in this issue commercial law reports

The Law Publisher CC CK92/26137/23

Part 6 (2020)

Commercial Law Reports

Consulting Editorial Board:The Honourable FR Malan BA LLD, Former Judge of the SupremeCourt of Appeal, The Honourable P Levinsohn BA LLB, FormerDeputy Judge President of the Kwazulu Natal Provincial Division, TheHonourable S Selikowitz BA LLB, Former Judge of the High CourtEditor:M Stranex BA LLB, Advocate of the High Court of South Africa

CONTENTSRUCKSTUHL v WAKENSHAW ESTATE HOME OWNERSASSOCIATION (KZD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357Rectification of a certificate issued in terms of section 11(3)(b) of the SectionalTitles Act (no 95 of 1986)ABSA BANK LTD v CROSSMOOR TRANSPORT (PTY) LTD (KZP) 376Exercise of a court’s discretion in determining whether a winding-up shouldbe granted against a company, and whether the order should be a provisionalorder or a final order.BESTER N.O. v QUINTADO 120 (PTY) LTD (WCC) . . . . . . . . . . . . 403A party claiming that money paid to a company constitutes a claim entitlingthat party to liquidate the company on the grounds of that company’sinsolvency

Company demand in terms of section 345

Liquidation locus standi of creditor money

laundering scheme of company, proof of

claim of company, provisional or final order

Property rectification of s11(3) certificate

Sectional Title rectification of s11(3) certificate

In this issue

RUCKSTUHL v WAKENSHAW ESTATE HOME OWNERSASSOCIATION

Rectification of a certificate issued in terms of section 11(3)(b) of the SectionalTitles Act (no 95 of 1986)

Judgment given in the Kwazulu Natal Division, Durban, on 13 July 2020 byOlsen J

Ruckstuhl and the second plaintiff were owners of sectional title units inWakenshaw Manor, a development which had its origins in a subdivided pieceof land on which three other developments had taken place. Bodies Corporatewere established for the sectional title developments on these properties. Theintention was that the four developments would be treated as one for certainpurposes. It was for that reason that the Wakenshaw Estate Home OwnersAssociation, was created.

Clause 5.3 of the Association’s constitution provided that when a memberbecame the registered owner of an erf he would ipso facto become a memberof the Association and when he ceased to be the owner of an erf, he would ipsofacto cease to be a member of the Association.

Ruckstuhl determined that the conditions under which he and the secondplaintiff held their sectional titles, as recorded in certificates filed with theRegistrar of Deeds in terms of section11(3)(b) of the Sectional Titles Act (no95 of 1986), did not contain conditions rendering them members of or liableto the Association.

Ruckstuhl sought an order declaring that the plaintiffs were not members ofthe Association, not subject to the Association’s constitution, and not liable tothe Association for any claims made against them under its constitution.

The Association counterclaimed that its constitution as well as the section11(3)(b) certificates relating to Wakenshaw Manor should be rectified.

Held—Every owner of an erf in a sectional title unit in the rest of what was the

parent property regarded themselves as members of the Assocation uponacquiring ownership of an erf or a unit. All owners thought that they hadbecome members, and that they were subject to the constitution and conductrules of the Association, even though they may not have seen the constitutionat the time when they became owners of property on the estate. The ownersbehaved consistently with their belief that each owner was a member of theAssociation. On each occasion of the acquisition of ownership within the estatethere was an error with regard to the defendant's constitution common to thenew owner, the existing owners and the defendant itself. It would have been

358 RUCKSTUHL v WAKENSHAW ESTATE HOME OWNERS ASSOCIATIONOLSEN J 2020 SACLR 357 (KZD)

perfectly obvious to any newcomer, as it was to those already members of theAssociation, that a single homeowners association was necessary.

The case for the rectification of the constitution was established.As far as the counterclaim was concerned, the observations made in the case

of Willow Waters Homeowners Association (Pty) Limited v Koka NO 2015 (5)SA 304 (SCA) were directly applicable. In that case, it was held that similarlyto municipalities, bodies corporate, which enjoy the statutory protectionafforded by the embargoes, extend credit to all homeowners and their estateswithout the benefit of requiring security therefore. There is no materialdifference between homeowners' associations and bodies corporate in termsof their objects, activities and status. There is no basis to deprive theassociation of the protection afforded by the embargo which has an identicalpurpose and effect to that provided to bodies corporate (and municipailties) bya law of general application.

These observations supported the proposition that the rectification of thecertificates relating to Wakenshaw Manor was desirable if not necessary. Itwas certainly undesirable, focusing upon the peculiarities of the communitieswhich now reside on the parent property, that some of them are bound to theprovisions under discussion by their title deeds, but not others. Given that thebenefits provided by the Association were shared by all, it was unacceptablethat the obligations to the Assocation should not be shared by all on equivalentterms.

Confining the enquiry to deeds to immovable property, that in the case of atitle deed to free standing property it would be difficult to contend for theexistence of an error in the deed, and its rectification contrary to the wishes ofthe owner, in the absence of an antecedent agreement or a common intentionthat the deed should have contained something, or should not have containedsomething, when it was registered. But in the case of deeds to property whichis to be occupied and enjoyed in terms of peculiar communal arrangementssuch as are found in so-called ‘gated estates’, the position is different.

The Registrar of Deeds should be authorised to proceed with the claimedrectification to the section 11(3)(b) certificate relating to Wakenshaw Manoron condition that the Registrar shared the view that the rectification isdesirable, or regards it as necessary.

Advocate M E Stewart instructed by Northmore Montague Attorneys, Durban,appeared for the plaintiffsAdvocate P J Combrinck SC instructed by Pearce, Du Toit & Moodie, Durban,appeared for the defendant

RUCKSTUHL v WAKENSHAW ESTATE HOME OWNERS ASSOCIATION 359OLSEN J 2020 SACLR 357 (KZD)

Olsen J:[1] This action concerns established housing developments on propertywhich, before it was subdivided, was described as the Remainder ofPortion 405 (of 11) of Lot 56 No. 931. It was 6,4525 hectares in extent.(I will call it the parent property.) The parent property was considerablylonger than it was wide. Its length was on a more or less south to northaxis, the southern boundary being the one over which vehicular accessto the property might be gained.[2] In 2003 the then owner of the parent property submitted anapplication for permission to lay out a private township then tocomprise four subdivisions. This was granted in 2004. The fourportions were delineated by boundaries across the width of the parentproperty. The most southern portion became Rem of Ptn 405 (of 11).The one to the north of that was Ptn 725 (of 405) and the next two, inorder proceeding in a northerly direction, were Ptns 726 and 727, bothof 405. These subdivisions were created to permit a phased housingdevelopment. It was a condition of the subdivision that a right of wayservitude would traverse the Remainder and Ptns 725 and 726 in orderto ensure access to Ptns 725, 726 and 727.[3] Ptn 727 was the first to be developed. The developer decided oncluster housing which required the subdivision of the portion intoseparate housing plots which could be sold under freehold title. Thiswould suit the cash flow requirements of the developer. (Thedevelopment on Ptn 727 was accordingly named ‘Clusters’.) Theintention with regard to the Remainder and Ptns 725 and 726 was thatthey would become sectional title developments. That is whathappened. (The development of Ptn 725 was originally to include anhotel, but that did not eventuate.)[4] The development (ie construction of buildings on land for saleeither on freehold title on Clusters or on the other subdivisions undersectional title) took place between 2005 and 2008. The development onPtn 726 was called ‘Wakenshaw Estate’; Ptn 725 was called ‘lhlatiLodge’; and the Remainder was called ‘Wakenshaw Manor’. BodiesCorporate were established for the sectional title developments on thesethree properties.[5] The intention was that the four developments would be treated asone for certain purposes. From the evidence before me there is no doubt


that it was for that reason that the defendant in this case, theWakenshaw Estate Home Owners Association, was created. Accordingto its constitution it is a ‘common law corporate body’ having perpetualsuccession and the capacity to be sued in its own name. Its objects areof the type commonly found when such associations are established toattend to the shared needs of the owners of property in so-called gatedestates. It had to provide and maintain a secure environment by way ofgate controlled access to the estate, the provision of perimeter fencingand the appointment of security staff. It had to attend to roads andverges, street lighting, areas of conservation significance, and ensurethat good standards of conduct were maintained by its members andoccupiers of housing on the estate. For these purposes it would raiselevies and, if necessary, would impose fines and penalties. Its memberswould be the owners of erven and, at the outset, obviously thedeveloper. Clause5.3 read as follows.

'When a member becomes the registered owner of an Erf he shall ipsofacto become a member of the association and when he ceases to bethe owner of an Erf, he shall ipso facto cease to be a member of theassociation.’

No registered owner of an Erf would be entitled to resign as a memberof the association.[6] Of significance to one of the disputes raised in this case is the factthat the word ‘Erf ' was defined in clause 1 of the constitution to mean‘an Erf in the township, a sectional title unit in the township or a minisubdivision of an Erf in the township’. That covered all forms of titleto be available on the parent property.[7] The first and second plaintiffs are owners of sectional title units inWakenshaw Manor. There were originally four plaintiffs, but the thirdand fourth of them have not pursued the case.[8] The plaintiffs instituted action against the defendant for an orderdeclaring that the plaintiffs are not members of the defendant, notsubject to the defendant's constitution, and not liable to the defendantfor any claims made against them under the defendant's constitution.(Alternative relief was sought declaring that any oral or tacitagreements the plaintiffs had concluded to become members of thedefendant were invalid or lawfully cancelled. The alternative claims


were not supported by evidence tendered on behalf of the plaintiffs.With respect it appears to me that their decision not to pursue thoseclaims was the correct one.) In pleading the case the plaintiffs pointedout that the conditions under which they held their sectional titles, filedwith the Registrar of Deeds in terms of s11(3)(b) of the Sectional TitlesAct, 95 of 1986, did not contain conditions rendering the plaintiffsmembers of or liable to the defendant.[9] It is apparent from evidence led by the defendant that this actionwas the culmination of dissatisfaction that had arisen amongst somepeople, but especially the plaintiffs, as to the conduct of the defendant.It is apparent from the minutes of a meeting of the defendant held in2015 that an attorney engaged by the body corporate of WakenshawManor had identified shortcomings (which the defendant classifies aserrors) in the constitution of the defendant and in the section 11(3)(b)certificate recording the conditions upon which title to some sectionaltitle units are held. The plaintiffs claim that these shortcomings justifythe grant of the declaratory relief they seek.[10] It is apparent that having thus been alerted, the defendant, orperhaps the defendant and the plaintiffs, launched a thoroughinvestigation into the documents generated by or in connection with thedevelopment of the parent property. (This investigation generatedreams of documents, some of which were unnecessarily placed beforethe court.) The defendant delivered a plea asserting that its constitutionas well as the s11(3)(b) certificate relating to Wakenshaw Manor fallto be rectified. A counterclaim to the same effect was delivered. Aconveyancer (who had emigrated, and was accordingly not called) wasresponsible for producing the s11(3)(b) certificate. He has not beenheard. Nevertheless, on the evidence before me the conveyancer’sstandard of work was below the required one.[11] The investigation into the s11(3)(b) certificate relating toWakenshaw Manor revealed also that the registration of the right ofway servitude over the Remainder had been omitted. That was anadditional subject dealt with in the defendant’s claim-in- reconvention.The plaintiffs accepted that the certificate clearly had to be rectified tocorrect the omission of the right of way servitude, and an order wasmade by consent dealing with that aspect of the case.[12] The defendant joined all affected parties to its


claim-in-reconvention and I was given the assurance by counsel that allof them, including the Registrar of Deeds, had due notice. TheRegistrar of Deeds delivered a report abiding the decision of this court.THE DEFENDANT'S CONSTITUTION[13] In their particulars of claim the plaintiffs pleaded that membershipof the defendant is (and was) confined to persons who are registeredowners of erven or sectional title units in the estate, and thatWakenshaw Manor was not part of the estate as defined in thedefendant's constitution.[14] The definition of the word ‘estate’ where it appears in clause 1 ofthe constitution of the defendant reads as follows.

'1.1.13 ‘Estate’ means the township shown on General Plan2004/445Aconsisitng of Erven 739 to 754 Balitoville.'

The estate, according to this definition, is comprised of Clusters only.The defendant's case is that the incorrect layout plan is referred to inclause 1.1.13 which must be rectified to read as follows.

'Estate- means the township shown on Township Layout Plan number2003/7248 consisting of the remainder of Portion 405 and subdivision725, subdivision 726 and subdivision 727 including subdivisions 739to 754 Balitoville shown on Township Layout Plan number2004/445A'.

[15] The developer in this matter was the Wakenshaw Trust. Thedefendant called a Mr Richard Chapman, a builder, who was a trusteeof the developer at the material time and who project managed theentire development. His evidence was that notwithstanding the initialsubdivision of the parent property into four parts, the intention was thatthere would be a single gated estate. It was discussions with themunicipality and the water authority, which were to service the estate,which generated the decision that there had to be a single jointhomeowners association covering the entire parent property.[16] It will be recalled that Clusters was the first of the foursubdivisions to be developed. A Mr Richie, a property administrator,was entrusted with the duty of drawing up the defendant's constitutionas well as the constitution of the homeowners association exclusivelyfor Clusters. It was regarded as necessary for Clusters to have its ownhomeowners association (in addition to the defendant) because it wasnot a sectional title development and accordingly did not have a body


corporate. According to Mr Chapman the two constitutions wereprepared by Mr Richie and they were both signed at the inauguralmeetings of the defendant and the Wakenshaw Clusters HomeownersAssociation on 26 April 2005. The signed versions of the twoconstitutions have gone missing. According to Mr Jamieson, who wasemployed by Wakefields Property Management, that firm bought MrRichie's practice, and got with it Mr Richie's computer on which theunsigned texts of the two constitutions were found. Those were thedocuments relied upon by the parties as containing the provisionswhich govern in particular the defendant homeowners association.[17] The constitutions of the defendant and Clusters are almost exactlythe same. Clearly the drafter was intent on streamlining his work. Itlooks like the constitution for Clusters was drafted first, as thedefinition of the estate which is common to the two constitutions is thecorrect definition for Clusters. It appears that the drafter, when turninghis hand to the defendant's constitution, did little or nothing more thanchange the title. The result is that the whole of the parent property wasnot included in the definition of the estate for which the defendantwould become responsible. (Furthermore, the objects of the Clustersassociation are the same as the defendant's, a situation which is at bestconfusing.)[18] Counsel were correctly in agreement that the defendant’sconstitution is at least a contract between the members of thedefendant. Counsel for the plaintiffs argues that the requisites for theclaim of rectification cannot be met in this case because there could nothave been any common mistake when the terms of the defendant'sconstitution were fixed because, at the time the constitution came intobeing, only the Wakenshaw Trust was or became a member of thedefendant. In my view there is no merit in this argument.[19]


[21] Mr Combrinck SC, appearing for the defendant, has argued thatthe initial mistake was one common to the first trustees of thedefendant and the developer (in its capacity as owner at the time of allthe subdivisions of the parent property), and that the error, common tothose two parties, would on its own justify the rectification claimed bythe defendant. Rectification is relief which is necessary to determinerights and obligations in the context of enforcement. The underlyingprinciple of rectification was put thus in Tesven CC and Another vSouth African Bank of Athens 2000 (1) SA 268 (SCA) at para 16.

'To allow the words the parties actually used in the documents tooverride their prior agreement or the common intention that theyintended to record is to enforce what was not agreed and sooverthrow the basis on which contracts rest in our law: theapplication of no contractual theory leads to such a result'.

