2
party thereto and it was res inter alios acta the indemnity agreement. The evidence
established that the Respondent was commercially insolvent and that the Applicant
had the requisite locus standi to apply for the winding up of the Respondent.
Held: The Applicant was entitled to seek the winding up of the Respondent, ex debito
justitiae.
Held: The application for the winding up of the Respondent in the hands of the
Master of the High Court is granted and the costs of the application are costs in the
winding up proceedings.
JUDGMENT
KAIRINOS AJ:
1. This is an application for the winding-up of the respondent in terms of section
344(f) and 345(1)(a) of the Companies Act (1973) read with Item 9 of
Schedule 5 of the Companies Act (2008) and further with sections 66 and
69(1)(a) and/or (c) of the Close Corporation (1984).
2. It is common cause that the applicant is a creditor of the respondent - as
contemplated in section 346(1)(b) of the 1973 Companies Act - in the sum of
approximately R6.3 million. The respondent's indebtedness to the applicant
arises out of a home loan agreement concluded between the respondent
and The Standard Bank of South Africa Limited (“SBSA”), which loan is
guaranteed by the applicant , who in turn is indemnified by the respondent.
This is a common commercial arrangement often seen in the courts and
there is nothing novel therein.
3. The respondent opposed the application on essentially four grounds,
namely:
3
3.1. The respondent contended that there was no affidavit filed on behalf
of the applicant in that the deponent to the founding affidavit was
employed by Standard Bank as opposed to the applicant – this
defence was wisely not persisted with at the hearing and nothing
more need be said about it.
3.2. The respondent contended further that the debt forming the subject
matter of the proceedings had prescribed in terms of the Prescription
Act (1969). However during the hearing, when faced with the
applicant’s reliance on the judgment in Standard Bank of SA Ltd v
Miracle Mile Investments 67 (Pty) Ltd and Another 2017 (1) SA 185
(SCA) at paragraphs 24 and 26 which provides that prescription
would commence to run only from the date of a notice claiming the
outstanding balance and accelerating the debt, the respondent again
wisely indicated it would not be persisting wit h the defence of
prescription since whilst some of the debt prior to the acceleration of
the amounts due may indeed have prescri bed, the accelerated debt
had not prescribed and was clearly in excess of the statutory
minimum of R100 required to apply for the liquidation of a company
and R200 for the liquidation of a close corporation as in casu.
3.3. The respondent contended further that the applicant's claim was
securitised and that the scheme was not in compliance with the
securitisation notice, as a result of which the applicant allegedly
4
lacks the requisite locus standi for purposes of this application – in
relation to this defence and faced with the fact that the respondent
had produced no evidence to establish that the claim was in fact
securitised and having regard to the applicant’s denial of such
contention in the replying affidavit, the respondent also wisely
indicated that it would not persist with this defence since it had not
produced any evidence that the applicant’s claim had been
securitised and it could not therefore discharge its onus of proving
this allegation and that the allegation was based on speculation and
conjecture.
3.4. The only defence that was argued fully at the hearing and in respect
of which I also asked the respective parties to furnish me with
supplementary heads of argument, was the contention that on a
proper interpretation of clause 4.1.1 of the gua rantee agreement
between the applicant and SBSA, the applicant was not entitled to
apply for the winding up of the respondent and its rights were limited
to taking steps to seek the foreclosure of the mortgage bond over
the property in favour of the applicant for the indebtedness between
the applicant and the respondent arising from the indemnity
agreement in terms of which the respondent agreed to indemnify the
applicant for any claim against it by the SBSA arising from a default
by the respondent of its home loan obligations to the SBSA.
5
4. In terms of a guarantee agreement concluded between the applicant and
The Standard Bank of South Africa Limited (SBSA), the applicant would from
time to time guarantee the obligations of SBSA's debtors under home loan
agreements, the home loan agreement in casu being one such agreement.
5. The guarantee structure may briefly be summarised as follows:
5.1. A borrower (such as the respondent) approaches SBSA for a home
loan.
5.2. SBSA agrees to make a home loan available to the respondent
subject to:
5.2.1. a guarantee being issued by the applicant to secure the
payment of the respondent's debts to SBSA;
5.2.2. a mortgage bond being registered in favour of the
applicant as security for the respondent's indebtedness to
the applicant in terms of the above- mentioned indemnity.
