Corporate Money Managers (Pty) Limited & others v Kufa Trading Enterprise CC

The appellants were six companies in the CMM group (under curatorship), a management fund, and three curators appointed in terms of the Financial Institutions (Protection of Funds) Act 28 of 2001. They sought to wind up the respondent close corporation. The second appellant (CMM Finpro) had entered into a loan agreement dated 27 February 2009 with the respondent to advance R15 million at 2% interest per month to fund a contract awarded to the respondent for upgrading student residence 5B at the University of Limpopo's Medunsa campus. The second appellant was to provide administration and support services and give a performance guarantee. Advances of R1,881,000 and R6,500,000 were made in February and March 2009. The respondent used R1,650,000 to purchase earth-moving equipment. The appellants issued a s 69 demand which the respondent refused to pay, disputing the debt. The appellants alleged the respondent was insolvent, unable to pay its debts, and that winding up was just and equitable. The respondent denied the debts were due and payable, arguing payment was only due upon project completion and final accounting, and that the appellants had breached their obligations.

• Whether the close corporation was unable to pay its debts as required for winding up under the Close Corporations Act 69 of 1984
• Whether the amounts advanced to the respondent were due and payable on demand
• Whether the loan agreement ('Annexure B') governed the relationship between the parties despite not being signed by the second appellant
• Whether the loan advances were void or voidable due to alleged bribery and corruption
• Whether the respondent was commercially or factually insolvent
• Whether it was just and equitable to wind up the respondent

The appeal was dismissed with costs.

1. In applications for final winding up orders, applicants must establish their case on a balance of probabilities and the matter must be decided essentially on the respondent's version of facts, except where that version contains denials that do not raise real, genuine or bona fide disputes of fact, or allegations or denials which are so far-fetched or clearly untenable that they can be rejected merely on the papers (applying Cuninghame v First Ready Development 249 2010 (5) SA 325 (SCA)). 2. A contract may be enforceable despite lack of signature by one party where the surrounding circumstances and conduct of the parties demonstrate agreement, including: drafting by the unsigned party, acceptance by the other party, subsequent conduct consistent with the agreement, similar prior agreements performed by both parties, and exchange of performance under the terms. 3. A close corporation cannot be deemed unable to pay its debts under s 69 of the Close Corporations Act 69 of 1984 where there is a bona fide dispute as to whether the debt is due and payable. 4. Where a loan agreement is allegedly tainted by bribery or corruption rendering it voidable, it does not fall away unless actually avoided by the innocent party. 5. Allegations of bribery and corruption must be clearly established and cannot be accepted where denied and the denial cannot be rejected on the papers, particularly where the alleged briber was the managing director of the lender.

The learned judge a quo wrongly found that there was a joint venture between the parties, though this finding did not affect the result. The Court noted that if loans were tainted by bribery and corruption the contract would be voidable (citing Extel Industrial (Pty) Ltd v Crown Mills (Pty) Ltd 1999 (2) SA 719 (SCA) at 728E-729D), and if avoided and cancelled, the advances would become unauthorised payments reclaimable without more. The Court observed that it is commonplace in the industry for raising fees to be charged on loans, even by financial institutions themselves, which provided context for understanding Mr Sithole's acceptance of such a fee request.

This case is significant for establishing important principles regarding winding up applications against close corporations in South African law. It clarifies the evidentiary burden on applicants seeking final winding up orders - they must prove their case on a balance of probabilities and the court must accept the respondent's version unless denials are not genuine or are far-fetched. The case demonstrates that technical formalities (like unsigned contracts) will not prevent enforcement where conduct demonstrates agreement. It also illustrates that s 69 deemed inability to pay debts under the Close Corporations Act cannot be established where there is a bona fide dispute about whether debts are due and payable. The judgment reinforces that winding up remedies should not be used to collect disputed debts, and that allegations of corruption must be clearly proven and the contract actually avoided to have legal effect in winding up proceedings.