IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION,
CAPE TOWN
In the matter between:
BUSINESS PARTNERS LIMITED
[Registration Number: 1981 /000918/06}
and
THE COMPANIES AND INTELLECTUAL
PROPERTIES COMMISSION OF SOUTH AFRICA
THE MINISTER OF TRADE AND INDUSTRY N.O.
THE MINISTER OF FINANCE N.O.
THE MINISTER OF PUBLIC WORKS N.O.
THE REGISTRAR OF DEEDS, CAPE TOWN
CRYSTALL ROHWENA ADONIS
DONOVAN THESTAN HANEKOM
DON MO PROPERTY (PTY) LTD
Case No: 14388/2024
Applicant
First Respondent
Second Respondent
Third Respondent
Fourth Respondent
Fifth Respondent
Sixth Respondent
Seventh Respondent
Eighth Respondent
JUDGMENT
ANDREWS,AJ
Introduction
[1] This is Part B of an opposed application in terms of which the Applicant,
Business Partners Limited ("Business Partners") is seeking a provisional winding-up
of the Eighth Respondent, Don Mo Property (Pty) Ltd ("Don Mo"), together with the
usual ancillary relief. In Part A of this application, the Applicant sought an order that
the dissolution of Don Mo be declared void in terms of section 83(4) of the Compan ies
Act1 ("the 2008 Companies Act") after it had been dissolved on 21 January 2024, due
to its failure to file its annual returns and pay the prescribed fees in respect thereof.
[2] The orders in Part A that were granted on 04 September 2024 ("the
reinstater:nent order"), also included inter alia that:
(a) The liabilities of Don Mo , immed iately prior to its dissolution on 21 January
2024, we re declared to re-vest in Don Mo ; and
(b) Don Mo was joined as the Eighth Respondent in this application.
[3] The Sixth Respondent, Crystal! Rohwena Adonis ("Ms Adonis"), and the
Seventh Respondent, Donovan Thestan Hanekom ("Mr Hanekom ") ("the directors"),
were cited in this application in their capacity as the former directors of Don Mo .
Pursuant to the directors giving notice of their intention to opposed the application on
1 Act 71 of 2008.
2
18 July 2024, the parties agreed to regulate the further conduct of the matter in
respect of the relief sought in Part B of this application as part of the reinstatement
order.
Salient grounds of the application
[4] Business Partners is a creditor of Don Mo for a combined amount of
R1 961 608.60, together with interests and costs. Business Partners is seeking a
provisional winding-up order on the following grounds:
(a) Don Mo is unable to pay its debts as envisaged in section 344 of the Companies
A ct 2 ("the 1973 Companies Act"), as read with section 345(1)(c) thereof, and
(b) It is just and equitable for Don Mo to be wound up as envisaged in section 344(h)
of the 1973 Companies Act.
The Term Loan Agreement
[5] The parties, namely Business Partners and Don Mo entered into a term loan
agreement ("the term loan") on 5 March 2014, in terms of w hich Business Partners
agreed to loan to Don Mo an amount of R2 249 260, subject to standard terms and
conditions. A salient term of the agreement, included that the term loan was payable
in full on demand as set out in the "Breach" clause thereof, which in the main
stipulates that without prejudice to any of its rights in law or interest of the term loan,
Business Partners would be entitled to withhold any portion of the loan not paid out
and claim immediate payment of the outstanding balance payable by Don Mo to
Business Partners in terms of the term loan irrespective of whether the due date for
. payment has arrived if, Don Mo inter alia3:
2 A ct No 61 ofl973.
3 A nnexure ".FA6", C lause 27, page 97.
3
(a) Failed to comply with any of the terms and conditions of the term loan, or acted in
conflict with any of the provisions of the term loan;
(b) In the opinion of Business Partners, conducts its business in conflict w ith generally
recognised business practice or any law;
(c) Was deregistered; or
( d) Supplied false information or withheld information from Business Partners.
The shareholder's loan agreement
[6] Business Partners and Don Mo concluded a shareholder's loan agreement
("the shareholders agreement"), on 5 March 2014, in terms of which Business
Partners agreed to loan to Don Mo an amount of R1 250 000, subject to standard
terms and conditions.4 The default clause in essence mirrored that of the term loan
agreement.5
Point in limine
[7] Business Partners contended that the directors lack authority to oppose the
liquidation application on behalf of Don Mo. In augmentation of this assertion, it was
submitted that despite Mr Hanekom 's averment that he is "duly authorised" in terms
of a resolution purportedly signed by the board of directors of Don Mo on 18 July
2024, to oppose the application for the winding up of Don Mo and that he did so on
behalf of Don Mo , Ms Adonis and himself, he failed to obtain the written approval of
the shareholders of Don Mo as required in terms of Don Mo's Memorandum of
Incorporation ("MOl ")6.
4 Ann exure "FAT ', clause, 2, page 113.
s Annex ure"FA 7", clause, 26, page 128.
6 A nnexure "RA l", page 626.
4
[8] Business Partners referred to Clause 19 of the MOI which deals with matters
which are considered to be "Material Items" which Don Mo cannot undertake "except
as may be approved or agreed to in writing by the shareholders who at the relevant
time hold the higher of (i) 75% of the total voting rights in Don Mo attaching to the
shares or (ii) such percentage of the total voting rights in Don Mo attaching to the
shares which is equal to (100% -(less) the percentage of voting rights exercisable by
Business Partners Limited+ (1%))."7
[9] Business Partners highlighted that a material item in terms of clause 19.2.31 of
the MOI would include, inter a/ia, "the institution or defence of any legal proceedings
other than those arising in the ordinary course of business. "8 They argued that these
proceedings against Don Mo are not proceedings arising in the ordinary course of
Don Mo's business which ordinarily relates to property letting as set out in clause 5.1
of the MOI and is therefore, a material item for which the requisite authority is
required:
'The business of the Company as at the Signature Date is property letting or any other
business undertaken by the Company thereafter subject to the requisite approval of the
Shareholders as relevant Material Item pursuant to the Company's memorandum of
incorporation. ,o
[10] Business Partners analysed that in order for Don Mo to competently
resolve to oppose this liquidation application, the shareholders of Don Mo were
required to approve such opposition by way of a written resolution of 64% of the voting
rights attaching t<? the shares (100% - (less)) the percentage of voting rights
exercisable by the applicant (37%) + ( 1 % ) ) . This calculation is predicated on the terms
7 Annexure "RA J", page 647.
8 Annexure "RA l", page 650.
9 Annexure "RA J", page 679.
5
of clause 5.2.1 of Don Mo's shareholders agreement in terms of which the issued
share capital of the company comprises of 1000 shares, of which 370 (which
translates in 37%), is held by Business Partners and 630 shares (which amounts to
63%), is held by the Hanekom Family Trust. Business Partners in the Replying
Affidavit10 contended that no shareholders' meeting was convened for the purposes
of adopting the necessary resolution. In consequence whereof, Don Mo did not
resolve in writing that it may oppose the liquidation application. It was furthermore
mooted that Mr Hanekom was not authorised to act and deposed to the Answering
Affidavit on Don Mo's behalf. Likewise, the Attorneys purporting to act on behalf of
Don Mo were not granted the requisite authority and mandate to do so.
[11] Consequently, it was argued, that there is no competent opposition of
the application on behalf of Don Mo before the Court and that the matter ought to
proceed, as against Don Mo, on an unopposed basis. Business Partners submitted
that the directors could at best oppose the liquidation application in their personal
capacity.
[12]. It follows that this concession by Business Partners that Don Mo's
directors have a legal interest was the reason underpinning why they were joined as
parties to these proceedings as having a direct and substantial interest. The
Respondents asserted that this is also borne out by the continued existence of Don
Mo whose interest they are bound to serve.
[13] As to their authority to represent Don Mo, it was argued that these
proceedings do indeed arise in the ordinary course of business and that Business
10 Replying Affidavit, para 23, page 602.
6
Partners understanding of the requisite clause is incorrect. They proffer that two
discrete enquiries are to be held namely:
(a) Firstly, whether the transaction on which the debt is based is one "in the ordinary
course of business" and
(b) Secondly, whether these legal proceedings arise out of that transaction.
[14] As to the first enquiry, it was contented that the test for whether a
transaction is one in the ordinary course of business in reference to Joosub v
Ensor11 is "an objective one, namely whether having regard to the terms of the
transaction and the circumstances under which it was entered into, the transacUon
was one which would normally have been entered into by solvent business men". Don
Mo submitted that in applying that test, the debt in question is one which arose during
the ordinary course of business application since it emanates from a loan agreement
granted by Business Partners to Don Mo to conduct its business.
[15] This, it was argued, is evident from clause 3 of the term loan agreement
which stipulates as follows:
'3 PURPOSE FOR WHICH THE LOAN WAS GRANTED
The loan was granted for purposes of financing:
3. 1 The business known as: Hanekom Transport ... '12
[16] In relation to the second enquiry, reference was made to the definition in
the Oxford Dictionary wh ich defines the word "arise" to mean ''to happen as a result
of something of a particular situation"13 It was mooted that these proceedings
11 1966 (1) SA 319 (A) at 326D - E.