5.3. In the event of the respondent defaulting on its obligations to SBSA
under the home loan agreement and in the event of SBSA exercising
its right to accelerate and place on demand all amounts owing by the
respondent under the home loan agreement, then:
6
5.3.1. SBSA calls on the applicant in terms of the guarantee;
5.3.2. the applicant is obliged to proceed in court against the
respondent; and
5.3.3. the applicant's cause of action against the respondent is
the indemnity as secured by the mortgage bond.
6. On 17 December 2019, SBSA and the respondent concluded a home loan
agreement in terms of which:
6.1. SBSA loaned and advanced the sum of R4 050 000.00 to the
respondent; and
6.2. the respondent's indebtedness would be secured by, inter alia, a
guarantee by the applicant, whose claim against the respondent
would in turn be based on an indemnity secured by a mortgage
bond.
7. The guarantee and indemnity were duly obtained and duly registered, in the
case of the mortgage bond.
8. The respondent breached the home loan agreement by failing to pay its
instalments as and when they fell due. As at 3 April 2024, the respondent
7
was in arrears in the sum of R2.1 million. This breach triggered one or more
remedial rights in favour of SBSA in terms of the home loan agreement.
9. Despite demand being made, the respondent failed to remedy its breach of
the home loan agreement and SBSA subsequently elected to cancel the
home loan agreement on or about 13 May 2024, which was one of SBSA’s
aforementioned remedial rights.
10. On 14 May 2024, SBSA called on the guarantee issued by the applicant,
which obliged the applicant to proceed in court against the respondent and
to exercise whatever rights the applicant may have against it in terms of the
indemnity agreement.
11. On 31 May 2024, the applicant's attorneys caused a letter in terms of section
69 of the Close Corporations Act to be served upon the respondent. Section
69(1) provides as follows:
“a creditor, by cession or otherwise, to whom the corporation is indebted in a
sum of not less than two hundred rand then due has served on the
corporation, by delivering it at its registered office, a demand requiring the
corporation to pay the sum so due, and the corporation has for 21 days
thereafter neglected to pay the sum or to secure or compound for it to the
reasonable satisfaction of the creditor; or
any process issued on a judgment, decree or order of any court in favour of
a creditor of the corporation is returned by a sheriff, or a messenger of a
magistrate's court, with an endorsement that he or she has not found
8
sufficient disposable property to satisfy the judgment, decree or order, or that
any disposable property found did not upon sale satisfy such process; or
it is proved to the satisfaction of the Court that the corporation is unable to
pay its debts.”
12. Notwithstanding that a period in excess of three weeks passed since the
date of service of the aforesaid letter of demand, the respondent failed to
pay the amounts claimed from the applicant or to secure or compound the
sums to the reasonable satisfaction of the applicant.
13. As at 1 July 2024, the respondent was (and remains) indebted to the
applicant in the sum of approximately R6.3 million together with interest
thereon. Accordingly, the respondent is deemed to be unable to pay its debts
as contemplated in sections 344(f) and 345(1)(a) of the Companies Act
(1973). Is furthermore apparent from the above that the respondent ls
commercially insolvent in terms of section 69(1)(c) of the Close Corporations
Act.
14. The applicant complied with all the statutory formalities required for a
liquidation application.
15. Section 346(1)(b) of the 1973 Companies Act provides as follows:
“(1) An application to the Court for the winding-up of a company may,
subject to the provisions of this section, be made-
(a) …;
9
(b) by one or more of its creditors (including contingent or prospective
creditors);”
16. Section 344(f) of the 1973 Companies Act , 61 of 1973 provides that:
“A company may be wound up by the Court if –
… (f) the company is unable to pay its debts as described in section 345; ”
17. Section 345 of the aforesaid Companies Act in turn provides as follows:
“(1) A company or body corporate shall be deemed to be unable to pay
its debts if-
(a) a creditor, by cession or otherwise, to whom the company is
indebted in a sum not less than one hundred rand then due-
(i) has served on the company, by leaving the same at its registered
office, a demand requiring the company to pay the sum so due; or
(ii) in the case of any body corporate not incorporated under this Act,
has served such demand by leaving it at its main office or delivering it to the
secretary or some director, manager or principal officer of such body
corporate or in such other manner as the Court may direct,
and the company or body corporate has for three weeks thereafter neglected
to pay the sum, or to secure or compound for it to the reasonable satisfaction
of the creditor; or
(b) … ; or
(c) it is proved to the satisfaction of the Court that the company is
unable to pay its debts.
