IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
CASE NO: 1 916/2023
In the matter between:
JOHANNES ZACHARIAS HUMAN MULLER N.O. First Applicant
TARYN VALERIE ODELL N.O. Second Applicant
and
CULTIGRAIN (PTY) LTD Respondent
Coram: Justice Holderness
Heard: 19 November 2024
Delivered electronically: 17 March 202 5
JUDGMENT
Introduction
[1] The two related issues in this matter are , firstly, the consequences of this
court failing to exercis e the discretion under section 341(2) of the Companies Act,
1973, to declare a disposition of a company’s assets, made after the commencement
of winding up, not to be void , and second ly, whether this discretion should be
exercised based on the facts of this case.
[2] The applicants, in their capacities as the joint liquidators (the liquidators) of
Wheatcor (Pty) Ltd (Wheatcor), seek a declarator that payments made by Wheatcor
and received by the respondent, Cultigrain (Pty) Ltd (Cultigrain) , in the aggregate
amount of R4,797,374 are void in terms of section 341(2) of the Companies Act No.
61 of 1973 (the Act) . Furthermore, they are seek ing judgment against Cultigrain in
this amount.
[3] Cultigrain launched a counter application in terms of which it seeks a
declaration that the payments made by Wheatcor to Cultigrain from the
commencement date of Wheatcor ’s winding up (the effective date) until the granting
of the provisional order of liquidation (the dispositions) should be declared valid and
not void in terms of sectio n 341(2) of the Act.1
Factual matrix
[4] At all material times, Wheatcor conducted business as a miller of grain and
seller of grain related milled products, particularly, various types of flour .
[5] Wheatcor was effectively controlled by members of the Theodoulou family,
the directing mind being Mr Dino Theodoulou (Mr Theodoulou). Beginning in 2007,
Wheatcor was a trading partner of Bester Feed and Grain (Pty) Ltd (Bester).
[6] In May 2020, Wheatcor was indebted to Bester in an amount of R8,939,678
for supplies of grain purchased from Bester . On 6 May 2020 Bester addressed a
written demand to Wheatcor in terms of section 345 (1)(a) of the Act. It app ears that
Wheatcor was in a dire financial position at that time and was unable to meet its
financial obligations as they fell due.
1 Section 348 of the Companies Act provides that a winding -up of a company shall be deemed to
commence at the time of the presentation to the Court of the application for the winding -up.
[7] The liquidators contend that the directing minds of Wheatcor, in response to
an embargo on the further supply of grain by Bester due to non -payment and in
circumstances where Wheatcor itself had acknowledged that it would be compelled
to close its business without supply. The directing minds of Wheatcor embarked on
a stratagem to transfer the business of Wheatcor to a related entity, Nelspruit Milling
(Pty) Ltd (Nelspruit Milling), an entity controlled by the Theodoulou family.
[8] According to the liquidators, this so-called scheme was executed as a result
of Bester ’s threat to initiate liquidation proceedings against Wheatcor. In the
process the business of Wheatcor converted from that of a milling company to a
brokerage, buying grain from Cultigrain and selling it to Nelspruit Milling at a 1%
margin , otherwise described as a ‘brokerage fee.’
[9] Put differently, the liquidators contend that Wheatcor was sacrificed in order to
create a trading history for Nelspruit Milling, which subsequently assumed control of
its core business operations . This was due to the fact that Nels pruit Milling lacked
the necessary trading history to secure the extensive line of credit that Wheatcor
required for its milling operations.
[10] Arising from the foregoing, the liquidators contend that the procurement of
grain by Wheatcor from Cultigrain w as not in the ordinary course of Wheatcor’s
business, as it involved a fundamental transfiguration of that business .
The forward sale agreements
[11] From about 6 May 2019, Cultigrain and Wheatcor entered into a number of
forward sale agreem ents (the agreements) . Deliveries were made to Whea tcor by
Cultigrain pursuant thereto during the period from 7 May 2019 until 6 October 2020.
The last invoice number 109767 was issued by Cultigrain to Wheatcor on 6 October
2020 (the October invoice) .
[12] The agreements were entered into for specific periods which included the
agreed tonnage in respect of a particular period of supply and the price to be
applied. Thereafter orders were placed to fill the contract .
