Court name
High Court Main Division
Case number
APPEAL 273 of 2014
Case name
Laicatti Trading Capital Inc v Greencoal (Namibia) (Pty) Ltd
Media neutral citation
[2016] NAHCMD 31
Judge
Parker AJ










REPUBLIC OF NAMIBIA





HIGH COURT OF NAMIBIA
MAIN DIVISION, WINDHOEK





JUDGMENT





Case no: A 273/2014





DATE: 22 FEBRUARY 2016





In the matter between:





LAICATTI TRADING CAPITAL
INC................................................................FIRST
APPLICANT





CHRISTOPHER PETER VAN ZYL
N.O.......................................................SECOND
APPLICANT





RYNO ENGELBRECHT
N.O.............................................................................THIRD
APPLICANT





EUGENE JANUARIE
N.O..............................................................................FOURTH
APPLICANT





(The second to fourth applicants in
their respective capacities as joint liquidators of Greencoal
Holdings Proprietary Limited (in liquidation), registration number:
2013/120207/07) (“Greencoal Holdings”)





And





GREENCOAL (NAMIBIA) (PTY) LTD


(REGISTRATION NUMBER:
2010/0314)......................................................FIRST
RESPONDENT





GERSHON
BEN-TOVIM............................................................................SECOND
RESPONDENT





Neutral citation: Laicatti Trading
Capital Inc v Greencoal (Namibia) (Pty) Ltd (Registration Number:
2010/0314) (A 273/2014) [2016] NAHCMD 31 (22 February 2016)





Coram: PARKER AJ





Heard: 2 – 3 November 2015





Delivered: 22 February 2016





Flynote: Company – Winding up –
Applications for – Grounds – On the basis of the ‘just
and equitable’ provision – Ambit of ground –
Company, in instant case, in substance a partnership –
Circumstances justifying dissolution of partnership also justifying
winding up of company – Court satisfied applicant has
established specific grounds sufficient for the granting of a
provisional winding up order – Principles in, eg, Ebrahim v
Westbourne Gallaries Ltd and Others [1972] 2 All ER (House of Lords)
applied – Companies Act 28 of 2004.





Summary: Company – Winding up –
Application for – Grounds – On the basis of the ‘just
and equitable’ provision – Ambit of ground –
Company, in instant case, in substance a partnership –
Circumstances justifying dissolution of partnership also justifying
winding up of company – Court satisfied applicant has
established specific grounds sufficient for the granting of a
provisional winding up order – On the papers it is sufficiently
established that the relationship of mutual trust and confidence and
friendly cooperation between the equal shareholders in company has
broken down irretrievably – Furthermore, there has been breach
of good faith parties owed to each other – Court accordingly
held that first applicant has made out a case for provisional winding
up order – Companies Act 28 of 2004.





Flynote: Company – Winding up –
Application for – Grounds – On the basis of the ‘unable
to pay its debts’ provision – Company unable to pay its
debts when it is unable to meet current demands placed on it in its
day-to-day activities in the ordinary course of business –
Court will make an order for compulsory winding up of company where
on the totality of the evidence interested parties would be protected
only by a fully independent investigation of the company’s
affairs in compulsory winding up – Where on the papers there is
prima facie case (ie a balance of probabilities) in favour of
applicant, provisional order of winding up should normally be granted
– Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 945 (A)
applied – Companies Act 28 of 2004.





