similar to this case, the case
concerned liquidation proceedings arising from arrear levies owed to a body
corporate. And similar to this case, a third party made payment ostensibly to
extinguish the debt after the granting of the provisional order, and it was claimed,
amongst other things, that this meant the body corporate lost its locus standi to
continue with the liquidation proceedings.

[11] The SCA put paid to this argument as follows at paragraph 14:

‘…even if the payment by the third party had wiped the slate
clean, as one is dealing with a relationship between the body
corporate as creditor and Express Model as debtor in relation to a
recurrent debt in the form of monthly levies and charges, for as
long as the latter continued to own properties in Dolph in Ridge,
the body corporate (as Mr Bester correctly observed) remained a
prospective creditor of Express Model. That legal relationship is
established by the provisions of the Sectional Titles Act. In Gillis -
Mason Construction Co (Pty) Ltd v Overvaal Crushers (Pty)
Ltd 1971 (1) SA 524 (T) at 528 Trengove J defined a prospective
creditor as ‘one who by reason of some existing vinculum juris has
a claim against a comp any which may ripen into an enforceable

1 Express Model Trading 289 CC v Dolphin Ridge Body Corporate (656/2013) [2014] ZASCA 17;
[2014] 2 All SA 513 (SCA); 2015 (6) SA 224 (SCA) (26 March 2014).
debt on the happening of some future event or on some future
date’. And as to what is meant by the term vinculum juris , Nestadt
J observed in Holzman NO v Knights Engineering and Precision
Works (Pty) Ltd 1979 (2) SA 784 (W) at 787E -F that ‘there must I
consider be a legal obligation which creates a right enforceable in
a court of law. It can arise either from contract or delict . . . .’
Nestadt J added (at 787G): ‘It is clear therefore that the claim of
the “creditor” need not be due or payable at the date of the
presentation of the application for winding -up . . . But it is essential
that there actually exists a vinculum juris with the company. It
does not suffice that it will probably arise in the future’.
Counsel for Express Model was thus constrained to concede that
he had some difficulty in persisting with the submission that the
body corporate had lost its locus standi after payment of the sum
upon which the application was originally founded. ’

[12] There is accordingly no merit in the locus standi argument.

[13] Next is the argument that the fact of the payment should result in an inference
that Red Socks is ab le to pay its debts as and when they are due . This too was an
argument raised in Express Model which was similarly dismissed, as follows2:

‘To the extent that the full court held that the mere fact that a debt is paid
by a third party did not per se justify the inference that a debtor is unable
to pay the debt - that may as a general proposition be unobjectionable.
But, the last sentence of the quoted passage appears to me to state the
position rather too widely. An enquiry of this kind, I do believe, is fact -
based. Thus as important as the fact of payment, may well be the source
of payment. A debtor’s ability to raise a loan from a third party may
indeed be a demonstration of its creditworthiness. On the other hand, it
could conceivably demonstrate th e exact opposite, where (as here) it
amounts to no more than borrowing from Peter to pay Paul. Unlike

2 At para 16.
in Helderberg , where the funds appear to have been borrowed pursuant
to an arm’s length transaction from an unrelated entity, here, Express
Model’s benefa ctor initially remained undisclosed. It subsequently
emerged that assistance was obtained from corporate entities, namely
Billmont and Class A Trading, who as part of Mr Hassan’s stable of
corporate entities, enjoyed a fraternal relationship with Express M odel.
Mr Bester explains:

‘The Corporation is surety for the debts of Billmont No. 104 CC to
Rand Merchant Bank (“RMB”). Billmont is a “subsidiary” of the
corporation. RMB registered surety bonds over the remaining units
of the corporation in liquidation, which surety bonds were
registered in the capital amount of R18 000 000.00 (excluding the
additional amounts). The current outstanding amount owing by
Billmont to RMB amounts to R25 300 000.00 (see “A3”). The full
suretyship obligation forms a contingent l iability in the books of the
corporation and must be taken into consideration in its liability
statement. RMB has submitted two requisitions in the provisional
liquidation of the corporation (see “K1” and “K2”), and I have
established that Billmont is curr ently in arrears with its payments
to RMB.’

It follows that no inferences favourable to Express Model’s
creditworthiness or its ability to raise arm’s length funding can
accordingly be drawn.

