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[2023] ZAWCHC 202
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Electrolux South Africa (Pty) Ltd v Rentek Consulting (Pty) Ltd (19664/2022) [2023] ZAWCHC 202; 2023 (6) SA 452 (WCC) (10 August 2023)

SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN THE HIGH OF SOUTH
AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
CASE NUMBER:
19664/2022
In
the matter between:
ELECTROLUX
SOUTH AFRICA (PTY) LTD
Applicant
and
RENTEK
CONSULTING (PTY) LTD
Respondent
The judgment was handed
down electronically via email to the parties’ representatives
on 10 August 2023.
JUDGMENT
FRANCIS, J
1.
This is an application for the final
liquidation of the respondent on the basis that it is unable to pay
its debts.
2.
The applicant
is in the business of selling
solar and electrical geysers and related products to the public.
3.
During 2019, the parties entered into an agreement in terms of
which the applicant agreed to deliver various products and materials

to the respondent. Goods were subsequently provided to the respondent
in the amount of R3 384 885.36 during the period 28
March 2019
to 1 October 2020.
4.
The applicant failed to make payment for the goods sold and
delivered to it, and admitted both its liability and its inability to

pay the amount due in e-mail correspondence sent to the applicant on
25 May 2021. Thereafter, the respondent sent an acknowledgement
of
debt, dated 27 May 2021, to the applicant in which it once again
admitted that it was “truly and lawfully” indebted
to the
applicant in the amount of R3 384 885.36. The respondent
proposed making payments of R10 000 per month from
30 June 2021
until the full amount was settled. The acknowledgement of debt was
signed by one of the directors of the respondent,
Mr Ashaan Pillay.
5.
Due
to the failure of the respondent to make payment in full, or at all,
the applicant delivered a letter of demand in terms of
section
345(1)(a)(i) of the old Companies Act, 61 of 1973 (“the
Companies Act”)
[1]
.
The respondent failed to respond to the statutory letter of demand
and, according to the applicant, the respondent was thus deemed

commercially insolvent as it could not pay its debts as and when they
fell due and payable and thus ought to be liquidated.
6.
The respondent opposed the liquidation
application on two grounds: firstly, it raised a point
in
limine
, arguing that the defence of
lis
alibi pendens
was applicable because
the appellant had issued summons prior to the institution of
liquidation proceedings for the same debt which
the applicant now
seeks to use as the basis for the liquidation application; and,
secondly, the respondent argued that the applicant
failed to prove
that it (the respondent) is commercially insolvent because there is a
bona fide
dispute
whether or not the debt is due and payable. I now consider each of
these defences in turn.
LIS
ALIBI PENDENS
7.
It is common cause that the applicant
issued a combined summons in this court under case number 10297/2021
on 18 June 2021 in which
it cited the respondent as the second
defendant and in which the applicant claimed an amount of
R3 384 885.36 (“the
action proceedings”). The
action was defended, and a plea filed by the respondent.  The
applicant did not elect to apply
for summary judgment and the action
proceedings remain unresolved.
8.
In essence, the respondent submitted that
there is pending litigation between the same parties based on the
same cause of action
and in respect of the same subject matter in
that the amount of R3 384 885.36 claimed in the action
proceedings is the
same amount in respect of which the applicant
issued the statutory demand as a precursor to the liquidation
proceedings. According
to the respondent, the liquidation application
should be struck off the roll or be stayed pending the finalisation
of the action
proceedings.
9.
The applicant countered by arguing that the
defence of
lis alibi pendens
is unsustainable. While the action proceedings and the liquidation
application involve the same parties and the same underlying
debt,
the cause of action and the relief sought are different. The cause of
action in the liquidation application relates to the
failure of the
respondent to comply with a statutory demand for payment and the
relief sought is the liquidation of the respondent
in terms of the
Companies Act. On the other hand, the action proceedings relate
solely to the payment of a monetary debt.
10.
