IN THE HIG H COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISIO N, CAPE TOWN )
Case number: 17446 /2024
In the matter between :
CEZ INVESTMENTS (PTY) LTD Applicant
and
BLOCKKOIN (PTY) LTD First respondent
Registration number : 2014/064942/07
Registered address : 27th Floor, The Box
9 Lower Burg Street, Cape Town
THE FINANCIAL SECTOR CONDUCT AUTHORITY Second respondent
Case number: 20613/2024
And in the matter between:
BLOCKKOIN (PTY) LTD Applicant
and
CEZ INVESTMENTS (PTY) LTD First respondent
THE SHERIFF, CAPE TOWN WEST Second respondent
OFF'ICE OF THE CHIEF JUSTICE
REPUBLJ C OF SOUTH AFRJ.CA
REASONS DELIVERED ON 14 MARCH 2025
VAN ZYL AJ :
INTRODUCTIO N
1. On 14 November 2024 this Court dismissed, with costs (including counsel’s
fees taxed on Scale C), two opposed applications that served before it:
1.1. The first1 was an application for the provisional liquidation of the first
respondent.2
1.2. The second3 was an application for the interim suspension of the
attachment of the first respondent’s right, title and interest in an action
instituted against the applica nt, pending the final determination of the
ex parte application (as it initially was) pursuant to which such
attachment had been procured.4
2. These are the reasons for the orders granted. I shall discuss the liquidation
application first, and thereafter de al with the suspension application. For the
sake of convenience, I shall refer to the parties as they are in the liquidation
application .
THE APPLICATION FOR THE PROVISIONAL LIQUIDATION OF THE FIRST
RESPONDENT
Background
3. The relevant facts will be considered in more detail below, but this matter
1 Under case number 17446/2024.
2 The second respondent did not take part in the proceedings.
3 Under case number 20613/2024.
4 Again, the second respondent in this application did not take part in the proceedings.
arose, in brief, as follows: By agreement between the applicant and the first
respondent this Court, on 9 April 202 4 (“the April 2024 order”) ,5 inter alia
ordered the first respondent to repay the sums of R29 897 520,69 and
$200 000,00 respectively to the applicant. Those sums had previously been
paid by the applicant to the first respondent, a financial services provider,6
who had been given a mandate by the applicant to pay a party in Hong Ko ng
with whom the applicant had a contractual relationship. The first respondent –
for reasons that will be referred to in due course - did not pay the party in
Hong Kong, and the applicant terminated the first respondent's mandate .
4. The April 2024 order wa s agreed to pursuant to the applicant’s launch of an
ex parte application on 15 March 2024 and the grant of a rule nisi on that date
(“the March 2024 order”) . The ex parte application was thereafter postponed
for hearing on the semi urgent roll regarding a further amount claimed by the
applicant from the first respondent .
5. The April 2024 order contains the following recordal: “ The payments above
are paid without prejudice to any of the parties’ rights to claim or reclaim any
amounts in respect of any cause (sic) action between the parties concerning
the subject matter under the above case number” .
6. The first respondent failed to pay the full judgment debt set out in the April
2024 order , and execution steps taken by the applicant were largely
unsuccessful. A sum of R3 688 700,00 (plus interest) remains unpaid.
7. The applicant thus applied for the provisional liquidation of the first respondent
on the bases that the latter was unable to pay its debts as they fell due in the
ordinary course of business as contemplated in section 344(f), read with
section 345(1)(c), of the Companies Act 61 of 1973 ,7 and that the grant of a
provisional winding -up order was just and equitable.
5 Under case number 5369/2024.
6 In terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (“the FAIS Act”) .
7 Read with Item 9 of Schedule 5 to the Companies Act 71 of 2008.
8. The first respondent opposed the application , contending that it was disputing
the claim on bona fide and reasonable grounds, particularly because it had
liquid and illiquid cou nterclaims against the applicant, the quantum of which
exceeded the applicant’s claim. It claimed that the applicant’s claim had been
extinguished by set -off and that the applicant therefore lacked the requisite
locus standi to pursue the liquidation appl ication . The first respondent
pleaded further that the applicant was precluded by the ex turpi causa rule
from claiming the funds because (as will appear from the discussion below)
those funds had been paid in terms of an illegal payment arrangement.
9. In August 2024 the first respondent instituted action8 against the applicant,
seeking the relief it says it is entitled to in terms of its counterclaims (as they
are referred to in the liquidation application) against the applicant. The action
is pending.
The relevant legal principles
10. It is apposite at the outset to refer to the legal principles involved in opposed
applications for provision liquidation .
11. The applicant must establish its entitlement to an order on a prima facie basis,
meaning that the applicant must show that the balance of probabilities on the
affidavits is in its favour .9 This would include the existence of the claim where
it is disputed. A distinction must be drawn between factual disputes relating to
the respondent's liability to the applicant (i.e. relating to the applicant's claim)
and disputes relating to the other requirements. At the provisional stage,10 the
other requirements must be satisfied on a balance of probabilities with
reference to the affidavits.
8 Under case number 17661/2024.
9 Orestisolve (Pty) Ltd t/a Essa Investments v NDFT Investment Holdings (Pty ) Ltd and another
2015 (4) SA 449 (WCC) at para [7] , with reference to Kalil v Decotex (Pty) Ltd and another
1988 (1) SA 943 (A) at 975J -979F.
10 The test for a final order is different. At that stage the applicant must establish her case on a
balance of probabilities. Where the facts are disputed, the Court is not permitted to determine
the balance of probabilities on the affidavits but must instea d apply the rule in Plascon Evans
Paints (Tvl) Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634E -635C (see
Orestisolve supra at para [9]).
12. In relation to the applicant's claim, however, the Court must consider not only
where the balance of probabilities lies on the papers but also whether the
claim is bona fide disputed on reasonable grounds.11 The accepted appr oach
is based on the so -called Badenhorst rule,12 to the effect that winding -up
proceedings are inappropriate (and can be abusive) for the determination of
complex factual (and perhaps legal)13 disputes as to the existence of an
indebtedness and , conversely , a claim.
13. A court may conclude that the claim is so disputed even though on a balance
of probabilities (based on the papers) the applicant's claim has been made
out.14 However, where the applicant at the provisional stage shows that the
debt prima facie exists , the onus is on the first respondent to show that it is
bona fide disputed on reasonable grounds.15
14. In Hülse-Reutter and another v HEG Consulting Enterprises (Pty) Ltd (Lane
and Fey NNO Intervening) ,16 the following was stated in relation to the onus
on the first respondent :
"I think that it is important to bear in mind exactly what it is that the trustees
have to establish in order to resist this application with success. Apart from
the fact that they dispute the applicants' claims, and do so bona fide, which is
now common cause , what they must establish is no more and no less than
that the grounds on which they do so are reasonable. They do not have to
establish, even on the probabilities, that the company, under their direction,
will, as a matter of fact, succeed in any action which might be brought against
it by the applicants to enforce their disputed claims. They do not, in this
matter, have to prove the company's defence in any such proceedings. All
that they have to satisfy me of is that the grounds which they advance for their
11 Orestisolve supra at para [8].
12 Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) 346 (T) at 347H -348C.
See also GAP Merchant Recycling CC v Goal Reach Trading 55 CC 2016 (1) SA 261 (WCC)
at paras [20] -[29].
13 See the discussion in Orestisolve supra at para [12].
14 Payslip Investment Holdings CC v Y2K Te c Ltd 2001 (4) SA 781 (C) at 7 83G-I.
15 Orestisolve supra at para [8].
16 1998 (2) SA 208 (C) at 219F -220B. Emphasis added.
and the company's disputing these claims are not unreasonable. To do that, I
do not think that it is necessary for them to adduce on affidavit, or otherwise,
the actual e vidence on which they would rely at such a trial ….
