CIV/APN/310/86

IN THE HIGH COURT OF LESOTHO HELD AT MASERU

In the matter between:

M
K DAVIES trading as PANALEC Petitioner

and

OCRIM SOCIETE per AZIONE Respondent

and

ADRIMAR ENGINEERING (PTY) LTD Intervening Creditor

and

DESIGN PROJECTS (PTY) LTD Intervening Creditor

JUDGMENT.

Delivered by the Honourable Acting Chief Justice Mr.
Justice J.L. Kheola on the 24th day of November. 1986.

On the 24th September, 1986 the petitioner obtained ex
parte
an order in the following terms:-

"1. That the respondent is placed in Provisional
Liquidation in the hands of the Master of the High Court;

2. 
   That the respondent is called upon to show cause
   if
   any on 27th day of October, 1986 why this Pro­
   visional Order
   should not be made final;

   
   

3. 
   That publication of this Order shall be placed in
   the
   "Lesotho Today";

   
   

4. 
   That service of this Order shall be effected on
   the
   respondent at its place of business at Maseru
   Industrial
   Sites, Maseru, Lesotho;

   
   

/

-2-

5. 
   That STEPHAN CARL BUYS is appointed as
   Provisional
   Liquidator of the respondent to take
   immediate
   control of the respondent's assets and the
   powers
   provided for in Section 188 (a) and (c) and Section
   188
   (2)(a), (b), (c), (d), (e), (f), (g) and (h) of
   the Companies Act
   1967, as amended, are hereby granted
   to him and that the
   Provisional Liquidator be authorised
   in terms of Section 188 (2)
   specifically to adopt and
   carry on the Contract between the
   respondent and the
   Ministry of Agriculture and Marketing of the
   Government
   of Lesotho dated 11th March, 1985;

   
   

6. 
   That the costs of this Petition be paid out of
   the
   assets of the respondent's Estate."

   
   

The order was returnable on the 27th October, 1986. The
respon­dent anticipated the return day and set down the matter
for hearing
on the 10th October, 1986. However, on the 9th October,
1986 Mr. Molete for the respondent appeared before me in chambers and
indicated
that the matter could not proceed on the 10th. He informed
me that the petitioner's counsel had been notified of the
postponement.
For some unknown reason what transpired on the 9th
October was not recorded but I recall that Mr. Molete said the reason
why the
case could not proceed on the following day was that the
petitioner's counsel would not be available that day. On the 10th
October
Mr. Edeling for the petitioner and Mr. Moiloa for the
respondent appeared before me.

It was argued on behalf of the petitioner that the
matter should be removed from the roll with costs to the petitioner.
Mr. Moiloa
argued that the petitioner was not entitled to costs
because it was notified of the postponement at 11.00 a.m. on the 9th
October,
1986. He submitted that the petitioner's counsel ought not
to have come to Court. I reserved my ruling on the question of costs
until
the 27th October.

/

-3-

On the 23rd October an application was made by two
creditors that they be allowed to intervene. The two intervening
creditors were
Adrimar Engineering (Pty) Ltd. and Design Projects
(Pty) Ltd The application was granted and the rule was extended to
the 10th November,
1986. The matter was argued on the 10th, 11th and
12th November and judgment was reserved to the 24th November, 1986.

On the 11th March, 1985 the respondent entered into a
contract with the Ministry of Agriculture and Marketing of the
Government of

Lesotho for the supply of plant and equipment for the
contract known

as the "Maseru Maize Mill and Silo Complex. The
respondent is a company

with limited liability incorporated in Italy.

The petitioner is a South African company with limited
liability incorporated according to the laws of the Republic of South
Africa.
On the 23rd March, 1985 the petitioner entered into a
contract with the respondent for the supply of engineering plant and
equipment
and related services for the Maseru Maize Mill and Silo
Complex contract. The sub­contract is annexure "MKD6".
The
petitioner carried out its part of the contract and received
several payments for the work it had done. The payments appear in
Annexure
"MKD10" which shows the grand total outstanding
excluding retention as R303,899-00. It is this amount which led to
serious
litigation between the parties.

