Reportable: Yes/No
Circul~tc to Judges: Yes/No
Circulate to Magistrates: Yes/No
IN THE HIGH COURT OF SOUTH AFRICA
(NORTHERN CAPE DIVISION, KIMBERLEY)
In the matter between:
ELIZABETH NEEL$
and
LU-ALLY$ GUEST HOUSE (PTY) LTD
Case No.:
Date heard:
Date delivered:
233/2025 &
1475/2023,
13-08-2025
26-09-2025
Applicant
(Reg No : 2013/178702/07) 1st Respondent
COMPANIES AND INTELLECTUAL PROPERTIES
COMMISSION 2nd Respondent
FREE ST ATE WHEELS (PTY) LTD
(Reg No: 2022/647862/07) 1st Intervening Party
THE EMPLOYEES OF LU-ALL YS
GUESTHOUSE (PTY) LTD 2nd Intervening Party
In re:
In the matter between:
FREE STATE WHEELS (PTY) LTD
(Reg No: 2022/647862/07)
and
LU-ALLY$ GUEST HOUSE (PTY) LTD
Applicant
(Reg No: 2013/178702/07) 1 st Respondent
ELIZABETH NEELS 2nd Respondent/Intervening Party
11
2
CORAM: WILLIAMS J
JUDGMENT
WILLIAMS J:
Background
1. Free State Whee ls (Pty) Ltd (Free State Wheels) obtained default
judgment against Lu-Allys Guesthouse (Pty) Ltd (the company) in the
Free State H igh Court on 7 Ma rch 2021, in the total amount of about R5
million.
2. A warrant of execution against the movable property of the company
resulted in a nu/la bona return by the Sheriff.
3. Attachment of the bank accounts of Ms Elizabeth Neels, who was surety
for the indebtedness of the company , resulted in certain payments
received by Free State Wheels, reducing the amount of the company's
indebtedness to R4 . 96 million.
4. When no further payments were received, Free State Wheels served a
notice in terms of s 345 (1)(a) of the Companies Act, 61 of 1973 upon
the company on 31 March 2023.
5. When no response to the s 345(1 )(a) notice was received, Free State
Wheels issued an application for the winding-up of the company on 10
August 2023.
6. The provisional winding-up order was granted on 20 October 2023 with
the return day being 1 Decembe r 2023. The return day was extended
to 23 February 2024 after notice of intention to defend was filed.
7. Ms Neels, the sole director and shareholder of the company then filed
an application to intervene in the winding-up and on 23 February 2024,
she was granted leave to intervene as the second respondent and the
return date for the winding-up application was further extended to
31 January 2025.
II
3
8. Ms Neels' affidavit in support of her application to intervene is regarded
as the answering affidavit in the liquidation application. She in short
disputed the claim of Free State Wheels and contended that she had
instructed her attorney of record to immediately apply for rescission of
the judgment granted by default and file a counterclaim, alternatively sue
for damages, which she and the company would claim against Free
State Wheels an amount of approximately R19 million.
9. On 30 January 2025, one day before the return date in the liquidation
application, Ms Neels launched an application to place the company in
business rescue in terms of S131{4) of the Companies Act 71 of 2008.
10. Since the launch of the business rescue application had the effect of
suspending the liquidation process, the parties by agreement postponed
the business rescue application and the liquidation application to 6 June
2025 for hearing of the business rescue application, which should it fail,
then the hearing of the liquidation application
11. On 6 June 2025 certain employees and participants brought an
application to intervene in the business rescue application. I allowed the
employees to intervene and ordered thatthe matters again be postponed
to 13 August 2025 and that the parties file the necessary affidavits in the
meantime.
12. On 13 August 2025 I heard arguments on both the business rescue
application and the liquidation and extended the rule for judgment to be
handed down , on the basis that should the business rescue application
succeed, the liquidation will be suspended and should the business
rescue application fail, I would then consider the liquidation application.
The business rescue application.
13. The business rescue application is brought in terms of s 131 (4)(a) of the
Companies Act and on the basis that the company is in financial distress,
that the company has failed to pay amounts owing in terms of obligations
with respect to employment related matters, that it would be just and
4
equitable to place the company in business rescue and that there are
reasonable prospects for rescuing the company .