[22] At this time the issue of enforcement arises not between theoriginal contracting parties (ie the developer and the first trustees of thedefendant) but between the defendant and the current owners of ervenor units. The original error is perpetuated, but the common intention it


offends is the one shared between current members and the defendant.I accordingly prefer to reason along the lines stated earlier, withoutdeciding the question as to whether the original error which unwittinglycontradicted the original common intention of, or antecedent agreementbetween, the developer and the defendant's first trustees justifies therectification sought by the defendant.RECTIFICATION OF THE SECTION 11(3)(b) CERTIFICATE[23] In further elucidation of their claim to be entitled to an orderdeclaring that they are not, and are not required to be, members of thedefendant, the plaintiffs plead that the schedule of conditions underwhich title is held to sectional title units in Wakenshaw Manor, issuedunder s11(3)(b) of the Sectional Titles Act, 1986, do not render theplaintiffs members of the defendant.[24] In its claim-in-reconvention the defendant seeks rectification ofthe certificate relating to the units in Wakenshaw Manor by the additionof two further conditions as conditions E and F. Condition E is thematter of the right of way servitude mentioned earlier, which has beenresolved, the plaintiffs admitting that rectification of the certificate inthat regard is necessary. Condition F has two parts, the one grantingwhat is called an ‘Omnibus servitude for services’ in favour of thedefendant, and the other (the more contentious part) providing asfollows.

'HOME OWNERS ASSOCIATIONNeither the lot, nor any further subdivision, nor any unit thereon, asdefined in the Sectional Titles Act No. 95 of 1986, shall betransferred to any person until he has bound himself to become andremain a member of the ‘Home Owners Association’ for the durationof his ownership and a clearance certificate has been issued by suchassociation to the effect that its articles of association have beencomplied with.'

[25] The condition relating to the Home Owners Association is not amodel piece of drafting, but its message is clear, and it has already beenemployed with regard to the sectional title units on lhlati Lodge andWakenshaw Estate.[26] After clusters had been developed, Portion 726, WakenshawEstate, followed. The certificate relating to units on Wakenshaw Estatesdid not contain the conditions now sought to be endorsed on the


certificate relating to Wakenshaw Manor. lhlati Lodge was the third ofthe four subdivisions to be developed. The certificate in respect of theunits in that development contained the now disputed conditions.[27] In 2016, after these problems with the documentation werediscovered, the owners of units in Wakenshaw Estate recognised theerror in their certificate, and by notarial deed their certificate wasrectified. (I will revert to this rectification at the end of this judgment.)The same cannot be done for Wakenshaw Manor as the plaintiffs willnot agree to it. (It appears from the evidence of Mr Jamieson that thereare more members of Wakenshaw Manor besides the plaintiffs whoresist the defendant at some or other level, but none of them has enteredan appearance to defend the claim-in-reconvention.)[28] In its claim-in-reconvention the defendant pleads that rectificationof the s 11(3)(b) certificate relating to Wakenshaw Manor falls to begranted under the common law and additionally under s 4(1)(b) of theDeeds Registries Act, 47 of 1937.[29] There is no need to repeat what has already been said about thecommon intention of all owners with regard to compulsory membershipof the defendant. The following should be added.(a) As mentioned earlier, in terms of clause 5.3 of the defendant'sconstitution, when becoming a registered owner, a person automaticallybecomes a member of the defendant; and ceases to be suchautomatically when ceasing to be an owner.(b) Clause 6.13 of the constitution reads as follows.

'No transfer of an Erf shall be registered unless a certificate has beenissued by the association that all levies due to it in respect of the Erfhave been paid.'

(c) The conduct rules speak in similar vein. Rule 11.7 reads as follows.'No property may be transferred without a certificate by theAssociation confirming that all levies and other amounts owing bythe member to the Association have been paid in full.'

[30] In its relevant parts 4(1)(b) of the Deeds Registries Act reads asfollows.

'(1) Each registrar shall have the power-(a) …(b) whenever it is in his opinion necessary or desirable to rectify in


any deed or other document, registered or filed in his registry, anerror in the name or the description of any person or propertymentioned therein, or in the conditions affecting any such property torectify the error: Provided that-(i) every person appearing from the deed or other document to beinterested in the rectification has consented thereto in writing;(ii) if any such person refuse to consent thereto the rectification maybe made on the authority of an order of Court;(iii)…(iv)no such rectification shall be made if it would have the effect oftransferring any right.'

[31] A Mr Hugh Edwards, an experienced conveyancer, was called bythe defendant to deal with and explain various deeds and processesrelevant to the current dispute. He identified Resolution 12 - 2017 ofthe Registrars' Conference Resolutions, 2017 as relevant to theproposed rectification of the s 11(3)(b) schedule of conditionsapplicable to Wakenshaw Manor. The resolution is recorded as follows.

'Error in a Section 11(3)(b) Schedule of ConditionsMay an error in a section 11(3)(b) Schedule of Conditions beamended in terms of s 4(1)(b) of Act 47 of 1937 if it will not have theeffect of transferring a real right?Resolution:Yes. Section 4(1)(b)(i) of Act No. 47 of 1937 finds application.'

The Registrar of Deeds has not in the present case contended that hisoffice lacks a power to rectify the certificate in question. Neverthelessit should be observed that(a) the existence and ambit of the power must be determined by theprovisions of the Act; and(b) it is not clear why the resolution records that s 4(1)(b)(i) findsapplication without recording also that subsection (ii) would in needalso find application.[32] In terms of s 4(1)(b) the registrar may rectify an error in theconditions affecting a sectional title unit which are set out in a s11(3)(b) certificate when the registrar is of the opinion that it is‘necessary or desirable’ to do so. In the present case there is noevidence of any application having been made to the registrar,


presumably because the plaintiffs would obviously not agree to therectification in writing. This gives rise to a minor conundrum. Theregistrar's power to rectify the certificate exists only if it is theregistrar's opinion that it is necessary or desirable to do so. We do nothave that opinion. I do not think that the section can be read to obligethe registrar to furnish what would be an academic opinion on thesubject of necessity or desirability of rectification when it is clear thatthe affected parties, or some of them, will not consent to the exerciseof the power. I do not think that s 4(1)(b)(ii) of the Act can be read toconvey any more than that the court may authorise the registrar todisregard the refusal of consent by any affected party. But, equally, I donot think that it would be appropriate for a court to authorise theregistrar to dispense with the consent of any necessary party to arectification which in the courts view of matters is neither necessarynor desirable. I accordingly approach this matter along the followinglines.(i) The court must consider the question as to whether the proposedrectification is necessary or desirable and refuse to grant its authorityunder s 4(1)(b)(ii) if it finds that the rectification is neither necessarynor desirable.(ii) The court's authority to dispense with the written consent of allnecessary parties should, if it is to be granted, be expressed to beconditional upon the registrar forming the opinion that the proposedrectification is necessary or desirable.This approach leaves the operative opinion on necessity and desirabilitywhere the Act places it, that is in the hands of the registrar. A refusalby the registrar to effect the rectification despite the court's authorityto dispense with the written consent of all affected parties would bejusticiable in the ordinary course.[33] The first part of the proposed condition F is the Omnibus servitudefor services. It reserves to the defendant the right to ‘erect, lay,maintain, use and remove standards, lines, cables, pipes and the likeunder, on or over the said land for the purpose of conveying electriccurrent, water drainage, sewerage and the like’ without payingcompensation for the exercise of that right. In turn the owner agrees notto obstruct such activities without the express consent of the defendant.The defendant would be obliged to rectify any damage done when


exercising its powers and rights. The defendant is given the right toenter upon property at reasonable times to carry out these activities.[34] The Omnibus servitude for services reflects in part the objects ofthe defendant set out in clause 3 of the constitution; and in part thereality that certain services necessary for the use and enjoyment of allof the homes on the parent property are provided on a communal basis.That seems to have been the foundation for the insistence of themunicipality and the water authority on the creation of a singlecommunal property owners association for the entire parent property.[35] It seems to me that the defendant is in many ways the like of amunicipal service provider. Rights of access and the like for theperformance of duties relating to the provision of services andassociated works are traditionally either the subject of laws or ofregistered servitudes. In my view a registered servitude is required inthis case. It is desirable, if not necessary, that provision is made for itin the s 11(3)(b) certificate relating to Wakenshaw Manor. One wouldhope that a situation would never arise where a single owner obstructsthe performance of work necessary for the benefit of other owners, butit is desirable and perhaps necessary for the benefit of all owners thatnone of them should have the right to do so. Rights of access toproperty by the defendant may well be regarded as implicit in thedefendant's constitution and conduct rules, but an express provision inthe s 11(3)(b) certificate is preferable and provides the requisitesecurity. The question as to what work must actually be performed isleft by the defendant's constitution to its elected trustees.[36] The essential effect of the second part of the proposed conditionF is that no Erf or unit can be transferred to any person unless(a) the proposed owner agrees to become and remain a member of thedefendant; and(b) a clearance certificate has been issued to the effect that theprovisions of the defendant's articles of association have been compliedwith.I think that for the term ‘articles of association’ one must read theconstitution of the defendant; and the principal element of thecompliance spoken of in the provision must be the payment of levies,a subject already dealt with in the constitution and the conduct rules ofthe defendant.


[37] It seems to me that the registration of the condition which is thesecond part of the proposed Condition F addresses two legitimateconcerns of the community which occupies the parent property.(a) Firstly it will bring about that no one might become an ownerwithout advance notice of the intended consequence that the personbecomes a member of the defendant.(b) Secondly it will prevent, or certainly should prevent, the inadvertenttransfer of ownership of any Erf (as defined in the defendant'sconstitution) without unpaid levies or other charges being accountedfor.In my view both these outcomes are desirable, given the communalstructure of the developments on the parent property which involveseach property owner playing his or her part in the provision andmaintenance of shared facilities and services.[38] A condition such as the one under discussion here was called an‘embargo provision’ by the court in Willow Waters HomeownersAssociation (Pty) Limited v Koka NO and Others 2015 (5) SA 304(SCA). The court held (at para 24) that the effect of such an embargois similar to the ones protecting municipalities in terms of the LocalGovernment : Municipal Systems Act 32 of 2000, and bodies corporatein terms of s 15B(3)(a)(i)(aa) of the Sectional Titles Act. The courtcontinued as follows.

'[27] It must be borne in mind that homeowners' associations areobliged to provide services to all of their members. And so, similarlyto municipalities and bodies corporate which enjoy the statutoryprotection afforded by the embargoes, they extend credit to allhomeowners and their estates without the benefit of requiringsecurity therefore. As was contended by the amici curiae, there is nomaterial difference between homeowners' associations and bodiescorporate in terms of their objects, activities and status. There issimply no basis to deprive the association of the protection affordedby the embargo which has an identical purpose and effect to thatprovided to bodies corporate (and municipailties) by a law of generalapplication.'

[39]


[40] I did not understand the argument of counsel for the plaintiffs toraise any serious challenge to the aforegoing analysis of the situationregarding the proposed amendments to the certificate setting out theconditions applicable to Wakenshaw Manor. However, counsel argued,as the type of ‘error’ liable to be rectified is not defined in s 4(1) of theDeeds Registries Act, the common law of rectification of contractsmust apply. As the conveyancer responsible for drafting the certificatewas not called, we cannot be certain why he first omitted the relevantprovisions when dealing with Wakenshaw Estate, then inserted themwhen dealing with lhlati Lodge and then again omitted them whendealing with Wakenshaw Manor. Neither is there any evidence that anyof the owners of the units in Wakenshaw Manor shared a commonintention with the defendant, prior to acquiring ownership, that theconditions of title reflected in the relevant s 11(3)(b) certificate shouldbe regarded as including those now sought to be introduced. Thearguments of counsel for the plaintiffs seem to me to have some merit,but only if one accepts the proposition that rectification of a registeredcertificate can only take place if the common law requirements forrectification of a contract are satisfied.[41] In Ex Parle Kachholi Anjuman Islam 1945 WLD 215 the courtconsidered an application to amend a title deed in circumstances whereall the three affected parties agreed that for want of a note on the deedto the effect that the transferee would hold for another, the deederroneously conveyed that the transferee would hold in its own right.The Registrar objected, arguing that the errors contemplated by s4(1)(b) of the Deed Registries Act were errors made by the registrar;and as the registrar had made no error, the application should berefused. Price J held that an error is not likely to be made by theregistrar, in which case it would have been made by the conveyancer.He continued (at 217):

‘So primarily the error referred to in the section is an error not made


by the registrar's office but made by the conveyancer who waslodging the deed for registration or by some other person.’

The order was granted on the footing that the error was that of theconveyancer. Given what was done in other deeds relating to thesubdivided parent property in this case, whilst we do not know withcertainty why the conveyancer responsible for the development didwhat he did, the probabilities are that the failure to insert the nowdisputed conditions in the s 11(3)(b) certificate was a conveyancer'serror. It is equally probable that the intention of the developer at thetime material to the registration of the certificate for WakenshawManor was that the conditions now in issue should be contained in thecertificate, as had been done in the case of lhlati Lodge.[42] Bester NO and Others v Schmidt Bou Ontwikkelings CC 2013 (1)SA 125 (A) involved the subdivision of a parent property, one portionof which would be transferred to a purchaser, and the other retained bythe original owner, Schmidt. For reasons not uncovered, Schmidt'sconveyancer secured the unwitting signature of his client to a power ofattorney to transfer both properties to the buyer, and that was donewithout Schmidt knowing. Subsequently the buyer took wrongfuladvantage of the error, which was then revealed to Schmidt andresulted in an action for the rectification of the deed to reflect Schmidtas the owner of the property erroneously transferred to the buyer. Twoobservations by Brand JA appear relevant to the present case.(a) The learned judge observed that the rectification of the deed wassanctioned by s 4(1)(b) of the Act, but he pointed out, with reference toWeinerlein v Goch Buildings Ltd 1925 AD 282 at 283, that the rightalso flowed from the policy of our registration laws that the truecontract under which land is held must be reflected on the register. Inmy view it is probable that the true contract under which sectional titleunits are held on the parent property are those reflected in the s 11(3)(b)certificate of lhlati Lodge, and not the current certificate relating toWakenshaw Manor. Given the communal arrangements necessary forthe enjoyment of the homes on the parent property, the enquiry cannotbe limited to a blinkered examination only of the position occupied bythe individual owners of units in Wakenshaw Manor, who in allprobability would not have appreciated or anticipated a potentialconflict between the communal arrangements reflected in the


defendant's constitution and conduct rules, and the conditions of titleapplicable to the units they were buying.(b) In paragraph 12 of the judgment the learned judge said this.

'In the end, I therefore believe that there is no difference in thepresent context between rectification of a contract, on the one hand,and rectification of a deed of transfer, on the other.' (My emphasis.)

[43] In my view, whilst an antecedent agreement or a commonintention might reveal an error in a deed, neither constitute aprerequisite for a finding that there is an error in a deed which it isdesirable to correct. Rectification of an error in a contract is a rightwhich the court must enforce when the requirements for the existenceof the right have been established. The requirements for rectification interms of s 4(1) of the Deeds Registries Act are different. Rectificationmay take place when it is considered necessary or desirable to do it. Itis done under statutory authority. The statute says nothing about thequalities of the error which is susceptible to rectification. Counsel forthe plaintiff may well be correct in arguing that the error here is aunilateral one. But the statute does not expressly deny the remedy ofrectification of such an error; and one should hesitate to imply anintention to deny the remedy in such a case when the test for the grantof the remedy is whether in the opinion of the Registrar of Deeds it isdesirable or necessary to rectify the deed.[44]


[46] However I am compelled to mention two matters which may affectthe registrar's approach to a request for the rectification of thecertificate relating to Wakenshaw Manor. I have taken cognisance ofthe expense of this litigation, and the fact that it is all about theplaintiffs and their relationship with the defendant. The immediateparties to this litigation deserve answers to the questions they haveposed. I have decided to provide them, despite the fact that I havemisgivings about the following two circumstances or factors whichsuggest that more should be done than the amendment of the certificaterelating to Wakenshaw Manor in order to ensure that the owners of allhomes constructed on the parent property are treated equally.(a) The evidence before me reveals that the title deeds to Clustersreflect the conditions sought to be recorded in the s 11(3)(b) certificaterelating to Wakenshaw Manor, but as far as I can see from the sampledeed provided to the court, the conditions relate to the Clusters HomeOwners Association, and not to the defendant.(b) The rectification of the certificate relating to Wakenshaw Estateappears to have been confined to the embargo provision andcompulsory membership of the defendant, as set out under the heading‘Home Owners Association’ in the rectification sought by thedefendant with regard to Wakenshaw Manor. The ‘Omnibus Servitudefor Services’ was not inserted at the same time.The following order is made.