[13] Upon r eceipt of the proofs of delivery , which would reflect loading details and
dates, along with the delivery date and proof of delivery in respect of that invoice,
Cultigrain would issue an invoice to Wheatcor on the same date . . Wheatcor was
then required to settle the invoice within a period of fourteen days .
[14] Cultigrain asserts that the payments were made in the ordinary course of
business and not to the detriment of creditors, nor with an in tention to prefer
Cultigrain as a creditor.
[15] Cultigrain maintained that it was bona fide and legitimate in its ongoing
deliver y of product s to Wheatcor, and was unaware of any liquidation proceedings
being launched until it ceased supply during early October 2020. The liquidators
acknowledged that Cultigrain was unaware of the application. The y do however ,
contend that Cultigrain was aware of Wheatcor’s indebtedness to Bester and that
Dino had transferred Wheatcor’s business to Nelspruit Milling.
The effective date
[16] On 8 September 2020, the application for the liquidation of Wheatcor was
presented to the Gauteng Division of the High C ourt, Johannesburg, by the
petitioning creditor, Bester Feed and Grain (Pty) Ltd (Bester).
[17] It is common cause that t he effective date of the liquidation of Wheatcor is 8
September 2020 (the effective date), by reason of the operation of section 348 of the
Companies Act, 1973 . It is on such date that the concursus creditorum was formed.
[18] Wheatcor was provisionally wound up on 19 October 202 0, and the final
winding up occurred on 8 December 202 0.
[19] Delivery of bulk wheat by Cultigrain to Wheatcor took place in respect of the
October invoice on 6 October 2020 . The payments which the liquidators claim are
void pertain to the invoices rendered up until 23 September 2020 (invoice 109640).
Invoices rendered thereafter to Wheatcor were settled by Nelspruit Milling.
[20] The agreements were concluded almost simultaneously with the credit
application of Nelspruit Milling to Cultigrain . It appear s that at the time of the
deliveries in respect of which the impugned payments or dispositions were made, Mr
Kobus Kitshoff, the managing director of Cultigrain , (Mr Kitshoff) was aware of the
fact that that there was a risk of Wheatcor’s financial collapse . .
[21] Wheatcor increased its grain purchases from Cultigrain after Bester refused to
continue supplying it unless its account was settled. The purchases in question
include the disputed transactions, for which the applicants, acting as the duly
appointed liquidators of Wheatcor, are now seeking repayment in accordance wi th
section 341(2) of the Act
[22] During the period from 9 September 2020 to 23 September 202 0 (‘the
relevant period’) Wheatcor paid C ultigrain amounts in aggregate of R4,797,374 for
grain delivered . The payments for the relevant period were made in respect of
invoices issued between 28 August 2020 to 11 September 2020. The payments
made after the effective date (8 September 2020 ), but before the date of the
provisional order (23 September 2020 ), consti tute the dispositions giving rise to
these proceedings.2
The grounds of opposition
[23] Initially, Cultigrain contested the authority of the first applicant, Mr Johannes
Zacharias Human Muller N.O ., on the grounds that he failed to prove that in
instituting this application , he acted jointly with his co -liquidator, the second
applicant, Ms Taryn Valeria Odell N.O . However, Cultigrain subsequently abandoned
this ground of opposition during the hearing.
2 The original amount of R5,297,179 claimed by the applicants was reduced by a total amou nt of
R499,804, after the deduction of two disputed payments made on 8 September 2020 of R349,804
and R150,000 respectively, which the applicants concede they cannot prove were made after the
effective date. Accordingly, the amount claimed is R4,797,374 i n respect of payments which arose
from the sale of grain by Cultigrain to Wheatcor.
[24] A further basis of opposition was that Wheatcor was wound up on the basis
that it was unable to pay its debts , and that the winding up application was instituted
under the Act on the basis that Wheatcor was deemed to be insolvent in terms of
section 345(1)(a) of the Act, as read with Section 344(f) of the Act, and / or is both
factually and commercially insolvent as conte mplated by section 345(1)(c) of the Act .
Additionally , Wheatcor is liable to be wound up on the grounds that it is just and
equitable as contemplated by section 344(h) of the Act. Consequently, A winding up
order would accordingly only have been granted if Wheatcor was found to be
insolvent.3
[25] Cultigrain asserts that Wheatcor was neither factually , nor commercially
insolvent at the time the provisional order was granted, and on this basis denies that
section 341(2) is applicable . It contends that the liquidators have failed to
demonstrate that Wheatcor is unable to pay its debts , and that it was the ir
responsibility to allege and substantiate this claim at the time they filed the
application.