14. Ms Neels in her founding affidavit states that the company's core
business is in the hospitality industry (guest house), logistics, hauling
and other mining related activities. Since it had started its operations 10
to 15 years ago, the company had acquired a fleet of trucks and trailers
in order to offer a more comprehensive service to its mining clients in the
area.
15. During April 2019 Kulumela Mine had offered the company a contract to
transport iron ore from Aucampsrus to Kulumela Mine worth R36 million.
She alleges that the company lost this contract due to the illegal actions
of Free State Wheels. Due to the default judgment obtained, the
company's assets and bank accounts were attached which led to a mass
exodus of workers leaving the company to seek alternative employment.
16. The company however, denied liability and continued trading. After the
provisional liquidation order was issued the provisional liquidators
attached all the company's equipment and machinery resulting in the
company being unable to generate an income sufficient to finance its
operations, pay trade creditors when payments fell due, cover
overheads and the staff salaries of the employees who are still working
at the guesthouse. The municipal rates pertaining to the guesthouse
currently stands at R120,000.00 and it is unclear how that amount would
be paid.
17. Ms Neels states that despite the present difficulties experience by the
company, the future looks promising. The company is in the process of
finalising a contracts with TP Andover Rock (Pty) Ltd for contract mining,
operations management and maintenance of mining assets at its three
mines, with a value of R10 million to R15 million annually for 5 years,
with an option to extend for another year.
5
18. The company has also received a purchase order from Advent One
Project (Pty) Ltd for accommodation for its contractors working at
Kulomela Mine at R130 ,000.00 per month over 18 months.
19. Ms Neels herself has purchased two vehicles for the company to
commence a motor vehicle rental business from which the monthly
income is estimated at R30,000.00 per vehicle.
20. Taking into account the above mentioned financial opportunities it is
contended on behalf of the company that there is a reasonable prospect
for its rescue as envisaged in the Companies Act.
21. Ms Neels further states that the company has book debts of
R720,000.00 resulting from the rental of a trailer and that attempts were
being made to recover the debt and retrieve the trailer.
22. The only creditors of the company, according to Ms Neels, are Free
State Wheels and the Tsantsabane Municipality. She however disputes
the claim of Free State Whee ls against the company on the basis that it
is based on fraud and a contravention of the Consumer Protection Act.
The liquidation of the company has been opposed by her on this basis.
23. As mentioned, six employees of the company have intervened in support
of the business rescue application. Initially they also sought an order that
the company and or the joint provisional liquidators release and make
available to them certain documents and information in terms of Rule 35
(14), which would be in possession of the provisional liquidators. This
relief was subsequently abandoned after the employees were advised
that the provisional liquidators we re not obliged to release such
information to them and were in any event not parties to these
proceedings.
24. The employees. are allegedly employed at the guesthouse run by the
company. Their interest lies in the continuation of the guesthouse
business of the company and by deduction their employment. They also
attached two documents shown to them by "management ", presumably
attached two documents shown to them by "management ", presumably
Ms Neels and which they refer to as requests for services from the
6
company as proof of financial opportunities available to the company,
which if realised, would return the company to profitability under the
control of a business rescue practioner.
25. These documents appear to be an agreement entered into between the
company and Nguni Logistics (Pty) Ltd for the transportation of
manganese from Hotazel to Gqeberha. This agreement is signed by
both parties, A J Roos on behalf of Nguni (Pty) Ltd and Ms Neels on
behalf of the company and dated 3 July 2025.
26. The other document is a tax invoice from the company dated 1 July 2025
to one Eugene Phemelo relating to the use of mining vehicles and diesel
costs in the amount of about R7 million and signed by Ms Neels.
27. Should these documents be genuine, the upshot of this is that Ms Neels
has been entering into agreements on behalf of the company while the
company is in provisional liquidation. Whether the provisional liquidators
are aware of the position is a mystery. It also presupposes the use of
vehicles and equipment which the company does not possess, at least
as far as the liquidators are aware of. In its opposing affidavit to the
business rescue application, the attorney for Free State Wheels
attached an email from Ubique, the auctioneers appointed by the
provisional liquidators and dated 3 September 2024 wherein it is stated
that the auctioneers removed all the trucks and trailers belonging to the
company which they could find and that it consisted of 3 trucks and 2
tipper trailers. These vehicles were held by the auctioneers in
Postmasburg.