1.The first and second plaintiffs' (hereinafter ‘the plaintiffs’) claim inconvention is dismissed with costs, the plaintiffs' liability for suchcosts being joint and several.2.The Registrar of Deeds, Pietermaritzburg, is authorised to rectifythe schedule of conditions applicable under s 11(3)(b) of theSectional Titles Act, No 95 of 1986 to the sectional title schemeknown as Wakenshaw Manor by adding thereto the conditions set outhereunder if the Registrar of Deeds is of the opinion that suchrectifications are necessary or desirable, and to do so without thewritten consent of all persons interested in the rectification. Theadditional conditions are the following.‘Omnibus Servitude for ServicesThe ‘Home Owners Association’ reserves in perpetuity the right,without being required to pay compensation therefor to erect, lay,


maintain, use and remove standards, lines, cables, pipes and the likeunder, on or over the said land for the purpose of conveying electriccurrent, water drainage, sewerage and the like and the owner agreesnot to obstruct or interfere with any such standards, lines, cables,pipes and the like to erect any building or other permanent structurewithin 1,00 metre of any such standards, lines, cables, pipes and thelike without the prior express consent of the ‘Home OwnersAssociation’ provided that any damage done during the process oferecting, laying, maintaining, using or removing such standards,lines, cables, pipes and the like shall be made good by the ‘HomeOwners Association’. The owner also agrees that the ‘Home OwnersAssociation’ by itself, or others, may enter upon the said property atall reasonable times for the purpose of enforcing the rights reservedand the obligations accepted in this clause.‘Home Owners Association’ shall mean its orders or assigns.‘Home Owners Association’Neither the lot, nor any further subdivision, nor any unit thereon, asdefined in the Sectional Titles Act, No. 95 of 1986, shall betransferred to any person until he has bound himself to become andremain a member of the ‘Home Owners Association’ for the durationof his ownership and a clearance certificate has been issued by suchassociation to the effect that its articles of association have beencomplied with.’3.It is declared that each of the owners of sectional title units in thesectional title development known as Wakenshaw Manor are liable,and since acquiring ownership of their respective units have beenliable, as members of the Wakenshaw Estate HomeownersAssociation to pay levies due to that association raised by theassociation from time to time.4.The costs of the claim-in-reconvention shall be paid by theplaintiffs, their liability for such costs being joint and several.

ABSA BANK LTD v CROSSMOOR TRANSPORT (PTY) LTD

Exercise of a court’s discretion in determining whether a winding-up shouldbe granted against a company, and whether the order should be a provisionalorder or a final order.

Judgment given in the Kwazulu Natal Provincial Division, Pietermaritzburg,on 30 July 2020 by Moodley J

Crossmoor Transport (Pty) Ltd concluded loan agreements with Absa BankLtd in the form of bank facilities and instalment sale agreements in respect ofvarious assets, chiefly motor vehicles. December 2018, the respondentdefaulted with repayment to the applicant and fell into arrears with its financialobligations in terms of the facility letter and instalments on the instalment saleagreements.

In December 2018, Crossmoor defaulted with repayment to the bank and fellinto arrears with its financial obligations. In June the following year, the bankand Crossmoor entered into discussions to resolve the issues arising fromCrossmoor’s default. Crossmoor paid the outstanding arrears for May and June2019 to the bank, but failed to provide its annual financial statements as at 28February 2019. In July, a further meeting was held between the parties, theprimary purpose being to discuss the arrear instalments on the variouscommercial asset finance facilities, and to obtain an update on developments.Crossmoor undertook that the company would settle the full outstandingarrears by 31 July 2019. It failed to do so.

On 15 August 2019 the bank's attorney delivered a notice of default anddemand to Crossmoor for payment of arrears amounting to R2 876 981.33. Inresponse, Crossmoor’s attorneys requested an urgent meeting with the bank.The meeting was held on 22 August 2019. Following discussions conductedat the meeting, Crossmoor made some payments to the bank but defaulted inothers.

On 1 October 2019 the bank's attorney addressed a statutory letter of demandto the respondent in terms of section 345 of the Companies Act (no 71 of1973) read with item 9 schedule 5 of the 2008 Companies Act. The bankdemanded, inter alia, payment of the sums of R132 388 846 and R9 113 501together with interest thereon. The letter was sent by registered mail and servedby the sheriff on 4 October 2019 on the directors of Crossmoor. On 2December 2019 the liquidation application was served by the sheriff atCrossmoor’s registered offices. On 12 December 2019 the bank issued asecond section 345 notice. This was emailed to Crossmoor’s attorney, andserved on Crossmoor by the sheriff on 17 December 2019 at its registeredaddress on 12 December 2019, and posted on 12 December 2019 by registered

ABSA BANK LTD v CROSSMOOR TRANSPORT (PTY) LTD 377MOODLEY J 2020 SACLR 376 (KZP)

post to both addresses. Relying on the provisions of section 345(1)(a) of the Act, the bank submitted

that Crossmoor should be deemed to be unable to pay its debts as it failed topay, secure or compound the sum due and owing to the reasonable satisfactionof the bank within the stipulated time after the service of the section 345notice.

Held—As the bank only served the section 345 notice on Crossmoor’s registered

address on 19 December 2019, the deeming provision of this section wouldonly arise three weeks thereafter. The application was however issued prior tothat date on 29 November 2019. The mere presentation of the application tothe Registrar of the court does not invoke the deeming provision in section345, as there is as yet no order for winding-up.

As was apparent from the chronology and facts, neither the service of thefirst section 345 notice prior to the issuing of the application papers nor thesubsequent service on the registered address of Crossmoor on 17 December2019, constituted compliance with the Act for the purposes of the application.Crossmoor could therefore not be deemed to be insolvent in terms of section345(1)(a) of the Act.

The question that arose was whether or not Crossmoor was actually andcommercially insolvent and unable to pay its debts.

Crossmoor did not dispute its indebtedness. It merely alleged a few incorrectcalculations. If there were in fact material discrepancies in the figures reliedupon by the bank which would have enabled Crossmoor to dispute itsindebtedness on bona fide and reasonable grounds, the discrepancies wouldundoubtedly have been set out.

The fact that Crossmoor’s debt to the bank remained due and owing and thatthere was no acceptable evidence to the contrary, was sufficient to concludenot only that Crossmoor was unable to pay its debts but that it was alsofactually and commercially insolvent. Crossmoo contended that it was notfactually or commercially insolvent as it had substantial assets and equitywhich exceeded its liabilities. It contended that if the assets of a company doexceed the liabilities, mere illiquidity, capable of being overcome within areasonable time, should be a trump card to resist liquidation. However, it wasnot possible to perceive such trump card in the hand of Crossmoor.

Crossmoor had not provided any acceptable evidence that it was solvent.Mere allegations were insufficient The bank had given sufficient undisputeddocumentation to lead to the conclusion that Crossmoor was actually andcommercially insolvent , and unable to pay its debts.

378 ABSA BANK LTD v CROSSMOOR TRANSPORT (PTY) LTDMOODLEY J 2020 SACLR 376 (KZP)

A court must exercise its discretion in determining whether the winding-upshould be granted and whether the order should be a provisional order or afinal order, as sought by the bank. In the present case, the appropriate orderwould be for the provisional liquidation of the company.

Advocate D Ramdhani SC instructed by Tim Du Toit & Co Inc, Johannesburg,appeared for the applicantAdvocate GM Harrison instructed by Naidoo Maharaj Inc, Durban, appearedfor the respondent.Advocate B De Beer instructed by Ronette Govender & Associates, Durban,appeared for the first intervening partyAdvocate D Caro instructed by Dean Caro Attorneys, Durban, appeared for thesecond intervening party

Moodley J[1] This is an application by ABSA Bank Limited (‘the applicant’) forthe final winding- up of the respondent, Crossmoor Transport (Pty)Limited.[2] The applicant seeks the winding-up order on the grounds that therespondent:

2.1 is both factually and commercially insolvent ;2.2 is unable to pay its debts within the meaning of s 344(f), readwith the provisions of s 345(1)(c) of the Companies Act, 71 of 1973(‘the Act’);2.3 is deemed to be unable to pay its debts within the meaning of s345(1) of the Act;2.4 has committed certain acts of insolvency.

The applicant submits further that it would be just and equitable, asintended in terms s 344(h) of the Act as read with item 9 of schedule 5of Act 71 of 2008 (‘the 2008 Act’) for the court to order the finalwinding-up of the respondent.[3] The application is opposed by the respondent on all the aforesaidgrounds. The respondent denies that it is factually and commerciallyinsolvent and it cannot be deemed to be unable to pay its debts. Itasserts that its assets, though encumbered, exceed its liabilities. It aversfurther that it was exposed to unforeseen circumstances which caused


it to fall into arrears with its repayments. However, it has averted theadverse consequences and is now a viable trading business. It wouldfurther not be just and equitable to wind up the respondent, especiallybecause of the consequences to its large force of employees.Factual Matrix[4] The events preceding the application and the course of the litigationas set out in the applicant's chronology are common cause. The mainfacts of relevance to this application are:

4.1 The respondent and its 'sister' company Xmoor Transport (Pty)Ltd (‘Xmoor’), trading as Crossmoor Transport, jointly and severallyin solidum obtained from the applicant banking facilities which wereamended from time to time.4.2 On 19 July 2018 the respondent and Xmoor renewed theirbanking facilities as joint borrowers with the applicant in terms of afacility letter dated 25 June 2018. The companies were representedby Alvin Naicker and lnderan Naicker, who are directors in bothcompanies.4.3 As security for the facilities, Xmoor and other third partiesexecuted guarantees in favour of the applicant.4.4 The respondent thereafter entered into instalment sale agreementswith the applicant for each individual item financed.4.5 On 15 November 2018, Tex Investments (Pty) Limited issued aliquidation application against Xmoor.4.6 During December 2018, the respondent defaulted with repaymentto the applicant and fell into arrears with its financial obligations interms of the facility letter and instalments on the instalment saleagreements.4.7 On 14 June 2019 a meeting was convened between the applicant'smanagement which included its Chief Credit Officer, BradleyGreenfield, the respondent's director, lnderan Naicker, and thefinance team of the Xmoor Group, at which the unpaid debit ordersand the R80 million overdraft facility with First National Bank (FNB)were discussed.4.8 Subsequently, in consequence of the respondent's breach of itsobligations to FNB, FNB called up its overdraft facility.4.9 On 30 June 2019 the respondent paid the outstanding arrears for


May and June 2019 to the applicant, but failed to provide its annualfinancial statements as at 28 February 2019.4.10 On 3 July 2019 a further meeting was held between BradleyGreenfield and lnderan Naicker. The primary purpose of the meetingwas to discuss the arrear instalments on the various commercial assetfinance facilities, and to obtain an update on the developments at therespondent and Xmoor. Mr Naicker offered various reasons for thedelay in repayments and undertook that the respondent would settlethe full outstanding arrears by 31 July 2019, which it failed to do.4.11 On 23 July 2019 Xmoor registered a general notarial bond inthe amount of R52 million in favour of Engen without notifying theapplicant, which became aware of the general notarial bond duringAugust 2019.4.12 On 15 August 2019 the applicant's attorney delivered a noticeof default and demand to the applicant for, inter alia, payment of thearrears which amounted to R2 876 981.33. In response, therespondent's attorneys requested an urgent meeting with theapplicant. The meeting was held on 22 August 2019.4.13 The discussions at this meeting were recorded in a letter bearingthe same date by the applicant's attorney, Mr Du Randt, to therespondent's attorney. He specifically recorded that the letter waswithout prejudice to the rights of the applicant to terminate allagreements that were in arrears, as recorded in the letter of demanddated 15 August 2019, and that the applicant reserved its rights toterminate all agreements and to exercise its rights under theindividual agreements or the facility. Mr Du Randt also confirmedthat the applicant afforded the respondent and Xmoor the opportunityto submit a proposal for consideration by all its creditors before 27August 2019.4.14 He recorded further that the respondent had not disclosed to theapplicant the liquidation application by Tex Investments for R199million and that if the Tex Investments liquidation application wasnot settled or withdrawn by 26 August 2019, all facilities andagreements would be cancelled by the applicant. (The liquidationapplication was settled and withdrawn on 10 September 2019.)4.15 On 27 August 2019 the respondent delivered some financialstatements reflecting the respondent's financial position, equities and


liabilities, debtor's indebtedness, income statement, arrears and workin progress.4.16 On 28 August 2019 the applicant delivered its letter oftermination, terminating and cancelling all the facilities andinstalment sale agreements, recording that the respondent and Xmoorfailed to comply with the demands, alternatively, remedy the defaultsas contained in the letter dated 15 August 2019. The applicant alsorequested delivery of all the assets and to be placed in control of theassets financed by it.4.17 On 2 September 2019 the respondent paid to the applicant theamounts of R4 637 771 and R484 992.4.18 On 12 September 2019 the respondent's attorney delivered aletter to the applicant's attorney addressing, inter alia, therespondent's indebtedness to its other creditors and requesting a‘payment holiday’.4.19 On 1 October 2019 the applicant's attorney addressed astatutory letter of demand to the respondent in terms of s 345 of theAct read with item 9 schedule 5 of the 2008 Act, in terms whereof itdemanded, inter alia, payment of the sums of R132 388 846 and R9113 501 together with interest thereon. Another creditor, ManFinancial Services SA(Pty) Ltd, also addressed as 345 letter to therespondent on the same day.4.20 The firsts 345 letter was sent by registered mail and served bythe sheriff on 4 October 2019 on the directors of the respondent at102 Essenwood Road, Musgrave, Durban. In a letter dated 11October 2019 the respondent's attorney recorded that the respondenthad received the first s 345 letter on 10 October 2019.4.21 On 10 October 2019 the respondent paid R5 million to theapplicant and on 11 October 2019 made a further payment of R586789.4.22 Lawrence Graham, the applicant's Manager: Business BankCommercial and Asset Finance Division Recoveries certified that therespondent was indebted to the applicant in the amount of R113 756745.52 as at 8 November 2019. He also certified that Xmoor wasindebted to the applicant in the amount of RB 162 969.81 as at 8November 2019.4.23 On 2 December 2019 the liquidation application was served by


the sheriff at the respondent's registered offices and on therespondent's employees. The sheriff's return of service recorded thatthere were no trade unions.4.24 In an email dated 5 December 2019 the respondent's attorneyrecorded that his instructions were that arrears on payments due bythe respondent were:i.Absa Bank - R19 millionii. Standard Bank - R4,8 millioniii. Wesbank - R191 000iv. Mercedes Benz - R21 millionv.Komatsu - R2 millionvi. lveco - R2 millionvii. Man Truck - R91 000viii. Other creditors - R6 millionix. Salaries - R3,5 million4.25 In its preliminary answering affidavit dated 9 December 2019,the respondent undertook to pay the full outstanding arrears to theapplicant before the end of February 2020.4.26 On 10 December 2019 the application served before KhuzwayoAJ who ordered that the application be adjourned to 26 February2020, and granted both parties leave to deliver supplementaryaffidavits.4.27 On 12 December 2019 the applicant's further s 345 notice (‘thesecond s 345 notice’) was emailed to the respondent's attorney, andserved on the respondent by the sheriff on 17 December 2019 at itsregistered address viz 3 Newton Road, Mariann Industrial EstatePinetown and at 102 Essenwood Road, Durban on 12 December2019, and posted on 12 December 2019 by registered post to bothaddresses. The second s 345 notice records that the respondent isindebted to the applicant in an amounts of R122 099 572 plus interestat 10.25% calculated from 12 December 2019 and R8 627 353.36plus interest at 10.25% calculated from 12 December 2019.4.28 On the same date, the applicant's attorney also requested fromthe respondent's attorney the identity of all trade unions representingboth the respondent and Xmoor, the details of any labour brokersrepresenting any employees and confirmation that the respondent


would in terms of s 197B(2) of the Labour Relations Act 66 of 1995notify its employees of the liquidation application enrolled on 26February 2020. The respondent's attorney merely responded that itdid not represent the employees. The applicant's attorney repeated hisrequest on 4 February 2020.4.29 On 26 February 2020, in terms of a consent order, a labourbroker was granted leave to intervene (which I return to below) andthe parties granted leave to file supplementary affidavits. The matterwas then enrolled on the opposed roll for hearing on 22 May 2020.4.30 It is common cause that the respondent remains substantiallyindebted to the applicant as the debt was not settled at the end ofFebruary 2020 as undertaken. Although an inspection of the assetsfinanced by the applicant was conducted, the assets remain in thepossession of the respondent and are utilised in the respondent'soperations.