(2) In determining for the purpose of subsection (1) whether a company
is unable to pay its debts, the Court shall also take into account the
contingent and prospective liabilities of the company.”
18. South African law recognises two forms of insolvency:
10
18.1. factual insolvency (where a company's liabilities exceed its assets);
18.2. commercial insolvency (a position in which a company is in such a
state of illiquidity that it is unable to pay its debts, even though its
assets may exceed its liabilities) - Rosenbach & Co (Pty) Ltd v
Singh's Bazaars (Pty) Ltd 1962 (4) SA 593 (D) at 597 D - G;
Johnson v Hirotec (Pty) Ltd 2000 (4) SA 930 (SCA) at par 6.
19. In Rosenbach & Co (Pty) Ltd v Singh's Bazaars (Pty) Ltd 1962 (4) SA 593
(D), Caney J held as follows at 597 D – G:
“The proper approach in deciding the question whether a company should
be wound up on this ground appears to me, in the light of what I have said,
to be that, if it is established that a company is unable to pay its debts, in the
sense of being unable to meet the current demands upon it, its day to day
liabilities in the ordinary course of its business, it is in a state of commercial
insolvency; that it is unable to pay its debts may be established by the
means provided in para. (a) or para. (b) of sec. 112, or in any other way, by
proper evidence. If the company is in fact solvent, in the sense of its assets
exceeding its liabilities, this may or may not, depending upon the
circumstances, lead to a refusal of a winding-up order; the circumstances
particularly to be taken into consideration against the making of an order are
such as show that there are liquid assets or readily realisable assets
available out of which, or the proceeds of which, the company is in fact able
to pay its debts. Cf. Chandlers Ltd v Dealesville Hotel (Pty.) Ltd., 1954 (4)
SA 748 (O) at p. 749. Nevertheless, in exercising its powers the Court will
have regard to the fact that
'a creditor who cannot obtain payment of his debt is entitled as between
himself and the company ex debito justitiae to an order if he brings his case
within the Act. He is not bound to give time'.
11
Buckley, p. 450.
This view is supported also by Palmer at p. 27:
'The fact that there is due to the petitioner a liquidated sum, that the debt is
not disputed, and that the petitioner has demanded payment without
success, affords cogent prima facie evidence of the company's inability to
pay its debts, and is the evidence most commonly relied on.'
Evidence that a company has failed on demand to pay a debt, payment of
which is due, is cogent prima facie proof of inability to pay its debts:
“…for a concern which is not in financial difficulties ought to be able to pay
its way from current revenue or readily available resources.”
20. In ABSA Bank Ltd v Rhebokskloof (Pty) Ltd and Others 1993 (4) SA 436 (C) ,
Berman J held as follows at 440F – H:
“The concept of commercial insolvency as a ground for winding up a
company is eminently practical and commercially sensible. The primary
question which a Court is called upon to answer in deciding whether or not a
company carrying on business should be wound up as commercially
insolvent is whether or not it has liquid assets or readily realisable assets
available to meet its liabilities as they fall due to be met in the ordinary
course of business and thereafter to be in a position to carry on normal
trading - in other words, can the company meet current demands on it and
remain buoyant? It matters not that the company's assets, fairly valued, far
exceed its liabilities: once the Court finds that it cannot do this, it follows that
it is entitled to, and should, hold that the company is unable to pay its debts
within the meaning of s 345(1)(c) as read with s 344(f) of the Companies Act
61 of 1973 and is accordingly liable to be wound up.”