Summary: Company – Winding up –
Application for – Grounds – On the basis of the ‘unable
to pay its debts’ provision – Company unable to pay its
debts when it is unable to meet current demands placed on it in its
day-to-day activities in the ordinary course of business –
Court will make an order for compulsory winding up of company where
on the totality of the evidence interested parties would be protected
only by a fully independent investigation of the company’s
affairs in compulsory winding up – Where on the papers there is
prima facie case (ie a balance of probabilities) in favour of
applicant, provisional order of winding up should normally be granted
– In instant case purpose of the rule nisi sought is to give
interested parties interim protection and for them to be heard –
Second, third and fourth applicants (‘these applicants’)
are liquidators of insolvent holding company – Second
respondent is a 50 percent shareholder of insolvent holding company
and director thereof at the material time – Liquidators’
investigations revealed an unexplained shortfall on holding company’s
books in the amount of N$4,7 million – Court found that assets
of insolvent holding company diverted by second respondent by way of
questionable and unauthorized transactions to the company (first
respondent) through intervention of second respondent – Some of
these payments to company constituted disposition without value in
terms of s 26 of the Insolvency Act 24 of 1936, read with s 344 of
the Companies Act 28 of 2004 – Court found further that
company’s failure to pay certain proved indebtedness is due to
its inability to pay and therefore company is commercially insolvent
– Court found no evidence that there has been any revenue flow
into company or that funding has been sourced for company –
Court found further that only when liquidators of company has
investigated company that the full picture of questionable and
unauthorized dealings in the company, including the role of the
second respondent in them, would emerge – On the totality of
the evidence court found there is a prima facie case (ie a balance of
probabilities) in favour of applicant – Consequently court
concluded applicants have made out a case for the grant of a
provisional winding up order.





ORDER





Order dated 3 November 2015 granted ex
tempore. (Paragraph 4 of this judgment).





JUDGMENT





PARKER AJ:





[1] The instant application revolves
around a scientific project whereby biomass is converted to coal by a
process called torrefaction. The initial application for the
provisional winding up of the first respondent was brought by the
first applicant on 10 October 2014. The second, third and fourth
applicants (‘the liquidators’) were duly appointed as
joint liquidators of Greencoal Holdings (Pty) Ltd, a company
registered in South Africa (‘the insolvent’ or ‘Greencoal
Holdings’) as a consequence of its winding up in terms of both
a provisional order and final order of the High Court of South
Africa. The liquidators received a certificate of appointment issued
by the Master of the High Court of South Africa on 27 November 2014
pursuant to that order. The liquidators were, in terms of the
recognition order granted by this Court on 13 March 2015 and made
final on 10 April 2015, authorised to institute these proceedings for
the winding up of the first respondent, and were granted further
powers to recover movable property belonging to the insolvent and
situated in Namibia.





[2] The liquidators brought an
application to intervene in the pending winding up proceedings
brought by the first applicant. The respondents moved to oppose this
application, but shortly before it was due to be heard, withdrew
their opposition. The intervention application was accordingly
granted by agreement between the parties on 23 July 2015. Thereafter,
the liquidators filed founding papers in the main winding up
proceedings.





[3] The respondents have moved to
reject the application. The first applicant’s case is based on
the ground contained in 349 (h) of the Companies Act No. 28 of 2004
(‘the Companies Act’), namely, that it is ‘just and
equitable’ that the first respondent be wound up. While they
associate themselves with the just and equitable provision relied on
by the first applicant, the second, third, and fourth applicants rely
on another provision. It is the ‘unable to pay its debts’
provisions in s 349(f), read with s 350(1)(c), of the Companies Act.





[4] After hearing counsel I issued the
following order on 3 November 2015:





‘1. The first respondent be
provisionally wound up in the hands of the Master of the High Court.





2. Costs are reserved.





3. A rule nisi is issued calling on the
respondents and all other interested persons to appear before the
court on 6 April 2016 at 10h00 or so soon thereafter as the matter
may be heard, to show cause, if any, why the following order should
not be made:





(a) The first respondent is finally
wound up in the hands of the Master of the High Court.





(b) The unopposed costs of the
application of the respective applicants are costs in the winding up
of the first respondent.





(c) The second respondent pays the
respective applicants’ costs of the application, save those
mentioned in subpara (b), including the costs reserved earlier, and
including costs of one instructing counsel and one instructed counsel
of the respective applicants.