28. A similar situation arises with regard to the guesthouse. Ms Neels in her
affidavit stated that the guesthouse business remained operational after
the provisional sequestration and generates about R1 million per year.
The intervening employees have also indicated that they are employed
in the guesthouse. One on the provisional liquidators, Mr Cornelius Van
Heerden, has however filed an affidavit attached to Free State Wheel's
Heerden, has however filed an affidavit attached to Free State Wheel's
answering affidavit wherein he states that Ms Neels had informed him
on 16 September 2024 that the guesthouse was no longer operating and
7
that it ceased its business activities after the provisional liquidation order
was granted.
29. When confronted with the allegation in the opposing affidavit of Free
State Wheels, that the "active" contract which Ms Neels referred to in her
founding affidavit with Advent One Projects (Pty) Ltd for accommodation
for their contractors in the guesthouse is without the permission or
knowledge of the provisional liquidators and that such action is illegal,
Ms Neels in her replying affidavit, merely responded by stating that she
had mentioned in her founding affidavit that the contracts referred to
would be implemented once consent is obtained from either the
provisional liquidators or the business rescue practioner, should one be
appointed.
30. This reply by Ms Neels is untenable and contradicts not only what she
stated in her founding affidavit regarding the guesthouse but also what
the employees state in their affidavit that they had been informed (by Ms
Neels apparently) that the company has a current 18 month contract with
Advent One Projects for accommodation which is subject to renewal or
extension.
31 . The guesthouse property itself is not owned by the company, only the
business of the guesthouse. Ms Neels says in her application that the
guesthouse has 20 bedrooms, which means that it is a substantial
property. However no lease agreement has been signed with the owne r
of the property and no mention is made of any rental payable on the
property. She mentions only that the company is responsible for the
municipal costs. She does concede in her replying affidavit that the
Municipality is not a creditor of the company, since the company is not
liable to the Municipality for the services but the owner of the property
itself, a complete turnabout of what was stated in the founding affidavit.
32. The business rescue application leaves one with more questions than
answers. Clearly Ms Neels is not playing open cards with the court or
answers. Clearly Ms Neels is not playing open cards with the court or
the provisional liquidators, which negatively impacts on her bona tides
and that of the application for business rescue.
8
33. As it is, on her version now, Free State Wheels is the only creditor of the
company. Ms Neels however denies that the claim of Free State Wheels
is legitimate and expresses an intention to apply for the rescission of the
judgment obtained by Free State Wheels and possibly file a
counterclaim. Long and costly litigation with its only creditor would
defeat the objectives of business rescue which amongst others envisage
the implementation of a business rescue plan which must be approved
by the majority of the creditors of a company, with the aim of achieving
the rescue of the business or a better return for the creditors than what
they would receive should the company be immediately liquidated.
34. In Southern Palace Investments 265 Ltd v Midnight Storm Investments
386 Ltd 2012 (2) SA 423 (WCC) Eloff AJ stated as follows at paragraph
3"
[3) The scheme created by the business rescue provisions in Chapter 6
of the new Act envisages that the company in financial distress will be
afforded an essential breathing space while a business rescue plan is
implemented by a business rescue practitioner. It is, however. necessary
to caution against the possible abuse of the business rescue procedure,
for instance, bv rendering the company temporarily immune to actions
by creditors so as to enable the directors or other stakeholders to pursue
their own ends. The courts in Australia have been careful not to allow
their equivalent procedure to be used where there appears to be an
ulterior purpose behind the appointment of an administrator by the
directors, it is necessary that an application for business rescue be
carefully scrutinized so as to ensure that it entails a genuine attempt to
achieve the aims of the statutory remedy." (own highlighting)
35. Ms Neels in her application for business rescue has not mentioned a
single word about how the rescue of the company would be in the
interest of its sole creditor, Free State Wheels. I must mention at this
interest of its sole creditor, Free State Wheels. I must mention at this
stage that the intervening employees have not alleged non-payment of
salaries. in fact they state that they have always been paid their salaries,
contrary to Ms Neels' contention in the founding affidavit of the
company's inability to pay the salaries of the employees still working at
the guesthouse. All these factors and those previously mentioned,
support an inference that Ms Neels is running the guesthouse
independent of the company or the fact of it being in provisional
9
liquidation, for her own account. There is no indication that the current
employees would find themselves unemployed should an order placing
the company in business rescue not be made and a final order of
liquidation is granted.