Applicable law
Was Wheatcor insolvent at the time of the winding up?
[26] The Supreme Court of Appeal in Boschpoort Ondernemings (Pty) Ltd v Absa
Bank Limited4 has confirmed that for a company to be wound -up in terms of either
section 80 or section 81 of the 2008 Companies Act (the 2008 Act) , it must be
commercially solvent. If it is commercially insolvent it may be wound -up in
accordance with chapter 14 of the Act.5
[27] It is self -evident that the Court which granted the provisional and final winding
up orders would not have done so if it did not find that Wheatcor was insolvent , as
3 The transitional provisions contained in the Companies Act 71 of 2008 (‘the 2008 Companies Act),
which retains the application of Chapter 14 of the Act, excludes the appl ication of section 344 of that
Act except in the case of insolvent companies . (Emphasis added).
4 Boschpoort Ondernemings (Pty) Ltd v Absa Bank Limited 2014 (2) SA 518 (SCA) at para 22.
5 As is provided for in sub item 9(i) of schedule 5 of the new Act.
contemplated in 345(1)(a) and (c) of the Act, read with Section 344(f) and (h) of the
Act.
[28] Cultigrain failed to provide any positive evidence to rebut the aforementioned
allegations. Moreover , it appears from the report of the liquidators that there is an
apparent shortfall of R10,386,741 between Wheatcor’s assets and liabilities , and that
it is commercially insolvent.
[29] In my view Cultigrain’s argument that the applicants did not demonstrate that
Wheatcor was unable to pay its debts at the time of its winding up is unsustainable.
The concursus
[30] The Supreme Court of Appeal i n Pride Milling Co (Pty) Ltd v Bekker N.O and
Anothe r6 (Pride Milling) cited De Villiers CJ in Walker v Syfret NO (Walker ),7
regarding the effect of a winding -up order , which is ‘to establish a concursus
creditorum , and nothing can thereafter be allowed to be done by any of the creditors
to alter the rights of the other creditors .' In the same case Innes JA succinctly stated
the legal position as follows :8
'The sequestration order crystallises the insolvent's position; the hand of the
law is laid upon the est ate, and at once the rights of the general body of
creditors have to be taken into consideration. No transaction can thereafter be
entered into with regard to estate matters by a single creditor to the prejudice of
the general body. The claim of each credi tor must be dealt with as it existed at
the issue of the order.'
[31] In Incledon (Welkom) (Pty) Ltd v Qwaqwa Development Corporation9
Goldstone AJA stated:
6 Pride Milling Co (Pty) Ltd v Bekker N.O and Another (Pride Milling) 2022 (2) SA 410 at para 24,
citing the factors listed in Lane NO (fn 4 supra) at at 386D -387B.
7 Walker v Syfret NO (Walker ),7 1911 AD 141 at 160.
8 Ibid at 166 .
9 Incledon (Welkom) (Pty) Ltd v Qwaqwa Development Corporation [1990] ZASCA 85; 1990 SA 798
(A).
'As between the estate and the creditors and as between the creditors inter
see their relationship becomes fixed and their rights and obligations become
vested and complete.'10
The discretion of the court to validate the payments
[32] In terms of section 341(2) of the Act:
‘(2) Every disposition of its property (including rights of action) by any
company being wound -up and unable to pay its debts made after the
commencement of the winding -up, shall be void unless the Court
otherwise orders.’
[33] The purpose of section 341(2) is to safeguard and prevent the dissipation of
the assets of the company in liquidation (the company) pending the winding -up
application is pending , and to ensur ing that creditors are receive equal treatment
without preference according to their ranking ; while taking into account any securities
or prefere nces the y may enjoy under the Insolvency Act 24 of 1936.11
[34] If payments are made by the company after the effective date but prior to the
grant of the provisional order, the onus is on the person or entity seeking an order
validating the transaction to establish circumstances justifying the making of a
validating order . If that onus is not discharged, there is no basis for the exercise of
the court’s discretion in section 342(1) .12
[35] The applicants are required in terms of section 341(2) to show that :
35.1 There was a disposition made by Wheatcor;
35.2 That Wheatcor was unable to pay its debts; and
10 Ibid a t 803. And as cited in Pride Milling at footnote 4. This abiding principle has been consistently
applied by this Court in several cases. See, for example, Administrator, Natal v Magill, Grant & Nell
(Pty) Ltd (In Liquidation) 1969 (1) SA 660 (A) at 671; Cohen NO and Others v Verwoerdburg Town
Council 1983 (1) SA 334 (A) at 345 -347.
