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IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
Case Number: 2024-050928
(1) REPORTABLE:
(2) OF INTEREST TO OTHER JUDGES:
(3) REVISED
In the matter between:
THE STANDARD BANK OF SOUTH AFRICA LIMITED Applicant
And
LLR PROPERTYS (PTY) LTD Respondent
___________________________________________________________________
JUDGMENT
MOTHA J
1) Before this court are two applications. First, the Standard Bank of South Africa
(the applicant) seeks an order for the final winding- up of LLR Property (Pty)
Ltd (the respondent), in terms of section 344(f) as read with section 345 of the
Companies Act 61 of 1973 (“the Act”) ; and read with Item 9 of Schedule 5 of
the Companies Act 71 of 2008, based on that the respondent is deemed to
be, and is in fact, unable to pay its debts , id est, commercially insolvent .
Second, the respondent brings a counterapplication to declare that the
applicant's termination of the loan agreement concluded with the respondent
on 12 July 2019 was unlawful and should be set aside.
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2) Importantly, the respondent does not contest that on 30 December 2023 its
arrears totalled R2 704 608,00, and that its outstanding balance was
R15 855 546.49.
The background.
3) On 12 July 2019, the applicant , The Standard B ank of S outh Africa Limited ,
concluded a C ommercial Property Finance Loan Facility (loan) with the
respondent, LLR Property (Pty) Ltd. Shortly thereafter, on 22 August 2019, the
loan agreement was amended, with the aggregate maximum capital amount
that could be advanced under the loan set at R16 500 000.00.
4) This loan facility was granted to raise finance against the security of Portion 25
(of 15) of ERF […] P[…] Z[…], Portions 3 and 5 of ERF 1[…] F[…] and ERF
1[…] T[…] J[…].
5) The funds were to be utilized to settle the existing medium -term loan against
the security of Portion 25 (of 15) of ERF […] P[…] Z[…]; settle the Mortgage
bond held by First National Bank over Portions 3 and 5 of ERF 1 […] F[…]; and
part-fund the purchase of shares in the second respondent.
6) According to clause 9.1.1, t he loan facility was to be repaid in monthly
instalments of R196,236.00 (One Hundred a nd Ninety -Six Thousand Two
Hundred and Thirty-Six Rand), covering both the capital and interest.
7) Clause 17.1.1 stipulates that a default occurs if , inter alia , at any time , the
respondent fails to pay any sum due by it in terms of the facility letter or
otherwise to the a pplicant or Standard Bank Group Limited or any other
subsidiary or associated company of Standard Bank Group Limited on the due
date. A default also occurs, under c lause 17.1.2, if the approved loan limit is
exceeded.
8) Having failed to effect payment of the instalments due in terms of the loan
agreement, the respondent fell into arrears. As already mentioned above, on 30
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December 2023, the respondent was in arrears in the amount of
R2,704,608.00, and the outstanding balance amounted to R15,855,546.49,
together with interest at the rate of 11.4% per annum.
9) Pursuant to the breach, the applicant dispatched a letter of demand, by way of
registered post and email, for the payment of arrears, on 10 January 2024. In a
nutshell, the letter afforded the respondent ten (10) business days within which
to pay the arrears.
10) Additionally, it recorded that in the event of the respondent’s failure to settle all
arrears and remedy the breach, the applicant elected to:
• Enforce the respondent’s indebtedness in terms of the agreement;
• Cancel the agreement without any further notice to the respondent; and
• Proceed with legal action for payment of the outstanding balances, which
included a foreclosure on the property and claim subsequent shortfall
damages, if any.
11) The respondent failed to make the requisite payment s to settle the arrears .
Two months later, on 13 March 2024, the notice of cancellation was dispatched
by email and registered post, electing to cancel the agreements and to institute
legal action for the recovery of all outstanding amounts.
12) On 19 March 2024, the section 345 letter was sent , with the application issued
on 19 May 2024. Essentially, the letter demanded payment of R13 961 580.69
and recorded that if the respondent failed to timeously pay the amount within a
period of three (3) weeks (21 calendar days) from receipt of the notice,
alternatively fail to secure or compound to the reasonable satisfaction of the
applicant, within the stipulated period, it w ill be deemed that respondent is
unable to pay its debts; legal action would be proceeded with to have the
respondent liquidated.