36. The interests of all affected persons must be weighed up in considering
whether a business rescue application should succeed.
37. In terms of s 131(4) of the Companies Act, the court may, after
considering an application for business rescue;
"(a) make an order placing the company under supervision and
commencing business rescue proceedings, if the court is
satisfied that-
(i) the company is financially distressed;
(ii) the company has failed to pay over any amount in terms
of an obligation under or in tenns of a public regulation, or
contract, with respect to employment-related matters; or
(iii) it is otherwise just and equitable to do so for financial
reasons."
and there is a reasonable prospect for rescuing the company"
38. Mr Zietsman SC for Free State Wheels, has argued that Ms Neels has
not even made out a case that the company is in financial dis tress which
is a prerequisite for a business rescue order. He bases this argument on
the fact that Ms Neels mentioned that the company is financially
distressed because of its only creditor obtaining judgment against it, but
then goes on to deny that the company is indebted to Free State Wheels,
alleging that the claim has its origins in fraud and that the company
reserves the right to challenge the debt - thereby approbating and
reprobating, which is not allowed. I do not agree with Mr Zietsman in this
regard. The stands taken by Ms Neels are not necessarily mutually
destructive. The claim upon wh ich the judgment is based is disputed, not
the fact of the judgment itself - wh ich then led to what she alleges is the
cause of the financial distress. I will accept that in terms of the definition
of "financially distressed" under s 128 of the Compan ies Act, it appears
10
to be reasonably unlikely that the company will be able to pay all of its
debts as they become due and payable within the immediately ensuing
six months.
39. There is no indication that the company has not been able to pay its
employees, indeed the contrary is averred by the employees, but the real
issue to my mind is whether it has been shown that there is a reasonable
prospect of rescuing the company by placing it in business rescue.
40. The only known or admitted assets of the company are those three
trucks and tipper trailers which have been in storage with the auctioneers
since 2023 and some cash which was in the attached bank account of
the company . The value of these assets have not been disclosed by Ms
Neels, not even an estimation was ventured.
41. With these assets, the condition of the vehicles and machinery is also
unknown, Ms Neels seems to envisage the company being able to
perform services, if the contracts attached to her affidavit are anything
to go by, such as mining operations and transportation of minerals, worth
millions of Rands. No mention is made of how and from where the
company would be able to source financial backing for these ventures.
In Nedbank Ltd v Bestvest 153 (Pty) Ltd, Essa and Another v Bestvest
153 (Pty) Ltd and others 2012(5) SA 497 (WCC), Gamble J stated, at
paragraph 41 -42, that although it should be left to the business rescue
practioner to formulate a rescue plan after properly assessing the
company and its prospects going forward, "That is not to say, however,
that a party can approach the Court for the appointment of a business
rescue practitioner with flimsy grounds in the hope that the practitioner
will provide the panacea to its problems. The application must set out
sufficient facts, if necessary augmented by documentary evidence, from
which a Court would be able to assess the prospects of success before
exercising its discretion."
I l
42. Gamble J refers in, paragraph 43 of the judgment, that it would be ideal
inter alia for the applicant to show the prospects and likelihood of
obtaining financial assistance for the company to attain commercial
viability.
43. Financial institutions and event private individuals are known to be
reluctant to invest in companies which are in business rescue and if they
do, they do it at exorbitant interest rates. The position in the case of the
company is worsened by the fact that it has been in provisional
liquidation for the last two years. In these circumstances I would expect
to have been provided at least, with a provisional financial plan which
would enable the company to fulfil its requirements relating the attached
mining industry contracts. Mr Snyders who appeared for Ms Neels, has
referred me to the judgment of Lever J in this division Schwartz v
Tornado Boerdery and Algemene Handelaars CC and Others
(854/2022) [2024] ZANCHC 62 where he summarized the requirements
needed to establish a reasonable prospect of success for business
rescue. One of these grounds mentioned is apposite to this case and it
is found in paragraph 19.3 of that judgment where Lever J states:
"There must at least be a coherent factual foundation laid for establishing
the above reasonable grounds that takes it out of the realm of
speculation and/or wishful thinking;"
44. W ithout financial backing, the probability of the company achieving
success in business rescue, is to my mind, mere wishful thinking.