Intervening Parties[5] It appears appropriate at this stage to record the conduct of theintervening parties in this application. Section 197B (2)(b) of theLabour Relations Act read with s 346(4)(A) of the Act provides that:

'An employer that receives an application for its winding-up orsequestration must supply a copy of the application to any consultingparty contemplated in section 189(1) (in this regard a Trade Union orthe Labour Broker), within two days of receipt, or if the proceedingsare urgent, within 12 hours.'

[6] The sheriff's return on the liquidation application reflected thatservice on 2 December 2019 on the employees of the respondent waseffected by service on the supervisor, Rita Pillay and that 'there are notrade unions.'[7] On 10 December 2019 Sala 45 786 (Pty) t/a Satloblokas(‘Satloblokas ‘), a labour broker 'deployed at the respondent ', soughtleave to intervene in this application, alleging that it represented 1758contract employees of the respondent. In the founding affidavit thedeponent, Simone Pillay, stated that 'Natal (should be 'National’)Transport Movement (‘NTM’), represents between 400 to 500members, which include those persons employed by both theRespondent and the Intervening party.' She stated further thatSatloblokas attorney of record met with the leadership of NTM on 6


December 2019 andwas advised that NTM:

'11.1 in principal oppose the liquidation;11.2 needed an opportunity to take formal mandate from theirmembers; and11.3 would attempt to meet with their legal representatives duringthe course of the past weekend;11.4 were uncertain if they would have sufficient time to attend tothe above and be in a position to formally intervene when theapplication for liquidation is heard on 10 December 2019, due to theshort notice the same.'

Annexed to the affidavit of Simone Pillay was an unsigned letter fromSamkeliswe Magwaza, Provincial Secretary of NTM for theKwaZulu-Natal Province, confirming the union's opposition to theliquidation application.[8] On 10 December 2019 the liquidation and intervention applicationswere adjourned to 26 February 2020. On 26 February 2020, Satloblokaswas granted leave to intervene in terms of an order taken by consent.However, Satloblokas took no further action in the intervening threemonths between the order and the hearing of the application on 22 May2020. At the hearing, Ms De Beer advised me that she had beeninstructed at 09h00 on that very morning to represent Satloblokas at thehearing and to advise the court that Satloblokas did not intend toproceed. There was no tender of an explanation or of costs or a formalapplication to withdraw. Ms De Beer stated that she had no furtherinstructions whatsoever.[9] The conduct of Satloblokas and its attorney of record smacks ofdisrespect for the court and judicial proceedings. The conduct of itsattorney in instructing counsel on the morning of the hearing to appearin court without proper instructions is unprofessional and unbefittingan officer of the court. If it was intended that NTM would continue torepresent the employees, it is inconsistent with Ms Pillay's allegationthat Satloblokas represented 1758 employees, as it appears below thatNTM represents only 256 employees. I have little hesitation inconcluding that the application to intervene by Satloblokas wasintended merely to delay the finalization of the winding-up applicationby the applicant, and not motivated by a genuine need to protect the


employees of the respondent whom Satloblokas allegedly represented.[10] On 21 May 2020 at approximately 13h28 an email from AttorneyD Curo was delivered to me. Mr Curo advised that he had beeninstructed to bring an application to intervene on behalf of NTM, aunion allegedly representing 256 employees of the respondent and anadjournment 'on the basis of its belated receipt of the liquidationapplication'. The notice of motion transmitted with the letter confirmedthat NTM sought leave to intervene in the winding-up proceedings andan adjournment of the hearing on 22 May 2020. The affidavit insupport of NTM's application was deposed to by SamkelisweMagwaza, whose letter was annexed to Satloblokas application tointervene.[11] Mr Magwaza stated under oath that the applicant had failed toserve the application papers on NTM as prescribed by s 346(4A) of theAct although it was aware that NTM was a union which representedsome of the respondent's employees. Mr Magwaza did not elucidate onhow he obtained a copy of the application papers, but it is clear fromhis references to the allegations by the applicant in its affidavits that MrMagwaza was in possession of the application when his affidavit wasdrafted. He alleged further that he had only learnt a week prior to thehearing that the application was proceeding and referred the matter tothe General Secretary of NTM, who reverted to him on 20 May 2020.Given the extreme time constraints, NTM was unable to consider itsposition in respect of the liquidation and therefore sought anadjournment and leave to deliver an affidavit supporting or opposingthe application, failing the delivery of which it would abide thedecision of the court.[12] However, at the hearing of the application on 22 May 2020, MrRamdhani who represented the applicant in these proceedings,furnished a sheriff's return of service dated 20 February 2020 whichrecorded that the application papers had been served on 18 February2020 at 15h30 on NTM at its regional offices in Durban. The returnfurther recorded that 'Given address is occupied by NTM Trade Unionrepresenting the respondent as per the administrator.' Mr Magwazaconfirmed in his affidavit that this is the address at which NTM'sregional office is situated.[13] After he was provided with the return of service on NTM, Mr


Curo initially attempted to persuade me of the ignorance of NTM inrespect of the nature or significance of the application papers, to whichI gave short shrift. There was no cogent reason to accept that theunion's representatives acquired a comprehension of the papers onlyafter they acquired knowledge of the application 'via the grapevine',given the contents of Mr Magwaza's letter in December 2019. At hisrequest, Mr Curo was given leave to take instructions from his client.He then sought leave to withdraw the application on the instructions ofNTM. I granted NTM leave to withdraw its application with no orderas to costs at the instance of the applicant and respondent's legalrepresentatives.[14] The blatant dishonesty of Mr Magwaza's allegations in hisaffidavit undermined the bona fides of his expressed intention tointervene in these proceedings to protect the interest of the employeesrepresented by NTM. I also note that no resolution by NTM authorizingMr Magwaza to depose to the affidavit or a confirmatory affidavit byits General Secretary was annexed to the notice of motion, to indicatethat Mr Magwaza was in fact authorised by NTM to intervene in thematter or to instruct Mr Curo or to act 'urgently' to protect the interestsof its members in the employ of the respondent. I gained the distinctimpression that this attempted intervention was contrived andstrategically timed to delay the finalisation of the winding-upapplication yet again.[15] In the premises, any further action by Satloblokas and NTM inrelation to the liquidation of the respondent should be viewed withextreme circumspection.The Companies Act 61 of 1973[16] The provisions of the Act relevant to this application are:

'344. Circumstances in which company may be wound up by Court.- A company may be wound up by the Court if-…(f) the company is unable to pay its debts as described in section345;(g) ….(h) it appears to the Court that it is just and equitable that thecompany should be wound up.


345. When company deemed unable to pay its debts. - (1) A companyor body corporate shall be deemed to be unable to pay its debts if-(a) a creditor, by cession or otherwise, to whom the company isindebted in a sum not less than one hundred rand then due-(i) has served on the company, by leaving the same at its registeredoffice, a demand requiring the company to pay the sum so due; or(ii) ...and the company or body corporate has for three weeks thereafterneglected to pay the sum, or to secure or compound for it to thereasonable satisfaction of the creditor; or(b) …(c) it is proved to the satisfaction of the Court that the company isunable to pay its debts.(2) In determining for the purpose of subsection (1) whether acompany is unable to pay its debts, the Court shall also take intoaccount the contingent and prospective liabilities of the company.'

Deemed Act of Insolvency[17] Relying on the provisions of s 345(1)(a) of the Act, the applicantsubmits that the respondent should be deemed to be unable to pay itsdebts as it failed to pay, secure or compound the sum due and owing tothe reasonable satisfaction of the applicant within the stipulated timeafter the service of the s 345 notice. Mr Ramdhani submitted thatalthough the first s 345 notice was not served at the respondent'sregistered address, it was common cause that it was received by therespondent on 10 October 2019. He argued that as the respondent wasaware of the demand and both the respondent and its attorney failed torespond to the demand within a reasonable time, in terms of theprovisions of s 345(1)(a) the respondent is deemed unable to pay itsdebts. In advancing the argument that the intention of the legislature isto ensure that the demand is received by the company, Mr Ramdhanirelied on the following excerpt from BP & JM Investments (Pty) Ltd vHardroad (Pty) Ltd:

'The learned editors of Henochsberg's work go on to say (loc cit) thatit may be argued that the intention of the Legislature is, in substance,only to ensure that the demand be received by the company. Theanswer to that may be that, where an applicant seeks to rely on the


inability of a company to pay its debts by showing that a demand wasreceived by the company, and the company failed to respond to thatdemand within a reasonable time, then, prima facie , the case couldbe brought under the provisions of para (c) of s 345 (1).'

[18] However it has, in my view, been properly contended in responseby Mr Harrison, who appeared for the respondent, that the significantcomments of the court in BP & JM Investments follow on the excerptrelied on by Mr Ramdhani:

'But, to avail himself of the benefit of the deeming provisionscontained in para (a) (i) of s 345 (1), an applicant must at the leastcomply with the requirements stated by the Legislature therein. Thereis no justifiable basis evident to me for substituting for the words ‘byleaving the same at its registered office’, some other words such as‘by delivering it to the company’.'

Further , the court did not decide the issue of substantial compliance inthat case because there was no proof that the respondent received thedemand.[19] I am therefore persuaded that Mr Harrison has correctly contendedthat as the applicant only served the s 345 notice on the respondent'sregistered address on 19 December 2019, the deeming provision wouldonly arise three weeks thereafter. The application was however issuedprior to that date on 29 November 2019. Mr Harrison also relied on theauthority of Chiliza v Govender, where the Supreme Court of Appeal,referring to Natal Joint Municipal Pension Fund v EndumeniMunicipality held that a court should not disregard the clear languageused in a statute and where a provision of a statute is couched inperemptory language or terms, it must ensure compliance therewith.Although in Chiliza the court considered s 9(4A) and s 11(2A) of theInsolvency Act 24 of 1936 and specifically the use of the word 'service'as opposed to 'furnish', the principle applied is apposite to s 345(1)(a).Section 345(1)(a) stipulates that the demand must be served on theregistered address of the company and the respondent be permittedthree weeks to comply. The consequences following on the failure tocomply are serious, hence the peremptory language and the necessityof enforcing the provision as it is read.[20] In the course of his argument on the s 345 demand, Mr Harrisonalso referred to s 348 of the Act which provides as follows:


'A winding-up of a company by the Court shall be deemed tocommence at the time of the presentation to the Court of theapplication for the winding-up.'

However , his reliance on s 348 to argue that the s 345 notice was notproperly served as it was presented after the winding-up was deemedto commence, is misconceived. In Kalil v Decotex (Pty) Ltd & anotherCorbett JA stated in respect of s 348 as follows:

'Clearly the effect of the section is to antedate, by means of adeeming provision, the commencement of a winding-up by the Courtto the time of the presentation of the application for winding-up. And,in my opinion, the time from which the commencement ofwinding-up was intended to be antedated by this deeming provisionwas the date of the grant of the winding-up order. It seems implicitin this that the Legislature regarded a winding-up as ordinarilycommencing with the order for winding-up.'

Therefore ,

Is the respondent actually and commercially insolvent and unable topay its debts?[22] The applicant bears the onus to prove on a balance of probabilitiesthat the respondent is unable to pay its debts and actually andcommercially insolvent. An applicant for a provisional order ofliquidation need only make out a prima facie case. Whether theevidence adduced by the applicant constitutes a prima facie case isgenerally determined according to the principle set out by Corbett JAin Kalil v Decotex (Pty) Ltd as follows:

'Where the application for a provisional order of winding-up is notopposed or where, though it is opposed, no factual disputes are raisedin the opposing affidavits, the concept of the applicant, upon whom


the onus lies, having to establish a prima facie case for the liquidationof the company seems wholly appropriate; but not so where theapplication is opposed and real and fundamental factual issues ariseon the affidavits, for it can hardly be suggested that in such a case theCourt should decide whether or not to grant an order withoutreference to respondent's rebutting evidence.'

[23] Therefore the case is decided on the probabilities as they appearfrom the papers. However, if the applicant seeks a final order ofwinding-up, then it has to prove its case on evidence which must beassessed in the usual manner in motion proceedings for final relief. InPaarwater v South Sahara Investments (Pty) Ltd the court held that:

'...the degree of proof required when an application is made for a finalorder is higher than that for the grant of a provisional order. In theformer case a mere prima facie case need be established whereas thecourt, before it will grant a final order, must be satisfied on a balanceof probabilities that such a case has been made out by the applicantseeking confirmation of the provisional order.'

