INSOLVENCY LAW JAN TO NOVEMBER 2018€¦ · Business rescue – Application for leave to proceed with winding-up application -unable to pay its debts and that no reasonable possibility

INSOLVENCY LAW UPDATES JANUARY TO OCTOBER 2018

DRAFTED BY ADV MATTHEW KLEIN

(The notes are summaries of important cases in insolvency law)

INDEX:

CASE NAMES

SUBJECT INDEX

CASES

CASE NAMES

Absa Bank Ltd v Murray and Another (CA338/2017) [2018] ZAECGHC 75 (28 August 2018)

Akbur and another v Button NO and others [2018] JOL 40314 (KZP) Alderbaran (Pty) Limited and another v Bouwer and others [2018] JOL 39938 (WCC)

Alderbaran (Pty) Ltd and Another v Bouwer and Others (19992/2017) [2018] ZAWCHC 38 (22 March 2018)

ALDERBARAN (PTY) LTD AND ANOTHER v BOUWER AND OTHERS 2018 (5) SA 215 (WCC)

Amendment of section 83 of the Insolvency Act 24 of 1936 by the Financial Sector Regulation Act 9 of 2017

Anthony v Anthony and another [2018] JOL 39963 (KZP)

Argent Industrial Limited v Gainsford NO and others [2018] JOL 40406 (KZP)

ASA Metals (Pty) Ltd v Vardocap (Pty) Ltd (5630/2017) [2018] ZALMPPHC 12 (17 April 2018)

Barloworld South Africa (Pty) Ltd t/a Barloworld Equipment Rental and Cat Rental Store v Blue Chip Mining & Drilling (Pty) Ltd and others [2018] JOL 40387 (NCK) Body Corporate of the Grove Sectional Title Scheme No 16/1983 v Sehri Trading (Pty) Limited [2017] JOL 37796 (GP)

BODY CORPORATE SANTA FE SECTIONAL TITLE SCHEME NO 61/1994 v BASSONIA FOUR ZERO SEVEN CC 2018 (3) SA 451 (GJ) Bradley Scott Real Estate CC v Serengeti Exclusive Estate Home Owners Association NPC and others [2017] JOL 39363 (GJ) Broodie NO v Maposa and others [2018] 2 All SA 364 (WCC) Burco Civils CC v Stolz and another [2017] JOL 39331 (GP)

C Pro Construction PTY v Caliber Devco CC and Others (63054/15) [2018] ZAGPPHC 663 (3 September 2018)

CDH Invest NV v Petrotank South Africa (Pty) Limited and another [2017] JOL 39322 (GJ) CDH Invest NV v Petrotank South Africa (Pty) Ltd and another [2018] 1 All SA 450 (GJ) CDH INVEST NV v PETROTANK SOUTH AFRICA (PTY) LTD AND ANOTHER 2018 (3) SA 157 (GJ) Cilliers NO and others v Ellis and another [2017] JOL 37555 (SCA) CILLIERS v LA CONCORDE HOLDINGS LTD AND OTHERS 2018 (6) SA 97 (WCC) City Capital SA Property Holdings Ltd v Chavonnes Badenhorst St Clair Cooper and others 2018 (4) SA 71 (SCA) COLLARD v JATARA CONNECT (PTY) LTD AND OTHERS 2018 (5) SA 238 (WCC)

Commissioner for the South African Revenue Service v Logikal Consulting (Pty) Ltd (96768/2016) [2018] GNP (29 March 2018)

Commissioner, South African Revenue Service v Pieters and others (1026/17) [2018] ZASCA 128 (27 September 2018)

Cross-Med Health Centre (Pty) Limited (in business rescue) and others v Crossmed Mthatha Private Hospital (Pty) Limited and another [2018] JOL 40146 (ECG)

Cross-med Health Centre (Pty) Ltd and Others v Crossmed Mthatha Private Hospital (Pty) Ltd and Another (357/2018) [2018] ZAECGHC 24 (29 March 2018)

Cruzn Motors (Pty) Ltd v Hussen Family Partnership and Others (10250/2017P) [2018] ZAKZPHC 15 (15 May 2018)

De Villiers v GJN Trust (756/2017) [2018] ZASCA 80 (31 May 2018)

Diener NO v Minister of Justice and others (South African Restructuring and Insolvency Association (SARIPA) and others as amici curiae) [2018] 1 All SA 317 (SCA) DIENER NO v MINISTER OF JUSTICE AND OTHERS 2018 (2) SA 399 (SCA)

Diener NO v Minister of Justice and Correctional Services and Others (CCT03/18) [2018] ZACC 48 (29 November 2018)

Eksteen v Van der Merwe [2018] JOL 40301 (FB) Ergold Property No 8 CC and another v Hersov [2017] JOL 39366 (GJ)

Eurocoal (Pty) Limited (in liquidation) and others v Hendricks NO and others [2018] JOL 39943 (GP)


First Rand Bank Limited v Master of the High Court Pretoria (53071/2016) [2018] GSJ 18 April 2018

FirstRand Bank Ltd t/a Wesbank v Enroute Traders 30 CC [2018] JOL 39500 (ECG)

FIRSTRAND BANK LTD v COWIN NO AND OTHERS 2018 (3) SA 322 (GP)

Fischer v Ubomi Ushishi Trading & others (1085/2017) [2018] ZASCA 154(19 November 2018) Freedom Property Fund Limited and another v Stavridis and others [2018] 3 All SA 550 (ECG) Freedom Property Fund Limited and another v Stavridis and others [2018] JOL 30034 (ECG) Geffen and others v Martin and others [2018] 1 All SA 21 (WCC) Kriel NO v Born Free Investments 247 (Pty) Ltd [2018] JOL 40446 (WCC) LEVAY AND ANOTHER v VAN DEN HEEVER AND OTHERS NNO 2018 (4) SA 473 (GJ)

Lutchman N.O and Another v Ferreira (15655/2014) [2018] ZAGPPHC 500 (3 July 2018)

MANTIS INVESTMENT HOLDINGS (PTY) LTD v EASTERN CAPE DEVELOPMENT CORPORATION AND OTHERS 2018 (4) SA 439 (SCA)

Mantis Investment Holdings (Pty) Ltd v Eastern Cape Development Corporation & others (857/2017) [2018] ZASCA 95 (1 June 2018)

Mapalakanye and Others, In Re: Mapakanye and Another v Born-to-Protect Security Services (Pty) Ltd and Others (3437/2018) [2018] ZALMPPHC 28 (29 June 2018)

Marais and 56 others v Shiva Uranium (Pty) Ltd (in business rescue) and others [2018] JOL 40497 (LC) Maree and another v Bobroff and others [2018] JOL 39863 (GJ)

Master’s fees Government Gazette dated 3 November 2017 MFV “Polaris”: Southern African Shipyards (Pty) Ltd v MFV “Polaris” and others [2018] 3 All SA 2019 (WCC)

Minister of Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others (CCT13/17) [2018] ZACC 20 (5 July 2018)

MINISTER OF ENVIRONMENTAL AFFAIRS v RECYCLING AND ECONOMIC DEVELOPMENT INITIATIVE OF SOUTH AFRICA NPC 2018 (3) SA 604 (WCC) MINISTER OF JUSTICE AND ANOTHER v SA RESTRUCTURING AND INSOLVENCY PRACTITIONERS ASSOCIATION AND OTHERS 2018 (5) SA 349 (CC)

Mngomezulu and another v Van den Heever NO and others [2018] JOL 39548 (GJ)1

Mostert and Others v Nash and Another (604/2017) [2018] ZASCA 62 (21 May 2018)

Naidoo v Discovery Life Limited and others [2018] JOL 39960 (SCA)

Naidoo v Discovery Limited and Others (202/2017) [2018] ZASCA 88 (31 May 2018)

Nutrigrun (Pty) Ltd v Odendaal and Another (5603/2017) [2018] ZAFSHC 52 (3 May 2018.

Osborne v Cockin NO and Others (549/2017) [2018] ZASCA 58 (17 May 2018)

Papadogianis v Master of the High Court, Johannesburg and others [2017] JOL 39361 (GJ)

Paragon Lending Solutions (Pty) Limited v Weybridge Properties (Pty) Ltd [2018] JOL 40468 (NCK)

Ragavan and Others v Klopper N.O. and Others (12897/2018) [2018] ZAGPPHC 230 (3 May 2018)

Razzmatazz Trading Investment 19 (Pty) Ltd v Q-Civils (Pty) Ltd (CPMS Civil Road Rehabilitation (Pty) Ltd and another as Intervening Parties) [2018] JOL 39925 (FB)

Reezen Limited v Excellerate Holdings Limited and Others (11899/2018) [2018] ZAGPJHC 409 (22 June 2018)

Reezen Limited v Excellerate Holdings Limited and others [2018] JOL 40120 (GJ)

Samons v Turnaround Management Association and CIPC Case 4939/2018 15 October 2018, High Court Johannesburg Shiva Uranium (Pty) Ltd (in business rescue) and others v The Companies and Intellectual Property Commission and others case CT122OCT2018

Siyahlanza Engineering CC v Hornet Properties Pty Ltd (in liquidation) and another [2018] JOL 40055 (GJ)

Smyth and others v Investec Bank Ltd and another [2018] 1 All SA 1 (SCA) 1 Mngomezulu and another v Van den Heever NO and others [2018] 2 All SA 221 (GJ)

Smyth and others v InvestecBank Ltd 2018(1) SA 494 (SCA)

South African Bank of Athens Limited and another v Zennies Fresh Fruit CC and others [2018] JOL 39519 (WCC)

South African Bank of Athens Limited v Zennies Fresh Fruit CC, Business Partners Limited v Zennies Fresh Fruit CC and Another (7681/17) [2018] ZAWCHC 11 (February 2018)

SOUTH AFRICAN BANK OF ATHENS LTD v ZENNIES FRESH FRUIT CC 2018 (3) SA 278 (WCC) South African Bank of Athens Ltd v Zennies Fresh Fruit CC and a related matter [2018] 2 All SA 276 (WCC) South African Property Owners Association v Minister of Trade & Industry and others [2018] JOL 39915 (GP)

SOUTH AFRICAN PROPERTY OWNERS ASSOCIATION v MINISTER OF TRADE AND INDUSTRY AND OTHERS 2018 (2) SA 523 (GP)

Southern African Shipyards (Pty) Ltd v MFV "Polaris" and Others (AC42-2017; AC48-2017) [2018] ZAWCHC 48 (18 April 2018)

Southern African Shipyards (Pty) Ltd v MFV "Polaris" and others [2018] JOL 39881 (WCC)

Standard Bank of South Africa Limited v Botha (54753/16) [2018] ZAGPPHC 35 (7 March 2018)

Standard Bank of South Africa Limited v McCrae [2018] JOL 39438 (GJ)

Standard Bank of South Africa Limited v Midnight Feast Properties 4 (Pty) Limited [2017] JOL 39365 (GJ) STEENKAMP AND ANOTHER v CENTRAL ENERGY FUND SOC LTD AND OTHERS 2018 (1) SA 311 (WCC)

Tayob v Multi Furn Wholesalers and Retailers (Pty) Ltd (32604 / 2017) [2018] ZAGPPHC 548 (6 August 2018)

Thamae and others v Roering NO and others [2017] JOL 39416 (GJ)

The Standard Bank of South Africa Limited v The Master of the High Court, Eastern Cape, Port Elizabeth and Others (2632/2017) [2018] ZAECPEHC 55 (2 October 2018)

THE POLARIS SOUTHERN AFRICAN SHIPYARDS (PTY) LTD v MFV POLARIS AND OTHERS 2018 (5) SA 263 (WCC)

Treif Distributors (Pty) Ltd t/a Sacks Butchery v Benade and Another (5797/17) [2018] ZAWCHC 50 (20 April 2018)

TRINITY ASSET MANAGEMENT (PTY) LTD v GRINDSTONE INVESTMENTS 132 (PTY) LTD 2018 (1) SA 94 (CC)

V v V (7833/2016) [2018] ZAGPPHC 505 (6 July 2018)

Van der Merwe and others v Zonnekus Mansion (Pty) Limited (in liquidation) and another (Commissioner for the South African Revenue Service and another as intervening parties) [2017] JOL 39477 (WCC)

Venditor Asset Management (Pty) Ltd v The Master of the High Court, Pretoria and Others (38885/2017) [2018] ZAGPPHC 332 (10 May 2018)

Vengadesan NO and Another v Standard Bank Limited (7415/2017) [2018] ZAKZDHC 59 (30 November 2018)

Visser v Sunset Point Properties 380 CC and others [2018] JOL 39567 (NWM)

Western Crown Properties 61 (Pty) Ltd v Able Walling Solutions (Pty) Ltd (8073/16) [2017] WCC (13 November 2017)

Woa Fuels and Oils CC v Mzumbe Oil (Pty) Ltd [2018] JOL 40054 (GJ)

Zitonix v K201250042 (290/2017) [2018] ZASCA 63 (21 May 2018)2

SUBJECT INDEX

Amendment-Sale of security by entities defined in the Act Amendment of section 83 of the Insolvency Act 24 of 1936 by the Financial Sector Regulation Act 9 of 2017

Assets-Insurance – Risk-only life insurance policy – Beneficiary nomination clause – Whether constituting asset of policy-holder – Effect of section 15(2)(c) of the Matrimonial Property Act 88 of 1984 Naidoo v Discovery Life Limited and others [2018] JOL 39960 (SCA)

Assets-Insurance-beneficiary clause – stipulatio alteri – such policy cannot be an asset in the estate of the policyholder and of joint estate from marriage in community of property – such a policy not an insurance policy in terms of s 15(2)(c) of the Matrimonial Property Act 88 of 1984. Pieterse v Shrosbree confirmed regarding nominees. Naidoo v Discovery Limited and Others (202/2017) [2018] ZASCA 88 (31 May 2018)

Assets of spouse in divorce- Corporate Liquidators (Pty) Ltd & another v Wiggill & others 2007 (2) SA 520 (T) overturned-It is common for parties getting divorced, to enter in to an agreement for the distribution of assets which is made an order of court in terms of section 7(1) of the Divorce Act 70 of 1979- In Corporate liquidators it was ruled that the effect of such an order is to distribute the assets, and a party is entitled to assets in terms of the order even if the estate of the other party has been sequestrated after the divorce-now overturned by SCA Fischer v Ubomi Ushishi Trading & others (1085/2017) [2018] ZASCA 154(19 November 2018)

2 Strange name for a case!

Business rescue – Application for leave to proceed with winding-up application -unable to pay its debts and that no reasonable possibility existed for it to be rescued and be able to pay its debts, the court found it just an equitable that the company be liquidated. Business rescue — Business rescue plan — Vote against its adoption — Voter's aim to frustrate damages claim that plan envisaged company bringing against it — Application to set vote aside — Companies Act 71 of 2008, ss 153(1)(b)(i)(bb) and 153(7). COLLARD v JATARA CONNECT (PTY) LTD AND OTHERS 2018 (5) SA 238 (WCC)

Business rescue – Business rescue practitioner – Claim for remuneration – Ranking of claim in insolvency proceedings – Whether, when business rescue converted to liquidation, business rescue practitioner’s claim for remuneration and expenses enjoys a “super-preference” over all creditors, secured or unsecured DIENER NO v MINISTER OF JUSTICE AND OTHERS 2018 (2) SA 399 (SCA)

Business rescue – Duties of company director to business rescue practitioners and company Cross-Med Health Centre (Pty) Limited (in business rescue) and others v Crossmed Mthatha Private Hospital (Pty) Limited and another [2018] JOL 40146 (ECG)

Business rescue – Impact on lease agreements- financing intended in section 135(2) relates to the obtaining of financing in order to assist in managing the company out of its financial distress. South African Property Owners Association v Minister of Trade & Industry and others [2018] JOL 39915 (GP)

Business rescue — Moratorium on legal proceedings in relation to property belonging to company — Not applying to property already under maritime arrest — Admiralty court may order sale of arrested property — Admiralty Jurisdiction Regulation Act 105 of 1983, s 10; Companies Act 71 of 2008, s 133(1). THE POLARIS SOUTHERN AFRICAN SHIPYARDS (PTY) LTD v MFV POLARIS AND OTHERS 2018 (5) SA 263 (WCC)

Business rescue — Post-commencement finance — Rental and other amounts payable iro occupation of immovable property by company under business rescue — Not constituting 'financing' or 'costs of business recue proceedings' — Companies Act 71 of 2008, ss 135(2) and 135(3). SOUTH AFRICAN PROPERTY OWNERS ASSOCIATION v MINISTER OF TRADE AND INDUSTRY AND OTHERS 2018 (2) SA 523 (GP)

Business rescue — Practitioner — Rescue converted to liquidation — Whether practitioner 'creditor' under Insolvency Act — Ranking of practitioner's claim for remuneration and expenses — Date of liquidation — Insolvency Act 24 of 1936, s 44; Companies Act 71 of 2008, s 135(4). DIENER NO v MINISTER OF JUSTICE AND OTHERS 2018 (2) SA 399 (SCA)

Business rescue — Resolution to begin — Setting-aside — Power of court to make 'any further necessary and appropriate order' — Discretion to be exercised judicially, and only limit on further order which may be made was that it had to be both necessary and appropriate — Companies Act 71 of 2008, s 130(5)(c). ALDERBARAN (PTY) LTD AND ANOTHER v BOUWER AND OTHERS 2018 (5) SA 215 (WCC)

Business rescue — Resolution to begin — Setting-aside — Requirement that copy of application be served on company and Companies and Intellectual Property Commission — Type of service required — Both company and Commission to be joined — In respect of company, service in terms of Uniform Rule of Court 4(1)(a), ie service by sheriff in one of manners referred to in rule 4(1) — In respect of Commission, service in terms of Uniform Rule of Court 4A(c) as read with Commission's practice note 9 of 2017, ie service by electronic mail at email address provided by the Commission — Companies Act 71 of 2008, s 130(3). ALDERBARAN (PTY) LTD AND ANOTHER v BOUWER AND OTHERS 2018 (5) SA 215 (WCC)

Business rescue — Resolution to begin — Setting-aside — When permitted — 'Just and equitable' — Conclusion that termination of business rescue would be just and equitable involving exercise, not of discretion, but of judgment on relevant facts, but once that conclusion was reached, making of order to set aside resolution and terminate business rescue involved exercise of discretion — Companies Act 71 of 2008, s 130(5)(a)(ii). ALDERBARAN (PTY) LTD AND ANOTHER v BOUWER AND OTHERS 2018 (5) SA 215 (WCC)

Business rescue — Termination — Failure by business rescue practitioner to apply for extension of business rescue where not ending within three months of commencement — Where, as in present case, delay unreasonable, order terminating business rescue justified — Companies Act 71 of 2008, s 132(3). SOUTH AFRICAN BANK OF ATHENS LTD v ZENNIES FRESH FRUIT CC 2018 (3) SA 278 (WCC) Business rescue — Termination — Rejection of proposed business rescue plan — What constitutes — Adjournment of creditors' meeting without voting to approve plan on preliminary basis — Not amounting to rejection of plan — Companies Act 71 of 2008, ss 152(1)(d)(ii),152(1)(e)and 152(3)(a). SOUTH AFRICAN BANK OF ATHENS LTD v ZENNIES FRESH FRUIT CC 2018 (3) SA 278 (WCC) Business rescue application – Court’s discretion-liquidated CC-no proof company could be resued Siyahlanza Engineering CC v Hornet Properties Pty Ltd (in liquidation) and another [2018] JOL 40055 (GJ)

Business rescue application- company in liquidation- application procedurally defective- no resolution from the trust- first applicant not an “affected person” Van der Merwe and others v Zonnekus Mansion (Pty) Limited (in liquidation) and another (Commissioner for the South African Revenue Service and another as intervening parties) [2017] JOL 39477 (WCC)

Business rescue- director lacked locus standi to represent and act on behalf of the company without the assistance and consent of the business rescue practitioner Razzmatazz Trading Investment 19 (Pty) Ltd v Q-Civils (Pty) Ltd (CPMS Civil Road Rehabilitation (Pty) Ltd and another as Intervening Parties) [2018] JOL 39925 (FB)

Business rescue proceedings – Application to set aside resolution to place company under business rescue –section 130(5)(a)- court may set aside the resolution on any of the above grounds or if, having regard to all of the evidence, the court considers that it is otherwise just and equitable to do so’ Alderbaran (Pty) Limited and another v Bouwer and others [2018] JOL 39938 (WCC)

Business rescue proceedings – Companies Act 71 of 2008 – Termination of business rescue proceedings – Although no evidence existed to suggest that the business rescue plan was not approved, if business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings – Where an extraordinarily long period of time had passed since the business rescue proceedings were initiated, court making order terminating business rescue proceedings South African Bank of Athens Limited and another v Zennies Fresh Fruit CC and others [2018] JOL 39519 (WCC)

Business rescue proceedings –Termination of business rescue proceedings – Although no evidence existed to suggest that the business rescue plan was not approved, if business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings – Where an extraordinarily long period of time had passed since the business rescue proceedings were initiated, court making order terminating business rescue proceedings. South African Bank of Athens Ltd v Zennies Fresh Fruit CC and a related matter [2018] 2 All SA 276 (WCC) Business rescue proceedings-moratorium-lease agreement – Cancellation of – Claim for return of leased equipment – Effect of Barloworld South Africa (Pty) Ltd t/a Barloworld Equipment Rental and Cat Rental Store v Blue Chip Mining & Drilling (Pty) Ltd and others [2018] JOL 40387 (NCK)

