Centaur Shipping (Pty) Ltd v Blue Sails Shipping (Pty) Ltd (D11699/2023; D11712/2023) [2024] ZAKZDHC 102 (9 December 2024)

begin wrapper begin container begin header begin slogan-floater end slogan-floater - About SAFLII About SAFLII - Databases Databases - Search Search - Terms of Use Terms of Use - RSS Feeds RSS Feeds end header begin main begin center # South Africa: Kwazulu-Natal High Court, Durban South Africa: Kwazulu-Natal High Court, Durban You are here: SAFLII >> Databases >> South Africa: Kwazulu-Natal High Court, Durban >> 2024 >> [2024] ZAKZDHC 102 | Noteup | LawCite sino index ## Centaur Shipping (Pty) Ltd v Blue Sails Shipping (Pty) Ltd (D11699/2023; D11712/2023) [2024] ZAKZDHC 102 (9 December 2024) Centaur Shipping (Pty) Ltd v Blue Sails Shipping (Pty) Ltd (D11699/2023; D11712/2023) [2024] ZAKZDHC 102 (9 December 2024) Download original files PDF format RTF format make_database: source=/home/saflii//raw/ZAKZDHC/Data/2024_102.html sino date 9 December 2024 IN THE HIGH COURT OF SOUTH AFRICA KWAZULU-NATAL LOCAL DIVISION, DURBAN Case no.: D11699/2023 In the matter between: CENTAUR SHIPPING (PTY) LTD                                                       APPLICANT and BLUE SAILS SHIPPING (PTY) LTD                                                RESPONDENT AND Case no.: D11712/2023 In the matter between: CENTAUR SHIPPING (PTY) LTD                                                       APPLICANT and ETHEKWINI MARINE AIR IMPORTS & EXPORTS CC                                                             RESPONDENT ORDER The following orders shall issue: A. In case number D11699/2023: 1.     The application for the liquidation of Blue Sails Shipping (Pty) Ltd is dismissed. 2.     The applicant is ordered to pay the respondent’s costs on Scale B. B. In case number D11712/2023: 1.     The application for the liquidation of Ethekwini Marine Air Imports & Exports CC is dismissed. 2.     The applicant is ordered to pay the respondent’s costs on Scale B. JUDGMENT BRAMDHEW AJ Introduction [1] These are applications brought by the applicant, Centaur Shipping (Pty) Ltd, for the liquidation of Blue Sails Shipping (Pty) Ltd (“Blue Sails”), under case number D11699/2023, and Ethekwini Marine Air Imports & Exports CC (“Ethekwini Marine”), under case number D11712/2023. Both applications are brought in terms of section 344(h) of the Companies Act [1] (“the Act”), on the basis that it is “ just and equitable ” to wind-up the respective respondents. [2]        Although these are different respondents, given the overlap in facts and legal arguments, I shall address both matters together, unless otherwise stated.  Both matters were heard together. [3]        The issue for determination is whether the applicant has established a case for the liquidation of the respondents on the grounds that it is just and equitable to do so, as provided for in section 344(h) of the Act. The background/facts [4]        Blue Sails is a private company of which Ms Pillay, Mr Ethiraju and Ms Moodley are directors.  Ethekwini Marine is a close corporation, and Ms Moodley is its sole member.  These three individuals were formerly employed by the applicant in various capacities. The applicant has not placed their employment contracts before this court and relies on a general confidentiality agreement, which requires employees to maintain confidentiality regarding the applicant’s operations.  There is no allegation that these employees’ employment contracts contained a restraint of trade provision in respect of the applicant’s client connections, its client data base, or its business methodologies. [5]        The applicant is a clearing and forwarding agent, shipping containers for its clients into and out of South Africa. As at 26 April 2023, Ms Pillay was employed by the applicant as an export clerk and dealt directly with the applicant’s clients.  Mr Ethiraju, at the time of his resignation on 28 April 2023, was responsible for preparing quotes for the applicant’s clients and arranging for placement of containers at clients’ premises. Ms Moodley, at the time of her resignation in February 2023, was employed as a bookkeeper who oversaw the applicant’s accounts. [6]        The applicant contends that, while still employed by it, these three individuals sought to divert work and clients to Blue Sails and Ethekwini Marine, which they established or controlled in breach of the confidentiality agreement. The basis for the liquidation applications is the alleged fraudulent conduct by these individuals and that the respondents