Investec Bank Limited v Personify Investments (Pty) Ltd
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Nkosi J |
| Judgment Date | 17 August 2023 |
| Citation | 2023 JDR 3155 (KZD) |
| Hearing Date | 03 August 2023 |
| Docket Number | D5622/2020 |
| Court | KwaZulu-Natal Local Division, Durban |
Nkosi J:
Introduction
The applicant applies for the final winding up of Personify Investments (Pty) Ltd, Misty Blue Investments (Pty) Ltd and Huntrex 302 (Pty) Ltd (hereinafter referred to collectively as ‘the respondents’. This is pursuant to the judgment that was delivered by Ploos van Amstel J on 29 June 2021, in terms of which the learned Judge dismissed the business rescue application in respect of each one of the
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Nkosi J
respondents and granted the provisional winding-up orders against all three of them. The application is opposed by the respondents.
Factual background
The factual background to the matters is fully set out in the judgment of Ploos van Amstel J, hence I do not propose to restate same in this judgment. It suffices to mention by way of summary that the respondents’ application for leave to appeal against the dismissal of their business rescue application by Ploos van Amstel J went all the way up to the Constitutional Court. It was refused by that court on 21 October 2022 on the basis that it bore no reasonable prospects of success. Until then, the proceedings for the winding-up of the respondents had remained suspended in terms of s 131(6) of the Companies Act, 71 of 2008 (‘the 2008 Companies Act’). Therefore, with the respondents having exhausted all avenues of appeal in respect of their business rescue application, the suspension of the winding-up proceedings against them has finally been lifted.
The provisional winding-up order granted by Ploos van Amstel J against the respondents had called upon them and all interested parties to show cause, if any, to this court on 24 August 2021 why the provisional order should not be made final. It is common cause that the return date of the winding-up application was postponed several times while the respondents applied to the Supreme Court of Appeal (SCA) and the Constitutional Court, respectively, for leave to appeal against the dismissal of their business rescue application by Ploos van Amstel J. It has taken more than two years for the respondents to exhaust their appeal remedies, and the question for determination by this court is whether the applicant has made out a case for a final winding-up order to be granted against the respondents.
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Nkosi J
It is trite that where a provisional order was granted, the applicant must satisfy the court that a case has been established for a final winding-up order to be granted. [1] The degree of proof required when an application is made for a final winding-up order is higher than that for the granting of a provisional winding-up order. In the case of a provisional winding-up order a mere prima facie case must be established, whereas the court must be satisfied on a balance of probabilities that such a case has been made out by the applicant seeking confirmation of the provisional order before it grants such an order. [2] This is more so where the company which is sought to be liquidated has put up opposition to the granting of a final winding-up order against it. The court can exercise its discretion not to grant a final winding-up order if it can discern from the evidence before it, on a balance of probabilities that the company concerned does not appear to be insolvent.
In the present case, the finding made by Ploos van Amstel J was that the evidence before him established, prima facie, that the respondents were unable to pay their debts as and when they became due. Consequently, the learned Judge saw no basis for exercising his discretion against the granting of a provisional liquidation order sought by the applicant. Therefore, what remains for determination by this court at this stage of the proceedings is whether the evidence before this court establishes, on a balance of probabilities, that the respondents are unable to pay their debts as and when they become due. If so, that would mean that the respondents are commercially insolvent, in which case this court will have no basis to exercise its discretion against the granting of the final winding-up order against them.
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Nkosi J
Forms of insolvency
It was argued by Mr Harpur, who appeared with Ms Deodath on behalf of the respondents, that the respondents are neither actually nor commercially insolvent. The difference between actual and commercial insolvency was explained by the SCA in Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd [3] as follows:
‘For decades our law has recognised two forms of insolvency: factual insolvency (where a company’s liabilities exceed its assets) and commercial insolvency (a position in which a company is in such a state of illiquidity that it is unable to pay its debts, even though its assets may exceed its liabilities).’
Within the context of the explanation set out in the preceding paragraph, the court went on to state that:
‘That a company’s commercial insolvency is a ground that will justify an order for its liquidation has been a reality of law which has served us well through the passage of time. The reasons are not hard to find: the valuation of assets, other than cash, is a notoriously elastic and often highly subjective one; the liquidity of assets is often more viscous than recalcitrant debtors would have a court believe; more often than not, creditors do not have knowledge of the assets of a company that owes them money – and cannot be expected to have; and courts are more comfortable with readily determinable and objective tests such as whether a company is able to meet its current liabilities than with abstruse economic exercise as to the valuation of a company’s assets. Were the test for solvency in liquidation proceedings to be whether assets exceed liabilities, this would undermine...
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