[14] Similar to the circumstances in Express Model , the payment here was made
by Mr Kleynhans who explain s that he obtained a loan in his personal capacity from
Jean Avenue Property Investments (Pty) Ltd to settle the arrears on behalf of Red
Socks . It can hardly be argued that this was an arm’s length transact ion. Kleynhans
was the sole director of Red Socks . No explanation has been forthcoming about the
terms of this loan , and whether and to what extent Red Socks is exposed thereby.

[15] Perplexingly, it is Golden Loop that claims, in the intervention application, that
it is a creditor of Red Socks. This assertion raises more questions than answers,
given that Kleynhans claims to have obtained the loan in his personal capacity , not in
the name of Golden Loop . And if the assertion is true, it means that Golden Loop
advanced the said loan to Red Socks , the details of which are yet to be disclosed.
Such an arrangement would furthermore have been made without the intervention of
the provisional liquidator, thus acting against the very purpose of a liquidation, which
is to establish a concursus creditorum . Further, a loan by Golden Loop to Red Socks
would not be an arm’s length transaction given that the former is the sole
shareholder in Red Socks, a situation akin to the circumstances in Express Model
where the payment was made by corporate entities which enjoyed a fraternal
relationship with the company in liquidation.

[16] There is moreover no basis to conclude, on the facts of this case, that the
payment of 20 May 2024 proves creditworthiness or solvency on the part of Red
Socks. The payment was, after all, not made by Red Socks , but by Kleynhans . And i f
it is correct tha t the payment was a loan to Red So cks, whether by Kl eynhans or
Golden Loop, the details of that arrangement have not been disclosed , and the Court
is not able to assess w hether it is an arrangem ent that is favourable to Red Socks.
Such a decision should, in any event, have been made by the provisional liquidator
were she properly involved and informed thereof. It has also not been shown that
Red Socks has any realisable assets to satisfy the debt. In any event, the me re
advancing of a loan to Red Socks does not necessarily justify an inference that it is
able to pay its debts as and when they fall due, but may mean that it can only survive
on loans, which amounts to the proverbial ‘borrowing from Peter to pay Paul’.3

[17] Still on the ability of Red Socks to pay debts as and when they arose, the
facts of this case date back some years, and the record shows that Red Socks
repeatedly failed to pay levies, resulting in summons being issued. And even in these
proceedings, Red Socks does not dispute that it owes arrears, although it disputes
the amounts, based on the various repeated defences already adverted to above
and which have no merit. The arrears that are the subject of these proceedings are

3 Body Corporate Fish Eagle v Group 12 Investments 2003 (5) SA 414 (W) at 426 -427.
substantial, amounting to R 2 270 024.25, and are calculated from as far back as
May 2018 to 22 March 2023 , with regular notification and demands for payments, to
no avail . There has never been an explanation for these extended delays in paying
the arrears which were due, and it is no wonder that the applicant approached the
Court to draw a legal conclusion, based on the provisions of section 345 of the
Companies Act, that Red Socks is unable to pay its debts as and when they are
due.4 To make matters worse, despite multiple affidavi ts filed on its behalf, Red
Socks has never disclosed any financial information in these proceedings, whether in
the form of bank statements, bank statements, balance sheets or income statements
in support of its contention that it is commercially and fact ually solvent. The
conclusion is irresistible that Red Socks is unable to pay its debts as and when they
fall due.5

[18] In addition to all this, the applicant disputes that the amount paid on 20 May
2024 extinguished all the arrear levies, stating that it is R300 000 less than the
outstanding debt. It explains that, whereas two interest amounts of R178 950 and
R271 455 are reflected as ‘written off’ in the statements , that is only for purposes of
the applicant’s income tax, not for the benefit of Red Socks. T his explanation
appeared in the applicant’s further replying affidavit which was in reply to the further
answering affidavit of Red Socks which relies substantially on the payment of 20
May 2024. It has not been seriously contradicted. It is not disputed t hat there has
never been an agreement to write off the said interest , and accordingly that it is
owed.

