IN THE HIGH COURT OF SOUTH AFRICA REPORTABLE

DURBAN AND COAST LOCAL DIVISION

Case No. 4103/2004

In the matter between

CITIBANK N.A. Applicant

and

DAVEGLEN 1003 TRADING CC Respondent

J U D G M E N T

Delivered:

8 February 2005 TSHABALALA JP

1. Introduction

On 31 August 2004 KRUGER J granted a provisional winding-up order

returnable on Tuesday 28 September 2004, in respect of the Respondent.

Prior to this matter being heard, on 27 t h February 2004, the Applicant

had applied for summary judgment under case number 251/2004 against

Avinash Ishwarlall Maharaj, being the First Respondent in that action, and

Prime Dime CC, the Second Respondent. Avinash Ishwarlall Maharaj

(Avinash) is the sole shareholder of the Respondent in this matter. The

summary judgment application was refused by MAGID J and the Defendants

were granted leave to defend on 27 t h February 2004.

Now, the Applicant is seeking the final winding-up order of the

Respondent on the basis that it is deemed to be unable to pay its debts in

terms of the provisions of s 69(1) (a) or (c) of the Close Corporations Act, 69

of 1984, alternatively that it is just and equitable that the Respondent be

wound up in terms of the provisions of s 68 (d) of the Act. These same

grounds were advanced by the Applicant when the provisional winding up

order was granted.

The Applicant is a South African branch of Citibank N.A., a national

association registered in terms of the National Banks Act of the United States

of America and registered in the Republic of South Africa as a branch of

foreign institution in terms of the Banks Act, 94 of 1990 and duly incorporated

in the Republic as a company in terms of the Companies Act, 61 of 1973, as

amended.

The Respondent is a close-corporation duly registered in terms of the

Close Corporations Act, 69 of 1984, which principally carries on business in

the area of financial intermediation, insurance, real estate and business

services. Its principal place of business is 133 Davenport Road, Glenwood,

Durban.

At the commencement of the hearing of this application the

Respondent applied for admission of further affidavits of Ishwarlall

Ramsunder Maharaj and Avinash. The application was opposed by the

Applicant. After hearing argument, I reserved my decision on the issue. I

deal with the issue hereunder.

2. Application for filing of further affidavits

The first issue to be determined is whether the Respondent is entitled

to file further affidavits. The principal case for the Respondent in this regard

is that when the Court declined to grant a final winding-up order and granted

instead a provisional order, the Court called upon the Respondent to show

cause why a final winding-up order should not be granted. It was argued that

the mere fact that a rule nisi calls upon the Respondent to "show cause"

obviously entitles it to place further information before court. Accordingly, so

it was submitted, the Respondent in this matter has a right to file further

affidavits.

Mr. Pammenter, SC, who appeared with Mr. Woodhaymal for the

Respondent, submitted in the alternative that this is an appropriate case for

granting of leave in terms of Rule 6(5)(e).

The main reasons advanced by the Respondent for seeking the

admission of these affidavits are that: the applicant was at all times aware

that the Respondent disputed that it was in arrears with payments due in

terms of the loan agreement' the Applicant did not deal with this issue in its

founding affidavit and did not even mention the existence of the dispute; that

when the Respondent raised the dispute in its answering affidavit, the

Applicant endeavoured to counter same in its replying affidavit by relying on

Annexures "A", "B" and "C" of the affidavit. It was submitted that by adopting

this strategy, the Applicant precluded the Respondent from being able to deal

with these documents in its answering affidavit. It is therefore the purpose of

the affidavits to show that the aforementioned annexures to the replying

affidavit did not entitle the Applicant to appropriate the sum of R340 000,00

paid to it on behalf of the Respondent towards the liability of Prime Dime CC.

Mr. Finnigan, appearing for the Applicant, submitted that the affidavits

are both late and out of the ordinary sequence provided for in Rule 6(5). He

argued that a party tendering affidavits late and out of their ordinary sequence

must explain why they are out of time and satisfy the court that in all the

circumstances of the case they should be received. (James Brown & Hamer

v Simmons N.O. 1963(4) SA 656 (A) at 660F.) It was further submitted that

generally circumstances identified in Mkhanazi v van der Merwe 1970(1) SA

609 (A) at 626 need to be considered by the court before exercising its

discretion either to grant or refuse the application. The court must be

satisfied by the reasons of the Respondent that although the affidavits are

submitted late and out of the ordinary sequence, they should nevertheless be

admitted, otherwise it will not be inclined towards admitting the affidavits filed.

