South Africa: North West High Court, Mafikeng

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[2022] ZANWHC 11
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MBT Petroleum (Pty) Ltd v Shalom Afslaers CC (M 622/2021) [2022] ZANWHC 11 (25 March 2022)
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IN THE NORTH WEST HIGH COURT, MAFIKENG
CASE NO: M 622/2021
Reportable: YES / NO
Circulate to Judges: YES / NO
Circulate to Magistrates: YES / NO
Circulate to Regional Magistrates: YES / NO
In the matter between:
MBT PETROLEUM (PTY) LTD Applicant
and
SHALOM AFSLAERS CC Respondent
DATE OF HEARING : 11 MARCH 2022
DATE OF JUDGMENT : 25 MARCH 2022
FOR THE APPLICANT : ADV. PRINSLOO
with ADV. JACOBS
FOR THE RESPONDENT : ADV. SWANEPOEL SC
with ADV. BOONZAAIER
JUDGMENT
Delivered: This judgment was handed down electronically by circulation to the parties’ representatives via email. The date and time for hand-down is deemed to be 10h00 on 25 MARCH 2022
ORDER
Consequently, the following order is made:
(i) The application for liquidation (provisional or final) of the respondent is dismissed.
(ii) The applicant is ordered to pay the costs of this application on the scale as between attorney and client.
(iii) Such costs to include the costs consequent upon the employ of two counsel, senior and junior.
JUDGMENT
HENDRICKS DJP
[1] On 16th November 2016 the applicant and the respondent, both duly represented, entered into a written retail and supply agreement for a period of ten (10) years, in terms where the applicant would supply petroleum (fuel) and associated products to the respondent, who in turn operate as an MBT Petroleum Dealership retailer. Goods were supplied and delivered and the respondent was invoiced for same. An amendment was effected to this agreement by a so-called solar agreement that was entered into. A solar system were to be installed but instead till points were installed on the premises of the respondent and the applicant would in turn not pay for the installation of the solar system. In addition there was also an agreement entered into with regard to the Buzz Café. The applicant allege that the respondent is in breach of the agreements by, inter alia, failing to pay the amounts due to the applicant in terms of the retail and supply agreement on due dates ; willfully discontinued the sale of petroleum products of the applicant; and purchasing and selling fuel and products other than that of the applicant. An amount of R2 638 556.97 is allege to be due in respect of the retail and supply agreement and R393 591.47 in respect of the Buzz Café. Due to the allege breach, these agreements were cancelled on 01st September 2021. Over and above the aforementioned claims, the applicant also allege that it suffered damages as a result of the breach and subsequent cancellation of the agreements in the amount of R22 915 680.85.
[2] Demand for payment in respect of the aforementioned amounts were made in terms of section 66 and 69 (1) (A) of the Close Corporation Act 69 of 1984, read with the provisions of Item 9 of Schedule 5 of the Companies Act 71 of 2008. Demand notwithstanding, the respondent failed to pay the aforesaid amounts. This prompted the applicant to lodge an application praying that the respondent be placed under final liquidation alternatively provisional liquidation in the hands of the Master of the High Court. This liquidation (provisional or final) is opposed by the respondent. The respondent state that it is disputing the amounts claimed on genuine and bona fide grounds. Since April 2017 it was incorrectly invoiced and an incorrect pricing structure was used. So for the past four (4) years it was over-charged because of a fundamentally flawed interpretation of the retail and supply agreement. Significant amounts have been paid as a result of the incorrect pricing system and it requested a statement and debatement of its account with vouchers and supporting indebtedness to each other. This request by the respondent was refused.
[3] The respondent tendered unconditional payment of an amount which may be found to be due and owing to the applicant, if any. An amount equivalent to the amount claimed to be due (R2 638 556.97 and R393 591.47) was paid into the trust account of the respondents’ attorney. This was conveyed to the applicants’ attorney of record. This despite, the present liquidation application was lodged.
[4] Winding-up (liquidation) proceedings ought not be resorted to as a means in order to enforce the payment of a debt, the existence of which is bona fide disputed on reasonable grounds. The winding-up procedure is therefore not designed for the resolution of disputes regarding the existence or non-existence of a debt.
[5] In Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) the following is stated:
“Die maatskappy betwis die geldigheid van die vordering van £120, en wanneer 'n skuld te goeder trou betwis word, moet 'n likwidasie aansoek geweier word. Hierdie proses is nie bedoel vir die beslissing van twyfelagtige skulde nie.”
and
“Likwidasie van 'n maatskappy raak die belange van alle krediteure en aandeelhouers, en behoort nie ligtelik beveel te word op aansoek van 'n enkele krediteur nie.