(d) This order shall be –





(i) published once in the Government
Gazette and The Namibian newspaper;





(ii) served on the first respondent at
its registered address, 12th Floor, Sanlam Centre, Independence
Avenue, Windhoek; and





(iii) served on the second respondent
at Farm Ehuiro, No. 120, Omaruru.





A. It is recorded that the reasons for
the order are to be delivered to counsel on or before 24 March 2016.’





[5] It may be important to note that on
the hearing of the application on the set down dates of 2 and 3
November 2015, while both counsel for the applicants appeared, Mr
Möller, who had appeared as counsel for the respondents all
along, including the hearing of the interlocutory matters, failed to
appear without as much as the courtesy, which a court always expects
from counsel, of an explanation from counsel for the failure to
appear. That is all that I can say in the circumstances. This is a
free country, and even legal practitioners are free to act as their
consciences dictate. Mr Möller was absolutely aware of the set
down dates; and in the circumstances I asked both counsel to prove
the case of the applicants. The train of justice could not wait for
Mr Möller to board at his whims and caprices.





[6] I now proceed to consider the first
applicant’s grounds and the grounds relied on by the second,
third and fourth applicants.





‘Just and equitable’
provision





[7] Greencoal Holdings (the insolvent)
is one company in a group of companies, sometimes referred to as ‘the
Greencoal Group’. The Greencoal Group includes the first
respondent, a company registered in Namibia. Greencoal Holdings was
provisionally wound-up on 21 August 2014 and a final winding up order
was granted on 9 October 2014. The application there was initially
opposed by Mr Gershon Ben-Tovim, the second respondent in the instant
proceeding; but after the matter had been fully argued the second
respondent abandoned his opposition to the relief sought. Greencoal
Holdings has two shareholders, each owing 50 per cent of the issued
share capital, namely, the second respondent (who was also a director
of Greencoal Holdings) and the first applicant in the instant
proceeding (Laicatti Trading Capital Inc). The winding up order in
respect of Greencoal Holdings was granted by the High Court of South
Africa at the instance of the first applicant.





[8] Furthermore, when investigating the
affairs of Greencoal Holdings, the liquidators established that the
assets of Greencoal Holdings are valued at just over N$10 million and
the liabilities amount to just over N$15 million, leaving an apparent
shortfall of about N$4,7 million. The Greencoal Group had as one of
its main areas of business the engagement in worldwide torrefaction,
a process whereby biomass properties are changed to obtain a much
more efficient fuel quality for combustion and gasification
application. The first and second respondents were at the centre of
this business plan. The second respondent was to provide expertise in
plant management, whilst the first respondent owned a torrefaction
plant in the country and had plans of constructing a new torrefaction
plant on its farm near Omaruru.





[9] In promoting this enterprise the
second respondent indicated that financing was required and expressed
confidence that he could attract financing of a least 50 per cent of
the total funds needed from a commercial bank. It was at that
juncture that the first applicant came in as a funder. A Founders
Agreement was entered into between the first applicant, the first
respondent and the second respondent to regulate the collaboration
between first applicant, as the funder, second respondent as the
corporate head, and first respondent as owner of the plant. In terms
of the agreement, the first applicant was to make funding available
over a period of time in an amount of about N$35 million. The
business did not take off. Despite the fact that first applicant
provided funding to the tune of some EUR2,248,190, plus a further
amount of EUR50,000 (about N$34,5 million), first respondent failed
to generate any income and did not secure any firm orders for the
torrefaction products.





[10] With these apparent intractable
impediments in the way of the fist respondent, in the business sense,
the relationship between the first applicant and the second
respondent broke down and caused the first respondent to become
dysfunctional: it gave rise to a situation where it is impossible for
the first respondent to continue its business operations. The
directors are embroiled in various disputes whose end is not in
sight; just as the financial and management woes of the first
respondent are not in sight. The directors accuse each other of
breaches of the founders agreement, dishonesty and deceit. It is the
applicant’s contention that the second respondent has failed to
conduct the business of the first respondent and Greencoal SA in
accordance with what the parties’ understanding was, and in
accordance with the founders agreement, the financial plan, business
plan and milestones. For this reason it is the applicant’s
position that it is no longer obliged to finance the first respondent
and Greencoal SA any longer. And what is more; the second respondent
has been unable to secure financing from first respondent’s
bankers to fund the enterprise.





