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IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

 

(1)       REPORTABLE: NO

(2)       OF INTEREST TO OTHERS JUDGES: NO

(3)       REVISED

  

CASE NO: 46328/2020

In the matter between:

EVOCATUS SECURITY SERVICES SA (PTY) LIMITED                                       Applicant
(Registration No. 2013/129215/07)

and 

NTAMO TECHNOLOGIES (PTY) LIMITED                                                              Respondent
(Registration No. 2006/031751/07)

JUDGMENT

BASSON, AC

[1]          This is an application for the winding up of the respondent pursuant to the provisions of section 344(f)[1] read with section 345(1)(a)[2] of the Companies Act[3] on the basis that the Respondent is unable to pay its debts. According to the applicant, the respondent is indebted to the applicant in an amount of at least R3 065 285.49 in respect of guarding and armed response services rendered in terms of two agreements concluded between the parties.

[2]          Despite that it is the practice in this division to ask for a final winding up order in the Notice of Motion with this court retaining a discretion to grant a provisional order, the applicant prayed for the granting of a provisional order only.

[3]          Condonation was granted for the late filing of the applicant’s reply and leave was granted to the respondent to file a further affidavit in which it is confirmed that the amount which the applicant claims is outstanding has been paid into the trust account of the respondent’s attorney. This was ostensibly done to thwart the applicant’s submission that the respondent is unable to pay the entire amount the applicant claims is outstanding.

[4]          The applicant claims that the respondent has failed to pay the full amount due for the months of February 2020, March 2020 and April 2020 despite the fact that it had delivered the services as it was contractually obliged to do.

The applicant’s case

[5]          The applicant states that the parties entered into two written Service Level Agreements (“SLA”) commencing on 1 November 2019 in terms of which the applicant was obliged to render guarding service to all buildings within the jurisdiction of the City of Ekurhuleni Municipality (“Ekurhuleni”). The applicant was further obliged to render armed response services at specific sites or as determined by the respondent. The parties had agreed that the payment terms would be 30 days after the first of every month.

[6]          Although the operation of the two agreements fell within the time period within which the President invoked the provisions of the Disaster Management Act[4] (“the DMA”), the services rendered by the applicant were considered “essential services”. The applicant continued to render services in terms of the respondent.

[7]          On 3 April 2020 the respondent informed the applicant that it intended to rely on the “force majeure” clause. At that time the respondent was already indebted to the applicant and in arrears with the payments due for February and March 2020. On 28 April 2020 the applicant demanded payment of the amounts then outstanding under the armed response agreement in terms of clause 6.1.4.

[8]          Two days later and on 30 April 2020, the respondent formally recorded the termination of the guarding agreement due to expire at midnight and once again referred to the “force majeure” clause. This contract was due to run for another 6 months. In addition, the respondent relied on several grounds of alleged non-compliance. The respondent then required proof of the applicant’s payroll in order to audit all payments made to the applicant.

[9]          On 11 May 2020 the applicant transmitted a demand to the respondent by e-mail. Despite disputing the content of the demand, the respondent paid an amount of R 1 million on 15 May 2020 towards the outstanding amount claimed by the applicant, leaving a balance of R3 754 193.25 outstanding.

[10]       The applicant delivered a statutory demand in terms of section 345(1) of the Act for payment which was served by the Sheriff at the registered address of the respondent on 11 June 2020.

[11]       Subsequent thereto the respondent made a further payment of R650 000.00 on 7 October 2020. As a result, an amount of R3 065 285.49 remains outstanding.

[12]       Despite the demand, the respondent has failed to pay its indebtedness. The applicant therefore claims that the respondent is deemed to be unable to pay its debts as contemplated by section 345(1)(a)(ii) of the Act and is therefore liable to be wound up. Furthermore, the applicant is a creditor for more than R100.00 as contemplated by section 346(1)(b) of the Act.

The respondent’s opposition

[13]       The respondent disputes its indebtedness and relies on various grounds. The respondent, inter alia, claims that the founding affidavit does not disclose a cause of action for payment in that the applicant in its founding affidavit merely indicates that it rendered the services: It does not indicate that it complied with the provisions of the agreement; nor that it invoiced in accordance with the provisions of the agreement by providing all the written documents. Because the applicant did not submit the required documents and having regard to the terms of the agreement, the respondent submitted that the applicant is accordingly not entitled to payment. With reference to the SLA, the respondent also claims that the applicant was not a minimum level 2 B-BBEE registered company. This, according to the respondent, constitutes a misrepresented the applicant companies’ true state of affairs.