There are three
requirements for a successful reliance on the defence of
lis
alibi pendens
:
the litigation is between the same parties, the cause of action is
the same, and the same relief is sought in both sets of proceedings.
11.
A
plea of
lis
alibi pendens
is
based on the proposition that the dispute between the parties is
being litigated elsewhere and, therefore, it is inappropriate
for the
dispute to be litigated in the court in which the plea is raised.
Once
a suit has been instituted, it should ideally be finalised before
that court before another suit can be instituted by the same
parties
relating to the same cause of action
[2]
.
The
policy consideration underpinning the
lis
alibi pendens
doctrine
is that there should be a limit to the extent to which the same issue
is litigated between the parties as it is desirable
that there be
finality in litigation
[3]
. Also,
a situation should be avoided where different courts pronounce on the
same issue with the risk that they may reach different
conclusions.
12.
In this matter, it is not disputed that the
litigation in the action proceedings and the liquidation application
relate to the same
parties and that the amount claimed in the action
proceedings is the same amount which remains unpaid in terms of the
statutory
demand. The crisp issue before this Court is whether the
two legal proceedings instituted can be categorised as being based on
the same cause of action.
13.
Mr Heunis, who appeared on behalf of the
respondent, indicated during the hearing of this matter that there
was a judgment in this
court that previously upheld a plea of
lis
alibi pendens
in circumstances where an
action was launched prior to the institution of liquidation
proceedings. Despite diligent search, Mr Heunis
was unable to produce
this judgement. I thus proceed on the basis that there is no binding
precedent on this Court on the issue.
14.
As
noted, the determination of the point
in
limine
in
this matter rests on the meaning of the term “cause of action”.
In
McKenzie
v Farmers’ Co-operative Meat Industries Ltd
[4]
,
Maasdorp JA approved the definition provided in the English case of
Cook
v Gill
L.R
8 CP.107
which
defined the phase “cause of action arising in the City”
as, “
every
fact which it would be necessary for the plaintiff to prove, if
traversed, in order to support his right to the judgment of
the
court
”.
Later, in the case of
Abrahmse
& Sons v SA Railways and Harbours
[5]
,
the court defined the expression “cause of action” as
follows:
“
The
proper legal meaning of this expression ‘cause of action’
is the entire set of facts which give rise to an enforceable
claim
and includes every fact which is material to be proved to entitle a
plaintiff to succeed in his claim. It includes all that
a plaintiff
must set out in his declaration to disclose a cause of action
”.
15.
From
these definitions, it is apparent that the cause of action for the
recovery of a liquidated debt from the respondent is different
from
the set of facts which give rise to an enforceable claim for the
liquidation of the respondent
[6]
.
In addition, the nature of the relief sought in the action
proceedings are without doubt different from the type of relief
sought
in the application for the liquidation of the respondent. In
the action proceedings, a creditor seeks to enforce a claim against
a
debtor. On the other hand, liquidation proceedings are designed to
set the machinery of the law in motion to declare a debtor
insolvent
and the estate of the debtor is then taken over for the benefit of
third parties and not only the creditor who instituted
liquidation
proceedings against the debtor. Thus, the liquidation of the company
does not only affect the rights of the applicant
and the respondent
but also that of third parties and involves the distribution of the
liquidated estate to various creditors while
restricting those
creditors’ ordinary remedies against the insolvent debtor
[7]
.
16.
Mr
Heunis cited the following comment of De Villiers CJ in
Collett
v Priest
[8]
as
authority for the proposition that the defence of
lis
alibi pendens
applies
in the circumstances of the matter before this court:
“
The
order placing a person's estate under sequestration cannot fittingly
be described as an order for a debt due by the debtor to
the
creditor.  Sequestration proceedings are instituted by a
creditor not for the purpose of claiming something from the latter,

but for the purpose of setting the machinery of the law in motion to
have the debtor declared insolvent.  No order in the
nature of a
declaration of rights or of giving or doing something is given
against the debtor.  The order sequestrating his
estate affects
the civil status of the debtor and results in investing his estate in
the master.  No doubt, before an order
in so serious consequence
to the debtor is given the court satisfies itself as to the
correctness of the allegations in the petition.