On the 1st April, 1986 the petitioner obtained an order
against the respondent in Case No. 6941/86 in the Witwatersrand Local
Division
of the Supreme Court of South Africa for the attachment of
certain funds in a current banking account in order to found
jurisdiction
for an action to be instituted against the respondent.
On the 10th April, 1986 the order granted on the 1st April, 1986 was
set aside
and the present petitioner was ordered to pay the costs of
the application, including the costs of two counsel.

/

-4-

On the 10th April, 1986 Mr Burger obtained an order in
this Court in Case No. CIV/APN/126/86 against the respondent to
attach to confirm
jurisdiction certain monies owing by the Government
of Lesotho to the respondent and certain assets. This order was also
set aside
with costs including costs of two counsel on the 16th
April, 1986. On the 20th May, 1986 an appeal was lodged and no date
has been
fixed for its hearing.

On the 28th April, 1986 the petitioner obtained an order
against the respondent in Case No. CIV/APN/138/86 of this Court to
attach
to confirm jurisdiction certain monies owing by the Government
of Lesotho to the respondent and other assets. The order was set
aside
on the 30th May, 1986 and the petitioner was ordered to pay
costs. On the 11th July, 1986 the petitioner lodged an appeal and no
date has been fixed for the hearing of the appeal.

On the 28th April, 1986 Mr. Burger sought and obtained
an order against the respondent in Case No. CIV/APN/139/86 of this
Court, it
was an order for the attachment of property in terms
similar to those in Case No. CIV/APN/138/86. The order was set aside
on the
30th May, 1906.

On the 20th August, 1986 the petitioner sought and
obatained an order for the arrest of Mr. Mecke who is the
respondent's project
engineer and an order to sue Mr. Mecke and the
respondent by edictal citation. The order was also set aside with
costs. This was
under Case No. 15086/86 in the Transvaal Provincial
Division of the Supreme Court of South Africa.

In Case No. 15210/86 in the Transvaal Provicial Division
of the Supreme Court of South Africa Burger's toustee, Fisher brought
an

/

-5-

application seeking an order similar to the one in Case
No. 15086/86. It was also set aside with costs.

I have given a short summary of these cases in order to
show that a lot of litigation had been going on between the present
peti­tioner
and the present respondent long before the former
obtained a provisional winding-up order of the latter on the 24th
September, 1986.
It is clear that in all the applications brought by
the peti­tioner against the respondent the orders that were
obtained were
eventually set aside with costs. The petitioner, having
lost in all the applications, decided to have the respondent wound up
on
the grounds that it (respondent) is unable to pay its debts, and
that it would be just and equitable that it should be wound up.

In his founding affidavit the petitioner deposes that he
proceeded with the sub-contract works in accordance with the agreed
programme
of works without any problems, save that some payments due
to him were not paid timeously by the respondent. The last payment
was
made on the 12th February, 1986. However, the petitioner states
that he continued with the sub-contract work until the 27th March,
1986 when he was forced by the respondents illegal conduct to remove
his personnel and equipment from the contract site.

In paragraph 7 of his founding affidavit the petitioner
states:

"In or about the second week of January, 1986,
representatives Binnies carried out an inspection of the work which
Your Petitioner
had done and listed a number of defects which
required your petitioner's attention. Your petitioner immediately
commenced with the
necessary work and, whilst this was being done,
the respondent's representative, Mecke, suggested that respondent
should send four
technicians from Italy to the contract site to
assist your petioner with the completion of its work. The Italian
team duly arrived,
headed by one Bresciani as Foreman. The said
Bresciani adopted the attitude that he was in charge of the
Sub-Contract works and that

_ 6 -

your petitioner was subject to his control and
directions.