[24] The principle applies in this matter although no provisional orderhas been issued. Therefore, a more stringent assessment of the evidenceis required and the Plascon- Evans evidentiary rule must be applied inopposed proceedings for a final order. The rule as stated by Corbett JAis:

'It is correct that, where in proceedings on notice of motion disputesof fact have arisen on the affidavits, a final order, whether it be aninterdict or some other form of relief, may be granted if those factsaverred in the applicant's affidavits which have been admitted by therespondent, together with the facts alleged by the respondent, justifysuch an order. The power of the Court to give such final relief on thepapers before it is, however, not confined to such a situation. Incertain instances the denial by respondent of a fact alleged by theapplicant may not be such as to raise a real, genuine or bona fidedispute of fact... If in such a case the respondent has not availedhimself of his right to apply for the deponents concerned to be calledfor cross-examination under Rule 6(5)(g) of the Uniform Rules ofCourt... and the Court is satisfied as to the inherent credibility of theapplicant's factual averment, it may proceed on the basis of thecorrectness thereof and include this fact among those upon which it


determines whether the applicant is entitled to the final relief whichhe seeks... Moreover, there may be exceptions to this general rule, as,for example, where the allegations or denials of the respondent are sofar-fetched or clearly untenable that the Court is justified in rejectingthem merely on the papers.' (references omitted)

[25] A company's inability to pay its debts may be proved in anymanner. To sustain its averment that the respondent is unable to pay itsdebts as envisaged in s 344(f) and s 345(1) of the Act, the applicantfurnished in its founding affidavit details of the indebtedness of therespondent to it and other creditors. Although the respondent hadsettled the amount outstanding on its overdraft facility, the outstandingamounts owing on the equipment financed by the applicant were R132388 846 by Crossmoor and R9 113 501 by Xmoor and the arrears onthose balances were R6 075 888.69 and R510 214 respectively. Theapplicant confirmed that it had cancelled the agreements and claimedrepossession of the assets but the respondent has failed to return theassets which are located throughout the country. In its supplementaryfounding affidavit, deposed to on 21 February 2020, the applicantconfirmed that the only payment effected since October 2019 by therespondent to it was R1,5 million during the week of 10 February 2020,and the respondent remained substantially indebted to it.[26] The applicant has also emphasised that the respondent issubstantially indebted to various other financial service providers, as isevident in the respondent's financial statements, and that the respondenthas admitted that it is indebted to its creditors in an aggregate amountof R1 443 967 530.44. The respondent's current liabilities, which weredue and payable and which the respondent was unable to pay, was theamount of R928 000 000. In addition it is common cause that therespondent had severe cashflow constraints and negotiated paymentmoratoriums with all the major banks in January 2019 and October2019. The applicant therefore submitted that this was an admission bythe respondent that it was de facto unable to pay its debts as and whenthey fell due.[27] In paragraph 33 of its answering affidavit, the respondent admittedthat annexures ‘FA3- FA6' to the applicant's founding affidavitcorrectly recorded the instalment sale agreements between theapplicant, the respondent and Xmoor, but alleged further that there are


one or two disputes in respect of the figures reflected on annexures‘FA5' and ‘FA6', which is the reconciliation of the amounts outstandingby the respondent and Xmoor. However, it furnished no details of the'minor arithmetic' required to rectify the figures, and admitted inparagraph 34 that the respondent failed to pay some of the instalmentswhich were due. In paragraph 35 the respondent did not dispute that ithad defaulted by failing to pay R2 876 981.33, but disputed 'the exactfigures' of the amounts set out in annexures ‘FA8-10'. However, itagain furnished no details of its dispute except to state that thediscrepancy is of 'an accounting/arithmetical nature'.[28] In his letter dated 15 August 2019 Mr Du Randt recorded thefollowing obligations of the respondent to the applicant:

i.Overdraft facility: R1 353 264.07 plus interest .ii. Per Schedule A: Arrear amount of R2 876 981.33 in respect of 56instalment sale agreements; total amount due R42 895 910.06.iii. Per Schedule B: full outstanding balance due in respect of 108instalment sale agreements - R96 984 155.15.

[25] In his letter dated 28 August 2019 Mr Du Randt recorded thatduring the meeting held on 22 August 2019:

'4.1 Crossmoor and Xmoor admitted their default and arrears as setout in our letter of the 15th of August 2019;4.2 Admitted their inability to make payment of their currentcreditors to date;'.

[29]

The respondent has notdisputed that at the meetings held in June and August 2019 it madesubmissions regarding the delay in repayments and that it hadundertaken to settle all the arrears by 31 July 2019. The explanation ittendered is that the sale of the mine from which it expected a cashinflow and the kidnapping of the administrator of the respondent madeit impossible to meet the deadline of 31 July 2019. But the respondentalso made further undertakings to the applicant which it did not meet.[30] The respondent made payments of approximately R11,7 millionin September and October 2019 and R1.5 million in February 2020 andsettled the overdraft facility. Nevertheless, it is evident from acomparison of the balances recorded in August 2019 and the balances


recorded in the applicant's founding affidavit and confirmed in itssupplementary affidavit, that the respondent remains in substantialindebtedness to the applicant. Nor has it met its undertakings made atthe meeting with the applicant in August 2019 and in its answeringaffidavits.[31] In paragraph 24 of the answering affidavit in response to theallegation by the applicant that the respondent is unable to pay its debtsas envisaged in s 344(f) and s 345(1) of the Act, the deponent MrNaicker stated:

'I deny the contents of this paragraph and advise that the difficultieswhich the Respondent is placed is simply a question of time and if theApplicant is simply patient, particularly as it has adequate security,it will be paid all amounts which are due to it, such amounts, it beingenvisaged, will be paid before the end of February 2020.'

It is common cause that the undertaking was not met when theapplication was heard on 22 May 2020. Therefore, despite the time thatthe respondent requested being exceeded by nearly three months, therespondent has been unable to settle its indebtedness to the applicant.[32] There can therefore be little doubt that the applicant hasestablished the respondent's indebtedness. In Afgri Operations Ltd vHamba Fleet Management (Pty) Ltd Willis JA reiterated the principlestated by Corbett JA in Kalil v Decotex:

'In regard to locus standi as a creditor, it has been held, followingcertain English authority, that an application for liquidation shouldnot be resorted to in order to enforce a claim which is bona fidedisputed by the company. Consequently, where the respondent showson a balance of probability that its indebtedness to the applicant isdisputed on bona fide and reasonable grounds, the Court will refusea winding-up order. The onus on the respondent is not to show thatit is not indebted to the applicant: it is merely to show that theindebtedness is disputed on bona fide and reasonable grounds.'

[33]


[34] However, these financial statements were provided by therespondent in August 2019. The discrepancy is of little value now. Therespondent alleged that it was unable to furnish its annual financialstatements to the applicant before 30 June 2019 mainly because of thekidnapping of a family member that was 'integrally involved in theadministration of the Respondent'. The respondent also acknowledgedthat facts of this matter have frequently changed since its inception.Nevertheless, although it has protested that it has made payments to theapplicant and several other creditors and that its assets and equityexceed its liabilities, and that despite its previous financial woes, it isnow operating a viable and profitable business, the respondent hasfailed to provide updated financial statements to sustain its allegations.The situation with the family member involved in the administration ofthe business no longer exists and is therefore not a bar to thepreparation of current financial statements. Updated current financialstatements would sustain the respondent's defence to this application,and demonstrate that it is not insolvent, that its assets exceed itsliabilities and it has a cashflow which will enable it to meet itsoperating expenses and other payments as and when they fall due. I amalso mindful that in his affidavit in the abortive application tointervene, Mr Magwaza stated:

'The first inkling we had of any financial difficulties the Respondentmight have been experiencing was in around December 2019 whenour members' salary payments were delayed by the Respondent andthey were paid in tranches. We were informed by the Respondent thatthis was because First National Bank had terminated their overdraftfacility.'

[35]


[36] In Firstrand Bank Ltd v Evans Wallis J stated:'...particularly at the level of a provisional order of sequestration, ifthe debtor is to persuade the court to exercise its discretion in his orher favour, they must place evidence before the court that clearlyestablishes that their debts will be paid if a sequestration order is notgranted. If that contention is based on a claim that the debtor is in factsolvent, then that should be shown by acceptable evidence. In thisregard the oft-quoted words of Innes CJ in De Waard v Andrew &Thienhaus Ltd are pertinent:‘Now, when a man commits an act of insolvency he must expect hisestate to be sequestrated. The matter is not sprung upon him ... Ofcourse, the Court has a large discretion in regard to making the ruleabsolute; and in exercising that discretion the condition of a man'sassets and his general financial position will be important elementsto be considered. Speaking for myself, I always look with greatsuspicion upon, and examine very narrowly, the position of a debtorwho says, I am sorry that I cannot pay my creditor, but my assets farexceed my liabilities. To my mind the best proof of solvency is thata man should pay his debts; and therefore I always examine in acritical spirit the case of a man who does not pay what he owes.’In this case Mr Evans concedes that he fell upon hard timesfinancially and, whilst he claims that his circumstances haveimproved somewhat in consequence of the sale of the sectional title


unit in Umhlanga, he does not make out any strong case that he isfinancially sound and capable of discharging his debts in the ordinarycourse. A person who claims that they are solvent, and for that reasonshould not be sequestrated, should be able to establish this by way ofacceptable evidence.' (footnote omitted)

[37] .

Like the respondent in Firstrand Bank Ltd v Evans, the respondentalleges that its financial circumstances have improved, and yet it hasfailed to meet its undertakings to settle its indebtedness not merelywithin a reasonable time, but at all. Further it is important to draw adistinction between a company which can realise its assets and stillcarry on its business and a company which if its assets are realised,would result in the company not being able to carry out its business.Inasmuch as the respondent submitted that it has realisable assets, andalso that the applicant may sell such assets, it has itself made noattempt to do so. It has also confirmed that it cannot operate itsbusiness if it returns the assets financed by the applicant, although theapplicant has terminated all its sale agreements with the respondent.[38] It is also of relevance that on 4 February 2020 Mr Du Randt wroteto the respondent's attorney, Mr S Naidoo, recording that the 66 assetsthat were made available for inspection:

'are in a very bad state of un-roadworthiness and disassembled. It isnot due to wear and tear but simply to a lack of maintenance andmost of the assets inspected are unusable according to our client'sreports they received.'

Mr Du Randt recorded that Mercedes and Wesbank, both largefinanciers of assets, had informed him personally that they too had'similar problems to inspect, locate and ascertain the values of theirassets'. The respondent was therefore put on terms to make theremaining assets available for inspection. At the hearing it wasconfirmed that the other assets had been inspected. However, what issignificant is that if the respondent is failing to maintain the assets theywill all fall into disrepair and thereby stall the business operations ofthe respondent. Alternatively, if the assets are maintained, the cost ofthe maintenance will add significantly to the respondent's operatingcosts, thereby eroding its income further by increasing its expenditure.


The sale and/or depreciation of assets will inevitably impact upon theactual solvency of the respondent and an increase in its operating costswill impact adversely on funds available to pay its creditors vizcommercial insolvency.[39] In denying that it is commercially insolvent, the respondent seemsto have conflated actual insolvency which involves a comparativeassessment of the value of a company's assets and its liabilities, andcommercial insolvency, which assesses a company's cash flow.Commercial insolvency recognises that if the company does not havesufficient cash resources to pay its current expenses as and when theyfall due, the company is commercially insolvent , whether it is actuallyinsolvent or not. The respondent has made no material submissions inrespect of its commercial insolvency. Even during its meetings with theapplicant's representatives it has made undertakings predicated ontransactions which would ease the constraints of its cash flow, such asa new contract or the sale of the Future Coal Mine, none of whichmaterialised.[40] I am mindful that the ability to pay its debts does not mean that therespondent itself must pay its debts. If it can raise finance from anexterior source or from friendly creditors to pay its debts it is notcommercially insolvent. It is apparent, from the undisputed facts on thepapers, that the respondent has in fact sourced funds from financialinstitutions other than the applicant over a period of time. However,those source of funds no longer appear to be available, as may beinferred from the actions instituted by several other creditors againstthe respondent. The applicant has furnished a s 345 demand dated 1October 2019 from MAN Financial Services SA (Pty) Ltd to therespondent which reflects that the respondent is indebted in the amountof R8 141 540.37 and the arrear amount being R1 398 503.95. Therespondent dismisses this demand as it was served on the wrongaddress and states that because MAN Financial Services is a separateentity the applicant cannot rely on this debt to support its application.It is also relevant to note that on 5 December 2019, the respondent'sattorney confirmed the amounts that were in arrears with the variouscreditors of the respondent. Although the respondent protests that theapplicant should not stretch its focus beyond the respondent'sindebtedness to itself, under s 345(2) of the Act the court may take


contingent and prospective liabilities into account when determiningwhether the respondent is unable to pay its debts. It is thereforenecessary for the court to have a holistic view of the respondent'sfinancial state, including the number of creditors with payments inarrears as admitted by the respondent.[41]

I am comforted by the following excerptfrom ABSA Bank Ltd v Rhebokskloof (Pty) Ltd & others:

'The concept of commercial insolvency as a ground for winding upa company is eminently practical and commercially sensible. Theprimary question which a Court is called upon to answer in decidingwhether or not a company carrying on business should be wound upas commercially insolvent is whether or not it has liquid assets orreadily realisable assets available to meet its liabilities as they falldue to be met in the ordinary course of business and thereafter to bein a position to carry on normal trading - in other words, can thecompany meet current demands on it and remain buoyant? It mattersnot that the company's assets, fairly valued, far exceed its liabilities:once the Court finds that it cannot do this, it follows that it is entitledto, and should, hold that the company is unable to pay its debts withinthe meaning of s 345(1)(c) as read with s 344(1) of the CompaniesAct 61 of 1973 and is accordingly liable to be wound up.'

[42] There is consequently no need to consider whether the applicanthas proved that there are just and equitable grounds for the winding-upof the respondent. Finally, the court must exercise its discretion indetermining whether the winding-up should be granted and whether theorder should be a provisional order or a final order, as sought by theapplicant. As stated in Henochsberg:


'The court's power to grant a winding-up order is a discretionarypower, irrespective of the ground upon which the order is sought...The discretion must be exercised on judicial grounds... and in itsexercise the Court should have regard to the grounds and reasons forthe proposed winding- up...

The Act itself places certain restrictions upon the exercise of theCourt's discretion to grant a winding-up order.' (references omitted)Under s 347 of the Act the:

'Court has a discretion whether or not to grant a winding-up ordereven if the ground on which the application is brought is establishedand irrespective of the nature of such ground; but all the provisionsof the section are partially regulator of the manner of the exercise ofthe discretion.'

[43] Mr Harrison submitted that in exercise of its discretion the courtshould take particular consideration of the fact that by issuing theliquidation application and taking a bond of security, the applicantcaused FNB to freeze the respondent's bank account in November 2019.FNB proceeded with the cession of debtors in order to freeze anddischarge the overdraft in circumstances where but for the calling upof the overdraft, the respondent would have been in a position to effectpayment of and deal comprehensively with the applicant's claims. Hecontended that the applicant should not be permitted to benefit from asituation which it created.[44] However I am inclined to find more persuasive the argument of MrRamdhani advanced on the authority of Macru Farming CC v StandardBank of South Africa Ltd. The Court faced with a claim by the appellantthat the respondent had been improperly induced to bring thewinding-up application, stated :

'[7] ... the appellant now relies on the following ‘facts’ to support itscontention that the respondent obtained the winding-up orderimproperly:7.1. The appellant's former attorney disclosed privileged informationto a liquidator as a result of which rumours regarding the appellant'sfinancial affairs circulated, causing the respondent to call up theoverdraft facility;…[8] With regard to the first complaint, there is no suggestion on the


papers that the respondent procured any information from the errantattorney. Once it is accepted that the appellant had indeed exceededits overdraft facility with the respondent on more than on occasion,and this is not disputed, the respondent was entitled to call it up. Thefact that there may have been ‘rumours’ circulating regarding theappellant's parlous financial situation does not detract from thisentitlement.'

[45] It is clear from the common cause facts that the respondentsuffered financial constraints long before November 2019. It maytherefore be accepted that not only were all its creditors aware of itsdefault in payments, but were also entitled to pursue the recoursesavailable to each of them independent of any legal action taken by anyother creditor. Furthermore, the directors of the respondent, asexperienced businessmen, must have appreciated the adverse legalconsequences that would follow on their failure to maintain thefinancial obligations of the respondent. They were not coerced into anyof the business transactions. While relying on large overdraft facilitiesto run the respondent's business operations, they must have appreciatedthe concomitant risks of conducting business in the ailing nationalcommercial and economic environment. The economy of this countryhas been on a downward trend for some time, causing businesses tostruggle in order to remain viable and operational. The Covid-19pandemic and the national lockdown which commenced in March 2020only exacerbated the situation. Nevertheless the directors of therespondent voluntarily assumed the risk of operating their commercialenterprises with funds acquired through wide-spread access to credit.The respondent must bear the consequences and not shift blame on itscreditors. I am therefore not persuaded that there is any merit in the'chicken and the egg defence' raised by the respondent.[46] Nevertheless, I am inclined to exercise my discretion to the extentof granting a provisional order of liquidation, and not a final order. Inmy view in the proper exercise of its discretion, a court should alsoconsider other parties who will be impacted by a winding-up of acompany. I endorse the comments in ABSA Bank Ltd v Newcity Group(Pty) Ltd:

'In plain terms, it is seems now to be incorrect to speak of an‘entitlement’ to a winding up order simply because the applicant is


an unpaid creditor. The rights of creditors no longer have pride ofplace and have been levelled with those of shareholders, employees,and with the public interest too...The norm that infuses the law aboutthe governance of companies after the advent of the Companies Act,2008, means that the age of the creditor supremacy is over...'

