Lichtenburg Graan Trustrees (Edms) Bpk v PJ & ILM Boerdery (Edms) Beperk (75/04) [2004] ZANWHC 25 (15 October 2004)

IN THE HIGH COURT OF

SOUTH AFRICA

(BOPHUTHATSWANA PROVINCIAL DIVISION)

CASE NO.: 75/04

In the matter between:

LICHTENBURG

GRAAN

TRUSTEES (EDMS) BEPERK : APPLICANT

AND

PJ & ILM BOERDERY

(EDMS) BEPERK : RESPONDENT

MMABATHO

MOKGOATLHENG

AJ

JUDGMENT

MOKGOATLHENG AJ:

Introduction

[1] This is an application for a provisional winding-up order. The Applicant is Lichtenburg Graan Trustees (EDMS) Beperk a private company with limited liability, duly incorporated in terms of the companies’ legislation of the Republic of South Africa whose main object is to assist commercial farmers to conduct commercial farming operations profitably by providing funds and by obtaining financial products on behalf of commercial farmers for input costs for the establishment of crops.

[2] The Respondent is PJ & ILM Boerdery (Pty) Ltd, a private company duly registered in terms of the companies’ legislation of the Republic of South Africa whose main object is to conduct commercial farming by establishing crops as a grain producer in the district of Coligny.

[3] The Applicant claims that the Respondent is indebted to it in an amount in access of R5 900 000.00. The said debt is in respect of monies loaned and advanced in terms of a written contract concluded between the parties on the 1st September 2002. This amount has been due and payable since 1st September 2003.

[4] The Applicant states that the Respondent has failed despite demand in terms of section 345 of the Companies Act no 61 of 1973 to pay the said debt. The Applicant avers that the Respondent is unable, from its resources in the ordinary course of business, to pay its debts. The Respondent’s finances are in a parlous state as it owes ABSA R2 849 577.00 and other sundry creditors R650 000.00.

[5] The Respondent opposes this application and disputes the validity of the Applicant’s section 345 demand.

[6] Section 346 (1) of Act 61 of 1973 provides as follows:

An application to the court for the winding-up of a company may, subject to the provisions of this section, be made-

by the company;

by one of more of its creditors (including contisent or prospective creditors).

(c) ……………….

(d) ……………….

(e) ……………….

(f) ……………….

[7] The Applicant contends that it has locus standi as a creditor to apply for the liquidation of the Respondent for the following reasons:

(a) in terms of the agreement the Applicant provided financing to the Respondent for the production of crops;

(b) the said financing was to be repaid by the Respondent from the proceeds of the crops produced;

(c) the Respondent had failed or has refused to deliver sufficient crops to repay the amount advanced by the Applicant.

[8] The parties entered into a written agreement with each other on 15 October 2002. This agreement consists of:

(a) The standard terms and conditions;

(b) A production agreement; and

(c) A management agreement.

Applicant’s version of the Contract

[9] The Applicant states that to determine what the intention of the parties was, one has to examine the indications in the agreement to ascertain what the parties intended the agreement to achieve. The Applicant contends that it provided finance and expertise to the Respondent in order to enable it to establish crops. The security for such finance was the right to the ownership of the crop by the Applicant. The Respondent has an obligation to repay the funds advanced, this is shown by the stipulations contained in the following clauses 3.1, 3.1.3, 3.1.4, 3.1.5, 4.2, 4.3, 6.1, 6.4 and clause 7. For convenience the aforestated clauses are reproduced hereinunder.

[10] Clause 7-2 of the contract under the heading,

“Die algemene verpligtinge van die kontrakteur” states:

“Die kontrakteur sal verantwoordelik wees vir die totale verbouing van die gewasse binne die termyn van hierdie ooreenkoms. Die gewas sowel as die inset material en rou materiale te berg, te beskerm en aan te wend en die grond tydig voorberei. Die kontrakteur sal alle arbeid, masjiniere, toerusting, brandstof, buite kontrakteur, produksiemiddele en kundigheid wat nodig is om die gewasse aan te plant, verbou, te onderhou en te oes, op eie koste voorsien en die oes vestig in korrek voorbereide grond.”