11 See Herrigel NO v Bon Roads Construction Co (Pty) Ltd and Another 1980 (4) SA 669 (SWA) at
678 (“Herrigel”) .
12 Lane NO v Olivier Transport 1997 (1) SA 383 (C) (‘Lane NO’) .
35.3 That such dispositions were made after the commencement of
its winding up.
[36] It is undisputed that the payments totalli ng R4,797,375 were dispositions
made by Wheatcor after the effective date of its liq uidation (from 9 September 2020
– i.e. excluding payments made on 8 September 2020) and prior to the granting of
the provisional order of liquidation.
[37] The S upreme Court of Appeal in Pride Milling13 affirmed that the pr imary
purpose of s 341(2) is ‘to decree that all dispositions made by a company being
wound up are void. ’ This provision must of course be read with s 348, which provides
that the winding -up of a company by a court shall be deemed to have commenced at
the time of the presentation of the application for winding -up to the court.
[38] The consequence is that the payments are potentially invalid at the moment
they are made, because the grant ing of a winding -up order will render s341(2)
operative. ’14 The Court in Pride Milling emphasised that the default position
established by s 341(2) is that all such dispositions are devoid of legal force and
effect in law .’15
The counter -application
[39] In the counter application, the respondent seeks an order declaring the
dispositions to be ‘valid and not void’ in terms of section 341(2) of the Act.
[40] Cultigrain bears the onus of demonstrating that the court should exercise its
wide discretion under section 341(2) in its favour and why it should depart from the
statutorily mandated default position and validate the payments. This discretion is
limited to payments that were made between the date of lodging of the application
for winding -up and the grant of the provisional order.16
13 Pride Milling at para 30.
14 At para 13.
15 At para 30.
16 See Mazars Recovery & Restructuring (Pty) Ltd and Others v Montic Dairy (Pty) Ltd (in Liquidation)
and Others (Mazars ) 2023 (1) SA 398 (SCA) paras 28 to 31.
[41] It is helpful to consider the guidelines set forth in Lane NO v Olivier Transport
(Lane NO)17 cited with approval by the Supreme Court of Appeal in Pride Milling:18
'(a) The discretion should be controlled only by the general principles which
apply to every kind of judicial discretion. (See Re Steane's
(Bournemouth) Ltd [1950] 1 All ER 21 (Ch) at 25.)
(b) Each case must be dealt with on its own facts and particular
circumstances.
(c) Special regard must be had to the question of good faith and the
honest intention of the persons concerned.
(d) The Court must be free to act according to what it considers would be
just and fair in each case.
(e) The Court, in assessing the matter, must attempt to strike some
balance between what is fair vis-à-vis the applicant as well as what is
fair vis-à-vis the creditors of the company in liquidation.
(f) The Court should gauge whether the disposition was made in the
ordinary course of the company's affairs or whether the disposition was
an improper alienation.
(g) The Court should investigate whether the disposition was made to
keep the company afloat or augment its assets.
(h) The Court should investigate whether the disposition was made to
secure an advantage to a particular creditor in the winding -up which
otherwise he would not have enjoyed or with the intention of giving a
particular creditor a preference and which latter factor may be decisive.
17 Lane NO v Olivier Transport at 386D -387B.
18 Pride Milling at para 24.
(i) The Court should enquire whether the recipient of the disposition was
unaware of the filing of the application for winding -up or of the fact that
the company was in financial difficulties.
(j) Little weight should be attached to the hardship which will be suffered
by the applicant (here the first respondent) if the payment is not
validated, the purpose of the subsection being to minimise hardship to
the body of creditors generally.
(k) The payment should not be looked upon as an isolated transaction if in
fact it formed part of a series of transactions.