Business rescue- section 10 of the Admiralty Jurisdiction Regulation Act 105 of 1983 (‘AJRA’) still refers to old act- the provisions of section 10 of AJRA and section 133 of the 2008 Companies Act appear to be in conflict with each other-AJRA followed Southern African Shipyards (Pty) Ltd v MFV "Polaris" and Others (AC42-2017; AC48-2017) [2018] ZAWCHC 48 (18 April 2018)

Business rescue-“enforcement action” for the purposes of section 133(1). includes sales in execution within the notion of “enforcement action” is consonant with the overriding objectives of the remedy of business rescue. Alderbaran (Pty) Ltd and Another v Bouwer and Others (19992/2017) [2018] ZAWCHC 38 (22 March 2018)

Business rescue-Admission of supplementary replying affidavit – Application for business rescue – Locus standi-applicants described themselves as “members of the local community and former employees of” the company. Thamae and others v Roering NO and others [2017] JOL 39416 (GJ)

Business rescue-application when company already in liquidation-on facts cannot succeed Mapalakanye and Others, In Re: Mapakanye and Another v Born-to-Protect Security Services (Pty) Ltd and Others (3437/2018) [2018] ZALMPPHC 28 (29 June 2018)

Business rescue-business rescue practitioner not entitled to fees-The second applicant is precluded from claiming any remuneration from Alderbaran 11 (Pty) Ltd

for his services as business rescue practitioner. it emerges from correspondence attached to the supplementary affidavit that Faizel Noor, although nominally in control as the BRP, was not truly in control of the affairs Alderbaran (Pty) Ltd and Another v Bouwer and Others (19992/2017) [2018] ZAWCHC 38 (22 March 2018)

Business rescue-business rescue practitioner-obligation by business rescue practitioner to apply for liquidation- no obligation Western Crown Properties 61 (Pty) Ltd v Able Walling Solutions (Pty) Ltd (8073/16) [2017] WCC (13 November 2017)

Business rescue-business rescue practitioner-review application for license revoked-successful application Samons v Turnaround Management Association and CIPC Case 4939/2018 15 October 2018, High Court Johannesburg

Business rescue-business rescue practitioners application to remove directors who took matters in their own hands-behind backs of BRPs-directors removed - Section 137 (5) Cross-med Health Centre (Pty) Ltd and Others v Crossmed Mthatha Private Hospital (Pty) Ltd and Another (357/2018) [2018] ZAECGHC 24 (29 March 2018)

Business rescue-business rescue practitioners-functions-access to premises-- obstructing rescue practitioners to enter premises not allowed Ragavan and Others v Klopper N.O. and Others (12897/2018) [2018] ZAGPPHC 230 (3 May 2018)

Business rescue-effect on contracts-lease agreement-sect 136 (2) (b)-dispute of facts Tayob v Multi Furn Wholesalers and Retailers (Pty) Ltd (32604 / 2017) [2018] ZAGPPHC 548 (6 August 2018)

Business rescue-general moratorium placed on all legal proceedings by section 133- Business rescue- section 10 of the Admiralty Jurisdiction Regulation Act 105 of 1983 (‘AJRA’) still refers to old act- the provisions of section 10 of AJRA and section 133 of the 2008 Companies Act appear to be in conflict with each other-AJRA followed Southern African Shipyards (Pty) Ltd v MFV "Polaris" and Others (AC42-2017; AC48-2017) [2018] ZAWCHC 48 (18 April 2018) Southern African Shipyards (Pty) Ltd v MFV "Polaris" and others [2018] JOL 39881 (WCC)

Business rescue-just and equitable in section 130 (5) does not stand alone-As Wallis JA made clear in Panamo, the provisions in subsections 130(5)(a)(i) and (ii) must be read conjunctively, and the word “or” must be read as if it were “and”, so that the just and equitable requirement referred to in section 130(5)(a)(ii) must not be understood an independent ground for setting aside a resolution in terms of section 130(1)(a), but as an additional requirement to be satisfied along with the need to establish one or more grounds for setting aside in terms of section 130(1)(a)(i), (ii) and (iii) Alderbaran (Pty) Ltd and Another v Bouwer and Others (19992/2017) [2018] ZAWCHC 38 (22 March 2018)

Business rescue-maritime property arrested post business rescue- unaffected by section 10 of the Admiralty Jurisdiction Regulation Act. MFV “Polaris”: Southern African Shipyards (Pty) Ltd v MFV “Polaris” and others [2018] 3 All SA 2019 (WCC) Business rescue-moratorium-section 133(1) of the Companies Act – this LABOUR COURT has no jurisdiction to uplifting the moratorium on litigation against a company in business rescue. Marais and 56 others v Shiva Uranium (Pty) Ltd (in business rescue) and others [2018] JOL 40497 (LC)

Business rescue-no statement under oath regarding the facts relevant to the grounds on which the first resolution was based-resolution set aside Alderbaran (Pty) Ltd and Another v Bouwer and Others (19992/2017) [2018] ZAWCHC 38 (22 March 2018)

Business rescue proceedings – Leave to appeal refused – Diener NO v Minister of Justice and Correctional Services and Others (CCT03/18) [2018] ZACC 48 (29 November 2018)

Business rescue-appointment of business rescue practitioner-CoR123 forms-disputed appointments; the matter was heard by the Companies Tribunal, it does give an indication as to how CIPC look at “requisitions” lodged in a business rescue, BUT do not try to use this as authority, there are shortcomings, for example the power of the CIPC to appoint BRP’s was not discussed, this ruling, my opinion, will be taken on review. I was also made to understand that there is a motion application pending in this case. Shiva Uranium (Pty) Ltd (in business rescue) and others v The Companies and Intellectual Property Commission and others case CT122OCT2018

Business rescue-failure to produce minutes of meeting concerning adopted plan-rescue set aside Vengadesan NO and Another v Standard Bank Limited (7415/2017) [2018] ZAKZDHC 59 (30 November 2018)

Claims– Admitting of claim in insolvent estate – Application to set aside –claim was a vexatious attempt to enforce a bogus claim-application was dismissed, and applicant was ordered to pay the fourth respondent’s costs of the application on the scale as between attorney and client. Papadogianis v Master of the High Court, Johannesburg and others [2017] JOL 39361 (GJ)

Claims-preferent creditors-PAYE deductions on employment claims due before liquidation-awards to employees are not subject to PAYE in terms of paragraph 2(1)(a) of Fourth Schedule to the Income Tax Act 58 of 1962. Commissioner, South African Revenue Service v Pieters and others (1026/17) [2018] ZASCA 128 (27 September 2018)

Company — Shares and shareholders — Shareholders — Appraisal rights of dissenting shareholders — Disposal of all or greater part of assets of subsidiary — Shareholders in holding company entitled to appraisal rights where disposal would amount to disposal of all or greater part of assets of holding company — Companies Act 71 of 2008, s 115(2)(b), s 164(2)(b). CILLIERS v LA CONCORDE HOLDINGS LTD AND OTHERS 2018 (6) SA 97 (WCC) Companies Act – Section 49 of the Close Corporations Act 69 of 1984 and section 163 of the Companies Act 71 of 2008 – Protection to minority shareholders against unfairly prejudicial conduct on the part of majority shareholders – Whether, objectively, the applicants had suffered prejudice which was sourced in the conduct of the majority shareholders and which was unfair, or at least, unreasonable or unethical – Court finding it not to have been established on the papers, that the alleged conduct complained of had adversely affected or was detrimental to the financial interests of the applicants. Geffen and others v Martin and others [2018] 1 All SA 21 (WCC)

Company law – Calling of shareholders’ meeting – Fiduciary duties of directors – Companies Act 71 of 2008 – Duty to act bona fide and in the best interests of the company is the fundamental duty which qualifies the exercise of any powers which the directors have and directors have a duty to exercise powers for proper purposes. CDH Invest NV v Petrotank South Africa (Pty) Limited and another [2017] JOL 39322 (GJ) Company law – Calling of shareholders’ meeting – Fiduciary duties of directors-section 61(12) of the Companies Act 71 of 2008-counter-application should succeed, to the extent that relief setting aside the resolution to amend the MOI by increasing the authorised shares and relief flowing from that consequence, were concerned. CDH Invest NV v Petrotank South Africa (Pty) Limited and another [2017] JOL 39322 (GJ) Company law – Carrying on business recklessly – Personal liability for debts of company-invested in a property development which never materialised-The defendant was declared to be personally liable for the debts of Panamo as stated in the order. Ergold Property No 8 CC and another v Hersov [2017] JOL 39366 (GJ) Company law – Locus standi – Whether agreements concluded by company constituted or involved an act or omission which was unfairly prejudicial, unjust or inequitable as contemplated in section 252(1) of the Companies Act 61 of 1973 as read with section 252(3) – Section 252 of the Companies Act 61 of 1973 providing a remedy to a member of a company in case of oppressive or unfairly prejudicial conduct – Interpretation of section 252 – A member is someone whose name has been entered in the company’s register of members – Beneficial owners of shares in a company not eligible to join as co-applicants with relevant nominees holding the shares on their behalf. Smyth and others v Investec Bank Ltd and another [2018] 1 All SA 1 (SCA) Company law – Reckless or grossly negligent running of company – Standard of proof – lack of aptitude could not be said to have amounted to using the business to incur obligations recklessly grossly negligent-Section 424 Burco Civils CC v Stolz and another [2017] JOL 39331 (GP) Company law – Sale of shares – Sale agreement in contravention of section 41(3) of the Companies Act 71 of 2008 – Shareholder approval – Voidness of agreement Reezen Limited v Excellerate Holdings Limited and others [2018] JOL 40120 (GJ)

Company Law – Companies Act 71 of 2008 – Interpretation of s 41(3). Section 38(1) empowers the board of a company to issue shares and s 41(3) limits that power and requires shareholder approval Reezen Limited v Excellerate Holdings Limited and Others (11899/2018) [2018] ZAGPJHC 409 (22 June 2018)

Company — Directors and officers — Director — Fiduciary duty — Ambit — Powers of directors to increase authorised shares, or to issue shares, subject to fiduciary duty to act bona fide, for proper purpose, and in best interests of company — Nature of test to be applied — Relevant considerations — Companies Act 71 of 2008, ss 36(3), 38(1) and 76(3). CDH INVEST NV v PETROTANK SOUTH AFRICA (PTY) LTD AND ANOTHER 2018 (3) SA 157 (GJ)

Company — Directors and officers — Directors — Removal — Appropriate procedure — Removal by shareholders and removal by board in case of ineligibility or disqualification — Companies Act 71 of 2008, s 71(1) and s 71(3) read with s 71(8). STEENKAMP AND ANOTHER v CENTRAL ENERGY FUND SOC LTD AND OTHERS 2018 (1) SA 311 (WCC) Company — Oppressive conduct — Relief — Who may apply — Whether beneficial owner of shares, whose shares registered in name of nominee, may apply — Relief available only to 'member' of company — 'Member' confined to persons entered in company's register of members — Beneficial owner of shares not included in register — Accordingly not entitled to apply for relief from oppressive conduct — Further, not eligible to join as co-applicants with relevant nominees — Companies Act 61 of 1973, ss 252 and 103. Company — Shares and shareholders — Shareholders — Meetings — Application to court in terms of s 61(12) for order requiring company to convene meeting — Court intervention not simply there for asking — Unless special circumstances requiring otherwise, court having to be satisfied that calling members' meeting bona fide intended, with legitimate purpose, and in best interests of company — Companies Act, s 61(12). CDH INVEST NV v PETROTANK SOUTH AFRICA (PTY) LTD AND ANOTHER 2018 (3) SA 157 (GJ)

Compromise-section 155 of the Companies Act 71 of 2018- faulty notice can lead to rescission. Commissioner for the South African Revenue Service v Logikal Consulting (Pty) Ltd (96768/2016) [2018] GNP (29 March 2018)

Compromise-section 155 of the Companies Act 71 of 2018-effect on SARS Commissioner for the South African Revenue Service v Logikal Consulting (Pty) Ltd (96768/2016) [2018] GNP (29 March 2018)

Creditors-Contribution in terms of section 106 of the Insolvency Act 24 of 1936- petitioning creditor liable-section 14(3)-even body corporate First Rand Bank Limited v Master of the High Court Pretoria (53071/2016) [2018] GSJ 18 April 2018

Curator bonis appointed in respect of property made subject to provisional restraint order granted in terms of Prevention of Organised Crime Act 121 of 1998 –Court confirming duty to account to the Master and to the applicants under the common law, which obligation went beyond the requirements of the accounting prescribed under the Act. Mngomezulu and another v Van den Heever NO and others [2018] JOL 39548 (GJ)

Directors-section 424-personal liability-liquidators did not prove reckless trading Lutchman N.O and Another v Ferreira (15655/2014) [2018] ZAGPPHC 500 (3 July 2018)

Divorce-Liquidator-Division of joint estate – Appointment of liquidator – Fiduciary duties Anthony v Anthony and another [2018] JOL 39963 (KZP)

Impeachable transactions-Dispositions without value – Matrimonial Property Act 88 of 1984 – Section 15 – Court held that disposition by a spouse of the member’s interest

in a close corporation for no consideration would be a donation or alienation without value as contemplated by section 15(3)(c) – Court considered the respondents’ reliance on section 15(9)(a) which deems the transaction concerned to have been entered into with the required consent if the person to whom the disposition was made did not know and reasonably could not have known that it was effected contrary to section 15(2) or (3) – Court believed that the third respondent was unaware that the deceased was married to the applicant at the time she entered into a customary marriage with him – Respondents’ reliance on section 15(9)(a) was thus upheld. Broodie NO v Maposa and others [2018] 2 All SA 364 (WCC) Insolvent person– Director of company – Disqualification – Unrehabilitated insolvent disqualified from being a director of a company or a trustee of a trust – Section 69(8)(b)(i) of the Companies Act 71 of 2008 – Disqualification does not automatically result in the invalidity of the appointment of an insolvent director, or in a person ceasing to be a director upon sequestration –point not ruled upon, only the exception to the pleadings-exception dimissed-point could therefore come up again in the trial Insolvent person-rights-unrehabilitated insolvent disqualified from being a director of a company or a trustee of a trust – Section 69(8)(b)(i) of the Companies Act 71 of 2008 – Disqualification does not automatically result in the invalidity of the appointment of an insolvent director, or in a person ceasing to be a director upon sequestration. Freedom Property Fund Limited and another v Stavridis and others [2018] 3 All SA 550 (ECG) Insolvent person-signing lease as lessee, prior to sequestration-clause giving right to cancellation by lessor if person sequestrated-clause valid Zitonix v K201250042 (290/2017) [2018] ZASCA 63 (21 May 2018)3

Interrogations-company in liquidation – issue of subpoenas by Master – set aside- Master has no reservoir of power outside the statutory instruments that authorise an intrusion upon those rights and thus no general authority to make an order that impinges on those rights. Mantis Investment Holdings (Pty) Ltd v Eastern Cape Development Corporation & others (857/2017) [2018] ZASCA 95 (1 June 2018)

Liquidated company – Appointment of curator – Moratorium on legal proceedings Kriel NO v Born Free Investments 247 (Pty) Ltd [2018] JOL 40446 (WCC) Liquidation and distribution account-finality thereof- creditor who has proved a claim against the estate after the confirmation of an account by the Master is excluded from the distribution under that account, but may share in the distribution under a subsequent account. In terms of s 408 of the Act the confirmation of a liquidation and distribution account by the Master ‘. . . shall have the effect of a final judgment, save as against such persons as may be permitted by the Court to reopen the account after such confirmation but before the liquidator commences with the distribution.’ De Villiers v GJN Trust (756/2017) [2018] ZASCA 80 (31 May 2018) Coram: Shongwe ADP and Seriti

Liquidation proceedings – Business rescue – Effect of – a persistent, systematic attempt by both respondents to delay and frustrate the inevitable, which was their 3 Strange name for a case!

final liquidation. Standard Bank of South Africa Limited v Midnight Feast Properties 4 (Pty) Limited [2017] JOL 39365 (GJ) Liquidation-dissolution of company after liquidation-Companies Act-order avoiding the dissolution of a company in terms of s 420 of the Companies Act 61 of 1973 – order granted in the absence of the appellants – whether the appellants were affected parties within the meaning of rule 42(1)(a) – ambit of s 420 and effect of order thereunder – appellants not affected parties and had no locus standi to challenge section 420 order De Villiers v GJN Trust (756/2017) [2018] ZASCA 80 (31 May 2018) Coram: Shongwe ADP and Seriti

Liquidator-investing funds in corporate saver account-lawfulness thereof-applicant bank was clearly wrong in bringing this to court The Standard Bank of South Africa Limited v The Master of the High Court, Eastern Cape, Port Elizabeth and Others (2632/2017) [2018] ZAECPEHC 55 (2 October 2018)

Liquidators – removal of liquidators of company – Locus standi – In terms of section 379(2) of the Companies Act 61 of 1973, the court may, on application by the Master or any other interested person, remove a liquidator from office in any of the circumstances referred to in section 379(1) or for any other good cause – Liquidators owe a fiduciary duty not just to proven creditors, but also to shareholders and the company being wound up- shareholders retained a residuary interest in the company Eurocoal (Pty) Limited (in liquidation) and others v Hendricks NO and others [2018] JOL 39943 (GP)

Liquidators– Application for removal of liquidators of company – Locus standi – In terms of section 379(2) of the Companies Act 61 of 1973, the court may, on application by the Master or any other interested person, remove a liquidator from office in any of the circumstances referred to in section 379(1) or for any other good cause – Liquidators owe a fiduciary duty not just to proven creditors, but also to shareholders and the company being wound up Eurocoal (Pty) Limited (in liquidation) and others v Hendricks NO and others [2018] JOL 39943 (GP)

Liquidators-appointment— Only Master authorised to appoint liquidators — Not competent for High Court to appoint liquidators — Where, as in present case, High Court declaring separate wound-up companies as single entity, its appointment of liquidators in respect thereof amounting to nullity — Companies Act 71 of 2008, ss 20(9), 22, 141(2)(c) and 141(3) City Capital SA Property Holdings Ltd v Chavonnes Badenhorst St Clair Cooper and others 2018 (4) SA 71 (SCA)

Liquidators-joint liquidators- must act jointly-auctioneer feeling aggrieved Venditor Asset Management (Pty) Ltd v The Master of the High Court, Pretoria and Others (38885/2017) [2018] ZAGPPHC 332 (10 May 2018)

Liquidators-sale of property – Rights in land – Nature of –arrear home owners levies-no prescription Bradley Scott Real Estate CC v Serengeti Exclusive Estate Home Owners Association NPC and others [2017] JOL 39363 (GJ) Master’s fees increased drastically! Applicable to all final court orders given from 1 January 2018 and voluntary liquidations, registered after 1 January 2018.Also applicable to curatorships and deceased estates.

Prescription delayed- The liquidators -appointed by the court have not been appointed finally and prescription is delayed until compliance with Section 359 (2) after the date of their final appointment. C Pro Construction PTY v Caliber Devco CC and Others (63054/15) [2018] ZAGPPHC 663 (3 September 2018)

Prescription-insolvency- applicable to suretyship-claim in the principal debtor's insolvency on 27 September 2012- On 8 November 2012 the three bonds were cancelled- surety to pay even if debt older than 3 years as bond’s 30 years applicable Standard Bank of South Africa Limited v Botha (54753/16) [2018] ZAGPPHC 35 (7 March 2018)

Sequestration application – Misjoinder- undesirable that two individuals should ever be joined in an application for the sequestration of respondents in one application. Maree and another v Bobroff and others [2018] JOL 39863 (GJ)

Sequestration application- nulla bona returns of service-potentially impeachable transaction seen as advantage to creditors-sheriff reprimanded concerning service Treif Distributors (Pty) Ltd t/a Sacks Butchery v Benade and Another (5797/17) [2018] ZAWCHC 50 (20 April 2018)

Sequestration application- partnership –no proof of partnership Cruzn Motors (Pty) Ltd v Hussen Family Partnership and Others (10250/2017P) [2018] ZAKZPHC 15 (15 May 2018)

Sequestration application-advantage to creditors-trustee can investigate Nutrigrun (Pty) Ltd v Odendaal and Another (5603/2017) [2018] ZAFSHC 52 (3 May 2018.