[11] The Applicant contends that this clause imposes an obligation on the Respondent which when ultimately coupled with what the Respondent owes in terms of the contract, creates the Respondent’s liability.

[12] Clause 3 under the heading “Regte en Verpligtinge van L.G.T” clause 3.1 states:

“Lichtenburg Graan Trustees onderneem om stiptelik en getrou sekere bestuurs- en administratiewe funksies wat direk verband hou met die verbouing van die produk en die insameling van die oes en wat in besonder verwys na die verskaffing van insetkostes en fasiliteite verskansingskoste, betaling aan verskaffers en aan die kontrakteur verslag te doen en verreken. In hierdie verband en sonder on die algemeenheid daarvan te Beperk, sal Lichtenburg Graan Trustees geregtig wees om;

3.1.1 ..……….

3.1.2 …………

3.1.3 Betalings aan die finansierders, verskaffers van inset-en-produksie, en enige ander sessionarisse namens die kontrakteur te maak in terme met hulle te binding.

3.1.4 ʼn Tjekrekening teen ooreengekome oortrekking …. in die naam van Lichtenburg Graan Trustees vir die kontrakteur aan te gaan, te bedryf en te beheer, alternatiewelik en indien haalbaar ʼn bestuurrekening vir die kontrakteur in Lichtenburg Graan Trustees se stelsels te skep waarvoor skriftelike rekwissies benodig sal word vanaf die kontrakteur en waartoe the kontrakteur, hetsy gesamentlik as medetekeninge magtigde sal oortree skriftelike rekwissie sal voorsien en verplig sal wees om:

3.1.5 uitbetaling van enige bv produksie en surplus nadat alle betaalbare uitgawes en lenings ten opsigte van uitsetkostes, insluitende die administrasiefooi en verrekening gebring is, aan die kontrakteur of sy skriftelike genomineerde uit te betaal en rekeningkundig verslag te …oor die samewerking daarvan.

3.1.6 Versekeringsdekking oor die oes op gunstige terme vir insetkoste te reel, premies te betaal en in stand te hou as deel van insetkostes, die opbrengs daarvan te ontvang en aan te wend volgens die kontrakspartye se afspraak.”

[13] Clause 6.4 states:

“die kontrakteur sal die lening by Lichtenburg Graan Trustees gebruik om die insetkostes/produksiekostes te verskaf ooreenkomstig die hoeveelhede en vir die waardes soos aangeheg in bylaes “E3” en “E7”.

[14] Clause 4.2 states:

“Regte en verpligtinge van die kontrakteur sonder opbreuk te doen aan die kontrakteur sal geregtig algemeenheid daarvan wees:

Oor betaling van insetkostes soos bepaal en soos redelikwys nodig mag wees om die opbrengs te oes te bewerkstellig aan te vra en te bekom.

[15] Clause 4.3 states:

“….. Dit word egter spesifiek ooreengekom dat vir die doeleindes van die verkryging van finansiering op krediete vir produksie/insetkoste, die Verhuurder instem tot sessie van sodanige regte waarvoor Lichentenburg Graan Trustees ingevolge die ooreenkoms beskik as wat redelikswys nodig is. Enige betalings deur Lichtenburg Graan Trustees aan enige verskaffer van produksie/insetkoste names Die Verhuurder/Kontrakteur gemaak, word egter gemaak sonder om daardeur te kenne gee dat Lichtenburg Graan Trustees persoonlike teenoor sodanige verskaffer aanspreeklik is of enige aanspreeklikheid sal oploop.

[16] Clause 6.1 under the heading “Eiendomsreg van Fondse en aanspreeklikheid vir laste” states:

“Eiendomsreg van die oes en ʼn die fondse welke Lichtenburg Graan Trustees by wyse van finansiering in Lichtenburg Graan Trustees se naam bekom het, setel deurentyd in Lichtenburg Graan Trustees nie in die kontrakteur nie. Lichtenburg Graan Trustees is nie aanspreeklik vir enige laste wat die kontrakteur self aangegaan het of wat Lichtenburg Graan Trustees as gemagtigde namens die kontrakteur aangegaan het nie. This clause is reinforced by clause 5.1 which states that “Lichtenburg Graan Trustees sal die eienaar wees van alle gewasse op die grond verbou en wat daarop voorkom gedurende die geldigheidstermyn van hierdie ooreenkoms…”

[17] Clause 7 under the heading “Administrasiefooi” states:

“Lichtenburg Graan Trustees sal geregtig wees op ʼn administrasiefooi betaalbaar deur die kontrakteur gelykstaande aan 2% van die totale versekerde waardee. Lichtenburg Graan Trustees sal die reg hê om hierdie administrasiefooi teen enige fondse af te sit om betaling daarvoor te bekom.”