12 Ann exure "F A6", page 81.
13 The Sixth to E ighth Respondents He ads of Argumen t, para 15, page 8.
7
therefore fall within the ambit of clause 19.2.3114 and that no shareholder approval
was required and as such, the directors have the necessary authorisation to represent
Don Mo in this application. The Respondents reasoned that even if clause 19, read
w ith clause 19.2.31 constitutes a curtailment of the powers of Don Mo 's directors, it
is one that is untenable as a matter of law for the following reasons:
(a) That the power to manage the company rests with the board;
(b) The directors' powers to manage the company is derived from statute and not
from the MO!;
(c) Clause 19.2.31 is an instruction whether or not to institute legal proceedings on
behalf of the company;
(d) Clause 19.2.31 effectively strips the directors of their ability to discharge their
fiduciary duties which includes protecting the company's interests in
circumstances where the petitioning creditor is a shareholder, whose consent is
required to protect those interests.
[17] The Respondents emphasized further that the correct remedy would
have been for Business Partners to challenge the directors' authority under Rule 7,
which it did not do and as such, there is no proper challenge to the directors' authority
in this regard. In response to these contentions, Business Partners placed reliance
on Section 66(1) of the 2008 Companies Act15 which provides for the business and
affairs of a company to be managed by or under the direction of its board, which has
the authority to exercise all of the powers and perform any of the functions of the
14 MOI, Annexure "RA I", para 19.2.31 'the institution or defence of any legal proceedings other than those
arising out of the ordinary course of business'.
1 s "The business and affairs of a company must be managed by or under the direction of its board, which hos
the authority to exercise all of the powers and perform any of the functions of the company, except to the
extent that this Act or the company's Memorandum of Incorporation provides otherwise.,,
8
company, except to the extent that this Act or the company's MOI provides otherwise.
In this regard, it is uncontroverted that Business Partners and Don Mo concluded a
shareholder's loan agreement containing standard terms and conditions for such
loan.
[ 18] To strengthen the force of the Respondents' argument, they also rely on
Ganes v Telecom Namibia Ltd'6 ("Ganes'J where the following was held:
'The deponent to an affidavit in motion proceedings need not be authorised by the party
concerned to depose to the affidavit. It is the institution of the proceedings and the
prosecution thereof which must be authorised.'
[19] In response, Business Partners contended that Ganes is distinguishable
in that it related to proceedings that were instituted and prosecuted by a firm of
attorneys purporting to act on behalf of the Respondent.
[20] It is uncontroverted that the directors were cited as parties who have a
direct and substantial interest in the matter. It therefore follows that Don Mo's directors
have locus standi. However, insofar as they were authorised to oppose the liquidation
application on behalf of Don Mo requires the consideration of whether the MOI
specifically directed how the business affairs of Don Mo were to be managed by or
under the direction of its board, which ordinarily has the authority to perform any of
the functions of Don Mo, in terms of Section 66(1) of the Company 's Act.
[21] In this regard, Clause 19.2.31 of the MOI specifically requires that the
institution or defence of any legal proceedings other than those arising in the ordinary
16 2004 (3) SA 615 (SCA) at paras 18 - l9.
9
course of business must be dealt with by way of the procedure envisaged in clause
19.1 of the MOL Much was debated around whether these proceedings are regarded
as arising in the ordinary course of business. The "Business of the Company", is
clearly defined in clause 5 of the Shareholders Agreement as property letting. The
"Company ", is defined in clause 1.2 .13 of the Shareholders Agreement to be Don· Mo.
The question to be answered is whether these proceedings flow out of the ordinary
course of business as envisaged in the agreement between the parties. In my view,
it does not as the parties identified the need to deal with the requisite authority
required as one of the material items listed in the MO I. Therefore, in order for Don Mo
to competently resolve to oppose this liquidation application, the shareholders of Don
Mo were required to approve such opposition by way of a written resolution. It is
undisputed that no shareholders meeting was convened for the purposes of adopting
the necessary resolution.
[22] I am therefore in agreement with the contention of Business Partners
that there was no written resolution that Don Mo may oppose the liquidation
application. In my view, the reference to Ganes (supra), does not assist the
Respondents, as the MOI explicitly regulated the manner in which decisions are to
be taken and binds all parties thereto. Clause 19.1 unequivocally limited the directors'
powers regarding "material items" such as the winding up of the company as well as
the institution or defence of any legal proceedings other than those arising in the
ordinary course of business. Consequently, I find that Mr Hanekom lacked the
requisite authority to depose to the Answering Affidavit on behalf of Don Mo.
Notwithstanding the lack of authority, it is evident that the Respondents' Answering
Affidavit was delivered late.
JO
Condonation
[23] In terms of the Order dated 4 September 2024, the Respondents'
Answering Affidavit fell due on 12 September 2024. It was delivered on 23 September
2024, being 11 days later. On 11 September 2024, an indulgence was requested by
the Respondents' attorneys to' deliver the Answering Affidavit within the week of 15
September 2024, as they were waiting for information from ln2Tax. The indulgence
was refused, whereupon the Respondents' attorneys requested a reconsideration
response the Applicant's Attorney doubled-down on his refusal.
[24] The Respondents contended that they sought only an additional week
to ensure that their case in opposition was properly mounted. Owing to the delay in
delivering the Answering Affidavit, the Replying Affidavit was delivered on 10 October
2023. The Applicant laments that it was prejudiced in the delivery of its heads of
argument because it was prepared under time pressure owing to the lateness of the
Replying Affidavit.
[25] It is the Respondents' contention that the Applicant's cry of prejudice is
a hollow one as the Replying Affidavit comprises of 29 pages. The Respondents'
furthermore argued that the annexures to the Replying Affidavit comprised of
documents that were already in the Applicant's possession and as such, the delay in
preparing its heads of argument cannot be placed upon the Respondent's shoulders.
There is no suggestion that the Applicant has been unable to meet the Respondents'
opposition, which according to the Respondents it has; and therefore, the Applicant's
contention of prejudice is unsustainable. The Respondents submitted that the
Applicant's attitude in refusing the indulgence sought was manifestly unreasonable;
ll
contending that they have made out a proper case for the late delivery of the
Answering Affidavit.
[26] In the Heads of Argument, Business Partners indicated that it does not
oppose the directors' application for condonation but, insofar as a punitive costs order
is sought in respect thereof, it is subm itted that no case is made out for such an order.
I will deal further with the issue of costs later in this judgment.
Delivery of the Supplementary Answering Affidavit
[27] The Respondents sought leave to deliver a Supplementary Answering
Affidavit in terms of a Notice of Application in terms of Rule 6(5)(e), which essentially
deals with Don Ma's dispute with the City. In amplification of this request, the
Respondents submitted that the information will be of assistance to the Court in
exercising its discretion as there will be no prejudice to the Applicant. It is apparent
that there was no objection to this request as the Applicant also delivered a Notice of
Application in terms of Rule 6(5)(e), requesting leave to deliver the supplementary
affidavit of Clinton Trevor Lang. A further Answering Affidavit was filed which is
irregular by all accounts, but to which no objection was articulated.
[28] In respect of the further Supplementary Answering Affidavit filed by Mr
Hanekom , the follow was stated:
"I am an adult male and a director of the Eighth Respondent and the deponent of the
Sixth, Seventh and Eighth Respondents' Answering Affidavit. I remain as described
there and I remain duly authorised." [emphasis added]
12
[29] The authority to act on behalf of Don Mo , in these proceedings as
previously indicated, must be viewed within the context of whether these proceedings
flow out of the ordinary course of business as envisaged in the agreement between
the parties. It was already established that in order for Don Mo to competently resolve
to oppose this liquidation application, the shareholders of Don Mo were required to
approve such opposition by way of a written resolution. No shareholders meeting was
convened for the purposes of adopting the necessary resolution. Don Mo did not in
writing resolve to that it may oppose the liquidation application.
[30) Therefore, my earlier finding that Mr Hanekom lacked the requisite
authority to depose to the first Answering Affidavit on behalf of Don Mo will hold true
for any further Answering Affidavits attested to in this matter. There is therefore, no
competent opposition in relation to Don Mo. The only recognised opposition insofar
as it relates to this application is in respect of the Sixth and Seventh Respondent.
[31] In the event that I may have erred in coming to this conclusion, as will
be demonstrated later in this judgment, the status of Don Mo as at the time of initiation
of these proceedings was that of bona vacantia. Upon the reinstatement or restoration
of Don Mo's status with effect from 4 September 2024, there had to have been strict
compliance with the terms of the term loan and shareholders loan agreements,
respectively insofar as it related to authorisations.
