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IN THE HIGH COURT OF SOUTH AFRICA NOT REPORTABLE

EASTERN CAPE, GRAHAMSTOWN

Case No.: 1010/09

Date Heard: 6 May 2010

Date Delivered: 19 August 2010

In the matter between:

ABSA BANK LIMITED Applicant

and

SCHOOL FURNITURE AND TIMBER

PRODUCTS (PTY) LIMITED Respondent

JUDGMENT

______________________________________________________________

EKSTEEN J:

[1] The respondent has enjoyed banking facilities with the applicant since 2002. In 2009 the applicant instituted liquidation proceedings against the respondent. The application was vehemently opposed. Notwithstanding the opposition the respondent was placed under provisional liquidation during January 2010. The applicant now seeks a final order of liquidation.

[2] The applicant, in its founding papers, alleged that the respondent is indebted to it, firstly in the sum of R3 932 219,31 in respect of a term loan (herein referred as the “term loan”) and secondly in the sum of R326 176,77 in respect of an overdraft facility (herein referred to as “the overdraft”). The applicant asserted that the debts are due and payable in consequence of the respondent’s breach of the terms of the loan agreement and further by virtue of the applicant having called in the overdraft which was repayable upon demand.

[3] In respect of the term loan the applicant made demand in terms of and in the manner prescribed by section 345(1) of the Companies Act, 61 of 1973 (herein referred to as “the Act”). The respondent failed to make payment of the amount due and accordingly the applicant contends that the respondent is deemed to be unable to pay its debts by the operation of section 345.

[4] The demand in terms of section 345 of the Act is not in dispute. The respondent, however, denies that it is in fact unable to pay its debts, and moreover, denies that the term loan was due and payable.

[5] A number of disputes arise from the Respondents answering affidavit. On the papers it is not suggested that the respondent is not indebted to the applicant on the term loan, however, the respondent contends that the extent of the debt on the term loan is the subject of a significant dispute in respect of which litigation is pending. It attacks the bona fides of the applicant for its failure to deal with the dispute and the pending litigation in its founding papers and accuses the applicant of duplicity.

[6] The respondent contends, furthermore, that an agreement was concluded in August 2008 in terms of which the applicant undertook to provide an additional facility of R2 million on overdraft. It alleges that the applicant has breached its undertaking and accordingly had acted in bad faith and contrived the situation which has now arisen. On the strength of this alleged agreement it contends accordingly that the overdraft is not due and payable.

[7] Finally, the respondent denies that it has breached the terms of the term loan and accuses the applicant of making scandalous and unfounded allegations in this regard to mislead the Court.

[8] The applicant, understandably, responded to these averments in its replying papers raising numerous disputes. This in turn elicited further affidavits from the respondent to deal with new matter which it contended ought to have been in the founding papers. Numerous sets of affidavits were eventually filed, however, in argument before me neither party makes any point of the admissibility of these affidavits. Suffice it to say that both parties have now dealt exhaustively with all the issues raised.

[9] The respondent argues that:

1. Whereas the applicant’s have not sought to refer the matter to oral evidence and there are fundamental disputes of fact which cannot be resolved on the papers, the application should be dismissed;

2. The debt upon which the applicant relies is the subject of a dispute and the winding-up procedure is accordingly inappropriate for the resolution of such a dispute;

3. To the knowledge of the applicant the respondent is not unable to pay its debts and it has substantial assets;

4. The entire winding-up procedure is an abuse of the process of court. This argument is founded upon the applicant’s alleged lack of bona fides and ulterior motives in pursuing this application. I shall revert in greater detail to this aspect below.

[10] I have stated above that the provisional liquidation order was granted during January 2010. Further affidavits were filed subsequent to this order. Much of what is set out therein in respect of the merits of the application is repetitive of what is stated in the various affidavits filed prior to the provisional order. It emerges from these papers, however, that a further payment was received by the applicant since the provisional order was granted.

[11] At the time of the granting of the provisional order of liquidation, speaking generally, the standard of proof required is of course on a prima facie basis. Before a final order may be granted the Court must, however, be satisfied on a balance of probability that a proper case has been made out. I shall accordingly consider the evidence afresh.

[12] Historical background

The respondent is a company with limited liability. One Nkola (herein referred to as “Nkola”), the deponent to the main affidavits on behalf of the respondent is the sole director and shareholder of the respondent. He also owns other companies and was also at all material times the sole director and shareholder of Topaz Computers (Pty) Ltd (herein referred to as “Topaz”), a company to which reference is repeatedly made in the papers.

[13] The respondent, as its name suggests, has at all times material hereto traded as a manufacturer and supplier of school furniture. It appears from the papers that in years gone by the respondent held a number of contracts with the Department of Education in the Eastern Cape and earned significant revenue from this relationship. More recently it also held contracts with the Independent Development Trust, also for the provision of school furniture

[14] I have already stated that the respondent held various banking facilities with the applicants since 2002. In 2004 the respondent signed a cession in securitatem debiti of its book debts in favour of the applicant. On this basis the relationship continued between the parties and the facilities were reviewed from time to time. On 26 November 2007 the facilities were restructured pursuant to a request dated 19 September 2007. The applicant’s credit decision, which is included in the papers, reflects the respondent’s request as follows:

“Request

1. The conversion of the outstanding balance on cheque account number 4055606110 to a 10 year term loan.

2. An overdraft facility of R4 million on cheque account number 4055606110.

3. To register a GNB over fully paid up machinery with an open market value of R6 596 million.

4. To take cession of the proceeds of the remaining IDT contract.” (The abbreviation GNB is not explained and I assume for present purposes that it refers to a General Notarial Bond.)

[15] In response the credit committee of the applicant approved the restructuring of the overdraft balance on the cheque account to a long term loan. It declined to extend the further overdraft facility requested and did not accept the General Notarial Bond. The restructuring was subject to the following condition:

“Conditions

1. Business Bank to inform client that the above restructure must be seen as final.

2. Should the client not meet monthly reduction Business Support reserves the right (to) call up the facility and the group will be transferred to WLRS.

3. Any lump sum payment by the client into the loan will be for capital reductions.”

The abbreviation utilised in clause 2 of the conditions is not explained on the papers.

[16] The credit decision bears the following comments:

“Comments

• Letter of undertaking received from IDT which states that funds will flow to client by 30/11/2007.

• Client was unable to comply with previous reductions as per the last approval due to debtors payment not being on time.