[14]       Lastly, the respondent indicates that it is a solvent concern and that it can pay its creditors including the applicant should it be found that the respondent is liable to the Applicant. In this regard I have already referred to the fact that the respondent has now deposited an amount of R3 065 285.49 into its attorney’s trust account which takes care of the argument that the respondent is unable to pay its debts.

Section 345 of the Act

[15]       This is an application for a provisional order. It is trite that the requirements for provisional liquidation differs from the stage where a final order is sought. See in this regard Orestisolv (Pty) Ltd t/a SA Investments v. NDFT Investment Holdings (Pty) Ltd & Another[5]  where the court confirmed the principle that in an opposed application for provisional liquidation, the applicant must establish its entitlement for an order on a prima facie basis

[16]       The application is premised on section 345 of the Act which is referred to as a “deeming provision”. In terms of section 345 (1) (a) of the Act, an applicant is required to prove on a balance of probabilities that the respondent’s indebtedness is due.  However, even where the applicant is able to establish its claim on a prima facie basis, a court will nonetheless refuse an order if the claim is bona fide disputed on reasonable grounds. In this regard the court in Orestisolve explains as follows:[6]

“[8] Even if the applicant establishes its claim on a prima facie basis, a court will ordinarily refuse the application if the claim is bona fide disputed on reasonable grounds. The rule that winding-up proceedings should not be resorted to as a means of enforcing payment of a debt, the existence of which is bona fide disputed on reasonable grounds, is part of the broader principle that the court's processes should not be abused. In the context of liquidation proceedings the rule is generally known as the Badenhorst rule, from the leading eponymous case on the subject, Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) at 347H – 348C, and is generally now treated as an independent rule, not dependent on proof of actual abuse of process (Blackman et al Commentary on the Companies Act vol 3 at 14 – 82 to 14 – 83). A distinction must thus be drawn between factual disputes relating to the respondent's liability to the applicant and disputes relating to the other requirements for liquidation. At the provisional stage the other requirements must be satisfied on a balance of probabilities with reference to the affidavits. In relation to the applicant's claim, however, the court must consider not only where the balance of probabilities lies on the papers but also whether the claim is bona fide disputed on reasonable grounds. A court may reach this conclusion even though on a balance of probabilities (based on the papers) the applicant's claim has been made out (Payslip Investment Holdings CC v Y2K Tec Ltd  2001 (4) SA 781 (C) at 783G – I).  However, where the applicant at the provisional stage shows that the debt prima facie exists, the onus is on the company to show that it is bona fide disputed on reasonable grounds (Hülse-Reutter and Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO Intervening) 1998 (2) SA 208 (C) at 218D – 219C).”

 

[17]       Where a bona fide dispute on reasonably grounds exists regarding the existence of a debt, the court will not grant an order for the winding-up of a company.[7] It is for the respondent to show that the applicant's claim is disputed on a bona fide basis. The defence must, over and above being bona fide, also be reasonable.

Is the defences bona fide and reasonable?

[18]       I have already referred to the defences raised by the respondent. I do not intend dealing with all of them but will rather concentrate on the defence which I regard as dipositive of the application.

[19]       With reference to the two SLA’s, the respondent pointed out that clause 6.1.2 (similar in both agreements) requires that payment “will only be made if all required documentation, time sheets …. accompanies the service provider invoice”.

[20]       This is where the dispute lies. The respondent contends that the applicant, apart from merely stating in the founding affidavit that it rendered the services, does not indicate that it complied with the provisions of the agreement nor that it invoiced in accordance with the provisions of the agreement by providing all the written documents. More in particular, the respondent claims that the applicant did not submit the time sheets and is accordingly not entitled to payment. On this basis it is contended that there is a valid dispute between the applicant and the respondent in respect to whether any amount is due, owing, and payable and the exact amount. It is further submitted that the respondent is accordingly not obliged to make payment unless there has been full compliance with the provisions of the agreement in relation to payment, which there has not been to date. The respondent further submitted that the applicant is fully aware of the fact that there is a requirement in relation to the time sheets and has not furnished the respondent with copies thereof.

[21]       Reference has already been made to the fact that the respondent has made partial payments towards the outstanding invoices. The respondent states in its papers that these payments were made where it had been ascertained that such amounts were in fact due despite the non-compliance with the documentary proof and the timesheets.

[22]       In this regard the attorneys on behalf of the respondent sent an email to the applicant’s attorneys pointing out, inter alia, the various requirements contained in the agreement such as the requirement that the applicant must be a minimum level 2 B-BBEE registered company. More importantly, the applicant is reminded of the provision that payment will only be made if all required documentation, such as timesheets, accompany the invoice. The letter further points out that the applicant has failed to supply any timesheets together with its invoices. The letter further advises that there exist disputes in respect to the compliance and amounts owing and invited the applicant to withdraw the application for liquidation.