Art. 111 laat aan die Hof 'n diskresie om likwidasie te weier selfs al word die feite bewys wat in die verskillende paragrawe van die artikel genome word. In hierdie geval is ek nie oortuig dat die maatskappy nie sy skulde kan betaal nie, en applikant sou beter gerade gewees het om sy eis by wyse van dagvaarding te probeer verhaal.”
This is referred to as the ‘Badenhorst rule’ which is the label used to describe the principle that winding-up is not an appropriate procedure to be available of by a creditor whose claim against the respondent company is bona fide disputed on reasonable grounds.
[6] It is contended by the applicant that the respondent’s contention that the disputes raised by it relates to the existence of the debt, is factually incorrect. There is at least a portion of the debt of R2.6 million disputed. This being the case, the respondent concedes that it is indebted to the applicant an amount in excess of R200.00 as required in terms of the act. The respondent, despite demand, failed to secure or to pay the said amounts within twenty-one (21) days of demand. Therefore, it is deemed that the respondent is insolvent in terms of section 69 (1) (A) of the act.
See: Koekemoer v Taylor & Steyn 1981 (1) SA 267 W.
Ter Beek v United Resources CC and Another 1997 (3) SA 315 (C).
Body Corporate of Fish Eagle v Group Twelve Investments 2003 (5) SA 414 (WLD).
[7] Evidence is presented to the effect that the respondents’ attorney has in his trust account an amount of R3.3 million, which was paid in by the respondent. This amount is equivalent to the amounts claimed by the applicant. This is not part payment but payment in full of the amounts claim in the event that it is established that it is indeed due, owing and payable to the applicant. The submission by the applicant is that this amount of R3.3 million was paid in installments into the trust account of the respondents’ attorney and not once-off, which is indicative of the fact that the respondent is not solvent. Furthermore, that it was paid into the trust account of the respondents’ attorney and it was not paid to the applicant, which does not take away the fact that it is owed and over-due as it is still not paid over. This is with due respect being over-technical.
[8] The respondent dispute that these amounts are in fact owed to the applicant. According to the respondent an incorrect method was applied in determining the amounts due and payable, so for example did it pay more than R70 million in one year as a result of the incorrect pricing that was applied by the applicant. This despite, the whole amount claimed is paid into trust pending the finalization of the disputed amount claimed and pending the debatement of the respondents’ accounts. This was made clear to the applicant since March 2020.
[9] The respondent instituted action against the applicant in the Gauteng Division of the High Court, which action is still pending. The claim is based on exactly the same grounds as enlisted in the answering affidavit in this matter. There are thus genuine and bona fide grounds upon which the respondent refuses to make payment to the applicant unless a debatement of accounts take place in order to determine exactly what is owed by which party. This does not amount to a conditional tender to pay. This case is quite distinguishable because there is not mere reliance on a counter-claim that still need to be proven, but there is also the unconditional payment of the whole amount equivalent (R3.3 million) into the respondents’ attorneys trust account. So it is definitely not a mere counterclaim that is raised as a recourse but payment into trust, subject to the debatement of the accounts. Furthermore, there is also the payment of the solar system that is in issue. The onus on the respondent is not to show that it is not indebted to the applicant, but it is merely to show that the indebtedness is disputed on bona fide and reasonable grounds.
See: Kahil v Decotex (Pty) Ltd and Another 1988 (1) SA 948 (A).
Freshrest Investments (Pty) Ltd v Marabeng (Pty) Ltd [2016] JOL 3691 (SCA)
[10] I am of the view that the liquidation proceedings in this case was instituted to enforce payment of the debt and was not done genuinely to the benefit of concursus creditorum. This is an abuse of the process of this Court and this Court will show its disquiet by awarding a punitive costs order. The applicant fail to establish any advantage to creditors. The respondent dispute the amounts claimed since March 2020 which pre-dates the demand made by the applicant in June 2021. Instead of sorting out the dispute with regard to the pricing system which is allegedly incorrect and also to do the requested debatement of account, the applicant embarked on the launching of this winding-up (liquidation) application. In addition, the applicant furthermore, as part of this winding-up application, relying on an illiquid damages claim.
See: Imobrite (Pty) Ltd v DTL Boerdery CC (M 506/19B) [2020] ZANWHC 67 (11 June 2020).