• Client to utilise funds that will be received from IDT on 30/11/2007 to diversify his business and improve his cash flow position.

• The approval to restructure the facilities is based on the following:

- To allow the client to finalise any issue with his debtor (Independent Development Trust).

- Client has shown commitment in past to diversify his business and to reduce Absa overall exposure to acceptable levels.

- Sales for the period 01/03/2007 – 31/08/2007 amounted to R7 463 211.

- Company is profitable with PPT amounting to R1,1 million.

- Company is solvent.

• Requests 2, 3 and 4 will be favourably assessed once the client’s start receiving payments from debtors.

• EWL risk classification to remain 3.5 substandard.”

[17] It is apparent from the credit decision that even prior to November 2007 respondent had not complied timeously with its repayment obligations and that the flow of funds to its account was problematic. It is further apparent from the respondent’s risk classification that the applicant had a measure of concern about its exposure. This notwithstanding the Applicant was still ready to accede to the further requests provided money started to flaw to the Respondent.

[18] At approximately this time and while the aforesaid credit review was being considered Nkola acquired two further companies known as “Cashmere Trade 48 (Pty) Ltd” (herein referred to as “Cashmere”) and “Rickshaw Trade and Invest 49 (Pty) Ltd” (herein referred to as “Rickshaw”). Nkola has at all times material hereto and since October 2007 been the sole shareholder and director of these companies. Upon acquisition of these companies and during October 2007 the companies opened banking accounts with Nedbank. The account of Cashmere was opened in the name of “Cashmere Trade 48 (Pty) Ltd trading as School Furniture and Timber Products”.

[19] During December 2007 the respondent applied to the applicant to extend facilities to Topaz. Facilities were granted to Topaz on 4 March 2008 on a temporary basis until 30 May 2008. The credit decision in respect of this facility reflects the following conditions:

“Conditions

1. Business Bank to provide to Business Support a full group review on or before 30 May 2008 including the following:

In name of Topaz Computers (Pty) Ltd:

1.1 Audited financials for year ending 2007.

1.2 Up to date signed management accounts (income statement, balance sheet and cash flow statement).

1.3 Up to date debtors age analysis.

1.4 Up to date creditors age analysis.

In name of School Furniture and Timber Products (PTY) Ltd:

2.1 Audited financials for year ending 2007.

2.2 Up to date signed management accounts (income statement, balance sheet and cash flow statement).

2.3 Up to date debtors age analysis, addressing 120+ days debtors.

2.4 Up to date creditors age analysis.”

[20] It is apparent from this approval that by December 2007 the applicant exhibited a need to carry out a full assessment of the respondent’s financial affairs before any further facility was to be considered. In particular it required audited financial statements.

[21] When this facility came up for review at the end of May 2008 the conditions upon which it was granted had not been met and in particular the financial statements had not been forthcoming. The respondent, however, arranged with its accountants, Messrs Charteris and Barnes, to provide an undertaking that the financial statements would be available by no later than end of September 2008. Such undertaking was contained in a letter from the said accountants under the heading “To whom it may concern” and dated 11 June 2008.

[22] On considering this undertaking the applicant granted an extension of the date for review of the facility to 15 September 2008. The extension was recorded as follows in a letter directed to Nkola.

“Sir

Re: Banking Facilities with Absa Bank

The existing facilities of Topaz Computers (Pty) Ltd and School Furniture and Timber Products (Pty) Ltd have been extended until 15 September 2008. This is a final concession in respect to extension of existing facilities without formal review. As you are aware the bank needs to renew these facilities annually and the latest financial information is required for this purpose.

Please ensure that at least February 2008 audited financial statements are available for Topaz Computers (Pty) Ltd, School Furniture and Timber Products (Pty) Ltd and FMMC Holdings (Pty) Ltd. This information will assist the bank to fully assess your request for increased facilities.”

It is abundantly clear from this communication that applicant would be disinclined to extend further facilities to respondent or Topaz until proper financial statements were received.

[23] It is against this background that a meeting was arranged between the parties to be held on 15 August 2008. There is a dispute between the parties as to the purpose of the meeting. On behalf of the respondent it is alleged that the meeting was set up at the initiative of Nkola to discuss the further funding of his business as it was intended to diversify their activity. Applicant contends that the meeting was set up to discuss the respondent’s deteriorating financial position. Whatever the intention of the respective parties may have been it is clear from the foregoing that the applicant was at that time concerned about the risk to which it was exposed and the continued provision of the facilities without it having the opportunity to consider properly audited financial statements for respondent and Topaz. It is common cause that at that time, during August 2008, the respondent did not have a manufacturing or supply contract in operation. There was, accordingly, no guaranteed flow of income. This consideration may laid credence to the assertion by the Applicant that it was concerned for the deteriorating financial position of the Respondent.

[24] There is much debate on the papers about what was in fact resolved at this meeting. There is no dispute that agreement was reached that certain securities held by the applicant in securitatem debiti in respect of the indebtedness of Nkola and his group of companies would be realised and applied to the reduction of the indebtedness on the term loan. It is further common cause that the existing term loan, reduced as aforesaid, would be restructured over a lengthy term. The reduction in the capital amount owing and the extension of the term would then have the effect of reducing the monthly payments due in respect of the term loan which, in turn, would serve to improve the respondent’s cash flow.

[25] The securities were duly realised and the restructured loan agreement was concluded on 12 February 2009. A dispute arose however in respect of the applicant’s accounting for the sums realised from the securities. I shall revert to this issue below.

[26] The respondent contends that an additional agreement was reached on 15 August 2008 to the effect that upon realisation of these securities the applicant would advance a further R2 million as working capital. The respondent contends that this sum was to be provided on overdraft. No further particulars are set out by the respondent as to the further terms of the alleged agreement. Nkola recorded his perception of the agreement by letter dated 24 August 2008. In the letter Nkola records as follows:

“It was further agreed that the realisation of this investment would enable Absa to advance financial assistance of R2 million to the Nkola group of companies as a working capital.”

No response was received to this communication.

[27] The applicant, for its part, denies that an agreement was concluded in respect of the R2 million overdraft. It has alluded to the insistence, before and after 15 August 2008, that financial statements would first have to be provided and it contends that to the knowledge of Nkola, the officials who attended the meeting did not have the authority to approve facilities. This, the applicant contends, can only be done by the credit committee of the applicant. The alleged agreement relating to the R2 million overdraft is accordingly in dispute. It is, however, common cause that, save to the extent set out below, the R2 million advance has not been made.

