Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd

• Jurisdiction: South Africa

Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd
2014 (2) SA 518 (SCA)

2014 (2) SA p518

Citation	2014 (2) SA 518 (SCA)
Case No	936/2012; [2013] ZASCA 173
Court	Supreme Court of Appeal
Judge	Cachalia JA, Petse JA, Willis JA, Swain AJA and Meyer AJA
Heard	November 15, 2013
Judgment	November 28, 2013
Counsel	H Oosthuizen for the appellant.; J Bergenthuin SC (with A Botha and B Bergenthuin) for the respondent.

Flynote : Sleutelwoorde B

Company — Winding-up — Solvent and insolvent companies — Meaning of terms — 'Solvent' means commercially solvent — Only commercially solvent C companies (whether factually solvent or insolvent) may be wound up under Act 71 of 2008 — Commercially insolvent companies (factually solvent or insolvent) may only be wound up under ch 14 of Act 61 of 1973 — Commercially solvent companies may not be wound up under ch 14 — Companies Act 61 of 1973, ch 14; Companies Act 71 of 2008, ss 79 – 81 and sch 5 items 9(2) – (3).

Headnote : Kopnota

D In the Companies Act 71 of 2008 'solvent' means commercially solvent. (The word appears in ss 79 – 81 and sch 5 items 9(2) – (3).) Only commercially solvent companies (whether factually solvent or insolvent) may be wound up under that Act. By contrast, commercially insolvent companies (factually solvent or insolvent) may only be wound up in terms of ch 14 of the Companies Act 61 of 1973. Commercially solvent companies may not be E wound up under that chapter. (Paragraphs [21] – [22] and [24] at 525B – E and 525G – H.)

Cases Considered

Annotations

Case law

Southern Africa F

Business Partners Ltd v Yellow Star Properties 1061 (Pty) Ltd [2012] ZAKZDHC 96: referred to

Commissioner for Inland Revenue v Estate Hulett 1990 (2) SA 786 (A): referred to

Edge Geo LLC v Geothermal Energy Systems (Pty) Ltd [2012] ZAWCHC 391: G referred to

Ex parte Aufrichtig 1979 (4) SA 426 (N): referred to

Ex parte Davidson 1981 (3) SA 575 (D): dictum at 577H applied

Ex parte De Villiers and Another NNO: In re Carbon Developments (Pty) Ltd (in Liquidation) 1993 (1) SA 493 (A): referred to

FirstRand Bank Ltd v Bunker Hills Investments 499 CC (GSJ case No 32130/2011): referred to H

FirstRand Bank Ltd v Lodhi 5 Properties Investment CC 2013 (3) SA 212 (GNP): referred to

FirstRand Bank Ltd v Samgram Holdings (Pty) Ltd [2013] ZAKZDHC 41: referred to

FirstRand Bank Ltd v Wayrail Investments (Pty) Ltd [2013] 2 All SA 295 (KZD): referred to I

Fundstrust (Pty) Ltd (in Liquidation) v Van Deventer 1997 (1) SA 710 (A) ([1997] 1 All SA 644): dictum at 732A – B applied

Herman and Another v Set-Mak Civils CC 2013 (1) SA 386 (FB): referred to

Johnson v Hirotec (Pty) Ltd 2000 (4) SA 930 (SCA): referred to

Knipe v Kameelhoek (Pty) Ltd t/a Schaapplaats 978 (Pty) Ltd [2012] ZAFSHC 160: J referred to

2014 (2) SA p519

Krause v Commissioner for Inland Revenue 1929 AD 286: referred to A

LSP Petroleum (Pty) Ltd v Kukhanya Marketing CC [2013] ZAGPPHC 212: referred to

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): dictum in para [18] applied

Pearl Construction (Pty) Ltd v Seabo Construction, Plumbing and Business Ventures CC B [2013] ZAFSHC 168: referred to

Platt v Umgamanzi Fishing (Pty) Ltd [2012] ZAECPEHC 81: referred to

Realisation Company v Commissioner of Taxes 1951 (1) SA 177 (SR): referred to

Rosenbach & Co (Pty) Ltd v Singh's Bazaars (Pty) Ltd 1962 (4) SA 593 (D): referred to C

Scania Finance Southern Africa (Pty) Ltd v Thomi-Gee Road Carriers CC and Another Case 2013 (2) SA 439 (FB): referred to

Standard Bank of South Africa Ltd v R-Bay Logistics CC 2013 (2) SA 295 (KZD): dictum in para [29] approved.