Sequestration application-against trust as alter ego-Where no contractual or other claim lies against a trust, and the creditor alleges that the trust is the alter ego of the debtor, it cannot claim the sequestration of the trust unless it can show that the trust is its debtor and is insolvent. An unliquidated claim for damages cannot found a claim for sequestration and sequestration is not the appropriate remedy for resolving a dispute about a debt. Osborne v Cockin NO and Others (549/2017) [2018] ZASCA 58 (17 May 2018)

Sequestration application-benefit for creditors-creditor is ex wife-judgment based on arrear maintenance-provisional order granted V v V (7833/2016) [2018] ZAGPPHC 505 (6 July 2018)

Sequestration application-dismissed-appeal also dismissed- creditor made payment whilst under debt counselint to Buffalo City Municipality-not constituting an act of insolvency contemplated in s 8(c) of the Insolvency Act 24 of 1936 when this was not the case made out in the founding papers’ Absa Bank Ltd v Murray and Another (CA338/2017) [2018] ZAECGHC 75 (28 August 2018)

Sequestration application-friendly sequestration – Requirements-act of insolvency not proved Eksteen v Van der Merwe [2018] JOL 40301 (FB)

Sequestration application-not for purpose to establish a debt Cruzn Motors (Pty) Ltd v Hussen Family Partnership and Others (10250/2017P) [2018] ZAKZPHC 15 (15 May 2018)

Trustee — Appointment — Ministerial affirmative action policy unconstitutional — Constitution, s 9(2); Insolvency Act 24 of 1936, s 158(2). MINISTER OF JUSTICE AND ANOTHER v SA RESTRUCTURING AND INSOLVENCY PRACTITIONERS ASSOCIATION AND OTHERS 2018 (5) SA 349 (CC)

Trustee-fees- Pension fund – curatorship in terms of s 5(2) of Financial Institutions (Protection of Funds) Act 28 of 2001 – trustee’s remuneration – court order that it be agreed with Executive Office of the Financial Services Board in accordance with the norms of attorneys’ profession – whether fee as a percentage of amounts recovered on behalf of fund in accordance with those norms – whether contrary to public policy or an infringement of Contingency Fees Act 66 of 1997. Mostert and Others v Nash and Another (604/2017) [2018] ZASCA 62 (21 May 2018)

Trustees4-“Abide the order”-effect- a litigant “abiding the order” cannot appeal-court perplexed by the fact that she was granted leave to appeal the order. Cilliers NO and others v Ellis and another [2017] JOL 37555 (SCA)

Trustees-appointment — section 158 — policy for the appointment of provisional trustees — ultra vires — displacement of the Master’s discretion Minister of Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others (CCT13/17) [2018] ZACC 20 (5 July 2018)

Trustees-appointment Insolvency Act 24 of 1936 — section 158 — policy for the appointment of provisional trustees — arbitrary — exclusion of citizens born on and after 27 April 1994 — no reasons justifying exclusion Minister of Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others (CCT13/17) [2018] ZACC 20 (5 July 2018)

Voidable preferences – appeal-succeeds-facts not proven Akbur and another v Button NO and others [2018] JOL 40314 (KZP) Voidable preferences- dispostion without value- sequestrated trust – Action by liquidators- Unjust enrichment-claim succeeded-appeal dismissed Argent Industrial Limited v Gainsford NO and others [2018] JOL 40406 (KZP)

Voluntary liquidation- winding up of the first respondent as a solvent company whilst the company was insolvent to the amount of more than R35 million, renders the purported voluntary liquidation null and void. C Pro Construction PTY v Caliber Devco CC and Others (63054/15) [2018] ZAGPPHC 663 (3 September 2018)

Winding-up application – Inability to pay debts – Provisional liquidation Paragon Lending Solutions (Pty) Limited v Weybridge Properties (Pty) Ltd [2018] JOL 40468 (NCK)

4 This case did not deal with a trustee but an executor, but the trend is that trustees and liquidators should abide,it can save a lot of costs! (Unless off course trustee is sued in personal capacity)

Winding up application – Commercial insolvency-respondent did not pay because its own employee committed fraud! Woa Fuels and Oils CC v Mzumbe Oil (Pty) Ltd [2018] JOL 40054 (GJ)

Winding up of close corporation – Application for liquidation-unopposed but, it was crucial for the Court to satisfy itself that from the financial status of the CC, its liabilities exceeded its assets and that the applicant, as a surety, was not in a position to honour his obligations towards payment of the mortgage bond. The Court was not persuaded that that was the position. The application was dismissed. Visser v Sunset Point Properties 380 CC and others [2018] JOL 39567 (NWM)

Winding up-Provisional winding up – Requirements- offer was made by the respondent personally, and that he had shown an inability to pay. Standard Bank of South Africa Limited v McCrae [2018] JOL 39438 (GJ)

Winding-up — Application — By creditor — Abuse of process — Rule that court will refuse application as constituting abuse of process where company bona fide disputing debt on reasonable grounds (Badenhorst principle) — Ambit — Whether rule applicable to dispute on legal issues- not preclude a liquidating or sequestrating court from deciding a straightforward legal issue on common-cause facts. TRINITY ASSET MANAGEMENT (PTY) LTD v GRINDSTONE INVESTMENTS 132 (PTY) LTD 2018 (1) SA 94 (CC) Winding-up — Application — Intervention — Whether creditor or minority shareholder can intervene to oppose. LEVAY AND ANOTHER v VAN DEN HEEVER AND OTHERS NNO 2018 (4) SA 473 (GJ)

Winding-up — Application — Locus standi — Extended standing to apply for remedies under s 157 of Companies Act, 2008 — Whether extending standing to applicant for liquidation of solvent company not otherwise having standing — Companies Act 71 of 2008, ss 88(1) and 157(1)(d).MINISTER OF ENVIRONMENTAL AFFAIRS v RECYCLING AND ECONOMIC DEVELOPMENT INITIATIVE OF SOUTH AFRICA NPC 2018 (3) SA 604 (WCC) Winding-up — Creditors — Locus standi — Whether s 387(4) giving creditor F standing to bring application to resolve whether creditor N or company in liquidation owned debts — Liquidators not resolving issue and refusing to approach court to do so — Companies Act 61 of 1973, s 387(4). FIRSTRAND BANK LTD v COWIN NO AND OTHERS 2018 (3) SA 322 (GP)

Winding-up — Interrogation — Subpoena to appear — Creditor asking for subpoena of persons — Master, without proper consideration of request, issuing same — Companies Act 61 of 1973, ss 415 and 417. MANTIS INVESTMENT HOLDINGS (PTY) LTD v EASTERN CAPE DEVELOPMENT CORPORATION AND OTHERS 2018 (4) SA 439 (SCA)

Winding-up application-section 345 -response to section 345 notice-clear dispute of fact is going to arise-not be resolved on papers-must proceed by way of action. ASA Metals (Pty) Ltd v Vardocap (Pty) Ltd (5630/2017) [2018] ZALMPPHC 12 (17 April 2018)

Winding-up– Final winding up – Inability to pay debts- close corporation must rely on the grounds set out in section 344 and 345 of the Companies Act 61 of 1973-commercially solvent yet cannot pay debts. FirstRand Bank Ltd t/a Wesbank v Enroute Traders 30 CC [2018] JOL 39500 (ECG)

Winding-up order – Inability to pay debt- levies not paid to Body Corporate Body Corporate of the Grove Sectional Title Scheme No 16/1983 v Sehri Trading (Pty) Limited [2017] JOL 37796 (GP)

Winding-up — Application — Of close corporation on basis of inability to pay its debts — Effect of repeal of s 68(c) of Close Corporations Act which provided inability to pay debts as basis for winding-up — Close Corporations Act 69 of 1984, s 69; Companies Act 71 of 2008, ss 344(f) and 345. BODY CORPORATE SANTA FE SECTIONAL TITLE SCHEME NO 61/1994 v BASSONIA FOUR ZERO SEVEN CC 2018 (3) SA 451 (GJ) CASES Burco Civils CC v Stolz and another [2017] JOL 39331 (GP)

Company law – Reckless or grossly negligent running of company – Standard of proof – lack of aptitude could not be said to have amounted to using the business to incur obligations recklessly grossly negligent-Section 424

A company which had been placed under final winding up, was indebted to the applicant in the amount of R1 066 196,80. Despite notices in terms of section 345 of the Companies Act 71 of 2008, the company failed and or refused to pay the amounts owed to the applicant.

In anticipation of the liquidation, the applicant launched the present application to protect its interests in terms of section 424 of the Companies Act 61 of 1973. It sought an order declaring the respondents personally liable for claims which creditors were unable to recover in the liquidation of the company. in that regard it contended that the first respondent carried on the business of the company recklessly and/ or with gross negligence and/ or with the intent to defraud among others, the applicant for a fraudulent purpose. The applicant alleged that the first respondent, during the business dealings between applicant and the company, did not act in good faith and for a proper purpose, did not act in the best interest of the company; and did not act with the degree, skill and diligence that may be reasonably expected.

Held that the issue was whether the respondents contravened the provisions of section 22(1) and 76(3) of the Companies Act, and if so, whether, in terms of section 218, the respondents were liable to the applicant for the loss suffered as a result of that contravention.

In determining whether the respondents could be said to be reckless or grossly negligent, the court had to establish what that means in our law. It was held that the respondents had demonstrated a lack of skill, and might have been out of place and chose an inappropriate route for the purpose of commencing their business operations. However, that lack of aptitude could not be said to have amounted to using the business to incur obligations recklessly grossly negligent, as interpreted in our law. The court was unable to find that the respondents conducted their business for a

fraudulent purpose. It could not be found that the respondents contravened section 76(3) of the Companies Act.

To succeed on the basis of section 218(2), it must not only be shown that a person contravened any provisions of the Act, and that another person suffered damage. It must also be shown that such damage suffered was as a result of that contravention. In other words, there must be proof of a causal link or connection between the contravention of the Companies Act, and the debts or liabilities for which the person may be held liable. The failure of the company was as a result of external forces, and not internal forces and more specifically it was not as a result of the conduct of the respondents.

The application was dismissed with costs.

Papadogianis v Master of the High Court, Johannesburg and others [2017] JOL 39361 (GJ)

Claims– Admitting of claim in insolvent estate – Application to set aside –

In an application in terms of section 151 of the Insolvency Act 24 of 1936, the applicant sought the setting aside of the decision of the first respondent, at the conclusion of a meeting of creditors in the insolvent estate of the applicant, admitting the claim for R1 672,000 submitted by the fourth respondent, and ancillary relief. The first respondent was the Master of the High Court, Johannesburg, and the second and third respondents were the joint trustees of the insolvent estate of the applicant.

According to the applicant, the fourth respondent did not have a claim against the insolvent estate of the applicant, and the said claim was a vexatious attempt to enforce a bogus claim.

Held that in terms of section 151 of the Insolvency Act, any person aggrieved by any decision, ruling, order or taxation of the Master may bring it under review by the court. A court hearing a review application under section 151 sits both as a court of review and a court of appeal to reconsider the ruling or decision of the first respondent. That does not mean that the court may disregard the factual material before the first respondent or his reasoning. It is only where the first respondent, in granting his approval, has erred or misdirected himself based on the material placed before him, that the court can, on review and / or appeal, go further and decide the matter de novo.

There was no evidence in this case to suggest that the first respondent failed to properly fulfil his function. The main challenge to the first respondent’s decision to admit the claim of the fourth respondent, was that the first respondent accepted the claim without any supportive evidence. However, the Court was not persuaded that the first respondent accepted the fourth respondent’s claim without any supportive evidence. The Court also rejected applicant’s allegation of bias on the part of the first respondent.

The application was dismissed, and applicant was ordered to pay the fourth respondent’s costs of the application on the scale as between attorney and client.

Bradley Scott Real Estate CC v Serengeti Exclusive Estate Home Owners Association NPC and others [2017] JOL 39363 (GJ)

Liquidators-sale of property – Rights in land – Nature of –arrear home owners levies-no prescription

The applicant alleged that, as joint liquidators of a company, the second and third respondents owed the first respondent an amount of R198 600 in respect of levies for each of certain properties. A declaration to that effect was sought, as well as an order directing the first respondent to issue a levy clearance certificate as contemplated in the properties’ title deeds and in respect of the property to the applicant and/or the second or third respondents.

As liquidators, the second and third respondents had sold five properties to the applicant. It was common cause between the parties that in terms of the purchase and sale agreements, the obligation to pay the clearance figures fell to the applicant. The applicant consequently sought clearance figures from the managing agent of the first respondent. On applicant’s own version, the payment of the home owners association’s (“HOA”) levy clearance was necessary before the HOA would certify that all amounts due to it by the liquidated company had been settled and transfer could be passed. The applicant averred that the levies and penalties included in the HOA calculations dated as far back as 1st of April 2011, to which levies and / or penalties the HOA was not entitled, due to the provisions of section 11(d) of the Prescription Act 68 of 1969.

The applicant referred to a clause in the title deeds, which stated that, “The owner of the erf, or any subdivision thereof, or of any sectional title unit erected thereon shall not be entitled to transfer the erf, or any portion thereof, or any unit, without prior written confirmation of the association that all amounts due to the association by the owner have been paid”. The applicant averred that it was of importance to identify first respondent’s “right” in terms of the contents of the latter clause. It contended that whilst the provision was an embargo provision, its intention was none other than to secure a debt. If so, any money owed to the HOA for a period of longer than three years had become prescribed and could therefore no longer be due and payable.

Held that the applicant’s argument appeared to be that the first respondent’s “right” was not a “real” right, but a “personal claim” right, that is a right in respect of a debt, which prescribes after three years in terms of section 11(d) of the Prescription Act.

In order to determine whether a right or condition in respect of land is a real right, two requirements must be met. The intention of the person who creates the right must be to bind not only the present owner of the land, but also successors in title; and the nature of the right or cancellation must be such that its registration results in a “subtraction from dominium” of the land against which it is registered. The clause in question was found to be an embargo provision, and the first respondent therefore had a real right in respect of levies and penalties owed to it and a choice to either claim from the insolvent estate or pursue what it owed to it from the owner or its successor in title. The applicant’s approach in calculating the amount of levies by it to first respondent was therefore not correct.

The application was dismissed with costs.

Standard Bank of South Africa Limited v Midnight Feast Properties 4 (Pty) Limited [2017] JOL 39365 (GJ)

Liquidation proceedings – Business rescue – Effect of – a persistent, systematic attempt by both respondents to delay and frustrate the inevitable, which was their final liquidation.

The applicant instituted liquidation proceedings against the respondent. A similar separate application would be decided on the same facts as the present matter. The provisional liquidation order in both the present matters was extended on numerous occasions. No answering affidavit to the applicant’s founding affidavit was filed. Secondly, business rescue proceedings had been instituted and were pending in the High Court. The contention advanced by the respondents, which was the sole issue addressed in argument before the present Court, was that the liquidation proceedings were suspended by the business rescue proceedings.

Held that the papers filed revealed

One of the requirements for a business rescue application is that an applicant must satisfy the court that all reasonable steps have been taken to notify all affected persons known to the applicant, by delivering a copy of the court application to them. The respondent conceded that the said requirements had not been complied with. It was nevertheless contended that the court should exercise its discretion not to grant the final winding-up of the respondents, on the ground that the final liquidation could reasonably be avoided by disposing of their assets. The Court refused to accede to that request and ordered the final winding up of the respondent.

Ergold Property No 8 CC and another v Hersov [2017] JOL 39366 (GJ)

Company law – Carrying on business recklessly – Personal liability for debts of company

The plaintiffs, by way of loans, invested in a property development which never materialised. Relying on section 424 of the Companies Act 61 of 1973, they brought an claim against the defendant. The latter was a member of the family which owned the development. The development entity and the borrower of the loans advanced by the plaintiffs, was a company (Panamo) which was a shelf company with no financial means or assets or trading background. The plaintiffs’ claims were based on the allegation that the business of Panamo was carried on recklessly and that the defendant was knowingly a party thereto, as contemplated in section 424 of the Act.

The defendant raised a special plea of prescription as well as a defence on the merits. Special defences based inter alia on the Conventional Penalties Act 15 of 1962; on the averment that the loan agreements constituted dispositions not for value, as contemplated in section 26 of the Insolvency Act 24 of 1936 were also raised.

Held that section 424 has been retained by Schedule 5 to the new Companies Act 71 of 2008.

None of the special defences raised had any merit and were all dismissed.

On the merits, at the heart of the plaintiffs’ case was their reliance on the illegality and voidness of the contracts, which were specifically prohibited in terms of section 67 of the Town Planning and Townships Ordinance 15 of 1986, for the conclusion of recklessness to which the defendant was knowingly a party. The Court agreed that the relevant agreements were in contravention of section 67 of the Ordinance, and were

therefore illegal and of no force and effect. It went on to find that the business of Panamo was carried on recklessly and that the defendant was knowingly a party thereto. The defendant was declared to be personally liable for the debts of Panamo as stated in the order.

CDH Invest NV v Petrotank South Africa (Pty) Limited and another [2017] JOL 39322 (GJ)

Company law – Calling of shareholders’ meeting – Fiduciary duties of directors

The main application in this matter was brought by the majority shareholder in a private company, and the counter-application was by the minority shareholder.

The majority shareholder sought an order in terms of section 61(12) of the Companies Act 71 of 2008 (the “Act”) directing the company and the board to convene a shareholders’ meeting in terms of section 61(3) for the purpose of considering and passing five resolutions, namely the removal of a director; the election of a substitute director; instructing the board to demand that the minority shareholder pays the company R1m; instructing the board to sue the minority shareholder for such money; and instructing the board to consider a pro rata rights offer of 98 835 ordinary no par value shares.

The minority shareholder consented to the first two resolutions, resulting in a consent order being granted in respect thereof, but disputed the last three. In turn, it applied an order: setting aside the demand by the applicant to convene the shareholders’ meeting; setting aside the board resolution amending the memorandum of incorporation (“MOI”) by increasing the authorised shares from 1 000 to 1 000 000 ordinary no par value shares; interdicting the applicant from calling a shareholders’ meeting to vote on certain resolutions; and directing the board to correct a certain paragraph of its MOI by deleting 1 000 and substituting for it 100 000.

Held that important facts in this dispute were that the two shareholders had clearly fallen out, were involved in other litigation against each other, and did not trust each other. The applicant effectively controlled the board and the general meeting and felt that the second respondent made promises that had not materialised. The applicant believed that it had put up substantially greater capital than had the second respondent and proposed that the general meeting meet to decide whether or not to sue the second respondent for its capital contribution.

Section 38(1) of the Act gives power to directors to issue shares. The exercise of the power to issue shares, is constrained by section 76(3). The duty to act bona fide and in the best interests of the company, is the fundamental duty which qualifies the exercise of any powers which the directors have. Directors have a duty to exercise powers for proper purposes. The tenets of the parties’ agreement in their pre-corporation founding consensus, whether embodied in a written agreement or not, is a significant consideration in judging fair dealing and probity; and the yardstick for measuring the exercise of a power against the purpose for which it was given in the first place, is objective.

Applying the above to the facts of this case, the court found that the main application had to fail, and the counter-application should succeed, to the extent that relief setting aside the resolution to amend the MOI by increasing the authorised shares and relief flowing from that consequence, were concerned.

Thamae and others v Roering NO and others [2017] JOL 39416 (GJ)

Replying affidavits – Admission of supplementary replying affidavit – Application for business rescue – Locus standi

The applicants sought the discharge of a provisional liquidation order granted against a mining company by which they had allegedly been employed. The respondents were the liquidators of the company.

On the morning of the hearing, the Court was presented with a further replying affidavit when new attorneys came on record for the applicants. During the hearing, it learnt of further affidavits that should have been before the court. The admissibility of the further replying affidavit was argued, and the parties had consensus that the matter had to be postponed if the court were to allow the affidavit.

Held that it became clear that the merits of the application had to be argued too, as if the applicants had no prospects of success, the application should be dismissed and not be prolonged.

Before considering admitting the supplementary replying affidavit, the first question which the court had to determine was whether the applicants had shown that they had locus standi. The applicants described themselves as “members of the local community and former employees of” the company. That was in dispute and unsubstantiated by the applicants. Not only was former employment not proven, but none of the applicants averred that he was employed by the company when it was placed in provisional liquidation.

The Companies Act 71 of 2008 sets out the procedure to apply to place a company in business rescue. Such application may be brought by an “affected person” (section 131(1)). In the absence of proof of such employment, the applicants were not affected persons with locus standi. Accordingly, it would serve no purpose to consider admitting yet another affidavit into evidence.

