Superior Macadamias (Pty) Ltd and Others v Emvest Agricultural Corporation (Mauritius) Ltd and Another

The first respondent (Agricultural) launched four liquidation applications against the first four appellants (Superior, Evergreen, Foods, and Barvale) based on alleged indebtedness arising from service level agreements. The second respondent (Products) intervened as a 49% shareholder in Evergreen, Foods and Barvale, seeking their liquidation on a just and equitable basis. All four companies were previously part of the same suite of companies with Products. Between November 2013 and January 2014, share transactions took place whereby Products sold 51% of Evergreen, Foods and Barvale, and 100% of Superior. The sales were preceded by due diligence investigations based on 2013 audited annual financial statements. Provisional winding up orders were granted on 19 December 2018 and final liquidation orders on 24 May 2022. The directors of the companies, who resided outside South Africa, refused to cooperate with provisional liquidators, failed to provide documents or information as required by law, and dealt with company property during liquidation. Leave to appeal was granted on 1 August 2022, but technical issues arose regarding the order, requiring condonation applications.

• Whether Agricultural proved indebtedness by Superior and thus had locus standi as a creditor to bring liquidation proceedings under s 345(1)(a) of the Companies Act 61 of 1973
• Whether the high court erred in requiring Superior to prove it was not indebted rather than placing the onus on Agricultural to prove indebtedness
• Whether it was just and equitable to wind up Evergreen, Foods and Barvale under s 344(h) of the Companies Act 61 of 1973 or s 81(1)(d)(iii) of the Companies Act 71 of 2008
• Whether condonation should be granted for the reinstatement of lapsed appeals and what role prospects of success play in such applications
• Who should bear the costs of condonation and leave to appeal applications

The condonation application by the first appellant (Superior) was granted and its appeal was reinstated and upheld. The provisional and final winding up orders against Superior were set aside, with costs payable jointly and severally by the first and second respondents. The condonation applications by the second, third and fourth appellants (Evergreen, Foods and Barvale) were dismissed, meaning the final liquidation orders against them stood. The fifth appellant (Kwikbuild) was ordered to pay the costs of the condonation applications and the applications for leave to appeal.

A creditor applying to wind up a company under s 345(1)(a) of the Companies Act 61 of 1973 must prove on a balance of probabilities that the company is indebted to it - only then does the creditor have locus standi to invoke the deeming provision that the company is unable to pay its debts. The onus cannot be reversed to require the company to prove it is not indebted. For the 'just and equitable' ground under s 344(h) of the Companies Act 61 of 1973 or s 81(1)(d)(iii) of the Companies Act 71 of 2008, it is just and equitable to wind up companies where: (a) they are dormant with no assets; (b) their non-resident directors wilfully refuse to comply with the Companies Acts and Insolvency Act including duties to cooperate with liquidators and provide information and documents; (c) directors deal with company property during liquidation in breach of insolvency laws; and (d) directors obstruct liquidators and obfuscate the true state of affairs. In condonation applications for reinstatement of lapsed appeals, prospects of success are decisive.

The Court noted that although broad categories of circumstances for 'just and equitable' winding up have evolved, these do not constitute a complete and closed list and the facts of each case must be considered. The Court observed that it would be inappropriate for the costs of condonation applications that turn on merits and prospects of success to form part of costs of administration in liquidations, and similarly for costs of leave to appeal applications. The Court commented that when facts averred are such that the disputing party must possess knowledge of them but rests on bare or ambiguous denial rather than providing particularity, the court will have difficulty in finding the test for genuine dispute is satisfied. The Court also noted that it would place form over substance to non-suit an applicant on technical pleading grounds where the substantive issue was squarely raised, fully canvassed and fully argued.

This case establishes important principles regarding liquidation applications in South African law. It confirms that a creditor seeking to liquidate a company under s 345(1)(a) of the Companies Act 61 of 1973 bears the onus of proving indebtedness on a balance of probabilities and that reversing this onus is an error of law. The case also demonstrates the breadth of the 'just and equitable' ground for winding up companies, including where companies are dormant, where directors residing outside South Africa refuse to cooperate with liquidators, and where directors wilfully disregard provisions of the Companies Acts and Insolvency Act. It illustrates that non-compliance with statutory duties, obfuscation, and dealing with company assets during liquidation can independently justify winding up on just and equitable grounds. The case also addresses procedural issues regarding condonation for reinstatement of appeals, confirming that prospects of success are decisive in such applications.