He arbitrarily condemned certain work which had been
done by your petitioner although this work conformed to the
specifications as
contained in the Sub-Contract. A few days later he
brought five more Italian technicians to the site. Without reference
to your petitioner
or Bennies, respondent's employees dismantled
certain work carried out by your petitioner and substituted other
equipment which did
not conform to the original Sub-Contract
specification. In or about mid-February, the respondent brought a
further team of ten South
African electricians to the contract site
who, together with Respondent's employees, effectively and
unila­terally took over
the balance of the Sub-Contract works
from your petitioner".

On the 26th March, 1986 Mr. Carlisle, acting for the
petitioner, wrote a letter to the respondent notifying it that
because of its
conduct the respondent had rendered it impossible
for the petitioner to complete the sub-contract and that the
petitioner would
remove his personnel and equipment from the site on
the 27th March, 1986. The letter is Annexure "MKD8".

The opposing affidavit was made and sworn to by one
Rochus Mattias Mecke who is the project engineer in the employ of the
respondent.
He deposes that the respondent is not indebted to the
petitioner in the amount which the petitioner claims is owing to it.
The reason
being that the petitioner was consistently late in the
performance of his obligations in terms of the contract, and that
much of
the work that the petitioner did was not done properly and
accordingly had to be redone. The respondent went to considerable
expense
in bringing in extra technicians from Italy and later from
the Republic of South Africa, and incurred further expenditure in
regard
to additional materials by reason of the petitioner's
defective performance of the work.

The affidavits in the present application are very bulky
because an attempt is being made to cover all what was said in the
numerous
applications which were previously made in this Court and

-7-

in the various divisions of the Supreme Court of South
Africa. However, the most important issue in this application is
whether the
respondent is unable to pay its debts. The respondents
argu­ment is that it is able to pay its debts but refuses to pay
the petitioner
on the simple ground that the alleged debt is
seriously disputed on the ground that petitioner failed to perform
its part of the
contract properly and in accordance with the terms of
the sub-contract.

Section 172 (c)of the Companies Act No. 25 of 1967
provides as

follows:

"'A. company shall be deemed to be unable to pay
its debts -

(c) If it is proved to the satisfaction of the court
that the company is unable to pay its debts, and in determining
whether a company
is unable to pay its debts, the court shall take
into account the contingent and prospective liabilities of the
company."

The onus is on the petitioner to prove on a balance of
probabilities that the respondent is unable to pay its debts. In
Wackrill v.
Sandton International Removals (Pty) Ltd and others, 1984
(1) S.A. 282 (W) it was held that the standard of proof of the
relevant
facts required for the confirmation of a provisional
winding-up order should not be anything less than that required in
civil cases.
that is proof on a clear balance of probabilities, with
the admission of viva voce evidence where necessary to resolve
material disputes
on the affidavits.

It seems to me that in the present case there are no
material

disputes on the affidavits and there was no need to hear
oral evidence.

-8-

It is common cause that the petitioner lodged numerous
appli­cations against the respondent in this Court and in the
Republic
of South Africa in an attempt to attach certain properties
of the respondent in order to found jurisdiction. All the
applications
were dismissed on various grounds. In one of such
applications the petitioner sought and obtained ex parte the order
for the arrest
of Mecke. The order was set aside only after four days
spent by Mr. Mecke in prison. Having failed in all the applications
the petitioner
decided that he would solve the problem by making a
petition for the winding up of the respondent. He was well aware that
there was
a dispute concerning the alleged debt. In all the previous
applications the respondent had disputed the debt.

It is trite law that the Court will not grant a
winding-up order where there is a bona fide dispute as to the
existence of a debt
(Mcleod v. Gesade Holalings (Pty) Limited, 1958
(3) S.A. 672 (W), Walter McNaughtan (Pty) Ltd v. Impala Caravans
Ltd., 1976 (1) S.A.
139). Where there is a bona fide dispute, the
Court may order the applicant to prove his debt by action before
applying for a winding-up
order. Winding-up proceedings cannot be
used as a means of enforcing payment of debt where there is a
bona-fide dispute of the existence
of a debt because a winding-up is
not designed for resolution of disputes as to the existence or
non-existence of a debt (Henochsberg
on the Companies Act, 4th
edition (Vol. 2) p., 583).