It seems to me to be sufficient for the trustees in the present application, as
long as they do so bona fide, … to allege facts which, if proved at a trial, would
constitute a good defence to the claims mad e against the company ….”
15. The background to this application and the first respondent’s defences are
consi dered in this context.
The factual context
16. The applicant has established its claim on the papers, relying as it does on the
judgment debt arising from the April 2024 order. In what follows I set out the
bases upon which the first respondent disputes its obligation to make payment
of the remainder of that debt. I am of the view that the first respondent’s
allegations do indicate that the grounds upon which the first respondent
resists the liquidation application are not unreasonable, and that the first
respondent is bona fide doing so.
The payment agreement
17. The first respondent was at the relevant time registered as a service provider
with the Financial Sector Conduct Authority ("the FSCA"), established in terms
of section 56 of the Financial Sector Regulation Act 9 of 2017, conducting the
business of a crypto exchange.
18. It is common cause that around 22 and 23 February 2024 the applicant and
the first respondent into an agreement , which has been referred to in the
papers as the "payment agreement". The first respondent was represented at
the conclusion of the payment agreement by Kenneth Finneran ("Finneran") ,
and the applicant was represented by Jonathan Lancaster ("Lancaster") and
Byron Wilson ("Wilson").
19. The first respondent states that the following facts were represented to
Finneran by Lancaster and Wilson when the payment agreement was
concluded: The applicant had entered into a joint venture ("JV") agreement
with Global Energy Corporation ("GEC"), a company registered and
purportedly trad ing as an importer of oil in Hong Kong, in the People's
Republic of China. In terms of the JV agreement the applicant had bound itself
to make payment of USD 3,5 million on behalf of GEC to the Chinese
authorities. The money represented the cost of upfront import fees levied
against GEC by the Chinese authorities in respect of shipments of sweet light
crude oil purchased by GEC from Shell Brazil Petroleum LTDA ("Shell") and
imported into China, which oil was on the point of being discharged in Hong
Kong fr om an oil tanker, the Motorship MIT Dominica. The applicant had
undertaken in terms of the JV agreement to defray that cost on behalf of GEC.
20. The applicant required the first respondent to undertake the transfer of USD
3,5 million from the applicant , which held the funds in its South African bank
accounts, to GEC in Hong Kong, by way of a once -off over -the-counter
("OTC") transaction. In other words, the first respondent was required to
transfer money from one of the joint venturers to and on behalf of the other.
21. Notably, it is now common cause that the facts represented to Finneran in
concluding the payment agreement were not true. GEC was a hollow entity
and the JV agreement was a sham document, fraudulently created for the
sole purpose of establishing a plausible basis for the payment by US D 3,5
million by CEZ to GEC. None of the allegations made by the first respondent
in this r espect has been disputed.
22. The first respondent , upon what had been represented to Finneran by
Lancaster and Wilson, entered into the payment agreement. I t is useful to set
out what is alleged in the first respondent’s particulars of claim in the action17
as regards the express, tacit , or implied terms of the payment agreement :
17 The first respondent as plaintiff, and the applicant as defendant.
"4.1 The plaintiff would, by way of an OTC transaction, in discharge
of the defendant's obligations under a joint venture agreement
("the JV agreement") mentioned below, make payment of USO
3,5 million for the defendant to and on behalf of an entity known
as Global Energy Corporation ("GEC"), a company registered
and purportedly trading in Hong Kong, in the People's Republic
of China, more particularly by procuring the payment of that
money into an account held by GEC at Shanghai Bank in Hong
Kong.
4.2 The cause of the payment was a JV agreement between the
defendant and GEC, in terms of which the defendant would on
behalf of GEC pay certain upfront import fees levied against it
by the Chinese authorities in respect of shipments of sweet light
crude oil purchased by GEC from Shell Brazil Petroleum LT DA
("Shell") and imported into China, which oil was on the point of
being discharged in Hong Kong from an oil tank er, the
Motorship M IT Dominica.
4.3 The defendant would deposit the ZAR equivalent of the USD to
be transferred, as aforesaid, into a bank account held by the
plaintiff at Capitec Bank, Cape Town.
4.4 The plaintiff would use its transactional skills, resources and
business connectio ns with associates to convert the ZAR
deposited by the defendant into USD and thereafter to convert
the USD into cryptocurrency readily re -convertible in Hong Kong
to USD, namely, USDT (a form of stable cryptocurrency, the
value of which is tethered to the USD).
4.5 The plaintiff would channel the funds to GEC through a payment
associate in the cryptocurrency market, which had at its
disposal a sufficient supply of USD in Hong Kong to re -convert
USDT into USD.
4.6 The plaintiff would itself pay a commission of 3.5% in respect of
the overall value of the ZAR deposited by the defendant for the
purposes of the OTC transaction, ie, on the conversions of such
ZAR into USD, and the plaintiff would generate a profit of 2% on
such conversion by recovering a commission of 5. 5% from the
defendant in respect thereof.
4.7 The plaintiff would itself pay a commission of 3.5% in respect of
con versions of USD into USDT (and conversely on
conversions of USDT into ZAR), and would recoup such
payments by charging a commission of 3.5% to the defendant in
respect of such conversions.
4.8 The defendant might in terms of Part 1 of Chapter 3 of the
Financial Intelligence Centre Act 38 of 2001 ("FICA") (or a
similar law in any other country) be obliged to provide
information and documentation (de scribed in the
cryptocurrency market as "Know Your Client" data or "KYC") to
the plaintiff and/or to any payment associate of the plaintiff, in
order to verify the identity of GEC, thereby, as far as practicable,
ensuring that the OTC transaction was not a transaction which
contravened any relevant prohibition in the Prevention of
Organised Crime Act 121 of 1998 ("POCA") (or a similar law in
any other country).
4.9 The defendant would provide KYC to the plaintiff and/or to any
payment associate of the plaintiff when called upon to do so,
failing which the plaintiff's payment of the funds of the defendant
on behalf of GEC, as contemplated in the OTC transaction,
would not, in terms of the legislation contemplated in the
preceding sub -paragraph, be lawfully permis sible. "
“Know Your Client”
23. The obtaining of "Know Your Client" data ("KYC), mentioned in the particulars
of claim, is one of the obligations imposed under FICA upon accounting
institutions,18 essentially to combat contraventions of the Prevention of
Organised Crime Act 121 of 1998 ("POCA") by id entifying and obstructing
suspicious or unusual transactions at their inception.
18 Within the definition of which the first respondent has fallen since 2022.
24. In terms of section 21(1)(b)(i) of Financial Intelligence Centre Act 38 of 2001
(“FICA ”) an accountable institution must, in instances where a client acts on
behalf of another person, including in a “single transaction ”, obtain information
to establish and verify the identity of that other person. Such information is
what has commonly come to be referred to as KYC. If the required KYC
cannot be obtained, the institution is prohibited, in terms of section 21E(ii) of
FICA, inter alia from performing " any act to give effect to a single transaction ".
In the present matter the payment agreement wa s on the face of it a single
transaction as defined in FICA, that is, "a transaction (a) other than a
transaction concluded in the course of a business relationship; and (b) where
the value of the transaction is not less than the amount prescribed, except in
the case of section 20A ".19
25. There is no dispute between the parties that KYC was in fact required in
respect of GEC.
26. The applicant partially performed its obligations under the payment agreement
by transferring the ZAR equivalent of US D 2 million (R38 780 000 ,00) into the
first respondent 's Capitec Bank account in two tranches on 23 and 28
February 2024. The balance of US D 1,5 m illion was never transferred to the
first respondent .