21. In Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd 2014 (2) SA 518
(SCA), it was held as follows at par [17]:
12
“[17] That a company's commercial insolvency is a ground that will justify an
order for its liquidation has been a reality of law which has served us well
through the passage of time. The reasons are not hard to find: the valuation
of assets, other than cash, is a notoriously elastic and often highly subjective
one; the liquidity of assets is often more viscous than recalcitrant debtors
would have a court believe; more often than not, creditors do not have
knowledge of the assets of a company that owes them money — and cannot
be expected to have; and courts are more comfortable with readily
determinable and objective tests such as whether a company is able to meet
its current liabilities than with abstruse economic exercises as to the
valuation of a company's assets. Were the test for solvency in liquidation
proceedings to be whether assets exceed liabilities, this would undermine
there being a predictable and therefore effective legal environment for the
adjudication of the liquidation of companies: one of the purposes of the new
Act, set out in s 7(l) thereof.”
22. None of the aforesaid background facts or the law is contentious.
23. The applicant was therefore prima facie entitled ex debito justitiae to a
winding-up order against the respondent, but for the last defence relied upon
by the respondent. It is to this defence which I now turn.
24. In essence, the respondent contends that the applicant’s locus standi to
institute proceedings against the respondent derives from the provisions of
clause 4.1.1 of the guarantee agreement between the applicant and S BSA
and that the right accorded to the applicant is to institute action and foreclose
on the bond and not to institute liquidation proceedings against the
respondent. A large portion of the parties’ respective arguments was
devoted to the issue of the proper interpretation of clause 4.1.1.
13
25. Clause 4.1.1 of the guarantee agreement between the applicant and SBSA
(to which the respondent was not a party) provides as follows:
“Notwithstanding anything to the contrary contained in this Guarantee,
should the Creditor notify the Guarantor in writing to make any payments to
the Creditor as set out in clause 13, then:
…the Guarantor shall (through the Servicer), if so required by the Creditor in
writing, promptly proceed in any competent court against the Debtor (who
has defaulted under a Loan Agreement under the Indemnity) and call up and
foreclose on the Mortgage Bond and enforce such other remedies as may be
available to it at law, provided that the Guarantor will not be required to
exercise any right, power or discretion in terms of this Guarantee"
26. The respondent’s main contention is that on a proper interpretation of the
aforesaid clause, it confirms that the applicant's right is to proceed against
the respondent and call up and foreclose on the mortgage and that “It is
clear that this is a prerequisite, and not an alternative option, to proceed with
other remedies such as foreclosure.” So, contends the respondent, the
applicant was obliged to first proceed against the respondent for foreclosure
on the mortgage bond before it could apply other remedies such as applying
for winding up.
27. After the hearing I requested the parties to deliver supplementary heads of
argument on whether the terms of the demand guarantee contract between
Standard Bank and SB Guarantee are res inter alios acta the terms of the
indemnity contract between SB Guarantee and Infinity Petroleum ; whether
14
Infinity Petroleum is entitled to rely on the terms of the demand guarantee
contract since it is not a party thereto and whether SB Guarantee’s rights
against Infinity Petroleum arise solely from of the terms of the indemnity
guarantee. Both parties filed comprehensive supplementary heads of
argument on this issue and I am indebted to both parties’ legal
representatives for their original and supplementary heads of argument.
28. It became clear that if the respondent was not entitled to rely on the terms of
the guarantee agreement since it was not a party thereto and if the
applicant’s locus standi was derived from the terms of the indemnity
agreement between the applicant and the respondent and not from the terms
of the guar antee agreement between the applicant and the SBSA, then the
determination of the proper interpretation of clause 4.1.1 of the guarantee
agreement was irrelevant as to the issue of the applicant’s locus standi to
seek the winding up o f the respondent. This is so because even if the
interpretation placed on clause 4.1.1 by the respond ent was correct (and I
make no finding thereon) that clause 4.1.1 afforded the applicant a limited
right to obtain a money judgment against the respondent and foreclose on
the mortgage bond only and not to apply for the winding up of the
respondent, it seems to me that if the applicant breached such clause and
applied for the winding up of the respondent since the respondent was
indebted to the applicant in terms of the indemnity agreement, then it was for
SBSA to claim as against the applicant a breach of the guarantee agreement
and it does not lie in the mouth of the respondent to do so on SBSA’s behalf.
