Robson v Wax Works (Pty) Ltd and Others
Jurisdiction | South Africa |
Judge | Binns-Ward AJ |
Judgment Date | 20 April 2001 |
Citation | 2001 (3) SA 1117 (C) |
Docket Number | 9161/2000 |
Hearing Date | 22 February 2001 |
Counsel | G Selikowitz for the applicant. I C Brembridge for the respondents. |
Court | Cape Provincial Division |
Binns-Ward AJ:
[1] The applicant has applied for the winding up of the first respondent. B
[2] The first respondent company carries on business in the manufacture and wholesale of wax candles. Prior to 1998 it had been a close corporation, with the second and third respondents as its only members. C
[3] In July 1998 the applicant acquired a proprietary interest in the first respondent's business. He achieved this by purchasing from the second respondent a 60% share of her then 50% interest in the first respondent's enterprise. One of the terms of the transaction between the applicant and the second respondent D required the conversion of the first respondent from a close corporation into a private company with a share capital.
[4] Once effect was given to this arrangement later during 1998, it resulted in the applicant holding 30% of the issued share capital of the company. The remaining 70% was held as to 50% by the third E respondent and as to 20% by the second respondent. The agreement in terms of which the applicant acquired a substantial shareholding in the first respondent did not, however, provide, as would ordinarily be the case where a private company is the corporate guise for a partnership, for his appointment as a director of the company. Indeed, F in his affidavits the applicant explains that it was not intended that he play an active role in the management of the first respondent; vis-à-vis the second and third respondents he was effectively a so-called 'sleeping partner'; that is his role vis-à-vis the second and third respondents was intended to be analogous to that of an en commandite partner. G
[5] The rationale for converting the first respondent from a close corporation into a company is not declared on the papers, but it seems to me probable that it was to afford the applicant a greater degree of protection against third parties in respect of any potential liability arising from any delinquent conduct of the entity's affairs H by the second and third respondents than he would have enjoyed as a co-member of a close corporation.
[6] At the time that the applicant acquired his interest in the first respondent, he lived in Gauteng. In August 1999, in his mid-forties, he 'retired' to Cape Town, where the operations of the first respondent are located. In Cape Town the applicant developed I a more direct interest in the business of the first respondent. He came into the factory daily and spent the mornings there. The extent and basis of his daily involvement is a matter of some dispute. It is relevant mainly because the applicant contends that the first respondent, represented by the second and third J
Binns-Ward AJ
respondents, agreed that he should be paid a monthly salary of R5 000 per month (net of A income tax) with effect from March 2000 in respect of these attendances. In the event the applicant has not been paid any salary at all. This, in part, is the basis upon which the applicant instituted proceedings for the winding up of the first respondent. To a lesser degree, the issue of the applicant's involvement in the daily running of the first respondent's business is also relevant in the context of B the other basis upon which the winding up application has been brought.
[7] The winding up application has been brought by the applicant on two grounds, viz first, as an alleged creditor of the first respondent, it being alleged that the first respondent is unable to pay its debts and, secondly, on the grounds that it is just and C equitable that the first respondent be wound up.
[8] The alleged indebtedness of the first respondent to the applicant arises from two causes. D
[9] It is convenient to deal with the smaller claim first. It concerns a claim for payment of the sum of R3 288,70 allegedly due by the first respondent to the applicant in respect of the purchase price of a printer and certain stationery. The first respondent did not expressly deal with this claim in its original answering papers. In a subsequently filed affidavit, which was admitted without opposition from the applicant, the first respondent, while denying the alleged E indebtedness, indicated that it was not willing to allow the claim to prejudice its existence and therefore tendered payment of the amount to the applicant. The cheque was drawn on respondents' attorneys' trust account and made out in favour of applicant's attorneys. The cheque was not deposited by reason of advice furnished to the applicant that F the tendered payment might be an 'impeachable transaction' within the meaning of the Insolvency Act.
[10] Suffice it to say that, in the context of the tendered payment, I would not be willing to exercise my discretion to grant a winding up order on that ground of alleged indebtedness considered by itself. It is not necessary to consider whether the payment might be G subject to impeachment in terms of the Insolvency Act. The applicant must make his own decision on receipt of the payment, having regard, no doubt, to the result of these proceedings.
[11] The indebtedness is in any event disputed, it being contended by the second and third respondents that the applicant H had acquired the printer and stationery without authority from the first respondent and primarily for his personal and private use.
[12] The second ground of alleged indebtedness by the first respondent to the applicant is his previously mentioned salary claim. In this respect the applicant annexed to his founding affidavit I a draft deed of agreement prepared by him in August 2000 for signature by himself and the second and third respondents. The draft records his entitlement to a salary with effect from March 2000. The salary was to be paid when the financial situation of the applicant rendered payment convenient. The document J
Binns-Ward AJ
provided for 'a review date' to occur 'no later than 28 February 2001'. The second and third A respondents have denied the conclusion of any salary agreement with the applicant. It was common cause that they had refused to sign the document prepared by the applicant which purported to record the arrangement.