[11] Thus, on the papers, on any
reasonable account, it is established that the relationship of mutual
trust and confidence and friendly cooperation between the equal
shareholders in first respondent, namely, the first applicant and the
second respondent has broken down irretrievably. With this holding,
the first sign post in the way to consider is this. Should the court
exercise its discretion to grant the application on the basis of the
just and equitable provision? That is the subject of the next level
of the enquiry.





[12] I start with the interpretation
and application of the just and equitable provision; and in that
behalf, I set out here in extenso the speech of Lord Wilberforce in
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (House of Lords) at
499g-500h, referred to me by Mr Steyn:





‘It is also true, I think, that,
generally speaking, a petition for winding up, based upon the
partnership analogy, cannot succeed if what is complained of is
merely a valid exercise of powers conferred in terms by the articles
… To hold otherwise would enable a member to be relieved from
the consequences of a bargain knowingly entered into by him …
But this, I think, is subject to an important qualification. Acts
which, in law, are a valid exercise of powers conferred by the
articles may nevertheless be entirely outside what can fairly be
regarded as having been in the contemplation of the parties when they
became members of the company; and in such cases the fact that what
has been done is not in excess of power will not necessarily be an
answer to a claim for winding up. Indeed, it may be said that one
purpose of [the just and equitable provisions] is to enable the Court
to relieve a party from his bargain in such cases.









‘My Lords, in my opinion these
authorities represent a sound and rational development of the law
which should be endorsed. The foundation of it all lies in the words
‘just and equitable’ and, if there is any respect in
which some of the cases may be open to criticism, it is that the
courts may sometimes have been too timorous in giving them full
force. The words are a recognition of the fact that a limited company
is more than a mere judicial entity, with a personality in law of its
own: that there is room in company law for recognition of the fact
that behind it, or amongst it, there are individuals, with rights,
expectations and obligations inter se which are not necessarilty
submerged in the company structure. That structure is defined by the
Companies Act 1948 and by the articles of association by which
shareholders agree to be bound. In most companies and in most
contexts, this definition is sufficient and exhaustive, equally so
whether the company is large or small. The ‘just and equitable’
provision does not, as the respondents suggest, entitle one party to
disregard the obligation he assumes by entering a company, nor the
court to dispense him from it. It does, as equity always does, enable
the court to subject the exercise of legal rights to equitable
considerations: considerations that is, of a personal character
arising between one individual and another, which may make it unjust,
inequitable, to insist on legal rights, or to exercise them in a
particular way.





‘It would be impossible, and
wholly undesirable, to define the circumstances in which these
considerations may arise. Certainly the fact that a company is a
small one, or a private company, is not enough. There are very many
of these where the association is a purely commercial one, of which
it can safely be said that the basis of association is adequately and
exhaustively laid down in the articles. The super imposition of
equitable considerations requires something more, which typically may
include one, or probably more, of the following elements: (i) an
association formed or continued on the basis of a personal
relationship, involving mutual confidence – this element will
often be found where a pre-existing partnership has been converted
into a limited company; (ii) an agreement, or understanding, that
all, some (for there may be ‘sleeping’ members), of the
shareholders shall participate in the conduct of the business; (iii)
restriction on the transfer of the members’ interest in the
company – so that if confidence is lost, or one member is
removed from management, he cannot take out his stake and go
elsewhere.