27. It was initially considered that the transfer of the applicant's funds to Shanghai
Bank would be undertaken through Openpayd, a European payment
associate of the first respondent. Openpayd was set up to ach ieve a
conversion of cryptocurrency in Hong Kong to Euros or GBP. However, Wilson
thereafter indicated that GEC required payment in Hong Kong in US D. It was
thus agreed to utilise Agile Ventures Ltd ("Agile"), one of the first respondent's
payment service providers, to make the onward payment of US D to GEC in
Hong Kong. According to the first respondent, t he most efficient way of
19 According to regulation 1A(1) of the FICA regulations published in GN R1595 in Government
Gazette 24176 of 20 December 2002, the prescribed value of a transaction is an amount not
less than R5 000,00.
procuring this outcome was to effect the transfer through Agile in f iat currency
(USD) rather than in cryptocurrency .
28. The first respondent started discharging its obligations under the payment
agreement by making transfers to the Shanghai Bank account of GEC through
the account of Agile held at FNB Zambia. It made a test transfer of
USD 1 000,00 on 25 February 2024 . When that pro ved to be successful,
made a further transfer of USD 200 000,00 on 27 February 2024.
29. On 4 March 2024 FNB Zambia notified Agile that it had placed a compliance
hold on the onward transfer of USD 200 000, because it required KYC to
verify the identity of GE C. From that day onwards, the first respondent made
repeated demands to the applicant to furnish KYC in respect of GEC . The
first respondent says that none of the demands were complied with.
30. On 4 March 2024 Wilson requested Finneran, in an effort to bypass the
obstacle created by FNB Zambia to the onward transfer of funds to GEC, to
procure that the funds of the applicant remaini ng in the first respondent 's
hands (having been converted into USDT ) would not be transferred through
Agile. Instead these would be transferred directly from a wallet created for the
applicant on the first respondent 's trading platform, into a wallet which had
been created on the trading platform of a crypto exchange in Poland (“the
Polish wallet”). The funds would be channelled via the Polish wallet to GEC .
The payment agreement wa s varied accordingly. On 5 March 2024 the first
respondent created a crypto wallet for the applicant and made a nominal test
payment of USDT 10 from that wallet into the Polish wallet.
31. The first r espondent did not know the holder of the Polish wallet. Thus, again,
KYC was required to verify the identity of the holder of that wallet (and again
of GEC, on whose behalf the payments were to be made into the Polish
wallet). On 6 March 2024 Finneran aske d Wilson how much he wanted to
transfer to the Polish wallet and requested him to send the necessary KYC.
Wilson answered that he wanted to transfer US D 500 000 (which ought to
have been a reference to USDT) . Wilson said that he was "getting the KYC
pack from them ". The KYC pack did not arrive , and when Wilson himself
attempted to transfer USDT 200 from the applicant 's wallet on the first
respondent s trading platform, a compliance hold was placed on that wallet.
32. There is some dispute between the parties as to who was responsible for
obtaining the KYC, but it seems to me that it cannot be denied that it had to be
done.
The cancellation of the payment agreement and the arising of the first respondent’s
claim for c ontractual damages
33. The first respondent avers that it was at all material times willing and able,
upon provision of the KYC demanded by it from the applicant , to perform its
obligations under the payment agreement . It argues that by failing to provide
the KYC demanded and promised on 6 March 2024 in respect of the Polish
wallet, the applicant withheld the co-operation that was essential for the first
respondent to discharge its obligations under the payment agreement . The
applican t thus breached the agreement by committing mora creditoris .20 The
applicant denies that this is the case, and this is no doubt a central issue in
the action pending between the parties.
34. The main effect of mora creditoris is to shift the responsibility for further delay
or non -performance onto the creditor. As a result of its mora creditoris the
applicant was not entitled thereafter to rely on the delay in performance or the
nonperformance by the first respondent of the payment agreement, as a
foundation for cancelling the payment agreement or to claim damages or
restitution from the first respondent.21
35. On 8 March 2024 the applicant purported to cancel the payment agreement
on the basis that the first respondent had, despite repeated dema nds by the
applicant , delayed in performing its obligations under the payment agreement,
20 See the discussion in Christie ’s Law of Contract in South Africa (7ed, LexisNexis ) at pp 605-
606.
21 Ibid.
more particularly by delaying the transfer of funds from its trading platform to
the Polish wallet. This was followed, during the period from 8 March 2024 to
14 March 2024, by repeated demands that the first respondent should
immediately restore to the applicant the funds the latter had paid to the first
respondent.
36. The first respondent contends that, because the applicant was not entitled to
rely on the alleged delay in performance of the payment agreement by the first
respondent as a ground for cancelling the payment agreement, its purported
cancellation of the agreement on 8 March 2024 constituted a repudiation of
the agr eement. As a result of such repudiation, the first respondent suffered
liquidated contractual damages , being a loss of the commission it would have
earned under the payment agreement .
37. In addition, the first respondent’s case is that it is entitled to re coup
commission in respect of the conversion of funds from USD to USDT. This
loss came about because, as indicated, on 4 March 2024 at Wilson’s request
the parties agreed to channel funds in USDT through the Polish wallet. The
first respondent thus had t o undertake an intermediate conversion of its funds
holdings in USD to USDT, at a commission payable by it (the first respondent)
of 3,5%. The first respondent had already acquired USDT with the first
payment to it of R10 million by the applicant, and no intermediate conversion
of those funds was required.
38. The first respondent used the second payment of R28 780 000,00 from the
applicant to acquire USD, pursuant to the decision to transfer the funds in
USD to Agile. It was therefore necessary to undertake an intermediate
conversion of USD, equivalent to R28 780 000,00, into USDT, to give effect to
the transfer into the Polish wallet. This conversion exposed the first
respondent itself to a commission of 3,5% on the USD equivalent of R28 780
000,00 . This is recoverable from the applicant in terms of the payment
agreement.
39. The first respondent’s claim s are quantified as follows in the particulars of
claim in the action against the applicant :22
"24 Prior to the defendant's purported cancellation of the OTC
transaction, the plaintiff had converted ZAR 38 780 000 into
USD, in respect of which conversion the plaintiff became
entitled as against the defendant to 5,5% commission, ie, an
amount of ZAR 2 132 900.
25. Prior to the defendant's purported cancellation of the OTC
transaction, the plaintiff had converted US D 1 698 155,90 (the
balance after deduction of its aforesaid commission, the transfer
of US D 200 000 to Agile and certain smaller payments made for
the defendant) into USDT, in r espect of which conversion the
plaintiff became entitled as against the defendant to 3,5%
commission, ie, an amount of ZAR 1 145 581,85.
26. Because it was commercially imprudent to hold USDT in
readiness for a transaction which had become subject to
poten tial delay, the plaintiff converted the US DT then held by it
(USDT 1 665 892,83) back into ZAR, in respect of which
conversion the plaintiff became entitled as against the
defendant to 3,5% commission, ie, an amount of ZAR 1 096
156,94.
27. In the premise s, the plaintiff became entitled to the payment of
com mission by the defendant in the amounts of (a) ZAR 2 132
900, (b) ZAR 1 145 581,85, and (c) ZAR 1 096 156.94, that is,
an aggregate amount of ZAR 4 374 632,79.
…
30. But for its purported cancellatio n of the OTC transaction, the
defendant was obliged to deposit a further amount of ZAR 29
085 000 (equivalent to US D 1 500 000) into the plaintiff's
Capitec Bank account, in final and complete performance of its
obligations under the OTC transaction.
31. The profit component of the commission which the plaintiff
22 The payment agreement is referred to as "the OTC transaction".
would have earned on the conversion of the further amount of
ZAR 29 085 000 into US D would have been 2%, ie, an amount
of ZAR 581 700.
