Absa Bank Limited v Afrifurn Manufacturing (Pty) Ltd

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Mossop J
• Judgment Date: 27 March 2023
• Citation: 2023 JDR 2606 (KZP)
• Hearing Date: 14 March 2023
• Docket Number: 732/2022P
• Court: KwaZulu-Natal Division, Pietermaritzburg

Mossop J:

[1]

This is an opposed application in which the applicant seeks an order provisionally liquidating the respondent. The grounds for the relief claimed is that the respondent is deemed to be insolvent by virtue of the provisions of section 344(f), read with section 345(1)(a) and (c), of the Companies Act 61 of 1973 (the old Act), as read with item 9 of Schedule 5 of the Companies Act 71 of 2008.

[2]

The applicant was represented when the matter was argued by Mr Pietersen and the respondent was represented by Mr Kissoon Singh SC who, I must point out, did not draw the respondent’s heads of argument. Both counsel are thanked for the assistance that they have provided to the court.

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Mossop J

[3]

The applicant is a major financial institution that operates throughout South Africa. The respondent is a private company based in KwaDukuza, KwaZulu-Natal. On 19 June 2019, the parties concluded a written agreement, described on the face of that document as being a ‘Mortgage Backed Business Loan’ (the agreement), in terms of which the applicant agreed to advance to the respondent a loan in the amount of approximately R5 million. The parties agreed that the respondent was to repay the loan in 120 monthly instalments. In the event of the respondent falling into arrears with its payment obligations, the parties further agreed that the applicant could establish the quantum of its indebtedness to the applicant by way of a certificate of balance (the certificate) given by an authorised employee of the applicant whose appointment and authority did not have to be proved. As security for the amount to be advanced to it, the respondent was required to pass a mortgage bond over certain immovable property that it owns in KwaDukuza. It did so.

[4]

It is appropriate to mention at this juncture that there is an action proceeding in this court for the repayment to the applicant of the respondent’s alleged indebtedness to it. I was advised from the bar that the respondent has pleaded to the applicant’s particulars of claim, that pleadings had closed and that an amendment was then introduced to the particulars of claim but that the pleadings have now closed for a second time. The pleadings in the action have not been placed before this court.

[5]

It has not been directly disputed in the answering affidavit that the applicant advanced the loan amount to the respondent. I shall therefore regard the loan as admitted. The applicant alleges that the respondent fell into arrears with its instalment payments. As the applicant bluntly puts it, the respondent ‘stopped paying the monthly instalments’, and as at 30 November 2021 was in arrears with its repayment obligations in the sum of approximately R730 000. The total amount owing to the applicant was the sum of approximately R5,9 million on that date. This was confirmed in the certificate that the applicant issued. The respondent appears to dispute all of these allegations.

[6]

According to the applicant, as a consequence of the respondent’s failure to make payments that it was obliged to make, a demand (the demand) was delivered

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Mossop J

to the respondent’s registered address by the sheriff. It claims that it is a written demand as contemplated in section 345(1)(a) of the old Act.

[7]

Section 345(1)(a) reads as follows:

‘(1)

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

(a)

a creditor, by cession or otherwise, to whom the company is indebted in a sum not less than one hundred rand then due—

(i)

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

(ii)

in the case of any body corporate not incorporated under this Act, has served such demand by leaving it at its main office or delivering it to the secretary or some director, manager or principal officer of such body corporate or in such other manner as the Court may direct,

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

[8]

It is necessary to dwell for a moment on the content of the demand, given the excitement that it has generated in this matter. It plainly reveals that it was delivered in accordance with the provisions of section 345(1)(a) of the old Act. It demanded the repayment from the respondent of an amount of R5 894 028.43 within the statutorily defined period. It further stated the following:

‘In this regard we draw your attention to Section 345(1)(a) of the Companies Act 61 of 1973, as amended, which states . . .’.

What thereafter appears in the demand is a verbatim narration of the provisions of section 345(1)(a) of the old Act. The demand goes on to state the following:

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Mossop J

‘8.

Should you therefore neglect to pay the said amount or to secure or compound for it [sic] to the reasonable satisfaction of our client within TWENTY ONE (21) DAYS of receipt of this the demand, you will, in terms of the abovementioned Section, be deemed to be unable to pay your debts.

9.

The effect of the abovementioned section is that our client will be able to proceed to apply for the liquidation of yourselves pursuant to section 345(1)(a) on the basis of your deemed inability to pay your debts.’

[9]

The demand elicited no reaction from the respondent, which did not pay the amount demanded of it nor did it secure or compound that amount to the reasonable satisfaction of the applicant. Thus, so the applicant contends, the law deems the respondent to be insolvent.

[10]

Multiple defences are raised by the respondent in its answering affidavit. Not all of them were persisted with in argument. Those that were persisted with are trenchantly set out in the heads of argument prepared on the respondent’s behalf. Each must be considered.

[11]

The first defence raised is that the applicant has failed to establish a breach of the agreement. It is submitted that the applicant has not put up a schedule of the payments made by the respondent from which a missed payment or payments by the respondent can be discerned. That may be correct. However, in terms of section 345(1)(a) of the old Act, all the applicant had to establish was that the respondent was indebted to it in an amount not less than R100. It was not required to establish the respondent’s indebtedness to it in granular detail.

[12]

The specific allegation that the respondent...