Mr. Farlam, for the petitioner, submitted that although
the amounts of the petitioner's claim may not be admitted, it is at
least
common cause that as at March, 1985 there were amounts owing by
the respondent to the petitioner and that no payments had been made
by the respondent since the 12th February, 1986. According to him the
only dispute between the parties is whether the respondent
has a
counterclaim for damages against the petitioner.

-9-

He further submitted that a disputed counterclaim is no
defence to a debt which is due and payable. Furthermore, the
counterclaim
is a claim for damages and is accordingly unliquidated.
It accordingly cannot even be set off against such debt.
(Rosettenville Motor
Exchange v. Grootenboer, 1956 (2) S.A. 624 (T).
I agree with this submission as far as the law is concerned. The
facts of the present
case are different from those in Rosettenvill
Motor Exchange case in that in the present case a certain amount of
money was to be
paid to the petitioner by the respondent on the
proper completion of some specified work. The petitioner failed to do
the work properly
and repudiated the contract on the ground that the
respondent's employees made it impossible for him to execute his part
of the contract.

I say the petitioner failed to do his part of the
sub­contract properly because there is evidence to that effect.
The petitioner
also admits that his work was defective and had to bo
redone. See paragraph 48.2 of the petitioner's replying affidavit in
which
he admits that his work was defective. As proof that petitioner
failed substantially to perform in terms of the contract, on the
17th
January, 1986 Binnie and Partners, Lesotho, who are the consulting
engineers appointed by the Lesotho Government to supervise
the work
and to satisfy themselves that work under the contract was done
properly, sent a telex to the respondent which reads as
follows:-

"To: OCRIM CREMONA - ATTN. A. MILAZZO MASERU MAIZE
MILL - CONTRACT 1 17.01.86/RJW/5216-31

ELECTRICAL INSTALLATION (A) DESIGN AND SUPERVISION

-10-

We refer to your undertaking of 19/20 December in which
you stated that you would have an Electrical Engineer on site/in RSA
"Early
January" and to cur telex of 10.1.86 in which we
(again) draw attention to the situation in respect of Panalec, and
stated that
the presence of an Electrical Engineer in Maseru was
urgently required.

We have received no response to our telex of 10,1.86,
and we cannot accept that your statement in your telex of 9.1.86 that
your Electrical
Engineer will be arriving "within the next few
weeks" is adequate.

We re-iterate that it is now absolutely essential that
you send an Eletrical Engineer to Maseru immediately to carry out
outstanding
design work and to supervise Panalec.

We should like to draw your attention to your statement
at the commencement of this contract that in respect of Panalec
"Design
and Supervision" would be by Ocrim. We are not
aware of any Design or Supervision being carried out by Ocrim so far,
despite
the limitations of Panalec being clear for some considerable
time.

(B) INSTALLATION

In an effort to establish what further problems remained
we requested the presence in Maseru for 2 to 3 days of Malcolm
Davies.

The meetings held confirmed our impression that there is
a widespread disregard for the technical and functional requi­rements
of the specification together with a lack of technical competence.

MAIN POINTS ARE:

(A) The two MCCS on site fail substantialy to meet the
specification or even to comply with the relevant SABS. Under normal
circumstances
we would rejects these items totally and have them
removed from site. Under the current circumstances we are obliged to
accept that
they' be re-built on site and that it is not possible to
remedy certain defects which we would normally not accept. This must
of
course be drawn to the clients attention.

(8) Only by obtaining unofficially from Panalecs
erectors their cable schedules, and re-calculating all cable sites
ourselves, were
we are able to prevent the installation in the
worktower of many undersize cables, some slightly so but some

/

-11-

significantly so. This is of particular concern as we
had already some months ago shown Davies how to calculate cable sizes
and rejected
many of his original proposals, His promised revised
calculations were never received (or carried out?).