32. As a result of the defendant's breach of the OTC transaction,
the plain tiff was precluded from earning the aforesaid profit
component of ZAR 581 700 of the commission which the
plaintiff would have earned, and thereby suffered damage in this
sum. "
40. The first respondent accordingly claims R 4 956 332,79 from the applicant by
way of liquidated contractual damages .23
The ex parte application
41. Reference has already been made to the applicant’s ex parte application.
When the first respondent had not by 14 March 2024 returned the applicant 's
funds , the applicant instituted the ex parte application, freezing (under a rule
nisi) the first respondent 's assets in its bank accounts and crypto wallets by
way of the March 2024 order. The return day o f the rule nisi was anticipated,
and the April 2 024 order was granted by agreement between the parties .
42. The April 2024 order provided that the first respondent would make a payment
of R29 897 520,69 to the applicant . The amount of USD 200 000,00, which
the first respondent had attempted to transfer to Hong Kong through Agile,
remained subject to a compliance hold by FNB Zambia. Accordingly, the April
2024 order also provided that the first respondent would pay the ZA R
equivalent of USD 200 000,00 within 24 hours of those funds being received
by the first respondent . The appl icant’s claim for the balance of the R38 780
000,00 paid to the first respondent was postponed for hearing on a later date.
23 The first respondent argues that the claim made in para s 30 to 32 of the particulars of claim
may be overly generous to the applicant. It is premised on the view that the first respondent is
entitled to recover only the profit component (2%) of its stipulated commission of 5,5% in
respect of the amount of USD 1,5 million (R29 085 000 ,00) that the applicant was o bliged to,
but did not, pay to the first respondent. It is arguable that the first respondent ought to be
entitled to recover the full commission of 5,5% stipulated for which, in relation to the balance
of USD 1,5 million never paid by the applicant, amoun ts to R1 599 675,00 (instead of the
R581 700 ,00 claimed at present ).
43. It is common cause th at the first respondent has discharged the judgment
debt of R29 897 520,69 30 . The applicant contends that such payment was
delayed to the extent that mora interest of R102 410,84 has since accrued.
44. It is also common cause that the first respondent has r eceived the amount of
USD 200 000 ,00, but that it has not paid that amount to the applicant . This is
the amount of R3 688 70 ,31 owing under the April 2024 order, upon which the
applicant relies for the purposes of the liquidation application, and upon which
it founds its locus standi . With interest, the amount outstanding is
R3 791 110,84.
The extinction of the judgment debt by set-off
45. The first respondent submits that th e applicant’s judgment debt was
extinguished by set -off.24 Set-off occurs when two parties are mutually
indebted to each other, and both debts are liquidated and due. It occurs
automatically.25
46. The applicant criticizes the first respondent for raising this defence several
months after agreeing to the terms of the April 2024 order. I have mentioned,
however, that that order contained a provision safeguarding the parties’ rights
to “claim or recla im any amounts, in respect of any cause [of] action between
the parties concer ning the subject matter of the ex parte application ”. The first
respondent is accordingly not barred from raising its claim , presumable on the
advice of its newly appointed legal representatives, after the grant of the April
2024 order . There was nothing in the first respondent’s attorney’s letters after
the grant of the April 2024 order to indicate that the first respondent
abandoned reliance on the safeguard contained in the order.
47. One of issues which arise from the first respondent’s reliance on its
contractual claim for damages is whether the first res pondent is entitled to
24 Bannister Print (Pty) Ltd v D&A Calendars CC and another 2018 (6) SA 77 (GJ) at para [10].
25 See Western Cape Housing Development Board v Parker 2005 (1) SA 462 (C) at para [18].
claim damages at all.
Damages cause d by the termination of a mandate which has already commenced
48. In its replying affidavit the applicant for the first time characterises the
payment agreement as a "mandate". The first respondent argues that this is
done to enable the applicant to rely the common law rule that a mandator may
terminate his mandate at will ; therefore, the applicant’s cancellation of the
payment agreement could not have amounted to repudiation , and no
damages could arise from the termination of the mandate.
49. There is authority for the proposition that a mandate may be terminated by the
mandator at will. LAWSA26 states as follows in this respect:
"69 Factors terminating the mandate The contract of mandate is terminated
in the same way as other obligations come to an end, namely by:
performance; set -off; merger impossibility of performance; novation;
compromise; waiver or discharge; and prescription or rescission. In the case
of mandate, however, there are certain special cases which bear
consideration .
…(g) The mandator may revoke the mandate at any time before its
performance or completion (footnote 16) . Since such revocation may have the
effect of depriving the mandatary of his or her anticipated remuneration, it can
be argued that a contract of mandate should be subject to an implied term that
it will not be revoked except on good cause shown (footnote 17) ."
50. In footnote 16 in the extract the authors rely inter alia on Huber HR 3.12.39
and Voet 17.1.17. The authors add in footnote 17: "This might be the case
where the mandate closely resembles a contract of service or employment."27
51. The Roman -Dutch authority referred to in footnote 16 supports what is said in
26 Joubert et al (eds) LAWSA (3ed) "Mandate" Vol. 28(1) at para 69. Emphasis added.
27 A contract of service is locatio conductio operis , and a contract of employment is locatio
conductio operarum .
the main LAWSA text. Voet 17.1.1728 states that a mandate can be revoked
“with impunity on both sides if the matter is still in its entirety , …. If the matter
is not in its entirety, damages caused by the renunciation or revocation having
taken place simultaneously must be made good” .
52. Huber HR 3.12.3929 is to similar effect : ”39. Notice may be freely given by
both sides, so long as the matter is still entire. That is to say, the principal may
revoke his mandate and the mandatary may renounce it, so long as the one or
the other su ffers no damage thereby; for if that happens, then the person
giving notice is obliged to make the damage good , unless it was given for
weighty reasons .... " 30
53. The first respondent argues that the upshot of these authorities is that a
mandate may be terminated "before the mandatary has acted upon the
mandate ".31 The proposition advanced by the applicant, namely that when a
mandator terminates his mandate at will the mandatary cannot suffer
contractual damages, is thus an oversimplification. The true common law rule
is that a mandate may be terminated at the will of the mandator before the
mandatary acts upon it, b ut that if it is revoked after the mandatary has
already started to act upon it, the mandatary is entitled to damages suffered
as a result of the termination thereafter of the mandate. In the present matter
the first respondent had already partly performed under the payment
agreement when it was terminated on 8 March 2024. The first respondent is
thus entitled to claim damages.
Was the p ayment agreement a contract of locatio conductio operis?
54. In footnote 17 to the quoted passage from LAWSA (at paragraph 4 9 above)
the authors remark that a contract of mandate might be subject to an implied
term that it will not be revoked except on good cause shown, if it closely
28 Ganes translation Vol . 3 at p 211 . Emphasis added.
29 Gane's translation Vol . 1 at p 464 . Emphasis added.
30 See also Grotius Introduction to Dutch Jurisprudence 3.12.12 ( Maasdorp's translation at p
238).
31 Kerr Law of Agency (4ed, Lexisnexis ) at p 195 .
resembles a contract of locatio conductio operis .
55. The first respondent was obliged in terms of the payment agreement to
underta ke and complete a specific task on behalf of the applicant, namely to
make a payment on its behalf . The payment agreement may therefore be
described as a contract of locatio conductio operis : .32
“1.…The object of the contract of work is the performance of a certain
specified work or the production of a certain specified result. It is the product
or the result of the labour which is the object of the contract.
2….By way of contrast the conductor operis stands in a more independent
position vis-à-vis the locator operis. The former is not obliged to perform the
work himself or produce the result himself (unless otherwise agreed upon). He
may accordingly avail himself of the labour or services of other workmen as
assistants or employees to perform the work or to assist him in the
performance thereof.
3….The conductor operis is bound to perform a certain specified work
or produce a certain specified result within the time fixed by the contract of
work or within reasonable time where no time has been specified.