The law
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13) Distinguishing between factual insolvency and commercial insolvency is an
important starting point. Examining these two forms of insolvency, t he court in
Boschpoort Ondernemings (Pty) Ltd v Absa Bank Limited1 held:
“For decades our law has recognised two forms of insolvency: factual
insolvency (where a company’s liabilities exceed its assets) and
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). See, for example, Johnson v Hirotec (Pty) Ltd; Ex
parte De Villiers & another NNO: In re Carbon Developments (Pty) Ltd (in
Liquidation); Rosenbach & Co (Pty) Ltd v Singh’s Bazaars (Pty) Ltd.
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(1) thereof.”2
14) The court continued and stated:
“This conclusion is significant in determining what is meant by a ‘solvent
company’. The retention by the legislature in the context of a winding- up
company’. The retention by the legislature in the context of a winding- up
1 (936/2012) [2013] ZASCA 173; [2014] 1 All SA 507 (SCA); 2014 (2) SA 518 (SCA) (28 November 2013)
2 Supra paras 16 and 17.
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of a solvent company in the new Act, of the deeming provisions as to
when a company is unable to pay its debts as contained in s 345 of the
old Act, is a clear indication of what is meant by an insolvent company in
the new Act. It can only mean a company that is commercially insolvent. It
therefore follows that a solvent company must be the converse, namely a
company that is commercially solvent.
Consequently, in order for a solvent company to be wound- up in terms of
either s 80 or 81 of the new Act, it must be commercially solvent. If it is
commercially insolvent it may be wound-up in accordance with chapter 14
of the old Act, as is provided for in subitem 9(i) of schedule 5 of the new
Act.
The confusion which has arisen as to when a company may be wound- up
in terms of the new Act or in terms of the old Act is thus eliminated. The
so-called factual solvency of a company is not, in itself, a determinant of
whether a company should be placed in liquidation or not. The veracity of
this deduction may be illustrated, as in the present case, where the issue
has arisen as to whether a company which is factually solvent, but
commercially insolvent, is to be wound- up in terms of the new Act or the
old Act. To attribute so-called ‘factual solvency’ to the meaning of the term
‘solvent company’ in the new Act would lead to an unbusiness -like result
that would not make sense.
Factual solvency in itself is accordingly not a bar to an application to wind-
up a company in terms of the old Act on the ground that it is commercially
insolvent. It will, however, always be a factor in deciding whether a
company is unable to pay its debts. See Johnson v Hirotec (Pty) Ltd, it
follows that a commercially solvent company (whether factually solvent or
insolvent), may be wound up in terms of the new Act only; a solvent
company cannot be wound up in terms of the old Act”
3.
3 Supra paras 21 to 24.
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15) Dealing with the abuse of w inding-up proceedings, the court in Imobrite (Pty)
Ltd v DTL Boerdery CC4 held:
“It is trite that, by their very nature, winding-up proceedings are not
designed to resolve disputes pertaining to the existence or non-existence
of a debts. Thus, winding-up proceedings ought not to be resorted to
enforce a debt that is bona fide (genuinely) disputed on reasonable
grounds. That approach is part of the broader principle that the court’s
processes should not be abused.
A winding-up order will not be granted where the sole or predominant
motive or purpose of seeking the winding-up order is something other
than the bona fide bringing about of the company’s liquidation. It would
also constitute an abuse of process if there is an attempt to enforce
payment of a debt which is bona fide disputed, or where the motive is to
oppress or defraud the company or frustrate its rights.”5
16) Still o n this point , the court in Afgri Operations Ltd v Hamba Fleet Pty Ltd
6stated:
“It is trite that winding -up proceedings are not to be used to enforce
payment of a debt that is disputed on bona fide and reasonable grounds.
This is known as the so- called ‘Badenhorst rule’. Where, however, the
respondent’s indebtedness has, prima facie, been established, the onus is
on it to show that this indebtedness is indeed disputed on bona fide and
reasonable grounds.”
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17) Section 344(f) of the old Act provides that a company may be wound up by the
court if ‘the company is unable to pay its debts as described in section 345’.