3. 
   The arrangement set cut in the specification and
   shown
   on the DRGS in respect of the Mill SDB, SUB, SOBS,
   lighting and
   small power has been totally ignored. Again,
   to avoid delay a
   compromise must be accepted.

   
   

4. 
   No transformer/MV switchboard or MV
   switchboard/MCC
   cable size calculations were available. In fact
   it was
   clear that Panalec were not able to carry these out
   properly.
   In the case of the TRANS/MVS cables, and the
   MVS/Worktower
   MCC cables, we have been through calculations with
   Panalec
   and agreed cable sizes. Davies was unable even to
   provide
   the technical criteria for the other cables. No cable
   sizing
   was therefore been agreed for feeders to the Mill MCCS.

   
   

Davies Statement that these cables are "oversized"
is unsupportable.

It has been clear to both of us for a long time that
Panalec are a firm of limited resources. It is difficult to see how
they are
to complete all outstanding design work, procurement,
workshop fabrication and site installation without assistance.

We are doing what we can to rectify this including
becoming involved in design work which is your own responsibility but
which cannot
wait any longer if the project is not to be delayed.
This is most unsatisfactory.

Please let us know by return what steps you intend to
take to remedy this state of affairs.

Regards

Binnie
and Partenrs Lesotho."

On the 31st January, 1986 the respondent sent a telex to
the Petitioner and it reads as follows:-

"PLS give this message to Mr Des Flett urgently.
CREMONA, 31.1.86

TLX No. 586/AM/AD

-12-

We regret to inform you that Panalec is on its way to
created big problems and a disaster should Panalec not proceed to
take our advice
as per attached TLX.

You had given us your guarantee for Panalec's
experience, seriousness and well-established company.

You have also written this in your agreement with us
your full responsibility.

We are forecasing very big and costly problems and your
commission may have to be withdrawn in part or in full as guarantee.
We therefore
ask you to review FLWG TLX to Panalec.

Quote

Cremona, 31.1.86

TLX No. 581 MC/AM/AD

ATTN. MR. MALCOLM DAVIES RE: MASERU MAIZE MILL

We have received report from Mr. Mecke/Mr. Bresciani
regarding your progress of works, and we must now take action to
avoid disaster.

1. FLWG are main points from report!

1. 
   Works performed by you or in progress do not
   comply
   with basic electromechanical standards and are not of
   good
   quality construction. This is in contrast with your
   contract
   obligations.

   
   

2. 
   Construction of MCC on site is unacceptable
   therefore
   these panels must be remedied immediately,

   
   

3. 
   Remaining MCC seen in your workshop are only 5
   constructed.
   Only one person was seen working.

   
   

4. 
   Erection on site is slow (very slow)

   
   

F) Above points will create delay of final
commissioning to our view about 30 days. The client will charge
penalities for R. 5,400
x day which are your responsibilities. If you
then also add costs for maintaining our people on site, inoperable
because of delay,
htese sums are very high and they will be all to
your charge.

2. Ocrim is not interested in wasting time over
controversies,
but to get the job finished in time and to be
professional with
client.

We want to continue working relationship with Panalec in
friendly way as done in past. We believe that on your part it is not
a matter
of lacking good will but lack of experience in the field of
electrical 'Turn-key' supply for Milling Plant, especially when heavy
penalities are involved.

/

-13-

3. 
   After December visit of our Mr. Milazzox Mr. Donno
   and
   present visit of Mr. Mecke/Mr. Bresciani, we have
   sufficient
   proof that Panalec is not capable to finish works in
   time.
   Only six weeks remain until start of commissioning.
   Only
   solution left to avoid this disastrous problem is to stand
   4
   or 6 persons skilled electricians from Italy that will
   work
   with you, your people on site will follow them closely
   obey
   decisions made by our chief site engineers.