were the entities established to perpetrate such conduct. [7]        The applicant alleged that during early 2023 it discovered that its regular customers had not been conducting business with it. [8]        Further, the applicant alleges that, due to a series of events on 26 April 2023, it discovered that customer files were in Ms Pillay’s bag, who indicated that that Ethekwini Marine was being used by the applicant’s clients as a clearing and forwarding agent. [9]        The applicant alleged that pursuant to a specialist forensic investigation, it discovered correspondence and invoices sent by Ms Pillay, on behalf of Ethekwini Marine, to the applicant’s clients. [10]    The applicant alleges that Ms Moodley’s involvement was revealed by an exchange of emails between her and Ms Pillay in which Ms Moodley sends proof of payment from Ethekwini Marine to Ms Pillay, with the comment “ Pop attached.  Please delete .”  The applicant further asserts that Mr Ethiraju shared a letterhead for Ethekwini Marine with Ms Pillay.  Based on these allegations, the applicant contends that these three employers were conspirators in the activities relating to Blue Sails and Ethekwini Marine. [11]    Based on these allegations, the applicant seeks to wind up the respondents by relying on section 344(h) of the Companies Act, which states: “ A company may be wound up by the Court if- (h)      it appears to the Court that it is just and equitable that the company should be wound up. ” [12]    The respondents deny the allegations, asserting that the applicant has failed to meet the threshold for liquidation under section 344(h) of the Act. The respondents allege that the applicant has failed to demonstrate that it is a creditor of the respondents and suggests that, at best, the applicants’ claims may lie against the former employees, and not the respondents. The legal framework and its application to the facts [13] The interpretation of Section 344(h) of the Companies Act has been considered in numerous cases, including Rand Air (Pty) Ltd v Ray Bester Investments (Pty) Ltd [2] (“ Rand Air ”), which sets out five broad categories in respect of which the ground of “ just and equitable ” may apply [3] : 1.     the disappearance of the company’s substratum ; 2.     illegality of the objects of the company and fraud committed in connection therewith; 3.     deadlock which results in the management of the companies’ affairs; 4.     grounds analogous to those for the dissolution of partnerships; and 5.     where there is oppression. [14]    The applicant contends that this court can exercise its discretion under the category of the “ illegality of the objects of the company and fraud committed in connection therewith ”. [15]    The court in Rand Air explained this specific category as follows: ‘ If a company is promoted in order to perpetrate a serious fraud or deception on the persons who are invited to subscribe for its shares, it is the kind of case in which the persons who are defrauded in that fashion can take the promoters to Court and, provided the circumstances demand that, ask that the company be wound up. ’ [4] [16]    In Rand Air , the court emphasised that section 344(h) is not a "catch-all" provision. [17] The burden of proof rests on the applicant to establish a prima facie case for liquidation, as set out in Kalil v Decotex (Pty) Ltd and Another . [5] The evidence must demonstrate that the requirements of s 344(h) have been met. [18]    The applicant’s case hinges on the allegation of fraud perpetrated by its three former employees and the contention that Blue Sails and Ethekwini Marine were instrumental in facilitating this fraudulent conduct. However, in my view, there are several difficulties with the applicant’s reliance on this basis for seeking the liquidation orders. [19]    The applicant does not fall within the categories expanded upon in Rand Air . Nor has the applicant provided any evidence of exclusive client relationships or that Blue Sails and Ethekwini Marine made misrepresentations directly to those clients, or that such clients acted upon them. [20] Mr Shapiro SC , appearing for the applicant, referred this court to an email [6] sent by the applicant’s insurer, in which Ethekwini Marine is described as a “ sister company ” of the applicant. It was argued that this representation was made to the applicant’s insurer and demonstrates fraudulent intent.  