[18] The Applicant contends that the above referred to clauses objectively viewed create an obligation for liability by the Respondent to repay the funds advanced to it by the Applicant in respect of input costs and ancillary debits incurred to enable the Respondent to establish and harvest the crops.

[19] The Applicant states that in pursuance of its obligations to ensure that the Respondent is enabled to produce and harvest the crops it debited the Respondent’s account with the following amounts:

(a) administration fee R127 798.68

(b) insurance premium R 74 000.00

(c) bank charges R 523.00

(d) interest R876 561.14

_____

TOTAL R1 078 882.80

[20] The Applicant states that it made the following payments to and on behalf of the Respondent in order to enable it to produce and harvest the crop.

(a) Landbank R 75 000.00

(b) Absa Bank

12 December 2002 R887 688.10

13 December 2002 R308 906.43

03 February 2003 R800 000.00

21 February 2003 R200 000.00

(c) Novon WTY(Pty) Ltd R928 982.41

(d) Pioneer Hi-Bred (Pty)Ltd R 33 250.00

R 31 040.00

44 870.00

(e) NWK R 84.10

(f) Insurance premium R575 094.06

____

TOTAL R3 884 915.00

The Applicant states that it send the Respondent monthly statements, that the Respondent as at 31st August 2003 was indebted to the Applicant in the amount of R5 972 484.17.

Respondent’s version of the Contract

[21] The Respondent states that during the 2001/2002 season the Applicant invited farmers to various meetings. At these meetings the Applicant advised farmers (including the Respondent) that it had developed a no risk production concept. The Applicant portrayed itself as a non-profit organization established by farmers to help commercial farmers to produce and harvest crops without any attendant risks.

[22] The Applicant explained that it leases land from farmers who then farm on behalf of the Applicant. The advantage to the farmer was that:

(a) All risk in the production of the crops would enure to the Applicant.

(b) The Applicant was to insure the farmers against crop losses due to drought and other elements pertaining to farming.

(c) Farmers would be able to access financial and insurance products at competitive cost.

(d) Farmers would share in the profits after deduction of production costs. In the event that the production costs exceeded the value of the harvested crops, no loss would accrue to the farmer as this exigency would be covered by insurance. The farmer would break even in the worst scenario.

[23] The Respondent states that the contract it concluded with the Applicant in essence sets out the parties’ relationship in accordance with what the Applicant explained at the abovementioned meetings. In terms of the agreement the Applicant leases certain specified land from the Respondent. The Respondent undertakes to produce crops on behalf of the Applicant on the leased land. The Applicant undertakes to provide the essential materials, equipment, insurance and other commodities to enable the Respondent to establish the crops on the Applicant’s behalf.

[24] The Respondent states that the Applicant has no locus standi to launch the application for the liquidation of the Respondent that the Applicant’s conduct amounts to and abusage of the court process and is motivated by ulterior motives. The Respondent’s liquidation is not just and equitable and will be to the detriment of other creditors and will only benefit liquidators and auctioneers.

[25] The Respondent states that it is not commercially insolvent. Its assets exceed its liabilities. The Respondent owns the following assets:

(1) Movable assets valued at, at least R8 000 000.00. The Sheriff of the Court has indicated that the forced sale value of these movable is R5.2 million.

(2) Maize harvest on 840.99 hectares valued at R6 938 167.57.

