IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

In the matter between:

And

CLOETE. AJ

[1] This is an opposed application for the final winding up of the respondent. There are two intervening creditors who support the main application and, in the alternative, approach this court in their own right for the liquidation of respondent in the event of the main application being unsuccessful. A third intervening creditor (Take Shape Properties 1 CC) withdrew its claims prior to the hearing of this matter.

[2] The applicant obtained a provisional winding up order on 29 April 2010 with return date 2 June 2010. Due to the respondent's opposition, the return date was extended to 19 August 2010. After the applications of the intervening creditors, the return date was again extended to 15 September 2010, and then again to 4 November 2010, upon which date the matter was argued before this court

[3] The two intervening creditors who persist with their claims are Kevin Gadd Architects CC ("Gadd") and Annemarie Liebenberg ("Liebenberg"). When the matter was argued, the applications of Gadd and Liebenberg to intervene in these proceedings were not opposed by the respondent, although the respondent opposed the balance of the relief sought by them.

[5] For sake of convenience I will deal firstly with the main application, and thereafter with the applications of Gadd and Liebenberg respectively. Where I make reference to "the parties" in each application, I am referring to the parties in that particular application.

THE MAIN APPLICATION
[6] The applicant avers that during the period March 2007 to February 2008 it concluded five bridging finance agreements with the respondent in terms of which it loaned and advanced capital to the latter. The capital amount also attracts interest and finance charges in the form of discounting fees which are payable by the respondent. On 3 November 2009 the applicant served a letter in terms of s 345(1) of the Companies Act, 61 of 1973 ("the Companies Act") at the registered office of the respondent. There was no reaction to this letter and on 21 April 2010 an application was made for the provisional winding of the respondent, which was granted on 29 April 2010.

[7] Respondent disputes its indebtedness to the applicant, alleging that the latter has miscalculated the amount due by it, and calls for a debatement of account. In particular, it alleges that interest was incorrectly calculated, certain of the capital amounts advanced have not been proven and that in fact it has overpaid the applicant.

[11] The dispute between Mr David Muller of the applicant and Mr Thomas Notnagel of the respondent is a classic case of a business relationship turned sour, and neither party can be complimented on keeping detailed and accurate records of its dealings with the other. The lack of these records has inevitably given rise to a whole host of disputes of fact, and it is thus important to focus on whether the debt is genuinely disputed on reasonable grounds. With the above in mind, the following emerges from the papers;

[11.1.] In its founding affidavit, applicant relies on an indebtedness by respondent of R276 199.06 together with interest thereon at the rate of 36% per annum as from 19 January 2009 until date of final payment.
[11.2.] By way of background, applicant alleges that it provided bridging finance to the respondent in a total sum of R490 000 together with interest at a rate of 0.15% per day. It then alleges that the respondent repaid the applicant R446 110.59 on 19 June 2008, at which date the outstanding balance due by respondent (inclusive of interest) was R256 233.87. It further alleges that the parties thereafter decided to consolidate the respondent's debt, as the applicant required security for the amount still owing to it. (The founding affidavit does not allege when the decision to consolidate was taken, where it was taken or by which natural persons the juristic entities were represented). In this regard the applicant relies on a power of attorney to register a mortgage bond over the respondent's property, which it avers was signed by Notnagel on 10 June 2008 The draft mortgage bond reflects an indebtedness to the applicant of R450 000 plus interest thereon at the rate of 36% per annum as from 13 June 2008 until date of payment. It is common cause that this mortgage bond was never registered

[11.4.] The applicant's difficulties are compounded by the allegation in its replying affidavit that as at 19 June 2008 the balance due by the respondent was R318 918 76 (as opposed to R276 199.06 in the founding affidavit). Respondent requested a debatement of account but the applicant chose instead to persist in its application for the winding up of the respondent, with the assistance of the intervening creditors. .

“

THE APPLICATION OF GADD

[15.1.] It is a creditor of the respondent; and 
[15.2.] The respondent is unable to pay its debts.