15
29. Therefore, in relation to whether the applicant is entitled to seek the winding
up of the respondent and whether it has the requisite locus standi to do so,
one is confined to the vinculum iuris between the applicant and the
respondent in order to establish whether the applicant is indeed a creditor of
the respondent. Once it is and insofar as the terms and conditions of the
indemnity agreement between the applicant and the respondent do not
preclude the applicant from applying for the respon dent’s winding up, then
the applicant has the requisite locus standi as a creditor to do so. It is in this
sense that the guarantee agreement is res inter alios acta – more correctly
would be to state that the terms and conditions of the guarantee agreement
are irrelevant to whether the applicant has locus standi to apply for the
winding up of the respondent since its locus standi is not derived from the
guarantee agreement but from the terms and conditions of the indemnity
agreement.
30. It is therefore the terms and conditions of the indemnity agreement that must
be scrutinised and interpreted in order to determine whether they afford the
applicant a cause of action against the respondent in order to justify the
applicant’s stance that it is a creditor of the applicant (which as set out above
could not seriously be disputed) and whether they curtail the app licant’s right
– once it has proved that it is a creditor of the respondent – to apply for the
respondent’s winding up.
31. In terms of clause 2.2 of the indemnity agreement, the respondent
acknowledged and agreed that the applicant had or would guarantee to
16
SBSA “…the fulfilment of the obligations of [the respondent] in terms of the
[Home Loan Agreement ]…”.
32. In terms of clause 3.1 of the indemnity agreement and in consideration for
the applicant guaranteeing the respondent’s obligations to SBSA under the
Home Loan Agreement, the respondent:
“…as a separate and Independent primary obligation, indemnifies and holds
the Guarantor harmless from and against all loss, damage, costs, expenses
and liabilities which the Guarantor may suffer or incur as a result of or in
connection with any claims which may be made against the Guarantor by the
Bank or by the Transferee arising in any manner out of or in connection with
the Guarantee…”
33. The plain meaning of clause 3.1 of the indemnity agreement is that, in the
event of SBSA making “any claim” against the applicant in terms of the
guarantee agreement, the respondent indemnifies the applicant against any
liability that the applicant may incur, which in this case is the applicant’s
liability to SBSA in terms of the guarantee agreement.
34. Clause 3.2 of the Indemnity then provides as follows:
“3.2 The Borrower acknowledges and agrees that if, in terms of the
Guarantee given to the Bank or the Transferee, -
3.2.1 the Bank or the Transferee lodges or makes a claim against the
Guarantor; or
3.2.2 the Guarantor becomes liable to pay any amount to the Bank or the
Transferee,
17
the Borrower shall immediately be liable to the Guarantor in terms of this
Indemnity for the amount for which the Guarantor is liable under the
Guarantee.”
35. Accordingly, in the event of SBSA making any claim against the applicant in
terms of the Guarantee, the respondent must, on written notice, make
payment to the applicant the sums stipulated by SBSA as being payable in
terms of the Home Loan Agreement.
36. The respondent’s liability in terms of the indemnity agreement is a “separate
and primary obligation”. As long as SBSA has made a claim against the
applicant in terms of the guarantee agreement (which it is common cause it
did), the respondent’s obligations under the indemnity agreement arise.
These obligations are separate and independent from the applicant’s
obligations to SBSA.
37. That obligation is embodied in clause 3.3 of the indemnity agreement, which
provides that if the applicant gives the respondent written notice “…that an
amount is payable [by the respondent] in accordance with the terms of this
Indemnity and demanding payment of such amount, [the respondent] must,
immediately following such written notice of demand, pay such amount…”
38. In the present matter:
38.1. On 14 May 2024, SBSA made a claim against the applicant in terms
of the guarantee agreement. The nature of the claim, including the
18
instruction given by SBSA to the applicant pursuant to the claim, is
irrelevant as far as the respondent is concerned: SBSA simply made
a claim against the applicant as contemplated in clause 3.1 and
clause 3.2.1 of the Indemnity.
38.2. On 16 May 2024, the applicant gave written notice, in terms of
clause 3.3 of the indemnity agreement, that an amount is payable by
the respondent to the applicant. In terms of clause 3.3, the
respondent then simply undertook in such an instance to pay the
amount stipulated as being payable.