(3) Livestock

(a) 468 breeding stock valued at R3 762.00 each

= R1 760 616.00

116 large weaners valued at R1 900.00 each

= R 220 400.00

8 Large bulls valued at R15 000.00 each

= R 120 000.00

Livestock valued at R 50 000.00

(d) Cash R 100 000.00

(e) Fuel, Fertilizer, etc R 150 000.00

Total R17 000 000.00

[26] The Respondent states that only two creditors have instituted proceedings against it namely the Applicant and Pannar Saad. The Respondent disputes both these actions and states that it has a bona fide defence against these claims. The Respondent states that the total value of the claims the Applicant and Pannar Saad claims against it amount to R 9 569 613.09. The Respondent states that it has an overdraft facility at Absa Bank amounting to approximately R2.3 million. The Respondent also has a loan facility amounting to R440 577.09. The other creditors total approximately R650 000.00. All these debts are currently not due and payable.

[27] Absa holds security for its claim to the value of R12.7 million in terms of the following bonds:

(a) B43557/90 R10 million

(b) B1161/98 R .6 million

(c) B7671/95 R.5 million

(d) B31435/97 R.8 million

(e) B18456/97 R.8 million

TOTAL R12.7 million.

[28] The Respondent states that it is clear that it is solvent and posses assets which exceed it liabilities that its assets are of such a nature that they can be realised into cash within days. The Respondent states that it has given the Applicant an undertaking that it shall not alienate its assets pending the finalisation of any action the Applicant institutes against the Respondent. If the Applicant should succeed in an action against the Respondent there are enough assets available for the Applicant to satisfy and execute its judgment.

Respondent’s Liability in terms of the Contract

[29] The Respondent in support of the contention that no liability arises at it’s instance from the terms of the agreement, states that, it was specifically agreed that the Applicant would advance funds to the Respondent to establish the crops at the Applicant’s cost, this is borne out by the following clauses:

“Die partye tot hierdie ooreenkoms wil met mekaar saamwerk om ʼn geintegeerde risikobestuurstelsel daar te stel ingevolge waarvan Lichtenburg Graan Trustees sal optree as huurder, prinsipaal, bestuurder en administrateurde om mielies, sonneblomme, koring, graansorghum en soja te bekom. Die verhuurder sal optree as die verhuurder van die plaas of die lande, en ook as boer en kontrakteur om die oes te verbou”.

[30] Clause 3.3 of Annexure “WR3(C)” states:

“Die kontrakteur sal geregtig wees op die netto bo-produksie opbrengs van die oes plus die huurgeld. Hierdie bedrae sal betaalbaar …….na inagneming van enige vooruitbetalings, sessies, lenigs en nakoming van alle uitstaande verpligtinge deur die verhuurder en die kontrakteur teenoor die Lichtenburg Graan Trustees.”

The Respondent contends that, the afore quoted clauses clearly indicate that the obligation to effect payment rests on the Applicant.

[31] Clause 5.2 Annexure “WR3(e)” states:

“Die risiko en voordeel tot die res en gewasse wat op die grond verbou word en daarop voorkom setel in Lichtenburg Graan Trustees. Lichtenburg Graan Trustees sal die nodige versekeringsdekking ten opsigte van die oes reël en verkry….Die koste verbonde daaraan vorm deel van die produksie koste.”.

The Respondent contends that this clause sets out the formula that is used to calculate what amount should be paid by the Applicant to the Respondent. It cannot be inferred from this clause that a duty to pay the Applicant arises in respect of the Respondent.

[32] Clause 7.2 annexure “WR3(h-i)” states:

“Die kontrakteur sal alle arbeid, masjinerie, toerusting, brandstof, buitekontrakteurs, produksie middele en kundigheid wat nodig is om die gewasse aan te plant, verbou, te onderhou, in te oes, op eie koste voorsien en die oes vestig op korrekte voorbereide grond”.

The Respondent contends that the Applicant explained this clause to mean that the Respondent has to provide the necessary tractors and implements, but that the Applicant was liable to pay for all the consumables including labour.

[33] The Respondent states that in the event that it incurred more costs than the agreed input costs it had to pay for same, this is provided for in clause 6.4 annexure “WR3(F)” which provides that:

“Die kontrakteur sal aanspreeklik wees vir enige werklike kostes wat the ooreengekome kostes oorskry en dit self betaal.”.