[19] Besides, it is not disputed that Red Socks had other creditors, namely the City
of Cape Town in the amount of R320 216, and the SARS in an undisclosed amount.
There is every reason for the provisional liquidator to have been consulted in the
process of making of this payment since she is lawfully vested with the insolvent
estate, so that other interests in the estate could be considered. In this regard, there
was nothing untoward in the applicant reporting the fact of the payment to the
liquidator, or for forwarding the payment to her as requested.

4 Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) 347 -348. Trinity Asset
Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd 2018 (1) SA 94 (CC). ABSA Bank Ltd
v Rhebokskloof (Pty) Ltd and others 1993 (4) SA 436 (C) at 446J.
5 Boschpoort Ondernemings (Pty) Ltd v ABSA Bank Ltd 2014 (2) SA 518 (SCA).

[20] Red Socks continues to claim that the applicant’s failure to retain the
payment and to use it to extinguish the debt amounted to an ulterior motive with the
single aim of ejecting Red Socks from the premises . No evidence is presented to
support the latter claim. As for the former, the applicant has explained, firstly, that the
account statement which was generated in favour of Red Socks, reflecting the
payment, was automatically generated and had since – by the date of deposing to
the applicant’s further replying affidavit on 15 July 2024 - been corrected. This
appears to have been on account of the applicant’s legal position that it was not
entitled to accept the payment and enter into an agreement post -provi sional
liquidation. This evidence is not seriously disputed on the papers.

[21] The parties disagree about the status of the payment , and relying on the case
of Corruseal6, the applicant claims that it was amounted to a donation to the estate.
On the other hand, the intervening party relies on the SCA case of Mostert and
Others v Firstrand Bank t/a RMB Private Bank 7 in which it was held, based on the
principles of the law of contract, that a creditor is not entitled to refuse payment from
a third party who makes a payment on behalf of a debtor in circumstances where it
makes no difference to the latter by whom the contract is performed , as long as the
performance is effective and in term s of the contract. The obvious problem facing
this argument is that, since Red So cks was in liquidation at the time that the payment
was made, th e present case concerns, not only the principles of contract , but also
the laws of insolvency.

[22] Ultimately, w hatever the status of the payment may be, the fact of the
payment does not cure the fundamental problem that is at the core of this
application, namely that it has not been established that Red Socks is able to pay its
debts as and when they become due , for all the reasons already discussed.
Accordingly, even if the payment were construed as payment of the debt as
contended by Red Socks and Golden Loop, that does not discharge the inference

6 Corruseal Corrugated KZN (Pty) Ltd and Another v Zakharov and Another (2108/2021) [2023]
ZAWCHC 48 (6 March 2023) .
7 Mostert and Others v Firstrand Bank t/a RMB Private Bank (198/2017) [2018] ZASCA 54; 2018 (4)
SA 443 (SCA) (11 April 2018) see para 27. See also Absa Bank Ltd v Moore & Another [2016] ZACC
34; 2017 (1) SA 255 (CC).
that Red Socks is commercially, if not factually, insolvent. The applicant has
otherwise complied with the requirements of the provisional order of 28 March 2024 ,
and there is no reason not to grant the final order .

[23] Turning to the intervention application, it raises the same issues and defences
raised by Red Socks in the main application. This, despite the fact that the affidavits
in the application are deposed by Kleynhans in his capacity as a representative of
the three trustees in the Kleynhans Trust.

[24] The founding affidavit in the intervention application sets out the
circumstances of the payment of 20 May 2024 and, on the basis thereof the
application avers that all its debts against the applicant are extinguished; the
applicant has lost its locus standi to proceed with the liquidation proceedings; and
that the app licant displays mala fide intentions by continuing with these proceedings
and not accepting its payment. The affidavit also sets out some events subsequent
to the granting of the provisional order which involve an arrangement or agreement
to enter into a c ollaborative effort with another entity, namely Onomo Hotels to
generate income. Not only is this a regurgitation of what was mentioned in the further
answering affidavit of Kleynhans in the main application, but it alarmingly shows that
the deponent conti nues to enter into final arrangements on behalf of Red Socks,
apparently without the involvement of the provisional liquidator.

[25] Section 354 of the Companies Act provides as follows:

(1) The Court may, at any time after the commencement of a
winding -up, on the application of any liquidator, creditor, or
member, and on proof to the satisfaction of the Court that all
proceedings in relation to the winding -up ought to be stayed or
set aside, make an order staying or setting aside the
proceedings or for the continuance of any voluntary winding -up
on such terms and conditions as the Court may deem fit.