(Dawood v Mohamed 1979(2) SA 361 (D) at 365)

It was further argued that the explanation by the Respondent why the

evidence in the affidavits was not produced timeously is both unsatisfactory

and inadequate.

The principal point insisted on by Mr. Finnigan and also referred to in

his heads of argument is that the affidavits in issue are inadmissible because

they are contrary to the loan payment structure provided for in the written loan

agreement. He therefore argued that the affidavits seem to change the

provisions of the loan agreement.

Dealing with the same issue of admission of a fourth set of affidavits in

the application, in Afric Oil (Pty) Ltd v Ramadaam Investments CC 2004(1)

SA 35 (N) at 38 I - 39 A, MOLEKO J said:

"Normally in motion proceedings three sets of affidavits are allowed and no further affidavits may be filed without leave of Court. Such leave is in the discretion of the Court and such discretion is to be exercised judicially upon consideration of the facts in each case. In Herbstein and Van Winsen Civil Practice of the Supreme Court of South Africa at 359 it is stated that leave of Court will only be granted in special circumstances or if the Court considers such a course advisable. Special circumstances exist where something unexpected or something new emerges from applicant's replying affidavit. There must be a satisfactory explanation which negatives mala fide as to the reason why the information was not placed before the court at an earlier stage."

First, I deal with the availability of an automatic right to lead further

evidence or furnish further affidavits on the return date because the

Respondent was asked in the rule nisi to show cause why the provisional

order should not be made final. The Respondent here did not refer me to any

cases to support this submission and I am not aware of any. The point on

contentions dealt with by the affidavits is not new; the Respondent was well

aware of the Applicant's replying affidavit a long time ago as it was delivered

on 27 May 2004. There is no explanation as to why the affidavits were not

delivered before the hearing on 31 August 2004. This means the Respondent

waited until after the first opposed hearing before it delivered the affidavits on

27 September 2004. There is no explanation why this occurred. One would

expect that from the Respondent's point of view, it would have reacted more

urgently to such a replying affidavit. I will therefore agree with Mr. Finnigan

that this shows remissness on the part of the Respondent. It remains to be

decided whether such remissness can be corrected without material prejudice

to the Applicant (see Dawood v Mahomed [supra] at 365 F-G).

There was no prejudice that was identified by counsel for the Applicant

that might be suffered if the application is granted. I am aware of the

importance and necessity of abiding by rules and proper observance thereof,

but tend to agree with what PAGE AJ (as he then was) said in Dawood v

Mahomed (supra) at 365 G - H:

"Whilst in no way seeking to detract from the necessity for rules and the proper observance thereof it remains the fundamental task of the Court to attempt to adjudicate upon the real issues between the parties rather than to allow itself to be diverted from that course by technicalities which would have the effect of precluding a full ascertainment of all facts relevant to the issues in dispute."

I am accordingly of the view that no material prejudice will be suffered by the

Applicant if the affidavits are admitted and accordingly exercise my discretion

in favour of the Respondent. On the issue of an automatic right to furnish

further evidence after a rule nisi calling on a party to show cause why the

order should not be made final, to my mind it is only a logical conclusion that

"showing cause" is by way of furnishing further evidence. I do not, however,

wish to express any firm view on this point since I have exercised my

discretion in favour of the Respondent.

3. Salient facts

This application arose from the indebtedness, which is conceded by

the Respondent. The Applicant and the Respondent, both duly represented

by their representatives, concluded a loan agreement in Durban on 27

February 2003. The capital amount of the loan was R1 319 957,39 with the

interest rate of 17%. In terms of the loan agreement the Respondent agreed

to repay the principal debt, finance charges and all other amounts due under

the loan agreement to the Applicant in monthly instalments on the last day of

each month, which instalments were to be calculated in accordance with the

variations in the Applicant's prime overdraft rate until the principal debt,

finance charges and any other amounts due to the Applicant in terms of the

agreement were paid in full. The arrangements were that the Respondent

would pay the principal debt, together with interest thereon, in 108 monthly

instalments of R23 890,74.