[34] The Respondent states that clause 8 clearly excludes the liability of each party in relation to the other. Clause 8 of annexure “WR3(I)” provides that:-

“Lichtenburg Graan Trustees en die kontrakteur vrywaar mekaar hiermee wedersyds teen enige aanspreeklikheid wat die “onskuldige” mag opdoen en wat veroorsaak mag word deur die opsetlike nalatige of optrede van die “skuldige party”.

[35] The Respondent states that in the event of a dispute or breach of contract provision is made in terms of clause 5 to resolve the dispute through mediation. The Applicant has not in terms of clause 6 as it is obliged invoked the provisions thereof to place the Respondent in mora for breach of contract. No written notice alleging any breach in terms of which the defaulting party is placed in mora has been sent to the Respondent by registered post by the Applicant entitling it to obtain the right to cancel the agreement alternatively, to take applicable steps to compel specific performance and thereafter claim damages.

[36] The Respondent states that in terms of clauses 3.1.6. and 3.1 the Applicant undertook as an obligation to arrange for insurance cover in respect of the production costs and the crop. Clause 3.1.6 provides as follows:

“Lichtenburg Graan Trustees onderneem om versekeringsdekking oor die oes op gunstige terme vir insetkoste te reel, premies betaal en instand te hou as deel van die insetkoste. Die opbrengs daarvan te ontvang en aan te wend volgens die kontrakspartye se afspraak”.

[37] The Respondent states that in terms of clause 9.5 the Applicant collected 5% of each and every farmer’s contract value to cover uninsured risks. Clause 9.5 annexure “B18” provides:

“Die 5% aftrekking ten aansien van onversekerde risiko soos waarna verwys en sal deur Lichtenburg Graan Trustees bestuur word in ʼn gesamentlike groepsreserve en uitbetaalbaar wees. Lichtenburg Graan Trustees sal geregtig wees om enige onversekerbare risiko’s was nie andersins gein word nie teen hierdie heffing af te sit.”.

“Onversekerbare risiko’s” is defined as, “enige onverhaalbare verliese of tekorte wat ontstaan en wat tot gevolg het dat Lichtenburg Graan Trustees en/of die produsent skade ly, wat nie deur normale versekering gedek word nie. In hierdie omskrywing sal ook inbegrepe wees diefstal, bedrog, opsetlike optrede deur die kontrakteur, uitgawes deur Lichtenburg Graan Trustees…..”.

The Respondent contends that the Applicant did not suffer any loss from this agreement, as it was in possession of the amount of R25 million which accrued from the 5% levy of the value of all farmers’ contracts with the Applicant. The Respondent states that it complied with all its obligations in terms of the contract by producing the crops, reported and appraised the Applicant of the weather conditions, and problems regarding the failure of the crops. The Respondent harvested the crop and with the knowledge and consent of the Applicant sold same to Thaba Phephu Trust. The Respondent provided the Applicant with a cession relating to the payment it expected from Thaba Phephu Trust. The Applicant was paid the amount of R5 287 780.00 by the Trust as ownership of the crops vested in the Applicant.

The Law

[38] It has been held that in an application for a provisional order of liquidation the onus to make out a prima facie case is borne by the Applicant. Contextually the phrase prima facie means a balance of probabilities in favour of the Applicant on a consideration of all the affidavits (See Provincial Building Society of South Africa v Du Bois 1966 (3) SA 76 (W) at 78E;

“Where in an opposed application for a provisional order of winding-up the affidavits do not reveal a balance of probabilities in favour of an applicant, no prima facie case has been established and the provisional order cannot be granted. In such circumstances the Court nevertheless has a discretion to allow the hearing of oral evidence in an appropriate case …. In exercising the discretion with which it has been imbued a Court should to a larges extent be guided by the prospects of viva voce evidence tilting the balance of probabilities in favour of the party bearing the onus probandi”.

(See Atkinson v Rare Earth Extraction Co Ltd 2002 (2) SA 547 at 552 J-553E)

[39] The approach in resolving the question whether disputed factual issues should be referred for viva voce evidence was formulated by Leon J in Sewmungal and Another NNO v Regent Cinema 1977 (1) SA 814 (N) at 819A-C.