[16]     The following is clear from the papers:
[16.1.] Gadd brought a previous application for the winding up of the respondent on 11 June 2009 which was opposed;

[16.3.] Respondent failed to make any payment by 14 December 2009; [164] Over the period December 2009 to June 2010 respondent made various proposals and gave undertakings to settle its indebtedness to Gadd, which respondent has failed to honour;
[16.5] Due to the respondent's failure to pay. Gadd proceeded to execute against its immovable properties;
[16.6.) Notwithstanding the execution steps, respondent still failed to make any payment to Gadd who was then prevented from proceeding with the sale in execution as a result of the provisional winding up order obtained against respondent at the instance of the applicant

[17] In its notice of motion, Gadd incorrectly applied, in the alternative, for an order of final liquidation against respondent. To my mind, nothing turns on this, inasmuch as I am satisfied that, notwithstanding this error. Gadd has complied with all of the necessary procedural requirements for the grant of a provisional winding up order, by effecting service as required in terms of ss 346(4) and 346(4A) of the Act, furnishing the requisite security and producing the necessary certificate from the Master.

[18] Respondent's counsel sought to persuade me that Gadd's application was "contradictory" in that if the provisional order against the respondent was discharged, the agreed (payment) process could run its course in order to enable Gadd to obtain payment. To my mind, there is no merit in this submission. Gadd was clearly entitled to proceed to levy execution against the immovable property of the respondent in circumstances in which the latter had failed to pay the amount due to it within the deadline stipulated in the settlement agreement

"A sale in execution of property attached prior to the commencement of the winding up is suspended in terms of s 359(1)(a) ... Indeed, after such commencement it cannot proceed at the instance of the execution creditor not even if he purports to give notice in terms ofs 359(2)(a) of an intention to continue with the execution. The liquidator, in the light of the provisions of ss 342(1) and 391, is bound and entitled to claim the property from the execution officer who must deliver it to him... and if, despite the institution of the winding up, the execution creditor causes the sale to proceed, the proceeds of such sale must be released to the liquidator by the execution officer if held by him and must be repaid to the liquidator by the execution creditor if they were paid to him subject only to the preference enjoyed by the execution creditor for the costs of execution not exceeding R50 ..."

"The concept of commercial insolvency as a ground for winding up a company is eminently practical and commercially sensible. The primary question which a court is called upon to answer in deciding whether or not a company carrying on business should be wound up as commercially insolvent is whether or not it has liquid assets or readily realisable assets available to meet its liabilities as they fall due to be met in the ordinary course of business and thereafter to be in a position to carry on normal trading - in other words, can the company meet current demands on it and remain buoyant? It matters not that the company's assets, fairly valued, far exceeds its liabilities: once the court finds that it cannot do this, it follows that it is entitled to, and should, hold that the company is unable to pay its debts within the meaning of s 345(1)(c) as read with s 344(f) of the Companies Act, 61 of 1973 and is accordingly liable to be wound up."

[22] In my view, the inescapable conclusion is that the respondent is unable to pay its debts within the meaning of s 345(1 )(c) as read with s 344(f), of the Act and that it is commercially insolvent.

THE APPLICATION OF LIEBENBERG
[24] Liebenberg's application sets out that she sold a smallholding in Brackenfell for development as residential erven. She alleges that she is a creditor of the respondent with a claim of R 2 657 430 being the balance of the purchase price due to her arising out of the aforementioned sale.

[25] Liebenberg avers that the deed of sale does not reflect her oral agreement with the respondent. She states that the respondent undertook to pay a portion of the purchase price to her on the grant of rezoning approval, and that she signed the deed of sale with this understanding. In the alternative (and albeit in reply), Liebenberg relies upon an unwritten undertaking of the respondent that it would make payment to her upon approval of the rezoning.