(l) Generally a Court will refuse to validate a disposition by a company
when it occurs after the winding -up has commenced unless the
liquidator (dul y authorised) consents accordingly and there is a benefit
to the company or its creditors.'
[42] In Engen Petroleum Limited v Goudis Carriers (Pty) Ltd (in Liquidation)19
Sutherland J cautioned as follows:
‘The scope for the discretion is itself a cue t o limitation. It is exercised in
favour of the ensnared creditor only if by so doing the general body of
creditors is not disadvantaged by a diminution of assets to divvy up amongst
them.’
[43] It is clear that a court has a wide and unfettered discretion to validate a
disposition . However, this discretion must be exercised judiciousl y, with a particular
focus on the facts of each specific case.
[44] It is common cause that Cultigrain was unaware that liquidation proceedings
had been instituted . The liquidators however , contend that at the time the
19 2015 (6) 21 (GJ) at para [24].
dispositions were made, Cultigrain was aware that Wheatcor was in financial
distress.
[45] Cultigrain contended that the knowledge of a pending liquidation application
by a party is not a determining factor. If all individuals cease trading with a company
facing a pending liquidation, such an application would inevitably become self -
fulfilling. Consequently, a company in financial distress would find itself unable to
meet its obligations when it is effectively barred from continuing its operations.
[46] Furthermore, Cultigrain contends that the dispositions and the ‘scheme’ are
not associated with the applicants allegations that Wheatcor 's directors were
involved.
[47] Cultigrain relied on the fact that the dispositions were associated with
transactions in respect of which Wheatcor acquired the product it had ordered and
paid for, and was able to on -sell such product for a ‘profit’ or brokerage fee to
Nelspruit Milling.
[48] Cultigrain asserted that the disposition was accordingly made in the ordinary
course of business , was intended to augment the assets of Wheatco r and was to
the benefit of the company in liquidation and its creditors.
[49] According to Cultigrain, the Court in considering what is just and fair, can only
strike a balance between the interests of the respondent and the creditors of the
company20 if the payments are validated.
[50] In Sithole N.O and Another v Sachal & Stevens (Pty) Ltd and Another21
(‘Sithole’) Binns -Ward J, after referring to the decision of the SCA in Pride Milling ,
found that a n exemption order will be granted only in extrem ely limited
circumstances , as the creation of such an order is inconsistent with the objective of
20 As set out in Lane N.O at 386D -387B.
21 Sithole N.O and Another v Sachal & Stevens (Pty) Ltd and Another (‘Sithole’) (14657/2019) [2021]
ZAWCHC 194 (5 October 2021) at para 44.
the subsection , which is to safeguard the interests of the concursus creditorum and
ensure that the company’s creditors are treated equally.
[51] With reference to the SCA judgment in Gainsford NO and Others v Tanzer
Transport (Pty) Ltd, In Re; Gainsford NO and Others v Tanzer Transport (Pty)
Limited and Others22 the learned judge (in Sithole ) emphasised that the mere fact
that a payment was allegedly made in the ordinary course of business will not, of
itself, afford sufficient reason to have it declared valid and effective. Cultigrain is
required to show good re ason for this court to make an order exempting the
payments made to it from the effect of s 341(2).
[52] I now turn to consider the nature of the agreements and how this affects
whether payments in terms thereof are included in the concursus and should (o r
should not) be validated.
The executory nature of the agreements
[53] At the hearing of the matter I enquired of Mr Olivier SC, who appeared for the
liquidators , whether the applicants would not have been obliged to tender the value
of the goods in respect of deliveries made by Cultigrain after the effective date , for
which payment was made by Wheatcor. This aspect was not canvassed in argument
by either Mr Olivier or Mr van Eeden SC, who appeared on behalf o f Cultigrain. In
Mr Olivier’s submission , there is no basis for such a tender to be made , as after the
date of the liquidation, Cultigrain would not have a claim for specific performance
and any claim it may have would form part of the concursus.
[53] In my view it is indeed necessary to draw a distinction between payments
made by Wheatcor in respect of deliveries by Cultigrain after the effective date , and
payments made in respect of deliveries made prior thereto .
[54] For the reasons set out below, it is necessary to make such a distinction in
determining whether to exercise my di scretion in favo ur of validating certain , or all , of
22 Others [2014] ZASCA 32 (28 March 2014); 2014 (3) SA 468 (SCA).
the dispositions made between the effective date and the date of the granting of the
provisional order , for the reasons set out below.