   
   

4. 
   Examples of works not in compliance to contract.

   
   

A. Your contract signed in Cremona 23.3.85 clearly
states
that you must first have approval from Ocrim, and not
to
deal directly with Binnie and Partners.

Our Mr. Mecke/Mr. Bresciani for example have asked you
not to make motor connection cable coming from top but from floor
below. You
refused this solution even though any Miller today knows
hew useful it is for maintenance in a Mill.

B. You have not yet ordered second unit for backup
to
TELEM/PROTEA as requested by us in December and recently
by
TLX. AFH devers is making software for one VDU contrary

to our contract agreements (Annex 2). You also did not
give them copy of operator's manual/specifications as required.

C. The only two MCC delivered so far have been
unaccepted
not only by Ocrim but also by Binnie and Partners:
These
require immediate modifications,

5. Conclusions

We had overlooked exclusions from your quotation, and if
we have decided to order supply of signal cabling even though
agreements
were to be for Turn-key supply, do not think it is a
result of being weak, but instead because we are determined to finish
job in
time and avoid controversies.

With this spirit of good will we now propose to send 4
technicians immediately to site to help you with works. Should you
not confirm
this to us by TLX within Monday Feb. 3, we remind you
that you will be charged with not only penalities deriving from delay
but also
any costs or damages that will be as an outcome of your
unfulfillment of contract obligations.. Mr. Mecke/Mr Bresciani are
authorized
to discuss with you all details and to define programme of
works.

Best Regards.

M. Cinquetti/A. Milazzo

We believe the time has come to take immediate action
and your Involvement will be a denefit to everyone.

Kind Regards. Mario Cinquetti".

-14-

The two telexes appear as annesures "RA2" and
"RA3" res­pectively in CIV/APN138/86.

It is clear from the above telexes that the work done by
the petitioner was not satisfactory and had to be redone. As a result
of
his lack of expertise, the petitioner agreed when the respondent
sent four technicians from Italy to the contract site to assist
the
petitioner in the completion of the work. If the petitioner was able
to complete the work on his own, why did ho agree to the
suggestion
that technicians be brought from Italy to come and assist him? He was
aware that he could not do that kind of work without
the assistance
of people who had the right knowledge. The expenses of bringing
technicians from Italy must be borne by the petitioner
because,
according to the respondent, it was because of the petitioner's
incompetence and lack of experience that it had to bring
technicians
from both Italy and the Republic of South Africa.

It is not correct to say that the petitioner is entitled
to an amount of R303,899-00. He cannot be entitled to that amount
because
he left the site before he completed the work he was supposed
to do in terms of the contract. He alleges that he was forced to
leave
the site by the illegal conduct of the respondent; the
respondent alleges that the petitioner left because it had become
very clear
that he lacked the skill to do the work in terms of the
contract. It seems to me that the probabilities are in favour of the
respondent.
Binnie and Partners Lesotho found a number of defects and
notified the respondent that the petitioner lacked technical
competence
and that the petitioner was a firm of limited resources
(See "RA2"). As a result of the petitioners incompetence
nine
technicians were brought to Lesotho from Italy. Apparently the
petioner did not see eye to eye with the Italian technicians as to
how the defects had to be rectified and decided to repudiate the
contract.

-15-

In an attempt to rebut the overhelming evidence
regarding the petitioner's incompetence and limited resources, an
unsigned supporting
affidavit by one Siegfried George Kuryszczyls was
filed by the petitioner. I do not regard that document as evidence
before

this Court.

Another supporting affidavit came from one Stephen John
Lambert who describes himself as a freelance engineer. He was
employed by
the petitioner on ad hoc basis to carry out design,
drawing and supervision functions. He confirms that he and other
employees of
the petitioner were forced to leave the contract site by
the illegal conduct of the respondent's employees. In CIV/APN/138/86
this
gentleman described himself as a freelance draughtsman but in
the present case he describes himself as a freelance engineer. I
agree
with the submission that in the present proceedings the
deponent is trying to give the Court the impre­ssion that he is a
highly
qualified engineer and in a position to tell this Court that
the petitioner carried out his work properly and in terms of the
contract.
His evidence cannot stand against the evidence of Binnie
and Partners Lesotho who are qualified engineers appointed by the
Government
of Lesotho to do supervisory work.