[28] I have referred to the dispute which arose in respect of the accounting by the applicant in respect of the proceeds realised from the sale of the securities held by the applicant. The securities were indeed realised. The respondent contends that two sums in the amounts sum of R148 516 and R18 909 respectively, which were received by applicant in respect of these securities have not been accounted for. In the circumstances a dispute exists as to the extent of the debt owed to the applicant on the term loan. The dispute is, however, limited to the sum of R167 425, being the total of these two amounts.

[29] The respondent has instituted action against the applicant claiming a proper account in respect of the amounts realised from the securities and an order that the respondent the advance R2 million on overdraft to it. These disputes underlie the argument that the debt upon which the applicant relies is in dispute and that the applicant has engineered the respondent’s predicament.

[30] Pursuant to the meeting of 15 August and on 19 August 2008 the credit committee of the applicant did approve an increase in the facility for Topaz by R500 000 until 30 November 2008. In January 2009, however, Topaz had exceeded its facilities then at its disposal and a further meeting ensued on 20 January 2009.

[31] It is not clear from the papers when Cashmere started to trade, however, the papers do reveal that during 2008 Cashmere, trading under the name and style of “School Furniture and Timber Products”, tendered for a contract with the Department of Education, Eastern Cape, to manufacture and supply certain school furniture.

[32] It is also not clear when or how the applicant first became aware of the existence of these two companies, however, it is common cause that at some stage prior to January 2009 the applicant did obtain this information. The papers do not disclose whether the applicant knew at that stage what the nature of Cashmere’s business was, but the deponent on behalf of the applicant does state that the applicant first became aware of the fact that Cashmere was trading as “School Furniture and Timber Products” during June 2009.

[33] It is apparent that in January 2009 the applicant had learnt of the banking account held at Nedbank in respect of “School Furniture and Timber Products”. Representatives of the applicant accordingly referred the respondent to amounts which they contend were due to the respondent and which were being “diverted” to Nedbank.

[34] In response the respondent says that Nkola explained that the respondent held no bank accounts with Nedbank and that those accounts related to other companies owned by Nkola. It was then agreed at this meeting that all banking accounts by companies in the Nkola Group of companies would be held with the applicant. It is noteworthy, however, that Nkola does not suggest that he confided in the applicant at this meeting, that Cashmere was in fact trading as a manufacturer of school furniture under the name and style of “School Furniture and Timber Products”.

[35] This meeting did not resolve the differences between the parties and on 2 February 2009 the applicant, by way of a letter, gave notice that it intended to call up the overdraft facility at the conclusion of ten days from the date of the letter. This gave rise to a further meeting between the respondent and the applicant on 7 February 2009. At this meeting the dispute relating to the accounting of the applicant for the proceeds of the securities it had realised was fully aired. A transcript of the discussions which took place on 7 February 2009 is annexed to the papers. It reveals that at this stage the applicant knew that Cashmere and Rickshaw existed and the applicant had in fact prepared the necessary documentation to open accounts for these companies with the applicant. These papers were at the time awaiting signature by Nkola in order to activate the accounts.

[36] The transcript further reveals that at this meeting it was contended by on behalf of the applicant that the mere fact that a R2 million advance was discussed in August 2008 does not mean that the applicant had approved such an advance. It is explained that the credit committee would have to approve such an advance and that they were precluded from assessing same by the respondent’s continued failure to provide financial statements for the financial year 2007 and 2008 and by the unsatisfactory conduct of the account. It is apparent from this discussion that applicant denied the alleged agreement and persisted in its stance that it would only consider further facilities once it had received audited financial statements.

[37] On 12 February 2009 the restructured term loan agreement reflecting the reduced indebtedness was concluded. The agreement provides, inter alia, as follows:

“Breach

The bank may, without effecting any other rights which it may have, claim immediate payment of all amounts payable in terms of the agreement, all of which shall then become due, if the borrower-

10.1 fails to comply timeously with any provisions of the agreement or of any other agreement between the parties all of which provisions are material; or

10.2 …

10.3 …

10.4 …

10.5 …; or

10.6 has made any incorrect or untrue statement or representation in connection with the agreement or its financial affairs or does, or allows to be done, anything which might prejudice the bank’s rights under the agreement; or

10.7 in accordance with the bank’s opinion and discretion has a deterioration in its financial position.”

[38] On 13 February, the day after signature of the term loan, a further meeting ensued between representatives of the applicant and representatives of the respondent. The applicant again demanded audited financial statements for the years 2007 and 2008 before it would consider any further advance. Nkola contends that he protested that it had not been a precondition in August 2008 and stated, in any event, that it would not be possible to provide such financial statements at such short notice as the respondent had recently changed its auditors. This meeting too did not resolve the issues and the respondent states that a further meeting was scheduled for 16 February 2009. He contends that it was proposed that the respondent provide management accounts.

[39] The respondent asserts that at this meeting on 16 February 2009 Nkola met with one Els, on behalf of the applicant, and that the ten days notice of call up of the overdraft was waived at this meeting and that management accounts were again requested.

[40] The applicant, for its part, not only denies that Els purported to waive the ten days notice but denies that any meeting was held on 16 February 2009. The applicant avers that by 16 February 2009 the overdraft facility had lapsed and the full amount on the overdraft was payable. No documentation has been put up in support of the alleged waiver and Nkola did not confirm this agreement in writing.

[41] In respect of the R2 million advance the applicant contends that it did not approve the loan because the financial statements had not been submitted and because the respondent was diverting its debtors to other companies holding accounts at Nedbank, notably Cashmere, which the applicant alleges, and it is not in dispute, is trading in the same kind of business and from the same premises as the respondent utilising the same manufacturing equipment. In fact, as already stated, Cashmere trades under the name and style of “School Furniture and Timber Products”, the name of respondent. The applicant accordingly contends that Cashmere is no more than a mirror company of the respondent, a position designed to confuse.

[42] In late February the applicant became aware that an additional sum of R1,3 million due to the respondent was paid into an account at First National Bank in an alleged breach of the cession of book debts. This is not in dispute but, the respondent argues that it was entitled to do so because an arrangement had persisted for two years whereby moneys from this particular creditor had been paid into First National Bank.

[43] On 18 March 2009 the applicant’s attorneys of record addressed a demand in terms of the provisions of section 345 of the Act to the respondent to pay to the applicant the sum of R3 932 219,31 together with interest calculated at the rate of 16 % per annum, capitalised monthly from 14 March 2009 to the date of payment in respect of monies lent and advanced on the term loan. It is not in dispute that the demand was delivered in the manner prescribed by section 345(1). No payment was received in response hereto, instead, summons was issued by the Respondent in respect of the litigation to which reference is made above.