[32] Insofar as the further filing of Supplementary Affidavits is concerned, it
is evident the content thereof primarily deals the extent and circumstances
surrounding the Respondents indebtedness to the City, in an attempt to apprise the
court of developments in this regard. In considering this application, it behoves this
13
court to be have regard to all relevant facts. Therefore, in light of the fact that there is
no opposition to the further filing of these affidavits, the court has had regard thereto
for the purposes of making a determination for the purposes of this application. Both
parties are ad idem that the costs in relation thereto ought to be costs in the cause.
Principal submissions on behalf of Business Partners
[33] It is averred that because Don Mo had breached the term loan and
shareholders loan agreements respectively, when it was placed under final
deregistration on 21 January 2024, this has affected Don Mo 's ability to repay
Business Partners as none of Don Mo's income and/or assets vested in it during the
period 21 January 2024 to 4 September 2024. This, it was argued, has had a direct
impact on the security held by Business Partners. Reliance is furthermore placed on
the express provision of the term loan and shareholders loan agreements which
entitles Business Partners to accelerate payment of Don Mo's indebtedness under
the agreements in the event of Don Mo 's deregistration.
[34] Business Partners contended it was fully entitled to enforce the
acceleration clause expressly provided for in the respective agreements and that the
materiality of the breach is irrelevant. It was furthermore submitted that the debt that
is due to Business Partners under the term loan and shareholders loan agreements
became unenforceable for as long as the deregistration subsisted. Therefore, it was
submitted that Business Partners would have been precluded from executing on its
mortgage bond during this time.
[35] Business Partners furthermore argued that Don Mo breached the term
loan and shareholders agreements in that it failed to submit its annual returns and to
14
pay the prescribed fee in respect thereof. In so doing, Don Mo conducted its business
in conflict with the generally recognised business practice and laws of South Africa,
more specifically Section 33(1) of the 2008 Companies Act17. Jn addition, it was
submitted that Don Mo had also failed to file its income tax and VAT returns in
contravention of section 28(1) of the Value Added Tax Act18 as well as Section 66(13)
of the Income Tax Act 19.
[36] Business Partners furthermore contended that Don Mo has failed to
make payment of the municipal rates and taxes levied in respect of the immovable
property which Business Partners holds as security for Don Mo's indebtedness. In
this regard, it was argued that the arrear amount of R483 690.94, is indicative of the
fact that the failure had to have subsisted for a prolonged period of time. This, it was
argued, is a further breach of the term loan and shareholders loan agreements in that
Don Mo has contravened the Local Government: Municipal Systems Act20 and the
Local Government: Municipal Property Rates Act21 . Moreover, Business Partners
contended that Don Mo's failure to disclose material information regarding the
significant extent of the arrears of the rates and taxes owing by Don Mo , as set out in
17 '(1) Every company must file an annual return in the prescribed form with the prescribed fee, and within the
prescribed period after the end of the anniversary of the date of its incorporation, including In that return-(a) a
copy of its annual financial statements, if it is required to have such statements audited in terms of section
30(2) or the regulations contemplated in section 30(7); and {Pora. (o) substituted bys. 23 of Act 3/2011) (b) any
other prescribed information. (2) Every external compa ny must file an annual return in the prescribed form with
the prescribed fee, and within the prescribed period after the anniversary of the date on which it was registered
in terms of section 23(1). {3} Each year, in its annual return filed in terms of subsection (1), every company must
designate a director, employee or other person who is responsible for the company's compliance with the
requirements of this Part, and Chapter 3, if it applies to the company.'
18 Act No. 89 ofl 991.
19 Act No. 58 of 1962.
20 Act No . 32 of 2000.
21 Ac t No . 6 of 2004.
15
the standard terms and conditions of the respective agreements, is a further breach
of the agreements.22
Principal submissions on behalf of Don Mo
[37) Don Mo challenges for the Application on the following grounds:
(a) It has never defaulted on its payments to Business Partners;
(b) It is currently trading;
(c) Has consistent monthly cashflow;
(d) Has operated at a net profit between 2019 to 2023;
(e) Only has 2 other creditors namely:
(i) The C ity of Cape Town and
(ii) SARS .
(38] Don Mo proffered an explanation leading to its deregistration. In this
regard. it elucidated that ln2Tax was appointed to attend to the administrative
obligations of Don Mo, which included ensuring that all annual returns were timeously
filed. They say that the directors never had any reason to suspect whether ln2Tax
had done what it was supposed to do and at no time did the Companies and
Intellectual Property Commiss ion (CIPC) direct any correspondent to the directors.
They do however, explicate that the only address on record is the physical address
of Don Mo , as the registered Post Office box to which all correspondence could be
sent was closed down in November 2022. In addition, they illuminated that the
App licant, who is a shareholder of Don Mo did not communicate with the directors
22 Term Loan A greement, C lause 27.1.1 and 27.1.8; Shareholders A greement, C lauses 26. l.l and 26. l.7
16
regarding the de-registration. In this regard, they aver that the Applicant launch this
application without forewarning.
Legal Principles
[39] It is incumbent upon an Applicant to establish its case on a balance of
probabilities. In this regard, the Applicant, referring to the matter of Kalil v Decotex
(Pty) Ltd and Another 3, contended that it has, on a balance of probabilities made
out a prima facie case. In this matter, Corbett JA referred to the Badenhorst rule in
Badenhorst v Northern Construction Enterprises (Pty) Ltd24 where it was stated
that:
'This rule would tend to cut across the general approach to applications for a provisional order of
winding-up which I have outlined above as it is conceivable that the situation might arise that the
applicant could show a balance of probabilities in his favour on the affidavits, while at the same
time the respondent established that is indebtedness to the applicant was disputed on bona fide
and reasonable grounds. Whether the Badenhorst rule should be accepted then as an exception
to the general approach relating specifically to the focus standi of an applicant creditor, and the
further quest;on as to whether it should be applied inflexibly or only when it appears that the
applicant is in effect abusing the winding-up procedure by using it as a means of putting pressure
on the company to pay a debt which is bona fide disputed ... need not be decided in this case .... '
[40] It is trite that where the Applicant at the provisional stage shows that the
debt prima facie exists, the orius is on the Respondent company to show that it is
bona fide disputed on reasonable grounds. It is therefore obligatory on a Respondent
to identify the disputes fully and accurately in the Answering Affidavit.25
23 1988 (1) SA 943 (A) at 980F-H.
24 1956 (2) SA 346 (T).
25 Nampeseca (SA) Products (Pty) Ltdv Zaderer 1999 (l) SA 886 (C) at 892H-J; Townsend Productions (Pty)
Ltdv Leech 2001 (4) SA 33(C) at 40E-H .
17
[41] The Badenhorst rule finds application to legal disputes. Orestisolve v
NDFT Holdings26 offers clear guidelines as to the requirements, and legal principles
applicable for consideration of factual disputes where the following was elucidated:
'[10) The difference in approach to factual disputes at the provisional and final stages appears to
me to have impNcations for the Badenhorst rule. If there are genuine disputes of fact regarding
the existence of the Applicant's claim at the final stage, the Applicant will fail on ordinary principles
unless it can persuade the court to refer the matter to oral evidence. The court cannot, at the final
stage, cast an onus on the respondent of proving that the debt is bona tide disputed on
reasonable grounds merely because the balance of probabilities on the affidavits favours the
Applicant. At the final stage, therefore, the Badenhorst rule is likely to find ffs main field of
operation where the Applicant, faced with a genuine dispute of fact, seeks a referral to oral
evidence. The court might refuse the referral on the basis that the debt is bona tide disputed on
reasonable grounds and should thus not be determined in liquidation proceedings ...
[11] 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. It is thus unsurprising to find that the reported
judgments where the Badenhorst rule has been relevant on the outcome have been cases of
applications for provisional liquidation rather than final liquidation.
[12] Even where the facts are undisputed, there may be a genuine and reasonable argument
whether in law those facts give rise to a claim. I have not found any case in which the Badenhorst
role has been applied, either at the provisional or final stage, to purely legal disputes. If the
Badenhorst rule's foundation is abuse of process, it might be said that it is as much an abuse to
resort to liquidation where there is a genuine legal dispute as where there is a genuine factual
dispute. But if the Badenhorst rule extends to purely legal disputes, I venture to suggest that the
rule, which is not inflexible, would not generally be an obstacle to liquidation if the court felt no
real difficulty in deciding the legal point. .. the equivalent rule in England finds application where
the dispute is shown to be one "whose resolution will require the sort of investigation that is
normally within the province of a conventional triar. A purely legal question would not have that
character ... '
[42) Froneman J in Trinity Asset Management (Pty) Ltd v Grindstone
Investment 132 (Pty) Ltd27 in dealing with the Badenhorst principle stated the
following:
26 2015 (4) SA 449 at 454F-455D
27 2018 (]) SA 94 (CC) at para 141.
18
'ft concerns whether what has become known as the Badenhorst principle also applies to purely
legal issues that arise in provisional liquidation proceedings, The principle holds that where there
is a genuine and bona tide (good faith) factual dispute concerning a debtor's indebtedness to a
creditor seeking provisional liquidation of the debtor's estate, the application for provisional
liquidation should normally be dismissed. There is yet no authoritative certainty whether this
principle also applies to genuine and legal disputes arising from undisputed facts ...