45. This is however not the only problem that I have with this application. As
already mentioned the bona tides of Ms Neels in bringing this application
is questionable, not only for the issues already mentioned but also for
the fact that this application has been brought so late. The company had
been in provisional liquidation for mo re than 1 ½ years before the
business rescue application was launched and just days before the
return date of the provisional liquidation order. The argument on behalf
12
of Free State Wheels that this was just an unmeritorious attempt to delay
the liquidation, is more than just a reasonable inference, taking into
account also the fact of the denial of the claim of Free State Wheels.
46. This is not an instance where I can reasonably find that Ms Neels or the
intervening employees have shown that there is a reasonable prospect
for rescuing the company.
47. Another issue which must be addressed is that of Free State Wheels
referring in its opposing affidavits to evidence led during the ss417 and
418 enquiry without having brought a proper application to court for such
confidential evidence to be allowed. Ms Neels has objected to this
evidence and has sought its striking out. It is only fair, in my view, that
without the proper opportunity to respond to such evidence, or its
inclusion, that it would be prejudicial to Ms Neels and should therefore
be struck out. All references in the papers to the evidence led at the
ss417 and 418 enquiry are thus struck out.
48. The application for business rescue must thus fail and the only issue
remaining is that of costs. There is no reason why costs should not
follow the result. However, it would only be fair that the intervening
employees pay the wasted costs occasioned by their late intervention on
6 June 2025, having known of the application since January 2025.
The application for liquidation
49. There is no dispute that the formal requirements for a final winding-up
order had been met. The company has been placed under provisional
liquidation on the basis that it was deemed to be unable to pay debts,
having neglected (i) in terms of s 345 (1) (a) of the Companies Act, to
pay the demanded sum due within three weeks or to secure or
compound for it to the satisfaction of the creditor; and (ii) in terms of s
345 (1) (b) a warrant of execution for movable property served by the
Sheriff resulted in a nu/fa bona return.
13
50. The intervening party, Ms Neels, opposed the granting of a final order of
liquidation on the basis that the company is not factually or commercially
insolvent. That the claims of Free State Wheels on which default
judgment was obtained were mired in fraud and that Ms Neels, as surety
in her personal capacity for the indebtedness of the company, had
instructed her attorneys to bring an application for rescission of the
judgment and to file a counterclaim, alternatively she intended
commencing legal proceedings against Free State Wheels for damages
suffered by the company. The averment is that it would not be just and
equitable, where the company has a bona fide defense to the claim and
there is a bona tide dispute of the claim on reasonable grounds, for the
company to be finally liquidated.
51. The main thrust of Ms Neels' defense to the claim upon which Free State
Wheels obtained judgment, is that the company had purchased five
trucks from Free State Wheels to enable it to perform a contract with
Kolomela M ine worth about R36 milllon. It is alleged that Free State
Wheels had supplied the company with vehicles which were not fit for
purpose and on pretense of removing it for purposes of repairing the
trucks, sold it to unknown persons, resulting in the company losing the
contract with Kulumela.
52. Free State Wheels did not oppose the intervention of Ms Neels in the
liquidation application, only the opposition put forward in her affidavit.
Free State Wheels denies the allegation of the purchase of the trucks
and states that it entered into rental agreements with the company after
it (Free State Wheels) had purchased the vehicles for supply to the
company . The trucks were collected from the company after non
payment of rentals and the rental agreements had already expired.
53. I do not need to delve any deeper into the merits of the disputed claim
raised by Ms Neels, except to say that there is clearly a dispute of facts.
The question is whether such a dispute is bona fides.
14
54 Ms Neels has not made out any case in her intervention application,
despite mere reference thereto, that the company is indeed
commercially solvent. The only basis on which the opposition to the
granting of a final liquidation order was argued, was that there exists a
bona fide dispute of the debt on reasonable grounds, thus relying on
what is called the Badenhorst rule, in reference to Badenhorst v Northern
Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T), where the court
held that the process of liquidation was not meant to enforce
questionable debts.