[44] Grounds for the liquidation

The applicant relies in the main on the provisions of section 344(f) of the Act. Section 344(f) provides for the winding-up of a company if it is unable to pay its debts “as described in section 345”. I shall revert below to the provisions of section 345.

[45] In the alternative the applicant seeks to wind-up the respondent on the basis that it would be “just and equitable” to do so, as provided for in section 344(h) of the Act.

[46] Legal Approach

It is well established that a final winding-up order will only be granted where the court is satisfied, on a balance of probabilities, that a proper case has been made out for a final order. In Paarwater v South Sahara Investments (Pty) Limited [2005] 4 All SA 185 (SCA) at 186 Zulman JA summarised the position as follows:

“… The degree of proof required when an application is made for a final order is higher than that for a grant of a provisional order. In the former case a mere prima facie case need be established whereas the court, before granting a final order, must be satisfied on a balance of probabilities that such a case has been made out by the applicant seeking confirmation of the provisional order.”

[47] In the present matter the respondent resists the application challenging the extent of the indebtedness, as set out above, and asserting that such indebtedness as exists is not due and payable.

[48] The approach to evidence where disputes of fact exists on the papers in regard to essential matters upon which the applicant is required to satisfy the court was set out by Corbett JA in Plascon-Evans Paints v Van Riebeeck Paints [1984] ZASCA 51; 1984 (3) SA 623 at 634E-635C as follows:

“Secondly, the affidavits reveal certain disputes of fact. The appellant nevertheless sought a final interdict, together with ancillary relief, on the papers and without resort to oral evidence. In such a case the general rule was stated by VAN WYK J (with whom DE VILLIERS JP and ROSENOW J concurred) in Stellenbosch Farmers' Winery Ltd v Stellenvale Winery (Pty) Ltd 1957 (4) SA 234 (C) at 235E - G, to be:

    "... where there is a dispute as to the facts a final interdict should only be granted in notice of motion proceedings if the facts as stated by the respondents together with the admitted facts in the applicant's affidavits justify such an order... Where it is clear that facts, though not formally admitted, cannot be denied, they must be regarded as admitted."

… It seems to me, however, that this formulation of the general rule, and particularly the second sentence thereof, requires some clarification and, perhaps, qualification. It is correct that, where in proceedings on notice of motion disputes of fact have arisen on the affidavits, a final order, whether it be an interdict or some other form of relief, may be granted if those facts averred in the applicant's affidavits which have been admitted by the respondent, together with the facts alleged by the respondent, justify such an order. The power of the Court to give such final relief on the papers before it is, however, not confined to such a situation. In certain instances the denial by respondent of a fact alleged by the applicant may not be such as to raise a real, genuine or bona fide dispute of fact … If in such a case the respondent has not availed himself of his right to apply for the deponents concerned to be called for cross-examination under Rule 6(5)(g) of the Uniform Rules of Court … and the Court is satisfied as to the inherent credibility of the applicant's factual averment, it may proceed on the basis of the correctness thereof and include this fact among those upon which it determines whether the applicant is entitled to the final relief which he seeks …. Moreover, there may be exceptions to this general rule, as, for example, where the allegations or denials of the respondent are so far-fetched or clearly untenable that the Court is justified in rejecting them merely on the papers …”

See also Paarwater (supra) at 817.

[49] Clearly it is not every dispute of fact raised on the papers which precludes a court from determining the matter on the papers alone. In the matter of Ter Beek v United Resources CC and Another 1997 (3) SA 315, Van Reenen J states at follows at 336C-E:

“Although it is undesirable to endeavour to resolve disputes of fact on affidavit without the hearing of evidence and seeing and hearing witnesses before coming to a conclusion … It is equally undesirable to accept disputes of fact at their face value, because if that were done an applicant could be frustrated by the raising of fictitious issues of fact by a respondent … Accordingly a Court should in every case critically examine the alleged issues of fact in order to determine whether in truth there is a dispute of fact that cannot be satisfactorily determined without the aid of oral evidence ….”

[50] Where in liquidation proceedings the opposition is based upon a dispute as to the existence of the alleged debt. The respondent company bears an onus of proving that the dispute is bona fide and advanced on reasonable grounds. Where a bona fide dispute as to the liability exists the court will, save in exceptional cases, discharge the rule and dismiss the application. See Wolhuter Steel (Welkom) (Pty) Ltd v Jatu Construction (Pty) Ltd (in Liquidation) 1983 (3) SA 815 (O); Compare also Godlonton NO v Ryan Scholtz and Co (Pty) Ltd 1978 (4) SA 84 (E) at 90; and Payslip Investment Holdings CC v Y2K Tec Limited 2001 (4) SA 781 (C) 788.

[51] The term loan

Against the background of these principles I turn to consider the term loan. Section 345(1)(a) provides as follows:

“A company or body corporate shall be deemed to be unable to pay its debts if –

1. a creditor, by cession or otherwise, to whom the company is indebted in a sum not less than R100 then due-

(i) has served on the company by leaving the same at its registered office, a demand requiring the sum so due; or

(ii) in the case of body corporate …

And the company and body corporate have for three weeks thereafter neglected to pay the sum, or to secure or to compound for it to the reasonable satisfaction of the creditor.”

[52] The effect of the section is clear that where the applicant has a claim in excess of R100 against the respondent and proper notice has been given in terms of section 345(1)(a) demanding payment thereof then the respondent will be “deemed to be unable to pay its debts” if it neglects for a period of three weeks thereafter to pay the sum due. In the present matter it is not disputed that the applicant gave such a notice and neither the form nor the delivery is in dispute. It is further common cause that the respondent failed to make any payment, notwithstanding the lapse of a period in excess of three weeks.

[53] The respondent’s position on the affidavits is that the debt is in dispute to the extent reflected above and the contention that the debt was not due and payable when the demand was made. In this regard Section 345(2) of the Act requires some clarification. Section 345(2) provides as follows:

“(2) In determining for the purpose of subsection (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.”