(145] Liquidation proceedings are designed to bring about a concurrence of creditors to ensure
an equal distribution of the insolvent estate between them, and are inappropriate to resolve a
dispute as to the existence of a debt. In order to prevent the possible abuse of the liquidation
process, the rule was developed to the effect that where there is a genuine and good faith factual
dispute concerning an alleged insolvent debtor's indebtedness to a creditor, the application for
provisional liquidation should normally be dismissed. '
Discretion of the Court
[43] It is trite that the Court's power to grant a winding-up order is a
discretionary power, irrespective of the ground upon which the order is sought. Absa
Bank Ltd v Rhebokskloof (supra)26 distils the discretion of the court as follows:
'Notwithstanding this the Court has a discretion to ref use a winding-up order in these
circumstances but it is one which is limited where a creditor has a debt which the
company cannot pay; in such a case the creditor is entitled, ex debito justitiae, to a
winding -up order. 129
[44] The matter of Afgri Operations Ltd v Hambs Fleet (Pty) Ltd3°
succinctly deals with the overarching principles as follows:
'Notwithstanding its awareness of the fact that its discretion must be exercised judicially,
the court a quo did not keep in view the specific principle that generally speaking, an
unpaid creditor has a right, ex debito justitiae, to a winding-up order against the
respondent company that has not discharged that debt ... A court a quo also did not heed
the principle that, in practice, the discretion of a court to ref use to grant a winding-up
order where an unpaid creditor applies therefor is a "very narrow one" that is rarely
exercised and then in special or unusual circumstances only.'
28 At 440J-441A.
29 2022 (l) SA 91 (SCA), para 12.
30 2022 (l) SA 91 (SCA) , para 12.
19
[45] Besides to its statutory discretion, the Court has an inherent jurisdiction
to prevent an abuse of the process even where a ground for winding up has been
established. It is trite that liquidation proceedings are designed to bring about a
concursus creditorum. In certain instances, 'the Court will not grant the order where
the sole or predominant motive or purpose of the Applicant is something other than
the bona fide bringing about of the company's liquidation for its own sake, e.g. the
attempt to enforce payment of a debt bona tide disputed ... '31 Also instructive is what
Rogers J stated in Orestisolve (supra) that:
'If the Badenhorst [principle's] foundation is abuse of process, it might be said that it is as much
an abuse to resort to liquidation where there is a genuine legal dispute as where there is a
genuine factual dispute. 132 He went on to say that:
'[l]f the Badenhorst [principle] extends to pure legal disputes, I venture to suggest that the rule,
which is not inflexible, would not generally be an obstacle to liquidation if the court felt no real
difficulty in deciding the legal point. 133
[46] In the matter of Payslip Investment Holdings CC vY2K TEC 34 Brand J
held that:
'It follows that Applicant has, in my view, failed to make out one of the essential requirements
for the order that it seeks. Consequently, the application cannot succeed. However, even if
I did conclude that respondent was unable to pay its debts, I would still, in the exercise of
the judicial discretion that I am afforded in terms of s 344 of the Act, have refused the
application ... the inference is justified, in my view, particularly after the bank guarantee had
been furnished, that the predominant motive or purpose of applicant in seeking the
liquidation order, is something other than a bona fide attempt to enforce payment of its claim.
ln short, I cannot liquidate a public company on an application which may very well amount
to an abuse of the process of this Court.'
31 M eskin 'Henochsberg on the C ompanies Act' (Butterworths) Vo l 1 [Issue 23] page 693.
32 At para 12
3; At para 12.
34 2001 (4} SA 781 (CPD) at 789 B-C and F-G.
20
Is Don Mo unable to pay its debts as envisaged in section 344 of the 1973
Companies Act, as read with section 345(1)(c) thereof?
[4 7] One of the circumstances under which a company may be w ound up by
a court is if the company is unable to pay its debts as described in Section 345.35
Section 345(1)(c) provides that a company is deemed to be unable to pay its debts if
inter alia 'it is proved to the satisfaction of the court that the company is unable to pay
its debts'
[48] It was unequivocally stated that Don Mo is not and has never been in
arrears under the agreements. The Applicant is one of three identified creditors. The
Respondent has disputed the extent of its indebtedness to the City and indicated that
the debt to SARS is not yet due.
[49] The trigger event for these proceedings was Don Mo 's de-registration. It
is Don Mo's contention that the Applicant has brought these proceedings for a
purpose other than the winding up of Don Mo , namely to exercise pressure upon it.
According to the well-established Badenhorst principle, winding-up proceedings
should not be resorted to as a means of enforcing a debt which is bona fide disputed
on reasonable grounds.36 The rationale underpinning the Badenhorst rule is that
liquidation proceeding are not the proper forum for the resolution of disputes as to the
existence or otherwise of debts. The Badenhorst rule is a self-standing principle that
35 Section 344 (f) of the Comp any's A ct.
36 See also Afri Operations Ltd v Ham ba Fleet Mana geme11l (Pty) Ltd (542/16) [20 17] ZASCA 24 (24 M arch
20 17) w here W illis JA stated that: 'It is trite that winding-up proceedings are not to be used to e,iforce paym ent
of a debt that is disputed on bonajide and reasonable grounds. This is known as the so-called 'Badenhorst
rule'. W here however, tfie respondent's indebtedness has, prim a facie, been established, the onus is on it to
show that this indebtedness is indeed disputed on bonafide and reasonable grounds.
21
winding-up proceedings are not the appropriate procedure for a creditor to use when
the debt is bona tide disputed.
[50] Rosenbach & Co. (Pty} Ltd v Singh's Bazaars (Pty} Ltc/37 deals with
the principles applicable in deciding the question of whether a company should be
wound up in circumstances when it is unable to pay its debts. In this regard, Caney J
states that a company is in commercial insolvency when ' ... a company is unable to
pay its debts, in the sense of being unable to meet the current demands upon it, its
day to day liabilities in the ordinary course of its business ... '
[51] The concept of commercial insolvency was expounded on in Absa v
Rhebokskloof 38 as follows:
'The concept of commercial insolvency as a ground for winding up a company is eminently
practical and commercially sensible. The primary question which a Court is called upon to answer
in deciding whether or not a company carrying on business should be wound up as commercially
insolvent is whether or not ft has liquid assets or readily realisable assets available to meet its
liabilities as they fall due to be met in the ordinary course of business and thereafter to be in a
position to carry on normal trading - in other words, can the company meet current demands on
it and remain buoyant? It matters not that the company 's assets far exceed its liabilities: once the
C ourt finds that it cannot do this, it follows that it is entitled to, and should, hold that the company
is unable to pay its debts within the meaning of s 342(1 )(c) as read with s 344(f) of the Companies
Act 61 of 1973 and is accordingly liable to be wound up ... '
[52] The approach in deciding whether a company is able to pay its debts
when they fall due is a question of fact and is to be evaluated by considering the
entirety of the company's financial position. It has been held that factual insolvency is
a strong indicator of inability to pay debts.39 To this end, it was argued that Don Mo is
37 1962 (4) SA 593 at 597C-D.
38 1993 (4) SA 436 (CPD ) at 440F-G.
39 Johnson v H irotec (Pty) Ltd 2000 (4) SA 930 at 9331-J.
22
factually solvent with its assets exceeding its liabilities and its creditors do not have
any debts which have fallen due or are indeed payable. This contention, is in stark
contrast to the Applicant's contention that Don Mo is unable to pay its debts as
envisioned in Section 344(f) read with Section 345(c) of the 1973 Companies Act.
[53] I deem it appropriate at this juncture to interpolate to deal with the
submission pertaining to whether the liabilities to Don Mo's creditors are indeed
payable. Don Mo contended that the Applicant is paid up to date under the
agreements; the debt owing to the City has been reduced significantly and can easily
be discharged and that there is no evidence that the liability in respect of Don Mo 's tax
obligations is due.
City of Cape Town ("the City'J
[54] The Applicant contended that Don Mo is in arrears with its municipal
account and owes the City an amount of R488 698.45. Don Mo disclosed that it only
owed the City "the sum of R51 475.17 and which has been substantially reduced from
the sum of R488 698.45 as a result of the resolution of a dispute with the City."40 Mr
Hanekom, explained in the Supplementary Answering Affidavit that on 17 October
2024, Heyns and Partners Attorneys reverted to him and advised that the arrears owed
to the City are only R51 175.47. A confirmatory affidavit was attested to by Lara Van
Wyk in this regard. There was an undertaking that the arrears would be settled by the
end of October 2024.