It may, for
example, have to determine whether the debtor owes the money as
alleged in the petition.  But while the court
has to determine
whether the allegations are correct, there is no claim …
against the debtor to pay him what is due nor
is the court asked to
give any judgment, decree or order against it upon any such claim.
”
17.
It seems to me that, contrary to what Mr
Heunis argued,
Collett v Priest
in fact supports the view that the legal
proceedings for sequestrating a person’s estate is
fundamentally and materially different
from proceedings instituted
for the payment of a debt due by a debtor to a creditor. It is quite
clear from
Collett v Priest
that
sequestration proceedings are instituted not for the purpose of
claiming something from a debtor but for the purpose of setting
the
machinery of law in motion to have a debtor declared insolvent for
the benefit of all the debtor’s creditors.
18.
In light of the foregoing, it is apparent
to me that the respondent cannot rely on the plea of
lis
alibi pendens
in
this matter because one vital element is missing: the cause of action
in the action proceedings and the liquidation application
are
different. Accordingly, in my view, the institution of action
proceedings that have not been concluded cannot serve as a bar
to
this liquidation application.
INDEBTEDNESS IS
DISPUTED
19.
The applicant submitted that goods were
sold and delivered to the respondent in the sum of R3 384 885.36
and despite the
statutory demand, it failed to make payment.
According to the applicant, the respondent cannot legitimately
dispute its indebtedness
due to the fact that the respondent signed
an acknowledgement of debt in which the latter admitted its liability
to the applicant.
20.
The respondent, on the other hand,
submitted that after the combined summons was served upon it, the
respondent’s attorneys
dealing with the matter wrote a “without
prejudice” letter to the applicant’s attorneys setting
out why the respondent
denied being indebted to the applicant. A
schedule listing sales quotes was attached to the letter and the
respondent drew the
applicant’s attention to the fact that
several of the items were not delivered, some of the sales quotes
were duplicated,
and some of the prices were incorrect. The
respondent thus denied that it was liable for the amount claimed.
21.
In its answering affidavit, the respondent
admitted that an acknowledgement of debt was signed by it in favour
of the applicant.
However, the respondent averred that this document
was signed under threat of criminal prosecution. This was denied by
the applicant.
In its replying affidavit, the applicant admitted that
a criminal prosecution was pursued against the respondent but
submitted
that this was done because the latter had taken goods from
the applicant with the connivance of an employee of the applicant.
Thus,
according to the applicant, the laying of criminal charges had
nothing to do with the debt that was due and the acknowledgement
of
debt provided to it by the respondent.
22.
Section 344 of the Companies Act is the
source of authority that vests a court with the power to liquidate a
company in certain
circumstances. Sub-section 344 (1) read with
section 345 (1)(a)(i) of the Companies Act provides that a company
may be wound-up
by a court if it is unable to pay its debts and that
the company will be deemed to be unable to pay its debts if a
creditor who
is owed not less than R100 serves on the company a
demand requiring the company to pay the sum due and the company fails
to comply.
23.
In
this matter, the respondent has disputed the debt allegedly due to
the applicant. In
Imobrite
(Pty) Ltd v DTL Boerdery CC
[9]
,
the Supreme Court of Appeal summarised the principles to be applied
in cases where a debt is disputed, as follows:
“
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 debt. 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 predominanant 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”.
(footnotes omitted).
24.
However,
an unpaid creditor has a right,
ex
debito justitiae
,
to a winding-up order against a company that has not discharged its
debts
[10]
. The court exercises
a narrow discretion when deciding on a liquidation application and
the following observations in
Boschpoort
Ondernemings (Pty) Ltd v Absa Bank Limited
[11]
appositely
illustrate why a court will not be easily swayed towards exercising
its discretion in favour of a debtor that has not
discharged its
debts:
“
[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 who 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.
”
25.