[13] The applicant was aware prior to the institution of the application that his money claims against the first respondent were B disputed. It is trite that winding up proceedings are inappropriate when brought by a creditor whose claims are reasonably and bona fide disputed. See Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) and the many subsequent cases in which the so-called Badenhorst rule has been applied (some of C which are collected in Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A) at 980D - F). The institution by a creditor of winding up proceedings in such circumstances has on occasion been stigmatised as an abuse of process.
[14] What a respondent must show to demonstrate in winding up proceedings that a creditor-applicant's claim is reasonably D disputed has recently been restated by this Court (per Thring J) in Hülse-Reutter and Another v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO Intervening) 1998 (2) SA 208 (C) at 219F - 220A:
'Apart from the fact that they dispute the applicant's claims, and do so bona fide, . . . what they must establish is no E more and no less than that the grounds on which they do so are reasonable. They do not have to establish, even on the probabilities, that the company, under their direction, will, as a matter of fact, succeed in any action which might be brought against it by the applicants to enforce their disputed claims. They do not . . . have to prove the company's defence in any such proceedings. All they have to satisfy me of is that the grounds which they advance for their F claims and the company's disputing these claims are not unreasonable. To do that, I do not think that it is necessary for them to adduce on affidavit, or otherwise, the actual evidence on which they would rely at such trial. This is not an application for summary judgment in which . . . a defendant who resists such an application by delivering an affidavit or affidavits must not only satisfy the Court that he has a bona fide defence to the action, but in terms of the Rule must also disclose fully in his affidavit or affidavits ''the G material facts relied upon therefor''. . . . It seems to me to be sufficient for the [respondents] in the present application, as long as they do so bona fide, . . . to allege facts which, if proved at a trial would constitute a good defence to the claims made against the company.'
[15] A lack of bona fides is not readily inferred. There is nothing in the papers which leads me to conclude that the H second and third respondents, as directors of the first respondent, do not genuinely dispute the claims of the applicant.
[16] In the circumstances it is not necessary for me to analyse and decide the question of whether the first respondent is able to pay its debts. This was also a contentious issue on the papers. Certainly the ratio of current assets to current liabilities stated on I the first respondent's audited balance sheet dated 31 October 2000 would suggest that there is considerable substance in the allegation by the applicant that the company was not able to meet its current liabilities. Mr Selikowitz, who appeared for the applicant, pointed to the 'shareholder loans' of J
Binns-Ward AJ
R121 941 reflected on the undated (and unaudited) company balance sheet annexed to the A answering papers highlighted the fact that they do not appear on the audited balance sheet dated 31 October 2000 and contended that it fell to be inferred that second and/or third respondent had probably been constrained to make a substantial financial injection into the company in November or early December to keep it going. I B suspect that he may well be correct. That...
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McMillan NO v Pott and Others
...1004 CC t/a Passage to India and Another 2003 (2) SA 39 (D): dictum at 46D – F applied I Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): dicta in paras [36] and [53] applied Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A): J ref......
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McMillan NO v Pott and Others
...1004 CC t/a Passage to India and Another 2003 (2) SA 39 (D): dictum at 46D – F applied I Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): dicta in paras [36] and [53] applied Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A): J ref......
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Recycling and Economic Development Initiative of South Africa NPC v Minister of Environmental Affairs
...Robinson v Randfontein Estates Gold Mining Co Ltd 1921 AD 168: dictum at 178 – 179 applied Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): dictum at 1130H – J applied B S v Theron 1984 (2) SA 868 (A): referred Schlesinger v Schlesinger 1979 (4) SA 342 (W)......
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Pilot Freight (Pty) Ltd v Von Landsberg Trading (Pty) Ltd
...69 Eiendomme (Pty) Ltd v PA Venter Worcester (Pty) Ltd 2000 (4) SA 598 (C): referred to Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): referred to Securefin Ltd v KNA Insurance and Investment Brokers (Pty) Ltd [2001] 3 All SA 15 (T): referred to I SMM Ho......
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McMillan NO v Pott and Others
...1004 CC t/a Passage to India and Another 2003 (2) SA 39 (D): dictum at 46D – F applied I Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): dicta in paras [36] and [53] applied Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A): J ref......
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McMillan NO v Pott and Others
...1004 CC t/a Passage to India and Another 2003 (2) SA 39 (D): dictum at 46D – F applied I Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): dicta in paras [36] and [53] applied Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A): J ref......
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Recycling and Economic Development Initiative of South Africa NPC v Minister of Environmental Affairs
...Robinson v Randfontein Estates Gold Mining Co Ltd 1921 AD 168: dictum at 178 – 179 applied Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): dictum at 1130H – J applied B S v Theron 1984 (2) SA 868 (A): referred Schlesinger v Schlesinger 1979 (4) SA 342 (W)......
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Pilot Freight (Pty) Ltd v Von Landsberg Trading (Pty) Ltd
...69 Eiendomme (Pty) Ltd v PA Venter Worcester (Pty) Ltd 2000 (4) SA 598 (C): referred to Robson v Wax Works (Pty) Ltd and Others 2001 (3) SA 1117 (C) ([2001] 3 All SA 546): referred to Securefin Ltd v KNA Insurance and Investment Brokers (Pty) Ltd [2001] 3 All SA 15 (T): referred to I SMM Ho......