The 'norm' referred to should apply to liquidations irrespective of thefact that the Act still applies to the liquidation of companies.[47] Despite the criticisms levelled at those who represented theemployees of the respondent in the aborted intervention applications,the rights of the employees are significant. The respondent has asubstantial number of employees nationally who should not suffer theconsequences of the conduct of those who represented them. Furtherthe status of the assets which the respondent refers to resist theallegation of actual insolvency may be ascertained by the provisionalliquidators. In the premises I am satisfied that the granting of aprovisional order is appropriate.Order

1.The respondent is placed under provisional liquidation.2.A Rule Nisi is issued, calling upon all interested parties to showcause, if any, on 8 September 2020 at 09h30, or as soon thereafter asCounsel may be heard, why an order in the following terms shouldnot be granted:2.1.that respondent be placed under final liquidation.2.2.that the costs of this application, including reserved costs, becosts in the liquidation and such costs to include the fees of SeniorCounsel.3.A copy of the provisional liquidation order be served:3.1.on the respondent at its registered office;3.2.on the South African Revenue Services;3.3.on all known creditors, with claims in excess of RS 000 by wayof prepaid registered post;3.4.on the respondent's employees:i.by affixing a copy thereof to any notice board to which theemployees have access inside the respondent's premises; andii. by affixing a copy thereof to the front door of the premises fromwhich the respondent conducts business;


3.5.on any registered trade union that represents any of therespondent's employees;4.A copy of this order is to be published on or before the day of 11August 2020 once in the Government Gazette and once in a dailynewspaper published in Durban and circulating in KwaZulu-Natal.

BESTER N.O. v QUINTADO 120 (PTY) LTD

A party claiming that money paid to a company constitutes a claim entitlingthat party to liquidate the company on the grounds of that company’sinsolvency

Judgment given in the Western Cape Division, Cape Town, on 18 August 2020by Binns-Ward J

Bester and the other applicants, trustees in the sequestrated estate of Louw,a director of Quintado 21 (Pty) Ltd, applied for the final liquidation of thatcompany. The shareholders of the company were two trusts representing theinterests of Louw and Kellerman, the other director of the company.

The application was based on three claims. The first was the claim that theinsolvent estate enjoyed a creditor’s claim against the company in the sum ofR31 141 000,90, the total amount transferred from Louw’s banking accountsinto that of the company between January 2015 and his sequestration inNovember 2018. Most of the money transferred by Louw into the company’sbank account was paid on to other entities in which Louw had an interest, oneof which was Pholaco (Pty) Ltd.

The second claim asserted that the company owed the sequestrated estatejust over R9m, being the amount reflected in the company’s general ledger asowing by the company to Louw on loan account. This claim did not take intoaccount a reverse indebtedness of approximately R16m.

The third was a claim for R606 047 being the sum reflected in thecompany’s financial statements for the year ended 28 February 2019 as owingto Louw in respect of a ‘directors loan’.

Over a period of several years before his sequestration Louw hadmisappropriated funds entrusted to him for investment by the clients of hisaccounting firm. Louw had misled his clients into believing that theirinstructions had been duly carried out by issuing them falsified sharecertificates and investment statements and the like. Louw laundered much ofthe misappropriated money through a number of entities under his control,including Quintado. A substantial part of the misappropriated funds thatflowed into Quintado’s bank account was paid on to Pholaco (Pty) Ltd. Louwalso used Quintado’s status as a registered VAT vendor for the purpose of anincome tax evasion scheme that he executed on behalf of some of his clients.

Held—In the first place, it had to be established that the sequestrated estate was a

creditor of the company.

404 BESTER N.O. v QUINTADO 120 (PTY) LTDBINNS-WARD J 2020 SACLR 403 (WCC)

The first claim was based on nothing but a represented flow of funds withno meaningful indication of the basis therefor. The second claim waspredicated on sets of accounts that could not be relied upon as a true reflectionof reality. The third claim was premised on a reconstruction of the company’saccounts by a firm of accountants acting on Kellerman’s instructions given onthe basis of an uncompleted investigation. The probative quality of any of theclaims was questionable.

The use by Louw of Quintado’s banking account for money launderingpurposes in relation to his personal defalcations or fraudulent tax schemes wasin a sense a fraud on the company in the broad meaning of the word. Thisactivity could not be said to be within the field of the company’s operationsassigned to him. It had nothing to do with the company’s operations. Even ifthis was an incorrect assessment, the action of utilising the company’s bankingaccount as a conduit for the execution of his own purposes was not by designor result for the company’s benefit. There was no reason was Louw’sactionsshould be attributed to Quintado.

Louw acted for himself in using Quintado’s bank account for his ownpurposes. Hhe did not act for the company, and did not do that by anyarrangement with it. He was not acting for Quintado when he made thetransfers into and out of the company’s bank account, and the company did notreceive or accept the funds by virtue of any transactional relationship withLouw or his clients. The persons entitled to proceed against the bank to recoverthe stolen funds, for so long as those funds remained to the credit ofQuintado’s account in the bank’s books, were Louw’s clients, not Louw. WhenLouw caused the funds to be paid on to his actually intended beneficiaries, hewas not disposing of funds to which the company had any entitlement and hewas obviously therefore also not acting on the respondent’s behalf in doing so.

In the circumstances the applicants had not established on a balance ofprobabilities that the insolvent estate had an outstanding claim againstQuintado. Certainly, the applicants had not established that the estate enjoyeda liquidated claim that was not genuinely disputed by the company.

The application was refused.

Advocate L.M. Olivier SC and Advocate J.P. White instructed by Mostert &Bosman, Bellville, appeared for the applicantAdvocate P.A. van Eeden SC and Advocate D. Baguley instructed byAssheton-Smith Ginsberg, Cape Town, appeared for the respondent

BESTER N.O. v QUINTADO 120 (PTY) LTD 405BINNS-WARD J 2020 SACLR 403 (WCC)

Binns-Ward J:[1] On 24 February 2020 an order was made placing the respondentcompany under provisional liquidation. On the extended return day ofthe accompanying rule nisi the applicants have applied for a finalwinding up order. The respondent opposed the application, as indeedit also had the application for the provisional order.[2] The applicants are the joint trustees of the insolvent estate of PetrusSerdyn Louw (‘Louw’) and Martha Maria Sophia Louw. Louw was atall material times prior to his sequestration one of the two directors ofthe respondent company. The other director was his brother-in-law,one Markram Jan Kellerman (Kellerman). [3] Louw, who is a chartered accountant, was the ‘executive director’in the sense that it was he who operated the bank account, kept thecompany’s books and carried on the farming operations that wereconducted on a property near Porterville that is the company’s principalasset. The accounting firm of which he was a founding member andsenior director, Louw & Cronje Inc., was also engaged to undertake thesupposedly ‘independent review’ of the company’s annual financialstatements required in terms of Companies Act 71 of 2008 read withthe company’s memorandum of incorporation. Having regard toLouw’s association with the accounting firm, I would have thought thatthe inappropriateness of Louw & Cronje’s engagement was manifest.Kellerman, who is also a chartered accountant, and the co-founder andchief executive officer of an investment company, Gryphon AssetManagement Ltd, reportedly acted as a non-executive director. Theshareholders in the company at all material times were the HNP Trust,representing Louw’s family interests, and the Markram de Jager Trust,apparently representing Kellerman’s interests. Each trust held 50% ofthe shares in the respondent company.[4] The HNP Trust’s shares in the company were transferred toKellerman on 18 December 2018, purportedly pursuant to the exerciseby the latter of his rights as cessionary in terms of an agreement he hadconcluded with the HNP Trust on or about 19 October 2018, wherebyhe was given security for the repayment of a loan he had made toLouw, very shortly before the latter’s sequestration, in the sum ofR17 680 000 for which the Trust had assumed liability. (The probityof the agreement in terms of which Kellerman obtained the HNP


Trust’s shares in the respondent is a matter in dispute, but that is not amatter for determination in these proceedings.) Kellerman is currentlythe respondent’s sole director, Louw having been disqualified fromcontinuing in office consequent upon his sequestration.[5] It is not in dispute that over a period of several years before hissequestration Louw had misappropriated funds entrusted to him forinvestment by the clients of his accounting firm. An amount ofapproximately R110 million is said to have been involved. Louw hadmisled his clients into believing that their instructions had been dulycarried out by issuing them falsified share certificates and investmentstatements and the like. It is also undisputed that Louw launderedmuch of the misappropriated money through a number of entities underhis control, including the respondent company. A substantial part ofthe misappropriated funds that flowed into the respondent company’sbank account was paid on to Pholaco (Pty) Ltd - a company throughwhich Louw conducted a manufacturing business at Atlantis, and whichhas since been liquidated - and the rest to the other entities.[6] Louw also used the respondent company’s status as a registeredVAT vendor for the purpose of an income tax evasion scheme that heexecuted on behalf of some of his clients. The scheme involvedfictitious agreements of purchase and sale for which VAT invoiceswere issued. Some of the VAT invoices that Louw gave out to hisclients for the purposes of his scheme purported to have been issued bythe respondent company. Others were issued by other VAT registeredentities over which Louw exercised de facto control. Quite how theflow of funds associated with this scheme worked is not clear on thepapers. It would appear from an affidavit made by Louw in February2019 (annexure AA3 to the answering affidavit of Kellerman jurat20 September 2019) that the clients would pay the amount of the priceindicated on the VAT invoices issued by the respondent into therespondent’s account and that they would subsequently, in a later taxperiod, be reimbursed by way of payment on a fictitious invoice in thesame amount issued by the client to the respondent. That the schemewas Louw’s, not the respondent’s, was borne out by the fact that Louwmade some of the repayments from his own account. I remarked thatit is not clear how the flow of funds worked because the evidence doesnot explain where the clients’ money was held or applied in the period


1Certain email exchanges between Louw and Kellerman concerning varioustransactions involving a farming enterprise conducted by H Investments (Pty) Ltdincluded in the applicants’ papers call into question the veracity of Kellerman’sclaimed ignorance of Louw’s use of a scheme involving VAT invoices related tofictitious transactions. The emails were in Afrikaans and their subject line was‘Smokkels’. It appears from a communication from Louw to Kellerman after hissequestration (annexure AA26 to the answering affidavit byKellerman jurat 20September 2019) that Louw was in the habit of describing the tax evasion transactionshe engaged in as ‘smokkels’. Despite the scepticism concerning Kellerman’s assertedignorance to which the email exchanges understandably give rise, it is not necessaryto make any determination however, because on their face they pertain to a differentcompany

between the issue of the respective VAT invoices. The VAT that wasrepresented on the invoices as being payable in respect of the fictitioustransactions was reportedly paid over to the revenue service, but as forthe rest it would seem that it would be disposed of as Louw woulddetermine for his own purposes. [7] In a voluntary disclosure application in terms of Part B of Chapter16 of the Tax Administration Act 28 of 2011 that was submitted on therespondent’s behalf in September 2019 it was stated that the fictitiouspurchase and sale transactions to which Louw had been party from2011 to 2018 had resulted in an overpayment of VAT by the company.I do not think that it is necessary to dwell for present purposes on thisaspect of Louw’s activities because it seems clear from what I havedescribed that should any claims arise against the respondent therefromthey would be claims by Louw’s clients, and not by his insolvent estate.[8] Kellerman claims to have been unaware of Louw’s shenanigans1,and to have been misled by the financial statements prepared by Louwfor the company that were approved by the directors during the yearsin question. He does not appear, however, to have been troubled by thelack of any proper independent review mechanisms during the relevantperiod, for which he undoubtedly bore shared responsibility. Thefinancial statements did not disclose the flow of substantial fundsthrough the respondent’s bank account.[9] Louw’s ability to disguise the flow of funds through the company’saccounts appears to have been assisted by a peculiar arrangemententered into with the company in terms of which he was permitted toconduct a farming operation for his own account on the company’s


property using the facility of the company’s corporate personality andtax status. There was no evidence that the terms of the arrangementwere ever reduced to writing. The arrangement would appear to reflecta verbal understanding between the company’s directors. The mannerin which the company’s farming operation was treated as being forLouw’s own account was that the profit or loss of the farming operationwas reflected as a credit or debit, as the case might be, to his loanaccount in the company. The explanation given for this arrangementwas that Kellerman did not wish the value of his indirectly held interestin the company to be exposed to the risks of the farming business,having invested in the company on the basis that it would only be aproperty holding enterprise. The applicants contend that the manner inwhich Louw was permitted to run a business for his own accountthrough the company constituted an irregular use of the company’sjuristic personality and entailed a contravention of the Companies Act,2008. This is indeed one of the bases upon which they contend, withsome justification in my view, that it would be just and equitable forthe company to be wound up.[10] Indeed, it appears from the judgment in respect of the provisionalwinding up order that the judge (Papier J) was persuaded that themanner in which the company’s juristic personality had been misusedmade it just and equitable that it should be wound up. He wasunimpressed by Kellerman’s explanation as to his ignorance aboutLouw’s misuse of the company as a conduit for launderingmisappropriated money. He held that Kellerman had ‘at bestabandoned his fiduciary duties and responsibilities, which in [thelearned judge’s] view amounted to a material breach of his fiduciaryduties and obligations’.[11] The order placing the respondent into provisional liquidation was,according to the judgment, made in terms of s 81(1)(c)(ii) of theCompanies Act 71 of 2008. Section 81 applies only in respect of thewinding up of solvent companies. And the provision thereof referredto concerns applications by creditors of such a company on the groundsthat it would be just and equitable for it to be wound up. In theirfounding papers the applicants had, however, in point of fact allegedthat the company’s assets were probably of insufficient value to satisfytheir claim, which was tantamount to an allegation that the company


2 In para 4

was insolvent. The judge, however, made no finding on the solvencystatus of the company. He also did not make any determinationexplicitly on the applicants’ disputed standing as creditors of thecompany.[12]

[13] The making of the provisional order in terms of s 81 of the 2008Companies Act, rather than in terms of s 344 of the 1973 Act, suggeststhat the judge must have proceeded on the basis of an acceptance,prima facie, of the third of three alternative bases (described below) onwhich the applicants contended that the insolvent estate was possessedof a claim against the respondent company, viz. in the sum of R606 047reflected in the respondent’s financial statements for the year endedFebruary 2019 as being owing to Louw on loan account, for aquantification of the insolvent estate’s claim in any of the higheramounts ventured in the applicants’ founding papers would be difficult,to say the least, to reconcile with a finding that the company wassolvent. There is no indication in the judgment, however, of the basisupon which the judge on that approach must necessarily have rejectedKellerman’s evidence that the company’s indebtedness to Louw as atthe date of his sequestration had been actually only in the sum ofR209 977, payment of which was tendered before the provisional orderwas made.[14] Now that a final order is sought, the evidence must be assessed ina different manner from that undertaken for the purpose of making theprovisional order. As the respondent’s counsel reminded me, in aprevious case, Absa Bank Ltd v Erf 1252 Marine Drive (Pty) Ltd andAnother [2012] ZAWCHC 43 (15 May 2012)2, I described thedistinction between the approach adopted in the adjudication ofapplications for a final winding up order and that in respect of


applications for a provisional order as follows:‘While the evidence might be the same as it was when the provisionalorder was granted, the approach to be taken to it for the purposes ofconsidering whether a final order should be made is different. At theprovisional stage the applicant had to make out only a prima faciecase – in the peculiar sense of that term explained in Kalil v Decotex(Pty) Ltd and another 1988 (1) SA 943 at 976D – 978F. In order tosucceed in obtaining a final order the applicant has to prove its caseon the evidence as it falls to be assessed in the usual manner inproceedings on motion for final relief. The practical distinctionbetween the two requirements thus arises out of the application of thePlascon-Evans evidentiary rule in opposed proceedings for a finalorder; cf. Export Harness Supplies (Pty) Limited v Pasdec AutomativeTechnologies (Pty) Limited 2005 JDR 0304 (SCA) [[2005] ZASCA24 (29 March 2005)], at para. 4. The effect has been described interms which suggest that a higher ‘degree of proof…on a balance ofprobabilities’ is required for a final order than for a provisional order(Paarwater v South Sahara Investments (Pty) Ltd [2005] 4 All SA185 (SCA), at para. 3). While the basis for that description isunderstandable, I would suggest respectfully that the position mightmore accurately be described as being that while the applicant mustestablish its case on the probabilities to obtain either a provisional ora final order, in an opposed application, a different, and morestringent approach to the evidence, consistent with thePlascons-Evans rule, must be adopted by a court in deciding whetherthe applicant has made a case for a final order. This is incontradistinction to the approach to an opposed application for aprovisional order, when the case is decided on the probabilities asthey appear from the papers.’ (Footnote omitted.)