It
is not necessary to prove actual insolvency for the purposes of
section 344 (f) of the Companies Act. In
Standard
Bank of South Africa v R-Bay Logistics CC
[12]
it
was held that “
if
there was evidence that the respondent’s company is
commercially insolvent (ie cannot pay its debts when they fall due)

that is enough for a Court to find that the required case under
section 344 (f) has been proved
”.
It goes without saying that the exercise of a discretion in favour of
not granting a liquidation order in circumstances
where a company is
commercially insolvent must be based on a solid factual foundation.
26.
Section
346 (1)(b) of the Companies Act confers
locus
standi
on all creditors of a company where the debt due is R100 or more. If
a creditor establishes a case for liquidation, where a portion
of the
amount of the debt is disputed by the debtor or the precise amount of
the debt is uncertain, such a dispute will not constitute
a
defence
[13]
. In accordance
with what is generally known as the
Badenhorst
rule
[14]
,
locus
standi
will
only be deemed to be absent where the existence of the whole of the
debt is
bona
fide
disputed
on reasonable grounds. Where
prima
facie
the
debt exists, the onus is on the respondent to show that the debt it
is
bona
fide
disputed
on reasonable grounds
[15]
.
27.
An
issue that arose during this hearing,
albeit
somewhat tangentially, was whether the
Badenhorst
rule
applies at the final stage of liquidation proceedings. In
Orestisolve
(Pty) Limited t/a Essa Investments v NDFT Investment Holdings (Pty)
Limited and Another
[16]
,
Rogers J expressed the view that the
Badenhorst
rule
only applied at the provisional stage of liquidation proceedings
where there was a factual dispute relating to the respondent’s

liability to the applicant, and the test to be applied for a final
liquidation order where material facts are in dispute is the
Plascon-Evans
test
as expressed in
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[17]
.
Thus, when an applicant seeks final relief in liquidation proceedings
and there are conflicting versions of fact, the court must
accept the
version of the respondent together with any facts admitted in the
applicant’s papers, unless the respondent’s
version is
far-fetched and clearly untenable. With respect, I am of the view
that both the
Badenhorst
rule
and
Plascon-Evans
test
must be applied where there is a factual dispute in respect of a
respondent’s indebtedness in an application for a final

liquidation order: quite simply, the
Badenhorst
rule
and
Plascon-Evans
test
serve different purposes. As Movshovich AJ commented in
Voltex
(Pty) Limited t/a Atlas Group v Resilient Rock (Pty) Limited
[18]
,
the
Plascon-Evans
test
is concerned largely with rules of procedure and evidence and not the
substantive requirements for an application to succeed
whilst the
Badenhorst
rule
is not a rule of procedure but relates to substantive requirements as
to what a party must establish to make out a claim or
establish a
defence.
28.
That
the
Badenhorst
rule
finds application in the final order stage of liquidation proceedings
was confirmed by the Supreme Court of Appeal in cases
such as
Afgri
Operations v Hamba Fleet (Pty) Ltd
[19]
and
Fresh
Investments (Pty) Ltd v Marabeng (Pty) Ltd)
[20]
-
admittedly,
these cases were decided after
Orestisolve
and
Gap
.
Thus, in
Fresh
Investments
[21]
,
Fourie AJA in dealing with an application for a final order for the
winding up of a company employed the
Badenhorst
rule
stated as follows:
“
The
guidelines laid down in
Kalil
[22]
as
to how factual disputes relating to the respondent’s
indebtedness is in an application such as the present should be
approached,
were stated thus by Brand J in
Payslip
Investment Holdings CC v Y2K Tek Ltd
2001
(4) SA 781
(C)
at
783 H-I: ‘with reference to disputes regarding the respondent’s
indebtedness, the test is whether it appeared on
the papers that the
applicant’s claim is disputed by respondent on reasonable and
bona fide grounds. In this event it is
not sufficient that the
applicant had made out a case on the probabilities. The stated
exception regarding disputes about a applicant’s
claim does cut
across the approached factual disputes in general’.