[26] Respondent relies upon the terms of the deed of sale itself, the relevant clause (i.e. clause 4.1) providing that Liebenberg's claim only arises from the nett proceeds of sales to end buyers and that, inasmuch as the erven have not been sold to end buyers, Liebenberg's claim is not payable. On Liebenberg's alternative claim, respondent avers that she has not alleged that rezoning approval has been granted, nor does she attach any proof of such approval to her affidavits (such approval would of course be a matter of public record). Accordingly, even on her alternative claim, Liebenberg has failed to establish that her claim is payable. (Respondent also disputes that certain payments made by it were made on account of the purchase price, and sought to persuade this court that such payments were in fact loans to Liebenberg. However, even on the respondent's version, an amount is owing to Liebenberg, and the probabilities are overwhelming that this amount - whatever it may be - exceeds the sum of R100).

[27]     In his heads of argument, counsel for respondent put it thus (at para 61):
"White Liebenberg may enjoy a prospective claim conferring upon her locus standi, and that can be taken into account in reckoning whether the respondent is actually insolvent, she does not enjoy a payable claim that can be taken into account in evaluating whether the respondent is commercially insolvent"
[28] This submission is without merit. Section 345 of the Act makes provision for the instances in which a company is deemed unable to pay its debts. Section 345(2) specifically provides as follows:
"In determining for the purpose of sub section (1) whether a company is unable to pay its debts, the court shall also take into account the contingent and prospective liabilities of the company."

[29]     Henochsberg supra at p711 summarises the position as follows:
"A contingent liability is one which, by reason of an existing vinculum juris between the creditor and the company, may become an enforceable liability on the happening of some future event; a prospective liability is one which, by reason of an existing vinculum juris between the creditor and the company, will become an enforceable liability on a future date or on a date determinable by reference to future events ... In taking a contingent or prospective liability into account the court should not treat it as it were due and payable; it should treat it as it is and as one of the factors affecting its decision as to whether or not the company is unable to pay its debts (Barclays Bank CD & O v Riverside Dried Fruit Co (Pty) Ltd 1949 (1) SA 937 (C) at 949-950)."

[30] Although Liebenberg's claim for a provisional winding up order has been rendered abortive in light of my conclusion that Gadd is entitled to such an order, it is nonetheless necessary for me to consider whether Liebenberg approached this court bona fide for the relief sought, as this is relevant to her costs. In light of my view that
Liebenberg has a claim against respondent as envisaged in s 345(1) as read with s 345(2) of the Act, I am satisfied that she indeed approached this court on bona fide grounds

The question whether the costs of an abortive application should be included in the costs of sequestration and so made preferent, should be determined, in the first instance, by the trustee after consultation with the creditors, and the court should not make an anticipatory order."

ORDER
[32]     In the result, I make the following order:
[32.1 ] The provisional winding up order obtained at the instance of the applicant on 29 April 2010 is discharged with costs, such costs to include the costs of the postponement on 2 June 2010 but excluding the costs of the postponements on 19 August 2010 and 15 September 2010;
[32.2.] Respondent is placed under provisional liquidation at the instance of the first intervening creditor, Kevin Gadd Architects CC;

[32.3.1.]      A final order of liquidation should not be granted;

[32.3.2.] The costs of the first intervening creditors application, including the costs incurred by it in respect of the postponements on 19 August 2010 and 15 September 2010, should not be costs in the liquidation
[32.4.] Service of this order is to be effected:
[32.4.1.]      on the respondent at its registered office;
[32.4.2.]      by one publication in the Cape Times and Die Burger newspapers;
[32.4.3] on the respondent's employees by affixing a copy thereof to any notice board to which the employees have access inside the respondent's premises or by affixing a copy thereof to the front door of the premises from which the respondent conducts business;
[32.4.4.] on any registered trade union that represents any of the respondent's employees; and

[32.4.5.]      on the South African Revenue Service.
[32.5] Whether the costs of the third intervening party (including the costs incurred by her in respect of the postponements on 19 August 2010 and 15 September 2010) shall form part of the costs in the liquidation shall be determined by the liquidator in consultation with the respondent's creditors.