4….The conductor operis, however, is on a footing of equality with the locator
operis. The former is bound by his contract of work, not by the orders of the
latter. He is not under the supervision or control of the locator operis. Nor is he
under any obligation to obey any orders of the locator operis in regard to the
manner in which the work is to be performed. The conductor operis is his own
master being in a position of independence vis-à-vis the locator operis. The
work has normally to be co mpleted subject to the approval of a third party or
the locator operis. ”
56. If that is the case, the characterisation of the payment agreement as a
mandate is inaccurate, and the proposition that the applicant was entitled to
terminate the payment agreement at will is not correct .
32 On the test set out in Smit v Workmen's Compensation Commissioner 1979 (1) SA 51 A at
61A-G.See Kerr op cit at pp 14 -15.
Distinction between a contract of mandate and the authority granted thereunder
57. The first respondent raised a further argument, with reference to various
authorities,33 to the effect that even if the payment agreement was a contract
of mandate, a distinction should be made between the existence of such
contract and the authority granted thereunder.34
58. An agreement which embodies an instruction (a mandate properly so called)
and which also confers authority authorising the mandatory to bind the
mandator, is a "composite contract”.35 The mandatory under such a composite
agreement, that is, which not only embodies an instruction to him but also
authorises him to act at the mandator's agent, is known as an "empowered
mandatary", while a mandatary under an agreement which embodies an
instruction only, without authorising him to act as the mandator's agent, is
known as an "unempowered mandatary".36
59. It is often said that a principal may at will revoke his agent's authority, even if
he is an empowered mandatary under a composite contract of mandate.37
However, the fact that the authority of an empowered mandatary may be
revoked at will does not mean that the contact of mandate itself, which
conferred the authority, is revocable at will. As to a contract of mandate, it
has been e stablished that even if the authority conferred thereunder is
revoked, the contract itself may continue in existence.
60. It is not for present purposes necessary to debate this in any detail. The
payment agreement did not confer upon the first respondent authority , as
agent, to bind the applicant . The first respondent was a neutral payment
functionary,38 and thus an unempowered mandatary. The question whether
33 Including De Wet & Yeats Kontraktereg en Handelsreg (4ed, Butterworths ) at p 343 ; Glover v
Bothma 1948 (1) SA 611 (W); Ward v Barrett 1962 (4) SA 732 (N); Kotsopoulos v Bilard i 1970
(2) SA 391 (C); and Consolidated Frame Cotton Corporation Ltd v Sithole 1985 (2) SA 18 (N).
34 See LAWSA "Agency and Representation" (3ed) Vol. 1 at para 149 ; Kerr op cit at p 12.
35 Kerr op cit at p 17.
36 Kerr op cit at p 12.
37 See Consolidated Frame Cotton Corporation Ltd v Sithole 1985 2 SA 18 (N) at 22G.
38 Keyhealth Medical Scheme v Glopin (Pty) Ltd [2021] ZAGPPHC 446 (14 April 2021) at para
[11].
the applicant could at will revoke the first respondent 's authority therefore
does not arise.
61. The t rue question is whether, properly construed, the payment agreement
envisaged that the applicant might terminate it at will. If, as postulated earlier ,
the payment agreement was a contract of locatio conductio operis, the answer
to that question is in the negative . The first respondent argues that e ven if the
payment agreement is regarded as a mandate there are clear indications that
it was not envisaged that it would be unilaterally revoked by the applicant . The
parties intended t hat the payment agreement would be implemented swiftly .
The first respondent contends that this would have occurred, were it not for
the applicant’s mora creditoris . Given the very short time -frame within which
the payment agreement was intended to be im plemented, as a single task, it
was probably a tacit or implied term of the payment agreement that it would
not be terminated by the applicant within that time -frame, and certainly not
after the first respondent had started implementing it.
62. The applicant denies th at this is the case , but it does appear from the relevant
timeline that, after conclusion of the payment agreement on 22 and 23
February 2024, the decision that the funds would be sent via Agile in fiat
currency were made swiftly the reafter. The initial concept after the conclusion
of the agreement was a conversion from ZAR to USD and then to USDT, to
be sent to Hong Kong via Openpayd. Openpayd was, however, set up to
convert cryptocurrency in Hong Kong in GBP or Euro. As Wilson want ed
payment on Hong Kong in USD, the decision was made to transfer funds in
fiat currency via Agile. On 23 February 2024 the applicant paid R10 million to
the first respondent, and on 28 February 2024 it paid another R28 780 000,00.
The first respondent s tarted virtually immediately with its attempts to transfer
USD through Agile , because on 23 February 2023 already the test
transmission of USD 1 000,00 was made. The further transmission of USD
200 000,00 was attempted on 27 February 2024. The decision t o use Agile
was thus virtually contemporaneous with, or very shortly after, the conclusion
of the payment agreement .
63. On the first respondent’s argument i t follows, given the urgency with which the
payment agreement was to be implemented, that the applican t had already
committed mora creditoris, by withholding co -operation essential to enable the
first respondent to implement the payment agreement, when it purported to
cancel the agreement on 8 March 2024. It is a matter that will have to be
determined by a trial court in due course. I do not regard it as an
unreasonable proposition for present purposes.
Termination under the FAIS Code of Conduct
64. The applicant contends that, apart from cancellation under the common law, it
was entitled to terminate the payment agreement. in terms of section 20(a)(i)
of the General Code of Conduct for Authorised Financial Service Providers
and Representatives publis hed under the FAIS Act .39 That section provides
that "a provider must , subject to an y contractual obli gations, give immediate
effect to a request of a client who voluntarily seeks to terminate any
agreement with the provider or relating to a financial product or advice ".40
65. The first respondent submits that the underlined phrase mean s "subject to any
contractual obligations of the provider or of the client". Thus, the right of
termination conferred by section 20(a)(i) is not calculated to vary the
provider 's or the client's contractual obligations (and correlative rights),
whether at c ommon law or otherwise, as they otherwise exist in or arise from
the contract between them. The right of termination under the Code is thus
subordinate those rights and obligations.
Is the first respondent’s claim liquid?
66. The applicant denies that the alleged contractual claim constitutes a liquidated
debt, given the disputes on the papers as to the terms of the payment
agreement and the quantum of the amount claimed in the action .
39 Under BN 80 in Government Gazette 25299 of 8 August 2003.
40 Emphasis added.
67. It seems to me, however, that the claims set out in the particulars of claim are
at least capable of prompt ascertainment “ by proof in court … for commission
for an agreed amount, or upon an agreed basis ”.41
68. The existence of the payment agreement is common cause. If one accepts
that its termination after the first respondent had started implementing it gave
rise to a claim for liquidated contractual damages against the applicant , a
dispute about the terms of the agreement need not be entertained in these
proceedings. It is a matter fo r the court determining the action , and the terms
of the agreed need to be established there depending on where the onus lies
in relation to the allegations on the pleadings .42
69. As to the dispute in relation to the quantum of the first respondent’s claim, it
seems that even on the applicant’s version the first respondent was entitled to
a commission of 5,5% on the amount of US D 3,5 million to be transferred
under the payment agreemen t. Without allowing for the 3,5% commissi on
recoupment recoveries in respect of intermediate conversions of currencies
and cryptocurrencies, as alleged in the first respondent 's version of the terms
of the payment agreement, that comes to US D 192 500,00, which virtually
extinguishes the judgment debt relied upon by the applicant . This, however ,
should be left to the trial court for determination .
70. The applicant knew, when it launched th e liquidation application in early
August 2024, that the first respondent was of the view that the applicant had
breached the payment agreement by committing mora creditoris followed by
repudiation, and that it was contractually entitled to its commission. Th is was
done in the first respondent’s answering affidavit in the ex parte application,
delivered in July 2 024. Although the first respondent 's claim was not
quantified at that stage , it was nevertheless readily determinable that the
asserted claim was in the order of US D 1 925 000,00.
The illegality of the payment agreement
41 See Wille’s Principles of South Afri can Law (9ed) at p 833.
42 Topaz Kitchens (P ty) Ltd v Naboom Spa (Edms) Bpk 1976 (3) SA 470 (A) .
71. The other defence upon which the first respondent relies to resist the
liquidation application is its contention that the payment agreement was an
illegal contract.
