IN THE HIGH COURT OF SWAZILAND
JUDGMENT
Case No. 1945/2015
In the matter between:
EASIGAS SWAZILAND (PTY) LIMITED First Applicant
EASIGAS BOTSWANA (PROPRIETARY) LIMITED Second Applicant
And
MACS INVESTMENTS (PTY) LIMITED Respondent
Neutral citation: Easigas Swaziland (Pty) Limited and Another v Macs Investments (Pty) Limited (1945/2015) [2016] SZHC128 (21stJuly 2016)
Coram: M. Dlamini J
Heard: 6th April,2016
Delivered: 21stJuly, 2016
Application for liquidation – debt not liquid – debt highly contested – court cannot grant application where evidence show that the dispute is bona fide –
Insolvent debtor – court to examine evidence by looking at the business trend of the debtor to see if it is consistent with a person who is insolvent -
Application dismissed with costs
Summary: The applicants have sued out motion proceedings for an order of winding up respondent following respondent’s inability to pay its debts. Respondent is ferociously opposed to the order on the basis that it is not liable to the applicant.
The parties
[1] The first and second applicants are companies duly registered in Swaziland and Botswana with their principal place of business at Matsapha and Gaborone respectively. They are the wholesale suppliers of liquified petroleum gas (LPG).
[2] Respondent is a company registered in Swaziland with its principal place of business situate at Matsapha. Respondent is purchaser and the distributor of LPG from applicant.
The contract
[3] The parties’ contractual relationship is based on a Distributor Agreement (DA) signed with effect from 1st June 2005. Its initial period was for five years with option of renewal for further five years.
[4] The terms of the DA was that the first applicant would supply respondent with LPG at its principal place of business,Matsapha. Each consignment would be accompanied by an invoice. Credit facility was extended to respondent to pay upon delivery every thirtieth day of the next succeeding month. Should respondent fail to pay on the due date, first applicant was entitled to refrain from supplying the next order with interest of two percent Clause 34 which is relevant to the issue at hand, reads:
“6.11 A certificate signed by a Manager for the time being of Easigas certifying the amount due to Easigas at the date upon which such amount is due and payable to Easigas shall be prima facie evidence of the amounts due and the date of which it is payable. If any certificate issued in terms of this clause is held by a competent court not to be final irrefutable proof of the amount so due and payable by the distributor, the certificate shall be deemed to correctly record the amount so payable by the distributor and the distributor shall bear the onus of proving that the certificate is incorrect or that the amount owed differs from the amount certified in terms of the said certificate.”
[5] The DA terminated ought to have terminated on 30th September 2015. However, owing to the debt under issue, the DA was ended in November, 2014. Respondent however continued to order from the first applicant who supplied LPG on cash basis.
Second applicant
[6] On 6th November 2008,first applicant and respondent concluded a sale agreement referred to as Asset Purchase Agreement. First applicant sold to respondent Lot 136, situate Matsapha, Manzini District.Thisis the place where respondent is having its principal place of business. Bulk storage tanks and ancillary equipment were also purchased by respondent from second applicant, amongst others. The total purchase price consideration was E4 million to be paid in equal installments for a period of seventy two months. Interest was compounded at the rate of prime rate less three percent.
[7] First applicant later ceded his rights over the asset purchase agreement to second applicant. In turn responded registered a mortgage bond in favour of second applicant against Lot 136 situate in Matsapha, Manzini district.
[8] On the 2nd July 2009, for some unexplained reason on the pleadings, respondent signed an acknowledgement of debt. The balance from the principal debt of E4 million was by then E3.4 million. The respondent undertook to pay monthly installments of E47,222 per month. In September 2011, it is highlighted as follows:
“7. Due to, amongst other things, operational matters and other requirements the First and Second Applicant, and the Respondent entered into a Cession, Assignment, Substitution and Asset Purchase Agreement.”