The relevant portions of s 345 of the old Act read as follows:
4 (1007/2020) [2022] ZASCA 67 (13 May 2022)
5 Supra paras 14 and 15.
6 ZASCA 24 (24 March 2017)
7 Supra par 6.
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(1) A company... 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 of money of 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; ...
and the company... 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)...
(c)It is proved to the satisfaction of the Court that the company is
unable to pay its debts.’
Issues for determination
18) The respondent raised several defences to contest the winding- up application.
Upon a careful examination of the respondent’s case, three defences stand out
as issues for the court's consideration, namely:
• The abuse of court process;
• The unlawful termination of the agreement , which is tied to the
counterclaim; and
• The invitation to engage, the nub of the respondent’s case, as confirmed
by its counsel.
Submissions
By counsel for the respondent
Abuse of court process
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19) The respondent submitted that t his application was an abuse of process
because it had enough security. In its answering affidavit, the respondent
maintained that: “It held real security of more than what was the true amount
outstanding (according to it R13 million) ;” and concluded that it “had more than
sufficient assets to settle its true outstanding amount.”8
20) Furthermore, the respondent’s counsel submitted that “ Standard Bank holds
security in the sum of R24 125 000,00, all of which is secured by the continuing
covering mortgage bonds…”9
Unlawful termination of the loan agreement.
21) At the core of this defence is that the applicant , in its letter of demand, afforded
the respondent 10 days within which to settle the arrears before cancelling. By
so doing, the applicant prescribed, unilaterally and unlawfully, the time within
which it would take action against the respondent, argued counsel.
22) Counsel contended that clause 18 of the loan agreement addressed the
consequences of a default. Under clause 18.1.6, failure to pay entitled the
applicant to terminate the loan agreement "forthwith" on written notice.
Therefore, mentioning ten days from the date of the delivery of the letter, rather
than "forthwith," was in direct conflict with clause 18.1.6.
23) During the interaction with the court, counsel insisted that the loan agreement
did not prescribe a period of ten days to settle arrears or to remedy a breach of
the loan agreement. He concluded that t his unlawful conduct, which amount ed
to self-help, did not constitute a legal basis for terminating the loan agreement
or accelerating the payment of the outstanding balance.
The invitation to a discussion
8 Answering affidavit subparas 2.17.4 and 2.17.5.
9 Heads of argument subpara 2.2.8
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24) Counsel for the respondent contended that, in terms of paragraph 4 of section
345 letter, the respondent was afforded two options. To quote him verbatim, he
said:
“So, there are two issues that are raised, one, if you do not pay within
three weeks, you will be deemed to be insolvent. But you have an
alternative to engage with us , to come to an arrangement , which is
reasonable to the satisfaction to our client. If that happens, because it is
an alternative, then we cannot bring a liquidation application.”
25) During his submission, c ounsel reiterated that this wa s the nub of the
respondent’s case. O n 10 April 2024, a meeting took place between the
respondent, represented by Lesley Lufuno Ramatshila- Mugkri, and the
applicant's Donald Shigadhla, he argued.
26) At the meeting, counsel continued, it was agreed that the outstanding balance
on the loan transaction would be refinanced on the following conditions:
“I (Ramatshila-Mugkri) would settle an outstanding amount of R 80 000,
00 which was due on my cheque account. This was done on 11 April
2024.
The outstanding arrears, then in the amount of R 606 501, 45 would be
settled. This was done on 11 April 2024 and the arrears were cleared on
that date.
RM Incorporated would be used as the entity to enter into the refinancing
transaction and that I would provide the applicant with RM Incorporated's
documents which the applicant requested, such as its financial
statements, This was done on 16 April 2024.”
27) Once all these conditions were fulfilled, counsel maintained that there was no
need for the winding-up application.
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28) The court suggested to him that, if, as is common cause, the respondent was in
arrears of R2.7 million in January 2024, the applicant was well within its rights
to cancel and bring liquidation proceedings. Counsel re torted that despite this,
the court could not ignore the events of 10 April 2024.
29) When asked why the engagement focused on the arrears instead of the total
amount owed, he stated that the balance was going to be refinanced.
30) To paraphrase his submission, counsel averred that Mr. Ramatshila-Mugkri, on
behalf of the respondent, must have indicated that he could not pay R13 million
within 21 days but would instead bring in an entity, RM Incorporated, which
would enter into an agreement with the applicant to take over the balance of the
debt.