39. All of the aforesaid facts are also common cause between the parties.
40. Clauses 3.6.1 and 3.7.4 of the indemnity agreement also provide that the
respondent cannot refuse to make payment of its debts to the applicant on
the basis that the applicant has not yet made payment to SBSA, nor is the
respondent’s liability affected by “…the fact that [the applicant] or [SBSA]
may elect any particular remedy against [the respondent] to the exclusion of
any other remedy…” Incidentally, this provision also makes it clear that both
SBSA and the applicant have more than one remedy under the guarantee
structure.
41. Upon the respondent’s failure to pay the amount stipulated by the applicant
as being payable, the applicant chose to institute winding up proceedings
against the respondent. In this regard, the trite position in our law that a
19
creditor has a right ex debito justitiae to a winding -up order against a
company or corporation that is unable to pay its debts, was again confirmed
in Afgri Operations Ltd v Hamba Fleet (Pty) Ltd 2022 (1) SA 91 (SCA) at
paragraph [12]. It is clear that the respondent is such a debtor that is unable
to pay its debts as and when they fall due.
42. Whilst the object of insolvency proceedings has been described as bringing
“…about a convergence of the claims in an insolvent estate to ensure that it
is wound up in an orderly fashion and that the creditors are treated
equally…”, a creditor’s motive for instituting winding up proceedings against
its debtor is, more often tha n not, to ultimately obtain payment of its debt or
at least a portion thereof . In Estate Logie v Priest 1926 AD 312 at 319,
Solomon AJ said the following:
“It appears to me that it is perfectly legitimate for a creditor to take insolvency
proceedings against a debtor for the purpose of obtaining payment of his
debt. In truth that is the motive by which persons, as a rule, are actuated in
claiming sequestration orders. They are not influenced by altruistic
considerations or regard for the benefit of other creditors, who are able to
look after themselves. What they want is payment of their debt, or as much
of it as they can get.”
43. That the applicant can take such proceedings for purposes of obtaining
payment of the respondent’s debts is further evident from clause 4.2 of the
indemnity agreement, which provides that:
20
“4.2 If the Borrower does not immediately following the written notice of
demand referred to in clause 3.3 pay any amount due and payable by it, the
Guarantor will be have the right and be obliged –
4.2.1 to take all such steps as may be reasonably necessary to realise the
security in terms of the Security Agreements and otherwise to enforce the
claim against the Borrower in terms of this Indemnity…”
44. The respondent therefore in the indemnity agreement acknowledged and
agreed that the applicant could take whatever remedy it had available to it
for purposes of recovering the debt. It certainly did not curtail the applicant’s
right to apply for the winding up of the respondent.
45. The guarantee structure is self-evidently designed to afford the applicant
every right against the respondent as SBSA has against the respondent
under the Home Loan Agreement. This includes the right to seek the
winding-up of the respondent in the event of the Indemnity being triggered
and the respondent being unable to pay its debts. This is merely another
way in which the mortgaged property will be sold (i.e., by liquidators as
opposed to the Sheriff).
46. It accordingly cannot avail the respondent to say that the applicant’s rights
are limited to foreclosing on the mortgage bond, not least because the
guarantee agreement, the guarantee and the demand on the guarantee are
res inter alios acta or irrelevant as far as the applicant’s locus standi against
the respondent is concerned.
21
47. In the circumstances, the respondent was not entitled to rely on the
provisions of clause 4.1.1 of the guarantee agreement (whatever its correct
interpretation) to contend that the applicant did not have locus standi to
apply for the winding up of the respondent.
48. That being so and since in all other respects the applicant has proved a case
for the winding up of the respondent and the respondent had not established
any viable defence to its winding up, I find that the applicant is entitled to an
order for the winding up of the respondent.
49. In the circumstances, the following order is made:
49.1. The Respondent is placed under final winding up in the hands of the
Master of the High Court.
49.2. The costs of the application are to be costs in the winding up of the
Respondent.
KAIRINOS AJ
Acting Judge of the High Court: Gauteng Division, Johannesburg
For the Applicant:
Adv M De Oliveira
Instructed by:
Jason Michael Smith Incorporated Attorneys
For the Respondent:
Mr Zimmerman
22
Instructed by:
Taitz & Skikne Attorneys
Dates of Hearing: 22 July 2025
This judgment is delivered by upload to the digital data base of the court and by
transmission email to the parties on 9 September 2025. The judgment is deem ed to
be delivered on 9 September 2025.