40 Founding Affidavit, para 36.5, page 33.
23
[55] In response hereto, the Applicant filed a supplementary affidavit on 29
October 2024. The affidavit was attested to by Mr Lang, who is the Applicant's attorney
of record wherein the further exchanges between the parties were laid bare, more
particularly the letter sent on Tuesday 30 October 2024 to Lara Van Wyk. In terms of
the letter, they requested Heyns and Partners, on behalf of the Applicant as a 25%
shareholder in the Eighth Respondent, to provide them with the following information
or documentation:
'5. 1 Any and all correspondence exchanged between Heyns and Partners and the
representatives of the eighth respondent in relation to their instructions to negotiate
with the City of Cape Town Municipality to reduce the arrears on the company's
municipal account;
5.2 All correspondence exchanged between Heyns and Partners and the COCT in
relation to the aforesaid negotiations;
5.3 A complete copy of the email trial between Heyns and Partners and the eighth
respondent since annexure A the confirmatory affidavit deposed to by Ms van Wyk ,
appears to not be a complete version of the email trail;
5.4 All documentation received from the COCT in respect of the arrear municipal
account. >4 1
[56] It is apparent that there were difficulties in obtaining the information
sought whereupon the Applicant's Attorneys took it upon themselves to directly
engage the City. Flowing from the subsequent enquiry, the latest municipal account
revealed that the balance outstanding in terms of the account summary as at 21
October 2024, was an amount of R604 034.53.42 The amount immediately payable is
indicated as R578 275.63. The amount payable by 15 November 2024, is indicated in
the sum of R25 758.90. There is an active debit order linked to the account for the
maximum amount of R5 000 per month.
41 Supplementary Affidavit, para 5, page 26.
42 Annexure "CTL4 ", page 41.
24
[57] The Applicant contended that there is no payment arrangement between
the City and Don Mo in respect of the arears. They submitted that if the court is to
have regard to the content of the Supplementary Affidavit as read with all the affidavits
filed in relation to this matter, it is clear that the Respondents have attempted to
mislead the Court on a number of occasions in relation to the financial status of Don
Mo , concerning its commercial insolvency and the status of its creditors.
[58] Pursuant to the filing of the Applicant's Supplementary Affidavit, Don Mo
provided proof that payment was made to the City of the reduced amount of
R51 175.47. In my view, there is therefore a clear factual dispute in relation to inter
alia:
(a) the extent of the Respondents indebtedness to the City; and
(b) whether a payment arrangement is still in place and the exact terms thereof (if
any).
SARS
[59] The Applicant contended that Don Mo has an income tax liability which
becomes due on submission of its annual income returns and which excludes
penalties and interests in the amount of R294 489. The amount owing to SARS from
the Respondents perspective is less, but what is clear is that there is an amount owing
to SARS.
Business Partners
[60] The Applicant contended that because Don Mo is in breach of the
provisions of the term loan and shareholders loan agreements, Business Partners has
25
elected to enforce the acceleration clause in these agreements as it is entitled to do.
This has resulted in the full outstanding balance under the respective agreements
becoming immediately due, owing and payable. The Respondents contended that the
Applicant sought to enforce its claim on the launching of these proceedings without
forewarning. According to the Respondents, the Applicant has failed to demand
payment of the sums allegedly due.
[61] The Respondents contended that Don Mo is neither insolvent nor
financially distressed. In augmentation of this contention, it was submitted that the
Applicant has extensive security for its claim which includes a bond of R3.5million and
an additional sum of R700 000 over the property which is worth R5 652 500 as well
as five unlimited suretyships.
[62] The Applicant however contended that while it may be so that Don Mo
holds an immovable property which serves as security for its liability to Business
Partners, it has insufficient cash resources to meet its debts in the near term as they
become due. To demonstrate this contention, it was established that as at 31 August
2024, Don Mo had a credit cash balance in its bank account of R23 524.43. In addition,
they submitted that Don Mo operated at a loss of R 130 679 as per Don Mo's Income
Statement.43 Further thereto, the Respondents submitted that this contention ignores
the fact that Don Mo's liabilities have decreased year-on-year since 2019, and
ultimately stand at their lowest recorded point in 2024
43 Court Bundle 2, page 53 l.
26
[63] It is Don Mo's further contention that the Applicant has failed to
demonstrate that the application is brought for the company's sake or for the protection
of the concursus creditorum.
It is just and equitable for Don Mo to be wound up as envisaged in section 344(h)
of the 1973 Companies Act?
[64] It is trite that a company may be wound up by the Court if it appears to
the Court that it is just and equitable that the company should be wound up. The
Respondents argued that Section 344(h) confers on the Court a wide discretion on a
conspectus of all the relevant circumstances including the competing interests of all
concerned such as the creditors of the company itself. Both parties referred the court
to the matter of Moosa NO v Mavjee Bhawan (Pty) Ltd and Another 44.
[65] The Applicant argued that in circumstances where there is a justifiable
lack of confidence in the conduct and management of a company's affairs, it is just
equitable that the company be wound up. In augmentation of this contention, the
matter of Pienaar v Thusano Foundation and Another ("Pienaar)45 was referenced
whether the following was held:
'For the loss of confidence to be justifiable it must be founded on a Jack of probity in the
controller's conduct, not in regard to his private affairs, but in regard to the company1s
business .. That is to say, the conduct must be unfair or burdensome and wrongful.
Furthermore, where the loss of confidence is of such a degree that there is no
reasonable hope of another remedy which would make possible co-operation in the
future, and the controller's misconduct is such as to justify that degree of Joss of
confidence, then it is 'Just and equable" to wind up the company. '
44 1967 (3) SA 131 (T), Headnote and 136.
45 1992 (2) SA 552 (BG) at 583A -E.
27
[66] The Applicant fortified its contention that its loss of confidence in Don Mo
and its directors is justifiable. In this regard, it placed reliance on the provisions of
Section 76 of the 2008 Companies that sets out the standard of conduct expected
from directors, more particularly Sections 76{3) - (4) that stipulates:
'(3) Subject to subsections (4) and (5), a director of a company, when acting in that
capacity, must exercise the powers and perform the functions of director-( a) in good
faith and for a proper purpose; (b) in the best interests of the company; and (c) with the
degree of care, skill and diligence that may reasonably be expected of a person-(i)
carrying out the same functions in relation to the company as those carried out by that
director; and (ii) having the general knowledge, skNI and experience of that director.
(4) In respect of any particular matter arising in the exercise of the powers or the
performance of the functions of director, a particular director of a company-( a) will have
saUsfied the obligations of subsection (3)(b) and (c) if-(i) the director has taken
reasonably diligent steps to become informed about the matter; (ii) either-(aa) the
director had no material personal financial interest in the subject matter of the decision,
and had no reasonable basis to know that any related person had a personal financial
interest in the matter; or (bb). the director complied with the requirements of section 75
with respect to any interest contemplated in subparagraph ( aa); and (iii) the director
made a decision, or supported the decision of a committee or the board, with regard to
that matter, and the director had a rational basis for believing, and did believe, that the
decision was in the best interests of the company ; and (b) is entitled to rely on-(i) the
performance by any of the persons-(aa) referred to in subsection (5); or (bb) to whom
the board may reasonably have delegated, formally or informally by course of conduct,
the authority or duty to perform one or more of the board's functions that are delegable
under applicable law; and (ii) any information, opinions, recommendations, report.s or
statements, including financial statements and other financial data, prepared or
presented by any of the persons specjfied in subsection (5).'
[67] The Applicant therefore contended that there is clear evidence that the
directors of Don Mo have failed to carry out their duties in· accordance with the
requirements of the 2008 Companies Act. In augmentation, they referred to
correspondence directed by Nikita Mfenyana ("Mr Mfenyana"), the former regional
28
consulting manager of Business Partners, in an email dated 7 March 2024 to Ms
Adonis (director), pursuant to a shareholders meeting which was held between
Business Partners and the Hanekom Family Trust on 9 February 2024. The following
concerns were recorded in relation to the manner in which Don Mo's business was
being conducted and its affairs were being managed:
(a) Clarity on how and when the company intended to reduce or settle the
outstanding amount with the City;
(b) That it noted that Don Mo had not conducted a comprehensive audit since 2018
and that the 2018 financials were not signed. He stated that 'Tt]ransparency and
accurate financial reporting are essential for maintaining investor confidence"
and enquired as to when the statements could be expected;
(c) Mr Mfenyana recorded that Don Mo's outstanding VAT and Income Tax
payments "are a cause for concern" and underscored that timely compliance
with tax regulations were crucial for the reputation of Business Partners and for
financial stability;
(d) Mr Mfenyana also recorded that despite Business Partner's efforts to assist,
"the management of financial and administrative documents within the
company remains inadequate. This applies to the management of lease
agreements, rent collections and properly maintenance issues. Proper
recordings of transactions and adherence to corporate governance principles
are non-negotiable. Business Partners cannot continue to be a shareholder in
a company that may be perceived as trading recklessly."
29
[68] The Respondent on the other hand, argued that the Applicant's case on
the ground that it is just and equitable for the company to be wound up is a flaccid
which is based on the following:
(a) That the liquidators will be able to take charge of Don Mo 's assets to protect
the interest of the creditors; and
(b) That the directors have in essence "abandoned ship, so to speak". 46
[69] In relation to the accusation that the directors "abandoned ship", the
Respondents argue, that it is without merit for the following reasons:
(a) Don Mo has always and remains trading;
(b) Don Mo has always and remains servicing its debt to the Applicant.
