Export Harness Supplies (Pty) Limited v Pasdec Automotive Technologies (Pty) Limited

The respondent (Pasdec Automotive Technologies) instituted liquidation proceedings against two respondents, including the appellant (Export Harness Supplies) as second respondent. The application against the first respondent was abandoned. The respondent sought a final winding-up order against the appellant based on two grounds: (1) that the appellant was unable to pay its debts under s 345(1)(a) and (c) of the Companies Act 61 of 1973, and (2) that it would be just and equitable to wind up the appellant under s 344(h). The application was dismissed by Marais J in the High Court, Johannesburg. On appeal, the full court (Blieden J and Goldblatt J, with Goldstein J dissenting) granted a final winding-up order. The parties agreed before the full court that a final order rather than a provisional order should be granted if the applicant was entitled to relief. The appellant appealed to the Supreme Court of Appeal with special leave.

• Whether the respondent had discharged the onus of proof required for a final winding-up order (proof on a balance of probabilities rather than merely a prima facie case)
• Whether the demand made under s 345(1)(a) of the Companies Act was valid when it was addressed to the first respondent rather than the appellant
• Whether the respondent had established that the appellant was unable to pay its debts under s 345(1)(c) of the Companies Act
• Whether it would be just and equitable to wind up the appellant under s 344(h) of the Companies Act
• Whether disputes of fact could be resolved on the papers without referral to oral evidence
• Whether further evidence could be tendered on appeal under s 22 of the Supreme Court Act 59 of 1959 where it had been refused by the lower court

The appeal was upheld with costs. Paragraphs (a) and (c) of the full court's order were set aside and substituted with an order dismissing the appeal with costs. The appellant's application under s 22 of the Supreme Court Act was dismissed with costs, including costs of two counsel.

The binding legal principles established are: (1) A final winding-up order requires proof on a balance of probabilities, not merely a prima facie case. (2) An applicant for a final winding-up order must specifically plead the grounds relied upon in the founding affidavit. Where an applicant relies on s 345(1)(a) and does not plead inability to pay debts under s 345(1)(c), the respondent cannot be criticized for failing to address its financial position. (3) Where there are disputes of fact in liquidation proceedings on affidavit and the applicant seeks a final order without referral to oral evidence, the Plascon-Evans test applies: the court must consider whether the facts admitted by the respondent together with the facts alleged by the respondent justify the order sought. (4) In the absence of an appeal against a lower court's refusal to receive evidence, such evidence cannot be tendered on appeal under s 22 of the Supreme Court Act 59 of 1959. (5) An inference of inability to pay debts cannot be drawn merely from a dispute about the quantum of the debt where there is no evidence of the debtor's actual financial position and the disputed amount is substantially less than the amount claimed.

The court made obiter observations regarding the agreement between the parties that a final rather than provisional order should be granted if relief was warranted. The court clarified that such an agreement cannot mean that a final order should be granted if only the lesser onus for a provisional order is discharged; rather, it means that neither party wishes to place further evidence before the court and the matter should be decided on the basis that a final order is sought (with the corresponding higher onus). The court also noted, without deciding, the question of whether the allegations made (if proved) could justify an order that it would be just and equitable to wind up the company. The court observed that where a court employs two counsel for the main appeal due to its complexity, it is wise and reasonable to employ two counsel to oppose an ancillary application (such as an application under s 22) where the evidence sought to be introduced is significant.

This case is significant in South African insolvency law for clarifying the onus of proof in liquidation proceedings and the approach to disputes of fact. It reinforces the principle established in Paarwater v South Sahara Investments that while a prima facie case suffices for a provisional winding-up order, a final winding-up order requires proof on a balance of probabilities. The case emphasizes that an applicant for a final winding-up order must specifically plead and prove the grounds relied upon, including inability to pay debts under s 345(1)(c). It also confirms the application of the Plascon-Evans test to liquidation proceedings where there are disputes of fact on the papers. The case further clarifies that in the absence of an appeal, an affidavit refused by a lower court cannot be tendered under s 22 of the Supreme Court Act on appeal.