In the current matter I have before me not only the evidence that wasbefore the judge who made the provisional winding up order, but alsothe further papers exchanged between the parties for the return date.The papers have grown like Topsy to run in total to just short of 2000pages. The primary purpose of affidavits in motion proceedings is toset forth what in action proceedings would be contained in thepleadings and to adduce the relevant evidence. Regrettably, in thecurrent matter far too much ink has been used to advance arguments on


affidavit rather than to state facts, and there is also an excessive amountof repetitive material in the papers. Both sides were at fault in thisregard.[15] The applicants predicated their claim that the Louws’ insolventestate enjoys a creditor’s claim against the respondent company on anyone of three bases, each of them put up in the alternative to the others.[16] The first basis asserted a claim by Louw’s insolvent estate in thesum of R31 141 000,90, identified as the total amount transferred fromLouw’s banking accounts into that of the respondent company betweenJanuary 2015 and his sequestration in November 2018. In thealternative, but essentially on the same predicate, it was alleged that therespondent’s indebtedness to the insolvent estate was in the sum ofR13 686 794,48, being the difference between the aforesaid amount ofR31 141 000,90 and the amount of R17 454 206,42 paid from thecompany into Louw’s bank accounts during the same period. [17] Kellerman, who deposed to the principal answering affidavits onbehalf of the respondent, pointed out that most of the money transferredby Louw into the company’s bank account was simply paid on to otherentities in which Louw had an interest, notably Pholaco (Pty) Ltd. Healso showed that the flow of funds into Pholaco was accounted for inthe accounts of that company as an indebtedness on loan account toHNP Trust in an amount of more than R14 million. In other words,according to the respondent, it is apparent that Louw used his controlof the respondent’s bank account to use it as a conduit for paymentsthat he (not the respondent) was actually making to third parties.Having regard to the origin of the channelled funds, and the purposesfor which Louw’s clients had provided them, I think it may reasonablybe inferred that the reverse flows were probably necessary to pay thoseof Louw’s clients who wanted to cash in the investments that they hadbeen misled into believing he had made on their behalf or to pay themthe income that such investments should have generated. [18] Unless it were established that the respondent was party to thereceipt and disposal of the funds that Louw channelled through itsbanking account, a question I shall address presently, the first basisupon which the applicants’ standing is asserted cannot be sustained.[19] The second, and further alternative, basis of the applicants’ caseasserts a claim by the insolvent estate against the respondent company


of just over R9 million, being the amount reflected in the company’sgeneral ledger as owing by the company to Louw on loan account. Thecorrectness of that record was spoken to by Louw’s son, Henz Louw,at an enquiry in terms of s 152 of the Insolvency Act 24 of 1936. HenzLouw was one of the directors of Louw & Cronje Inc, the accountancyfirm established by Louw that acted as the company’s accountants andauditors. Henz Louw, however, qualified that evidence at a subsequentsitting of the enquiry, when he conceded that the ledger accountreflecting an apparent indebtedness by the company in that amount fellto be understood in the context of certain other identified ledgeraccounts, and agreed that the ‘consolidated’ position was that Louwwas in point of fact indebted to the company in the amount of just overR7 million. Henz Louw made a confirmatory affidavit in theseproceedings confirming his evidence at the insolvency enquiry.[20] The applicants argued that Henz Louw’s evidence is meaninglessbecause it is based on cooked accounts. That might well be so, but thenso is the computation of the claim by the insolvent estate. If Iunderstood him correctly, Mr L. Olivier SC for the applicants (togetherwith Mr White) eventually conceded, advisedly in my view, that theattempted formulation of the claim on the second basis asserted in thefounding papers was ‘an exercise in futility’.[21] The third basis asserted in the alternative in support of theapplicants’ standing involved a claim in the amount of R606 047 beingthe sum reflected in the company’s financial statements for the yearended 28 February 2019 as owing to Louw in respect of a ‘directorsloan’.[22]

[23] The applicants also contend, although this was not discernibly


3 Cf. Vereins und Westbank AG v Veren Investments and Others 2002 (4) SA 421(SCA) at para 11 (Cameron JA), citing Volkskas Bank Bpk v Bankorp Bpk (h/a TrustBank) en 'n Ander1991 (3) SA 605 (A) at 612C-D (Hefer JA). See alsoSaambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A) at 993 A-B,where Jansen JA referred with approval to the following statement in De Wet & YeatsKontraktereg en Handelsreg 4ed. at p. 236: ‘Behoudens enkele uitsonderinge, isvoldoening 'n tweesydige regshandeling, wat slegs met die medewerking enwilsooreenstemming van albei partye kan plaasvind.’

4 Also called the ‘identification theory’, Canadian Dredge & Dock Co v R 19 DLR(4th) 314; or ‘the directing mind and will principle’, Mostert NO v Old Mutual LifeAssurance Co (SA) Ltd (2) [2001] ZASCA 104 (1 June 2001); [2001] 4 All SA 250(A) at para 64-65. The ‘directing mind and will’ nomenclature derives from the

their case in the founding papers, that the respondent was complicit inthe fraudulent disposition by Louw of his assets and is therefore liableto the estate for having acted collusively in this regard. The mostobvious difficulty that I have with that contention is that it wasprimarily not Louw’s money that was being channelled to therespondent’s banking account, but rather that of Louw’s clients. Theother difficulty, even if one accepts for the purpose of the argument thatthe funds in question had become Louw’s after his clients paid theminto his account (which was the approach adopted in argument by theapplicants’ counsel), is that payment is a bilateral transaction3, andthere is no evidence that the respondent intended to accept paymentsfrom Louw. Indeed, the effect of the evidence is to the contrary;namely, that Louw was using the respondent’s banking facilities, overwhich he exercised sole control, to launder the pilfered funds and tofacilitate the fabrication of accounts that would misrepresent that thebeneficiaries of the payments, notably Pholaco (Pty) Ltd, were indebtedon loan account to the HNP Trust in respect of the stolen monies theyhad received. This suggests that in making and processing thepayments Louw was wearing his own hat, rather than his cap as adirector of the respondent. He was acting in his personal capacity, notfor and on behalf of the respondent company. That being the case,there is no basis for the applicants’ argument that the respondentcolluded with Louw in dealing with the funds.[24] The applicants’ counsel sought to argue, however, that applyingthe ‘directing mind’ or alter ego’ doctrine4 the acts of Louw in


speech of Viscount Haldane LC in Lennard’s Carrying Co Ltd v Asiatic PetroleumCo Ltd [1915] AC 705 (at 713).

5 Also reported at [1985] 1 SCR 662 and 1985 CanLII 32 (SCC).

6 The commentator in LAWSA loc. cit. (RC Williams, original text by the late MSBlackman) adopts the threefold test framed by Estey J in para 66 of Canadian Dredge& Dock Co supra

7 El Ajou v Dollar Holdings plc [1994] 2 All ER 684 (CA), Re Bank of Credit andCommerce International SA (in liquidation) (No. 15): Morris v Bank of India [2005]2 BCLC 328 (CA); [2005] EWCA Civ 693, Brambles Holdings Ltd v Carey (1976)2 ACLR 176 (SA), Chisum Services (Pty) Ltd and the Companies Act 1961 (1982)4 ACLR 641 SC (NSW) and Entwells (Pty) Ltd v National and General Insurance CoLtd (1991) 5 ACLR 424 SC (WA); [1991] WASC 286.

channelling the funds through the respondent fell to be regarded as theacts of the company, and that the company had in consequence to betaken as having accepted the payments. They referred me in this regardto the discussion on the doctrine in LAWSA Vol. 4(1) 2nd ed. at para79. But, as the commentators note at that place, citing, amongst otherauthorities, the judgment of the Supreme Court of Canada in CanadianDredge & Dock Co v R 19 DLR (4th) 3145, the doctrine operates onlywhen the action taken by the so-called directing mind (i) was within thefield of the company’s operation assigned to him or her, (ii) was nottotally a fraud on the company and (iii) was by design or result partlyfor the benefit of the company6.[25] As Heher JA observed in Consolidated News Agencies v MobileTelephone Networks [2009] ZASCA 130 (29 September 2009), [2010]2 All SA 9 (SCA), 2010 (3) SA 382, at para 31, with reference toCanadian Dredge and related English and Australian jurisprudence7,‘Each [case] must of course be read in context. In each case the courtstrives to determine whether it is the company which has spoken oracted to a particular effect through the voice or conduct of a humanagency and thereby to be held to the consequences or whether thatagency was engaged in an activity which cannot fairly be attributed tothe company. Each case raises different facts and the eventualconclusion must depend upon inference and probability in the absenceof express evidence of adoption of the statements or conduct as the


8 Supply of Ready Mixed Concrete, Re (No 2), Director General of Fair Trading vPioneer Concrete (UK) Ltd [1995] 1 All ER 135 (HL).

9 Quoted by Wunsh J in Simon NO and Others v Mitsui and Co Ltd and Others 1997(2) SA 475 (W) at 530G531A.

10 Note 7 above

company’s own.’ The essence of the learned judge of appeal’s remarksechoed the observations of Lord Hoffmann to similar effect inMeridian Global Funds Management Asia Ltd v SecuritiesCommission [1995] 3 All ER 918 (PC) at 928: ‘It is a question ofconstruction in each case as to whether the particular rule requires thatthe knowledge that an act has been done, or the state of mind withwhich it was done, should be attributed to the company. Sometimes, asin the Ready Mixed Concrete 8 case and this case, it will be appropriate.Likewise in a case in which a company was required to make a returnfor revenue purposes and the statute made it an offence to make a falsereturn with intent to deceive, the Divisional Court held that the mensrea of the servant authorised to discharge the duty to make the returnshould be attributed to the company: see Moore v I Bresler Ltd [1944]2 All ER 515. On the other hand, the fact that a company’s employeeis authorised to drive a lorry does not in itself lead to the conclusionthat if he kills someone by reckless driving, the company will be guiltyof manslaughter. There is no inconsistency. Each is an example of anattribution rule for a particular purpose, tailored as it always must be tothe terms and policies of the substantive rule.’ 9 In H L Bolton(Engineering Co Ltd) v T K Graham & Sons Ltd [1957] 1 QB 159 at173, Denning LJ said ‘Whether their intention [i.e. the intention of theofficers and agents of the company] is the company’s intention dependson the nature of the matter under consideration, the relevant position ofthe officer or agent and the other relevant facts and circumstances ofthe case.’ In El Ajou v Dollar Holdings plc supra10, Nourse LJendorsed the adoption of ‘a pragmatic approach’ as being appropriatein the application of the doctrine.[26]


[27] Mr Olivier also sought to make the respondent a party to Louw’sfraud for the purpose of establishing that it received the paymentsknowingly and therefore with the intention to receive them, andconsequently was not merely an uninvolved conduit for the stolenmonies, by relying on the dictum of Trollip J in Connock’s (SA) MotorCo Ltd v Sentraal Westelike Ko-operatiewe Maatskappy Bpk 1964 (2)SA 47 (T) at 53G-H that ‘… that where the representor is a companythe knowledge of the relevant facts that is required is its actual orimputed, and not merely constructive, knowledge (Houghton & Co. Ltdv Nothard, Lowe & Wills, 1928 A.C. 1 at pp. 14 - 15, 18 - 19 and 33).That would, therefore, include the knowledge of any of its agents orservants possessed and acquired by him in the course of hisemployment under such circumstances and being of such a nature thatit was his duty to communicate it to the proper authority in thecompany (Barberton Town Council v Ocean Accident & GuaranteeCorporation Ltd., 1945 T.P.D. 306) unless that agent or servant isperpetrating a fraud on the company in relation to the matters of whichhe so possesses or acquires knowledge (R v Kritzinger, 1953 (2) P.H.H 109 (A.D.); Houghton & Co. Ltd.'s case, supra; Halsbury, 3rd ed.vol. 6 p. 436)’. As counsel pointed out, the dictum was subsequentlyreferred to with approval by the appeal court in Afrisure CC andAnother v Watson NO and Another 2009 (2) SA 127 (SCA) at para 42.[28] In my judgment, counsel’s reliance on the dictum in Connock’sMotor Co was misconceived. The dictum was uttered in whollydistinguishable circumstances. The learned judge was dealing with theposition of a defendant company as representor in the context of analleged estoppel. In Connock’s Motor Co the plaintiff sued forpayment of the price of goods ostensibly sold and delivered to the


defendant company on open account. It was common cause that theorders had been placed by an employee of the defendant who had beenacting fraudulently to procure the goods for himself. The plaintiffreplicated to the defendant’s denial of liability for the unauthorisedactions of its fraudulent employee by pleading that the defendant wasestopped from denying that the fraudulently placed orders had beenauthorised. In the course of a general discussion on the developing lawon estoppel the learned judge noted that it appeared to be accepted inour law, as distinct from the position in England, that the reasonableeffect of the representation involved had to be judged taking intoaccount not only the position of the representee, but also with regard tothe representor’s knowledge of the relevant facts. It was in the latterconnection that the dictum was uttered. The plaintiff’s reliance onestoppel in Connock’s Motor Co was unsuccessful for a reasonadumbrated in the dictum, and which has some resonance on the factsof the current matter; viz. the employee who had placed the orders had,obviously unbeknown to the defendant company, been perpetrating afraud on his employer by his abuse of his inside knowledge of thecompany’s ordering procedures when he put in the orders in thedefendant’s name.[29] In relevant part the matter in Afrisure concerned the par delictumdefence raised by the first appellant to the respondents’ claim under thecondictio ob turpem vel iniustam causam for the repayment of morethan R5 million paid to the appellant in terms of an unlawful brokerageagreement with the medical aid scheme of which the respondents werethe liquidators. The respondents sought to avoid the incidence of thepar delictum rule by contending that the dishonourable conduct of themedical scheme’s principal officer, who had concluded the agreementon its behalf, could not be attributed to the scheme because thedirecting mind of the scheme in law resided with its board of trustees,not its principal officer. It was in rejecting that contention thatBrand JA made reference to the dictum uttered by Trollip J in a quitedistinguishable context in Connock’s Motor Co. Trollip J wasconcerned with the principles of agency when he uttered the dictumrelied on by the applicants’ counsel, not the directing will doctrine.[30] The difference between the position of the principal officer inAfrisure and that of Louw in the current case is that the principal officer