‘It is these, and analogous,
factors which may bring into play the just and equitable clause, and
they do so directly, through the force of the words themselves. To
refer as so many of the cases do, to ‘quasi-partnerships’
or ‘in substance partnerships’ may be convenient but may
also be confusing. It may be convenient because it is the law of
partnership which has developed the conceptions of probity, good
faith and mutual confidence, and the remedies where these are absent,
which become relevant once such factors as I have mentioned are found
to exist: the words ‘just and equitable sum these up in the law
of partnership itself.… A company, however small, however
domestic, is a company not a partnership or even a quasi-partnership
and it is through the just and equitable clause that obligations,
common to partnership relations, may come in.’





[13] It follows that the just and
equitable provision is not confined to cases analogous to the unable
to pay its debts provision. Nor can any fixed and immutable rule be
laid down as to the nature of the circumstances that would justify
the conclusion that it is just and equitable to wind up a company.
See Apco Africa (Pty) Ltd and Another v Apco Worldwide Inc 2008 (5)
SA 615 (SCA at 623A-F. In this regard, as Mr Steyn submitted, the
courts have proposed five categories of circumstances in which it
would prima facie be just and equitable to wind up a company under
this provision: (1) disappearance of its substratum; (2) illegality
of its objects and if it has a fraudulent purpose; (3) fraud,
misconduct and oppression; (4) deadlock in its administration; and
(5) irretrievable breakdown of the relationship between the
shareholders of a domestic company. This proposition is intended as
guidelines to assist the courts and not as hard and fast rules to be
applied regardless of factual context. In any case, Ebrahimi warns us
that the tendency to create categories or headings under which cases
must be brought if the provision is to apply is wrong; and the
general words in the provision should remain general and not be
reduced to the sum of particular instances.





[14] The three elements (elements (i),
(ii) and (iii) proposed in Ebrahimi) mark the nature of the first
respondent as a domestic company: The understanding of the parties to
the founders agreement (concluded on 7 July 2013) was that, for
example, the first applicant and the second respondent would be the
only shareholders and members of the first respondent in equal
shares. The business of the first respondent would be managed by a
board of directors nominated by the first applicant and the first
respondent in equal numbers, and comprising of any even number. The
first applicant and the second respondent would, like partners in
partnership relations, owe each other a duty of good faith. I,
therefore, accept Mr Steyn’s submission that upon the
authorities (see, eg, Re Yenidje Tobacco Co Ltd [1916 – 1917]
All ER 1050 (CA); [1916] 2 Ch 426 (Court of Appeal); Thunder Cats
Investments 92 (Pty) Ltd and Another v Nkonjane Economic Prospecting
& Investment (Pty) Ltd and Others 2014 (5) SA 1 (SCA), which
approved and applied Yenidje) the first respondent is a ‘domestic
company’ which may be liquidated on grounds similar to those on
which a partnership may be dissolved, as respects the just and
equitable provision.





[15] I accept the first applicant’s
averments that the fiduciary relationship of mutual trust and
confidence and friendly cooperation between the first applicant and
the second respondent as the only shareholders of the first
respondent, which is necessary and required to continue its business
as contemplated in the founders agreement cannot survive the
disparaging allegations of fraud and dishonesty levelled at Stanislav
Chebotar which the founding affidavit is replete with. Stanislav
Chebotar was nominated by the applicant to be a member of the board
of the first respondent. Added to this is what I have found
established, namely, that the relationship of mutual trust and
confidence and friendly cooperation between the equal shareholders in
the first respondent, that is, the first applicant and second
respondent, has broken down irretrievably.