[11] In Absa Bank Limited v Erf 1252 Marine Drive (Pty) Ltd & Another, Case No 23255/2010 WCHC (15 May 2012), Buns-Ward J stated:
“[25] I am hesitant to accept the notion that the Badenhorst rule goes to standing. After all, as Corbett JA observed in Kalil v Decotex supra, at 980, it is conceivable that a creditor could establish on a balance of probabilities that it had a claim against the respondent company in winding-up proceedings, while the respondent at the same time was able to establish that the claim was disputed on bona fide and reasonable grounds. The applicant in such a case would have established its standing, while the respondent would have established, irrespective of the merits of the claim or its defence to it, that the remedy sought by the applicant should not be granted. The Badenhorst rule would thus seem to constitute a self-standing (and possibly flexible) principle that winding-up proceedings are not an appropriate procedure for a creditor to use when the debt is bona fide disputed. Availment of the procedure in circumstances in which the Badenhorst rule applies can be an abuse of process. It is so, however, only when the creditor knew, or should reasonably have foreseen that the debt was disputed on bona fide and reasonable grounds at the time of the institution of the proceedings. I am thus unable, with respect, to find any substance in the qualification to which van Reenen J expressed his willingness to follow the English law as he understood it.
[26] It is possible to state the position in South African law without reference to the English law. There is no reason for our courts to adopt or entrench what Nourse LJ, in Bayoil, clearly suspected to be a mistakenly taken course in English jurisprudence determined in Portman. In my view reliance by a respondent on a ‘genuine and serious’ unliquidated counterclaim to oppose an application for its a liquidation is a quite distinguishable basis for resisting winding-up from that premised on a bona fide and reasonable dispute of an alleged indebtedness to a creditor-applicant. As pointed out by van Reenen J in Ter Beek, reliance by a respondent company on a counterclaim to avert a winding-up order actually entails an admission by it of the alleged indebtedness to the applicant relied upon by the creditor applicant. The allegation of the existence of the unliquidated counter-claim is nothing more than the putting up by the respondent of a basis upon which it is able to ask the court to exercise its discretion against making a winding-up order, notwithstanding that the applicant may have satisfied the technical requirements to achieve the remedy. There is accordingly no basis in our law in such circumstances to treat the application for winding-up as an inappropriate procedure, as a court would, applying the Badenhorst rule, in the circumstances of a claim for winding-up by a creditor when the existence of the debt in question is reasonably and bona fide disputed. For the same reason there is no reason in our law for a court, as a matter of principle, to adopt a general disposition against the granting of the remedy just because the existence of an unliquidated counterclaim is alleged by the respondent. There is also no basis in our law, in the postulated circumstances, to apply s 347(1) of the 1973 Companies Act in a manner as would circumscribe the judge’s discretion, as under English law.”
(emphasis added)
[12] Insofar as costs are concerned, it must be awarded in favour of the successful litigant which in this instance is the respondent who successfully opposed the winding-up (liquidation) application. Adv. Swanepoel SC on behalf of the respondent contended that costs should be awarded on the punitive scale as between attorney and client because of the manner in which the applicant conducted this matter. This Court should mark its disapproval with such conduct and it should be frowned upon by this Court. The respondent should not be left out of pocket. I am in full agreement with this contention. The applicant clearly abused the court processes and attempted to wind-up (liquidate) the respondent in circumstances where the allege debt has since March 2020 been disputed on bona fine and reasonable grounds. To reiterate, instead of sorting-out the contentious pricing system and to debate the respondents’ account and provide the necessary documentary proof as to the alleged indebtedness, the applicant rushed to court in an attempt to enforce its debt by instituting an application for the winding-up (liquidation) of the respondent. This, despite the fact that it knew all along on what basis the payment of the amounts claimed are disputed. It also forged ahead with the application despite being appraised of the fact that the whole amount claimed (R3.3 million) is paid into trust, subject to proof of its indebtedness after a debatement of the respondents’ account. I am of the view that a punitive costs order is warranted under these circumstances.
[13] Both parties employed the services of two counsel due to the nature and import of the matter to both parties. The application is well structured and very comprehensive and detailed heads of argument were filed, to the benefit of the Court, by both parties. This is clearly a case where the employment of two counsel is warranted, especially due to the importance of this matter to both parties.
Order
[13] Consequently, the following order is made:
(i) The application for liquidation (provisional or final) of the respondent is dismissed.
(ii) The applicant is ordered to pay the costs of this application on the scale as between attorney and client.
(iii) Such costs to include the costs consequent upon the employ of two counsel, senior and junior.
R D HENDRICKS
DEPUTY JUDGE PRESIDENT OF THE HIGH COURT,
NORTH WEST DIVISION, MAHIKENG