THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case No: 1030/2015

In the matter between:

FRESHVEST INVESTMENTS (PROPRIETARY) LIMITED

APPELLANT

and

MARABENG (PROPRIETARY) LIMITED

RESPONDENT

Neutral citation:
Freshvest Investments (Pty) Ltd v Marabeng (Pty) Ltd
(1030/2015) [2016] ZASCA 168 (24 November 2016)
Coram:
Shongwe, Leach and Willis JJA and Fourie and Nicholls AJJA
Heard:
15 November 2016
Delivered:

24 November 2016
Summary:
Winding-up application: respondent disputing debt on bona fide and
reasonable grounds: court a quo referring matter to oral evidence: winding-up
proceedings not designed for the enforcement of disputed debts.

________________________________________________________________
ORDER
_______________________________________________________________
On appeal from: Free State Division of the High Court of South Africa,
Bloemfontein (Jordaan J sitting as court of first instance):
The appeal is upheld and the order of the court a quo is set aside and
substituted with the following:
‘The application for the winding-up of the respondent is postponed sine die, with
costs to date to be costs in the cause.’
The costs of the appeal, including the costs of two counsel, where
applicable, are to be costs in the cause in the winding-up application.
Should the appellant be successful in the action that has been instituted
(‘the pending action’) in establishing a claim of not less than R100 against the
respondent, it may then set the winding-up application down for hearing on the
same papers, duly amplified as needs be.
Should the appellant fail to establish a claim of not less than R100 against
the respondent in the pending action, or fail to prosecute the pending action to its
final conclusion, then the winding-up application will be deemed to have been
dismissed with costs, including the costs of two counsel, where applicable.
_________________________________________________________________
JUDGMENT
_________________________________________________________________
Fourie AJA (Shongwe, Leach and Willis JJA and Nicholls AJA concurring):

[1] This is an appeal, with the leave of the court a quo, against the dismissal of
an application for the winding-up of the respondent, Marabeng (Pty) Ltd. In essence,
the matter serves as a stark reminder that winding-up proceedings are not designed
for the enforcement of a debt that the debtor-company disputes on bona fide and
reasonable grounds. This has become known as the ‘Badenhorst rule’ after
Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) at

347-348. See also Kalil v Decotex (Pty) Ltd & another 1988 (1) SA 943 (A) at 980B-
D, as well as the authorities referred to in Kalil at 980D-F. A collection of more recent
authorities on the application of the Badenhorst rule is found in P M Meskin et al
Henochsberg on the Companies Act 5 ed Vol 1 at 693-694.

[2] The application for the winding-up of the respondent was brought at the
instance of the appellant, Freshvest Investments (Pty) Ltd, a company which
conducts business by, inter alia, providing finance facilities to entities active in the
agricultural sector. It is common cause that the appellant, represented by Mr P Van
As Le Roux (Le Roux) and the respondent, represented by Mr J H Naudé (Naudé
Jnr), concluded three loan agreements during 2012, in terms of which it was
recorded that the appellant lent and advanced various amounts to the respondent. It
is further common cause that the respondent failed to repay the loans in terms of the
agreements, with the result that as at 28 July 2014, an amount of R9 171 298,84
was due and owing to the appellant. On the strength of this indebtedness, the
appellant approached the court a quo for the winding-up of the respondent.

[3] The respondent filed an extensive affidavit in opposition to the application, in
which it placed the validity of the appellant’s claim in issue. The main contentions
raised by the respondent in disputing the appellant’s claim were the following:
(a)
Naudé Jnr had no authority to represent the respondent in concluding the
three loan agreements with the appellant. In addition, the appellant’s representative,
Le Roux, was aware of Naudé Jnr’s lack of authority.
(b)
Both Naudé Jnr and Le Roux were aware that the loans were not for the
benefit of the respondent, but were advanced for the sole benefit of Naudé Jnr’s
personal farming activities. The loan agreements were the product of the fraudulent
and unlawful collusion between Le Roux, representing the appellant, and Naudé Jnr,
to obtain the loans for the benefit of Naudé Jnr.
(c)
Although the three loan agreements recorded that the appellant and the
respondent were the parties thereto, the true parties to the agreements were the
appellant and Naudé Jnr. In fact, the loans were not utilised by the respondent, but
by Naudé Jnr for his personal farming activities.
(d)
The three loan agreements were accordingly void ab initio and unenforceable
against the respondent.

[4] In its replying affidavit the appellant put these averments of the respondent in
issue. In the event, the matter was heard by Lekale J, who, after hearing argument,
delivered a written judgment. It appears from the judgment that Lekale J was alive to
the implications of the Badenhorst rule, as well as the nature of the onus resting on a
respondent who disputes its alleged indebtedness to an applicant in winding-up
proceedings. In Kalil at 980C-D this onus was described as follows:
‘Consequently, where the respondent shows on a balance of probability that its
indebtedness to the applicant is disputed on bona fide and reasonable grounds, the court
will refuse a winding-up order. The onus on the respondent is not to show that it is not
indebted to the applicant: it is merely to show that the indebtedness is disputed on bona fide
and reasonable grounds.’

