Grenco Projects and Construction CC v Hermanus Esplanade Dev Co (Pty) Ltd

The applicant, a contractor, concluded a JBCC construction contract with the respondent, the employer. The applicant obtained payment certificates from the principal agent, partly following an adjudicator's determination, which the respondent disputed and referred to pending arbitration. The applicant served statutory demands and subsequently applied for the respondent's provisional liquidation under section 344(f) (inability to pay debts) and alternatively 344(h) (just and equitable) of the Companies Act 61 of 1973, based on the unpaid certificates totaling R6,973,683.41. The respondent opposed, arguing the debt was bona fide disputed on reasonable grounds.

• Whether the applicant's claim based on the payment certificates is bona fide disputed on reasonable grounds, applying the Badenhorst rule.
• Whether interim payment certificates under a JBCC contract are immune from attack by defences such as set-off or counterclaim.
• Whether the effect of specific clauses (30.6.3, 30.6.4, 30.7.1) requiring implementation of adjudicator's determinations pending arbitration ousts the Badenhorst defence.
• Whether the respondent is deemed unable to pay its debts under section 345 of the Companies Act.
• Whether the court should exercise its discretion under section 347(1) to stay the liquidation application pending the arbitration.

1. The winding-up application is postponed sine die, respondent to pay costs on scale B. 2. If applicant succeeds in arbitration and proves a claim of not less than R100, it may re-enrol the application on amplified papers. 3. If applicant fails to prove such claim or prosecute the arbitration, the application is deemed dismissed with costs. 4. Applicant may re-enrol if arbitration dates before 15 December 2024 are available but the hearing is not completed due to respondent's unjustified failure to participate.

Where a construction contract contains clauses (similar to JBCC clauses 30.6.3 and 30.7.1) requiring that a determination by an adjudicator shall be immediately binding and implemented pending arbitration, a claim for payment based on a payment certificate issued consequent to such determination is not to be regarded as bona fide disputed on reasonable grounds for the purposes of the Badenhorst rule, even if the respondent has shown a genuine dispute on the merits of the underlying claims.

The court noted that even where a creditor makes out a case for winding-up, the discretion under section 347(1) remains, and the court may stay the application pending finalisation of arbitration, particularly where factors present in Afgri Operations (such as genuine pursuit of counterclaim, solvency indications, and impending dispute resolution) are established. It also observed that a liquidation application is not equivalent to 'implementation' of an adjudicator's determination.

The case clarifies the interplay between the 'pay now, argue later' principle in construction adjudication and the Badenhorst rule in liquidation proceedings. It confirms that contractual clauses requiring immediate implementation of adjudicator determinations pending arbitration can preclude a finding that a claim for payment based on such determinations is bona fide disputed, even if the underlying merits are genuinely contested. It also illustrates the court's discretion to stay liquidation proceedings pending dispute resolution rather than dismissing or granting them outright.