TRINITY ASSET MANAGEMENT (PTY) LTD v GRINDSTONE INVESTMENTS 132 (PTY) LTD 2018 (1) SA 94 (CC) Prescription — Extinctive prescription — Period of prescription — When it commences— Loan 'repayable on demand' — Whether debt becoming due when loan advanced, or when demand made — Debt becoming due when loan advanced, unless clear indication to contrary — Prescription Act 68 of 1969, s 12. Prescription — Extinctive prescription — Period of prescription — When it commences — General rule — Prescription beginning to run when debt arising, unless parties clearly stipulating otherwise — Prescription Act 68 of 1969, s 12. Company — Winding-up — Application — By creditor — Abuse of process — Rule that court will refuse application as constituting abuse of process where company bona fide disputing debt on reasonable grounds (Badenhorst principle) — Ambit — Whether rule applicable to dispute on legal issues. On 1 September 2007 Trinity Asset Management (Pty) Ltd (Trinity) and Grindstone Investments 132 (Pty) Ltd (Grindstone) entered into a written loan agreement in terms of which Trinity lent a sum of money to Grindstone. A key term was that the

loan capital would be 'due and repayable to the Lender within 30 days from the date of delivery of the Lender's written demand' (clause 2.3). While the capital loan was only paid over (in three tranches) during February 2008, the agreement deemed it to have been lent and advanced on 1 September 2007. Trinity made demand towards the end of 2013. When Grindstone failed to make payment in response, Trinity, in July 2014, applied to the High Court for the provisional liquidation of the former. In defence, Grindstone argued that the debt in respect of the loan paid over during February 2008 had prescribed in October 2010 (given the deemed advancement date), alternatively 13 March 2011, 15 March 2011 and 21 March 2011, being three years after the loan amount was lent and advanced. The High Court dismissed the application on the basis that Grindstone's raising of prescription amounted to a 'valid defence'. The court purported to rely on the Badenhorst principle, which held that, generally speaking, an application for liquidation should be dismissed where there existed a genuine and bona fide dispute of fact. Leave to appeal was granted to the SCA, where, by agreement, the only issue to be determined was the question of prescription. The SCA majority upheld Grindstone's prescription defence, and hence dismissed the claim for provisional liquidation. The applicant applied to the Constitutional Court for leave to appeal. The principal issue in the Constitutional Court was whether the debt had prescribed. The answer depended on when the debt became 'due' (hence triggering the running of prescription) for the purposes of the Prescription Act 68 of 1969. Was it the date on which the loan was advanced (as Grindstone argued, and in which case the debt would have prescribed), or was it the date on which demand was made (as Trinity argued)? A preliminary issue was whether the defence of prescription was properly before the court. The point raised was that the Badenhorst principle barred both the SCA and the Constitutional Court from considering the prescription point, given that there existed a dispute on it. Cameron J (Khampepe J, Madlanga J, Mhlantla J and Pretorius AJ concurring)— majority judgment Held, that the Badenhorst principle did not preclude a liquidating or sequestrating court from deciding a straightforward legal issue on common-cause facts. That was what the High Court in fact did, in finding that prescription amounted to a 'valid defence' (this despite the court's apparent reliance on Badenhorst). (See [91] – [93].) It conclusively extinguished Trinity's claim. That was how the parties understood the ruling, in setting aside their other disputes and agreeing that the only issue on appeal would be the law point (see [90). The prescription point was therefore properly before the SCA. And it was properly before the Constitutional Court. Leave to be appeal had to be granted. (See [93].) Held, that a loan without stipulation as to a time for repayment was 'repayable on demand'. Unless the parties agree otherwise, such a loan was repayable from the moment the advance was made and no specific demand for repayment needed to be made for the loan to be immediately due and repayable. The same principle applied where a loan afforded a debtor 30 days after demand to make payment, the key point being that the creditor had the sole power to demand performance at any time. It was this point that gave rise to the general rule applying to loans 'payable on demand', namely that prescription began to run when the debt arose, unless there was a clear indication to the contrary. (See [102] – [105].) Held, further, that the plain and un-extraordinary nature of the loan agreement, coupled with the absence of a clear signification to the contrary, led to the conclusion

that the parties did not delay prescription until demand (see [137]). Accordingly, in the circumstances, the debt had prescribed, and the appeal had to be dismissed (see [3] and [139]). Mojapelo AJ (Mogoeng CJ, Nkabinde ADCJ, Jafta J and Zondo J concurring) — dissenting judgment Held, that a contractual debt became due as per the terms of that contract. Whenno due date was specified, the debt was generally due immediately on conclusion of the contract. However, the parties might intend that the creditor be entitled to determine the time for performance, and that the debt would become due only when demand had been made as agreed. Where there was such a clear and unequivocal intention, the demand would be a condition precedent to claimability, a necessary part of the creditor's cause of action, and prescription would begin to run only from demand. (See [47].) Held, that the contract here, properly interpreted, indicated a clear intention that the debt would become due — and prescription would start running — only once demand had been made, and not earlier. On a reading of clause 2.3, written demand was a material condition to be fulfilled by the lender, without which the due date could not be determined; it was a condition precedent to enforceability. Further, in using the term 'due and payable' in providing for repayability, thereby mirroring the language of the Prescription Act, the parties indicated their intention to shift the commencement of prescription — the due date of the debt. Accordingly, Trinity's claim had not prescribed. (See [56], [60], [64] and [72].) Froneman J— concurring that appeal should be dismissed, but principally because of Badenhorst principle Held, that the High Court judgment had applied the Badenhorst principle in dismissing the provisional liquidation application. An appeal against the High Court's judgment could only succeed if its application of the principle was incorrect, more particularly, that the principle did not properly apply to a dispute on legal issues. (See [146].) The SCA and the Constitutional Court did not make any finding to such effect; they merely assumed the matter was properly before court. In the absence of such a finding, the appeal had to fail and refusal of the provisional liquidation application in the High Court confirmed on this ground. (See [4], [142] and [151] – [152].) (If he was wrong on this, he agreed with the majority judgment that the claim for repayment of the loan had prescribed, and that the appeal should be dismissed for that reason as well (see [153] and the discussion of prescription in [154] – [165]).) STEENKAMP AND ANOTHER v CENTRAL ENERGY FUND SOC LTD AND OTHERS 2018 (1) SA 311 (WCC) Minerals and petroleum — Petroleum — PetroSA — Board — Dismissal of directors by holding company (Central Energy Fund) — Constituting administrative act — Reasonable in circumstances. Company — Directors and officers — Directors — Removal — Appropriate procedure — Removal by shareholders and removal by board in case of ineligibility or disqualification — Companies Act 71 of 2008, s 71(1) and s 71(3) read with s 71(8). On 5 July 2017 the applicants, then the only two board members of PetroSA (the second respondent), were fired by PetroSA's holding company, the CEF (the first respondent). The CEF and PetroSA were both state-owned companies. The applicants were removed under s 71(1) of the Companies Act 71 of 2008, which

deals with the removal of directors by shareholders. In the present application the applicants sought the review of the CEF's decision to remove them (the 'disputed decision'). The reasons given for the disputed decision — set out for the first time in the CEF's answering affidavit — included the poor performance of PetroSA; differences between the two boards as to the role of PetroSA; and concerns about the PetroSA board's reliability, in particular its ability to implement a proposed turnaround strategy (see [61]). The CEF board had earlier, on 28 March 2017, written a letter to the PetroSA board, inviting the applicants to give reasons why they should be allowed stay on as directors. In the letter the CEF voiced concerns about the strategic direction and finances of PetroSA (see [9]). The applicants responded with detailed written representations that were placed before court by way of an annexure to their papers. The applicants contended in their papers that the facts showed that the CEF had predetermined the disputed decision, which was therefore mala fide and unlawful under the Promotion of Administrative Justice Act 3 of 2000. They argued that they were fired even though their written representations had 'firmly refuted' the complaints levelled against them in the CEF's March 2017 letter, and that the disputed decision was, moreover, so unreasonable and disproportionate as to be arbitrary and irrational. As an alternative to the review relief the applicants claimed that they were wrongly removed under s 71(1) instead of s 71(3) read with s 71(8) of the Companies Act. For its part the CEF contended that since the disputed decision was taken in terms of s 71, which had its own rules, it was not administrative action that was reviewable under PAJA, and that even if it were, the action taken had met its requirements. Held Since the applicants were removed pursuant to a shareholder meeting, the CEF correctly proceeded under s 71(1) instead of s 71(8). The fact that PetroSA had only two directors when the disputed decision was taken, was irrelevant: s 71 made a primary distinction between removals by shareholders and removals by the board, and since the PetroSA board had never dealt with the removal of directors, s 71(3) and s 71(8) were not applicable (see [27] – [29]). The challenge based on s 71 would therefore fail (see [34]). Theremoval, by one state-owned entity, of directors serving on the board of another state-owned entity, where both were wholly funded by public levies and taxes, was an administrative decision (see [52]). That it was done through s 71 of the Companies Act did not detract from this conclusion (see [53]). The disputed decision constituted administrative action that was subject to PAJA (see [59]). The fact that the CEF had formed a preliminary view — as set out in its letter of 28 March 2017 — that PetroSA's board was not performing satisfactorily and needed to be changed, did not mean that it had predetermined the matter, provided it had kept an open mind (see [64] – [66]). Nor did the applicants' unsubstantiated written representations serve to 'refute' the allegations against them, given the applicability of the Plascon – Evans rule (see [67] – [68]). The CEF's reasons as furnished in its opposing affidavit were not, to the extent that they differed from those informing its preliminary view, necessarily irregular, nor did they betray mala fides or an improper motive (see [72]). And they could not be dismissed as irrational or unreasonable, particularly in view of PetroSA's financial troubles and the strained relationship between the two boards (see [77]). The applicants' challenge on administrative-law grounds would therefore also fail (see [77] – [79]).

Smyth and others v Investec Bank Ltd and another [2018] 1 All SA 1 (SCA) Corporate and Commercial – Company law – Locus standi – Whether agreements concluded by company constituted or involved an act or omission which was unfairly prejudicial, unjust or inequitable as contemplated in section 252(1) of the Companies Act 61 of 1973 as read with section 252(3) – Section 252 of the Companies Act 61 of 1973 providing a remedy to a member of a company in case of oppressive or unfairly prejudicial conduct – Interpretation of section 252 – A member is someone whose name has been entered in the company’s register of members – Beneficial owners of shares in a company not eligible to join as co-applicants with relevant nominees holding the shares on their behalf. The main issue in this case was whether the remedy provided for in section 252 of the Companies Act 61 of 1973 is available to beneficial owners of shares in a company who have elected to hold their shares through nominees. Section 252 provided a remedy to a member of a company in case of oppressive or unfairly prejudicial conduct. A related issue was whether beneficial owners who cannot invoke the remedy for which section 252 of the Act provides because their legal interest falls short of a right to assert a claim, may nonetheless join as co-applicants together with their relevant nominees in proceedings for relief in terms of section 252 of the Act in relation to their shares by virtue of a direct and substantial interest in such proceedings.

In the main application in the court below, the first to seventh appellants sought a declaration that two agreements concluded by the second respondent constituted or involved an act or omission which was unfairly prejudicial, unjust or inequitable as contemplated in section 252(1) as read with section 252(3) of the Act. In two other applications, the eighth to thirty-fourth appellants and the thirty-fifth to forty-first appellants sought leave to intervene in the main application as co-applicants.

The agreements referred to above related to four claims instituted by the second respondent, following an alleged fraudulent scheme perpetrated against the second respondent. In essence, the appellants complained that both agreements were, as a direct result of the first respondent’s machinations, calculated to benefit the first respondent, to the financial prejudice of the appellants as shareholders of the second respondent.

The respondents challenged the locus standi of the appellants in the main application. It was not in dispute that the nominee applicants who sought to intervene in the main application did so at the behest of the beneficial shareholders and were thus carrying out their instructions in furtherance of the beneficial shareholders’ interests. The first respondent raised a preliminary point contesting the legal standing of some of the appellants, asserting that they were not members of the second respondent and therefore could not seek relief under section 252. The appellants disputed the assertion that they were not members of the second respondent. In the alternative, they sought to meet the challenge to their legal standing by contending that, as beneficial owners, they had a beneficial interest in the shares registered in the names of their respective nominees. Consequently, they asserted that it was they, as beneficial owners of the shares in the second respondent, and not their respective nominees, who stood to suffer patrimonial loss flowing from the respondents’ unfairly prejudicial conduct. By virtue of such interest, they contended that they had a direct and substantial interest in the relief sought in the main application, entitling them to either remain or join as co-applicants in the main application.

Upholding the locus standi point, the court below non-suited the seven main applicants and dismissed the applications for leave to intervene brought by the beneficial shareholders, resulting in the present appeal. The court held that, on a proper construction of section 252, the term “member” in section 252 does not include a beneficial shareholder. It also held that the legal interest asserted by the beneficial shareholders did not avail them as they could not be joined as co-applicants (with their respective nominees) because they would not be asserting a claim under section 252 nor could they competently do so. Held – Section 252 had to be given such construction as would advance the remedy rather than limit it.

The appellants accepted that a shareholder has a right to hold shares in his own name or through a nominee; a nominee acts in accordance with the instructions given by the beneficial owner; a beneficial owner has the right to terminate the nomination and to hold the shares in his own name; and the nominees who were permitted to intervene in the main application would act in the furtherance of the interests of the beneficial owners. Their primary criticism of the judgment of the court below was that it erred in holding that the remedy under section 252 of the Act is not available to a beneficial owner of shares in a company who has freely elected to hold those shares through a nominee.

The crux of the dispute between the parties was the interpretation of sec-tion 252 of the Act. Principles of interpretation require a court to pay due regard to the overall scheme of the Act. During an interpretative process, it is a fundamental principle of statutory interpretation is that words in a statute must be given their ordinary meaning, unless to do so would result in an absurdity. That general principle is, however, subject to three interrelated qualifications. First, the statutory provision should be interpreted purposively. Second, the relevant statutory provision must be contextualised. Finally, closely related to the purposive approach is the requirement that statutes must be interpreted consistently with the Constitution so as to preserve their constitutional validity, where it is reasonably possible to do so. Accordingly, the logical point of departure is the language of the provision itself read in the context of the overall scheme of the Act, having regard to the purpose of the provision and against the background to the production of the relevant statute.

The Court reminded that the present appeal was about whether the appellants – being beneficial shareholders – were members of the second respondent as contemplated in section 252 read with section 103. It was accepted that a company should concern itself only with registered owners of shares. The thrust of the appellants’ argument was that because it is the beneficial shareholder who suffers the prejudice contemplated in section 252 of the Act and not the nominee although a member in terms of section 103, it is permissible to go behind the register of members for purposes of section 252. The Court restated the principle that a nominee acts in the interests of and subject to the instructions of the beneficial owner. It declined to permit the intervention of the appellants in the main application in circumstances where the remedy created by section 252 is available only to a member of the company as defined in section 103 as the Legislature saw it fit. It was a simple matter for the appellants, if they wished to avail themselves of the remedy provided for in section 252 in their own names, to terminate the nomination of their respective nominees so as to procure the entry of their names in the register of the second respondent’s members. For as long as the nominees’ names remained in the register

of members, the beneficial owners lacked a legal interest in the subject-matter of the litigation.

The appeal was, accordingly, dismissed with costs.

Geffen and others v Martin and others [2018] 1 All SA 21 (WCC) Corporate and Commercial – Section 49 of the Close Corporations Act 69 of 1984 and section 163 of the Companies Act 71 of 2008 – Protection to minority shareholders against unfairly prejudicial conduct on the part of majority shareholders – Whether, objectively, the applicants had suffered prejudice which was sourced in the conduct of the majority shareholders and which was unfair, or at least, unreasonable or unethical – Court finding it not to have been established on the papers, that the alleged conduct complained of had adversely affected or was detrimental to the financial interests of the applicants. At the centre of the dispute between the parties in this case was a restaurant and entertainment business conducted by a person (“Richard”) who began a restaurant (“Bombay Bicycle Club”) located on premises in respect of which the first applicant held a long-term lease. The second applicant was employed as the holding entity of the Bombay Bicycle Club, with first applicant as its sole member. At a later stage, first applicant and Richard started the Side Walk Café, with second applicant again being the holding entity thereof. With a view to restarting a concept restaurant previously owned by Richard, in terms of which a particular dining experience would take place in a circus tent, the sixth respondent was incorporated to act as the holding company for the various restaurants and ventures to be established in the future. Subsequent thereto, the twelfth respondent was incorporated to act as the operating company for the restaurant and circus entertainment business. The sixth respondent held an 80% shareholding therein, with the second applicant being the remaining shareholder. The sixth respondent thereafter obtained an 80% interest in the Sidewalk Café and in the Bombay Bicycle Club, in each case with the second applicant holding the balance of the shares in the respective businesses. It was decided that the restaurant experience conducted by twelfth respondent should expand, but costs spiralled out of control and inevitably that led to the demise of the business. The twelfth respondent ended up being liquidated. In January 2017, first respondent’s attorneys wrote to first applicants attorneys advising that first respondent was willing to pay first applicant R2,4 million for his interest in the group, an offer which was not accepted. In the present application, relief was sought in terms of section 49 of the Close Corporations Act 69 of 1984, and section 163 of the Companies Act 71 of 2008. The relief sought in the notice of motion, included the appointment of a chartered accountant who was requested to compile a report which would include the financial statements of the sixth to the fifteenth respondents for the financial years 28 February 2011 to 28 February 2017; a determination of whether any amounts were due to applicants by sixth to fifteenth respondents and, if so, the actual amounts; a determination of whether amounts were due to the first and/or third respondent by sixth to the fifteenth respondents, and, if so,the actual amounts, as well as amounts due to the second, fourth and fifth respondents; and finally the determination of the fair

and reasonable values of the third applicant’s membership interest in the thirteenth and fourteenth respondents, second applicant’s shareholding in the sixth respondent and the fourth applicant’s shareholding in the fifteenth respondent. Held – Both section 49 of the Close Corporation Act and section 163 of the Companies Act afford protection to minority shareholders against unfairly prejudicial conduct on the part of majority shareholders. Section 163 provides that a shareholder or a director of a company may apply to court for relief if any act or omission of the company, or a related person, has had a result that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, the applicant; the business of the company, or a related person, is being or has been carried on or conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interest of, the applicant; or the power of a director or prescribed officer of a company, or a person related to the company, are being or have been exercised in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, the applicant. The conduct of the majority shareholders has to be evaluated in the light of a fundamental principle of company law, namely by becoming a shareholder; the latter undertakes to be bound by the decisions of the majority shareholders. Not all acts which prejudicially affect a minority shareholder or which disregard his interests will entitle a minority group to the relief set out in the section. The consequence of the act or omission must either be oppressive or unfairly prejudicial which, at the very least, connotes a significant element of unfairness. The inquiry was thus about whether, objectively, the applicants had suffered prejudice which was sourced in the conduct of the majority shareholders and which was unfair, or at least, unreasonable or unethical. Apart from the analysis of section 163, and its implication in the present case, the fact that an offer was made by first respondent to purchase first applicant’s interests required further legal analysis. In particular, the Court considered whether the making of the offer to purchase the minority shareholding ruled out the notion of unfairly prejudicial conduct by the first respondent. Two issues in that regard were argued extensively before the Court, namely the reasonable nature of the offer made by first respondent to buy out first applicant and an argument that relief sought in terms of section 163 of the Companies Act in respect of fifteenth respondent and sixth respondents, in particular, should be based upon the lifting of the corporate veil. Undertaking a detailed analysis of the facts and the allegations made by the applicants the Court concluded that on the papers, the applicants had failed to show on objective grounds, any prejudice sourced in unfair conduct on the part of the majority shareholders. On the papers, it was not shown that the alleged conduct had adversely affected or was detrimental to the financial interests of the applicants. The Court then addressed the argument relating to lifting of the corporate veil. It found no justification for taking that course of action. Emphasising that the applicant’s case had to be based on the founding papers, the Court concluded that on examining the founding papers and the averments contained in the answering affidavit, the conduct complained of was not found to be oppressive or unfairly prejudicial to the applicants. The application was dismissed with costs.

SMYTH AND OTHERS v INVESTEC BANK LTD AND ANOTHER 2018 (1) SA 494 (SCA)

Company — Oppressive conduct — Relief — Who may apply — Whether beneficial owner of shares, whose shares registered in name of nominee, may apply — Relief available only to 'member' of company — 'Member' confined to persons entered in company's register of members — Beneficial owner of shares not included in register — Accordingly not entitled to apply for relief from oppressive conduct — Further, not eligible to join as co-applicants with relevant nominees — Companies Act 61 of 1973, ss 252 and 103. In the High Court the first to seventh appellants — beneficial owners of shares in the company Randgold (second respondent), which shares were registered in the names of their nominees — brought an application under s 252 of the Companies Act 61 of 1973. Their complaint was that Randgold, in entering into certain agreements with Investec (first respondent) and another party, had committed acts 'unfairly prejudicial' to them within the meaning of s 252. They sought various declaratory relief, as well as an order that Investec purchase their shares. Alongside the above 'main application' were applications brought by various other beneficial shareholders (8th – 34th appellants) and nominee shareholders (35th – 41st appellants), in which they sought leave to intervene in the main application, similarly seeking relief under s 252. The court granted the applications to intervene of the various nominee shareholders. The court, however, dismissed the main application and intervention applications by the various beneficial shareholders on the basis of lack of legal standing: the remedy under s 252 was only available to 'members of a company' (section quoted in [15]) of judgment); beneficial shareholders, the court held, and contrary to the assertions of the appellants, did not fall into such a category, in the light of the clear meaning of 'member' as provided in s 103 (section quoted in [16] of judgment). The court rejected the alternative argument raised by the appellants that the beneficial owners, if found not to be members of Randgold, were nevertheless entitled to intervene in the main application as co-applicants with their respective nominees on the ground that they had a direct and substantial interest in the subject-matter of the main application. The appellants were granted leave to appeal to the Supreme Court of Appeal, where the above two points formed the focus of the proceedings. Held, that, implicit in the definition of 'member' located in s 103 of the Act was that, for a person to become a member, it was necessary that the name of such a person had to be entered in the register of members of the company concerned (see [19]). And in South African law, in respect of shares held by a nominee on behalf of a beneficial shareholder, only the nominee was eligible to have his or her name entered in the register of members, and who would only become a member once his or her name was so entered (see [23]). Accordingly, a beneficial shareholder, not being a member of a company, could not avail him- or herself of the s 252 remedy. Held, further, that the purposive interpretation of s 252 of the Act favoured by the appellants — that, given that it was the beneficial owner who sustained the prejudice sought to be redressed by s 252, he or she should be considered a 'member' for the purposes of that section, despite the meaning provided in s 103 (see [30] – [31]) — could not be accepted. This interpretation would do violence to the language of the provision, by placing upon it a meaning of which it was not reasonably capable. (See [45] – [46].) Held, as to the alternative argument, that the rules and common-law principles relating to joinder of interested parties could not avail the appellants in circumstances where they sought to be joined as co-applicants with their nominees

and invoke a statutory remedy that specifically catered for someone who was a member of the company in terms of the Act. To allow them to do so would fly in the face of the clear provisions of s 252 of the Act, which unambiguously confined the remedy only to members of a company, which the appellants were not. (See [54].) Accordingly, appeal dismissed with costs.