In breach of the terms set out in the loan agreement, the Applicant

alleges that the Respondent failed to punctually pay the monthly instalments

so that as at 30 November 2003, the Respondent was indebted to the

Applicant in the amount of R165 293,88, being the arrears. It was further

alleged that notice was given to the Respondent to pay the said sum, but that

the Respondent failed to oblige. The Respondent denies that the Applicant

has a right in terms of the loan agreement to cancel the contract and claim

the outstanding balance of the loan. The Respondent submits that it is the

Applicant who breached the loan agreement by transferring to the loan

account of Prime Dime CC the amount which was paid on behalf of the

Respondent.

Clause 13.2 of the loan agreement provides thus:

13. Event of Default

13.2 If an Event of Default has occurred, then at once or at any time thereafter for so long as such Event of Default is continuing, the Lender may, without notice to the Borrower, elect to cancel the Loan and, without prejudice to any other rights it may have (including the right to specific performance and the right to claim damages), require that the Borrower immediately repay the Loan, which shall be deemed to be immediately due and payable notwithstanding the fact that the date for payment has not yet arrived. In addition to the repayment of the Loan pursuant to this clause 13 the Borrower shall pay:

13.2.1 all reasonable wasted costs and funding break costs incurred by the Lender in respect of the transactions contemplated by this Agreement and

13.2.2 all other amounts outstanding under this Agreement by the Borrower, including but not limited to arrear Interest Amounts and any default interest."

This is the provision which, Applicant argues, entitles it to the claim of

R1 434 661,47 with interest as at the rate of 14% per annum on 30 November

2003 to date of final payment.

It is also common cause that the letter of demand on the

aforementioned debt was delivered to the registered office of the Respondent

on 9 December 2003. Part of the letter, as far as is relevant here, provided

that:

"2. Our client hereby instructs us to notify the close corporation that our client claims immediate payment of the full balance outstanding in terms of the Medium Term Loan Agreement in the amount of R1 434 661,47 which is immediately due and payable as a result of the breach.

3. We advise that in terms of Section 69 of the Close Corporations Act 69 of 1984 (as amended), the close corporation has 21 (twenty one) days from date of service hereof to pay the aforesaid full balance, or to secure or compound for it to the reasonable satisfaction of our client. We hereby place it on record that should payment as aforementioned not be made within 21 (twenty one) days, or should the close corporation have failed to secure or compound for it to the reasonable satisfaction of our client, our client shall proceed to apply for the liquidation of the close corporation without further notice."

It is common cause that, notwithstanding the abovementioned letter,

the Respondent failed to pay, secure or compound payment of the sum of its

indebtedness in favour of the Applicant or any portion thereof. Hence the

Respondent seeks an order for the winding-up of the Respondent.

4. Winding-up Application

The Applicant's case for the winding up of the Respondent is based

upon the allegation that it is deemed to be unable to pay its debts in terms of

the provisions of s 69(1)(a) or (c) of the Close Corporation Act, alternatively

that it is just and equitable that the Respondent be wound up in terms of the

provisions of s 68(d) of the Act. Sections 68 and 69 of the Close

Corporations Act provide thus:

68. Liquidation by Court - A corporation may be wound up by a Court, i f -

(a) members having more than one half of the total number of votes of members, have so resolved at a meeting of members called for the purpose of considering the winding-up of the corporation, and have signed a written resolution that the corporation be wound up by a Court;

(b) the corporation has not commenced its business within a year from its registration, or has suspended its business for a whole year;

(c) the corporation is unable to pay its debts; or

(d) it appears on application to the Court that it is just and equitable that the corporation be wound up.

69. Circumstances under which corporation deemed unable to pay debts - (1) for the purposes of section 68(c) a corporation shall be deemed to be unable to pay its debts if -

(a) a creditor, by cession or otherwise, to whom the corporation is indebted in a sum of not less than two hundred rand then due has served on the corporation to pay the sum so due, and the corporation has for 21 days thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) any process issued on a judgment, decree or order of any court in favour of a creditor of the corporation is returned by a sheriff, or a messenger of a magistrate's court, with an endorsement that he has not found sufficient disposable property to satisfy the judgment, decree or order, or that any disposable property found did not upon sale satisfy such process; or

(c) it is proved to the satisfaction of the Court that the corporation is unable to pay its debts.