72. I have earlier referred to the representations made to the first respondent
when the payment agreement was concluded. The first respondent alleges in
its answering affidavit that the true position was as follows:
72.1. GEC, although registered and incorporated in Hong Kong, was a
hollow entity, without known beneficial owners , directors , or other
controlling officer s, which did not engage in the importation of sweet
light crude oil .
72.2. The JV agreement was a sham contract, fraudulently created for the
sole purpose of establishing a plausible basis for the payment by the
applicant to and on behalf of GEC of an amount of USD 3,5 million .
72.3. The GEC invoice was a sham document, fraudulently created for the
sole purpose of establishing a plausible basis for the payment by the
applicant to and on behalf of GEC of an amount of US D 3,5 million .
72.4. GEC had not purchased sweet light crude oil from Shell, and was not a
cleared counterparty on the Shell Trading and Supply System .
72.5. The Mo torship MIT Dominica which was not an oil tanker registered to
carry sweet light crude oil, and was not then lying off Hong Kong in
readiness to discharge a cargo of sweet light crude oil.
73. The applicant denies that it made any misrepresent ations to the first
respondent, but does not deny the allegations referred to above . Wilson's
response is simply that the applicant "believed the transaction with GEC to be
a genuine, legitimate business opportunity ”; that it " believed that the facts
regarding the business opportunity presented to it by Mr Lancaster were
genuine ", and that, with the benefit of hindsight, the applicant "indeed became
suspicious of the whole transaction ". He states that the applicant "may
possibly have fallen victim to a scam perpetrated by international crime
syndicates ".
74. It is therefore effectively common cause that the first respondent , at least, was
duped into concluding the payment agreement with the applicant . The entire
factual substratum of the payment agreement was a fabrication. The first
respondent suggests that the payment agreement was concluded as part of
an illegal scheme to accomplish one or another of the transactions forbidden
by POCA. No innocent explanation has been suggested, and no other
plausible inference is consistent with what the first respondent labels the
numerous “co-ordinated steps ” taken to convince it to conclude the payment
agreement .
75. The applicant states that it was not a party to the fraud. It does not know how
the situation came about , but it regards itself a victim as well .
76. In the pap ers, the first respondent examines the content of the JV agreement,
a dubious invoice from GEC, and the relationships and interactions between
the parties and various other persons involved in the process, and comes to
the conclusion that the applicant kne w about the falsity of the payment
agreement. It says that, p rima facie , that the applicant and the other persons
collaborated in attempting to bring to fruition the illegal scheme embodied in
the payment agreement. The applicant has not been able to explain how the
situation came about.
77. It is impossible to reach a conclusion on the papers, and it is not necessary to
do so at this juncture. For present purposes the first respondent contends
that, the payment agreement, having been concluded in furtherance of an
illegal scheme or for an illegal purpose, was at common law an illegal
contract. The primary result of the illegality of a contract is that it is
unenforceab le, which is expressed in the rule that ex turpi causa non oritur
actio .43 On the first respondent’s version, if the applicant was knowingly a
party to the illegal agreement, the was never entitled to enforce the
agreement.
78. It is common cause that the applicant no longer seeks to enforce the payment
agreement , but that it has cancelled the agreement and seeks restitution of
the funds paid to the first respondent.
79. One of the further consequence s of the ex turpi causa rule is that a party who
has performed under an illegal contract cannot recover from the other party
what he had performed, save possibly by virtue of certain condictiones , which
were much disputed in the old authorities. This outcome is expressed in
instances where turpitude attaches to both parties to the illegal contract by the
rule that in pari delicto potior est conditio defendentis . This means that a claim
for restituti on by a party who performed under the illegal contract should
typically not succeed against the party who received the performance, the
position of the latter being stronger ("potior').
80. Although often raised in the same context, the ex turpi causa rule and the par
delictum rule are distinct. The par delictum rule may have harsh
consequences ; for example, the party who received performance is enriched
at the expense of the perform ing party. To prevent this, the par delictum rule
may in certain circumstances be relaxed by allowing the performing party to
recover his performance from the receiving party. Such relaxation depends in
each case on the Court's assessment of public policy.44
81. Thus, had turpitude attached to both parties in relation to the illegality of the
payment agreement, the applicant would in principle have been precluded by
the ex turpi cause rule from recovering its money from the first respondent ,
unless a Court could be persuaded that public policy justified the relaxation of
the par delictum rule.
43 Christie op cit at p 454.
44 See the discussion in Jajbhay v Cassim 1939 AD 537.
82. The first respondent was not aware of the illegality of the payment agreement
which, on the face of it, was perfectly regular. Where one party concludes a
contract for an illegal purpose but the other knows nothing of that purpose,
and is innocent, the innocent party can enforce the contract but the guilty
party cannot.45 It also follows from the first respondent 's ignorance of the
illegality of the payment agreement that it was not in pari delicto at all.46
Accordingly, the par delictum rule is not triggered, and the question whether it
should be relaxed in favour of the applicant does not arise.
83. The first resp ondent accordingly argues that, if the applicant was a party to
the fraud, it is not entitled to claim the funds paid to the first respondent .
The first respondent’s illiquid counterclaim for delictual damages
84. The first respondent contends, lastly, that it has an unliquidated claim for
delictual damages against the applicant. This claim is not based on the
alleged breach of the payment agreement, but on the discrete ground that the
applicant wrongfully obtained the March 2024 order in the ex parte
application, caus ing the first respondent to suffer damages because of an
interruption to its business operations.
85. The first respondent alleges that the March 2024 order was wrongfully
obtained as a result of material factual non -disclosures in the founding
affidavit in the ex parte application.47 Had the court hearing the ex parte
application known of these facts, it would not have granted the March 2024
order. The first respondent argues that the non-disclosure of the relevant
facts, and its consequences, ought properly to be determined by the Court
which tries the first respondent ’s action against the applicant .
86. The first respondent has not quantif ied this delictual claim . It argues that it
must be accepted “as a matter of common sense ” that such damages, for an
45 Christie Law of Contract in South Africa (7th Ed ) at 454
46 Van Staden v Prinsloo 1947(4) SA 842 (T) at 846.
47 The allegedly undisclosed facts are listed in one of the first respondent’s answering affidavits
in the ex parte application.
entity which conducts the business in which the first respondent engages, will
not be insubstantial.
87. In GAP Merchant Recycling48 the Court conside red whether the Badenhorst
rule applied to illiquid counterclaims:
“[30] I have thus far been considering the case where the petitioning creditor's
claim is disputed. Although that is one of the matters which arises in the
present case, there is also an a llegation by the respondent that it has a
substantial claim for damages against the applicant. Counsel appear to have
assumed that essentially the same test applied, namely that the court would
ordinarily dismiss a liquidation application if the respondent company bona
fide asserts a counterclaim for damages on reasonable grounds, at least
where such counterclaim exceeds the amount of the applicant's claim. That
does not appear to be the legal position.
[31] In Ter Beek v United Resources CC and Another 1997 (3) SA 315 (C)
Van Reenen J considered that South Africa should follow the English practice,
which he understood to be that the court has a gene ral discretion to refuse a
liquidation order where the respondent asserts a genuine and serious
counterclaim equal to or exceeding the amount of the applicant's claim . …
[32] …, in Erf 1252 Marine Drive supra Binns -Ward J subjected Ter Beek to
trenchant cr iticism. He pointed out that the English cases did not appear to
confer the wide discretion assumed by Van Reenen J. The English cases in
effect applied our Badenhorst rule … by holding that, save in exceptional
circumstances, a liquidation application sho uld be refused where the
respondent bona fide asserts on reasonable grounds a counterclaim for
damages equal to or exceeding the applicant's claim. Binns -Ward J
considered that there was no reason to adopt this approach in South Africa.
