PROFERT ZIMBABWE (PVT) LTD v MACDOM INVESTMENTS (PVT) LTD

HIGH COURT, BULAWAYO

[Opposed Application HB 83-16]

March 4 and 17, 2016

MAKONESE J

Company law  – Companies Act [Chapter 24:03]  – Section 206 (f)  – Winding up of a company  – Inability of a company to pay its debts  – Where company disputes alleged inability to pay its debts  – Effect of such dispute on application for winding up.

Company law  – Companies Act  – Winding up proceedings  – Use of winding up petition as a debt-collection method  – Such a petition being an abuse of court process.

The applicant applied for the compulsory winding up of the respondent on the ground that the respondent was unable to pay its debts within the contemplation of s 206 (f) of the Companies Act [Chapter 24:03]. The respondent opposed the application on two main grounds, namely that:

(i) it had the ability to pay its debts but was disputing the extent of the applicant’s claim and

(ii) the applicant was abusing court processes by resorting to winding up as a debt-collection measure.

Held, that where a company succeeds in establishing that the debt being relied upon by an applicant for winding up is disputed on bona fide and reasonable grounds, a winding up application will fail.

Held, further, that it is an abuse of court process to institute winding up proceedings in order to harass the respondent and compel it to pay a disputed debt.

Cases cited:

African Gold (Zimbabwe) (Pvt) Ltd v Modest (Pvt) Ltd 1999 (2) ZLR 61 (S), not followed

Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T), referred to

De Waard v Andrew & Thienhaus Ltd 1907 TS 727, referred to

Dominion Trading FZ-LLC v Victoria Foods (Pvt) Ltd 2013 (2) ZLR 332 (H), referred to

Federated Trust Ltd v Botha 1978 (3) SA 645 (A), referred to

Jockey Club of South Africa v Forbes 1993 (1) SA 649 (A), referred to

Scottish Rhodesian Finance Ltd v Honiball 1973 (2) SA 747 (R), referred to

Legislation considered:

Companies Act [Chapter 24:03], ss 205, 205 (a), 206 (f)

Prescription Act [Chapter 8:11], s 15

Companies (Winding Up) Rules, 1972 (RGN 841 of 1972), rr 5, 5 (1)(a), 5 (2)

Book cited:

Buckley HB (Baron Wrenbury) and Buckley DB Buckley on the Companies Acts (11th edn, Butterworths, London, 1929) p 357

AP de Bourbon SC, for the applicant

T Mpofu, for the respondent

MAKONESE J:

This is an opposed application for the compulsory winding up of the respondent on the basis that it is commercially insolvent and unable to pay its debts. The application is brought in terms of the provisions of s 206 (f) of the Companies Act [Chapter 24:03]. Applicant contends that on the basis of the papers filed, it has been established that the applicant is entitled to an order for the liquidation of the respondent, and an order to that effect is sought. The respondent argues that this application is nothing but a debt collection tool disguised as an application for compulsory liquidation. It is contended by the respondent that the application is an abuse of court process, regard being had to the fact that the debt sought to be enforced is disputed on bona fide grounds.

The respondent raised three main points in limine, but before I deal with these preliminary issues, I propose to set out the brief factual background to this dispute.

Background

The Agricultural Rural Development Authority (ARDA), a body corporate, plans, promotes, co-ordinates and carries out services for the development, exploitation, utilisation, settlement or dispersion of state land. The respondent concluded a written Build, Operate and Transfer Agreement (BOT) with ARDA for a period of 20 years, commencing 1 March 2009. In terms of this agreement respondent had to crop, build and develop upon land made available by ARDA at Chisumbanje. Respondent was required to cultivate crops, more specifically sugarcane. Such sugarcane was in due course produced for the production of ethanol. A close relationship exists between the respondent and a company known as Green Fuel (Pty) Ltd which operates a large factory/plant on the Chisumbanje Estates manufacturing bio-ethanol from sugarcane. Such bio-ethanol is a source of high quality, high octane, clean efficient renewable energy used as a vehicle fuel on its own, blended with petrol (up to 20 per cent), or used as petrol octane enhancer. The Zimbabwe Government has awarded the Green Fuel venture National Project Status in view of the long term energy solution which it provides. The respondent by necessity requires agricultural inputs for the production of sugarcane. It is against this background that the applicant became involved in the sale and delivery of substantial quantities of fertiliser products to the respondent. During the year 2009 through to 2010, respondent purchased certain quantities of fertiliser from a company known as Brocline Investment (Pty) Ltd, trading as Nutrichem. In due course, the name of this company was formally changed to “Profert Zimbabwe (Pvt) Ltd. This application has been instituted by Profert Zimbabwe (Pvt) Ltd and essentially deals with the non-payment of fertiliser delivered to the respondent.

Applicant has two claims for payment against the respondent. The first claim relates to what is termed the “Legacy Debt”. This amount refers to amounts dating before 28 November 2013 and allegedly acknowledged in writing by the respondent. The amount being claimed in the first instance is US$ 567 879.80. The second claim refers to amounts in terms of a Memorandum of Agreement executed on 28 November 2013. The figure claimed by applicant is US$ 682 221.81. Both amounts have been disputed by the respondents who allege that the applicant grossly inflated the prices of the fertiliser products. The respondents contend that as soon as the correct prices have been quantified sufficient guarantees have been put in place to liquidate the debt.

The basis of the applicant’s claims

From about 2014 the dispute between the parties dragged on without an end in sight. A considerable volume of e-mail communications was exchanged between the parties. As usual there were allegations and counter-allegations but the debt remained unpaid. On 10th October 2014 the applicant’s legal practitioners addressed the following letter to the respondents:

“10 October 2014

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