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

CASE NO:   23352/09

In the matter between:

v

FORTUIN, J: INTRODUCTION

[1] This is an application for the winding up of respondent on the basis that it is unable to pay its debts as and when they fall due. Applicant was placed under an order of provisional liquidation on 10 November 2009.

FACTS
[2] It is common cause that, during September 2007, Applicant rendered freight services to respondent in respect of a container of garlic imported from the Peoples Republic of China Respondent entered into a draft agreement with BD Trading to act as its agent. The garlic was released from the port of Cape Town to Respondent's leased premises at the Epping Market. Subsequent to the sale of the garlic to Respondents clients, the garlic discoloured in such a way so as to result in most of the garlic being destroyed. An account of R295 364.14 was rendered to Respondent for the freight services. Respondent failed to make payment.

[3]     Respondent denied that it is liable to Applicant on the following basis:
3.1.	Applicant had a statutory and contractual obligation to ensure that the imported garlic was irradiated in terms of requirement set out by the Department of Agriculture;
3.2.	Applicant intentionally, alternatively negligently, failed to comply with these obligations;
3.3.	As a result of Applicant's actions, Respondent denies that an amount of R295 364.14 is owing, alternatively. Respondent has a counterclaim against Applicant for an amount of R444 901.40 in respect of damages.

[4]     Respondent denied that it is commercially insolvent.

[5]     From the papers, the following is evident:
5.1.	Respondent, during January or February 2008. confirmed that he would be selling a property and would pay the account from the proceeds thereof;
5.2.	Two cheques, both for the amount of R50 000, drawn by Respondent in favour of the Applicant, was dishonoured by the bank for lack of funds;
5.3.	During February 2008, Respondent raised the issue of the quality of the garlic and asked for a discount of R150 000. Applicant denied being responsible for the quality of the goods, but agreed to a R75 000 discount, which discount was paid.
5.4.	On or about 24 June 2009, Respondent acknowledged his indebtedness to Applicant;
5.5.	The defence with regard to the irradiation of the garlic was raised for the first time in Respondent's answering affidavit

THE ISSUES

6.2.	whether Respondent is unable to pay its debts as and when they fall due; and
6.3.	whether there was a statutory and contractual obligation on Applicant lo ensure that the garlic was irradiated

THE LAW
[7] Section 344 of the Companies Act 61 of 1973 ("the Act") determines the court's power to wind up a company. Section 344(f) in particular deals with situations where the company is unable to pay its debts as described in section 345 of the Act. The section lists three situations in which a company is "deemed" to be unable to pay its debts, i.e. 
7.1    statutory demand;

7.3.	the company proved to be unable to pay its debts.

The law relating to the difference between 'commercial" and 'factual" insolvency is trite. It is undisputed that what is envisaged in sec 345 is commercial insolvency. The test to be applied by the court is very clearly laid down in the Act. The Act requires the court to take into account the contingent and prospective liabilities of the company In this regard, see sec 345(2).

APPLICATION OF FACTS TO THE LAW

[11] The next issue to be determined is whether there was a statuary or contractual obligation on Appellant to irradiate the garlic.

[12] During argument, when Mr Atkins, for Respondent, was asked to point out the statute which places such an obligation on Applicant, the court was referred to the Agricultural Pests Act 36 of 1983, and in particular sec 3 of the
Act.

[13]   Section 3 reads as follows:

(a) any plant, pathogen, insect exotic animal, growth medium, infectious thing, honey, beeswax or used apiary equipment;

(a)    shall do so only through a prescribed port of entry, except where an executive officer has determined some other place;
(b) shall present them at that place to the executive officer concerned for such inspection as he deems necessary:
(c) shall not remove them from that place before the executive officer concerned has consented in whting thereto.

(a) carry out an inspection contemplated in subsection (2) (b) at a time other than during the official office hours of such executive officer; or
(b) perform any other function in respect of such controlled goods.

(a) is desirable in order to combat the occurrence of plants, pathogens, insects or exotic animals of a specified kind in the Republic;
(b) is otherwise in the interest of a specified branch of agriculture.

[14] A proper reading of this section shows that it does not relate to the irradiation of imported goods It refers to the permit. The permit annexed to Respondent's answering affidavit as 'H52', mentions Respondent as the importer. The obligations placed by sec 3 of the Act, are therefore those of Respondent

[15] At the end of the hearing of the matter, with the permission of the court, Respondent was allowed to place a Supplementary Note before the court, which, in short, attempts to amplify its argument on the statuary obligation placed on Applicant. In this Supplementary Note, another Act is quoted as the relevant piece of legislation. This time, Respondent submitted that the statutory obligation is contained in the Customs and Excise Act No 91 of 1964 ("the customs and Excise Act").

(a) owns any goods imported;
(b) carnes the risk of any goods imported;
(c) represents that or acts as if he is the importer or owner of any goods imported;

(e) is beneficially interested in any way whatever in any goods imported.
(f) acts on behalf of any person referred to in paragraph (a), (b), (c), (d), or(e);"
This section, similarly to section 3 of the Agricultural Pests Act. does not place any obligation on Applicant to irradiate the garlic.

[18] It is indeed so that the correspondence as well as the conduct between the parties established that the amount was due and payable, e.g. between the period September 2007, when the goods were released to Respondent, to December 2009. when the answering affidavit was delivered. Respondent acknowledged its liability to Applicant.

[19] Whether Respondent is unable to pay its debts as and when they fall due, can be gathered from the conduct of Respondent prior to the issuing of the Notice of Motion, i.e.
19.1.	Mr Suliman's telephone call in September 2007. indicating that he was experiencing cash flow problems;
19.2.	Mr Suliman's undertaking during January/February 2008 that he will be paying the account from the proceeds of a house sale;
19.3.	The fact that two cheques, drawn in favour of Applicant, was dishonoured for lack of funds; and
19.4.	Mr  Suliman's  e-mail of 24   June  2009,   indicating   his indebtedness and his inability to pay.

[20] In bank statements annexed to Respondent's answering affidavit, as well as the averments with regards to assets, it does in fact indicate that Respondent, taking into account its contingent and prospective liabilities, is not able to pay its debts as and when they fall due. It is clear from the papers that the account was due and that it remained unpaid, even after it was claimed. This court is therefore entitled to conclude that Respondent is unable to pay its debts in terms of section 344(f), read with section 345(1)(a) of the Companies Act 61 of 1973.

22.1.	The undertaking by Mr Suliman to pay;
22.2.	The returned cheques i.e. the failure to pay; and
22.3.	The contingent and prospective liabilities gleaned from the bank statements.

[23] The next step this court will have to take is to determine whether the facts of this case make it an exception to the general rule, i.e. whether the amount claimed is disputed on substantial grounds.
[24] It is the finding of this court that the claim by Applicant is not disputed on substantial grounds as there was no statutory or contractual obligation on Applicant to irradiate the garlic. It is further the finding of this court that, in terms of section 345(1 ){c) of the Act, and taking into account the contingent and prospective liabilities of Respondent, the company is unable to pay its debts as and when they fall due.

[25]   In the circumstances, the application is granted.

25.1	The application is granted; and

25.2	Costs to be costs in the administration of Respondent's estate.