”
29.
In this matter, the respondent does not
dispute the manner in which the alleged debt claimed by the applicant
arose. Nor does it
dispute being in default of payment of the amount
claimed from it by the applicant pursuant to the service of the
statutory demand.
Whether the debt is due or payable, and the amount
thereof, is in dispute.
30.
On the facts placed before this court, the
applicant has established its claim on a
prima
facie
basis. The respondent has signed
an acknowledgement of debt in the applicant’s favour, the
wording of which is quite clear
and instructive:
“
1.
INDEBTED AMOUNT
The Debtor
acknowledges that it is indebted to the Creditor for the following:
1.1.
they are truly and lawfully indebted
to
ELECTROLUX SOUTH AFRICA (PTY)
LTD
in the sum of
R3 384 885.36
(Three million three hundred eighty four, eighty hundred and eighty
five rand & thirty six cents)
(hereinafter
referred to as “the outstanding amount”) being the
full
payment from stock supplied, which debt arose from various sales
quotes supplied as per attached schedule without payment received
;
1.2.
This is
the
final acknowledgment of debt
and
Rentek Consulting (Pty) Ltd may not be issued with additional
outstanding amounts.
”
(own
emphasis).
31.
When considering the issue as to whether
the respondent has discharged the onus of showing that the
indebtedness is genuinely disputed
on reasonable grounds, recourse
must be had to the respondent’s answering affidavit. The
respondent’s answering affidavit
is extremely light on detail
in support of its defence. The respondent refers to documents which
appeared in the particulars of
claim and the plea in the action
proceedings, and the letter which was apparently sent to the
respondent’s attorney querying
the amounts claimed by the
applicant. None of the documents referred to were annexed to the
answering affidavit. All that this
court has is the bald assertions
as to why the respondent disputes its indebtedness to the applicant.
The court is not made privy
to the duplicated invoices, or the items
that were allegedly not delivered, or what were the incorrect prices.
All this information
should be within the knowledge of the
respondent, but no details were furnished to, or placed before, this
Court.
32.
Furthermore,
the respondent does not seem to suggest that no amount is owing to
the applicant. Indeed, at the very least, an amount
greater than R100
must be owing because the respondent did not challenge the
locus
standi
of
the applicant to bring this application. Apart from its bald
assertion that the debt is not due and payable because it is
disputed,
the respondent has offered no supporting evidence to
substantiate its position. This must reflect negatively on the
bona
fides
of
its defence. In the absence of a genuinely disputed debt, the
conclusion is ineluctable that the respondent is commercially
insolvent.  As Malan J (as he then was) stated in
Body
Corporate of Fish Eagle v Group Twelve Investments
[23]
:
“
The
deeming provision of s 345(1)(a) of the Companies Act creates a
rebuttable presumption to the effect that the respondent is
unable to
pay its debts… If the respondent admits a debt over R100 even
though the respondent’s indebtedness is less
than the amount
the applicant demanded in terms of s 345(1)(a) of the Companies Act,
then on the respondent’s own version,
the applicant is entitled
to succeed in its liquidation application and the conclusion of law
is that the respondent is unable
to pay its debts”
.
33.
In my view, the respondent, too, has not
offered a convincing explanation why it signed the acknowledgment of
debt. If the respondent
was facing a threat of criminal prosecution,
this, on its own, does not amount to a valid reason to have concluded
the acknowledgement
of debt. Indeed, even prior to signing the
acknowledgement of debt, it is common cause that the respondent
admitted its indebtedness
in an e-mail sent to the applicant. There
was no argument by the respondent that this e-mail was also sent
under compulsion or
threat of criminal prosecution.
34.