[55] As a starting point it is imperative to evaluate the nature of the agreements in
question in the present matter, namely , that they are bilateral and executory . This is
due to the fact that both parties have outstanding obligations to perform , and the
agreement has not yet been fully executed , meaning that it has not yet been
completed, unlike an executed contract where the obligations of all parties have
been fulfilled.
[56] Certain contracts are terminated automatically by sequestration or liquidation
under common law. For example, sequestration of the principal terminates the
agent’s authority , and a partnership terminates on the sequestration or liquidation of
a partner.23
[57] Other contracts , executory or incomplete at the date of the institution of the
concursus creditorum , are not terminated by the insolvency or liquidation of any
party thereto. The contract continues and remains in effect , the trustee of liquidator
having to accept it as it is. The effect of the institution of the concursus being that the
other party cannot compel the trustee or liquidator specifically to perform it.24
[58] In Ellerine Brothers (Pty) Ltd v McCarthy Limited25 (‘Ellerine Brothers’) the
Supreme Court of Appeal, after considering various cases dealing with the approach
to be adopted in relation to executory contracts , held that the case of an
uncompleted or executory contract, the liquidator inherits the agreement in its
entirety. The creation of the concursus creditorum therefore , does not terminate the
continuous operation of a n agreement to which the insolvent is a party :
‘The concursus neither alters nor suspends the rights and obligations of the
parties thereunder and the liquidator, as the universal successor, steps into
the shoes of the insolvent and does not acquire any rights greater than those
23 See Meskin , Insolvency Law, p 5-56(1) and the authorities cited at notes 1 and 2.
24 See Ellerine Brothers (Pty) Ltd v McCarthy Limited 2015 (4) SA 22 (SCA) (‘Ellerine Brothers’ ) at
para 10.
25 Ibid at para 11 .
of the insolvent. This means that the liquidator must pe rform whatever is
required of the insolvent in terms of the lease, including unfulfilled past
obligations of the lessee. ’
[59] The court went on to state that:
‘The intended aim of the concursus , or as it has also been described, the
‘community of creditors’, created immediately upon the liquidation of the
insolvent, is to give equal protection to all the creditors without undue
preference and to preserve and distribute the estate to the benefit of all of
them. To give effect to the concursus , the liquidator must decide whether it
would be to the benefit of the community of creditors to continue to perform
the inherited obligations of the insolvent under an uncompleted contract. He
may elect not to do so. In that event a consequence of the concursus is that
the other party to the contract cannot demand performance by the liquidator of
the insolvent’s contractual obligations. The statement, ‘frequently
encountered, that a trustee or a liquidator in insolvency has a “right of
election” whe ther or not to abide by a contract’ means no more than that by
reason of the existence of the concursus ‘the other party cannot exact specific
performance against the trustee or liquidator if the latter should decide to
abandon the contract’. The act of t he liquidator in deciding not to continue the
lease constitutes ‘. . . a repudiation of the contract, which would have afforded
the lessor . . . the right, concurrently with other creditors, to claim from the
liquidator the payment of damages for the non -performance by the company
of its contractual obligations’. The claims of the other contractant are
therefore reduced by the concursus to a monetary claim and participation in
the insolvent estate as a concurrent creditor, where it is treated on the same
basis as all the other creditors in the insolvent estate. ’26
[60] The court in Ellerine Brothers27 reiterated the finding of r Friedman J in Smith
& another v Parton NO ,28 namely that there is ‘really only one legal principle involved
26 Ellerine Brothers at para 11, and the authorities there cited,
27 Ibid at para 12.
28 Smith & another v Parton NO 1980 (3) SA 724 (D) at 728H -729A and the authorities there cited .
and that is that there is nothing in the law of insolvency which affects uncompleted
contracts in general; the contract is neither terminated nor modified nor in any way
altered by the insolvency of one of the parties except in one respect, and that is that,
because of the supervening concursus , the trustee cannot be compelled to perform
the contract .’