Where the respondent disputes the indebtedness upon
which the applicant relies, the onus is on the respondent to prove,
not that it
is not indebted to the applicant, but that the
indebtedness is bona fide disputed on reasonable grounds (Paragraph
408 of the Law
of South Africa, Vol. 4), Machanick Steel and Fencing
(PTY) LTD. v. Wesrhodan (PTY) 1979 (1) S.A. 265 at 2698). I am of the
view
that in the present case the respondent has proved on a balance
of probabilities that the indebtedness upon which the petitioner
relies is bona fide disputed on reasonable grounds.

-16-

It was submitted on behalf of the petitioner that the
respondent is in breach of sections 286 and 113 of the Companies Act
No.25 of
1967 inasmuch as it had no people responsible for its
management in Lesotho and that its books of account are no longer in
Lesotho.
It seems to me that because of the harassment of the chief
agent of the respondent in Lesotho by the petitioner, it is
understandable
why Mr. Mecke had to leave this country. He was at one
time arrested and had to spend four days in gaol and there was no
guarantee
that the petitioner would not again embarrass him again by
having him arrested. In any case there is no proof that Mr. Mecke has
permanetly left this country. As far as the books of account arc
consent the proviso to section 112 (3) of the Companies Act seems
to
suggest that the books of account need not be kept in Lesotho all the
time.

It was as a result of the above harassment that the
respodent decided to transfer its funds into the name of its chief
agent so as
to take them out of the reach of the petitioner. It was
submitted that this conduct by the respondent was done fraudulently
and with
the intention of concealing from the respondent's creditors
the true position regarding its assets. I do not agree with this
submission
because it is the petitioner who is unwilling to comply
with the terms of the contract.

Paragraph 14 of the contract Annexure "MKD 6"
reads as follows:

"Arbitration

Any dispute or difference arising out of this Agreement
directly or indirectly between the parties hereto shall be settled
amicably
between them.

If the parties should not reach an amicable settlement
the dispute or difference shall be referred to the decision of an
Arbitrator
to be appointed by the parties.

/

-17-

Failing agreement between the parties to appoint the
Arbitrator within 30 days, the dispute shall be referred to the Board
of Arbitrators
composed of an Arbitrator named by each party and an
umpire named by the two Arbitrators as aforesaid.

Failing the two Arbitrators to appoint the umpire within
15 days from their appointment, this latter shall be designated by
the President
of the International Chamber of Commerce in Paris,
France.

The venue of arbitration shall be Paris and the
arbitra­tion shall be governed by the Rules of said Chamber of
Commerce.

The Board of Arbitration shall finally settle ex-bono et
equo.

The arbitration award, including assessment of the costs
of Arbitration, shall be final and binding on both parties and
judgment upon
the arbitration award may be entered in any Court
having jurisdiction.

During the period of dispute and/or arbitration, the
parties are not authorised to suspend the works according to the
contract no.
1".

Although the arbitration clause in the contract does not
oust the jurisdiction of this Court, especially as regards the
winding up
of the respondent, I am of the view that as far as the
existence or non-existence of the debt is concerned the petitioner
had to
resort to arbitration first. In the case of Yorigami Maritime
Construction Co. LTD v. Nissho-Iwai Co. LTD., 1977 (4) S.A. 682 (c)
Friedman, J. had this to say on an arbitration clause (at p. 692
E-F):

"In our law an arbitration clause does not oust the
jurisdiction of the Court and, if a party to an agree­ment seeks
to rely
on an arbitration clause when sued on that agreement, the
Court has a discretion as to whether or not it should itself
determine
the dispute or whether it should order the proceedings to
bo stayed pending the arbitrators decision."

