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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION. PRETORIA

CASE NUMBER: 66826/2013

DATE: 7 NOVEMBER 2014

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

In the matter between:

SERISO 345 CC...........................................................................................................................APPLICANT

AND

BEAUTIFUL STEPS TRADING AND PROJECTS CC.....................................................RESPONDENT

T/A LENCO PROPERTIES

JUDGMENT

LEPHOKO AJ

[1] This is an application for the provisional winding-up of the respondent in terms of section 81(1 )(c)(ii) of the Companies Act 71 of 2008 read with section 344 of the Companies Act 61 of 1973.

[2] In terms of section 81(1)(c)(ii) of the Companies Act 2008 a court may order the winding-up of a solvent company if it is just and equitable to do so. Section 344 (h) of the Companies Act 1973 provides that a company can be wound-up if it is just and equitable to do so, inter alia, due to fraud committed in connection with the objects of the company.

[3] The applicant’s case is that it would be just and equitable for the respondent to be wound-up on the ground that the respondent, through its representative and only member, Mr Theunis Nel (Nel), committed fraud and the only way to have the matters investigated is by way of appointing a liquidator.

[4] The application is opposed on the ground that it is an abuse of the court process as the applicant could not establish fraud on the part of the respondent and or its only member and persisted with the application after the delivery of the respondent’s opposing affidavit setting out a bona fide defence. It is further argued that the dispute between the parties is a pure commercial dispute which should be adjudicated upon by way of action.

[5] The issue to be determined is whether the applicant has made a case for the provisional winding-up of the respondent, a solvent company, on the ground of fraud.

APPLICANT’S VERSION

[6] The applicant alleges that the parties had entered into a joint venture agreement. During April 2013 Nel requested Gerhard van Niekerk (Van Niekerk), the representative of the applicant to lease certain earth moving equipment to Basil Read Construction at the Medupi Power Station Project in Ellisras. The joint venture project was on the premise that Nel would secure the contract with Basil Read. The applicant in anticipation of the Basil Read contract concluded a hire purchase agreement with BLC Plant Company (Pty) Ltd (BLC) for a Bull Dozer D6 and a Grader Cat 14. The applicant stated that Nel advised him that the contract was concluded with Basil Read and that certain machines were due to start working during the middle of May 2013 without providing the applicant with details or a copy of the contract with Basil Read.

[7] The applicant alleges that at that time there was still no formal joint venture agreement and the parties then agreed to register a company known as Lenco Plant Hire (Pty) Ltd (Lenco) in lieu of the joint venture. Nel and Van Niekerk were the only directors of Lenco. It was agreed that Nel would in the interim receive the payments from Basil Read and pay it into his own account. The applicant did not issue invoice for work done as it was rendered in terms of the joint venture with Lenco being contracted to Basil Read. The understanding was that the applicant would be reimbursed for the expenses incurred, the revenue from Basil Read would be used to pay expenses of the joint venture and the net profit would be for the benefit of the Lenco shareholders.

[8] The applicant alleges that it was under the impression that the contract with Basil Read was concluded in the name of Lenco and only discovered that it was fraudulently concluded in the name of the respondent when it received the letter of 26 September 2013 from Basil Read refusing to withhold payment to the respondent on the basis that the Basil Read contract was with Beautiful Steps Trading And Projects t/a Lenco Projects, whose sole member was Nel, and not with Lenco Plant Hire (Pty) Ltd. The applicant contends that the respondent in all probability used the applicant’s machines to convince Basil Read that the respondent has the means and ability to execute the contract.

[9] It is alleged that Nel requested BLC to issue the monthly invoices for the earth moving equipment in the name of the respondent in order to enable the respondent to eventually become the owner of the equipment. The applicant contends that Nel hijacked the contract with Basil Read and used the income to enrich himself and to purchase and hire other machines. It is alleged that Nel used the applicant’s machines to secure the contract with Basil Read.

[10] It is further alleged that the respondent repudiated the joint venture agreement when on 10 September 2013 it delivered a notice to the applicant to move all its machines from the site.

[11] The applicant alleges that the total amount due to it in terms of invoices issued to Nel is R2 607 624-17 and that whilst the respondent acknowledges that it is indebted to the applicant in the sum of R155 072-00 it has failed to show that it was solvent and capable to pay the said amount.

RESPONDENT’S VERSION

[12] The respondent’s version differs materially from that of the applicant inter alia in the following respects: The respondent alleges that the parties negotiated the possibility of a joint venture partnership and later incorporated a company for that purpose but the agreement was never finalized as the applicant could not furnish proof of ownership of its plant and/or the value thereof to the satisfaction of the respondent. It is alleged that as a result the applicant was retained as a sub-contractor of the respondent in respect to the Basil Read contract.

[13] The respondent alleges that it negotiated and concluded the contract with Basil Read before it started negotiating with the applicant for the conclusion of a possible joint venture. The respondent further alleges that applicant repudiated the sub-contract on 22 August 2013 when it notified the respondent that all its machines were to be removed from the project and subsequently removed the keys of various machines causing serious standing time which was followed by a letter of demand from Basil Read. The respondent alleges that it terminated the agreement due to the applicant’s repudiation.

THE APPLICABLE LAW

[14] Section 81 (1 )(c)(ii) of the Companies Act 2008 provides that a court may order a solvent company to be wound-up on application of a creditor of the company on the grounds that it is just and equitable for the company to be wound-up. Section 344 (h) of the Companies Act 1973 stipulates that a company can be wound-up if it is just and equitable to do so, inter alia, due to the illegality of the objects of the company and fraud committed in connection therewith.