England D

In re Budgett; Cooper v Adams [1894] 2 Ch 557: referred to.

Statutes Considered

Statutes

The Companies Act 61 of 1973, ch 14: see Juta's Statutes of South Africa 2012/13 vol 2 at 1-203.

The Companies Act 71 of 2008, ss 79 – 81 and sch 5, item 9: see Juta's Statutes of South Africa 2012/13 vol 2 at 1-324 – 1-325 and 1-387. E

Case Information

H Oosthuizen for the appellant.

J Bergenthuin SC (with A Botha and B Bergenthuin) for the respondent.

An appeal from the North Gauteng High Court, Pretoria (Bertels- mann J). The order is in para [28]. F

Order

The appeal is dismissed with costs, which costs are to include the costs of two counsel.

Judgment

Willis JA (Cachalia JA, Petse JA, Swain AJA and Meyer AJA G concurring):

[1] This case is concerned with an issue which has vexed the high court in various centres around the country since the coming into operation of H the Companies Act 71 of 2008 ('the new Act') on 11 May 2011: to what extent is it, in the words of counsel for the appellant, Mr Oosthuizen, 'business as usual' where an application is made for the liquidation of a company that is commercially insolvent, even though its assets may exceed its liabilities?

[2] The respondent ('the bank') applied to the high court (Bertelsmann J) I for an order to wind up the appellant in terms of s 344(f) read with s 345 of the Companies Act 61 of 1973 ('the old Act'), alternatively in terms of s 344(h) of the old Act, further alternatively in terms of s 81(1)(c)(ii) of the new Act. The high court made an order winding up the appellant on 15 June 2012. The high court did so on the basis that J

2014 (2) SA p520

Willis JA (Cachalia JA, Petse JA, Swain AJA and Meyer AJA concurring)

A it would be 'just and equitable' to make such an order in terms of s 81(1)(c)(ii) of the new Act. On 20 November 2012 the high court granted leave to appeal to this court.

[3] It was not disputed that the appellant had, since 1 October 2010, been in arrears in respect of its obligations to pay the bank more than B R29 million. At the time when the application was launched, the appellant had trade creditors to whom it was indebted in an amount in excess of R11 million. The appellant also owed FirstRand Bank Ltd a little less than R9 million and the South African Revenue Service about R2 million.

C [4] There was also no dispute that the appellant had been served with the relevant demand in terms of s 345 of the old Act and was in default in respect thereof. During the course of argument, counsel for the appellant fairly and correctly conceded that the appellant was 'commercially insolvent' in the generally accepted sense of the term.

D [5] Although the appellant adverted in its answering affidavit to the possibility of bringing an application at a later stage for the commencement of business rescue proceedings in terms of the provisions of parts A to D of ch 6 (ss 128 to 154) of the new Act, it did not do so. The question of the applicability of business rescue proceedings did not arise E in this appeal even though the court a quo referred in passing thereto and indicated that such proceedings would be inappropriate in this case.

[6] The appellant contended in its answering affidavit as well as in argument before both the high court and this court, that it was a 'solvent F company' in terms of item 9(2) of sch 5 of the new Act inasmuch as the value of its assets exceeded its liabilities and, therefore, could be liquidated only if it would be 'just and equitable' that it be wound up in terms of s 81(1)(c)(ii) of the new Act.

[7] The question of what is meant by a 'solvent company' in the new Act G has loomed large in this case. Counsel for the appellant conceded, once again fairly and correctly, that if a 'solvent company' in subitem 9(2) of sch 5 of the new Act meant a commercially solvent company, the liquidation of the appellant would necessarily follow. He contended, however, that a 'solvent company ' meant, simply, one in which its assets H exceeded its liabilities.

[8] The high court accepted that the appellant's balance sheet indeed showed that its assets exceeded its liabilities (a state of affairs which lawyers usually describe as being 'factually solvent') but found that it was nevertheless clear that the appellant was unable to pay its debts (a I situation which is, by...