[23]       The applicant responded to the allegation that, because it (the applicant) had not set out all aspects pertaining to the provisions of the SLA’s fully in its founding affidavit, that a proper cause of action has therefore not been set out in its papers, and explains that the reason for this is because the respondent only raised its defence belatedly. None of these defence, according to the applicant, were previously raised. Had the applicant been aware of these defences, it would have dealt with it in its founding affidavit. In its reply, the applicant further states that the respondent had the option to request proof of the payroll at any time during the duration of the agreement but has never done so. Because this request was only made in the termination letter, the applicant did not deem is necessary to respond thereto.

[24]       The applicant also claims in its reply that timesheets in the form of a “guarding recon” were submitted with the invoices and was duly accepted by the respondent since the inception of the contract. All attendances were recorded on internal control documents. However, despite this reference to the timesheets, none are attached to the papers.

[25]       The respondent conceded that it only raised its defences for the first time after the application was served but submitted with reference to Annexure “LD10” that, in the letter dated 30 April 2020 in terms of which the applicant was given notice of the ending of the Guarding Service Level Agreement by efflux of time, that the respondent requested documentation (the payroll) in order to audit payments made to the applicant’s staff against the payments which the respondent has made to the applicant.

[26]       In argument the respondent submitted that it needs the documentation in order to determine whether the guards for which they must pay, were in fact on duty. It was further submitted that, although the applicant could have attached the required time sheets to the replying affidavit, it has not done so. When confronted with the argument that the respondent has not requested timesheets in respect of the previous (non-disputed months), the respondent submitted that all this court is required to determine, is whether there is a bona fide dispute based on reasonable grounds and not whether the dispute has any merit and insisted that the respondent is entitled to query whether the guards were in fact posted as per the invoices before the debt becomes due and payable.

[27]       Lastly, it was submitted on behalf of the respondent that this is not a matter where there is an inability to pay. The respondent can pay and has demonstrated this ability by paying the disputed amount into its attorneys’ trust account.

[28]       Ultimately, this court must exercise a discretion taking into account all the circumstances such as the fact that the respondent is not in fact commercially insolvent and where there is a bona fide dispute about the claim. The court in Orestisolve explains:

“[21] Another circumstance which, in my view, would favour an exercise of the court's discretion against winding-up is where, despite the deemed inability to pay debts created by s 345(1)(a), the evidence shows that the company is not in fact commercially insolvent. It may also be relevant in this regard that the company's failure to pay is attributable to a genuine dispute concerning the claim, even if the court in the event considers the grounds of dispute are ill-founded.”

 

[29]       Returning to the facts of this matter. The respondent is not unable to pay its debts and is not commercially or factually insolvent. Is the claim bona fide disputed and on reasonable grounds? It was submitted on behalf of the respondent that whether the defence against the claim is valid is not something that is before this court. I agree. It is not, as was pointed out in Orestisolve,[8] for this court to necessarily have to hold the view that the claim will succeed or even that it is likely that the claim will succeed: “It would be sufficient, I think, that the company genuinely wishes to contest the claim and believes it has reasonable prospects of success.”

[30]       Having regard to the papers, I am persuaded that the claim is bona fide disputed on reasonable grounds: The respondent is saying that the amount claimed is not due and payable and disputed on the basis that the invoices were not accompanied by the necessary documents – most notably the timesheets – which would have enabled the respondent to determine whether the amount claimed is due and payable. Coupled with the fact that the respondent is not unable to pay its debts, I am not persuaded that a provisional order should be granted. The application is therefore dismissed. The respondent argued that the application should be dismissed on the scale as between attorney and client. I do not see any reason for dismissing the order with costs on such scale.

Order

[31]       The application is dismissed with costs.

 

AC BASSON

JUDGE OF THE HIGH COURT

GAUTENG DIVISION OF THE HIGH COURT, PRETORIA

 

Delivered:  This judgment was prepared and authored by the Judge whose name is reflected and is handed down electronically by circulation to the Parties/their legal representatives by email and by uploading it to the electronic file of this matter on CaseLines.  The date for hand-down is deemed to be 9 November 2021.

DATE OF HEARING          :                  6 OCTOBER 2021

 

APPEARANCES:

 

FOR THE APPLICANT     :                  ADV HR FOURIE SC

INSTRUCTED BY              :                  STRYDOM & BREDENKAMP INC

 

FOR THE RESPONDENT :                  ADVJ G DOBIE

INSTRUCTED BY              :                  TIM FOURIE ATTORNEY

 

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