(2) In determining for the purposes of subsection (1) whether a corporation is unable to pay its debts, the Court shall also take into account the contingent and prospective liabilities of the corporation."

Sections 68 and 69 are identical to the relevant provisions of sections

344 and 345 of the Companies Act 61 of 1973. Thus the views which have

been expressed with regard to companies in this regard are applicable in

respect of close corporations (see Ter Beek v United Rescources CC and

Another 1997(3) SA 315 (C) at 326 J - 327 A and Kanakia v Ritzshelf 1004

CC t/a Passage to India 2003(2) SA 39 (D) at 45 A - D).

5. Proof

It is trite that the quantum of proof for the granting of a final winding up

order is "a clear balance of probabilities." (per MARGO J in Wackrill v

Sandton International Removals (Pty) Ltd and Others 1984(1) SA 282 (W) at

286 A and see Ter Beek v United Resources CC and Another (supra) at 328

I.)

It is also a well established principle of our law that the court's power to

wind up the corporation is a discretionary power irrespective of the grounds

upon which the application is founded. This discretion operates even in

instances, like in casu, where application for winding up is based on a

deemed inability to pay debts as envisaged by s 69(1) (Ter Beek v United

Resources CC and Another (supra) at 331 I and cases cited therein; Kanakia

v Ritzshelf 1004 CC t/a Passage to India (supra) at 44 I - J; and Meskin

Henochsberg on the Close Corporations Act Vol. 3 at 212 para 68.1).

In what follows I will deal firstly with the application on the alleged

deemed inability of the Respondent to pay is debts. If the Applicant is

successful on this ground there will be no need for me to further decide the

case on the just and equitable ground. The case for the Applicant that it is

just and equitable that the Respondent be wound up is captured in paragraph

5.4 of the founding affidavit at page 14 of the papers thus:

"The Applicant humbly submits that it will be just and equitable to the general body of the creditors of the Respondent from (sic) the Respondent to be placed under winding up order and that a Liquidator duly appointed by the Master of the above Honourable Court to take immediate steps to collect its assets, to cause the same to be realized in the best possible manor (sic) in the interest of the general body of creditors, the proceeds of such realisation to be dealt with in accordance with the proper order of preference."

It appears from the papers lodged with the Court that the gravamen for

the case of the Applicant is that the Respondent is unable to pay its debts.

For this reason I consider it expedient to deal, firstly, with the deemed inability

to pay. If it is not proved or if winding up cannot be granted on this ground I

will proceed to deal with whether the case has been made out for the winding

up of the Respondent in terms of s 68(c) By adopting this approach I do not

intend to convey that matters relevant to the question whether it would be just

and equitable for the corporation to be wound up would not be relevant under

the ground of deemed inability to pay.1 Overlapping might to a certain extent

occur. The approach I have decided upon seems to be convenient in the

present case.

6. Respondent's inability to pay its debts

As far as the alleged inability of the Respondent to pay its debts is

concerned, the Applicant submits that notwithstanding the expiry of the time

period of 21 days referred to in the letter of demand, the Respondent has

failed to pay, secure or compound payment of its sum of indebtedness in

favour of the Applicant.

Ex facie the papers, the Respondent opposes the application for its

winding-up on the following grounds:

(a) that it is able to pay its debts;

(b) that certain payments made by the Respondent were wrongly allocated

by the Applicant and that had they been allocated properly to the

Respondent's account, the Respondent would have been in advance

of its monthly obligations;

(c) that consequently the Respondent is not in arrears and that there is a

bona fide dispute which precludes the Court from granting a final

winding up order; and

1 I adopt this approach fully aware that in Ter Beek v United Resources CC and Another (supra) VAN REENEN J considered the application on both the deemed inability to pay and just and equitable ground. On the first basis the learned Judge found for the Applicant and on the second one it was decided that the Applicant failed to discharge onus that the first Respondent should be wound up on the basis that it is just and equitable. To my mind, with respect, it seems convenient that if the Applicant discharges onus on one of the grounds it became unnecessary to deal with the other because the effect of the winding-up order is the same either under s 68(c) read with s 69(1)(a) and (c) or s 68(d). This approach which I follow was followed, albeit in a different format, by NEPGEN J in de Franca v Exhaust Pro CC (De Franca Intervening) 1997(3) SA 873 (SE at 891 G - I .