As noted, the courts have held that the
respondent’s failure to effect payment of a debt after a
statutory demand is presumptive
of insolvency. Apart from its bald
assertion that the debt is not due and payable because it is
disputed, the respondent has not
indicated anywhere in its answering
affidavit that it has the assets, resources, or sources of income to
pay its debts as and when
they fall due or to pay the debt owing to
the applicant. Accordingly, on a conspectus of the evidence placed
before this Court,
I am of the view that the applicant has
established that the respondent is commercially insolvent. The
respondent has not shown
that its indebtedness is genuinely disputed
on reasonable grounds. In the circumstances of this matter, the
applicant was entitled
to seek the liquidation of the respondent. All
the requirements for a liquidation order have been met, including the
formalities
prescribed by section 346 of the Companies Act.
ORDER
35.
Accordingly, the following order is
granted:
35.1
The respondent is placed under final liquidation.
35.2
The applicant’s costs are to be costs in the liquidation of the
respondent.
FRANCIS, J
[REPORTABLE]
CASE NO: 19664/2022
In
the matter between:
ELECTROLUX
SOUTH AFRICA (PTY) LTD
Applicant
(Registration
Number: 1971[…])
And
RENTEK
CONSULTING (PTY) LTD
Respondent
(Registration
Number: 2010[…])
Coram:
FRANCIS
J
Judgment
by:
FRANCIS
J
For
the Applicant:
Adv
A A Basson
Instructed
by
:
Barnard
Incorporated
C/O
Norman Wink Stephens Attorneys
For
the Respondent:
Adv
A M Heunis
Instructed
by:
Khan
and Kootbodien INC
Matter was heard on
22
June 2023.
The
judgment was handed down on
10 August
2023.
[1]
Schedule
5 of the
Companies Act 71 of 2008
provides for a transitional
arrangement that Chapter 14 of the (old)
Companies Act will
continue
to apply with respect to the winding-up and liquidation of companies
as if the latter Act had not been repealed.
[2]
See
,
Nestle (South Africa) (Pty) Limited vs Mars Inc
2001
(4) (SA) 542 (SCA)
.
[3]
Caesarstone
Sdot-Yam Ltd v The World of Marble and Granite 2000 CC and Others
2013
(6) SA 499
(SCA)
at
para 2.
[4]
1922
AD 16
at
23.
[5]
1933
CPD 626
at
633.
[6]
Cf.
The
Standard Bank of South Africa Ltd v Tsheola Dinare Tours and
Transport Brokers (Pty) Ltd
(22011/2021)
[2022] ZAGPJHC 311 (6 May 2022)
.
[7]
See,
Naidoo
v Absa Bank Limited
2010
(4) SA 597
(SCA)
and
Investec
Bank Ltd and Another v Mutemeri and Another
2002
(1) SA 265
(GSJ)
.
[8]
1931
AD 290
at
299.
[9]
(
1007/20)
[2022] ZASCA 67
(May 2022)
.
[10]
Afgri
Operations Limited v Hamba Fleet (Pty) Ltd
2022 (1) SA 91
(SCA)
at
para [12].
[11]
2014
(2) SA 518
(SCA)
.
[12]
2013
(2) SA 295
(KZD)
.
[13]
See,
Prudential
Shippers SA Ltd v Tempest Clothing Co (Pty) Ltd and Others
1976
(2) SA 856
(W).
[14]
After
one of the leading cases on the subject,
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956
(2) SA 346
(T)
.
[15]
Fresh
Investments (Pty) Ltd v Marabeng (Pty) Ltd)
(1030/2015)
[2016] ZASCA 168
(24 November 2016)
[16]
2015
(4) SA 449
(WCC)
.
See also,
Gap
Merchant Recycling CC v Gold Reach Trading 55 CC
2016
(1) SA 261
(WCC)
.
[17]
[1984] ZASCA 51
;
1984
(3) SA 623
(A)
.
[18]
(case
number 2021/29872) [2022] ZAGPJHC 241 (26 April 2022).
[19]
Id.fn
10 at para [20].
[20]
Id.fn
15.
[21]
Id.fn
15 at para [5].
[22]
Kalil
v Decotex (Pty) Ltd and Another
1988
(1) SA 943
(A)
.
[23]
2003
(5) SA 414
(W)
at
428B-C