[5] The guidelines laid down in Kalil as to how factual disputes regarding the
respondent’s indebtedness in an application such as the present should be
approached, were stated thus by Brand J in Payslip Investment Holdings CC v Y2K
Tec Limited 2001 (4) SA 781 (C) at 783H-I:
‘With reference to disputes regarding the respondent’s indebtedness, the test is whether it
appeared on the papers that the applicant’s claim is disputed by respondent on reasonable
and bona fide grounds. In this event it is not sufficient that the applicant has made out a case
on the probabilities. The stated exception regarding disputes about an applicant’s claim thus
cuts across the approach to factual disputes in general.’

[6] In Hülse-Reutter & another v HEG Consulting Enterprises (Pty) Ltd (Lane and
Fey NNO intervening) 1998 (2) SA 208 (C) at 219E-220A, Thring J commented as
follows on the nature and the extent of this onus:
‘I think that it is important to bear in mind exactly what it is that the trustees have to establish
in order to resist this application with success. Apart from the fact that they dispute the
applicants’ claims, and do so bona fide, . . . what they must establish is no more and no less
than that the grounds on which they do so are reasonable. They do not have to establish,
even on the probabilities, that the company, under their direction, will, as a matter of fact,
succeed in any action which might be brought against it by the applicants to enforce their
disputed claims. They do not, . . . have to prove the company’s defence in any such
proceedings. All that they have to satisfy me of is that the grounds which they advance for
their and the company’s disputing these claims are not unreasonable . . . It seems to me to

be sufficient for the trustees in the present application, as long as they do so bona fide, . . .
to allege facts which, if proved at a trial, would constitute a good defence to the claims made
against the company.’

[7] In applying these principles to the facts of the instant matter, Lekale J held as
follows:
‘I am, therefore, persuaded by common cause facts in the present matter that the
respondent disputes the debt on bona fide and reasonable grounds.’
In the light of the principles set out above, and bearing in mind the low threshold test
that the respondent had to satisfy in order to discharge its onus, that should have
been the end of the matter. Lekale J ought thereupon to have dismissed the
application. However, he came to the following conclusion:
‘In the light of the need for speedy finalisation of a matter of the present nature, the nature
and extent of the dispute involved as well as the fact that the dispute was not foreseeable on
the part of the applicant [the appellant], I am convinced that the parties are correct, in their
alternative submissions, that the correct course to follow is for the issue concerning the
respondent’s liability to the applicant to be referred to oral evidence.’

[8] The consequences of this referral were unfortunate. As recorded earlier, there
was no need in these proceedings for a finding whether or not the respondent is
indebted to the appellant, as the respondent does not have to prove its defence. All
that was required of the respondent, was to show that the appellant’s claims were
disputed on bona fide and reasonable grounds. This Lekale J held it had done.

[9] The application was then, in the temporary absence of Lekale J, referred to
Jordaan J for the hearing of oral evidence. He heard the evidence of Mr FJ Rossouw
(Rossouw), the deponent to the opposing affidavit of the respondent, as well as that
of Le Roux. Upon conclusion of the evidence, Jordaan J delivered a judgment in
which he dismissed the winding-up application with costs.

[10] It is apparent from the judgment of Jordaan J, that he was rather surprised by
the fact that, although Lekale J had held that the respondent disputed its
indebtedness on bona fide and reasonable grounds, the matter had been referred to

oral evidence on the issue of the respondent’s liability to the appellant. He put it as
follows at para 10 of his judgment:
‘The irony of the matter is that my brother held that the debt was disputed on bona fide and
reasonable grounds. However, I accept that this finding was obiter, otherwise there would
have been no reason to refer the matter for oral evidence to have the same issue decided.’
(My translation of the learned judge’s Afrikaans.)

[11] The finding of Lekale J was not obiter. As recorded above, he had expressly
held that, on the common cause facts, the respondent disputed the debt on bona fide
and reasonable grounds. In view thereof, Jordaan J ought to have held that it was
unnecessary to hear oral evidence. See Wallach v Lew Geffen Estates CC 1993 (3)
SA 258 (A) at 263H. The dismissal of the application ought then to have followed
without incurring further costs and delay.

[12] The irony is that, after hearing evidence for three days, Jordaan J came to
exactly the same conclusion as Lekale J, namely that the respondent disputed the
debt on bona fide and reasonable grounds. This conclusion was based on the
relevant documentation as well as the evidence of Rossouw and Le Roux, and after
making credibility findings, in particular, that the appellant’s witness, Le Roux, was
an extremely poor witness.