55. The Court retains a discretion (although narrow), notwithstanding the ex
debito justitiae maxim - i.e. that where a company is unable to pay a
creditor's claim the creditor is entitled to a winding up order - to refuse
the granting of a liquidation order if the claim of the creditor is bona fides
and genuinely disputed.
56. In Orestisolve (Ply) Ltd t/a Essa Investments v NDFT Investments
Holdings (Pty) Ltd and Another 2015 (4) SA 449 (WCC), Rogers J, as
he then was deals extensively with the Badenhorst rule and its
applicability as demonstrated with regard to the authorities. The learned
judge, at paragraph 67 and 68 the judgment, states as follows:
"[67] I must emphasise, though, that the Badenhorst rule is
conventionally formulated as requiring the company to satisfy the
court of two things: its bona fides and the reasonableness of its
grounds for disputing the claim . .. .Bona fides is a question of fact.
At the stage of a final order, it must be assessed in accordance
with the Plascon-Evans rule. Even though the onus on a
particular issue in motion proceedings might rest on the
respondent, this does not reverse the operation of the Plascon
Evans rule (see Ngqumba en 'n Ander v Staatspresident en
Andere 1988 (4) SA 224 (A) at 259E-263O; Rawlins & Another
v Caravantruck (Ply) Ltd {1992/ZASCA 204; 1993 (1) SA 537 (A)
at 541/-5428). And bona tides, in the context of
at 541/-5428). And bona tides, in the context of
the Badenhorst rule, does not in my view require that the
15
company should hold a belief that at trial its defence to the claim
would definitely succeed or even be more likely than not to
succeed. It would be sufficient, I think, that the company
genuinely wishes to contest the claim and believes it has
reasonable prospects of success.
[68] I mention bona tides at this point, because it bears on the two
remaining issues to be addressed below, namely inability to pay
debts and discretion. A finding that the company is not bona fide
in disputing the applicant's claim would usually go hand in hand
with a finding that the claim is being disputed solely for purposes
of delay; and such a purpose would often support an inference
that the company is unable to pay its debts and militate against
the exercise of a discretion in its favour."
57. What stand out from the authories referred to is that a "claim being bona
fide disputed on reasonable grounds", is not one such as in this case,
where judgment has already been obtained in relation to the claim. It is
trite that a judgment stands and is enforceable until it is set aside.
Ne ither the company (before provisional liquidation) nor Ms Neels, have
done anything since the judgment was granted, to initiate a rescission
application. The issue of a rescission of the judgment and the possibility
of a counterclaim or a claim for damages was brought up only in
opposition to the final order of liquidation, almost one and a half years
after the judgment was obtained. In circumstances where it has not been
shown that the company is commerc ially solvent, the only reasonable
inference to be drawn is that the claim is only disputed for purposes of
delay and does not support a contention that the court should exercise
its discretion in favor of the company and refuse a final order.
58. I must also mention that the possibility of a counterclaim has been held
not in itself to be a reason to refuse the liquidation of a company , but it
may be a factor taken into account in exercising the court's discretion as
may be a factor taken into account in exercising the court's discretion as
to whether or not to grant and order (see Afgri Operations Limited v
16
Hamba Fleet (Pty) Ltd (542/2016) [2017] SASCA 24; 2022 (1) SA 91
(SCA) at paragraph 7 thereof).
59. Taking into account all the circumstances, Free State Wheels has
satisfied the requirements for the granting of a final order of liquidation.
There is no reason why costs should not follow the result.
A In case number 233/2025 (Business rescue application)
a) The application is dismissed with costs on scale Cf
inclusive of the costs of the intervention of the
employees.
b) The wasted costs of Free State Wheels (Pty) Ltd
occasioned by the postponement on 6 June 2025 are
to be borne by the intervening employees.
B In case number 1475/2023 (The liquidation application)
a) A final order of liquidation is granted.
b) Costs of this application are costs in the liquidation, to
be determined upon taxation on scale C.
CC WILLIAMS
JUDGE
For Applicant in liquidation:
lnteivening Party in business rescue:
Adv P Zietsman SC
Symington De Kok Attorneys
c/o Meivyn Joel Attorneys
For lnteivening party in liquidation: Adv T Snyders
Applicant in business rescue application: Elton De bruin Attorneys
c/o Towell & Groenewald
For lnteivening party in business rescue: Adv Maluleke
(employees) Kenneth Juries & Associates