11 Cf. Beach Petroleum Nl and Claremont Petroleum Nl v Malcolm Keith Johnsonand Others [1993] FCA 283; (1993) 115 ALR 411; (1993) 11 ACSR 103, at para575.22.35, as to when a director’s conduct might not be treated as a ‘frolic of hisown’.

was acting within the ordinary ambit of his authority as agent of thescheme in concluding the contract. The agreement that he concludedon the scheme’s behalf might, to his knowledge, have been unlawful byreason of the statutory contraventions that were involved, but he wasnot on a frolic of his own for his own purposes when he entered into thecontract11. On the contrary, he was exercising his functions as principalofficer entirely for the purposes of the scheme. The scheme’sresponsibility for its principal officer’s actions in concluding thecontract could just as easily (and probably more appropriately) beattributed to the scheme under the well-established principles ofagency. By contrast, in the current case, Louw acted for himself inusing the respondent company’s bank account for his own nefariouspurposes; he did not act for the company. Louw’s conduct wasexcluded from being attributed to be that of the respondent company inthe circumstances because he was in fact acting in fraud of it and withno intention to benefit it and not within the field of the company’soperation assigned to him.[31] Kellerman pointed out that the applicants have, by their ownconduct, actually acknowledged that Louw utilised the bank accountsof the respondent company in order to make payments to third partiesthereby using the respondent as nothing other than a conduit, that is ina way that did not give rise to any advantage to or liability for therespondent, but merely gave rise to the misleading impression thatpayments had been made by the company instead of by him.Kellerman referred in this regard to an action instituted by theapplicants in this court under case no. 9723/19 against variousdefendants who were the ultimate beneficiaries of a number ofpayments made by Louw from the proceeds of the above-mentionedloan made to him by Kellerman in October 2018. The particulars ofclaim in the action allege that the payments in question, which theapplicants seek to have set aside as voidable dispositions in terms of theInsolvency Act, were effected from funds transferred by Louw to the


respondent company. The tenor of the case pleaded by the applicantsin the action is that the payments were made by Louw using therespondent company’s bank account as a conduit. Similar allegationswere made by the applicants in their application for the sequestrationof the HNP Trust. In that matter the applicants alleged that Louw hadlent and advanced moneys to Pholaco (Pty) Ltd through the conduit ofthe banking accounts of entities that he controlled, including that of therespondent company.[32] Relying on the judgment of the appeal court in Trustees EstateWhitehead v Dumas 2013 (3) SA 331 (SCA), the appellants’ counselsubmitted that the funds credited to the respondent’s account pursuantto the deposit therein by Louw of the funds misappropriated from hisclients fell to be regarded as having been appropriated by therespondent by reason of what they contended was the personal rightthat the company had against its bankers to all of the money standingto the credit of its account in the banks books. The case in Dumas is,however, quite distinguishable on its facts from the current case. I shallpause to discuss Dumas at greater length than might ordinarily havebeen warranted. It is appropriate to do so because of the emphasisplaced on it by the applicants’ counsel, who sought to equate therespondent’s position in the current case with that of D in that matter.I shall simplify the facts slightly for the purpose of narration.[33] The essence of the matter in Dumas was that D, an innocent party,was induced by the fraudulent misrepresentation of W or his agent toinvest a sum of money in a Ponzi scheme operated by W. He did so bycausing the funds to be transferred to W’s banking account. Themoneys were transferred with the common intention by transferor andtransferee that the payment was for investment by W in the purportedinvestment scheme. Very soon after the transfer had been effected, Dbecame aware of the fraud and sought to recover his funds from thebank on the basis that W had no entitlement to the benefit of them byreason of the fraud. The affected funds were then held in a suspenseaccount that was frozen pending the determination of the claims onthem. A short time thereafter W’s estate was provisionally sequestratedin terms of an order which directed the bank to pay the frozen fundsinto the account of the provisional trustees, which happened to beconducted at the same bank. D then instituted a claim under the


12 Commissioner of Customs and Excise v Bank of Lisbon International Ltd andAnother 1994 (1) SA 205 (N).

condictio ob turpem vel iniustam causam — a remedy available to aplaintiff who innocently transfers money to a defendant under anagreement which, to the knowledge of the defendant, is illegal. Anumber of parties were joined as defendants, including the bank and thetrustees of W’s insolvent estate. As Cachalia JA pointed out, the firstproblem with the claim advanced against the bank was that it was hadnot been party to the agreement or illegality.[34] The bank understandably took the position of a stakeholder andabided the court’s determination. The only parties to oppose D’s claimwere the trustees of W’s insolvent estate, who asserted W’s rightagainst the bank to the monies standing to the credit of his account atthe date of his sequestration.[35] The court of first instance upheld D’s claim on the basis of thejudge’s understanding of the import of the appeal court’s judgment inNissan South Africa (Pty) Ltd v Marnitz NO and Others (Stand 186Aeroport (Pty) Ltd Intervening) 2005 (1) SA 441 (SCA), [2006] 4 AllSA 120. On appeal, the Supreme Court of Appeal held that thecircumstances of the case in Nissan were materially distinguishable,and that the first instance judge had been incorrect to apply thatjudgment in respect of D’s claim. Cachalia JA identified the characterof the issue in D’s matter as follows at para 16 of Dumas: ‘The enquiryin this case … turns on whether or not [W] acquired a personal right tothe credit when [D] caused the money to be transferred to [W’s]account. If he did, the funds accrued to [W's] estate upon sequestration.However, if [W] himself did not acquire a personal right to the funds,neither would his estate have upon sequestration; the funds then remainthe property of the bank, with [W's] estate having no claim to itspayment. And the bank would be unjustly enriched, at [D’s] expense,if it retained the funds without incurring an obligation to release it tothe trustees.’ The learned judge of appeal proceeded, in para 23: ‘Soboth Nissan and Bank of Lisbon12 were concerned with theft or fraudoutside a contractual context. By contrast the investmenttransaction between [D] and [W], though tainted by fraud, neverthelessconstituted the causa for the payment. [D] intended to pay [W] and


voluntarily made the payment into [W’s] account; it is immaterial thatthe payment was solicited through [W] misrepresentation and fraud.’(My emphasis.) Just as much as D intended to pay W, so W alsointended to receive the payment; thus, in contradistinction to theposition in the current matter, the payment transaction in Dumas wastruly bilateral.[36]

[37] As Cachalia JA acknowledged in Dumas, at para 14, ‘… acustomer does not always acquire an enforceable personal right to thecredit in his account merely by virtue of the deposit. A bank is entitledto reverse a credit in the account-holder’s bank account if it transpiresthat the account had been credited in error, that the customer hadacquired the money by fraud or theft, that the drawer’s signature on acheque had been forged, or that the bank notes deposited into theaccount were forgeries’. In my judgment, the facts in the current casedemonstrate just such a situation. Unless Louw was acting on its behalfas much as he was on his own account in making the deposit to therespondent’s account, which in my view he was not, the respondentobtained no enforceable right against the bank to payment of the fundsso deposited.[38]


13 See p. 307 of the current (10th ed.) edition.

[39] In argument it was variously contended by the applicants’ counselthat the insolvent estate’s claim against the respondent – they wereevidently referring to the first of the abovementioned alternative basesof claim - is of a nature enforceable by means of a condictio sine causaor a claim under the actio Pauliana. In my judgment there is no meritin either of these contentions. As to the first, there is no evidence thatthe respondent was enriched and Louw impoverished by the funnellingof funds through the respondent. As to the second, the actio Paulianais a remedy available to creditors of an insolvent estate from whichdispositions have been made to the prejudice of the creditors to recoverthe dispositions from the party to which they have been made. It isavailable when the creditors can show that the recipient of thedisposition was complicit in the fraud on the creditors or when therecipient has received the disposition ex titulo lucrativa (iegratuitously). In Nedcor Bank Ltd v ABSA Bank and Another 1995 (4)SA 727 (W); [1995] 3 All SA 291 (W) at 729 G-I (SALR), Nugent Jexplained the nature of the actio as follows: ‘The actio Pauliana is nota remedy for recovery by a claimant of property which he has lost as aresult of fraud. It is a remedy to set aside a disposition of assets whicha debtor has made for the purpose of avoiding the assets falling into hisestate on insolvency and thereby becoming available for distribution tohis creditors. The party to whom the disposition was made can be madeto restore the property for the benefit of creditors if he colluded in thedisposition or if he received the property gratuitously. This I think isclear from the cases referred to above. (See, too, Mars The Law ofInsolvency in South Africa 8th ed at 23313, and the authorities cited


in Commissioner of Customs and Excise v Bank of Lisbon InternationalLtd and Another 1994 (1) SA 205 (N).).’ It has not been establishedthat the respondent was complicit in the fraud, nor indeed that it‘received’ the funds in the relevant sense. It is also less than clear thatthe dispositions were made for the purpose of avoiding the assetsfalling into his estate on insolvency.[40] The applicants’ counsel also submitted in their heads of argumentthat the respondent’s financial records were kept in such a manner asto reflect that Pholaco was its debtor in respect of the funds channelledthrough the company. The implication of the submission being that theaccounts evidenced an appropriation by the respondent of the fundspaid into its account by Louw. While there may be some basis to thecontention in regard to the manner in which certain ledger accountswere written up, the annual financial statements of the respondent thatwere approved by Louw and Kellerman as the directors during therelevant period did not reflect that the respondent’s assets included anyclaim against Pholaco (Pty) Ltd. The respondent’s financial statementsdid not reflect the channelled funds in any way whatsoever. In all thecircumstances of the case I do not think any credence can be attachedto the manner in which Louw had the respondent’s accounts written up.[41] Reverting now to the third of the aforementioned bases for theapplicants’ assertion that the insolvent estate is a creditor of therespondent. Kellerman averred that he had the respondent’s financialstatements redrawn after the discovery of Louw’s misfeasance, and thatthe amount owed to Louw on loan account as at the date of hissequestration was in fact only in the sum of R209 977, which has sincebeen paid to the applicants. It is therefore denied that the applicantshave any outstanding claim against the company. The calculation ofthe admitted claim of R209 977, which arose out of the aforementionedarrangements in terms of which Louw had conducted the farmingoperations on the respondent’s property, was set out in detail byKellerman in his answering affidavit jurat 20 September 2019.[42] Mr Olivier contended, without much conviction it seemed to me,that Kellerman’s qualification of his earlier admission that the extentof the company’s indebtedness to Louw on loan account was in the sumof R606 047, being the figure reflected in the company’s February 2019financials (in the drafting of which Kellerman had been personally


14 See National Scrap Metal (Cape Town) (Pty) Ltd and Another v Murray & RobertsLtd and Others 2012 (5) SA 300 (SCA) at para 21-22 and Mathewson and Anotherv Van Niekerk and Others [2012] ZASCA 12 at para 7.

15 The explanation was set out in detail in Kellerman’s affidavit jurat 20 September2019 and further in his affidavit opposing the application for a final order, jurat 22May 2020.

involved) was so far-fetched it could be rejected on the papers on thebasis of the qualification to the Plascon-Evans rule. The test fordeparting from the general tenet of the Plascon-Evans rule andrejecting a respondent’s evidence on the papers has been described asa ‘stringent’ one14. The applicants’ criticism of Kellerman’s evidencedoes not come near to satisfying it. On the contrary, on the face of itthe explanation that has been given in the respondent’s papers ofKellerman’s recalculation of Louw’s claim on loan account is cogent15.There is certainly no basis to reject it on the papers as far-fetched oruntenable.[43]

[44] The provisional order must therefore be discharged and theapplication dismissed. In my view it would be fair, however, havingregard to its admitted indebtedness when the application was instituted,for the respondent to be held liable for the applicants’ costs of suit upincurred up the delivery of the respondent’s answering papers includingtheir costs in respect of the perusal and consideration of those papers,and for such costs to include the fees of two counsel where such wereengaged. Save as aforesaid, the applicants will be ordered to pay therespondent’s costs of suit, also including the costs of two counsel.[45] It only remains to dispose of an application by the respondent forthe striking out of certain parts of the applicants’ replying papersdelivered in response to the affidavits delivered by the respondent in


opposition to the application for a final winding-up order. When thematter was argued, Mr van Eeden SC, who appeared for the respondenttogether with Mr Baguley, defined the material sought to be struck outmore narrowly than in the notice of application. He restricted theattack to paragraphs 22.2, 22.3, 22.5, 22.6, 27, 28 and 29 of theapplicants’ further replying affidavit and the whole of the affidavit ofBarend Ferreira jurat 25 June 2020. The application in respect of theidentified parts of the further replying affidavit was made on thegrounds that those parts constituted new matter or were vexatious,scandalous or irrelevant. It was contended that the content of Ferreira’saffidavit was irrelevant and that it constituted new matter.[46] The impugned subparagraphs in paragraph 22 of the furtherreplying affidavit bore on certain emails exchanged between Louw andKellerman concerning what may have been fictitious transactions in HInvestments (Pty) Ltd of the nature of those used in Louw’s tax evasionscheme that had resulted in VAT invoices being issued by therespondent in respect of fictitious transactions. The evidence went tothe issue of the credibility of Kellerman’s professed ignorance aboutthe tax evasion scheme. I agree that it was irrelevant. I do not agreethat it was scandalous or vexatious. In terms of rule 6(15) a court maynot uphold a striking out application in respect of irrelevant matterunless it is satisfied that the applicant will be prejudiced if theapplication is not granted. The reason for this qualification is obvious.Much unnecessary time and effort would be taken up if courts wererequired to deal with applications to strike out objectionable materialin affidavits that despite its objectionable nature nevertheless did notoccasion the affected litigant cognisable prejudice in the principallitigation. The parts of paragraph 22 to which objection has been takenby the respondent were so patently irrelevant to the case against therespondent that it should have been reasonably apparent that the courtwould pay no regard to them in the determination of the application.Insofar as they might be regarded by Kellerman as prejudicial to hisreputation and good character, it should be remembered that he is nota party to the litigation, and nor does he stand for relevant purposes tobe regarded as the respondent’s alter ego. It is only with the questionof prejudice to the respondent company that I must concern myselfwith. I am not satisfied that the parts of paragraph 22 to which


objection has been taken occasion any such prejudice.[47] There is no reason to deal with the application to strike outparagraphs 27-29 of the further replying affidavit any differently fromthe subparagraphs of paragraph 22 discussed above. The evidence inthose paragraphs might aptly be described as ‘more of the same’.[48] In my judgment, the content of the affidavit of Barend Ferreirawas neither irrelevant, nor ‘new matter’. It was a legitimate responseto the evidence put in by the respondent premised on the redrawing orrevision of the company’s financials by Mr Boshoff of MerlinChartered Accountants based on the information provided byKellerman concerning the investigative work that he had undertaken ofthe company’s accounting records subsequent to the exposure ofLouw’s fraudulent activities.[49] In the result the striking out application will be dismissed withcosts.[50] The following orders are therefore made:1.The provisional order of liquidation in respect of the respondent(Quintado 120 (Pty) Ltd) is hereby discharged and the winding-upapplication is dismissed.2.The respondent shall the applicants’ costs of suit in the winding-upapplication incurred up to the delivery of the respondent’s answeringpapers including their costs in respect of the perusal and considerationof those papers, and such costs shall include the fees of two counselwhere such were engaged.3.Save as provided in paragraph 2 above, the applicants shall pay therespondent’s costs of suit in the winding-up application, including thefees of two counsel where such were engaged.4.The respondent’s application to strike out is dismissed with costs,including the fees of two counsel.

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