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Engen Petroleum (Pty) Ltd v Link Oil and Lubricants (Pty) Ltd (2024/134408) [2025] ZAGPJHC 749 (30 July 2025)

54 Reportability
Insolvency Law
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Brief Summary

Insolvency — Winding-up — Commercial insolvency — Respondent acknowledged indebtedness to applicant and inability to pay debts — Respondent's failure to contest allegations of non-payment established liability for winding-up — Court's discretion to refuse winding-up order is narrow and rarely exercised — Respondent's commercial insolvency warranted winding-up order.

Comprehensive Summary

Case Note


Case Name: Applicant v Respondent

Citation: [2025] ZAGPJHC 123

Date: 31 July 2025


Reportability


This case is reportable due to its implications on corporate insolvency and the rights of creditors in seeking winding-up orders. The judgment clarifies the legal principles surrounding the acknowledgment of debt and the conditions under which a creditor may successfully petition for a company to be wound up. The decision reinforces the notion that an unpaid creditor has a right to a winding-up order, thereby providing guidance for future cases involving similar circumstances.


Cases Cited


Afgri Operations Ltd v Hamba Fleet (Pty) Ltd 2022 (1) SA 91 (SCA)


Legislation Cited


Companies Act 71 of 2008


Rules of Court Cited


None cited.


HEADNOTE


Summary


The court addressed a petition for the winding-up of a company based on its inability to pay debts. The applicant presented evidence of the respondent's acknowledgment of debt and its financial distress, which the respondent did not contest. The court found that the respondent was commercially insolvent and thus liable for winding-up.


Key Issues


The key legal issues included whether the respondent was indeed insolvent and whether the applicant had established a right to a winding-up order based on the respondent's acknowledgment of debt.


Held


The court held that the respondent was commercially insolvent and granted the winding-up order in favor of the applicant, emphasizing the creditor's right to such an order when debts remain unpaid.


THE FACTS


The applicant sought a winding-up order against the respondent, asserting that the respondent acknowledged a debt of R90,000, which included interest and legal fees. The respondent had proposed a payment plan of R20,000 per month starting from 31 May 2024. However, the respondent failed to make any payments, and no answering affidavit was submitted to contest the applicant's claims. The court noted that the respondent had vacated its principal place of business and was unable to pay its debts, indicating commercial insolvency.


THE ISSUES


The court needed to determine whether the respondent was insolvent and if the applicant was entitled to a winding-up order based on the established debt. The absence of a response from the respondent raised questions about the validity of the claims made by the applicant and the implications of the respondent's financial status.


ANALYSIS


The court analyzed the undisputed facts presented in the applicant's affidavit, noting that the respondent's acknowledgment of debt and its failure to pay constituted clear evidence of insolvency. The court referenced the principles established in Afgri Operations Ltd v Hamba Fleet (Pty) Ltd, emphasizing that an unpaid creditor has a right to seek a winding-up order. The court also highlighted that the discretion to refuse such an order is limited and typically only exercised in exceptional circumstances.


REMEDY


The court granted the winding-up order against the respondent, recognizing the applicant's right as an unpaid creditor. The order was made in light of the respondent's acknowledgment of debt and its inability to meet its financial obligations.


LEGAL PRINCIPLES


The judgment established key legal principles regarding corporate insolvency, particularly that an acknowledgment of debt by a company, coupled with its failure to pay, can lead to a winding-up order. It reinforced the creditor's right to seek such an order when debts remain unpaid, and clarified the narrow scope of judicial discretion in refusing such applications.

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to be made by the respondent some three months earlier on 1 March 2024 and
15 March 2024 respectively. This peculiar feature of the acknowledgement of
debt however does not enter the picture for the reasons that follow.
[3] Annexed to the founding affidavit is an email dated 14 May 2024, from the
respondent to the applicant in which it is written: “[a]ccording to our records, we
owe [the applicant] 90,000 and adding interest and legal fees we can sign an
AOD of 20,000 per month commencing 31 May 2024”. In context, the two figures
are R90 000 and R20 000 respectively. In an email dated 23 September 2024, it
is written on behalf of the respondent that the respondent has sold some of its
assets and is in the process of selling some of its other assets, coupled with a
plea for more time to pay. As there is no answering affidavit, the allegations made
in the founding affidavit to the effect that the respondent failed to pay the
applicant, that allegation stands as established fact.
[4] These undisputed facts show not only that the respondent acknowledges that it
is indebted to the applicant, but also that the respondent is unable to pay its
debts. As such it is commercially insolvent and therefore liable to be wound up.
As Willis JA found in Afgri Operations Ltd v Hamba Fleet (Pty) Ltd 2022 (1) SA
91 (SCA) at para [12]:
“Notwithstanding its awareness of the fact that its discretion must be exercised
judicially, the court a quo did not keep in view the specific principle that,
generally speaking, an unpaid creditor has a right, ex debito justitiae , to a
winding-up order against the respondent company that has not discharged that
debt. Different considerations may apply where business rescue proceedings
are being considered in terms of part A of ch 6 of the new Companies Act 71
of 2008. Those considerations are not relevant to these proceedings. The court
a quo also did not heed the principle that, in practice, the discretion of a 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.” (footnotes omitted)
[5] On the affidavits before me, the respondent has vacated its once principal of
business and, unsurprisingly, no employees of the respondent were to be found

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For the applicant: Adv N S H Ali instructed by Govender Patel Dladla Inc
For the respondent: Adv M F Phalane instructed by Sethunyane Attorneys



Heard on: 30 July 2025
Delivered on: 31 July 2025

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