Freshvest Investments (Pty) Ltd v Marabeng (Pty) Ltd

Freshvest Investments (Pty) Ltd, a financier in the agricultural sector, concluded three loan agreements in 2012 with Marabeng (Pty) Ltd. The loans were not repaid and Freshvest alleged that an amount of approximately R9.17 million was due and owing. Relying on this alleged indebtedness, Freshvest applied for the winding-up of Marabeng. Marabeng opposed the application, disputing the debt on the basis that its representative lacked authority to conclude the loan agreements, that the loans were not for the company’s benefit but for the personal farming activities of its representative, and that the agreements were the product of fraud or were simulated transactions. The High Court initially found that the debt was disputed on bona fide and reasonable grounds but nevertheless referred the matter to oral evidence, after which the winding-up application was dismissed. Freshvest appealed to the Supreme Court of Appeal.

The appeal was upheld. The order of the High Court was set aside and replaced with an order postponing the winding-up application sine die, with costs to be costs in the cause. The costs of appeal were also ordered to be costs in the cause. The appellant was permitted to revive the winding-up application if it succeeded in the pending action, failing which the winding-up application would be deemed dismissed with costs.

The case is a clear reaffirmation and application of the Badenhorst rule in South African company and insolvency law. It underscores that winding-up proceedings cannot be used as a debt-collection mechanism where the debt is genuinely disputed, and it clarifies that disputes about indebtedness in such applications must be resolved on the papers and not through oral evidence.