[9] In other words, second applicant ceded all its rights and obligations on the movables (storage tanks, pumps and accessories) to first applicant. The immovable (Lot 136) remained unaffected. Further, an agreement of sale for the said movables was entered into between first applicant and respondent where first applicant would purchase from respondent the said movable. A sum of E1 million was paid to respondent for the movables.
Second applicant’s claim
[10] Following the above transactions, it is submitted on behalf of second applicant that the respondent owes a sum of E2,061,412.18 (Emalangeni Two million sixty one thousand four hundred and twelve and eighteen cents) immovable. This claim is contested.
First applicant’s claim
[11] First applicant avers that respondent owes it a sum of E6,291,391.42 (Emalangeni six million two hundred and ninety one thousand three hundred and ninety one and forty two cents) in respect of LPG delivered in terms of the credit facility.
[12] Applicants’ main prayers:
The applicants pray for a rule nisi for:
“3.1 An order for the final liquidation of the Respondent should be granted.”
Causa
[13] The applicants base their prayer for a final order of winding up on various grounds: They assert firstly, that the debt totaling E8,621,783.87 (Emalangeni Eight million six hundred and twenty one thousand seven hundred and eighty three and eighty seven cents) is undisputed by the respondent. In fact, according to applicants, respondent acknowledged the debt as verified by a number of e-mail correspondences. Respondent went further to agree on a payment schedule in January 2015. Respondent is unable to pay in terms of the payment schedule. Respondent has further diverted cash of E5 million to finance other companies. On 29th October 2015 respondent had undertaken to solicit funds either from financial institutions or individuals in order to inject to the business but in vain.
Respondent’s case
[14] Respondent submits that the present litigation is as a result of first applicants’ lack of full operation in Swaziland. Although orders and payments were directed to first applicant, all decisions and processes were done in Johannesburg Easigas S.A. This brought about inconsistencies in invoices, ledgers related to the case. Respondent alleges that the address supplied by first applicants is for the applicants’ attorneys.
[15] Had the first applicant ran the business from Swaziland rather than Johannesburg, it would have been easy to reconcile the account. The respondent points out that since the beginning of the dispute, it has been calling for the debatement of the account to no avail.
[16] Through the hand of its director, Mr. BhekiMacwele, the respondent flatly denies any indebtedness to the first applicant. It points at a number of irregularities in the records of payment. Respondent further avers that it is not insolvent. It is able to pay its creditors and therefore cannot in law be subject of a liquidation order.
Issue
[17] From the sets of affidavits filled by both parties, there are two questions raised in this matter. Firstly, did the respondent admit liability to the applicants? Secondly, is the respondent insolvent?
Adjudication
Did respondent acknowledge indebtedness to first applicant?
[18] It is not in issue that a number of correspondences exchanged hands between the parties in respect of the debt for LPG delivered at the instance of respondent by first applicant. The first correspondence is authored by the director, Mr. BhekiMacwele on the 19th January 2015.[1] It reads:
“1. The amount of the outstanding debt at the present date is E2, 330,392.03 regarding the capital and E6, 443,808.10 regarding outstanding product invoices. The total debt is therefore, E8,774,200.13
2. Both these amounts are to be verified by our accounting services. Should our services not challenge any of the amounts by the end of the current month of January 2015 they are to be taken as good;
3. Upon agreement on the current amount owed, we will engage in a payment plan to settle this debt in its totality.”
[19] The preceding correspondence show that the respondent acknowledge the debt of E2,330,392.03 (Two million three hundred and thirty thousand three hundred and ninety two Emalangeni three cents) and E6,443,808.10 (Six million four hundred and forty three thousand eight hundred and eight Emalangeni ten cents) on condition that both sums were not challenged by the accounts office. Respondent has deposed in its answering affidavit:[2]
“40. The indebtedness was never accepted as there continued to be queries on the amount due particularly in respect of the product invoices. However, I do confirm that notwithstanding the queries, we did make proposals on a repayment plan. These proposals were made on a without prejudice basis and made in good faith by me, because at the time, I did not have the benefit of the information that is now at hand. What was evident though was that there had been a reflected a sudden surge in “deliveries” when neither the customer base had increased nor had the sales increased. Something was inherently wrong.”
