South Africa: Free State High Court, Bloemfontein

FREE STATE HIGH COURT, BLOEMFONTEIN REPUBLIC OF SOUTH AFRICA

Case No. : A324/10

In the appeal between:

D N H MAKELAARS BK …...................................................................Appellant

and

J P KLEINHANS …...........................................................................Respondent

CORAM: EBRAHIM, J et MOLE MELA, J

JUDGMENT BY: MOLEMELA, J

DELIVERED ON: 26 MAY 2011

[1] This is an appeal against the final order of liquidation granted by the Magistrate, Kroonstad on the 30 August 2010.

[2] The salient facts giving rise to the appeal can be summarised as follows. The appellant is a close corporation that conducts business as a brokerage firm. The respondent is a member of the close corporation concerned and had also entered into an employment contract with it (the close corporation). The respondent sued the appellant for arrear salary for February 2010 and March 2010 in the Magistrate's Court under case no. 1456/10. The appellant opposed the action and filed a plea and counterclaim.

[3] While the afore-mentioned action was pending, the respondent, via his attorneys, issued a letter of demand claiming payment of his salary for the months of April 2010 and May 2010 in the amount of R40 224.00. This letter was duly served on the respondent. As the appellant did not pay the arrear salary claimed within the 21 day period stipulated in the letter of demand, the respondent brought an application for liquidation of the appellant. The respondent averred that its letter of demand had been issued in compliance with the provisions of section 69(1 )(a) of the Close Corporations Act 69 of 1984 and that the appellant's failure to pay the amount claimed within the stipulated period was an indication of its inability to pay its debts.

[4] The appellant opposed the application for liquidation. In its answering affidavit it denied liability to the respondent in respect of the salary claimed and averred that the respondent had on the 6^th April 2010 advised the appellant that he was going to seek another job elsewhere and had never returned to the workplace. It further averred that the respondent had assumed employment with another company on the 1^st May 2010, for which services he had already been remunerated by the said company. The appellant asserted in the alternative that should it be found that the respondent was indeed entitled to a salary then it re-iterated the averment made in its counterclaim under case no. 1456/10, viz that the respondent is indebted to the appellant in respect of a loan advanced by the appellant to the respondent, which indebtedness was, according to the appellant due and payable. The appellant further averred that it was solvent and attached its latest financial statements as proof of its solvency.

[5] Having listened to a detailed address both in support of and against the granting of the liquidation application, the court a quo delivered a brief judgment in the following terms:

"Wel, soos die Hof dit verstaan is die wet baie duidelik, gronde vir likwidasie en een van die gronde is as die korporasie nie in staat is om sy skulde te betaal nie en dat daar - hier het die Hof dit voor horn - versoek gerig is om aan hierdie eis te voldoen om die skuld te betaal en dit dan binne 21 dae nie gedoen kan word nie. In hierdie geval is dit nie gedoen nie, want dit gaan hier soos wat hier betoog is om nie om Februarie en Maart se salarisse nie, maar vandag se aansoek is ten opsigte van April en Mei en daar is 'n aansoek gedoen, versoek is gerig en dit is nie betaal nie. Daar is kennis gegee om te se daar is 'n kontantvloei probleem so dit kan nie betaal word nie. So wat die Hof aanbetref, is die BK nie in staat om dit te doen nie en word die aansoek toegestaan soos versoek, wor dit 'n finale bevel gemaak" (sic).

[6] Given the text of the court a quo's judgment, the inference is irresistible that before delivering its judgment, the court a quo did not pay any regard to the financial statements submitted by the appellant. I make this statement mindful of the fact that judgments are often brief and that they are not always expected to be all-encompassing. This does not detract from the fact that a judgment is expected to deal with all the important issues that were raised and which led to the finding that was made. In this particular instance, the court a quo had an opportunity to give reasons for its judgment but chose to confine itself to the scanty reasons enunciated in its judgment. In my view, the financial statements were a very important factor to be taken into account when assessing whether the appellant was unable to pay its debts or not. After all, the appellant did not merely make a bold allegation of its solvency, it also attached financial statements as proof thereof. These financial statements were not disputed by the respondent, who happens to be a member of the appellant close corporation and can thus be expected to have information on the veracity of such statements. (See PLASCON EVANS PAINTS V VAN RIEBEECK PAINTS [1984] ZASCA 51; 1984 (3) SA 623 (A).

[7] Considering that the appellant's solvency and financial statements were canvassed at length in the closing arguments submitted to the court a quo, it is not far-fetched for one to infer that the reason why the court a quo failed to, in any way, allude to such financial statements and/or the issue of solvency was because it did not take them into account before giving judgment.