[61] The existence of the concursus , does not, on this principle, in any way affect
the continued existence of the rights and obligations of the respective parties to an
uncompleted contract. There is accordingly nothing that ‘excuses the trustee from
performing the insolvent’s obligations which fall due to be performed between the
date of sequestration and the date upon which the trustee makes his election’ to
abide the c ontract.29
Recovery of Void Dispositions
[62] The provisions of section 341 (2) say nothing about the recovery of the void
disposition but merely avoids the disposition itself. The invalidation of a disposition of
the company’s property and the recovery of the property disposed of are logically
two distinct matters .30 Ordinarily, it follows that a disposition that is void may be
recovered, as a matter of course by a claim for restitution. Ordinarily when claiming
restitution there should be a r eciprocal tender of restitution.31 However, to require a
trustee or liquidator to tender restitution of what was received by the insolvent prior
to the inception of the concursus, would disturb the concursus and have the effect of
preferring one creditor above the others.
Dispositions in respect of d eliveries made to Wheatcor before the effective
date
[63] The agreements in which delivery took place before concursus and payment
had not yet been made (before the effective date) by Wheatcor, can only be said to
have been unilaterally performed. Put differently , these agreements were executory
29 Ellerine Brothers at para 12.
30 Herrigel at 680 and In Re Leslie Engineers Co Ltd (in liquidation) [1976] 1 WLR 292 at 298, in
respect of the English equivalent, 227 of the English Companies Act of 1948.
31 Extel Industrial (Pty) Ltd and Another v Crown Mills (Pty) Ltd 1999 (2) SA 719 (SCA) at 732B – C.
or incomplete only in respect of payment due by Wheatcor to Cultigrain, which was
due within 14 days after the date of delivery .
[64] In respect of these agreements , Cultigrain’s claim for payment falls within the
concursus creditorum , as delivery had already been made before or at the effective
date.
[65] There is accordingly no rational , or legal justification for Cultigrain to retain
the payment s made after the effective date in respect of deliveries that were made
prior to the establishment of the concursus. To allow it to do so would have the
effect of preferring Cultigrain over other creditors. In my view these payments
therefore should not be validated in terms of section 341(2) of the Act.
Dispositions in respect of de liveries made after the effective date
[66] The dispositions or payments made by Wheatcor to Cultigrain in respect of
grain delivered after the effective d ate are, in my view , on a different footing .
[67] These agreements are executory from a bilateral perspective. Both Wheatcor
and Cultigrain performed or were due to perform after the effective date.
[68] If these transaction are to remain void, attention must be given to the
consequence.
[69] The liquidators wish to reclaim the payment as a restitution on the basis of the
invalidity in terms of section 341(2) of the Act.
[70] If a liquidator had already been appointed to the insolvent estate of Wheatcor ,
he would have the election to abide by the agreement by accepting the delivery, or to
repudiate it by refusing to accept same. He could not however have insisted on
delivery without tendering payment.
[71] If he repudiated, he would be obliged to tender restitution and return what was
delivered. Put differently, Cultigrain could not, post -concursus accept delivery and
decline to counter perform by effecting payment of the amount due in terms of the
agreements.
[72] Ordinaril y trustees and liquidators are exempt from this requirement, when
dealing with a creditor in the concursus , as a tender of restitution to such a creditor
would prefer that creditor.
[73] Where dealing with voidable dispositions under the Insolvency Act, 24 of
1936 made before commencement, a recipient in good faith of the disposition is
entitled, under section 33(1) , to an indemnification from the trustee for what was
given in considerati on for the disposition.
[74] In this instance , both the disposition and the value provided (the grain
delivered) were post concursus. Leaving the dispositions void and allowing the
liquidators to claim without tendering the grain or its value would have the effect of
putting Cultigrain into the concursus for a claim for restitution which only arose after
the concursus.
[75] The position would have been clearly defined if the deliveries had occurred
prior to concursus but the dispositions had occurred afterwards. Even if paid in the
ordinary course of business Cultigrain would have been preferred. At concursus it
had an executory contract – which required it to be deliver ed in order to receive
payment. The liquidators would have to make payment during the administration in
order to receive the benefit of delivery, as they were frozen at that time. This would
allow them to earn the 1% benefit.
[76] The liquidators objective is to maintain the benefit of the grain acquired after
concursus , thereby increasing the net assets to more than they were at concursus ,
which will simultaneously introduce Cultigrain into the concursus . This flies in the
face of the freezing principle.