[20] The undertaking mentioned above by respondent to pay is evident from a subsequent correspondence by email dated 6th October 2015. It is addressed to applicant, deponent (Mr. Fred Royer) by respondent (Mr. BhekiMacwele).[3] It states:
“Fred, I apologise for the delay in answering your email. There was some confusion in our camp. Our aim is to raise money to settle all the debt that we owe to Easigas. We request that you stick to the arrangement you set for end of October. Work is being done to meet that deadline. Bheki”
[21] As already pointed out above, respondent attests that an undertaking to pay was made without prejudice. Respondent attests further that to demonstrate that it was contesting the claim by applicants, it declined to sign an acknowledgment of debt. Friedman JP[4] once stated:
“If the innocent party with full knowledge of his rights performs an unequivocal act from which a reasonable person would necessarily infer that he has elected to affirm the contract, he would be bound thereby, whatever subjective reservations he might have had. On the other hand, if the act on which it is sought to rely for the exercise of an election is not unequivocal, regard may be had to the subjective considerations which motivated the party concerned in order to determine whether the act in question does in fact constitute an election or not. This approach appears to me to accord with that adopted in Van Schalkwyk v Griesel (supra) and in Segal v Mazzur 1920 CPD 634 at 644-5.
[22] The learned judge then cited Watermeyer AJ[5] as follows:
“Whether he (i.e. the innocent party) has made an election one way or the other is a question of fact to be decided by the evidence. If, with knowledge of the breach, he does an unequivocal act which necessarily implies that he has made an election one way, he will be held to have made his election that way; this is, however, not a rule of law, but a necessary inference of fact from his conduct ...”
[23] It is my considered view that the above enunciated principle stands to apply in cases where acknowledgment of debt is in issue. In other words, the court should enquire as to whether there was an unequivocal act consistent with admission of the debt. As pointed out by their Lordships[6]above the test is objective.
[24] There is no dispute with regards to the correspondence of 19th January 2015 cited at paragraph18 herein by reason that it had a resolutive condition. It appears to me that as at post January 2015, the respondent queried the debt. This is evidence by correspondence from applicants under the hand of Otto Steyn, the Chief Financial Officer which was written on 30th June, 2015. It reads:
“We refer to the various agreements between us and our recent discussions in this regard and would like to confirm the total outstanding debt of R8 927 042.89 to Easigas as at 31st August 2015, which relate to the following accounts in the Easigas Group:
“1. Outstanding loan - E2,015,860.32
2. Outstanding purchases Account (old debt account) E6,674,111.38
3. Outstanding amount on cash on delivery Account - E237,071.19”
[25] Further, besides respondent say so at paragraph 40 of its answering affidavit, this can further be deduced from applicant’s replying affidavit at paragraph 23.6:
“A process of reconciling the account was undertaken in July 2015 in communications with the responsible officers of the Respondent company being Mr. Jose Cabrita the General Manager and Mr. Cuthbert Mashwala who was the Financial Manager at the time.”
[26] On the 8th July, 2015, respondent’s employee, Jose Cabrita sent an email to applicants’ employee Fred Royer which reads:
“Sorry about the delay, I was busy negotiating the lease for our outlet in Ezulwini, which, by the way, is concluded and we will start the process of applying for licences and start construction immediately.
As we discussed yesterday, there were some unforeseen events that precipitate a new arrangement, that will be more favourable for both parties.
The two farms that were initially considered to be ceded to Easigas SA turned out to be bonded to Nedbank. So, the agreed plan of using them as collateral for the remainder of the debt after the sale of the main depot needed to be revised.
We decided to sell the said farms immediately, pay the bank the portion of the debt they cover and use the rest to repay Easigas immediately.
This is how the new plan will look like using the May values taken from the agreement you sent us, and obviously depending on your agreement:
Total outstanding debt: E5,293,447.58
Sale of the Matsapha property: E3,000,000
Immediate payment from sale of farms: E1,000,000