[70) To the extent that Don Mo was de-registered without the knowledge of
the directors, they contended that it was as a result of an administrative oversight and
was not an intentional act. In this regard, ln2Tax undertook to regularise Don Mo 's tax
affairs and file all outstanding returns. Furthermore, the debt owing to the City has
been the subject of a dispute with the Municipality upheld and reduced the
indebtedness. They submit that for all these reasons, it is neither just nor equitable for
wind up a financially sound company with assets exceeding its liabilities.
[71] It bears mentioning that the assertions made by Mr Mfenyana (supra),
were not disputed by Ms Adonis and conceded that those matters required attention.
It appears evident that the directors failed to take any action to address the issues
raised by Business Partners, as was pointed out that it is only after this application
46 Founding A ffidavit, para 51, page 38.
30
was served on the Respondents that the directors took steps to attempt to regulate
the affairs of Don Mo.
[721 In addition, the Applicant asserted that in attempting to address the
breach of the fiduciary duties to Don Mo and regulate the position, the directors have
further mismanaged Don Ma's affair by further contravening the MOI in the following
respects:
(a) ln2Taxwas instructed to prepare Don Mo's annual financial statements ("AFS")
for the 2024 ("the 2024 AFS"), financial year after this application was served
on the directors. The 2024 AFS were subsequently approved and signed by Mr
Hanekom and Ms Adonis on 2 .September 2024 under circumstances where
Don Mo was deregistered from 21 January 2024 until its status was restored
with CIPC on 4 September 2024. In the circumstances, it was argued that the
directors could not therefore have competently approve the 2024 AFS on 2
September 2024.
(b) Furthermore, the approval of the AFS for Don Mo for each financial year is
defined as a "Material Item" in clause 19.2.41 of the MOI. The shareholders of
Don Mo were therefore required to approve the 2024 AFS by way of special
resolution as contemplated in clause 19.1 of the MOL In this regard, the written
resolutions had to be approved by 64 % of the voting rights attaching to the
shares (100% - (less) the percentage of voting rights exercisable by the
applicant (37%) + (1%)). It is apparent that no meeting between Don Mo
shareholders took place to approve the 2024 AFS, not was nay such meeting
requested or convened.
3 1
(c) Moreover, it is pellucid that Don Mo's AFS 's for the 2019, 2020, 2021, 2022 and
2023 financial years had not been prepared until In2T ax was instructed to do
so after this application was served. These AFS were also approved and signed
by the directors on 2 September 2024 with Business Partners having any
insight or input in relation to its content. Furthermore, it was subm itted that his
conduct on the part of the directors was again unauthorised and in flagrant
disregard of the provisions of the MOI and the rights that Business Partners
holds in terms thereof.
[73] It was argued that the cumulative effect of these factors justified in its
contention that the directors have breached their fiduciary duties to such an extent that
it has resulted in a total loss of confidence in the directors' management of Don Mo 's
affairs. It was furthermore contended that the directors are clearly guilty of conduct
that is "unfair or burdensome and wrongful" as envisaged in Pienaar (supra). In
addition, Business Partners submitted that the directors' misconduct is of such a
degree that there is no reasonable hope of another remedy wh ich would make co
operation between Business Partners and the directors possible in the future.
New matter raised in Replying Affidavit
[74] The Respondents contended that the Applicant has impermissibly
developed an entirely new case that the directors have breached their fiduciary duties,
th~s justifying the Applicant's loss of confidence regarding Don Mo 's affairs.47
47 Replying Affidavit, paras 28 - 40, page 603.
32
[75] It is trite that in motion proceedings, the affidavits constitute both the
pleadings and the evidence. It is thus expected of the Applicant to disclose facts that
would make out a case for the relief sought, and sufficiently inform the other party of
the case it was required to meet in the founding affidavit.48 This legal principle has
been enunciated in Director of Hospital Services v Mistry49 where the Appellate
Division held:
'When ... proceedings were launched by way of notice of motion, it is to the founding affidavit
which a Judge will look to determine what the complaint is. As was pointed out by Krause J in
Pountas' Trustees v Lahanas 1924 WLO 67 at 68 and has been said in many other cases:
' ... an applicant must stand or fall by his petition and the facts alleged therein and that,
although sometimes it is permissible to supplement the allegations contained in the
petition, still the main foundation of the application is the allegaUon of facts stated therein,
because those are the facts which the respondent is called upon either to affirm or deny'
Since it is clear that the applicant stands or falls by his petition and the facts therein alleged, 'it is
not permissible to make out new grounds for the application in the replying affidavit (par Van
Winsan Jin SA Railways Recreation Club and Another v Gordonia Liquor Licensing Board 1953
(3) SA 256 (C) at 260)"
[76] It is therefore settled law that the issues and averments in support of the
parties' cases should appear clearly from the Founding Affidavit. The Founding
Affidavit is to contain sufficient facts upon which a court may find in the Applicant's
favour. In reference to the trite legal principle that an applicant is to stand or fall by its
Founding Affidavit, the Respondent correctly referred to the exception to the rule as
distilled in Finishing Touch 163 (Pty) Ltd v BHP Billiton Energy Coal South Africa
Ltd5° where a new matter is raised that the Applicant could not reasonably foresee,
thereby necessitating further new facts in reply:
43 See Swissborough Diamond M;nes (Pty) Ltd and Others v Government of the Republic of South Africa and
Others 1999 (2) SA 279 (T); Juta & C o Ltdv De Koker 1994 (3) SA 499 (T) at 508 B-D.
49 1979 (I) SA 626 (AD) at 635H-636B.
50 20 L3 (2) SA 204 (SCA) at para 26.
39
'A distinction must be drawn between a case in which the new material is first brought
to light by the applicant who knew of it at the time when his founding affidavit was
prepared and one in which facts alleged in the respondents' answering affidavit reveal
the existence or possible existence of a further ground for the relief sought by the
applicant. '
[77] The Respondents argue that the exception does not apply in casu as the
Applicant alleges facts that it was already aware of. In support of this contention, the
Respondents illuminated that the attached documents to the Replying Affidavit were
already in the Applicant's possession before the launch of the application, save for the
documents which were obtained from ln2Tax.
Discussion
[78] The application for provisional winding - up is essentially predicated on
Don Mo 's breach of the term loan and shareholder's agreements respectively. Don
Mo conceded that it breached the term loan and shareholder's loan agreement when
it was placed under final deregistration on 21 January 2024. On Don Mo's own
version, it is evident that it was not tax compliant and had failed to file its annual tax
returns. In this regard, Don Mo accords the blame on its accountants, ln2Tax
Consulting Services.
(79] It is trite that the court is not impelled to grant a winding up order and
retains a discretion on being satisfied that the requirements have been met as to
whether or not to grant a provisional winding up order. Generally, an unpaid creditor
has a right, ex debito justitiae, to the winding-order against a Respondent. company
which has not discharged that debt.
34
[80] Business Partners have decided to accelerate payment of the total
balance owing to it by Don Mo for reasons already expounded on earlier in this
judgment; which is entitled to do. It is noteworthy that prior to the institution of these
proceedings, Business Partners have not demanded any payment from Don Mo. In
these circumstances, the court has a wide discretion to refuse the winding up
application. The Respondents contend that the Applicant will nonetheless retain to
right to issue debt recovery proceedings to enforce the debt it believes it is owed and
may call up the securities that it holds namely the mortgage bond and 5 unlimited
sureties.
[81] The Badenhorst principle entrenches the principle that winding-up
proceedings should not be resorted to as a means of enforcing a debt which is bona
fide disputed on reasonable grounds. The rationale fortifying the Badenhorst rule is
that liquidation proceeding is not the proper forum for the resolution of disputes as to
the existence or othetwise of debts. It is a fundamentally accepted legal principle that
where there is bona tide factual dispute concerning a debtor's indebtedness to a
creditor seeking provisional liquidation of the debtor's estate, the application for
provisional liquidation should consequentially be dismissed.
[82] It is evident that Don Mo has disputed its indebtedness to the City. In
applying the Badenhorst rule to the factual matrix, an application should be dismissed
on the basis that there is a bona tide dispute on reasonable grounds. The question to
be answered therefore is whether there is indeed a bona fide dispute on reasonable
grounds. The dispute in relation to Don Mo is essentially rooted in the fact that there
was no demand and no default. It is also uncontroverted that the amount owing to
35
SARS is not yet payable. It is trite that liquidation proceedings are designed to bring
about a concursus creditorum. It is clear that where the Applicant at the provisional
stage show that the debt prima facie exists, the onus is on the company to show that
it is bona fide disputed on reasonable grounds.