[54] At face value it would appear that reliance may be placed in a demand made in terms of section 345(1)(a) upon a debt which is not yet payable. It has, however, been repeatedly held that where section 345(1)(a) refers to a debt “then due” it means then due and payable. See Barclays Bank (DC&O) v Riverside Dried Fruit Company (Pty) Ltd 1949 (1) SA 937 (C) 948; R v Bryant Investment Company Limited [1974] 2 All ER 683 (Ch) at 685; GATX-Fuller (Pty) Ltd v Sheperd and Sheperd Incorporated 1984 (3) SA 48 (W). It is accordingly necessary for the Applicant who seeks to rely on the deeming provisions in section 345(1)(a) to prove not only that the Respondent is endebted to it in a sum in excess of R100,00 but also that such debt was due and payable at the time the demand was made.

[55] The main ground upon which the applicant relies is, as stated above, section 344(f) of the Act which provides for the winding-up of a company if it is unable to pay its debts “as described in section 345”. The issue in the present matter is accordingly not whether the respondent is unable to pay its debts but whether it is unable to pay its debts “as described in section 345”. The deeming provision contained in section 345(1) is accordingly decisive. In Koekemoer v Taylor and Steyn 1981 (1) SA 267 (W) at 270 Goldstone J stated that the provisions in regard to the statutory demand “predicates situations where a company may well be able to pay its debts but is conclusively deemed not to be able to do so i.e. where a company has failed to respond positively to a statutory demand for payment …”. I am in agreement with this interpretation of the section. In the circumstances, provided that it is established that the respondent was indeed indebted to the applicant in an amount of in excess of R100 which was due and paying at the time the deeming provision contained in section 345(1)(a) will come into effect. In those circumstances it is irrelevant whether the Respondent is in fact able to pay its debts.

[56] Dispute in respect of the debt

Where it prima facie appears that the respondent is indebted to the applicant there is an onus upon the respondent to prove, not that it is not indebted to the applicant but that on a balance of probability the indebtedness is disputed on bona fide and reasonable grounds. If the existence of the debt upon which the applicant relies is bona fide disputed upon reasonable grounds the provisions of section 345(1)(a) cannot be invoked. See Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) at 347-348; Payslip Investment Holdings CC v Y2K Tec Limited (supra) at 783; Kalil v Decotex (Pty) Limited and Another 1988 (1) SA 943 (A) at 980.

[57] The term loan agreement was signed on 12 February 2009. The principle debt reflected in the term loan amounts to R3 885 194,54 which was repayable by way of 106 monthly instalments in the sum of R69 653,71 each. When the application was launched the applicant alleged that an amount of R3 932 219,31 was then outstanding on the term loan. The amount was duly supported by a certificate issued by a manager of the applicant which, in terms of the term loan agreement, constitutes prima facie proof of the balance outstanding. The dispute which arose in respect of the accounting, relates, as I have said above, to two specific amounts of R148 516 and R18 909. These amounts were obtained from the realisation of the security which the applicant held and which it was agreed on 15 August 2008 that the applicant should apply in reduction of the indebtedness of Nkola and his companies. These amounts were accordingly, on any version of the events, received by the applicant after 15 August 2008.

[58] There is an extensive dispute on the papers, not only as to how the amounts were applied but as to whether the applicant has properly accounted to the respondent in respect of such amounts. I am prepared to accept, for purposes of this judgment that a bona fide dispute exists in respect of the amount of R167 425 together with interest calculated on such amount, from 15 August 2008. The respondent has not raised any dispute in respect of the remainder of its indebtedness on the term loan. In these circumstances I consider that the applicant has clearly established a substantial indebtedness on the term loan, far in excess of R100, which existed at the time that the notice was given. The dispute which exists is accordingly not a dispute relating to the existence of the debt but one which relates to the extent of the debt. The dispute is furthermore one relating to a specific amount in the sum of R167 425 together with interest thereon. The extent of the actual debt which is in dispute was accordingly arithmetically calculable. This is not a case where Respondent can extend that it was unable to determine what was due. I accordingly hold that it has not been established on a balance of probability that the indebtedness, as opposed to the extent thereof, is disputed on bona fide and reasonable grounds.

[59] Since the granting of the provisional liquidation order, however, a further amount of R866 673,44, being the proceeds of a Momentum Life Policy which the applicant had held in securitatem debiti has been received and applied. This has further reduced the outstanding debt, however, on any calculation the indebtedness on the term loan remains substantial. The applicant contends that as at 28 February 2010 the indebtedness on the term loan was still in the amount of R3 647 983,47. This amount, of course, does not have regard to the disputed sum discussed above.

[60] Was the debt “due and payable”?

I have stated above that for purposes of section 345(1)(a) a statutory demand can only be made in respect of a debt in excess of R100 which is due and payable.

[61] The term loan was signed on 12 February 2009. The principle debt at the time was R3 885 194,54 which was repayable by way of 106 monthly instalments of R68 653,71. The statutory demand was made on 18 March 2009. At that time, ex facie the certificate provided in terms of the term loan agreement the outstanding balance was R3 932 219,31. It follows, that once it is accepted, as I have accepted, that a bona fide dispute of fact exists in respect of the application of R167 425 it cannot be said that it has been established on the papers that the respondent was in arrears in respect of the payments on the term loan.

[62] The applicant’s main contention is that the respondent had furnished the applicant with a cession of debtors as security for its liability to the applicant. The cession of debtors, it is alleged is unlimited and is still applicable to the respondent’s book debts. It is the applicant’s contention that the respondent diverted funds which were due to the applicant under the cession to an account hold with First National Bank.

[63] Whilst a number of the alleged “diversions” of funds are in dispute Nkola nevertheless admits that late in February 2009 one Els, on behalf of the applicant, advised that a sum of R1,3 million due to the respondent by the Independent Development Trust had been paid into the account of First National Bank. This it is not disputed, was money which was in fact due to the Respondent company. Nkola then states as follows:

“Although the applicant now seeks in this application to dress up this payment as a “diversion” of monies, I state that the applicant’s representatives were at all times aware that the payment of monies in terms of the contract in question were to be effected to the respondent’s First National Bank account which had been the way it had been for more than two years.”

[64] The cession of book debts is not in dispute. The cession was signed on 20 February 2004. It records as follows:

“I, the undersigned, Bongile Samuel Nkola, acting on behalf of School Furniture and Timber Products Proprietary Limited by virtue of a resolution passed by the Directors on 30 January 2004 … cede to Absa Bank Limited all my right in and to any claims evidenced by any document listed in the attached schedule, together with all dividends, interest, rentals and other monies now or hereafter to become owing in respect hereof. I also cede to the bank all my right in and to any claims listed in the schedule.”