[16] I am prepared to hold that in a
case like the present where there are only two persons interested,
where there are no shareholders other than the first applicant and
the second respondent, where there are no means of overruling by the
action of a general meeting of shareholders the trouble which is
occasioned by the first respondent becoming dysfunctional and the
quarrels in which the directors are embroiled, the first respondent
ought to be wound up because there exists grounds as would be
sufficient for the dissolution of a private partnership at the suit
of one of the partners against the other, that is, it is just and
equitable that the first respondent should be wound up. (Re Yenidje
Tobacco Co Ltd [1916 – 1917] All ER, at 1053D-E; per Warrington
LJ) And I do not find that the cause of the troubles of the first
respondent can largely be put at the door of the applicant who now
seeks to take advantage of it. (Re Yenidje Tobacco Co Ltd at 1051a)





[17] This court is satisfied that it is
impossible for the first applicant and the second respondent (who, as
I have said more than once, hold equal shares of 50 per cent of the
first respondent) to place that confidence in each other which each
has a right to expect, and such impossibility (as I have found
previously) has not been caused by the applicant seeking to take
advantage of it.





[18] Based on these reasons, in my
judgement, the applicant made out a case for the grant of the
application on the basis of the just and equitable provision, hence
the granting of the order set out in para 4 of this judgement.





‘Unable to pay its debts’
provision





[19] As intimated previously, the
liquidators (second, third and fourth applicants) seek a winding up
order against first respondent on the basis that the first respondent
is both factually and commercially insolvent and is, therefore,
unable to pay its debts within the meaning of s 349(f), read with s
350(1)(c), of the Companies Act.





[20] I consider the application on the
basis of the ‘unable to pay its debts’ provision in the
light of the purpose of the order of provisional winding up which is
to afford interested parties interim protection. The second, third
and fourth applicants are such interested parties in these
proceedings. These applicants need to preserve the movable assets of
the first respondent, pending a proper investigation into the affairs
of the first respondent with the purpose of recovering debts owed by
the first respondent. The next level of the enquiry is therefore, to
consider the facts which the liquidators rely on to establish the
‘unable to pay its debts’ provisions.





[21] The second respondent was at the
material time a 50 per cent shareholder of Greencoal Holdings. He was
also a director of the company at the relevant time. The liquidators’
investigations have revealed that there is a shortfall on Greencoal
Holding’s books in the amount of about N$4,700,000. This state
of affairs remains unexplained. Furthermore, the liquidators have
established facts that the first respondent is indebted to Greencoal
Holdings in the amount of N$635 340,81, together with interest. The
indebtedness arose from wages paid by Greencoal Holdings (of which
the second respondent was a director, as I have said previously) in
May 2014 to July 2014. I find that the payments were made without
cause and were not due by Greencoal Holdings to the first
respondent’s workers. This, accordingly, constituted a
disposition without value as contemplated by s 26 of the Insolvency
Act 24 of 1936, read together with section 344 of the Companies Act.
Indeed, it should be said in parentheses that the dispositions are
liable to be set aside in terms of these provisions. It is worth
noting that the respondents admit that the payment of such salaries
constitutes disposition without value.





[22] In the answering papers, the
respondents admit such payments but claim that the ‘payments
were made pursuant to the provisions of the Founders Agreement’.
This cannot be true. The founders agreement, as mentioned previously,
was entered into between first applicant, first respondent and second
respondent. Greencoal Holdings is, therefore, not a party to the
Founders Agreement; and so, it bore no obligations to make any such
payments. And the respondents can get no succour from their
contention that such debt is not due by first respondent to Greencoal
Holdings because, according to the respondents, Greencoal Holdings
was provided with funds by GI Development Forever Corporation and
that such payments were paid to the employees concerned of first
respondent pursuant to resolutions of first respondent and Greencoal
Holdings. This transaction was based upon a partially performed loan
agreement which is not subject to the terms of the Founders
Agreement.