He concluded that t he Badenhorst rule did not apply to an illiquid
counterclaim. He held that a respondent is not entitled to have a liquidation
application dismissed merely because it bona fide asserts on reasonable
grounds a counterclaim for damages exceeding the amount of the applicant's
48 Supra at paras [30] -[32]. Emphasis added.
claim …”
88. In GAP Merchant Recycling ,49 the Court did not decide the issue, but
assumed in favour of the respondent that the application for liquidation should
be dismissed if it found on an assessment of all the affidavits that the
respond ent was bona fide asserting on reasonable grounds a counterclaim for
damages which exceeded the amount of the applicant's claim. I follow the
same approach in th e present matter.
89. On consideration, I agree with the submission of counsel for the applicant that
the first respondent’s reliance on the alleged unliquidated counterclaim is
flawed.
90. As indicated, t he claim is unquantified, and the alleged damages are
unsubstantiated . There is a glaring dearth of evidence in relation thereto on
affidavit , even considering the dictum in Hülse -Reutter50 to the effect that the
first respondent does not have to prove its defence (or claim, in this instance)
in these proceedings. T he absence of evidence is demonstrated by the first
respondent's statement in its answering affidavit that it w ould deliver a
supplementary affidavit elaborating on this claim "as soon as the above
evidence has come to hand". The respondent fails to identify the evidence
which is to be forthcoming , or to explain why it is not "to hand" yet and why no
supporting affidavits, deposed to by representatives of the seven parties
referred to in its particulars of claim in connection with this claim , were
delivere d. The promised supplementary affidavit was never delivered.
91. There are other troubling aspects to this claim. The applicant points out that it
attempted , with little success, to contact the parties referred to in the
particulars of claim as having terminated their relationships with the first
respondent . However, i n a letter from attorneys representing Prime Circle
Finance (Pty) Ltd ("Prime Circle") , one of the parties referr ed to, it is indicated
that Prime Circle terminated its relationship with the first respondent in mid-
49 GAP Merchant Recycling supra at para [33].
50 Hülse -Reutte r supra at 219F -220B.
March 2024 for reasons which were unrelated to the applicant’s conduct in
obtaining the March 2024 order. On the contrary, the attorneys for Prime
Circle state that "any damages Finneran complains of was engineered under
his own hand".
92. It is alleged in the particulars of claim that damages w ere suffered resulting
from lost income from a business relationship between the first respondent
and Praxis Corpora tion CT SA (Pty) Ltd ("Praxis"). The applicant's
investigations show that Mr Van Rooyen, the sole director of the first
respondent, is also a director of Praxis.
93. The applicant points out, further, that the only assets of the first respondent
that were su ccessfully safeguarded in terms of the March 2024 order was
approximately R10,000,000.00 , made up of crypto -currency and some cash
held in the first respondent’s bank accounts . This, the applicant submits,
shows the untenability of the first respondent's contention that the
preservation order resulted in "massive business and financial damage".
94. In the circumstances, and given the skeletal nature of the alleged illiquid
counterclaim, I am not satisfied that the first respondent’s reliance thereon
qualifies as a bona fide dispute , on reasonable grounds, of the applicant’s
claim.
Conclusion on the section 344(f) ground for winding -up
95. In all of the circumstances set out above in relation to the first respondent’s
liquid contractual claim and the undeniable illegality of the payment
agreement, I am of the view that the first respondent has demonstrated that it
bona fide challenges the applicant’s claim on reasonable grounds . The first
respondent’s allegations were not bald, and it had previously informed the
applicant of its intention as regards its contractual claim. The claim has been
instituted, and it being pursued. As indicated in the relevant authorities, the
first respondent does not have to establish, even on the probabilities, that it
will as a matter of fact succeed in its action against the applicant . All it has to
satisfy this Court of is that the grounds whic h it advance s for its disputing the
applicant’s claim are not unreasonable. It is unnecessary , and undesirable,
for this Court to resolve the disputes between the parties in relation to the
defences raised by the first respondent that, on the discussion above, meet
the Badenhorst standard . They are to be determined in the appropriate
proceedings.
96. I regard the matter of Afgri Operations Ltd v Hambs Fleet (Pty) Ltd ,51 upon
which the applicant places reliance, as distinguishable from the present matter
on the facts . In Afgri Operations , the Supreme Court of Appeal upheld an
appeal against the dismissal of an application for a final liquidation order. The
appellant had previously obtained a judgment for costs against the
respondent . Those costs were subsequently taxed, but t he respondent failed
to pay them. The appe llant then brought an application to wind up the
respondent on the basis that the respondent was unable to pay its debts
within the meaning of s 345(1) (a), read with s 344 (f), of the 1973 Companies
Act. The respondent relied on a counterclaim against the appellant to resist
the winding -up application.
97. It is clear from Afgri that the respondent’s case in that matter was bald: “Other
than to present a bald denial that it is insolvent, the respondent did not dispute
the underlying debt and that it had failed to pay it. In addition, the issues of
whether demand had been given by the appellant to the respondent in terms
of s 345 of the old Companies Act and the failure of the respondent to satisfy
that demand were not in dispute ”.52 In the present matter, the first
respondent’s case, at least in relation to its contractual counterclaim, cannot
be described as bald
98. In addition, the counterclaim in Afgri was illiquid, and no version thereof was
attached to the answering papers in the liqu idation application.53 Although the
action had been instituted in March 2009, the respondent never pursued it . It
51 2022 (1) SA 91 (SCA).
52 Afgri supra at para [2].
53 Afgri supra at para [3], read with para [13].
may be mentioned, in this respect, that the Supreme Court of Appeal dealt
with the appeal during March 2017, eight years after the institution of the
claim. In the present matter, the first respondent instituted action in August
2024, four months after the April 2024 order, and is actively pursuing it.
99. There were other discretionary factors that weighed with the Supreme Court
of App eal in Afgri, including the fact that the respondent in that case had no
longer been trading or conducting business at the time of the application for its
winding -up.54 In addition, the respondent ’s considerable delay cast in
prosecuting its action doubt on its bona fides :
“[18] As mentioned earlier, in this particular case the inertia of the respondent
in pursuing its right of action alleged in the counterclaim generates a
considerable sense of unease about the genuineness of its contestation.
There are other relevant factors too: the illiquidity of the claim, the failure even
to attach the summons, the failure to respond to the s 345 demand, the lack of
any indication that the respondent may be solvent and the fact that the
respondent does not appear to be trading. It has therefore failed to discharge
the onus of demonstrating that its indebtedness to the appellant has indeed
been disputed on bona fide and reasonable grounds. ”
100. These factors are not present in the application before this Court. The first
respondent is trading, and it does not appear from the papers that other
creditors , apart from the applicant, stand to benefit from the first respondent’s
liquidation.
101. I am of cou rse mindful of the fact that the discretion to refuse a liquidation
application where an unpaid creditor applies therefor is a narrow one. As
stated in Afrgi:55
“[7] The existence of a counterclaim which, if established, would result in a
discharge by set -off of an applicant's claim for a liquidation order is not, in
54 Afgri supra at para [4].
55 Supra at para [7], read with paras [12] -[13].
itself, a reason for refusing to grant an order for the winding -up of the
respondent but it may, however, be a factor to be taken into account in
exercising the court's discret ion as to whether to grant the order or not
…
[12] …, 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. … The court a quo also did not heed the principle that,
in practice, the discretion of a court to refuse 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.
[13] As mentioned abo ve, mere recourse to a counterclaim will not, in itself,
enable a respondent successfully to resist an application for its winding -up.