[83} The court having found that the directors have no authorisation to defend
the application on behalf of Don Mo, the application insofar as it relates to Don Mo, is
for all intents and purposes unopposed and the application ought to succeed for this
reason alone as the Applicant simply needs to show at the provisional stage that the
debt prima facie exists as set out in Orestisolve (supra). That apart, in keeping with
Rosenbach (supra), without the sale of the immovable property, it is clear that Don
Mo would be unable to pay its debts in the sense of being unable to meet current
demands upon it, which includes its day to day liabilities in the ordinary course of its
business. In applying this formula, to the circumstances as laid bare pertaining to Don
Mo's liquidity, it is evident that it is in a state of commercial insolvency in the sense
that it would not be able to meet its current demands in the ordinary course. By way
of demonstration, Don Mo does not have the liquidity to honour the full outstanding
amount owing to Business Partners, without having to sell its asset. Business Partners
has elected to enforce the acceleration clause which means that the outstanding
balance under the respective agreements became due, owing and payable. To
reiterate, the accelerant event being Don Mo's deregistration, triggered the breach
clauses in the agreements. When the deregistration occurred, the Applicant became
entitled to call up the facility.
[84] The protestations raised by the directors insofar as it relates to the fact
that there is equity in the property and that Business Partners may also elect to call
36
upon the sureties is in my view no moment insofar as it relates to the Eighth
Respondent, Don Mo. The most recent statement shows that as at 31 August 2024,
the credit balance in Don Mo's account was R23 524.43. I do however deem it
apposite to state that this court is required, when deciding whether Don Mo is in fact
commercially or factually insolvent, to make this decision of fact in light of all the
circumstances of the case within the context of the factual matrix of this matter.
[85] Inasmuch as Don Mo suggested that it only has 3 major creditors, it
omitted to include its liability to ln2Tax for the work they have been instructed to
perform to bring Don Mo's tax affairs up to date. Furthermore, the extent of Do Mo 's
indebtedness to SARS for example appears to exclude interest and penalty charges.
The dispute regarding the outstanding amount owing to the City also appears to be
ongoing as the statement paints a different picture to other assertions made in this
regard. I pause here to state that I make no findings, in this regard, save to remark
that it is apparent that the statement indicates a significant amount of arrears.
[86J The documents put up by Mr Hanekom , suggests that the arrears to the
City, in the amount of R51 175.47 has been extinguished; however it appears as
though the correspondence attached to Mr Hanekom 's supplementary Answering
Affidavit indicates that there was a discussion in relation with "the instalment
agreement which was put in place and the possibility of extending same "51 [my
emphasis]. This email is dated 17 October 2024, which indicates that Don Mo had
already entered into a payment arrangement at that time. To emphasise, the account
summary as at 21 October 2024, indicates that R5 000 was paid on 7 October 2024. 52
It is also noteworthy that the amount payable immediately does not align with the
51 Supplementary Index, page 14.
52 A nnexure "C T L4", page 41.
37
version of the Respondents which is by and large unsubstantiated, save for the earlier
mentioned email correspondence and proof of payment in the amount of R51 175.47.
Even if an arrangement is in place with the City, which .has seemingly lapsed on 18
June 2024, the de facto position is that if the City were to call up the full outstanding
amount of approximately R485 k, albeit a disputed amount, it is evident on these
papers, that Don Mo will not be able to satisfy the debt immediately.
[87] To my mind, whether the asset is capable of being realised "in
reasonable time" is a consideration, however, this may be a relative concept as the
procedure in relation to the sale of immovable property is most certainly not an instant
process. In any event, the Applicant has elected to pursue these proceedings as
opposed to for instance; pursuing alternative remedies such as the calling up the 6
forms of security alluded to by the Respondents; invoking the provisions of Section
163 of the Companies Act, selling its shares and / or extricating from the business or
appointing its own directors. The decision by Business Partners, it was argued, has a
bearing on its bona fides in bringing this application. This assertion, is in my view, not
supported and neither is the suggestion that the sole motive behind the launching of
this application was to pursue access to the immovable property.
[88] Whilst the Respondents were at pains to demonstrate that it was able
to meet its operating expenses and that the statements indicated a year on year
reduction in Don Mo's liabilities, it is my considered view, that there are sufficiently
clear indicators that Don Mo is commercially insolvent when considering the locus of
the case within the context of the factual matrix. This conclusion is further underscored
by the fact that the Respondents have admitted its debts and its breach. Again, the
38
dispute in respect of the extent of Don Mo's indebtedness to the City does not detract
from the fact that the debt to Business Partners is not disputed and are in essence
due for immediate payment.
[89] It is furthermore incumbent for the court to consider the provision of
Section 344(h) which confers on the court a w ide discretion on a conspectus of all the
relevant circumstances including competing interests. Moreover, it behoves this court
to deal with the consideration of whether it is just and equitable to wind up Don Mo;
more particularly whether Business Partners have a justifiable lack of confidence in
the conduct and management of the company's affairs.
[90] It is unrefuted that the directors were oblivious to the fact that Don Mo
had been deregistered and carried on conducting its business affairs blissfully
unaware that Don Mo's status had changed. This was an undeniable breach of an
express provision of the term loan and shareholders agreement. In terms of the
entrenched legal position, none of Don Mo's income and/or assets vested in it, for the
period 21 January to 4 September 2024. This has had a cascading effect on the
operations of Don Mo to the effect that the debt due to Business Partners under the
term loan and shareholder's loan became unenforceable for as long as the
deregistration subsisted. Inasmuch as Don Mo has a realizable asset, Business
Partners would have been precluded from executing on its mortgage bond during this
time.
[91] The undisputed reasons for the deregistration of Don Mo was because
of its failure to file its annual returns and pay the prescribed fees in respect thereof,
39
which is undeniably a breach of the directors' fiduciary duties. I am therefore not
persuaded that this is in effect a new ground raised by the Applicant in Reply but is an
undisputed fact. In this regard, it is unrefuted that Don Mo had failed to file its income
tax and VAT returns in contravention of the relevant statutory prescripts as previously
stated. This is a duty of the directors. Of significance is the fact that the directors of
Don Mo have in any event conceded that Don Mo was not tax compliant. I interpose,
to mention that inasmuch that this court can accept that there may have been a dispute
lodged regarding the amount owing to the City, the significance for the purposes of
this application essentially turns on three aspects:
(a) The identified breaches by Don Mo of the Local Government and Municipal
Systems Act and Local Government Municipal Property Rates Act;
(b) The failure on the part of Don Mo and its directors to disclose material
information regarding the extent of the arrears of the rates and taxes owing and
(c) That Don Mo and its directors evidently conducted its business in conflict with
the generally recognised business practice and laws of South Africa.
[92] It is trite that the effect of the deregistration was that Don Mo was in
effect deprived its legal existence. 53 The court in Miller and Others v Nafcoc
Investment Holdings Co Ltd and Others54 describes is as follows:
'De registration ... , puts an end to the existence of the company. Its corporate personality
ends in the same way that a natural person ceases to exist on death.'
'3PM Meskin, B Galgut, and JA Junst Henochsberg on the on the Close corporations Act (Durban: LexisNexis 1997)
vol 3 issue 20 Com 550.
'4 2010 (6) SA 390 (SCA) at para 11.
40
(93] The writers of Henochsberg on the on the Close Corporations Act
describe the effect of deregistration as follows:
Tl}t is submitted that the effect of deregistration of a corporation is that its existence as a
legal person ceases ... and that upon such deregistration all its property, movable and
immovable, corporeal and incorporeal, passes automatically (ie, without any necessity
for delivery or any order of court) into the ownership of the State as bona vacantia'55
[94] A debt that may be due to a creditor of a company that has been
deregistered is not extinguished, rendered unenforceable against the company as was
held in Barclays National Bank Ltd v Traub; Barclays National Bank Ltd v Kalk56.
[95] It bears mentioning that the Respondents' Counsel referred the Court to
the matter of Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd57
("Newlands Surgical'), which dealt with the reinstatement of an administrative action
where the court held that it is understood that 'the Legislation had .. Jntended to
alleviate the prejudicial effect on third parties or even the company which may be
brought about by the retrospective effect of reinstatement under section 82(4). "58 In
that matter the court "declared the reinstatement of the first respondent as a company
in terms of Section 82(4) of the Companies Act 71 of 2008 had retrospective effect
from the date of its deregistration which included the retrospective validation of its
corporate activities during that period"59.
55 see also Miller and Others v Nofcoc Investment Holdings Co Ltd and Others 2010 (6) SA 390 (SCA) at para 11 and
Silver Sands Transport {Pty) Ltd v SA Linde (Pty) Ltd 1973 (3} SA 548 (W} at 549C.
56 1981 (4) SA 291 (W) at 2950.
57 [2015) 2 All SA 322 (SCA) .
5& At para 30.
59 Atpara3Ll.
41
[96} The status of Don Mo had to be restored in order for Business Partners
to bring Part B of the application to life. In terms of the Order granted on 4 September
2024, the dissolution of Don Mo on 21 January 2024, was declared void in terms of
Section 83(4) of the 2008 Companies Act. The Companies and Intellectual Property
Commission of South Africa was directed to restore the Company's name to the
register of Companies. The assets immediately prior to its dissolution on 21 January
2024 were declared to be no longer bona vacantia and was reinvested in the
Company .