(2) The Court may, as to all matters relating to a winding -up,
have regard to the wishes of the creditors or members as
proved to it by any sufficien t evidence.’

[26] In Essack v Resfam Investments CC and Others8, the court set out the legal
position regarding the application of section 354 as follows:

‘5.2 As set out in the commentary on this section in
Meskin, Henochsberg on the Companies Act, this section accords
a court a discretion whether to set aside a winding -up order or not.
This is irrespective of whether the basis for such setting aside is
the contention that the winding -up order should never have been
granted or whether the basis is that subsequent events to the
granting of the order justifies such setting aside .

5.3 A distinction should however, be made between circumstances
where it is contended, as the Applicant does, that the order should
never have been granted (in the words of Meskin (above): "should
not have occurred") and circumstances where setting aside is
sought by reason of subsequent events. In the former case, the
appli cation should only be granted in exceptional circumstances ..

5.4 In deciding whether or not to set aside winding -up proceedings, a
court should have regard to the wishes of the creditors and
members. In this regard (similar as when considering a stay of
proceedings), a court has to consider whether the rights of
creditors have been protected, such as where "satisfactory
provision (has been made) for them to be paid in full", and where
the liquidators' "special position has been fully safeguarded, eith er
by paying (them) the proper amount for (their) expenses or by
sufficiently securing payment".


8 Essack v Resfam Investments CC and Others (81703/2019) [2020] ZAGPPHC 145 (14 April 2020).
5.5 The solvency or not of the Corporation is also a factor to be
considered .

[27] To the extent that the intervention application is based on a n assertion that
the provisional order should not have been granted, Golden Loop has failed to
establish any exceptional circumstances for such relief. As I have indicated, the
basis for the intervention is what is already contended by Red Socks in the main
application, which ha s no merit.

[28] To the extent that the basis for seeking intervention is subsequent events to
the granting of the provisional order , it is clear that those subsequent events amount
to the payment made on 20 May 2024. As I have already indicated, the payment and
the arguments raised in support thereof do not justify the setting aside of the
provisional order.

[29] There is also to consider the fact that Red Socks has other creditors, namely
the City of Cape Town and possibly SARS. No mention is made of what is to
become of their interests, and their wishes have not been solicited or placed on
record. No effort has been made to show that satisfactory provision has been made
for them to be paid in full . I am accordingly not satisfied that the rights of all creditors
will be protected . Neither has it been shown that the special position of the liquidator
has been fully safeguarded, either by paying her the proper amount for her expenses
or by sufficiently securing payment.9 Finally, as I have already indicated, the
solvency of Red Socks has not been established on a balance of probabilities.

[30] For all these reasons, the intervention application has no merit.

[31] Lastly, t here is no reason why cost s should not follow the result. This matter
has unnecessarily become voluminous, with Mr Kleynh ans delivering multiple
affidavits, which were repetitious, raising the same or similar arguments at every
turn. Then, in another effort to stave off the final li quidation of Red Socks, the
intervention application was launched, with an affidavit deposed by Kleynhans, and

9 See Essack v Resfam Investments at para 5.4 relying on Re Calgary & Edmonton Land Co
Ltd [1975] All ER 1046 (Ch) at 1052.
the same issues as those raised in the main case by Red Socks were raised. I am in
agreement with the applicant that the delivery of multiple af fidavits and the
intervention application, coupled with the resulting postponements, amounts to
abuse of court processes.

[32] In the circumstances, the following order is made:

a. The intervention application of Golden Loop is dismissed with costs ,
including t he costs of postponement of 15 August 2024 .

b. The rule nisi granted on 28 March 2024 is confirmed and the respondent’s
estate is placed under final liquidation, and the costs of the application
shall be in the winding -up.


________________________
N. MANGCU -LOCKWOOD
Judge of the High Court


APPEARANCES

For the applicant : Adv M Verster
Instructed by : Martin E Coetzee & Associates
M Coetzee

For the respondent : Adv P S Bothma
Instructed by : Abrahams & Gross Inc.
H Bothma

For the intervening party : Adv C L H Harms
Lionel Murray Schwormstedt & Louw
M Nzimande