Moreover, as set out above, the discretion to refuse a winding -up order where
it is common cause that the respondent has not paid an admitted debt is,
notwithstanding a counterclaim, a narrow and not a broad one…. the onus is
not discharged by the respondent merely by claiming the existence of a
counterclaim. The principles of which the court a quo lost sight are: (a) as set
out in Badenhorst and Kalil, once the respondent's indebtedness has prima
facie been established, the onus is on it to show that this indebtedness is
disputed on bona fide and reasonable grounds; and (b) the discretion of a
court not to grant a winding -up order upon the application of an unpaid
creditor is narrow and not wide. ”
102. For the reasons set out above, as well as the troubling circumstances in which
the applicant’s claim arose, I am nevertheless not inclined to exercise my
discretion in favour of gr anting a provisional liquidation order.
The j ust and equitable ground for winding -up: section 344(h) of the 1973
Companies Act
103. In terms of s 344(h) of the 1973 Companies Act a company may be wound up
by the Court if it appears to the Court that it is just and equitable that it should
be wound up.
104. A finding that a company should be wound up on the grounds that it is just
and equitable to do so, "does not postulate facts but a broad conclusion of
law, justice and equity, as a ground for winding -up. The reaching of the
conclusion by the court that winding -up would be just and equitable involves
the exercise , not of a discretion, but of a judgment on the facts found by the
Court to be relevant. Once, however, such conclusion is reached, the making
of the order for the winding -up does involve the exercise of a discretion".56
105. The applicant’s reliance on section 344(h) is, h owever, intrinsically linked to
the claim advanced for the purposes of this application, and the
circumstances in which it arose. As such, the first respondent’s dispute
regarding the claim forms the basis for its opposition to winding up under
section 344(h). Given the conclusion to which I have come in relation to the
first respondent’s defences to the applicant’s claim, it is not necessary to
consider the winding -up of the first respondent on the section 344(h) ground.
THE APPLICATION FOR THE SUSPENSION OF THE ATTACHMENT OF THE
FIRST RESPONDENT ’S CLAIM AGAINST THE APPLICANT
106. These proceedings have an additional , somewhat unusual , feature .
107. As indicated, the applicant asserts locus standi in its liquidation application
upon the basis of a judgment debt (arising from the April 2024 order) due to it
by the first respondent in an amount of R 3 791 110,84 . The first respondent
resists the winding -up application on the various bases discussed earlier in
this judg ment, amongst others that it that it has a claim for liquidated
contractual damages against the applicant in the amount of at least R4 956
332,79, which (so the first respondent’s contends) by set-off extinguished the
judgment debt .
108. The determination of the first respondent alleged liability for the balance of the
56 Grenco Projects and Construction CC v Hermanus Esplanade Dev Co (Pty) Ltd [2024] 3
All SA 504 (WCC) at para [10], with reference to Apco Afri ca (Pty) Ltd and another v
Apco World wide Inc 2008 (5) SA 615 (SCA) at para [16].
money paid to it by the applicant , sought in Part B of its notice of motion in the
ex parte application, was postponed for hearing to a later date.
109. The first respondent instituted its claim agai nst the applicant on 12 August
2024. The applicant had previously, on 26 June 2024 , obtained a warrant of
execution against the first respondent pursuant to the judgment debt of R3
791 110,84. On 29 August 2024, in terms of the warrant, the applicant
attached the first respondent’s right, title and interest in and to its action
against the applicant .
110. The first respondent feared that this attachment was calculated to sustain a
submission that its claim for liquidated contractual damages no longer existed
in its hands, and therefore could not operate as a basis for the set -off alleged
in opposition in the winding -up application. 57 The first respondent therefore
sought , as a matter of urgency (to be heard together with the liquidation
application) , the suspension of the attachment, pending the hearing of Part B
of the applicant’s ex parle application .
111. Uniform Rule 45A provides that this Court may suspend the execution of any
order granted by it for such period as it may dee m fit. The Court also ha s the
inherent discretion to suspend the execution of any order granted by it, where
real and substantial justice requires a stay.58
112. As it happened, the applicant did not in its replying affidavit or in argument rely
on the proposition that the first respondent’s claim for liquidated contractual
damages against the applicant no longer exists in the first respondent’s
hands. The applicant’s counsel has assured the Court and the first respondent
that this propositio n would not be relied upon in the action instituted by the
first respondent.
57 See Brummer v Gorfil Brothers Investments (Pty) Ltd and others 1999 (3) SA 389 (SCA) at
417G -H, where the Supreme Court of Appeal found that (depending on the particular
circumstances of the matter) a defendant who used a statutory procedure, namely the
attachment and sale on the open market of a claim, to bring to a n end an action against him
which he regarded as vexatious, did not have an objectionable or improper intention.
58 See the discussion in Herbstein & Van Winsen’s Civil Practice of the High Courts of South
Africa (5ed) Vol. 2 at 1087ff.
113. I agree with the applicant that the suspension application has no merit.
114. First, there is no urgency to the matter. The debt in terms of which the
warrant of execution was issu ed, emanates from the order granted by
agreement on 9 April 2024, almost six months before this application was
launched in September 2024. The first respondent had knowledge of the
facts underlying its counterclaim by 9 April 2024.
115. The applicant obtain ed a warrant of execution on 26 June 2024. The first
respondent did nothing to have it stayed or set aside, even when the Sheriff
made various attachments of inter alia the first respondent’s bank accounts
and office equipment59 during early July 2024 . On 29 August 2024, and in
terms of the warrant , the applicant attached the first respondent 's right, title
and interest in its action against the applicant. The suspension application
was only launched on 23 September 2024 .
116. In these circumst ances , the first respondent has failed to make out a case for
urgency. Even if there were urgency, it would have been self-created.
117. Second, n o case is made out for interim relief. I deal with this briefly.
118. As to a prima facie (or clear) right , the first respondent does not seek the
setting aside of the order by agreement granted on 9 April 2024. The warrant
of execution was issued for purposes of giving effect to that order , and the first
respondent does not rely on any irreg ularity in the process of obtaining the
warrant of execution . The attachment, moreover, does not affect its locus
standi in the pending litigation between the parties.60 No prima facie right has
therefore been shown.
119. There is no irreparable harm to the first respondent. Whether or not set-off is
59 The first respon dent furnished security under Rule 45(5) to prevent the removal of the
equipment form its offices.
60 See the discussion in Mackenzie v HCI (1987) Pension [1997] 3 All SA 497 (W).
applied , the first respondent still needs to pursue its pending action to prove
its claim against the applicant . If the first respondent is successful with the
actio n, it will suffer no harm if set -off has not been applied. In the meantime, if
the first respondent wishes to avoid execution steps resulting from the April
2024 order agreed to by it, "it should simply comply with the court order".61
120. The balance of convenience lies with the applicant. Whilst the first
respondent will suffer no harm, the applicant will be prevented from giving
effect to an order obtained by agreement.
121. Finally, t he pending action is the first respondent’s obvious remedy.
122. Given these circumstances, I exercised my discretion against granting the
interim relief sought.
COSTS
123. There was no reason why costs should not follow the event . Counsel for both
parties submitted that counsel’s fees should be taxed on Scale C.
124. In the exe rcise of my discretion on the available facts as a whole, and particularly
with regard to the complexity of the matters (which were interlinked), I regard ed
an award of counsel’s fees on Scale C as warranted in each case, without
differentiating between senior and junior counsel .62
ORDER S
125. In the circumstances, I delivered the orders referred to at the outset of these
reasons.
____________________
61 Exclusive Access Trading 73 (Pty) Ltd v Bouwer 2011 JDR 0318 (ECG) at p 5.
62 See Uniform Rule 67A(3).
P. S. VAN ZYL
Acting judge of the High Court
Appearances:
For the applicant : Mr R. van Rooyen SC (with him Mr M. van
Staden), instructed by Mostert & Bosman
Attorneys
For the first respondent : Mr R. Goodman SC (with him Mr T. Tyler),
instructed by Lamprecht Attorneys