Diener NO v Minister of Justice and others (South African Restructuring and Insolvency Association (SARIPA) and others as amici curiae) [2018] 1 All SA 317 (SCA) Business rescue – Business rescue practitioner – Claim for remuneration – Ranking of claim in insolvency proceedings – Whether, when business rescue converted to liquidation, business rescue practitioner’s claim for remuneration and expenses enjoys a “super-preference” over all creditors, secured or unsecured – Chapter 6 of the Companies Act 71 of 2008 – Business rescue practitioner’s claim for remuneration ranked after the costs of liquidation but before those of post-commencement claims for wages by employees and secured and unsecured post-commencement finance, and was payable from the free residue of the insolvent estate. The appellant was appointed as business rescue practitioner to oversee the business rescue of a close corporation (“JD Bester”). He applied to the High Court for an order reviewing and setting aside the first and final liquidation, distribution and contribution account in respect of JD Bester. The third respondent (“Murray”) was one of the joint liquidators of JD Bester. He opposed the relief sought in the High Court and also opposed the appeal.

On 13 June 2012, the members of JD Bester passed a resolution placing it voluntarily in business rescue, in terms of section 129(1) of the Companies Act 71 of 2008. The appellant was subsequently appointed as business rescue practitioner. In August 2012, he decided that JD Bester could not be rescued and instructed attorneys to bring an application in terms of section 141(2)(a), to convert the business rescue proceedings into liquidation proceedings. The application succeeded but the joint liquidators could not agree on how the fees and expenses of the appellant and the attorneys should be dealt with. Murray was of the view that the appellant had failed to prove a claim in terms of sec-tion 44 of the Insolvency Act 24 of 1936 and that the attorneys were an unsecured creditor who, ultimately, was required to make a contribution in terms of section 106 of the Insolvency Act. The Master upheld the position adopted by Murray. The appellant objected to the liquidation, distribution and contribution account that had been finalised on the basis of the Master’s decision in favour of Murray but his objection did not succeed and the Master confirmed the liquidation, distribution and contribution account. The appellant applied to the High Court for the review of the Master’s decision to accept the first and final liquidation, distribution and contribution account. The dismissal of his application led to the present appeal. Held – The issues to be decided were the order of preference of the business rescue practitioner’s claim for remuneration and expenses on the liquidation of JD Bester; a determination of the date of liquidation, when business rescue proceedings are converted into liquidation proceedings; and whether the business rescue practitioner is required to prove his claim in terms of section 44 of the Insolvency Act, and the effect of the appellant not having proved his claim in this case.

Having regard to Chapter 6 of the Companies Act, the Court held that a business rescue practitioner’s claim for remuneration ranked after the costs of liquidation but before those of post-commencement claims for wages by employees and secured and unsecured post-commencement finance, and was payable from the free residue of the insolvent estate. On the second question, the Court held that the effective date of liquidation was the date on which an application for liquidation was filed. Finally, any creditor who wishes to share in the distribution of an insolvent estate is required to prove his claim.

The appeal was dismissed. CDH Invest NV v Petrotank South Africa (Pty) Ltd and another [2018] 1 All SA 450 (GJ) Corporate and Commercial – Company law – Calling of shareholders’ meeting – Fiduciary duties of directors – Companies Act 71 of 2008 – Duty to act bona fide and in the best interests of the company is the fundamental duty which qualifies the exercise of any powers which the directors have and directors have a duty to exercise powers for proper purposes. The main application in this matter was brought by the majority shareholder in a private company, and the counter-application was by the minority shareholder.

The majority shareholder sought an order in terms of section 61(12) of the Companies Act 71 of 2008 (the “Act”) directing the company and the board to convene a shareholders’ meeting in terms of section 61(3) for the purpose of considering and passing five resolutions, viz the removal of a director; the election of a substitute director; instructing the board to demand that the minority shareholder pays the company R1m; instructing the board to sue the minority shareholder for such money; and instructing the board to consider a pro-rata rights offer of 98 835 ordinary no par value shares.

The minority shareholder consented to the first two resolutions, resulting in a consent order being granted in respect thereof, but disputed the last three. In turn, it applied for an order: setting aside the demand by the applicant to convene the shareholders’ meeting; setting aside the board resolution amending the memorandum of incorporation (“MOI”) by increasing the authorised shares from 1 000 to 1 000 000 ordinary no par value shares; interdicting the applicant from calling a shareholders’ meeting to vote on certain resolutions; and directing the board to correct a certain paragraph of its MOI by deleting 1 000 and substituting for it 100 000. Held – Important facts in this dispute were that the two shareholders had clearly fallen out, were involved in other litigation against each other, and did not trust each other. The applicant effectively controlled the board and the general meeting and felt that the second respondent made promises that had not materialised. The applicant believed that it had put up substantially greater capital than the second respondent and proposed that the general meeting meet to decide whether or not to sue the second respondent for its capital contribution.

Section 38(1) of the Act gives power to directors to issue shares. The exercise of the power to issue shares is constrained by section 76(3). The duty to act bona fide and in the best interests of the company is the fundamental duty which qualifies the exercise of any powers which the directors have. Directors have a duty to exercise powers for proper purposes. The tenets of the parties’ agreement in their pre-

corporation founding consensus, whether embodied in a written agreement or not, is a significant consideration in judging fair dealing and probity; and the yardstick, for measuring the exercise of a power against the purpose for which it was given in the first place, is objective.

Applying the above to the facts of this case, the Court found that the main application had to fail, and the counter-application should succeed, to the extent that relief setting aside the resolution to amend the MOI by increasing the authorised shares and relief flowing from that consequence, were concerned.

Standard Bank of South Africa Limited v McCrae [2018] JOL 39438 (GJ)

Provisional winding up – Requirements- offer was made by the respondent personally, and that he had shown an inability to pay

In an application for the provisional sequestration the applicant relied on section 8 of the Insolvency Act 24 of 1936.

The applicant had entered into three agreements with an entity (the principal debtor), and the respondent had stood surety for the principal debtor’s obligations. The liquidation of the principal debtor resulted in breach of all three agreements. The respondent was sued in his capacity as surety and co-principal debtor for payment of the amounts owed to the applicant under the agreements.

Held that the applicant in such an application must establish prima facie that it has established a claim for R200 or more against the debtor; the debtor has committed an act of insolvency or is insolvent; and that there is reason to believe that it will be to the advantage of creditors if the debtor’s estate is sequestrated.

It was common cause that the respondent had met with the applicant to resolve the indebtedness. At the meeting, the respondent indicated that he would make an offer in full and final settlement of the total indebtedness. However, he failed to pay the applicant the settlement amount agreed upon. He stated in the present proceedings that he had not committed an act of insolvency under section 8(e) of the Insolvency Act because, at all material times, he was negotiating to pay the debt on behalf of the principal debtor (in liquidation). The Court pointed out that the respondent had no right or authority to negotiate on behalf of the principal debtor as it is in liquidation the debt was his debt as well as the debt of the principal debtor in liquidation. It was, in the circumstances, contrived to suggest an offer from him was not made in respect of his own indebtedness. Furthermore, the respondent was closely associated with the principle debtor.

The Court was satisfied that the offer was made by the respondent personally, and that he had shown an inability to pay. It was concluded that a proper case had been made for a provisional order to be granted.

FirstRand Bank Ltd t/a Wesbank v Enroute Traders 30 CC [2018] JOL 39500 (ECG)

Liquidation– Final winding up – Inability to pay debts- close corporation must rely on the grounds set out in section 344 and 345 of the Companies Act 61 of 1973-commercially solvent yet cannot pay debts.

The respondent was indebted to the applicant bank in terms of five credit agreements entered into between March and August 2015. The applicant decided to cancel the agreements in April 2017 due to the fact that the respondent was conducting its accounts with the applicant in an unacceptable manner and had as a result fallen into arrears. The bank alleged that the arrears remained outstanding and the full capital had become due and payable.

In the present application, the bank sought the final winding-up of the respondent.

Held that an applicant for the winding-up of a close corporation must rely on the grounds set out in section 344 and 345 of the Companies Act 61 of 1973.

The issue to be decided was whether or not the respondent was able to pay its debts. An unpaid creditor has a right, ex debito justitiae, to a winding-up order against a respondent company that has not paid its debt. The respondent’s defence to the application was that it was in fact commercially solvent and was able to meet its day to day liabilities, that it had liquid assets or readily realisable assets out of the proceeds of which it was able to pay its debts. At the same time however, the respondent concedes that it was not able to pay its debts timeously. Its contention that it was able to pay its debts was found not to be supported by the evidence.

The respondent was placed under final winding-up.

South African Bank of Athens Limited v Zennies Fresh Fruit CC, Business Partners Limited v Zennies Fresh Fruit CC and Another (7681/17) [2018] ZAWCHC 11 (1 February 2018)

Business Rescue Proceedings- lapsed-section 132(2)(c)(1) of the Companies Act - Business Rescue proceedings were not designed to protect a company indefinitely to the detriment of the rights of its creditors. The delay in the finalization of the business rescue proceedings are unreasonable in the circumstances and I am satisfied that an order is justified terminating the proceedings.

This dispute concerns two applications, being case numbers 24618/2016 and 7681/2017, which were consolidated as they both relate to a common Respondent, Zennies Fresh Fruit CC, (“Zennies”). Both Applicants are seeking a declaratory order that the Business Rescue Proceedings in respect of Zennies have ended or lapsed in terms of section 132(2)(c)(1) of the Companies Act No 71 of 2008 (“the Act”). Zennies on the other hand refutes that the business rescue proceedings have been terminated and aver that the Applicants are not entitled to proceed against it in terms of Section 133 of the Act which places a general moratorium on legal proceedings against a company.

On 30 January 2017 the sole member of Zennies signed a resolution to place it under voluntary Business Rescue proceedings in terms of section 129(1) of the Companies Act. The business rescue proceedings of Zennies commenced on 1 February 2017. On 3 February 2017, Bernard Schneider (“Schneider”) was appointed as the business rescue practitioner for Zennies.

[7] On 14 February 2017 the application for judgment which was issued on 19 December 2016, was postponed to 16 May 2017 to allow Mr Schneider an opportunity of approximately three months to finalise the Business Rescue Proceedings.

[8] On 17 February 2017 the first creditors’ meeting for the general body of creditors of Zennies took place in terms of section 151 of the Act. There were two creditors present, namely Business Partnersand the Bank. The minutes of the meeting indicate that:

“At the next meeting, scheduled for 25 business days after the appointment of the business rescue practitioner, a plan will be presented and voted on. This period for the voting of the plan can be extended with the permission of the major creditors”.

[9] The minute contains no recordal of any vote having taken place at the meeting. The proceedings at this first meeting are not in dispute. On 9 March 2017 a Business Rescue Plan (“the plan”) was published by Mr Schneider.

[10] On 23 March 2017 the second creditors’ meeting took place. It is what happened at this meeting which is the nub of the dispute.

[11] According to the supplementary affidavit of Business Partners, Schneider prepared and published the Plan which was distributed on 9 March 2017. This plan would be tabled for discussion and voting at the second creditors meeting which was scheduled for 23 March 2017. On the 20 March 2017, Business Partners attorneys directed an email to Mr Schneider which dealt with, inter alia, the contents of the plan and raised its concerns that the plan did not comply with the requirements of section 150(2) of the Act. The letter ended by stating that they would advise their client to either raise a motion in terms of section 152(d)(i) alternatively (ii) of the Act “in terms of which you will be allowed to either amend the proposed plan in accordance with the request by the holders of the creditors voting interest or adjourn the meeting in order to revise the plan for further consideration.” On the 22 March 2017, Mr Scheider replied by stating that it was his intention of settling all of the creditors in full and that he had already addressed this by realizing certain assets. He believed that two to three months would be the maximum duration of this proposed plan.

[12] According to Business Partners, the second meeting which took place was adjourned in order to prepare and publish a revised plan. According to the Minutes of that meeting under the topic of ‘Business Rescue Plan’, it was recorded, inter alia that the plan had been timeously circulated, that in order to comply with the prescribed time frames, there were certain information that Mr Schneider had been unable to confirm at the time of compiling the plan and that as such, it was suggested that the second meeting and the voting on the plan be adjourned until

certain information and facts were more firmly established. The Minutes also recorded that the ‘period for the voting of the plan can be extended with the permission of the major creditors.’

[13] In its affidavit, Business Partners relies on this recordal to claim that in terms of section 153(3)(a)(ii) of the Act, Mr Schneider was required to prepare and publish a new or revised plan within ten business days from the date of the second creditors’ meeting, that period so it was stated, having lapsed on 6 April 2017 and neither it nor the Bank had agreed to extend the time period for him to prepare and publish a new or revised plan. It therefore seeks a declaratory order that the Business Rescue of Zennies has ended and/or lapsed in terms of section 132(2)(c)(i) of the Act.

[14] Finally, with regard to the financial position of Zennies, the Minutes recorded that Mr Schneider had received an offer of R5.5 million for the company vehicles and that the proceeds would be sufficient to settle the outstanding creditors. It was noted that Business partners and the Bank as the major creditors were present at the meeting and that Mr Schneider “advised those present that he will amend and redistribute the Business plan when he had more facts at his disposal, especially around the pending sale of assets and that Zennies Fresh Fruits CC would be able to settle its overdue debt.”

[15] On 3 May 2017, the Bank brought a liquidation application against Zennies. The founding affidavit addressed only the requirements necessary to seek a winding up order, and did not deal with the business rescue of Zennies, nor did it ask for the termination of the business rescue on the basis of what had purportedly transpired at the second meeting. In its replying affidavit, the Bank averred that Zennies was no longer under Business Rescue, the contention being that there was no agreement to extend the time periods in reply to the allegation that all parties present agreed to extend the time periods in order to file an amended business rescue plan. The effect of this was that the plan was dismissed as contemplated by section 152 (3)(a) of the Act. It also denies that Mr Schneider took any steps in order to prepare and publish a new revised business plan within 10 days as permitted by section 153(3)(a)(ii) as contemplated.

[16] Zennies on the other hand contends that as a result of the lack of information available to Mr Schneider at the Second Meeting and the creditors’ position at the time, the plan was not accepted, and the meeting was adjourned on the basis that Mr Scheider would amend the plan and address the concerns raised by the creditors.

[17] It argues that on Mr Schneider’s version, all of the parties present at the Second Meeting agreed to extend the time periods to file an amended business rescue plan and that the Plan was neither accepted nor rejected. The argument therefore is that, “a further step” had been taken in the business rescue proceedings by the affected parties.

[18] In summary, Zennies argument is that it remains under business rescue and that, without the consent of Mr Schneider or the leave of the Court, the moratorium against any proceedings being instituted against it remains in place.

[19] The Plan was therefore not rejected, rather the parties agreed that it be amended as contemplated in Section 152(1)(d)(ii) and therefore section 153 does not apply and even were it to be held that the Plan was rejected (and that Section 153 does apply), in light of the instruction that Mr Schneider had to amend the Plan, the business rescue proceedings did not terminate (as Section 153(1)(a)(i) would apply.

THE ISSUES TO BE CONSIDERED

[20] The issue that needs to be considered in both matters therefore is whether the business rescue proceedings have terminated or come to an end or whether it is still under business rescue. In order to answer this question, I was requested to answer the following subsidiary questions:

20.1 Whether it was agreed to amend the plan as contemplated in section 152(1)(d)(ii) without rejection of the plan;

20.2 Whether if the plan was rejected,a further step was taken within the ambit of section 132(2)(a)(ii) thereby preventing the termination of the business rescue proceedings and

20.3 Whether, if a further step within the contemplation of section 132(2)(a)(ii) was taken, the business rescue still automatically terminates if the Business Rescue Practitioner fails in any of his other statutory obligations.

THE LEGISLATIVE FRAMEWORK

[21] The crisp question is whether the fact that no vote was taken to approve the plan at the second meeting justifies a conclusion that the plan was rejected as envisaged by section 152(3)(a) of the Act. This section provides that if a proposed business rescue plan is not approved on a preliminary basis, as contemplated in subsection (2), the plan is rejected, and may be considered further only in terms of section 153. It states as follows:

“152 Consideration of business rescue plan

…

(3) If a proposed business rescue plan –

(a) is not approved on a preliminary basis, as contemplated in subsection (2), the plan is rejected, and may be considered further only in terms of section 153…”

[23] Business Rescue ends in terms of section 132 (2)(a)(i) of the Act when the court sets aside the resolution or order that began those proceedings or has

converted the proceedings to liquidation proceedings in terms of section 132(2)(ii) of the Act.

[24] Another manner in which Business Proceedings comes to an end is in terms of section 132(2)(b) where the practitioner has filed with the Commissioner a notice of termination of business rescue proceedings. It is common cause that this has not been done. Finally, business rescue proceedings also ends in terms of section 132(2)(c)(i) or (ii) of the Act which provides for the termination of business rescue when a business rescue plan has been proposed and rejected in terms of Part D and no affected person has acted to extend the proceedings in any manner contemplated in section 153.

[25] In my view, this provision should be read in conjunction with section 152(3)(a) which reiterates that if a proposed business rescue plan is not approved on a preliminary basis, as contemplated in subsection (2), the plan is rejected and may only be considered further in terms of section 153 of the Act.

[26] Section 153 of the Act therefore only kicks in when a business rescue plan has not been approved and subsequently rejected. Section 153 provides for remedies in the event that a business rescue plan has not been adopted. These include seeking a vote of approval by the practitioner from the holders of voting interests to prepare and publish a revised plan or apply to court to set aide the result of the vote.

[29] It is common cause that the business rescue practitioner in both applications has not filed a notice of termination of the business rescue proceedings. It is also interesting to note that despite the apparent unhappiness in the manner in which the proceedings were undertaken, no application to remove the practitioner or set aside his appointment was ever brought in terms of section 130(1)(b)(iii) of the Act. Furthermore, none of the creditors sought to set aside the Resolution in terms of section 130(1)(a)(ii) on the grounds that there is no reasonable prospect for rescuing the company.

[30] At the meeting it is evident that the business plan was presented to the creditors in terms of section 151 of the Act. It is common cause that the meeting was adjourned.

[31] It is apparent from the wording of subsection 152(1)(d)(ii) that it has to be read in conjunction with section 152(1)(e) by the inclusion of the word ‘and’ at the end of the sentence. This means that in the event that a practitioner is directed to adjourn the meeting in order to revise the plan for further consideration, one of two things can occur in terms of subsection (e). First, the practitioner would have to call for a vote for preliminary approval of the proposed plan, as amended if applicable unless (my emphasis) the meeting has first been adjourned in accordance with paragraphs (d)(ii).

[32] The Respondent argued that there was no evidence that a vote had been taken. This contention would be correct if the meeting was postponed in order for the practitioner to obtain further information that he required for the amended business plan.

[33] Both Applicants placed reliance on section 152 (3)(a) of the Act on the proposition that because the business rescue plan was not approved on a preliminary basis as envisaged in section 152(1)(e) and 152(1)(d)(ii) of the Act, that it was automatically rejected. This argument presupposes that there was a vote on a preliminary basis of the business rescue plan as contemplated in subsection 2. There is no evidence to suggest that this happened and accordingly I find that the both the Applicants reliance on section 152 (3)(a) and 132(2)(c)(1) is misplaced. Since I have found that there is no evidence to suggest that the business rescue plan was not approved, there is no need for me to deal with section 153 as it does not find application here.

[34] To my mind, however, this is not the end of the inquiry. Can it be that a company enjoys the protection of business rescue indefinitely to the detriment of its creditors? Although the Act does not directly specify the length a company can be under business rescue, section 132(3) provides a guide under which the legislature envisaged companies to remain under business rescue. This section provides that if a company’s business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings. No such application was brought by Mr Schneider to extend the business rescue.

Purpose of Business Rescue

[35] “Business rescue” is defined in Section 128(b) of the Act to mean “proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for-

i) the temporary supervision of the company, and of the management of its affairs, business and property;

ii) the temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and

iii) the development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company.”

[42] In the absence of specific information received to finalize an amended plan for consideration, a Business Rescue Practitioner is under a statutory duty to file a Notice of Termination. There has been an extraordinary long period of time since the Business Rescue Proceedings were initiated. The second meeting of creditors occurred on 23 March 2017 and according to the affidavit of Mr Schneider, the

reason for the adjournment was for him to obtain information, inter alia regarding the sale of certain assets of Zennies and these included the sale of certain trucks, properties and the raising of working capital. There was also an averment that he had entered into an Agreement in principle and was awaiting signature of the signed sale agreement which would ostensibly have been finalized on 20 May 2017. Notably absent from the opposing affidavit, which was commissioned on 29 May 2017 was any evidence that the sale agreement had in fact been concluded. Neither was any evidence produced regarding the purported sale of the trucks which would have been sold in the region of R4million. In the absence of this vital information, this court was therefore unable to ascertain how far Mr Scheider was in securing these agreements. I mention these considerations in passing as it would in any event not have assisted Zennies since this was not part of the implementation of a plan as was consideration in Beginsel.

[43] In my view, the mechanisms of Business Rescue proceedings were not designed to protect a company indefinitely to the detriment of the rights of its creditors. The delay in the finalization of the business rescue proceedings are unreasonable in the circumstances and I am satisfied that an order is justified terminating the proceedings.

[45] I am therefore satisfied, that even if I am wrong with regard to my assessment of the Business Rescue proceedings, that Business partners is entitled to judgment against Schroeder in the absence of any answering affidavit in the application for judgment. I will however not order the executability of Erf 1319 Durbanville as I do not have sufficient information before me to make such an order at this stage. I will also not order the executability of the listed properties given the order that I propose to make in case number 7681/2016. I conclude therefore that a proper case has been made out for the relief sought in both notice of motions adjusted as indicated in the orders below.