[97] The Order of 4 September 2024 was very specific and did not included
the retrospective validation of its corporate activities during that period. This court
cannot read this into the order. If it was the intention of the court that the corporate
activities were to be validated then, in my view, same would have been expressly
stated as it was the case in Newlands Surgical ("supra').
[98] Although this order restored the status quo ante of Don Mo as if it had
not been deregistered, the decisions made by the directors between deregistration
and reinstatement which affected, Don Mo could not and should not have been made ;
and were evidently not sanctioned as required in terms of the agreements. The
deregistration of Don Mo in effect terminated the authority of the directors to make
decisions on behalf of Don Mo , which authority was not restored retrospectively by
virtue of the order on 4 September 2024.
[99] This is typically a case of trying to "put humpty dumpty together again".
The egg in my view broke the moment of Don Mo's deregistration. To unpick every
decision and transaction of Don Mo and its directors from January 2024 to September
42
2024 cannot be as simple as "return as you were" as expressed in the matter of
lnsamcor (Pty) Ltd v Dor-byl Light and General Engineering (Pty) Ltd 60 where it
was pointed out that this is an oversimplification to regard it as being 'no more than a
return to "as you were"'. 61
[100] There existed an onerous duty on the directors of Don Mo, more
specifically its directors, to ensure that Don Mo was registered at all times when they
engage in commercial transactions and in litigation. As directors, they are obliged to
check the 'status' of the corporate entities with the CIPC. The inescapable conclusion
is that the directors of Don Mo have, in my view, clearly flouted their responsibilities in
this regard.
[101] I agree with the Applicant that the directors have attempted to minimise
the seriousness of its breach as being of a "technical" nature. The Respondent's
contention that Don Mo's ability to service its debt to Business Partners was not
affected by its deregistration cannot be sustained as the deregistration ought to have
rendered Don Mo inoperative. The fact that they continued to operate as if it was
"business as usual" is worrisome and indicative of the fact that the directors did not
have their fingers on the pulse proverbially speaking.
[102] This conclusion is further underscored by the fact that there is an
apparent scuffling to get the financial affairs in order which no doubt would have the
effect of shareholders losing confidence in the manner in which the business affairs of
Don Mo are being conducted.
60 2007 (4) SA 467 (SCA) at 475C.
61 See also Fintech (Pty) Ltd v Awake Solutions (Pty) Ltd and Others 2013 (1) SA 570 (GSJ).
43
[103] The directors' misconduct in my view, is such as to justify that degree of
loss of confidence as the directors have failed to carry out their duties in accordance
with the statutory requirements. I am fully persuaded that the cumulative effect of the
factors mentioned in this judgment justifies the contention that the directors breached
their fiduciary duties which resulted in a total loss of confidence.
[1041 This court cannot turn a blind eye to the directors' breach of fiduciary
duties and the allegations of further m ismanagement as dealt with in earlier in this
judgment.
Conclusion
[105) Business Partners have approached this court under unique
circumstances which in my view, warrants that the matter is to be considered in the
milieu of cumulative circumstances of this matter. I am therefore not persuaded that
the application launched by Applicant is tantamount to an abuse of the process of the
court as alluded to by the Respondents.
[106J I am therefore satisfied having regard to the factual matrix, that
Business Partners have demonstrated a justifiable lack of confidence in the conduct
and management of Don Mo's affairs. I further find that the loss of confidence is of
such a degree that there is no reasonable hope of another remedy which would make
possible co-operation in future. I am therefore satisfied that the Applicant succeeded
in showing a prima facie case for a provisional winding-up order to be granted.
[107] Consequently, in the exercise of my discretion, I find that Don Mo is
unable to pay its debts as envisaged in section 344 of the Companies Act, as read
44
with section 345(1)(c) thereof, and that it is just and equitable for Don Mo to be wound
up as envisaged in section 344(h) of the 1973 Companies.
Costs
[108] The Respondents sought an indulgence for the late delivery of the
Answering Affidavit which was refused. Business Partners insisted on the timeous
delivery of the Answering Affidavit. They argued that the lateness thereof had the
consequential effect of delaying the delivery of Business Partners' Replying Affidavit
as well as the Heads of Argument. It was further submitted that Business Partners has
been prejudiced in its conduct of the matter in that its further papers had to be prepared
under significant time pressure.
[ 109] Business Partners argued that it is the Respondents who seek an
indulgence from the Court and the general rule in such cases with reference to case
authorities, is that "the applicant for the indulgence should pay all such costs as can
be reasonably be said to be wasted because of the application, such costs to include
the costs of such opposition as is in the circumstances reasonable, and not vexatious
or frivolous. '162
[110] In the Heads of Argument, Business Partners indicated that it does not
oppose the directors' application for condonation. I, therefore, make no order as to
costs in this regard. Insofar as it relates to costs of respective applications in terms of
Rule 6(5)(e), I direct that those costs shall be costs in the cause. In the further exercise
62Me the & Ziegler Ltdv Stauch, Vorster and Partners 1972 (4) SA 679 (SWA) at 683A;Afyers v Abramso n
1951 (3) SA 438 (C) at 455G.
45
of my discretion, I deem it appropriate that all other costs should be costs in the
liquidation of the Eighth Respondent.
Orders
[111] Having read the papers filed of record and having heard Counsel for the
Applicant, and the sixth, seventh and eighth respondents, in the exercise of my
statutory discretionary power, the following orders are made:
(a) The late delivery of the Respondents Answering Affidavit is condoned with no
order as to costs;
(b) Leave is granted for the delivery of the Sixth to Eighth Respondents'
Supplementary Answering affidavit is condoned with costs to be costs in the
cause;
( c) Leave is granted for the delivery of the supplementary affidavit of Clinton Trevor
Lang dated 30 October 2024, with costs to be costs in the cause;
(d) The Eighth Respondent is placed under provisional liquidation as per the terms
of the draft order marked "X"
APPEARANCES:
Counsel for the Applicant:
I nstn.icted by:
P DANDREWS
Acting Judge of the High Court of South Africa
Western Cape Division, Cape Tovm
Advocate L Van Dyk
Tim du Toit & Co
46
Counsel for the Respondent:
Instructed by:
Heard on: 01 November 2024
Delivered: 29 November 2024
Advocate P MacKenzie
Hanekom Attorneys Inc.
This judgment was handed down electronically by circulation to the
parties' representatives by email.
47
II ~ •
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
PROVISIONAL LIQUIDATION
BEFORE THE HONOURABLE ACTING JUDGE ANDREWS
AT CAPE TOWN: ON FRIDAY 29 NOVEMBER 2024
In the matter between:
BUSINESS PARTNERS LIMITED
[Registration Number : 1981/000918/06]
and
THE COMPANIES AND INTELLECTUAL
PROPERTY COMMISSION OF SOUTH AFRICA
THE MINISTER OF TRADE AND INDUSTRY N.O.
THE MINISTER OF FINANCE N.O.
THE MINISTER OF PUBLIC WORKS N.O.
THE REGISTRAR OF DEEDS, CAPE TOWN
CRYSTALL ROHWENA ADONIS
DONOVAN THESTAN HANEKOM
Case No: 14388/2024
Applicant
First Respondent
Second Respondent
Third Respondent
Fourth Respondent
Fifth Respondent
Sixth Respondent
Seventh Respondent
2
DON MO PROPERTY (PTY) LTD Eight Respondent
Registration No: 2014/030530/07
T eguka Business Park, Cnr Hammer & Spanner Road
Philippi East, Western Cape, Cape Town
Having read the papers filed of record and having heard counsel for the applicant
and the sixth, seventh and eighth respondents, it is hereby ordered that:
1. That the eighth respondent be placed under provisional liquidation.
2. That a rule nisi be issued calling upon all persons interested to show cause, if
any, on 29 January 2025 at 1 0h00 or so soon thereafter as the matter may
be heard:
2.1 Why the eighth respondent should not be placed under final liquidation;
and
2.2 Why the costs of this application should not be costs in the liquidation
on the High Court scale of fees contemplated in sub-rule 3 of Uniform
Rule 67 A , which shall be in accordance with scale A as indicated under
Uniform Rule 69(7)
3. That service of the order be affected as follows:
3.1 By one publication in each of the Cape Times and Die Burger
newspapers;
3.2 By service on the South African Revenue Service;
3.3 By service on the eighth respondent at its registered address;
3.4 By service on the employees of the eighth respondent by the sheriff of
this Court;
3.5 By service on the registered trade unions representing the employees
of the eighth respondent, if any, by the sheriff of this Court.
BY ORDER OF THE COURT
COURT REGISTRAR
Attorneys for Applicant:
Tim du Toit & Co. Inc
7th Floor, 56 Shortmarket Street
Cape Town City Centre
adrianne.naldoo@t imdutoit.co.za
Attorneys for 6th & '71h Respondents:
Hanekon Attorneys
Floor 3, The Chambers, 50 Keerom Street
Cape Town
ashwin @ hanekomattorne vs.co.za
3