As I stated earlier in this judgment the petitioner
ought to have proved the debt by action before he applied for the
winding-up of
the respondent. He failed to disclose to the Court that
a bona fide dispute exists between him and the respondent. Having
failed
to find any property of the respondent that he could attach to
found

/

-18-

jurisdiction the petitioner suddenly decided to
circumvent this problem by claiming that the respondent was unable to
pay its debts
and applying for its winding-up. This is obviously not
true because the respondent deliberately transferred its funds to Mr.
Mecke's
bank . accounts. The petitioner had to go to Paris and
arbitrate and obtain an arbitration award against the respondent
before applying
for the winding-up of the respondent. Such an award
would be executed in Italy or in Lesotho as well as in South Africa.

It was again contended that the petitioner has no locus
standi because on the 22nd January, 1986 the petitioner ceded, in
securitatom
debit, all its right, title and interest in and to its
book debts and other debts, present, past and future, to a company
called
Elcentre (West Rand) (PTY) Limited; this cession would have
included any claim against the respondent. It was submitted that
petitioner
had in law divested himself of any interest in that claim,
save a reversionary interest in the ceded right. Reference was made
to
the case of Holzman v. Knight Engineering and Precision Works
(Pty) Ltd.. 1979 (2) S.A. 784 (W) in which it was held that a cedent
of a debt in securitaten debiti is not a "contingent or
prospective creditor" of the debtor within the meaning of
section
346 (1) (b) of the South African Companies Act No.6 of 1973
and, therefore, has no locus standi to bringing proceedings for the
winding-up
of the debtor company. Section 174 (1) of the Lesotho
Companies Act No.25 of 1967 is couched in identical terms as section
346 of
the South African Act.

In a recent case of the Appellate Division of the
Supreme Court of South Africa of The Bank of Lisben and South Africa
v. The Master
of the Supreme Court (Transvaal Provincial Division)
and others (unreportod) dated the 30th September, 1986 the Court
reaffirmed
its previous decisions in the National Bank of South
Africa Ltd. v. Cohen's Trustee 1911 A.D. 235 and Leyds N.O. v. Noord
Westerlike
Kooperatiewe Landboumaatskappy Bpk en Andere, 1985 (2)
S.A. 756 in which it was held that the cedent in

-19-

securitatem debiti retains dominium in the right
concerned. It is clear that Holzman's case has been overruled. I come
to the con­clusion
that the petitioner has locus standi.

The intervening creditors' support to the petitioner's
case that the respondent is unable to pay its debts must be dismissed
on the
same ground that the respondent is able to pay its debts but
has a bona fide defence why it is refusing to pay the petitioner's
alleged
debt.

In the second alternative prayer the intervening
creditors seek to obtain an order for provisional winding-up order of
the respondent
on their own papers. This cannot be done at this stage
because no certificate has been issued by the Master of the High
Court in
respect of each intervening creditor that due security has
been found for payment of all fees and charges necessary for the
prosecution
of all proceedings until the appointment of a liquidator.
Furthermore, the intervening creditors made it clear in their
affidavits
that they intend lodging a petition for the winding-up of
the respondent if the Court should discharge the provisional order.
Now
that the provisional order is to be discharged the intervening
creditors will probably lodge their own petition for the winding-up
of the respondent.

For the reasons stated above the provisional order of
liquidation

the intervening is discharged with costs and the
applications of creditors are dismissed

with costs. Such costs should be paid by the petitioner
and the intervening creditors jointly and severally and include costs
of two
counsel.

/

-20-

The petitioner is not entitled to the costs for the 10th
October, 1986. No order as to costs for the 10th October, 1986.

J.L. KHEOLA

ACTING CHIEF JUSTICE.

27th November, 1986.

For Petitioner - Mr. Farlam
For Respondent - Mr.
Kuny.