[23] Indeed, despite the allegations
that the aforementioned funding was provided and resolutions were
passed in this respect, no supporting documentation is furnished. The
respondents also place reliance on an allegation that the payments
were authorised by Roby Zomer, but no confirmatory affidavit is
provided. Thus, although the respondents denied these allegations in
the answering affidavit in the intervention application, and now in
the answering affidavit in the present proceeding. I find that the
denials are bald and devoid of any factual basis, apart from the ipse
dixit of the deponent, Mr Ben-Tovim. I conclude therefore that no
bona fide dispute of fact arises in these circumstances; and so, the
denial is rejected, as untenable on the papers. (See Plascon-Evan
Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at
635c.) And Elisenheim Property Development Company (Pty) Ltd v Guest
Farm Elisenheim 2013 (4) NR 1085 (HC), para 63, tells us that
‘respondents cannot shield behind bald and unsubstantiated
denials (or assertions where they raise them as a defence) or where
denials are not genuine’. The conclusion is inescapable that
such allegations by respondents are not proved; they become mere
irrelevancies.





[24] It is my view that the liquidators
have established this indebtedness on the part of the first
respondent to Greencoal Holdings. The view rests on the authority of
Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 945 A.





[25] Moreover, I find that there is no
cogent or convincing response to the liquidator’s averment that
as a result of the aforementioned payments made less than six months
prior to the date of Greencoal Holding’s liquidation, Greencoal
Holdings’ liabilities exceeded the value of its assets. And it
is common cause that the first respondent has not repaid this
indebtedness to Greencoal Holdings; neither has it tendered to do so.
It seems to me clear that first respondent’s failure to repay
the amount is due to its inability to pay, and so the conclusion is
inevitable that first respondent is commercially insolvent.





[26] Furthermore, I find that the
Founders Agreement relied upon by the respondents has not been
properly implemented by first respondent inasmuch as there has been a
failure of the first respondents’ financial plan. On 7 July
2013 to 20 March 2014 first applicant provided second respondent with
EUR2,303,446,35 to be applied by first respondent as managing
director of first respondent to further its business objectives. But
none of these objectives, including the upgrading of first
respondent’s production plant, the generation of EUR16,515,398
in revenue, nor a recording of a profit of EUR7,066,124, have been
attained. And despite due demand, second respondent has failed to
account to first applicant utilisation of the funds. In a period of
two weeks, ending in September 2014, second respondent reduced the
balance of first respondent’s bank account from over
N$1,000,000 to just over N$500,000. And the liquidators’
investigations have revealed that second respondent caused Greencoal
Holdings to make unauthorised payments to himself or third parties in
an amount of at least N$4,076,498,85. It is reasonable to conclude
that these payments could account for the aforementioned shortfall of
N$4,7 million in the books of Greencoal Holdings.





[27] Additionally, either first or
second respondent was in possession of two Pajero motor vehicles
(‘vehicles’) for which Greencoal Holdings paid
N$991,217,39. The vehicles were never returned to Greencoal Holdings.
The respondents have provided no proper explanation for the vehicles
and for appropriating proceeds from the sale, except making vague and
unsubstantial allegations that the proceeds were used for
disbursements and expenses. I accept Mr Corbett’s submission
that the dishonest nature of the respondents’ dealings with the
motor vehicles is evidence from what is confirmed in the replying
affidavit, namely that after the liquidators obtained an order in the
Omaruru Magistrate’s Court against the first and second
respondents authorising the liquidators to seize the motor vehicles,
the deputy sheriff served the order on the second respondent on 9
June 2015. In the return of service the deputy sheriff reported that
Ben-Tovim, the second respondent, ‘claims that he does not know
anything about the said vehicles’. The sheriff’s version
contradicts Ben-Tovim’s explanation that the ‘vehicles
became redundant upon the extraction of first applicant from the
business’. This is relevant: The deputy sheriff records that
‘the foreman and workers, they informed me that the said
vehicles was on the Farm October 2014, both in accidents and was send
to Windhoek but never returned to the Farm’.





[28] Apart from all else, the following
excerpts from the minutes of the board of first respondent, dated 6
September 2013, are significant; and I accept Mr Corbett’s
submission that they are of major concern:





‘(a) Revenue flow in respect of
first respondent would have started in February 2014;





(b) Funding was to be secured by
sourcing debt to the amount of N$10 million through “suspensive
sale agreements”, and





(c) The total annual remuneration of
the management team and directors amounted to N$4,068,050.’