(d) that the evidence placed before the Court was that the Respondent

has no major creditor other than the Applicant; it is a property owning

close corporation and does not trade in the usual sense and that it

derives an income from rentals.

Relying on the decision in Ter Beek v United Resources CC and

Another (supra) at 331 A - G, Mr Pammenter argued that in any event, and

even if the provisions of s 69(1) had been satisfied, the deeming provision

created thereby is not irrebuttable.

The Respondent is quite correct that where the Respondent disputes

liability on the bona fide and reasonable ground, this Court is precluded from

granting a final winding up order. (see Ter Beek case (supra) and

Commonwealth Shippers Ltd v Mayland Properties (Pty) Ltd 1978(1) SA 70

(D) and Mayer N.O. v Bree Holdings (Pty) Ltd 1972 (3) SA 353 (T) at 354 - 5).

The approach to be followed when dealing with factual disputes in

winding-up applications was laid down in Kalil v Decotex (Pty) Ltd 1988(1)

SA 943 (A) at 976 A - 979 E. In Payslip Investment Holdings CC v Y2K TEC

Ltd 2001(4) SA 781 (C) at 783 G - I, BRAND J, with respect, succinctly

expressed approval of the Kalil case approach thus:

"According to these guidelines a distinction is to be drawn between disputes regarding the respondent's liability to the applicant and other disputes. Regarding the latter, the test is whether the balance of probabilities favours the applicant's version on the papers. If so, a provisional order will usually be granted. If not, the application will either be refused or the dispute referred for the hearing of oral evidence, depending on, inter alia, the strength of the respondent's case and the prospects of viva voce evidence tipping the scales in favour of the applicant. With reference to disputes regarding the respondent's

indebtedness, the test is whether it appeared on the papers that the applicant's claim is disputed by respondent on reasonable and bona fide grounds. In this event it is not sufficient that the applicant has made out a case on the probabilities."

[Emphasis added].

6.1 Debt not due and payable

I propose firstly to deal with the issue that the Respondent is not in

arrears and consequently that the debt is not due and payable. The

Respondent in its answering affidavit does not pertinently deny the conclusion

of the loan agreement with the Respondent. What is denied is that the

amount is not due and payable because the Applicant breached the

agreement by not crediting the Respondent's account with the R38 945,67

but crediting same to the account of Prime Dime CC. It was argued in the

answering affidavit that had the Applicant complied with its obligation, as

mandated by the Respondent, the Respondent would have been substantially

in advance of its monthly instalment obligations.

The Respondent, as alluded to above, conceded the signing of the

loan agreement and is therefore bound by the terms thereof. Clause 5 of the

loan agreement provides thus:

"5. Repayment of the Loan

The Borrower shall repay the Loan in the amounts and on the dates (the 'Capital Repayment Dates") set out in Schedule 2. Under no circumstances shall the Borrower be entitled to repay the Loan or any part thereof prior to the respective dates set out in Schedule 2."

Clauses 19.2, 19.3 and 19.4 provide:

"19.2 entire contract

This agreement contains all the express provisions agreed on by the parties with regard to the subject matter of the agreement and the parties waive the right to rely on any alleged express provision not contained in this Agreement.

19.3 no representation

A party may not rely on any representation which allegedly induced that party to enter into this Agreement, unless the representation is recorded in this agreement.

19.4 variation, cancellation and waiver

No contract varying, adding to, deleting from or cancelling this Agreement, and no waiver of any right under this Agreement shall be effective unless reduced to writing and signed by or on behalf of the parties."

To my mind, the above provisions of the loan agreement, including the

Default Clause 2 are conclusive. The obligation referred to by the Respondent

that the Applicant should have paid certain amounts of money towards its

indebtedness is contrary to the payment structure agreed to in terms of

Clause 5. There is also evidence of blatant disregard of Clause 19 of the loan

agreement. In HNR Properties CC and Another v Standard Bank of South

Africa Ltd 2004(4) SA 471 (SCA) at 479 C - D, SCOTT JA said:

"In SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere 1964(4) SA 760 (A) this Court held that a term in a written contract providing that all amendments to the contract have to comply with specified formalities is binding. The principle has been consistently reaffirmed, most recently by this Court in Brisley v Drotsky 2002(4) SA 1 (SCA)."