“In approaching this particular type of problem, it is not wrong for a Court at the outset to have some regard to the realities of litigation. What appears to be a good case on paper may become less impressive after the deponents to the affidavits have been cross-examined. Conversely, what appears to be an improbable case on the affidavits, may turn out to be less improbable or even probable in relation to a particular witness after he has been seen and heard by a Court. An incautious answer in cross-examination may change the whole complexion of a case. Considerations such as these may have influenced Schreiner J when he observed in Butterworth v Butterworth 1943 WLD 127 at 131 that

“in litigation as in less serious forms of adventure one may have a reasonable chance of winning though the odd may be against one”.’

[40] Rule 6 (5) (g) provides:-

“Where an application cannot properly be decided on affidavit the court may dismiss the application or make such order as to it seem meet with the view to ensuring a just and expeditious decision. In particular, but without affecting the generality of the aforegoing, it may direct that oral evidence be heard on specified issues with a view to resolving any dispute of fact and to that end may order any deponent to appear personally or grant leave for him of any other person to be subpoenaed to appear and be examined and cross-examined as a witness or it may refer the matter to trial with appropriate direction as to pleadings or definition of issues, or otherwise.”.

[41] Kumleben J, as he then was, in the case of Moosa Bros and Sons (Pty) Ltd v Rajah 1975 (4) SA 87 (D) at 93G-H interpreted the jurisdictional purview of Rule 6 (5) (g) to encapsulate the following conclusions:

“(c) Without attempting to lay down any precise rule, which may have the effect of limiting the wide discretion implicit in this Rule, in my view oral evidence in one or other form envisaged by the Rule should be allowed if there are reasonable grounds for doubting the correctness of the allegations concerned.

(d) In reaching a decision in this regard, facts peculiarly within the knowledge of an applicant, which for that reason cannot be directly contradicted or refuted by the opposite party, are to be carefully scrutinised.”.

[42] The Court, in considering whether there are prospects that the adducing of oral evidence may tilt the balance of probabilities in the Applicant’s favour applies the civil standard test of proof on a preponderance or balance of probabilities. It is trite that this is not an onerous test, “it merely implies a quantitative or qualitative superiority and not a marked or substantial superiority”.

[43] It is my view that the probabilities on the disputed issues are evenly balanced, on the consideration of all the affidavits. Courts are generally reluctant to decide disputes on affidavits. The Respondent’s counsel although he concede that it may be remotely possible that the Applicant by leading evidence and by cross-examination may show that the it is a creditor he nevertheless submits that the Applicant will not be able to surmount the hurdle of showing that the Respondent is unable to pay its debt. Further that the Applicant cannot controvert the fact that the Respondent’s assets exceed its liabilities. This assertion by experts has not been challenged by the Applicant, that therefore it will serve no purpose to refer this matter for oral evidence.

[44] The Respondent further submits that the Applicant is attempting to recover the amount of R5.9 million from two entities, that is, The Thaba Phephu Trust and itself. The Applicant has instituted provisional sentence proceedings against the Trust. The Applicant can join the Respondent in such proceedings. There is a possibility that these provisional sentence proceedings may render the referral of this matter for oral evidence nugatory. The conclusion by the Respondent is that the Applicant has failed to make out a prima facie case.

[45] The Court has a duty to enquire whether there is a prospect that the balance of probabilities may be tilted in favour of the Applicant by the adducing of evidence and the cross-examination of the deponents. This enquiry entails firstly, the assessment where the probabilities lie in respect of the disputed facts. Secondly, the enquiry entails a consideration of the prospects of viva voce evidence tilting the probabilities in favour of the Applicant, which is the party bearing the onus. This enquiry reposes in the discretion of the Court.

[46] The Respondent does not dispute that the Applicant at the Respondent’s instance and request advanced funds in respect of:

(b) Bank charges R 523.00

(c) Land Bank loan R 75 000.00

(d) Absa overdraft facility R887 688.10

R308 906.43

R800 000.00

R200 000.00

(e) Green Lands R659 736.89

(f) Insurance Premium R575 094.06

(g) Thaba Pephu Trust R715 977.91

(h) Novon WTP (Pty) Ltd R506 101.71

R 26 427.64

(j) Pioneer Hi-bred (Pty) Ltd R 44 870.40

R 33 250.00

R 31 046.00

(k) Administration fee R127 798.68

(l) Interest debit R876 561.14

The Respondent although not disputing these payments and debits, states that the Applicant is obliged in terms of the contract to pay for same.