31) However, it is worth noting that the balance was never refinanced, nor was the
debt taken over by RM Incorporat ed. According to counsel, this was because
the applicant reneged.
32) Referring to the answering affidavit, counsel asserted that the respondent’s Mr.
Ramatshila-Mugkri met with the applicant's Donald Shigadhla and Vivian, on 15
July 2024. During this meeting, Vivian informed the respondent that liquidation
proceedings had been instituted due to the respondent's failure to comply with
the aforementioned conditions.
33) According to the respondent, this was incorrect as all the conditions for
refinancing the transaction had been complied with. The fact that Vivian m ight
not have been aware that refinancing conditions had been complied with was a
consequence of miscommunication within the applicant's administration, so the
argument continued.
34) Since the letter of demand foreshadowed foreclosure proceedings, counsel
insisted that the applicant was precluded from bringing liquidation proceedings.
By counsel for the applicant
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35) The applicant’s counsel submitted that the respondent could not find refuge in
the fact that the bank held ample security, and conten ded that that argument
was legally hollow, as commercial insolvency wa s based on a company's
liquidity, not on its collateral. To this end, he referred to the case of FirstRand
Bank Limited v Tshabalala,10 where the court said:
“The fact that there is security for the applicant in the form of the property
and that PEM’s assets exceed its liabilities is no defence to the winding-
up application…It matters not that t he 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 s345(1)(c) as read with s344(f) of the
Companies Act 61 of 1973 and is accordingly liable to be wound up.’”
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36) The second line of reasoning was that the arrears had been reduced from R 2.7
million to about R 600 000.00. He argued that the events are determined at a
snapshot in time and referred to the threshold as set out in the Act , being a
creditor to whom a company is indebted in the sum of not less than R100.00.
37) Examining the argument that by suggesting foreclosure proceedings in
paragraph 4, the applicant wa s, ipso facto, precluded from embarking on
liquidation proceedings, counsel referred to clause 18.1 of the agreement ,
which reads: “The Bank may, without prejudice to any other rights it ma y have
hereunder or in law, at any time after the happening of an event of default , by
written notice to the Borrower:..”
38) The kernel of t he applicant’s submission is that its rights are not restricted to
the foreclosure proceedings mentioned in the letter of demand. Additionally, the
phrase on demand in clause 18.1.4 and the word forthwith in clause 18.1.6 are
not in conflict with the letter of demand, particularly paragraph 6, which states
not in conflict with the letter of demand, particularly paragraph 6, which states
that it will cancel without fu rther notice. Therefore, the Bank's cancellation was
10 2021/46586 ; 2021/46585) [2023] ZAGPJHC 674 (9 June 2023).
11 Supra para 27.
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valid. Pursuant to the cancellation of the loan agreement, the Bank had various
legal remedies at its disposal, he concluded.
Analysis
39) In my view, the respondent is grasping at straws, and its defences are devoid of
substance. To begin with, the defence that the respondent has sufficient
security flies in the face of the established legal position that factual solvency, in
itself, is not a bar to an application for the liquidation of a company in terms of
the old Act on the ground that it is commercially insolvent. Consequently, it is of
no moment that the STD Bank held security in the sum of R24 125 000.00.
40) Commercial insolvency is ass essed objectively, namely: “A company is unable
to pay its debts when it is unable to meet current demands on it, or its day -to-
day liabilities in the ordinary course of business, in other words, when it is
“commercially insolvent”. The test is therefore not whether the company’s
liabilities exceed its assets, for a company can be at the same time
commercially insolvent and factually solvent, even wealthy.”12
41) The test remains whether a company has readily realisable assets to meet its
liabilities as they fall due, and “ These will include not only cash on hand, but
receipts that it can expect to receive in the ordinary course; overdraft or other
banking facilities that can be used to make payment of debts when they fall
due; or assets, such as shares, bonds or book debts, that can be realised
quickly so as to generate cash with which to pay debts.”
13.
42) The second line of defence was that the applicant did not cancel the loan
forthwith but gave the respondent 10 days to purge the arrears . To me, this
argument amounts to fi ddling while Rome burns. In paragraph 6 of the
selfsame letter, the applicant states that failure to settle the arrears would result
in cancellation of the agreement without further notice to the respondent.
in cancellation of the agreement without further notice to the respondent.