In the circumstances, the following orders are made:

Application 24618/2016:

1. It is declared that the Business Rescue proceedings of First Respondent has terminated.

2. Judgment is granted against first and second respondents jointly and severally, the one paying, the other to be absolved, for:

2.1 Payment in the amount of R 19 151.04 for arrear Royalties in respect of the Royalty Agreement with account number 702009;

2.2 Payment in the amount of R 7 693.26 for future Royalties in respect of the Royalty Agreement with account number 702009;

2.3 Payment in the amount of R 666 749.28 in respect of the Loan Agreement with account number 405756;

2.4 Payment in the amount of R 2 046 179.68 in respect of the Loan Agreement with account number 405757;

2.5. Interest on the amounts referred to in paragraphs 2.1 and 2.2 above at a rate of Prime plus 0% (Prime currently 10.50%) compounded monthly in arrears from 26 November 2016 until date of final payment, both days inclusive.

2.6. Interest in the amount referred to in paragraphs 2.3 and 2.4 above at a rate of Prime plus 4.00% (Prime currently 10.50%) compounded monthly in arrears from 26 November 2016 until date of final payment, both days inclusive.

3. Costs to be paid on a party and party scale.

In matter 7681/17: Liquidation application

1. It is declared that the Business Rescue proceedings of Respondent has terminated.

2. The estate of Respondent is placed under provisional liquidation in the hands of the Master of the High Court.

3. A rule nisi is issued calling upon all interested parties to furnish reasons, if any, to this court on Tuesday 27 February 2018 why a final winding-up order should not be issued against Respondent.

4. This order is to be served by the Sheriff of his or her duly authorized deputy at its registered office and principal place of business being 11 Watercress Lane, Zeekoevlei, 7941.

5. A copy of the order must be served on:

(i) Any registered trade union that, as far as the sheriff can reasonably ascertain, represents any of the employees of Respondent;

(ii) The Respondent’s employees if any, by affixing a copy of the order to any notice board to which the employees have access inside the Respondent’s premises, alternatively by affixing a copy thereof to the front gate, where applicable, failing which the front door of the premises from which the Respondent conducts any business at 11 Watercress Lane, Zeekoevlei, 7941.

6. This order should be served upon the South African Revenue Services.

7. This order is to be published without any delay in The Burger and the Cape Times.

8. The costs of this application, including the costs of the 14 September 2017 but excluding the costs of opposition of this application, shall be costs in the liquidation.

Cross-med Health Centre (Pty) Ltd and Others v Crossmed Mthatha Private Hospital (Pty) Ltd and Another (357/2018) [2018] ZAECGHC 24 (29 March 2018)

Business rescue-business rescue practitioners application to remove directors who took matters in their own hands-behind backs of BRPs-directors removed - Section 137 (5)

The first applicant is a company under business rescue. It trades as a private hospital under the trading name Mthatha Private Hospital. The second and third applicants are the appointed business rescue practitioners. The second respondent, a medical doctor, is a director of the first applicant and a director and sole shareholder of the first respondent. In this judgment I shall refer to the first applicant as Cross-Med Health, to the second and third applicants individually as Cassim and Ndyamara and jointly as the BRPs, to the first respondent as Cross-Med Mthatha, and to the second respondent as Yako.

Application for interdicting and restraining the First and Second Respondents from: 2.1 Conducting any form of medical practice, rendering medical services or any other form of business from the premises of the First Applicant situated at 59 Nelson Mandela Drive, Mthatha, Eastern Cape (“the premises”);etc

The business rescue application was granted by the Mthatha High Court on 12 September 2017 and Cassim and Ndyamara were appointed as the business rescue practitioners.

On 22 January 2018 the BRPs applied in the Pretoria High Court for an order freezing the Nedbank bank account of Cross-Med Mthatha, pending the outcome of an action to be instituted. The order was granted. Yako had, without the knowledge of the BRPs, notified various medical aid societies that the bank account details of Cross-Med Health had changed to the account of Cross-Med Mthatha. Thereafter payments by medical aid societies due to Cross-Med Health were instead paid to the account of Cross-Med Mthatha. During the period July 2017 to 23 January 2018, medical aid societies paid the sum of R5 942 184.12 to Cross-Med Mthatha’s account. Of that sum, R3 767 643.00 was paid to Cross-Med Properties, a company controlled by Yako, R240 000.00 was paid to Yako, and R118 534.97 was paid to Yako’s attorneys. The balance as at 23 January 2018 in Cross-Med Mthatha’s bank account was R342 734.03.

[32] A consideration and assessment of Yako’s conduct is required. If one starts with his application for business rescue, which he brought partly in his capacity as an employee of Cross-Med Health, what emerges there is an expressed concern and hope that Cross-Med Health will survive its current difficulties. He referred to the demand for its services and the essential service it provided to the Mthatha community. One of the motivations for business rescue was that a business rescue practitioner could assist in recovering debts from the medical aid societies because he did not have time to do so. No mention was made of Cross-Med Mthatha or that he owned the hospital practice. The founding affidavit was deposed to in August 2017. Yet there is evidence that he diverted funds to Cross-Med Mthatha from as early as July 2017 and continued to do so until discovered in January 2018. The sentiments expressed in the business rescue application were therefore false and

misleading. He not only failed to disclose to the BRPs what he had done, he also gave Cassim a false explanation for the decline in income from the medical aid societies. This false explanation was clearly to put Cassim off the scent.

[38] My conclusion concerning Yako’s conduct is that he behaved dishonestly towards Cross-Med Health and the BRPs for his and Cross-Med Mthatha’s gain. He breached his fiduciary duties to Cross-Med Health and deliberately obstructed the BRPs in the performance of their functions. He operated persistently behind the scenes, influencing at least Thutha and Mpelane to aid and abet him. While the BRPs were trying to rescue Cross-Med Health, he was trying to achieve the opposite. It is fortunate that he was found out, otherwise in my view he would have continued with this conduct until Cross-Med Health was an empty shell.

[39] My further conclusion is that Yako’s sudden professed turn around, in the face of a pattern of dishonest and clandestine conduct extending over many months, is not tenable. It was submitted on his behalf that since taking legal advice he has seen the error of his ways, but I do not accept that he has and that he will not attempt further sabotage. As said earlier, he tried to take Cross-Med Health’s business for the benefit of Cross-Med Mthatha after this application had been served on him and he had notified his intention to oppose the application, via his attorneys. By this time he surely would have had legal advice.

Section 137 (5) of the Act provides:“(5) At any time during the business rescue proceedings, the practitioner may apply to a court for an order removing a director from office on the grounds that the director has—

(a) failed to comply with a requirement of this Chapter; or

(b) by act or omission, has impeded, or is impeding—

(i) the practitioner in the performance of the powers and functions of practitioner;

(ii) the management of the company by the practitioner; or

(iii) the development or implementation of a business rescue plan in accordance with this Chapter.

[51] In my view at least the grounds contained in s 137 (5) (b) (i) and (ii) are present in this case. It was submitted on behalf of the respondents that s 71 of the Act provides for removal of a director and reference was made to the procedural requirements of that section. It was acknowledged that it was competent for the BRPs to apply for Yako’s removal as a director but that such removal should occur in circumstances where his bona fides have not been tested in oral evidence.

[52] I have already expressed my views about Yako’s bona fides. The evidence discloses that he has impeded the BRPs in the performance of their powers and functions and their management of Cross-Med health in a dishonest and clandestine manner and in my view there are very strong grounds for his removal as a director.

Order

[55] An order will issue in terms of prayers 2,3,4,5 and 6 of the notice of motion.

Standard Bank of South Africa Limited v Botha (54753/16) [2018] ZAGPPHC 35 (7 March 2018)

Insolvency-claims -Prescription-insolvency- applicable to suretyship-claim in the principal debtor's insolvency on 27 September 2012- On 8 November 2012 the three bonds were cancelled- surety to pay even if debt older than 3 years as bond’s 30 years applicable

The plaintiff claims against the defendant as surety for the shortfall of a claim arising from a loan secured by a mortgage bond. The plaintiffs claim against the defendant became due when it proved its claim against the principal debtor in the principal debtor's insolvency.

The only defence in which the defendant persists is that the plaintiff's claim against her has prescribed. The defence of prescription is before me for determination pursuant to a statement of agreed facts submitted by the parties under rule 33(1).

First, a brief outline of the facts. Three bonds were registered against a property as security for the plaintiffs claim against the principal debtor; on 18 July 2003, 7 April 2006 and 12 December 2008 respectively. The home loan and the suretyship were concluded on 20 November 2008. The principal debtor was sequestrated on 28 September 2011. The trustees in the principal debtor's insolvency sold the bonded property to Titantrade 225 CC on 30 March 2012. Titantrade sold the bonded property to Mr and Mrs van Rooyen on 28 May 2012. The plaintiff proved its claim in the principal debtor's insolvency on 27 September 2012.

On 8 November 2012, the property was transferred first to Titantrade and then to Mr and Mrs van Rooyen. On the same date, the three bonds were cancelled.

On 22 November 2012, the trustees made a provisional payment of R1 million to the plaintiff. On 9 June 2014, the trustees paid a final dividend of R74 374,43 to the plaintiff. On 26 January 2015, the trustees' first and final liquidation, distribution and contribution account in the insolvency of the principal debtor was accepted by the Master.On 26 July 2016, the plaintiff served its summons in the present action on the defendant.

The periods of prescription of debts are set out in s 11 of the Prescription Act, 68 of 1969. The period of prescription of "any debt secured by mortgage bond" is 30 years. Counsel for the defendant contend that the 30 year period is not any longer applicable to the debt owed by the defendant to the plaintiff. That is so, counsel say, because the bonds were cancelled and the debt therefore ceased to be one secured by mortgage bond. If that is correct, then the prescriptive period is three years. The plaintiff's summons was served after the lapse of the three year period and therefore (thus the argument) the claim has prescribed.

Counsel for the plaintiff argue that the prescriptive period applicable to a specific debt is fixed when the debt in question becomes due and does not change. Therefore (reason counsel for the plaintiff) irrespective of the fate of the bonds, the debt due under the home loan remained, for purposes of the Prescription Act, one secured by mortgage bond.

Alternatively, say counsel for the plaintiff, if the prescriptive period transmuted to three years, prescription was interrupted by the payments made by the trustees. This is because, they say, s 14(1) of the Prescription Act provides that the running of

prescription shall be interrupted by an express or a tacit acknowledgement of liability by a debtor. Both sides accept the triteness of the propositions that a payment on account is such an acknowledgement of liability and that such an acknowledgement of liability by the principal debtor will interrupt prescription against the surety. Under s 14(2), prescription "shall commence to run afresh from the day on which the interruption takes place".

But, say counsel for the defendant, the principal debtor did not acknowledge liability: the trustees in his insolvent estate did so. The trustees are not the agents of the insolvent and the Prescription Act contemplates only the acknowledgement of the debtor or, possibly, his agent.

19 In the present case, when the debt fell due it was secured by mortgage bonds and, on the authority of Oliff, what thereafter befell the bonds is of no legal relevance. I therefore hold that the prescriptive period applicable was thirty years and that the defence of prescription must therefore fail.

20 I turn to the question whether the payments on account of the claim submitted by the plaintiff in the insolvency of the principal debtor interrupted prescription.

27 There seems to me, moreover, no reason why a trustee should not be empowered to achieve the benefit in the context of prescription of an agreement to postpone the due date of the debt, a power conferred on debtors by the provisions of s 14(2).

28 I therefore respectfully decline to follow Consolidated Textile Mills and hold that the payments by the trustees in the insolvent estate of the principal debtor interrupted prescription against the principal debtor. Counsel were agreed that the interruption of prescription against the principal debtor operates as an interruption against the surety.

29 The defendant's only defence has accordingly failed. The plaintiff must therefore succeed in its claim. Counsel were agreed that the case warrants the costs of two counsel.

DIENER NO v MINISTER OF JUSTICE AND OTHERS 2018 (2) SA 399 (SCA)

Business rescue — Practitioner — Rescue converted to liquidation — Whether practitioner 'creditor' under Insolvency Act — Ranking of practitioner's claim for remuneration and expenses — Date of liquidation — Insolvency Act 24 of 1936, s 44; Companies Act 71 of 2008, s 135(4). Mr Diener, a business rescue practitioner, concluded that a corporation could not be rescued and obtained an order terminating its business rescue and putting it into liquidation. He later submitted a claim for his remuneration and expenses to the liquidators, but it was excluded from the liquidation and distribution account because he had not proved it. He applied to review the Master's confirmation of the account, had his application dismissed, and was granted leave to appeal to the Supreme Court of Appeal. The issues were: (1) The ranking of a business rescue practitioner's claim for remuneration and expenses in a liquidation. Held, that it was a claim against the free residue, ranking after the costs of liquidation, but before the claims of employees and lenders arising

during the rescue, and the claims of other unsecured creditors. (See [49] and s 135(4) of the Companies Act 71 of 2008.) (2) Whether the date of liquidation was the day the members filed their resolution with the CIPC to begin business rescue; or the day the practitioner applied to the High Court to convert the business rescue to a liquidation. Held, that it was the latter. (3) Whether the practitioner was a 'creditor' in s 44 of the Insolvency Act 24 of 1936, and so required to prove his claim for remuneration and expenses. Held, that he was. Appeal dismissed.

SOUTH AFRICAN PROPERTY OWNERS ASSOCIATION v MINISTER OF TRADE AND INDUSTRY AND OTHERS 2018 (2) SA 523 (GP)

Business rescue — Post-commencement finance — Rental and other amounts payable iro occupation of immovable property by company under business rescue — Not constituting 'financing' or 'costs of business recue proceedings' — Companies Act 71 of 2008, ss 135(2) and 135(3). Under the heading 'Post-commencement finance', s 135(2) of the Companies Act 71 of 2008 provides that a company under business rescue may 'obtain financing . . . secured to the lender by utilising any asset of the company to the extent that it is not otherwise encumbered . . . in the order of preference set out in subsection (3)(b)'; and s 135(3) creates a preference for 'other costs arising out of the costs of the business rescue proceedings'. (Sections 135(2) and 135(3) are quoted in [21].) The applicant sought a declaratory order that rental (and other amounts such as a share of rates, taxes and public utility charges), payable in respect of the occupation of immovable property by a company under business rescue, constituted either 'financing' as contemplated in s 135(2) or 'costs of the business rescue proceedings' as contemplated in s 135(3) of the Companies Act 71 of 2008. Held The 'financing' contemplated s 135(2) of the Act related to the obtaining of financing in order to assist in managing the company out of its financial distress, hence the provision that any asset of the company may be utilised to secure that financing to the extent that the asset is not otherwise encumbered. It did not lean to an interpretation that encompassed existing obligations (other than obligations to company employees, under s 135(1) of the Act). Section 135(3) of the Act provided for two categories of costs: those in s 143 of the Act; and the other, costs incurred due to the business rescue proceedings. The costs contemplated by the applicant were costs incidental to a lease agreement; it did not, by any interpretation, constitute costs arising out of the business rescue proceedings. To hold that such costs constituted post-commencement financing would elevate an obligation incurred prior to commencement of business rescue proceedings to a preference over other creditors not provided or contemplated by the provisions of s 135 of the Act. It followed that the application would be dismissed.

South African Bank of Athens Ltd v Zennies Fresh Fruit CC and a related matter [2018] 2 All SA 276 (WCC) Business rescue proceedings –Termination of business rescue proceedings – Although no evidence existed to suggest that the business rescue plan was not

approved, if business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings – Where an extraordinarily long period of time had passed since the business rescue proceedings were initiated, court making order terminating business rescue proceedings. Two applications were consolidated in this Court as they both related to a common respondent (“Zennies”). Each of the applicants (“Business Partners” and a bank) sought a declaratory order that the business rescue proceedings in respect of Zennies had ended or lapsed in terms of section 132(2)(c)(i) of the Companies Act 71 of 2008 (“the Act”). Zennies on the other hand denied that the business rescue proceedings had been terminated and averred that the applicants were not entitled to proceed against it in terms of section 133 of the Act, which section places a general moratorium on legal proceedings against a company in those circumstances.

On 30 January 2017, the sole member of Zennies signed a resolution to place it under voluntary business rescue proceedings in terms of section 129(1) of the Companies Act. The business rescue proceedings commenced on 1 February 2017. On 3 February 2017, a certain person (“Schneider”) was appointed as the business rescue practitioner for Zennies. On 17 February 2017, the first creditors’ meeting for the general body of creditors of Zennies took place in terms of section 151 of the Act. There were two creditors present, namely Business Partners and the bank. On 9 March 2017, a business rescue plan (“the plan”) was published by Schneider.

The events at the second meeting of creditors was at the centre of the present dispute. According to the supplementary affidavit of Business Partners, Schneider had prepared and published the plan prior to the meeting, and the plan was to be tabled for discussion and voting at the second creditors meeting. On the ground that Schneider had been unable to confirm certain information at the time of compiling the plan, it was suggested that the second meeting and the voting on the plan be adjourned until the relevant information and facts were more firmly established. Business Partners claimed that in terms of section 153(3)(a)(ii) of the Act, Schneider was required to prepare and publish a new or revised plan within ten business days from the date of the second creditors’ meeting, that period so it was stated, having lapsed on 6 April 2017 and neither it nor the bank had agreed to extend the time period for him to prepare and publish a new or revised plan. It therefore sought a declaratory order that the business rescue of Zennies had ended and/or lapsed in terms of section 132(2)(c)(i) of the Act.

On 3 May 2017, the bank brought a liquidation application against Zennies. The founding affidavit addressed only the requirements necessary to seek a winding up order, and did not deal with the business rescue of Zennies, nor did it ask for the termination of the business rescue on the basis of what had purportedly transpired at the second meeting. In its replying affidavit, the bank averred that Zennies was no longer under business rescue, the contention being that there was no agreement to extend the time periods in reply to the allegation that all parties present agreed to extend the time periods in order to file an amended business rescue plan.

Zennies, on the other hand, contended that as a result of the lack of information available to Schneider at the second meeting and the creditors’ position at the time, the plan was not accepted, and the meeting was adjourned on the basis that Schneider would amend the plan and address the concerns raised by the creditors. It argued that on Schneider’s version, all of the parties present at the second meeting agreed to extend the time periods to file an amended business rescue plan and that the plan was neither accepted nor rejected. Its contention was that it remained under business rescue and that, without the consent of Schneider or the leave of the court, the moratorium against any proceedings being instituted against it remained in place. Held – In deciding whether the business rescue proceedings had terminated or whether Zennies was still under business rescue, the Court had to determine whether it was agreed to amend the plan as contemplated in section 152(1)(d)(ii) without rejection of the plan; whether if the plan was rejected, a further step was taken within the ambit of section 132(2)(a)(ii) thereby preventing the termination of the business rescue proceedings; and whether, if a further step within the contemplation of section 132(2)(a)(ii) was taken, the business rescue still automatically terminates if the business rescue practitioner fails in any of his other statutory obligations.

The crisp question was whether the fact that no vote was taken to approve the plan at the second meeting justified a conclusion that the plan was rejected as envisaged by section 152(3)(a) of the Act. The latter section provides that if a proposed business rescue plan is not approved on a preliminary basis, as contemplated in subsection (2), the plan is rejected, and may be considered further only in terms of section 153. Section 153of the Act only kicks in when a business rescue plan has not been approved and subsequently rejected. Section 153 provides for remedies in the event that a business rescue plan has not been adopted. Those include seeking a vote of approval by the practitioner from the holders of voting interests to prepare and publish a revised plan or apply to court to set aside the result of the vote. In terms of section 153(5), if no person takes any action contemplated in subsection (1), the practitioner “must promptly file a notice of the termination of the business rescue proceedings.”

In this case, the business rescue practitioner had not filed a notice of termination of the business rescue proceedings in either of the applications. In the event that a practitioner is directed to adjourn the meeting in order to revise the plan for further consideration, one of two things can occur in terms of section 152(1)(e). First, the practitioner would have to call for a vote for preliminary approval of the proposed plan, as amended if applicable unless the meeting has first been adjourned in accordance with paragraphs (d)(ii).

The Court found no evidence to suggest that the business rescue plan was not approved.

That however, was not the end of the inquiry. Although the Act does not directly specify the length a company can be under business rescue, section 132(3) provides a guide under which the Legislature envisaged companies to remain under business rescue. That section provides that if a company’s business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings. No such application was brought by Schneider to extend the business

rescue. There had been an extraordinary long period of time since the business rescue proceedings were initiated. The mechanisms of business rescue proceedings were not designed to protect a company indefinitely to the detriment of the rights of its creditors. The delay in the finalisation of the business rescue proceedings were found to be unreasonable in the circumstances and the court made an order terminating the proceedings. The relief sought in each of the applications against Zennies was then granted.

Western Crown Properties 61 (Pty) Ltd v Able Walling Solutions (Pty) Ltd (8073/16) [2017] WCC (13 November 2017)

Business rescue-business rescue practitioner-obligation by business rescue practitioner to apply for liquidation- no obligation

Where a business rescue practitioner gave notice of the termination of business rescue proceedings, the practitioner is under no obligation to apply for liquidation of the company. (Obiter dictum)

[21] (After dismissing the application for liquidation and therefore obiter and at most persuasive for later decisions) it was contended that the Business Rescue Practitioner (BRP) was obliged under section 141(2)(a)(ii) of the Companies Act 71 of 2008 to apply to court for the liquidation of the company having terminated business rescue. It is apparent from a reading of that provision that such an application for liquidation ‘must’ be made where ‘there is no reasonable prospect for the company to be rescued’ but that this is constrained by the words “at any time during business rescue proceedings'”. The effect is that having come to the view that there is no reasonable prospect of business rescue and before business rescue has been terminated, the liquidator must apply for the liquidation of the company in terms of section l42(2)(a)(ii). In this matter, business rescue proceedings ended in terms of section 132(2) when the BRP gave notice of such termination. It followed that he was thereafter under no obligation to apply for the liquidation of the company since business rescue proceedings no longer continued. (Par [21])

In light of the conflictual relationship which had developed the applicant would have been aware from the outset that its locus standi (standing) as a creditor of the company may be placed in issue in the matter. Liquidation should not be resorted to in order to enforce a claim which is bona fide disputed on reasonable grounds. [Kalil v Decotex (Pty) Lid and Another 1988 (1) SA 943 (A). See too Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T), at 347H-348.]