[13] This court is now faced with an appeal arising from proceedings before
Jordaan J which were unwarranted and irrelevant. Lekale J had already held that the
debt was disputed on bona fide and reasonable grounds. This finding was no doubt
correct, as, on the papers (particularly the extensive answering affidavit), a defence
was raised which was not unreasonable – on the contrary, the facts raised in
opposition, if proved at a trial, would no doubt constitute a good defence. Further, a
lack of bona fides cannot readily be inferred from the papers. Therefore, the matter
ought to have ended with this finding of Lekale J and the appellant ought then to
have instituted action to prove its disputed claim in the normal course. As recorded
earlier, Lekale J compounded the confusion by referring the matter to oral evidence
on the issue as to whether or not the debt was, in fact, due. Jordaan J then, contrary
to the order of Lekale J, decided the issue as to whether or not the debt was
disputed on bona fide and reasonable grounds. This issue had, however, not only

already been decided, but was an issue that had to be decided on the papers and
not with the aid of oral evidence. How does this court now unscramble the egg?

[14] What is clear from the above, is that the winding-up application could not have
succeeded. But, should the appeal against the order of Jordaan J now simply be
dismissed? Although one may at first blush be inclined to follow this route, I believe
that, for the reasons set out hereinafter, the appeal ought not to be dismissed.

[15] The appellant’s counsel forcefully argued that should this court find that the
respondent has in fact discharged its onus, the appeal should not be dismissed, but
it should be ordered that the winding-up application be postponed sine die to enable
the appellant in the meantime to proceed against the respondent with its action for
payment of its claim. We have been informed that action proceedings have already
been instituted by the appellant for the recovery of the full amount allegedly due to it
by the respondent.

[16] Counsel for the appellant further submitted that, in the hearing before Jordaan
J, the respondent had changed its stance by contending that the relevant loan
agreements were simulated transactions and not, as initially alleged in the answering
affidavit, the result of fraudulent and unlawful collusion between the appellant and
Naudé Jnr. Counsel contended that it was apparent from the evidence of Rossouw,
the respondent’s witness, that an amount of at least R600 000 of the funds advanced
by the appellant in terms of the agreements, was paid to the respondent’s creditor
and not to Naudé Jnr. Therefore, counsel argued, there was a reasonable possibility
that the appellant will have some success in its action against the respondent.

[17] Whilst it is not necessary to delve into the evidence tendered before Jordaan
J, I believe that there is merit in counsel’s submission that allowance should be
made for the possibility that the appellant may in the main action obtain an order
recovering some portion of the debt allegedly owing and on which the winding-up
application is based. However, I hasten to add that I make no definite finding in this
regard. Therefore it appears to be just and equitable at this stage not to finally
dispose of the winding-up application, but rather to postpone it sine die, thereby
awaiting the finalisation of the action proceedings.

[18] In arriving at this conclusion, I have also taken account of the fact that both of
the parties were instrumental in having the matter referred to oral evidence by Lekale
J. As appears from his judgment, the parties put this forward as an alternative route
to follow and then actively participated in the hearing before Jordaan J,
notwithstanding the prior finding made by Lekale J that the respondent disputed the
debt on bona fide and reasonable grounds.

[19] In making this order, it has been helpful to refer to the order made by Griesel
J in Investec Bank Limited v Lewis 2002 (2) SA 111 (C) at 121A-C.

[20] It is ordered that:
The appeal is upheld and the order of the court a quo is set aside and
substituted with the following:
‘The application for the winding-up of the respondent is postponed sine die, with
costs to date to be costs in the cause.’
The costs of the appeal, including the costs of two counsel, where
applicable, are to be costs in the cause in the winding-up application.
Should the appellant be successful in the action that has been instituted
(‘the pending action’) in establishing a claim of not less than R100 against the
respondent, it may then set the winding-up application down for hearing on the
same papers, duly amplified as needs be.
Should the appellant fail to establish a claim of not less than R100 against
the respondent in the pending action, or fail to prosecute the pending action to its
final conclusion, then the winding-up application will be deemed to have been
dismissed with costs, including the costs of two counsel, where applicable.

_____________________
P B Fourie
Acting Judge of Appeal

APPEARANCES:
Counsel for Appellant:

L M Buikman SC

Instructed by:

Cluver Markotter Inc., Stellenbosch

McIntyre & van der Post, Bloemfontein
Counsel for Respondent:
P J Greyling (with him J J Potgieter)

Instructed by:

Karien Schutte Attorneys, Middelburg

Schoeman Maree Inc., Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

24 November 2016

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form
part of the judgment.

Freshvest Investments (Pty) Ltd v Marabeng (Pty) Ltd (1030/2015) [2016] ZASCA 168
(24 November 2016)

The Supreme Court of Appeal (SCA) today delivered judgment in a liquidation
application in which the respondent-company, on the papers filed in
opposition, disputed the applicant’s claim against it on bona fide and
reasonable grounds. The SCA reiterated that in such circumstances the
application for liquidation should be refused as liquidation proceedings are not
designed for the enforcement of disputed debts. The high court erred in
referring the application to oral evidence after it had found that the debt was
disputed on bona fide and reasonable grounds. The SCA reiterated that such
procedure is not in accord with previous decisions of the courts.