In the circumstances, reliance by the Respondent on the agreements

which amounted to variations of the lease agreement is precluded by Clauses

19.2, 19.3 and 19.4. To hold otherwise would be to render the "Shifren

principle" wholly ineffective.3 I further agree with counsel for the Applicant

that parol evidence rule prevents the admission of extrinsic evidence. This

rule was formulated as follows by WATERMEYER JA in Union Government v

Vianini Ferro-Concrete Pipes 1941 AD 43 at 47: 4

" when a contract has been reduced to writing, the writing is, in general regarded as the exclusive memorial of the transaction and in a suit between the parties no evidence to prove its terms may be given save the document or secondary evidence of its contents, nor may the contents of such document be contradicted, altered, added to or varied by parol evidence."

I therefore decide, ex facie, the papers, especially the loan agreement,

that the amount claimed by the Applicant was due and payable as provided

by Clause 13 of the loan agreement. I therefore proceed to deal with the

question of the Respondent's ability to pay its debts.

6.2 Inability to pay

Mr. Finnigan submitted that it is not necessary for the Applicant to

prove that the Respondent is in fact unable to pay its debts because winding

up is sought on the basis that the Respondent is deemed to be unable to pay

its debts. Indeed it has been opined that the conclusion that the company is

unable to pay its debts is to be the conclusion of law; for the purposes of the

exercise by the Court of the jurisdiction to wind up under the section:

"the company is, where any of such situations exist, in law unable to pay its debts even if it is able to pay them (as may, indeed, be the case, e.g. a company may ignore a demand under s 345(1)(a) but yet be able to pay all its debts.)"

3 Philmatt (Pty) Ltd. v Mosselbank Development CC 1996 (2) SA 15 (A) at 22 I - 23A; Muller v Coca-ola SABCO (SA) (Pty) Ltd 1998 SA 824 (SE) at 827 H - 828 C and First National Bank of South Africa Ltd v Myburg and Another 2002(4) SA 176 (C) at 183 G - H. 4 This principle has most recently been applied in Man Truck & Bus (Pty) Ltd v Dusbus Leasing CC and Others 2004(1) SA 454 (W) at 480E.

(Meskin Henochsberg on the Companies Act (supra) at 707; Commonwealth

Shippers Ltd v Mayland Properties (Pty) Ltd (supra) at 71 and S v Rosenthal

1980(1) SA 65 (A) at 75 -77).

Considering the question of failure of the company to pay its debts in

ABSA Bank Ltd v Rhebokskloof (Pty) Ltd and Others 1993 (4) SA 436 (C) at

446 H - 447A BERMAN J said:

"A debtor's unexplained failure to pay his debt is, as was stated in Mackay v Cahi referred to above at 204 H, a fact to which the Court has always attached much weight in determining the question of solvency. The oft-repeated and, with respect, eminently commonsensical and practical assessment of INNES J in De Waard v Andrew & Thienhans Ltd 1907 TS 727 at 733 is singularly apt in the instant context, viz:

'To my mind the best proof of solvency is that a man should pay his debts; and therefore I always examine in a critical spirit the case of a man who does not pay what he owes'

words which were echoed by BRISTOWE J in his judgment in the same case, in which he said at 739:

'After all, the prima facie test of whether a man is insolvent or not is whether he pays his debts; and if he cannot pay them, that goes a long way towards proof that he is insolvent.'

Furthermore, this approach has been followed by our courts since its adoption

by CANEY J in Rosebanch & Co (Pty) Ltd v Singh's Bazaars (Pty) Ltd

1962(4) SA 593 (D) that evidence that a company has failed to pay its debts

is a cogent prima facie proof of inability to pay its debts. (See also Payslip

Investment Holdings CC v Y2K TEC Ltd (supra) at 787 A - B).

As alluded to above, in its answering affidavit, Respondent denies that

it is unable to pay its debts and it was further submitted in the same

answering affidavit that:

"I point out to this Honourable Court that the Respondent is a property owning close corporation which does not trade in the usual sense. It derives an income from rentals received and has no other major creditors."