[47] Corbett JA as he then was, in Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A) at 980 B-D held:

“That an application for liquidation, should not be resorted to in order to enforce a claim which is bona fide disputed by the company. 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.’.

[48] In Hülse Reuter v HEG Consulting Enterprises (Pty) Ltd (Lane and Fey NNO intervening) 1998 (2) SA 208 (C) 219 F-220A Thring J confirmed this approach by stating that:

“Apart from the fact that they dispute the applicant’s claim and do so bona fide, which is now common cause, what they must establish is no more and no less 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 applicant enforce their disputed claims. They do not, in this matter, have to prove the companies’ defence in any such proceedings. All that they have to satisfy me of is that the grounds which they advanced for their and their companies’ disputing these claims are not unreasonable. Do to that. I do not think that it is necessary for them to adduce on affidavits, or otherwise the actual evidence on which they would rely at such a trial.”.

Dispute of Debt

[49] The Respondent does not dispute that the Applicant advanced funds to it or made payments to certain entities on its behalf in respect of expenditure incurred by it. The Respondent however contends that such payments were the quid quo pro in return of the Applicant’s right to the crops.

[50] The Respondent alleges that the unambiguous intention of the parties was not to enter into a loan agreement, that nowhere in the voluminous agreement is it stated that this is a loan agreement. There is no provision in the agreement that the Respondent is obligated to repay any amounts. The contention is that if it was the intention of the parties to enter into a loan agreement they would have stated that in simple language.

[51] The Respondent states that the true intention of the parties was that the Applicant intended to acquire ownership of the crops, that logically to implement the agreement the Applicant is obliged to advance the funds to the Respondent to establish the crops that the quid quo pro, the return for the Applicant in exchange for which the Applicant advanced the funds, is the acquisition by the Applicant of the ownership of the crops.

[52] The Applicant contends that the parties entered into a loan agreement that this submission is borne out of the Respondent’s obligations ex facie the contract. The Applicant states that the Respondent did not deliver or concealed a maize crop of at least 4000 tons estimated at R4.2 million. The Applicant avers that due to the missing crops and the proceeds the Respondent has no income to pay its debts. The Applicant has no security for its claim.

[53] Mr van der Merwe on behalf of the Respondent sought support for the Respondent’s version of the interpretation of the contract by referring to a range of surrounding circumstances which were indicative of the intention of the parties and which he submits persuaded the Respondent to conclude the contract, namely; the various meetings were the Applicant portrayed itself as a non-profit organisation which has developed a non-risk crop-production concept which guaranteed that the farmer would not suffer any financial risk at all. The contention is that if there were profits after the deduction of production costs the farmer would share in such profits. The Respondent’s understanding of the contract is confirmed by two independent witnesses who state that:

“Volgens Applikant was dat die slegte wat kon gebeur indien a boer ʼn misoes sou maak, is dat die boer nie winste sou maak nie. Die uitgawes ten opsigte van die normale insetkostes sou in so ʼn geval deur die Applikant en sy versekeraars gedra word.”.

[54] The Applicant denies that it informed any farmer that the production concept would have no risks as far as producers would be concerned. The Applicant states that the concept involved the Applicant leasing the land, with the farmer/Respondent producing the crops at its own costs and expense providing all production inputs. The Applicant furnished or financed production costs subject to certain agreed limits that, due to the nature of farming there could have been no possibility of the absence of risk to the farmer despite limited insurance cover being available. The concept endeavoured to limit but could not exclude risk, it is therefore denied that the farmer would only be entitled to profits whilst not being liable for shortfalls.