[65] The schedule records as follows:

“Schedule to general cession

All right, title and interest in and to any book debts and any other debts, and claims of whatever nature, present and future, due and to become due to me (including any aversionary rights that may exist from time to time) and to all rights of action arising hereunder.”

[66] The cession document records that it is given as a continuing covering security and shall be security for all the debts of the respondent to the bank.

[67] The effect of such a cession is to divest the cedent all his rights. In Louw v WP Korporatief Beperk en Andere [1994] ZASCA 54; 1994 (3) SA 434 (A) Smalberger JA stated at 443F-G as follows:

“'n Sessie in securitatem debiti het dus tot gevolg (tensy die partye anders ooreenkom) dat die sedent ontdoen word van sy reg om die gesedeerde skuld in te vorder, en gevolglik geen locus standi het om dit af te dwing nie.”

[68] In my view the arrangement made to pay such monies to an account at First National Bank constituted a breach of the cession agreement.

[69] I do not consider that mere knowledge on the part of the applicant of the pre-existing arrangement concluded in breach of the cession agreement can serve to cure this difficulty for the respondent in the absence of a waiver of rights. The transcript of the meeting held on 7 February 2009 contains specifically the following passage referring back to the events which occurred at the meeting on 15 August 2008.

“Sizwe Ntonsi: Ok. One of the conditions coming out of that meeting was that all banking should be done with exclusively Absa. FMC account was opened in our books. It has never been activated. Account opened in documents for Cashmere and Rickshaw are ready. They are waiting Mr Nkola’s signature to be signed …”

[70] Mr Ntonsi represented the applicant in the meeting. It appears from the transcript of the meeting that this recordal of the events which occurred at the earlier meeting was not contested by Nkola in the meeting. Mr du Plessis, who attested to the affidavits on behalf of the applicant, has specifically referred to this passage in the transcript and relies upon this agreement. That such an agreement was concluded has not been contested on affidavit.

[71] In the circumstances, whatever knowledge the applicant may have had of any pre-existing agreement in respect of monies paid into First National Bank such knowledge was superseded by an agreement between the parties that no banking would be conducted other than through the applicant.

[72] In these circumstances the payment of the R1,3 million into First National Bank constituted a breach both of the cession agreement and of the agreement concluded in August 2008 to the effect that all banking would be conducted exclusively through the applicant. The applicant was accordingly entitled to call up the term loan in terms of the provisions of clause 10.1 and 10.6 of the term loan which I have previously set out. The entire amount owed on the term loan was then due and payable.

[73] It follows that all the prerequisites required by section 345(1)(a) have been established. The respondent neglected to make payment of the amount due for a period in excess of three weeks and is accordingly deemed, as envisaged in section 345(1)(a) to be unable to pay its debts. The effect hereof is that the applicant has proved that the respondent is unable to pay its debts “as described in section 345”.

[74] Section 345(1)(c)

In addition to the provisions of section 345(1)(a) the applicant relies on the provisions of section 345(1)(c) and contends that it has proved that the respondent is indeed unable to pay its debts in terms of this section. Section 345(1)(c) provides for the liquidation of a company where it is proved to the satisfaction of the Court that the company is unable to pay its debts.

[75] For purposes of section 345(1)(c) all the respondent’s debts fall to be considered. The provisions of section 345(2) find application in this instance and accordingly prospective and contingent debts fall to be considered.

[76] In its founding affidavit the applicant has alleged that the respondent is indebted to the applicant in an amount of R326 176,77 together with interest thereon in respect of the cheque account. The applicant contended that these were monies lent and advanced by the applicant to the respondent on an overdrawn cheque account by virtue of an oral agreement concluded in East London on or about 2004, which sum is repayable on demand but which the respondent, notwithstanding demand refuses or neglects to pay.

[77] In response thereto the respondent contends that the cheque account is not overdrawn, “but (the) subject matter of the aforesaid agreement to extend a credit facility in the sum of R2 million. The demand is in breach of the express terms of the agreement in respect of the credit facility, and a ruse to enable the applicant to avoid its obligations to account for the missing money, and to provide the agreed credit facility.”

[78] It is not readily apparent from the respondent’s affidavit whether Nkola contends that there was a specific agreement in the 2004 overdraft agreement precluding the applicant from demanding the repayment of the overdraft amount or whether it is contended that such a clause was contained in the agreement which Nkola contends was concluded on 15 August 2008. The respondent has not attempted to allege any such clause in either agreement and one is accordingly left with a bare denial of the term contended for on behalf of the applicant, namely that the overdraft was repayable upon demand.

[79] As regards overdraft agreements in general it appears to me that the capital amount would normally, in the absence of an express agreement as to the specific duration of the facility, be repayable either on demand or after reasonable notice to the customer. See Trust Bank of Africa Limited v Senekal 1977 (2) SA 587 (N) at 601. See also Willis: Banking in South African Law p. 141. The respondent has not alleged any term relating to a duration of the overdraft facility agreed upon in 2004 or the alleged facility in 2008 and I do not consider that his bald denial of the term contended for by the applicant constitutes a bona fide or real dispute of fact. I hold, on the papers, that any moneys advanced on overdraft were repayable upon demand.

[80] The applicant was therefore entitled to call up the overdraft facility and to demand the repayment thereof at any time. On 2 February 2009 the applicant gave notice by way of letter to the respondent that the overdraft account would be cancelled ten days hence and made demand for the repayment of the capital as it was entitled to do. This, like the demand in respect of the term loan, did not elicit any payment by the respondent. These, in my view, are strong indicators that the respondent is indeed unable to pay its debts and I consider, at least prima facie, it establishes that the respondent is unable to pay its debts.

[81] The question to be addressed is not whether the respondent is solvent or whether it has considerable assets. In considering whether the respondent is unable to pay its debts regard is had to the question whether it is able to meet current demands on it i.e. its day to day liabilities as they arise in the ordinary course of business. Compare Absa Bank Limited v Rhebokskloof (Pty) Limited 1993 (4) SA 436 (C) at 440; and Johnson v Hirotec (Pty) Limited [2000] ZASCA 131; 2000 (4) SA 930 (SCA) at 933.

[82] The respondent denies that is insolvent and denies that it is unable to pay its debts. Notwithstanding that it did not have a manufacture or supply contract in place in August 2008 the respondent has since concluded an agreement with the Independent Development Trust for the manufacture and supply of furniture in an amount in excess of R11 million. Respondent does not, however, indicate what its anticipated profit margin is on the contract and I am accordingly unable to determine the extent of the profits which are likely to be generated from such contract nor when such profits are likely to be realised. The respondent has put up no facts to displace the prima facie inference that it is unable to pay its debts. It has accordingly been proved to my satisfaction that the Respondent is indeed unable to pay its debts.