One must point out at this juncture that the Respondent did not provide

any evidence to elaborate on the reasons to refute the allegation of inability to

pay debts. One would have expected the Respondent to provide the value of

the properties owned; the rentals received monthly and possibly other

creditors which the Respondent has. By way of analogy I will refer to Payslip

Investment Holdings CC v Y2K TEC Ltd (supra) at 787 F - H where the

Respondent demonstrated its ability to pay debts by: presenting a bank

guarantee in terms of whereof the bank bound itself to the Applicant as co-

principal debtor with Respondent for payment of the full amount claimed by

the Applicant in the founding papers; by filing an affidavit deposed to by the

Respondent's auditors declaring that the Respondent is both legally and

commercially solvent and by annexing Respondent's draft financial statement

for the year ending 29 February 2000. The Applicant alleges that the

Respondent is unable to pay its debts, this is the case the Respondent was

required to answer by, one would imagine, showing that there are liquid

assets or readily realizable assets available out of which, or from the

proceeds of which, the company is in fact able to pay its debts. (See Meskin

Henochsberg on the Companies Act (supra) at 698). The bare denial thereof

and uncorroborated reference to the property owned by the Respondent and

rentals received thereof is of no assistance to this Court.

The Applicant further submitted that it is not necessary that it alleges or

proves, in terms, that the Respondent does not hold security for the claim. In

reply, the Respondent submitted that the court should refuse to exercise its

discretion in favour of granting a winding up order for the reason that in the

founding affidavit, the Applicant contended that it held no security for the

indebtedness of the Respondent, whereas later on it was conceded that, in

fact, it holds a mortgage bond over property of the Respondent. Although it is

not necessary, as argued by the Applicant, for the Applicant in this case to

prove that the Respondent holds, or does not hold, security for the Applicant's

claim, it has been opined, correctly so, that ordinarily the creditor should

disclose the position in this regard as this may be relevant to the exercise of

the court's discretion. (See Meskin Henochsberg on the Companies Act

(supra) at 714).

One should mention here that even if one can attach some value to the

information that the Applicant holds security for the Respondent's claim, the

Respondent did not provide any proof of the value of the property or indicate

whether or not the property is readily saleable. In any event, according to the

valuation commissioned by the Applicant in February 2002, the market value

of the property at that time was R1 260 000,00 which is less than the amount

of R1 434 661,47 being the capital debt owed to the Applicant. I have no

reason to dismiss valuation commissioned by the Applicant since the

Respondent tendered no evidence to prove the market value of the said

property or any other property owned by it.

Now, given the fact that generally the Court will exercise its discretion

in favour of the Respondent if it is shown that there are liquid assets or readily

5 See page 1 - 1 4 above and a case referred to.

available assets out of which, or from the proceeds of which, the Respondent

is able to pay its debts (see Rosenback v Singh Bazaars (supra) at 579 and

Ebrahim v Pakistan Bus Service 1964(4) SA 146 (N) at 147), the fact that the

Respondent has not done so, coupled with the absence of explanation for its

failure to have done so is, to my mind, susceptible of only one reasonable

inference, namely that the Respondent is unable to pay its debts. Mr.

Pammenter pressed on me that even if it is proved to the satisfaction of the

court that the corporation is unable to pay its debt, the deeming provision

created thereby is not irrebuttable. I agree that the deeming provision is not

irrebuttable,5 but my short reply to the case for the Respondent on this issue

is that there was no evidence to rebut that deeming provision.

7. Conclusion

In view of the foregoing, I am satisfied that ex facie the papers the

Applicant has proved on a balance of probabilities that the Respondent is

unable to pay its debts in respect of the loan agreement signed by the parties.

I accordingly find that the Applicant has succeeded in proving that the

Respondent is unable to pay its debts. As alluded to above, because of the

decision I have just made on the inability of the Respondent to pay its debts, it

is unnecessary to consider whether a case has been made out for winding up

of the Respondent on the basis that it is just and equitable to do so in terms of

s 68(1)(d) of the Act.

In the premises a final winding up order is granted with costs.

TSHABALALA JP

Date of Hearing: 25 November 2004

Date of Judgment: February 2005

Counsel for Applicant: Mr. D. Finnigan

Instructed by: Tate & Nolan Inc

Counsel for Respondent: Mr. C J . Pammenter, SC with him Mr. D. Woodhaymal

Instructed by: Sanjay Lorick & Partners