What was required of the applicant was that it placed all necessary material before the Court in order to indicate its locus standi. A referral to oral evidence is not intended to cure defects in the applicant’s founding papers or close holes in it. Nor is there any purpose served in granting such an application when on the facts already before the court the factual position is evident. Having regard to the totality of the facts before the Court, and the submissions made by counsel, the grant of the application for the referral of issues to oral evidence is not warranted in the circumstances of this matter and that the application falls to be dismissed. (Par [19])

The main application was postponed until the date of hearing of the application for oral evidence. On the material before the court the applicant has failed to show that it holds the requisite locus standi to pursue the relief sought in the main application since it has not shown that it is a creditor of the company and when there are clear and bona fide disputes regarding whether debts are in fact owed. The fact that the BRP recorded claims against the company does not prove that such claims are bona fide, nor does it warrant a conclusion by the court that Western Crown as a result of that recordal constitutes a creditor with the requisite locus standi to seek an order of liquidation against the company. For all of these reasons, absent the requisite locus standi, the application for liquidation falls to be dismissed. (Par [20])

Amendment of section 83 of the Insolvency Act 24 of 1936 by the Financial Sector Regulation Act 9 of 2017

Amendment-Sale of security by entities defined in the Act

If property held as security is of a class ordinarily sold through an authorised user or an external authorised user, on an exchange or an external exchange or, where applicable, a person prescribed by the Minister of Finance as a regulated person the creditor may, subject to certain provisions, and applicable standards and rules immediately sell the property in the prescribed manner.

The amendments are technical to provide for amendments to the Financial Markets Act 19 of 2012. See below for the text of the amendments to the Financial Sector Act 9 of 2017 by the Insolvency Act.

Amendment-section 35A

The addition in section 35A(1) in the definition of “market infrastructure”

[35A(1) 'market infrastructure' means-

(a) an exchange as defined in section 1 and licensed under section 9 of the Financial Markets Act, 2012; and

(b) a central securities depository as defined in section 1 and licensed under section 29 of that Act; or

(c) a clearing house as defined in section 1 of that Act and licensed under section 49 of that Act;]

of the following paragraphs:

(d) a central counterparty as defined in section 1 of that Act and licensed under section 49 of that Act; or

(e) a licensed external central counterparty as defined in section 1 of that Act;.

The amendment of section 83-

(a) by the substitution for subsection (2) of the following subsection:

(2) If such property consists of [a marketable security] securities as defined in section 1(1) of the Financial Markets Act, 2012 (Act No. 19 of 2012), [or] a bill of exchange or a financial instrument or a foreign financial instrument as defined in section [1 of the Financial Markets Control Act, 1989 (Act No. 55 of 1989)] 1(1) of the Financial Sector Regulation Act, 2017, the creditor

may, after giving the notice mentioned in subsection (1)

(c) by the substitution in subsection (8) for paragraph (a) of the following paragraph: (a) if it is [- (i)] any property of a class ordinarily sold through [a stockbroker as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985)] an authorised user or an external authorised user, on an exchange or an external exchange, each defined in section 1(1) of the Financial Markets Act, 2012 (Act No. 19 of 2012) or, where applicable, a person prescribed by the Minister of Finance as a regulated person in terms of section 5 of that Act, the creditor may, subject to the provisions of [the said] that Act and [(where] applicable[) the]standards and rules [referred to in section 12 thereof, forthwith] in terms of that Act, immediately sell it through [a stockbroker] an authorised user, external authorised user or such regulated person, or if the creditor is [a stockbroker] an authorised user, external authorised user or regulated person, also to another [stockbroker] authorised user, external authorised user or regulated person; [or (ii) a financial instrument referred to in subsection (2) the creditor may, subject to the provisions of the Financial Markets Control Act, 1989, and rules referred to in sections 17 thereof, forthwith sell it through a financial instrument trader as defined in section 1 of the said Act, or, if the creditor is a financial instrument trader or financial instrument principal as defined in section 1 of the said Act, also to another financial instrument trader or financial instrument principal; and]

Cilliers NO and others v Ellis and another [2017] JOL 37555 (SCA)

Appeal – Appealability of order – Required attributes of order- final in effect and not susceptible of alteration by the court of first instance

“Abide the order”-effect- a litigant “abiding the order” cannot appeal-court perplexed by the fact that she was granted leave to appeal the order.

Locus standi-a litigant “abiding the order”- perplexed by the fact that she was granted leave to appeal the order-does not have locus standi

The respondents had purchased certain immovable property from the second appellant and her husband. The latter died prior to the sale of the property and the

second and third appellants were appointed as the co-executors of his estate. After taking occupation of the property, the respondents allegedly discovered that the property suffered from material latent defects, which had not been disclosed to them. They launched urgent proceedings in the court a quo seeking that the sale of the property be cancelled and that upon the restoration of the property, the purchase price be repaid to them.

However, in a subsequent declaration filed by them, they expanded the relief sought to include a claim for damages and reduction of the purchase price. The second appellant objected to that on the ground that the respondents were legally precluded from approbating and reprobating. The trial court did not attempt to circumscribe or at least identify the issues relating to the merits and that failure led to an unclear order being made at the conclusion of the hearing. It was held that the respondents had succeeded on the merits “for such relief as he [they] can prove”. The relief (if any) to which the respondents might be entitled, would only be determined at the subsequent hearing of the issue of quantum.

The appellants appealed against the order.

Held that the appellants were confronted with two significant obstacles, namely whether the order appealed against was appealable; and whether they had the necessary locus standi to pursue the appeal.

A judgment or order is susceptible to appeal if the decision is final in effect and not susceptible of alteration by the court of first instance; it is definitive of the rights of the parties; and it has the effect of disposing of at least a substantial portion of the relief claimed in the main proceedings. Even where a decision does not bear all the attributes of a final order it may nevertheless be appealable if some other worthy considerations are evident, including that the appeal would lead to a just and reasonable prompt solution of the real issues between the parties. Furthermore, the interests of justice may be a paramount consideration in deciding whether a judgment is appealable. The order of the court a quo clearly did not possess any of the main three attributes referred to above. As the proceedings in the court below were unterminated, if the court were to entertain the appeal at this stage, it would not be able to finally dispose of the issues relating to the merits.

The Court also found that the appellants had no standing in the appeal. The third appellant had indicated that she abided by the court’s decision, and did not pursue the appeal. Her peremption of the appeal meant that she had no locus standi to participate in this appeal as the third appellant. The purported substitution of the second appellant was irregular.

The appeal was accordingly dismissed.

Standing of the appellants

[21] Mrs Cilliers in her representative and personal capacity and Du Toit in her representative capacity, sought and were granted leave to appeal the order of the court a quo, as the first, second and third appellants, respectively.

[22] As recorded above, Du Toit had abided the judgment of the court a quo and one is perplexed by the fact that she was granted leave to appeal the order. The decision

of Du Toit to abide the judgment clearly constituted a peremption of the appeal. In Hlatshwayo v Mare and Deas 1912 AD 242 at 253, Solomon JA put it as follows:

". . . under our law, by acquiescence in a judgment the right to appeal from it is perempted. And when once the appeal has been perempted, there is an end of the matter; there is no going back from that position."

In regard to the question what is meant by a party acquiescing in a judgment, the learned Judge of Appeal added the following at 253:

"In my opinion the effect of the authorities on this subject is to show that when once a party to an action has done an act from which the only reasonable inference that can be drawn by the other party is that he accepts and abides by the judgment, and so intimates that he has no intention of challenging it, he is taken to have acquiesced in it.

[23] The conduct of Du Toit in abiding the judgment of the court a quo; not filing a plea and not participating in the trial, constitutes clear evidence of acquiescence resulting in so far as she is concerned in a peremption of the appeal against the order. It follows that Du Toit, as the co-executrix in the estate of the late Mr Cilliers, had no locus standi to participate in this appeal as the third appellant.

Be that as it may, absent an application to court for the substitution of the executrix of the deceased estate of Mrs Cilliers, the purported substitution is irregular and the executrix has no locus standi to participate in this appeal. It follows therefore that there is simply no appellant herein with the necessary locus standi to pursue the appeal.

[26] For all the above reasons there is no proper appeal before this Court. The appeal accordingly falls to be dismissed.

ASA Metals (Pty) Ltd v Vardocap (Pty) Ltd (5630/2017) [2018] ZALMPPHC 12 (17 April 2018)

Winding-up application-section 345 -response to section 345 notice-clear dispute of fact is going to arise-not be resolved on papers-must proceed by way of action.

The applicant has brought an application seeking an order to wind up the respondent in terms of section 346 read with section 344(f) and section 345 of the Companies Act 71 of 1973 (“the old Act”). The basis of the applicant’s application is that the respondent is unable to pay its debts. The respondent is opposing the applicant’s application.

[2] According to the applicant, on the 9th December 2016, the parties concluded a partly written and partly oral agreement in terms of which the applicant sold to the respondent sasol green pitch coke and that the purchase price due and payable by the respondent amounted to R849 244-94. The respondent has failed and/or refused to pay the outstanding amount.

[3] On the 30th of May 2017 the applicant’s attorney addressed a letter to the respondent in terms of section 345(1) (a) of the old Act demanding payment of the full amount within 21 calendar days of receipt of the said letter. According to the applicant, the period of 21 calendar days has lapsed without the respondent paying

the full amount or a portion of it. Based on that, the applicant is of the view that the respondent is unable to pay its debt as contemplated in section 345(1) of the old Act.

[12] The respondent has attached to its answering affidavit a copy of a letter dated 30th June 2017 which it alleges that it is a reply to the applicant’s section 345(1) notice. In that letter the respondent denies being indebted to the applicant for any amount of whatever nature. In that letter the respondent specifically state the reasons for disputing the applicant’s claim. The respondent also warn the applicant that any application for their liquidation will be mala fide and will be opposed and it will seek a punitive cost order against the applicant. The respondent further advises the applicant that should they wish to institute legal action against them they are invited to serve summons and that it will file a counter-claim against the applicant’s claim.

On receipt of the respondent’s reply to its section 345 notice, it was clear to the applicant that a dispute of fact is going to arise which could not be resolved on papers. The respondent also gave the applicant a friendly advice that should it decides to institute legal proceedings against it, it must proceed by way of action. This was simply to inform the applicant that motion proceedings will not be able to resolve this matter as a dispute of fact will definitely arise. The respondent went further to warn the applicant that should it proceed with its liquidation application that application will be mala fide, and it will oppose it and ask for a punitive cost order. The applicant has ignored all these warnings.

[18] It is clear that the applicant wanted to take a shortcut by using the liquidation application as debt collecting tool which might scare the respondent to pay immediately. It knew that should it proceed by way of action, that litigation will probably take some time before the matter is finalized. However, in motion proceedings it will be much quicker. This type of litigation should be stopped in its infancy before it develops into practice. This in my view is a clear abuse of Court processes and this is the kind of matter where a punitive order of costs would be justified.

[19] In the result I make the following order: 19.1) The applicant’s application is dismissed 19.2) The applicant is to pay the respondent’s costs on an attorney and client scale.

Southern African Shipyards (Pty) Ltd v MFV "Polaris" and Others (AC42-2017; AC48-2017) [2018] ZAWCHC 48 (18 April 2018)

Business rescue- section 10 of the Admiralty Jurisdiction Regulation Act 105 of 1983 (‘AJRA’) still refers to old act- the provisions of section 10 of AJRA and section 133 of the 2008 Companies Act appear to be in conflict with each other-AJRA followed

This matter raises an interesting issue which is yet to receive treatment before our Courts, that is, the interface between section 10 of the Admiralty Jurisdiction Regulation Act 105 of 1983 (‘AJRA’) and section 133 of the Companies Act 71 of 2008

[24] The respondents have raised two points in limine in their answering affidavit but they only persist with one, namely, that section 10 of AJRA is in conflict with sections 128 to 155 (Chapter 6 of the 2008 Companies Act) in that, in terms of the 2008 Companies business rescue proceedings place a moratorium on the pending

application. Whilst not mentioned by the respondents, the specific provision of the 2008 Companies Act which places a general moratorium on proceedings against a company is section 133.

[25] It is argued on behalf of the respondents that the provisions of the 2008 Companies Act, as envisaged in section 5(4)(b)(ii), prevail, except to the extent provided otherwise in section 118(4) of that Act. It is further submitted that if it was the intention of the legislature for AJRA to have supremacy over the 2008 Companies Act, AJRA would have been included in the set of national legislation set out in section 5(4) of the 2008 Companies Act, which must be deferred to in the event of conflict, alternatively the Legislature would have included business rescue proceedings in section 10 of AJRA, in order to avoid any conflict between the two statutes.

[26] Furthermore, regard should be had to section 7(k) of the 2008 Companies Act, which points to the Legislature’s intention, and wherein it is stated that the purpose of the Act is to “provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders.”

[27] It is further contended on behalf of the respondents that the applicant’s reliance on judicial management proceedings, as contemplated by the Companies Act 61 of 1973 (‘the 1973 Companies Act’) is misplaced in that the latter Act has been repealed and along with it, judicial management provisions have been abolished. Hence, the 1973 Companies Act and/or judicial management cannot be applicable in this instance. In any event, so the respondents contend, business rescue proceedings are distinct from judicial management. The respondents consequently submit that this application should be dismissed on that ground alone and that the mfv Polaris and the contents thereof be released to the third respondent so that the business rescue practitioner can begin with his work.

[28] The respondents raise another defence of a counter-claim in which they state that the applicant owes the third respondent an amount of R1 200 000.00 in respect of a defective engine which was installed by the applicant onto the mfv Polaris. They deny that the vessel is deteriorating and contend that the claimants stand a better chance to get good value in business rescue proceedings than selling the vessel on auction.

[29] The applicant, on the other hand, denies the applicability of section 133 of the 2008 Companies Act to these proceedings, an issue dealt with shortly below. It also contends that the conduct of the respondents amounts to abuse of process in that they failed to take action when claims were lodged by various creditors leading to the arrest of the mfv Polaris since September 2017; they abandoned the vessel and her crew (who repatriated to Indonesia); they allowed the vessel to stand for a period of over five months during which time it has been falling into disrepair and devaluing; they failed to enter opposition at the provisional stage of this application; they entered notice of intention to oppose upon return day at the eleventh hour and failed to file any papers until the day of the hearing; they agreed to orders to file papers by 1 March 2018; and acted in contempt of such orders. The applicant further submits that the stay of these proceedings would in any event not release the mfv Polaris and the Cargo as they are under arrest.

Interaction between s 10 of AJRA and s 133 of the Companies Act

[44] Mr Mayosi’s contention as I understand it is that with the introduction of business rescue proceedings, the 2008 Companies Act presents a new phenomenon of general moratorium by way of statute (section 133), which directly conflicts with section 10 of the AJRA. According to him, this is different from the previous dispensation (which was presumably harmonious in application) as it carries an object which, if section 10 were to apply, would undermine the whole fabric of business rescue. Apart from that, his argument is that the words ‘business rescue’ do not appear in section 10 and the absence thereof should indicate that the Legislature had intended for that section not to apply to a business rescue practitioner or business rescue proceedings. Furthermore, if business rescue is found to be implied in section 10, the stay of proceedings in section 133 supersedes the provisions of section 10.

Approach to interpretation of statutes

[55] Before determining how the two statutes, which are the subject of this matter, are to be interpreted vis a vis one another, it serves well to start with the question whether business rescue proceedings or business rescue practitioner are included in section 10 of AJRA.

Is business rescue incorporated in s 10?

[58] To place a company under business rescue does not require a court order, (although a court can still be approached), a resolution puts the process in motion and a business rescue practitioner is appointed to, inter alia, investigate the affairs of the company, prepare a rescue plan and oversee its implementation (Merchant West supra at para 12)

[59] Judicial management on the other hand was an extraordinary remedy which required an application to be launched in the High Court, in which an applicant had to satisfy the Court that a “reasonable probability” existed that the company, if placed under judicial management, would be able to pay its debts, and ultimately be restored to a successful business. The judicial manager appointed by the Court investigated the company’s affairs and reported on the likelihood of a successful restoration of the company, which views would be taken into account by the court when considering whether to grant a final order of judicial management. (Merchant West supra at para 11)

[64] It will however serve the Legislature well to amend section 10 by expressly replacing reference to judicial manager / judicial management with business rescue practitioner and business rescue proceedings in keeping with the introduction of the concept of business rescue in the 2008 Companies Act.

How does one deal with the conflict between the two applicable statutes?

[65] Section 5(4) of the 2008 Companies Act regulates the general interpretation of that Act vis a vis other statutes. It provides the following:

“General interpretation of Act …

(4) If there is an inconsistency between any provision of this Act and a provision of any other national legislation-

(a) the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and

(b) to the extent that it is impossible to apply or comply with one of the inconsistent provisions without contravening the second-

(i) any applicable provisions of the-

(aa) Auditing Profession Act;

(bb) Labour Relations Act, 1995 (Act No. 66 of 1995);

(cc) Promotion of Access to Information Act, 2000 (Act No. 2 of 2000);

(dd) Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000);

(ee) Public Finance Management Act, 1999 (Act No. 1 of 1999);

(ff) Securities Services Act, 2004 (Act No. 36 of 2004);

(gg) Banks Act;

prevail in the case of an inconsistency involving any of them, except to the extent provided otherwise in sections 30(8) or 49(4); or

(hh) Local Government: Municipal Finance Management Act, 2003 (Act No. 56 of 2003); or

(ii) Section 8 of the National Payment System Act, 1998 (Act No. 78 of 1998).

(ii) the provisions of this Act prevail in any other case, except to the extent provided otherwise in subsection (5) or section 118(4).” (Underlined for emphasis)

[72] Stay of proceedings in the Companies Act is not a new occurrence. In terms of section 359(1) of the 1973 Companies Act legal proceedings were suspended when a Court had made an order for the winding-up of a company. They could also be stayed by a Court before the winding-up order was granted in terms of section 358 of that Act. It has also been mentioned that in judicial management Courts regularly directed that proceedings be stayed.

[86] I thought about whether this Court should have rather disposed of this matter only on the basis that the business rescue decision was not bona fide, my sense was that that was not sufficiently canvassed before me and that that was not the focus of the case presented by the parties per se. The case was argued mainly on the point in limine.

[87] Returning to the condonation application for the late filing of the answering affidavit, the explanation given in respect thereof is sorely inadequate. It has also not been compensated for by the merits of the case. There is, therefore, no point in condoning its lateness, although much of it rested on the point in limine which I have extensively dealt with.

[88] The applicant seeks costs on attorney and client scale on the basis that it is practise to do so in these kinds of matters. It relies on the decision of Brooks v the Taxing Master [1960] 3 All SA 160 at 165, where the Court considering what scale costs should be awarded in judicial management proceedings as a matter of

statutory interpretation addressed instances of insolvency and sequestration generally, and found that a person approaching a Court for such an order did so not only in their own interest, but in the interest of all creditors and it seemed “equitable that such person should, subject to the limits of attorney and client taxation, receive a full indemnity for his costs.” I see no reason why same should not be found in the instant matter.

[89] For all these reasons, the application should succeed.

[90] I therefore make the following order:

1. Condonation for the late filing of the answering affidavit is refused.

2. The application succeeds with costs on attorney and client scale.

3. The Rule Nisi granted on 30 January 2018 by Davis AJ and duly extended is made final.

Treif Distributors (Pty) Ltd t/a Sacks Butchery v Benade and Another (5797/17) [2018] ZAWCHC 50 (20 April 2018)

Sequestration application- nulla bona returns of service-potentially impeachable transaction seen as advantage to creditors-sheriff reprimanded concerning service

The first respondent, an attorney who previously practiced in Worcester, left the profession a number of years ago to run a number of restaurants through various corporate entities. The applicant butchery supplied meat to certain of those restaurants from time to time. One of the companies utilised by the first respondent in this business venture was Coral Reef Hospitality (Pty) Ltd (“Coral Reef”).

[2] During 2009 Coral Reef experienced cash flow problems and the butchery became concerned about its creditworthiness. It accordingly required of the first respondent that he execute an acknowledgement of debt (“an AOD”) on behalf of Coral Reef in favour of the butchery. The first respondent begrudgingly obliged and signed the necessary documentation on 16 October 2009. Thereafter Coral Reef was wound up and the butchery sought to prove a claim in liquidation. Eventually, in January 2015, it recovered an amount of R10 213,89, which left a substantial balance due under the AOD.

[3] In 2010 the butchery issued summons out of the Heidelberg Magistrates’ Court against the first respondent for payment of his obligations under the AOD. That action was resolutely defended but ultimately the butchery’s claim was upheld by the magistrate in the amount of R180 486,29 plus interest and costs. Undeterred, the first respondent soldiered on. He noted an appeal to this court which was dismissed on 25 April 2016 and thereafter sought leave to appeal further from the Supreme Court of Appeal, which application was dismissed on the turn on 15 August 2016. Accordingly, after more than 6 years of litigation aimed at avoiding his contractual liabilities to the butchery, the first respondent was liable to it for the payment of capital, interest and the various costs orders incurred in three courts.