Mr Shapiro further submitted that it must be inferred that these representations were also made to the applicant’s clients. However, there is no evidence before this court that representations were allegedly made to clients or that such clients acted upon these representations to the applicant’s detriment. [21] Mr Eades , on behalf of both respondents, annexed to his heads of argument the decision of Harrison AJ (as he then was) in Build IT v Sundeo CC [7] , in which a provisional liquidation order was granted based on allegations of fraud. Mr Eades sought to distinguish the cases at hand from Build IT in that the questions raised here regarding the applicability of section 344(h) of the Act were not considered in Build IT .  In the Build IT judgment, Build It alleged that it was just and equitable to wind up Sundeo CC as it had been the corporate vehicle through which payment had been made to Mahabeer, a former employee of Build IT.  These payments were made on the basis that Mahabeer would award contracts to Build IT’s suppliers and Mahabeer would, in turn, be paid this unlawful commission. Sundeo CC’s bank account had been identified as the banking account into which monies were paid on behalf of Mahabeer. [22] I agree with Mr Eades that Build IT is distinguishable from the current matters.  In Build IT , there was prima facie evidence linking Sundeo CC to fraudulent activities.  Sundeo CC was used as a vehicle for fraud and was devoid of employees, offices, or equipment and was merely a shell.  Sundeo CC met these allegations with bald denials. Sundeo CC’s sole member was Mahabeer’s wife.  Instead of dealing with the prima facie evidence contained in the founding affidavit, Sundeo CC sought to strike out these allegations contained in the founding affidavit.  The Court found that the member had a statutory duty to keep proper accounting records and to not hide behind the application to strike out.  The Court held that considering the prima facie evidence, Sundeo CC (and its member) had to explain the payments received.  The Court was not asked to interpret the provisions of section 344(h) of the Act in that matter. [23] In these matters, the applicant relies on general allegations of client diversion without proof of payment or contractual relationships regarding Blue Sails or Ethekwini Marine.  Further, there is no allegation of the existence of restraints of trade. [24] The principle established in Badenhorst v Northern Construction Enterprises (Pty) Ltd [8] is relevant. Liquidation proceedings may not be used as a means to enforce disputed claims. In this case, the applicant relies on unsubstantiated allegations of debt, which are not appropriate for determination in liquidation proceedings. Conclusion [25]    The allegations in the affidavits do not support the applicant’s contention that it is just and equitable to liquidate Blue Sails and Ethekwini Marine.  There is no basis to conclude that the applicant is a creditor of either respondent or that it is just and equitable to wind up the respondents. [26]    It was submitted that the costs of these applications could be determined on scale B.  Given the moderate complexity and the narrow issues required to be determined in the respective applications, orders for costs on scale B are, in my view, appropriate. Order [27]    The following orders shall issue: A. In case number D11699/2023: 1.     The application for the liquidation of Blue Sails Shipping (Pty) Ltd is dismissed. 2.     The applicant is ordered to pay the respondent’s costs on Scale B. In case number D11712/2023: 1.     The application for the liquidation of Ethekwini Marine Air Imports & Exports CC is dismissed. 3.     The applicant is ordered to pay the respondent’s costs on Scale B. BRAMDHEW AJ Case information Heard on: 18 November 2024 Judgment delivered: 9 December 2024 For the applicant: Mr Shapiro SC Instructed by: Macgregor Erasmus Attorneys Inc 1 st Floor, Bond Square 12 Browns Road, The Point Durban Ref: J Klingbiel/sv/CEN5/001 & 0002 E-mail: sandra@meattorneys.co.za For the respondents: Mr Eades Instructed by: Ash Naidoo Attorneys 10 th Floor, Metlife Building 391 Anton Lembede Street Durban Ref: AN679/S039 & AN 715/S040 Email: ash@ashnaidoo.co.za [1] Companies Act 61 of 1973. [2] Rand Air (Pty) Ltd v Ray Bester Investments (Pty) Ltd 1985 (2) SA 345 (W) at page 350 [3] Ibid at pages 349G-350H [4] Ibid [5] Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A). [6] Annexure “FA7” [7] Build IT v Sundeo CC Case no: D3594/2024 dated 15 October 2024 (unreported judgment of this Division). [8] Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T). sino noindex make_database footer start