[55] The Respondent’s counsel Mr van der Merwe correctly, in my view, submitted that this matter cannot be decided on the affidavits. Mr van der Merwe contends that the Applicant despite foreseeing and being advised that its claim is disputed nevertheless resorted to launching this application, that now that the Applicant is saddled with a massive dispute of fact and the interpretation of the contract, it now requests the Court to refer the matter for oral evidence. The submission is that there is no prospect that the hearing of oral evidence might tilt the balance in favour of the Applicant to make out a prima facie case for a provisional order of liquidation against the Respondent. The Applicant faces the unsurmountable hurdle as it cannot controvert the fact that the Respondent’s assets exceed its liabilities, that such assets are easily realisable to enable the Respondent to pay its debt.

[56] The interpretation of the contract reposes at the heart of the dispute. The Applicant and the Respondent differ with regard to the circumstances and background facts preceding the contract and as to their respective interpretations of the salient clauses of the contract. The genesis and purpose of the contract is critical to the interpretation of the contract. The parties’ affidavits reveal fundamental and crucial disputes of fact with regard thereto which, in my view, are material, and cannot be resolved on the affidavits.

[57] I am of the view that the factual disputes cannot be resolved without the inducement of viva voce evidence especially where the parties’ question each others bona fides.

[58] In my view, there are material and fundamental disputes of facts relating to:

(a) The extent of the finance advanced by and paid by the Applicant to the Respondent for the establishment of the crop.

(b) The admissible background and surrounding circumstances pertaining to the allegations allegedly made by the Applicant in various meetings regarding the so-called non risks production concept.

(c) The quantum of the tonnage of the crop the Respondent was contracted to deliver to the Trust.

(d) The allegation that the Respondent is concealing 4000 tons of crops of the proceeds thereof, or that the Respondent failed to deliver such crop tonnage to the Applicant valued at R4.2 million.

(e) The allegation that the Respondent failed to report a crop failure as obliged. The Respondent’s allegation that the crop failure was due to drought at a critical stage of the plants growth period which contention is supported by Jan C J Els.

[59] In view of the observations referred to above it is possible that the adducing of viva voce evidence coupled with the cross-examination of the Respondent’s directors, the deponents Els, H Jacobs and D Jacobs may tilt the balance of probabilities in the Applicant’s favour

[60] In view of this finding it would be superfluous to adjudicate the other issues raised by the parties. The following order is made:

(a) The application is postponed sine die, to a date to be arranged with the Registrar for the adducing of oral evidence.

(b) The issues to be resolved are:

(i) whether or not the Applicant is a creditor of the Respondent;

(ii) whether or not the debt in excess of R5.9 million is due and payable.

(c) Whether or not the Respondent did not deliver or is concealing 4000 tons of maize.

(d) The evidence to be adduced at the aforesaid hearing shall be that of any witness whom the parties’ or either of them may elect to call, subject, however, to what is provided below.

(e) save in the case of any persons who has already deposed to affidavits in these proceedings, neither parties’ shall be entitled to call any person as a witness unless

(i) it has served on the other party, at lest ten days before the date appointed for the hearing, a statement by such person wherein the evidence to be given in-chief by such person is set out; or

(ii) the Court, at the hearing, permit such person to be called despite the facts that no such statement has been so served in respect his evidence.

(f) Either party may subpoena any person to give evidence at the hearing, whether such person has consented to furnish a statement or not.

(g) The fact that a party has served a statement or has subpoenaed a witness shall not oblige such party to call the witness concerned.

(h) Within 30 days of the making of this order, each of the parties shall make discovery on oath of all documents relating to the issues referred to above, which documents are, or have at any time been, in possession or under control of such party.

(i) Such discovery shall be made in accordance with Rule 35 of the Uniform Rules of Court and the provisions of that Rule with regard to the inspection and the production of documents discovered shall be operative.

(j) The costs of the hearing of the application are to be determined by the Court which hears the postponed application.

____

R

D MOKGAOTLHENG

ACTING JUDGE OF THE HIGH

COURT

Date of Hearing : 30 September 2004

Date of Judgment : 15 October 2004

Counsel for the Applicant : Adv De Bruin (SC)

Counsel for the Respondent : Adv V.D Merwe

Attorneys for the Applicant : Van Rooyen Tlhapi & Wessels

Attorneys for the Respondent : Smit & Stanton

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