[77] For this reason the only payments which , in my view, should be validated in
terms of section 341(2) of the Act , are th ose payments made in terms of the forward
sale agreements made in respect of deliveries made after the effective date at the
institution of the concursus creditorum, but before the date on which the provisional
order was granted . The parties’ respective right s and obligations become vested and
complete on date specified.
[78] In my opinion, this factor is more significant than the other factors mentioned
in Lane in the specific circumstances of this matter . Even if the dispositions were not
made in the ordinary course of business, they still fall to be validated if the deliveries
were made after the effective date, for the reasons set out above.
[79] Moreover , the liquidators accept that Cultigrain was unaware of the liquidation
application at the time the dispositions were made. Even if only by a 1% margin, the
dispositions served to augment the assets of Wheatcor and its other creditors were
better off than they would have been had the dispositions not been made.
[80] Proceeding from the departure poi nt that the dispositions are void ex lege and
it remains only for this court to determine whether in its discretion, I need to be
satisfied that Cultigrain has shown good reason for a departure f rom the statutorily
mandated default position.
[81] For all the reasons set out above, I am satisfied that the validation only of the
dispositions in respect of which delivery was effected after the institution of the
concursus is fair to both the liquidators, the creditors of Wheatcor and Cultigrain.
[82] A schedule of the impugned dispositions, which inc luded the invoice / delivery
date and the date of payment in respect of each transaction , was annexed to the
applicants’ heads of argument .
[83] I have calculated the total of all the payments made in respect of which
delivery was made from 9 September 202 0, in keeping with the concession made by
the liquidators and their decision not to seek judgment for the payments made on the
effective date , on the basis that the delivery date is the same as t he payment date in
terms of the schedule as provided.
[84] The total amount of th e payments made in respect of transactions where
delivery was made on or after 9 September 2020 is R2,674,349.
[85] I have not incorporated the payments of R58,420 and R38,000, respectively,
made by Wheatcor on 23 September 2020, the date on which the provisional order
was granted, into this total amount. as it is clear from the authorities cited above that
these amounts cannot be validated in terms of section 341(2) .
[86] Having considered the factors set out in Lane and approved in Pride Milling, I
am not persu aded that there is any basis upon which I should exercise my discretion
in favour of validating these payments which in terms of section 341(2) are void ex
lege.
[87] It follows that all payments in respect of which deliveries were made before
the concursus, in an aggregate amount of R2,267,660 , are void and that judgment
should accordingly be granted in favour of the liquidators for this amount.
Conclusion
[88] In all the circumstances , I intend exercising my discretion in terms of section
341(2) of the Act in favour of declaring only the dispositions by Wheatcor in respect
of deliveries made by Cultigrain after the effective date , in an aggregate amount of
R2,674,349 , to be valid. The remaining dispositions are void ex lege and the
liquidators are entitled to judgment in respect thereof.
[89] Both pa rties have enjoyed a degree of success in obtaining certain of the
relief which they sought in the main application and the counter application
respectively. For this reason , I believe that a just costs order is that each party
should pay their own costs.
ORDER
[90] The following order shall issue:
1. The payments received by Cultigrain (Pty) Ltd from Wheatcor Milling
(Pty) Ltd after 9 September 2020 , in the aggregate amount of
R2,674,349 , are ordered not to be void in terms of section 341(2) of the
Companies Act 61 of 1973 .
2. The payments received by Cultigrain (Pty) Ltd from Wheatcor Milling
(Pty) Ltd from the date of the commencement of the winding up, being
8 September 2020 in the aggregate amount of R2,267,660 are void in
terms of section 341(2) of the Companies Act 61 of 1973 .
3. Judgment is granted against Cultigrain (Pty) Ltd in the amount of
R2,123 ,025.
4. Cultigrain (Pty) Ltd is to pay interest on the amount of R2,123,025 from
8 September 2020 to date of payment .
5. Each party is to pay their own costs.
M HOLDERNESS
JUDGE OF THE HIGH COURT
APPEARANCES :
Plaintiff’s counsel : Adv L Olivier SC
Instructed by : Rufus Derecksen Inc
Ref: H Teubes/B2953
Defendant’s counsel : Adv P van Eeden SC
Instructed by : Werksmans Attorneys
Ref: JJN/CULT35924.7