12 Murray and Others NNO v African Global Holdings (Pty) Ltd and Others (306/2019) [2019] ZASCA 152;
[2020] 1 All SA 64 (SCA); 2020 (2) SA 93 (SCA) (22 November 2019) para 28.
13 Supra paras 29 and 28
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43) The agreement records that payment must be required on demand, which is
not defined. By any stretch of the imagination, it cannot be said that affording
the respondent time to purge its default amounts to failure to comply with
clause 18.1.6. Be that as it may, the loan agreement was cancelled forthwith on
13 March 2024. The fact that the word forthwith was not mentioned is
immaterial.
44) The submission that the applicant was precluded from bringing winding up
proceedings is without merit. Clause 18.1 categorically states that, without
prejudice to any other rights it ma y have hereunder or in law, on default, the
Bank may cancel the agreement.
45) Finally, it is a misreading of the section 345 letter to conclude that there is an
alternative which involves negotiations to paying R13 961 580.69 within 21
calendar days. The alternative mentioned in the letter involves the securing or
compounding of the debt to the satisfaction of the applicant . (my emphasis).
To manufacture some mis understanding within the applican t’s administration
implausible. When the parties met in July, Vivian expressed dissatisfaction with
the respondent’s inability to fulfil its commitment. Therefore, the debt was never
secured or compounded to the satisfaction of the applicant.
46) When interpreting a legal text, it should not lead to absurdity. The trite
principles of interpretation are elucidated in Natal Joint Municipal Pension
Fund v Endumeni Municipality,
14 where the court held:
“Interpretation is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument, or contract,
having regard to the context provided by reading the particular provision
or provisions in the light of the document as a whole and the
circumstances attendant upon its coming into existence. Whatever the
nature of the document, consideration must be given to the language
used in the light of the ordinary rules of grammar and syntax; the context
used in the light of the ordinary rules of grammar and syntax; the context
14 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262
(SCA); 2012 (4) SA 593 (SCA) (Endumeni).
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in which the provision appears; the apparent purpose to which it is
directed and the material known to those responsible for its production.”15
47) In Cool Ideas 1186 CC v Hubbard and Another ,16 the court held that the
purposive approach involves the interpretation of the legal text, such as
statutes or contracts, in a manner that gives effect to the underlying purpose
or intention behind the text. It emphasised that the words of statutes should
be understood in their ordinary grammatical meaning, except where it would
lead to absurdity
48) With these legal precepts in mind, I am of the view that the respondent’s
interpretations of the word “ forthwith” in the loan agreement and the phrase
“to the satisfaction of the client” do not give effect to the underlying purpose or
intention behind the texts.
49) When all is said and done, i t is telling that the respondent suggested another
entity to assume its debt . This is an unequivocal concession that the
respondent could not honour its obligation to the applicant.
50) For all the reasons tabulated above, the respondent’s counterclaim does not
pass muster and stands to be rejected. It is common cause that t he respondent
does not dispute being indebted t o the applicant . Further, it is common cause
that the jurisdictional factors have been complied with. Having found that the
cancellation of the loan agreement was lawful, I am persuaded that the
respondent was commercially insolvent. In exercising my discretion, I am of the
view that it is just and equitable to place the respondent under final liquidation.
Costs
51) It is trite that the costs follow the results , and there is no reason to stray from
that well-trodden path. In the result, I make the following order.
15 Supra para 18.
16 Cool Ideas 1186 CC v Hubbard and Another [2014] ZACC 16; 2014 (4) SA 474 (CC); 2014 (8) BCLR 869
(CC) para 28.
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ORDER
1. The Respondent is placed under final liquidation;
2. The costs of the application are to be costs in the liquidation;
3. The Respondent’s counterclaim is dismissed with costs on scale B.
____________________________________
MP MOTHA
JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION,
JOHANNESBURG
APPEARANCES:
Date of Hearing: 08 October 2025
Date of Judgment: 04 December 2025
For Applicant: Adv JC Viljoen
Instructed by Stupel & Berman Incorporated
For Respondents: Adv Tsatsawane SC
Instructed by: Ramatshila-Mugeri Attorneys Incorporated
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