[15] Two steps are envisaged by section 344(h). The first step is the determination of the relevant facts and the Court forming an opinion that it is just and equitable that the company should be wound up. The second, which only arises once such an opinion has been formed, is whether the Court should exercise its discretion and grant a winding-up. See: Joffe and others, High Court Motion Procedure: A practical Guide, 5-12; Tjospomie Boerdery (Pty) Ltd v Drakensberg Botteliers (Pty) Ltd 1989 (4) SA 31 (T) at 41-42.

[16] The applicant has based its case only on allegations of fraud. For the applicant to succeed it is necessary for it to establish that fraud was committed by the respondent. “Fraud consists in unlawfully making, with intent to defraud, a misrepresentation which causes actual prejudice or which is potentially prejudicial to another”. J R L Milton: South African Criminal Law and Procedure, Vol. 2 (3^rd edition) at 702. The applicant must therefore show that Nel knowingly made a false representation to the applicant on behalf of the respondent and that the false representation caused the applicant to act to its detriment: See Feinstein v Niggli 1981 (2) SA 684 (A); Ruto Flower Mills (Pty) Ltd v Moriates 1957 (3) SA 113 (T); Gardner v The State (253/07) [2011] ZASCA 24 (18 March 2011] paras 29 - 32.

[17] It is significant that in the founding affidavit Van Niekerk first stated that he was advised that the contract was concluded with Basil Read and that certain machines had to start working in the middle of May 2013 but later contradicted himself by stating that he only knew of the contract concluded with Basil Read on 26 September 2013. This contradiction is material and cannot be taken lightly as it casts doubt on whether any misrepresentation was made by Nel regarding the contract with Basil Read.

CONCLUSION

[18] The versions presented by the parties are mutually exclusive in certain material respects concerning the alleged joint venture and result in a dispute of fact that cannot be resolved on the papers but by action proceedings. As a result of the disputed facts the applicant was not able to establish to the satisfaction of the court that the conduct of Nel on behalf of the respondent was indeed fraudulent. Due to this fact I am unable to conclude that it would be just and equitable to order the provisional winding-up of the respondent on the ground of fraud.

[19] The applicant alleges that an amount of R2 607 624-17 is due and payable to it whilst the respondent admits a debt of only R155 072-00. This admission does not advance the applicant’s case as it is only based on fraud and not money due and payable.

[20] In Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) 346 (T) it was held that an application for the liquidation of a company should not be resorted to in order to enforce the payment of a debt which is bona fide disputed by the company. It was further stated that as the liquidation of a company affects the interests of all creditors and shareholders, an order for its liquidation should not be lightly granted on the application of a single creditor: See also Meyer N.O. & Co. v Bree Holdings (Pty) Ltd 1972 (3) SA 353 (T); McLeod v Gesade Holdings (Pty) Ltd 1958 (3) SA 672 (W) at 678E. I am of the view that the claim of the applicant is disputed on bona fide grounds and that the dispute between the parties is of such a nature that it can be properly resolved through other dispute resolution processes other than by the winding-up of the respondent.

COSTS

[21] The respondent asked for the costs of two counsel due to the grave importance of the matter to the respondent. In deciding whether to grant such costs the court must consider the issue purely on whether it was proper and reasonable to brief two counsel in the circumstances relating to the action and not in light of what the court thinks of the ability and experience of the individual counsel: See Rand Townships And Smallholdings (Pty) Ltd v Griebenow 1956 (2) SA 42 (W) at 44H-45A; Steenkamp v Steenkamp 1996 (3) SA 294 (T) at 297H; In re Alluvial Creek 1929 CPD 532 at 535.

[22] In the present case the respondent was faced with real prospects of being liquidated on the ground of fraud. Liquidation of the respondent would have had very serious implications on the respondent. A finding of fraudulent conduct against Nel would also have had serious repercussions on his ability to conduct business in the future. Viewed against the importance of the matter to the respondent and Nel and the fact that the applicant persisted with the application after the respondent filed its answering affidavit in which a bona fide defence is raised, it was not unreasonable for the respondent to engage the services of two counsel.

[23] It is apparent from reading of the papers that a dispute of fact existed upon filing of the respondent’s answering affidavit and still remained after filing of the applicant’s replying affidavit. In my view the applicant should have at that stage reasonably foreseen that it would not be possible to resolve the matter on the papers and that it was inappropriate to proceed on motion proceedings. The applicant in nevertheless persisting with the application resulted in the respondent incurring unnecessary costs. This indiscretion of the applicant justifies a special order as to costs: See Walter McNaughtan (Pty) Ltd v Impala Caravans (Pty) Ltd 1976 (1) SA 189 (W) at 191H-192C.

In the premises following is ordered:

1. The application is dismissed.

2. The applicant is ordered to pay the costs of the application including the costs of 2 counsel.

A L C M LEPHOKO

ACTING JUDGEOF THE HIGH COURT

Heard on: 28 July 2014.

Judgment delivered on: 07 November 2014.

For the Applicant: Adv FJ Erasmus.

Instructed by: Cilliers & Reynders Inc.

For the First Respondent: Adv MC Erasmus SC, with him, Adv WJ Botha.

Instructed by: Rorich Wolmarans And Luderitz Inc.

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