[29] There is no evidence that there
has been any revenue flow or that any funding has been sourced. There
are rather only unexplained and apparently irregular payments made by
the first respondent, including the seemingly overblown remuneration
of the management team and directors; and what is more, there is no
record of first respondent’s income – budgeted or actual.
There is no asset register or annual financial statements available
despite the fact that first respondent was incorporated 2010. I
reject the respondents’ Delphic, generalised and irrelevant
statements.





[30] It would be the burden of the
respondent to prove what they assert, namely that the first
respondent is commercially solvent, by, for instance, providing asset
registers, financial statements and management reports showing that
this is indeed the case. They have avoided dealing with these
relevant issues. In my view, their inaction when challenged that no
such financial records exist, leads to the inexorable conclusion that
first respondent has no asset base, no finances and no ability to pay
its debts as and when they become due. Doubtless, one such debt is
the non-repayment of the aforementioned monies unlawfully disbursed
from Greencoal Holdings to first respondent, as well as the vehicles
bought for first respondent with Greencoal Holdings’ funds.





[31] Doubtless, it is only when the
liquidators of first respondent are able to take follow-up action, as
a result of investigations into the affairs of the company after
winding up, will the full picture be revealed. This would include
examining carefully the role of the directors, including Ben-Tovim
the second respondent, in the affairs of the first respondent.





[32] What the liquidators seek is
reasonable and purposeful. As I have said previously, the purpose for
seeking the rule nisi is to afford interested parties an opportunity
to be heard. Thus, the purpose of an order of provisional winding up
of the first respondent is to give such interested parties judicial
interim protection. Kalil v Decotex (Pty) Ltd and Another, at 979B-C,
tell us: ‘Where on the affidavits there is prima facie case (ie
a balance of probabilities) in favour of the applicant, then, …
a provisional order of winding up should normally be granted …’.
And it has been said -





‘The Court will make an order for
the compulsory winding up of the company where, on the evidence as a
whole, the body of creditors would be protected only by a fully
independent investigation of the company’s affairs in
compulsory winding up; for example, where there are considerable
suspicions about the real motive for the company seeking to avoid a
compulsory winding up order, giving rise to understandable fears on
the part of the creditors that the company’s shareholders and
directors have something to hide.’ (Italicized for emphasis)





(Ms Blackman, RD Jooste and GK
Everingham, Commentary on the Companies Act, Vol. 3, at 14-145)





[33] The totality of the evidence and
the respondents’ failed persistent manoeuvres to set at naught
the order of the court that the application should be heard as soon
as possible and the respondents’ abortive attempt to delay
indefinitely the hearing of the present application (see judgment
dated 8 October 2015) answer to the kind of situation the learned
authors put forth as an example of a case where ‘creditors
would be protected only by a fully independent investigation of the
company’s affairs in compulsory winding up’.





[34] Having carefully considered the
totality of the evidence and the grounds relied on by the second,
third and fourth respondents, although disputed – weakly and
unconvincingly disputed – I come to the inexorable conclusion
that there is a prima facie case (ie a balance of probabilities) in
favour of these applicants; and on that basis, in my judgement, the
applicants have made out a case for the granting of a provisional
order of winding up of the first respondent. It followed that the
application succeeded on the ‘unable to pay its debts’
provision, too; hence the granting of the order appearing in para 4
of this judgment.





C Parker





Acting Judge





APPEARANCES





FIRST APPLICANT: H Steyn





Instructed by Ellis Shilengudwa
Inc., Windhoek





SECOND, THIRD AND FOURTH APPLICANTS:
A W Corbett SC





Instructed by Fisher, Quarmby &
Pfeifer, Windhoek





FIRST RESPONDENTS: A Möller





Instructed by Du Plessis, De Wet &
Co., Windhoek