[83] The Disputed agreement of 15 August 2008

The thrust of the argument on the papers, apart from the dispute relating to the extent of the indebtedness, with which I have dealt above, is that the respondent has not exceeded its facilities by virtue of the alleged agreement to extend a credit facility in the sum of R2 million. The demand, it is alleged, is in breach of the express terms of the agreement in respect of the credit facility. This argument appears to presuppose that the applicant’s case is founded upon the debt having been due and secondly that the agreement in respect of the facility contains provisions which prevent the applicant from calling up the overdraft facility. I have found above that where reliance is placed on section 345(1)(c) the debt is not required to be due. In respect of the 2004 agreement upon which the applicant relies I have found that no bona fide or real dispute is raised by the board of pronouncement that “the demand is in breach of the express terms of the agreement in respect of the credit facility.”

[84] The respondent’s case, however, centres on a different agreement which it alleges was concluded in August 2008. This agreement is in dispute.

[85] Immediately after the meeting which occurred on 15 August 2008 and on 24 August 2008 Nkola addressed a letter to the applicant purportedly to confirm the agreements reached at the meeting. He records therein as follows:

“It was further agreed that the realisation of this investment would enable Absa to advance financial assistance of R2 million to the Nkola Group and Companies as a working capital”.

[86] This, it is argued, is a recordal of a binding agreement between the parties that upon the realisation of the security held in securitatem debiti by the applicant the applicant would provide a facility on overdraft in favour of the “Nkola Group of Companies” in an amount of R2 million.

[87] In my view, leaving aside the meaning of a “group of companies”, to which I revert below, it is by no means clear that the recordal in the letter necessarily carries the meaning. I consider that it is more readily understood to mean that it was agreed that the realisation of the security would pave the way for the bank, at some future date, to provide facilities to particular companies within the Nkola Group to a value of R2 million. I make no finding to this regard at this stage.

[88] In the meeting in January 2009 Nkola again adopted the stance that an agreement had been concluded that the applicant would advance R2 million to the “Nkola Group of Companies”. Shortly after this meeting Nkola again addressed a letter to the applicant, this time to its Regional Manager. In this letter Nkola records as follows:

“There was also another agreement taken in the same meeting that the bank would advance financial assistance of R2 million to the Nkola Group of Companies as working capital.”

The position was persisted in in the meeting held on 7 February 2009.

[89] After the delivery of the demand in terms of section 345(1)(a) of the Act summons was issued in the name of the respondent against the applicant. In its Particulars of Claim the respondent now contends that on 15 August 2008 and at East London an oral agreement was concluded to restructure the Respondents banking portfolio with the Applicant. In terms of the provisions of the agreement, it is alleged:

“(a) …

(b) …

(c) (ABSA Bank) undertook to extend to the plaintiff a facility of R2

million on the (ABSA’s) usual terms and conditions to enable the expansion of the plaintiff’s business.”

[90] Two features arise from this summons. Firstly, it is contended in the summons that the agreement was for a facility to be advanced on the usual terms. I have already stated above that the usual terms of an overdraft agreement is that the capital is repayable upon demand. The respondent would accordingly be entitled to demand the repayment at any time. The second noticeable feature of the summons is that the agreement now contended for, unlike the position which had consistently been taken prior to the issue of summons, was that an agreement had been concluded that the applicant would advance R2 million to the respondent, as opposed to the “Nkola Group of companies”. This I consider is markedly at variance with the agreement for which Nkola had consistently contended and which he had recorded in writing on more than one occasion.

[91] In the present application Nkola is initially somewhat coy as to the beneficiary of the facility in terms of the agreement and states merely that it had been agreed that “an additional credit facility of R2 million would be made available as working capital.” Later, however, in the answering affidavit Nkola contends that the demand made in terms of the provisions of section 345(1)(a) of the Act was “in breach of the applicant’s undertaking to extend the aforesaid credit facility of R2 million to the companies”. On the papers in the current application Nkola appears to have severed to the agreement originally alleged.

[92] The concept of a group of companies was discussed by Centlivres CJ in R v Milne and Erleigh (7) 1951 (1) SA 791 (A) at 827 where he stated as follows:

“The word “group” has been used with many shades of meaning. The basic idea seems to be: An association of companies, created not by resolutions to associate but by the acts of individuals, and depending upon the facts that they have a single secretary … and are controlled as to appointment of their Directors, and therefore as to the administration of their affairs, by one or a few people. The persons who weld the controlling power are the only legal persona apart from the companies themselves. There is no persona which is the group and there is no interests involved except the interests of the companies and the interests of the controllers. This is not mere legal technicality. No doubt it may be convenient to talk of the interests of the group, but no one could seriously think of a group as having interests distinct from those of the companies and controllers. The fact that in a group bargaining between companies may often be non existent, because the controllers decide, does not support the idea of a single persona with single interests. No businessman would be deceived into thinking that in a group there is, in effect, a pooling of assets and a right in the controllers to deal with the assets belonging to the companies without regard to their respective interests.”

[93] By parity of reasoning I do not consider that any businessman would be deceived into thinking that an undertaking to advance facilities to “the Nkola Group of Companies” constitutes an approval of an overdraft facility to the Respondent company. This, no doubt, necessitated the change in stance when summons was ultimately issued. In these circumstances I do not consider that a bona fide dispute exists in respect of the alleged granting of an additional overdraft facility to the respondent. On Respondents own contention no such agreement was concluded with the Respondent Company.

[94] In the result, in my view, the applicant has made out a proper case both in respect of section 345(1)(a) and section 345(1)(c). In these circumstances I do not consider it necessary to address the case put up in respect of section 344(h).

[95] Abuse of process

The provisions of section 344 provide that a company “may be” wound up if any of the circumstances set out in that section have been established. The court accordingly retains a discretion, irrespective of the ground upon which the order is sought. In addition the court has an inherent jurisdiction to prevent an abuse of its process and therefore, even where a ground for winding-up is established, the court will not grant an order where the sole or predominant motive or purpose of the applicant is something other than the bona fide bringing about of the companies liquidation for its own sake. The respondent argues that the application constitutes an abuse of the process of this court as it is plain from the Respondents case that there is and was at all times a bona fide dispute as to whether the debt sought to be recovered by Absa was due. I have dealt with this dispute of fact above. Suffice it to say that to the extent that reliance is placed on 345(1)(c) it is irrelevant whether the debt is in fact currently payable by virtue of the provisions of subsection (2). In respect of the term loan I have found that no bona fide dispute exists.

[96] The thrust of the attack upon the bona fides of the applicant are to be found in what the respondent argues are “scandalous allegations of misappropriation and diverting of funds”. The respondent argues that the applicant’s allegations were entirely without foundation and fact, and although they were entirely refuted in the company’s response thereto there was no retraction of these allegations in the applicant’s final reply, which admitted knowledge of the true position in early June 2009. It is argued accordingly that the applicant must have been aware of the true state of affairs, namely that the funds it averred were being diverted to the company Cashmere Trade 49 (Pty) Limited were properly owing to that company, and that it sought to mislead the court in this regard.

[97] In my view the respondent protests too much. The facts which emerged from the papers establish that at all times material hereto the respondent traded as “School Furniture and Timber Products”. Its business was the manufacture and supply of school furniture. The business of the manufacture and supply of school furniture, although lucrative at times, operates in “fits and starts” according to the respondent’s affidavit. As I understand this assertion it intends to convey that there is a dearth of contracts available in this business and at times there would be no contracts to be had. The respondent entered into such lucrative contracts from time to time with the Eastern Cape Department of Education and the Independent Development Trust.

[98] During the latter part of 2007 Nkola, being the sole member and shareholder of the Respondent applied to the applicant for an overdraft facility of some R4 million in favour of the respondent. Whilst this application was pending (it was not approved) Nkola acquired Cashmere and Rickshaw. He became the sole member and shareholder of these companies. He proceeded forthwith to open a bank account with Nedbank in the name of Cashmere trading as “School Furniture and Timber Products”, thus usurping the name of the respondent. Cashmere had no premises of its own and trades from the premises of the Respondent. It also utilises the equipment with which the Respondent has always operated.

[99] Early in 2008, a contract for the manufacture and supply of school furniture to the Eastern Cape Department of Education came up for tender. Nkola resolved to submit the tender in the name of Cashmere and ultimately, albeit after litigation this contract was awarded to Cashmere and Rickshaw.

[100] When in January 2009 the applicant began to make enquiries from the Department of Education, as it was entitled to do under its cession of book debts, it was advised that payments had been made to “School Furniture and Timber Products” into their account at Nedbank. This gave rise to the assertions by the applicant that funds due to it were being diverted to Nedbank. It appears from the papers that Nkola at this stage protested that monies paid into Nedbank were due to other companies owned by him, however, he declined to disclose to the applicant that Cashmere was in fact trading as “School Furniture and Timber Products”. This the applicant discovered at or about June 2009.

[101] I think that the applicant is fully justified in its charge that the acquisition and utilisation of Cashmere was to create a “mirror company” of the respondent. By doing so Nkola, as sole member and director of both the companies is able to resolve from time to time in which company tenders are to be submitted and so to “divert” contracts, and so also revenue, which would, but for the creation of Cashmere, have accrued to the respondent. In this manner he is able to systematically starve one company in favour of the other, thus hi-jacking the business of the Respondent into Cashmere.

[102] This strategy was not only a breach of Nkola’s fiduciary duties to the

respondent (see Atlas Organic Fertilisers v Pikkewyn Ghwano 1981 (2) SA

173 at 198H) but served to seriously undermine the applicant’s security.

Applicants perception of these circumstances is understandable.

[103] The bona fides of the applicant are further attacked for its failure to disclose in its founding papers the litigation pending between the parties. Mr Lowe who together with Mr de la Harpe appeared on behalf of the applicant, properly, concedes that the applicant ought to have disclosed such litigation in its founding papers and has made no attempt to defend its failure.

[104] The concession is clearly correct, however, I am unable to find that the failure on the part of the applicant should be attributed to mala fides. I am unable to find that the application constitutes an abuse for the process of court. There is clearly a very substantial debt owing to the applicant on any version of the events. The dispute in respect of the extent of the debt relates to a minor portion the debt owing. The alleged agreement to extend a R2 million overdraft to the Respondent company finds no support in any document other than the summons itself. In my view this is a proper case in which a final order of liquidation should be granted.

[105] I pause to mention that a number of very brief affidavits were filed by employees of Cashmere, Rickshaw and Topaz and on behalf of one creditor, Phoenix Steel, saying no more than that they are opposed to the liquidation of Respondent. No new facts emerged from any of these affidavits and I do not think that their mere wish justifies me in the face of the aforegoing to exercise a discretion against the applicant.

[106] Costs

There was some debate at the Bar relating to the costs occasioned by the hearing on 23 February 2010. It flows from conduct in the office of the Registrar of this Court when the provisional order of liquidation was granted. Van der Byl AJ ordered the issue of a Rule nisi returnable on 23 February 2010. Upon production of the order in the office of the Registrar the Rule Nisi issued reflected a return day of 25 February 2010. The order as typed by the Registrar reflecting the return day as 25 February was duly published and all known creditors were appraised by this date. When the matter was called on 23 February 2010 in accordance with the order in fact made it therefore required further postponement to 25 February 2010 and the costs incurred on 23 February 2010 were wasted. This was not occasioned by the fault of either party and I consider that it would be fair for such costs to be costs in the liquidation.

[107] The matter was further postponed from time to time. When the matter was called on 1 April 2010 it emerged that service had not occurred on all known creditors. The Respondent argues that, irrespective of the result of this application, the Applicant should be ordered to pay these costs as it was incumbent on Applicant to ensure such service. There is, however, some debate in the papers as to the creditors disclosed by Nkola to the provisional liquidator. I do not consider it appropriate to attempt therein to resolve this dispute in view of the conclusion to which I have come on the merits. It would be fair, in my view, for these costs to be costs in the liquidation.

In the result it is ordered that:

1. The Rule Nisi is confirmed and the Respondent is finally liquidated.

2. The costs of the application will be costs in the liquidation.

________________

J.W. EKSTEEN

JUDGE OF THE HIGH COURT

Counsel for Applicant: Adv. Smuts

Instructed by Wheeldon, Rushmere and Cole, Mr. Brody

Counsel for Respondent: Adv. De La Harpe

Instructed by Neville, Borman and Botha, Mr. Powers

Date heard: 6 May 2010

Date delivered: 19 August 2010

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