[4] Bills of costs were prepared in respect of the litigation in all three courts and after taxation the total thereof amounted to R120 408,81. Thereupon, the applicant issued various writs of execution out of the Heidelberg Magistrates’ Court for service on the first respondent at his residence in nearby Witsand, a holiday resort at the mouth of

the Breede River, where he and his wife, the second respondent, have retired[1]. They live in a house owned by the Sonja Benade Trust (“the Trust”) an entity which bears the name of the second respondent.

[5] I shall return to the steps taken by the Sheriff for Riversdale (and who covers the Heidelberg district) later. Suffice it to mention at this stage that returns of nulla bona were issued by the Sheriff. Armed with such returns of service, the applicant approached this court on 30 March 2017 for a provisional order of sequestration of the first respondent; the second respondent (to whom the first respondent is married out of community of property) having been cited nominally by virtue of her marital status.

THE SEQUESTRATION APPLICATION

[6] In its founding papers the applicant, relying on the nulla bona returns of service, alleged an act of insolvency on the part of the first respondent in terms of s8(b) of the Insolvency Act, 24 of 1936. The first respondent filed an opposing affidavit (termed a “Replying Affidavit”) in which a plethora of technical points was raised. The matter eventually came before Burger AJ on 22 June 2017 who refused a last-minute application for a postponement and issued a provisional order of sequestration returnable on 2 August 2017.

[7] In his judgment, Burger AJ noted that the only issue before him was whether there would be any advantage to creditors in the event of sequestration taking place. The Learned Acting Judge was satisfied that the applicant had established a prima facie case and granted the provisional order on this basis.

[8] On 2nd August 2017, the matter came before Papier AJ on the return day of the provisional order when the first respondent put up a further answering affidavit in which more points were raised. In the result the matter was postponed for hearing on the semi-urgent roll on 7 November 2017, with the parties being given leave to file supplementary affidavits and with further directions as to the filing of heads of argument. In the result the matter did not proceed on that day for reasons which are not material at this stage and eventually came before this court on 8 March 2018.

[9] On that day the applicant was represented by Adv D. Goldberg and the first respondent by Adv C.W.Kruger. The second respondent did not participate in the proceedings given that no relief was sought against her. The Court is indebted to counsel for their helpful heads of argument and submissions at the hearing.

[10] Notwithstanding a host of points, both technical and otherwise, taken in the opposing papers by the first respondent, Mr. Kruger focused his argument solely on the issue of whether a final order of sequestration would be in the interests of the general body of creditors. Mr. Goldberg joined issue on this point and it is to that point which I now turn.

POTENTIALLY IMPEACHABLE TRANSACTION

[16] The facts before the court show that the first respondent previously owned a property in Worcester which was sold in 2015 for R640 000. This occurred while he was in the midst of the litigation relating to the AOD but it is not in dispute that it was an arm’s length transaction. The net proceeds of that transaction, says the first respondent, amounted to R340 207,28. While it is common cause that part of this amount was paid into the bank account of the Trust, the first respondent does not

disclose what the amount in fact was. But, as Mr. Goldberg pointed out, the provisions of s 26(1)(b) of the Insolvency Act are applicable to that transaction.

“S26 Disposition without value

(1) Every disposition of property not made for value may be set aside by the court if such disposition was made by an insolvent -

(a)…..

(b) within two years of the sequestration of his estate, and the person claiming under or benefited by the disposition is unable to prove that, immediately after the disposition was made, the assets of the insolvent exceeded his liabilities:

Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of such excess.”

[18] In the circumstances I am satisfied that there is a reasonable prospect, (and one which is certainly not too remote) that the sequestration of the first respondent could lead to an enquiry that might establish sufficient assets to settle the applicant’s claim, at least a part thereof. Accordingly, in the exercise of my discretion I consider that it is appropriate to grant a final order of sequestration in this matter.

THE NULLA BONA RETURNS OF SERVICE

[19] In his answering affidavit of 11 May 2017 the first respondent took issue with the circumstances under which the Sheriff served the writs of execution and filed his nulla bona return, claiming that –

“Neither, The (sic) Sheriff, Mr. Gavin Michaels, nor any of his duly authorised representative/s, agent/s or assistant/s have at any material time performed, what could reasonably be described as a ‘diligent search’, of….my wife’s.…home and premises..[at]..Witsand, which constitutes her, my and Louis Jnr’s primary residence; as he and his assistant have only ever been in one room of the house, namely the open plan living-room on the first story level…”

The first respondent went on to allege that the return was impeachable and could not be relied upon by the applicant for purposes of sequestration.

[26] The office of the Sheriff is a vital cog in the machinery of the justice system. It requires absolute honesty and integrity on the part of the officers in question whose ipse dixitin regard to returns of service is implicitly relied upon by the courts day in and day out. The duties and functions of a Sheriff are circumscribed in the Sheriffs Act, 90 of 1986 and Chapter IV of that act specifically deals with improper conduct. In terms of s43(1)(b) thereof the making of a false return is designated as improper conduct on the part of a sheriff.

[27] In light of the allegations made under oath by Messers Michaels and Albertyn and Ms. Pietersen in this matter, it is necessary that the matter be brought to the attention of the South African Board for Sheriffs for its consideration.

A. The rule nisi is confirmed and there shall be a final order of sequestration against the first defendant. B. The Registrar of this court is directed to forward a copy of this judgment to the South African Board for Sheriffs.

South African Bank of Athens Limited and another v Zennies Fresh Fruit CC and others [2018] JOL 39519 (WCC)

Business rescue proceedings – Companies Act 71 of 2008 – Termination of business rescue proceedings – Although no evidence existed to suggest that the business rescue plan was not approved, if business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings – Where an extraordinarily long period of time had passed since the business rescue proceedings were initiated, court making order terminating business rescue proceedings

Two applications were consolidated in this court as they both related to a common respondent (“Zennies”). Each of the applicants (“Business Partners” and a bank) sought a declaratory order that the business rescue proceedings in respect of Zennies had ended or lapsed in terms of section 132(2)(c)(1) of the Companies Act 71 of 2008 (“the Act”). Zennies on the other hand denied that the business rescue proceedings had been terminated and averred that the applicants were not entitled to proceed against it in terms of section 133 of the Act, which section places a general moratorium on legal proceedings against a company in those circumstances.

On 30 January 2017, the sole member of Zennies signed a resolution to place it under voluntary business rescue proceedings in terms of section 129(1) of the Companies Act. The business rescue proceedings commenced on 1 February 2017. On 3 February 2017, a certain person (“Schneider”) was appointed as the business rescue practitioner for Zennies. On 17 February 2017, the first creditors’ meeting for the general body of creditors of Zennies took place in terms of section 151 of the Act. There were two creditors present, namely Business Partners and the bank. On 9 March 2017, a business rescue plan (“the plan”) was published by Schneider.

The events at the second meeting of creditors was at the centre of the present dispute. According to the supplementary affidavit of Business Partners, Schneider had prepared and published the plan prtior to the meeting, and the plan was to be tabled for discussion and voting at the second creditors meeting. On the ground that Schneider had been unable to confirm certain information at the time of compiling the plan, it was suggested that the second meeting and the voting on the plan be adjourned until the relevant information and facts were more firmly established. Business Partners claimed that in terms of section 153(3)(a)(ii) of the Act, Schneider was required to prepare and publish a new or revised plan within ten business days from the date of the second creditors’ meeting, that period so it was stated, having lapsed on 6 April 2017 and neither it nor the bank had agreed to extend the time period for him to prepare and publish a new or revised plan. It therefore sought a declaratory order that the business rescue of Zennies had ended and / or lapsed in terms of section 132(2)(c)(i) of the Act.

On 3 May 2017, the bank brought a liquidation application against Zennies. The founding affidavit addressed only the requirements necessary to seek a winding up order, and did not deal with the business rescue of Zennies, nor did it ask for the termination of the business rescue on the basis of what had purportedly transpired at the second meeting. In its replying affidavit, the bank averred that Zennies was no longer under business rescue, the contention being that there was no agreement to extend the time periods in reply to the allegation that all parties present agreed to extend the time periods in order to file an amended business rescue plan.

Zennies, on the other hand, contended that as a result of the lack of information available to Schneider at the second meeting and the creditors’ position at the time, the plan was not accepted, and the meeting was adjourned on the basis that Scheider would amend the plan and address the concerns raised by the creditors. It argued that on Schneider’s version, all of the parties present at the second meeting agreed to extend the time periods to file an amended business rescue plan and that the plan was neither accepted nor rejected. Its contention was that it remained under business rescue and that, without the consent of Schneider or the leave of the court, the moratorium against any proceedings being instituted against it remained in place.

Held that in deciding whether the business rescue proceedings had terminated or whether Zennies was still under business rescue, the court had to determine whether it was agreed to amend the plan as contemplated in section 152(1)(d)(ii) without rejection of the plan; whether if the plan was rejected, a further step was taken within the ambit of section 132(2)(a)(ii) thereby preventing the termination of the business rescue proceedings; and whether, if a further step within the contemplation of section 132(2)(a)(ii) was taken, the business rescue still automatically terminates if the business rescue practitioner fails in any of his other statutory obligations.

The crisp question was whether the fact that no vote was taken to approve the plan at the second meeting justified a conclusion that the plan was rejected as envisaged by section 152(3)(a) of the Act. The latter section provides that if a proposed business rescue plan is not approved on a preliminary basis, as contemplated in subsection (2), the plan is rejected, and may be considered further only in terms of section 153. Section 153 of the Act only kicks in when a business rescue plan has not been approved and subsequently rejected. Section 153 provides for remedies in the event that a business rescue plan has not been adopted. Those include seeking a vote of approval by the practitioner from the holders of voting interests to prepare and publish a revised plan or apply to court to set aside the result of the vote. In terms of section 153(5), if no person takes any action contemplated in subsection (1), the practitioner “must promptly file a notice of the termination of the business rescue proceedings.”

In this case, the business rescue practitioner had not filed a notice of termination of the business rescue proceedings in either of the applications. In the event that a practitioner is directed to adjourn the meeting in order to revise the plan for further consideration, one of two things can occur in terms of section 152(1)(e). First, the practitioner would have to call for a vote for preliminary approval of the proposed plan, as amended if applicable unless the meeting has first been adjourned in accordance with paragraphs (d)(ii).

The Court found no evidence to suggest that the business rescue plan was not approved.

That however, was not the end of the inquiry. Although the Act does not directly specify the length a company can be under business rescue, section 132(3) provides a guide under which the legislature envisaged companies to remain under business rescue. That section provides that if a company’s business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings. No such application was brought by Schneider to extend the business rescue. There had been an extraordinary long period of time since the business rescue proceedings were initiated. The mechanisms of business rescue proceedings were not designed to protect a company indefinitely to the detriment of the rights of its creditors. The delay in the finalisation of the business rescue proceedings were found to be unreasonable in the circumstances and the court made an order terminating the proceedings. The relief sought in each of the applications against Zennies was then granted.

Visser v Sunset Point Properties 380 CC and others [2018] JOL 39567 (NWM)

Close corporation – Application for liquidation

The applicant was a member of the first respondent close corporation (CC). The main purpose of the CC was to develop and erect residential units on certain immovable property. While the project was intended to take 6 months to complete, it extended for years, causing financial loss to the applicant and the CC. The applicant sought the provisional liquidation of the CC.

Held that the applicant had been the only active member of the CC for a while, and was solely responsible for its running. The CC had not been trading for a period of more than 2 years. It was clear that some of the residential units on the developed property had been sold. The Court was not told why the proceeds therefrom could not be used to liquidate a loan taken by the CC. because of the manner in which the applicant was conducting the financial affairs of the CC, it was crucial for the Court to satisfy itself that from the financial status of the CC, its liabilities exceeded its assets and that the applicant, as a surety, was not in a position to honour his obligations towards payment of the mortgage bond. The Court was not persuaded that that was the position. The application was dismissed.

Mngomezulu and another v Van den Heever NO and others [2018] JOL 39548 (GJ)

Curator bonis appointed in respect of property made subject to provisional restraint order granted in terms of Prevention of Organised Crime Act 121 of 1998 –Court confirming duty to account in respect of administration of property when the restraint order fell to be discharged-Section 28 of POCA allows for the appointment, by the court that has granted the restraint order, of a curator bonis to take possession and control of the restrained property. This appointment can occur at any time after the restraint order is granted. The Curator acts, at all times, subject to the directions of the court. Such directions can be varied from time to time. In terms of section 26(10)(b) of

POCA the court must rescind the restraint order when the proceedings against the defendant are concluded.

In terms of section 32(2) of POCA the provisions of the Administration of Estates Act apply mutatis mutandis in relation to the functions of a Curator appointed under POCA. Thus the obligation to account under POCA is owed to the Master in accordance with section 83 of the Administration of Estates Act

The respondents were: Theodore Wilhelm Van Den Heever NO (1R), Theodore Wilhelm Van Den Heever (2R), National Director of Public Prosecutions (3R), Master of the High Court, Johannesburg (4R), Minister Of Justice And Constitutional Development (5R), BASFOUR 481 (Pty) Ltd (6R), Companies and Intellectual Property Commission (7R), Commissioner: Companies And Intellectual Property Commission (8R), Government of the Republic of South Africa (9R), Master of the High Court, Pretoria

The first applicant was arrested on various criminal charges during July 2004. On 17 September 2004, the third respondent (“NDPP”) brought an ex parte application for a restraint order against the applicants, who were married to each other. The court granted a provisional restraint order and appointed the first respondent (“the curator”) as curator bonis. The restraint order was made final on 21 January 2005 and pursuant thereto letters of curatorship were issued.

Although the first applicant was acquitted of all charges against him in July 2012, the restraint order and the curatorship remained in operation, and had done for more than 13 years. For the period that the restraint order had been in force, the property had been under the control of the curator, and the applicants and the various companies and close corporations had not been able to deal with it. The curator had, as yet, made no formal accounting as to his administration of the property.

While the applicants sought orders rescinding the restraint order – to which they were entitled in light of the acquittal, they contended that those orders should be granted subject to compliance with certain conditions. Central to the proposed conditions was the recognition of the common law obligation to account fully to the applicants and the discharge of the curator only once the accounting procedure contended for and any statement and debatement process which may follow has been finalised. the curator and the State opposed the application on the basis that the restraint order should be rescinded and that the curator should be unconditionally discharged with immediate effect, with only the obligation to account to the Master on the limited basis provided for in the Administration of Estates Act 66 of 1965. The curator argued that the applicants were entitled only to an accounting in terms of the Prevention of Organised Crime Act 121 of 1998 and not under the common law.

Held that the curator’s contention that he was obliged only to account under the Prevention of Organised Crime Act, arose as a result of a failure to appreciate that his obligation as curator is both statutory, in relation to his function within the Act and fiduciary vis-à-vis the applicants. That failure also underpinned the contentions of the State.

As the curator is in total control of the property, and stands in a fiduciary relationship towards the applicants in relation to the restrained property, he is therefore in the ordinary course, under a duty at the end of his period of office to render an account to them in the manner required by the common law. The purpose of the Prevention of

Organised Crime Act is to provide a civil remedy for the preservation, seizure and forfeiture to the State, of property which is derived from or concerned with the carrying out of unlawful activities. The accounting prescribed is devised to meet that purpose. It is primarily, if not entirely, fashioned to serve the interests and purposes of the State. It does not describe nor facilitate the fiduciary obligations and duties owed to an owner in relation to the administration of his property. The Court confirmed that the curator was obliged to account to the applicants under the common law, which obligation went beyond the requirements of the accounting prescribed under the Act.

The Court then turned to the dispute in relation to whether the curator should be immediately discharged (as the respondents suggested) or not. The appointment of the curator occurred in terms of the Prevention of Organised Crime Act and thus his fiduciary relationship to the applicants arose from such statutory appointment. Section 28(3)(b) states that a court “shall rescind the order and discharge the curator bonis concerned if the relevant restraint order is rescinded”. the court rejected the submission on behalf of the curator to the effect that section 28(3)(b) does not permit of the interpretation contended for by the applicants – namely that the curator need not be discharged immediately on rescission of the restraint order and that he can and should remain in office until the accounting and debatement process is at an end. There is no time limit prescribed for the discharge of the curator and, as set out above, the office created by the Act envisages court oversight as a central ingredient of the office.

The orders of restraint and surrender of property were rescinded, and the first respondent was ordered to render a full and proper account to the applicants, within 30 days of the date of the grant of the order in respect of the curator's curatorship of all the property which had at any time been subject to the curator's curatorship under the restraint orders.

Alderbaran (Pty) Ltd and Another v Bouwer and Others (19992/2017) [2018] ZAWCHC 38 (22 March 2018)

Business rescue-just and equitable in section 130 (5) does not stand alone-As Wallis JA made clear in Panamo, the provisions in subsections 130(5)(a)(i) and (ii) must be read conjunctively, and the word “or” must be read as if it were “and”, so that the just and equitable requirement referred to in section 130(5)(a)(ii) must not be understood an independent ground for setting aside a resolution in terms of section 130(1)(a), but as an additional requirement to be satisfied along with the need to establish one or more grounds for setting aside in terms of section 130(1)(a)(i), (ii) and (iii).

Business rescue-no statement under oath regarding the facts relevant to the grounds on which the first resolution was based-resolution set aside

Business rescue-“enforcement action” for the purposes of section 133(1). includes sales in execution within the notion of “enforcement action” is consonant with the overriding objectives of the remedy of business rescue.

Business rescue-business rescue practitioner not entitled to fees-The second applicant is precluded from claiming any remuneration from Alderbaran 11 (Pty) Ltd for his services as business rescue practitioner. it emerges from correspondence attached to the supplementary affidavit that Faizel Noor, although nominally in control as the BRP, was not truly in control of the affairs

There are two related applications before the court:

1.1. The main application is one brought by Alderbaran (Pty) Ltd, the first applicant (“Alderbaran”), and Faizel Noor, the second applicant, in his capacity as the business rescue practitioner of Alderbaran (“Faizel Noor”), to interdict the transfer to the third respondent, Trade Off 118 (Pty) Ltd (“Trade Off”), pursuant to a sale in execution, of an immovable property belonging to Alderbaran, and to declare such transfer unlawful in terms of section 133 of the Companies Act 71 of 2008 (“the Act”) on the grounds that Alderbaran is in business rescue (“the main application”).

1.2. The second application is a counter-application brought by the first respondent in the main application, Gideon Phillipus Bouwer (“Bouwer”), being the execution creditor in respect of the aforementioned sale in execution, for the setting aside of the resolution placing Alderbaran under business rescue and the termination of the business rescue in terms of section 130 of the Act (“the counter-application”).

35. On the view I take of the matter it is not necessary for me to decide whether the sale in execution of the property constitutes “enforcement action” for the purposes of section 133(1). If I had to decide the question, I would hold that it does, since in Cloete Murray and Another NNO v Firstrand Bank Ltd t/a Wesbank,[4] Fourie AJA commented, albeit obiter, that “ ‘enforcement action’ relates to formal proceedings ancillary to legal proceedings, such as the enforcement or execution of court orders by means of writs of execution or attachment.” I respectfully agree that with this view. I consider that an interpretation of section 131(1) which includes sales in execution within the notion of “enforcement action” is consonant with the overriding objectives of the remedy of business rescue. It would, in my view, work against the efficacy of the remedy to hold that a sale in execution of property belonging to the company is not covered by the general moratorium, since that would permit a situation where assets essential to the production of company income, such as plant and machinery, could be sold in execution to satisfy prior judgment debts, thereby bringing the business of the company to a halt and scuppering any prospects of rescue.

36. I shall therefore assume, for purposes of argument, that the sale in execution of the property on 15 June 2017 constituted “enforcement action” of the type envisaged in section 133(1). The question then, as I see it, is whether the relief sought in the counter-application should be granted, more particularly:

36.1. whether the first resolution should be declared invalid and set aside, in terms of section 129(5)(a) read with section 130(1)(a), and the resultant business rescue proceedings terminated in accordance with 132(2)(a)(i) of the Act, and, if so

36.2. whether a consequential order should be granted confirming the validity of the sale in execution as a necessary and appropriate order of the type envisaged in section 130 (5)(c) of the Act.

SHOULD THE FIRST RESOLUTION BE SET ASIDE AND THE BUSINESS RESCUE PROCEEDINGS TERMINATED

37. Section 130 (1) of the Act

39. As Wallis JA made clear in Panamo, the provisions in subsections 130(5)(a)(i) and (ii) must be read conjunctively, and the word “or” must be read as if it were “and”, so that the just and equitable requirement referred to in section 130(5)(a)(ii) must not be understood an independent ground for setting aside a resolution in terms of section 130(1)(a), but as an additional requirement to be satisfied along with the need to establish one or more grounds for setting aside in terms of section 130(1)(a)(i), (ii) and (iii).

40. I must therefore be satisfied that Bouwer has made out a case that a) there is no reasonable ground for believing that Alderbaran is financially distressed, or b) there is no reasonable prospect for rescuing Alderbaran, or c) Aldebaran failed to satisfy the procedural requirements of section 129, and that it would be just and equitable to set aside the resolution having regard to all the evidence in this particular case.

41. It is important to note that there was no statement under oath regarding the facts relevant to the grounds on which the first resolution was based, as required in section 129(3)(a) of the Act. It can be accepted on the papers that no business plan was adopted pursuant to the first resolution. Indeed, it is clear from the supplementary affidavit that there has been no attempt to have a business rescue plan adopted pursuant to the second resolution, let alone the first.

42. The real business of Alderbaran is not clear from the papers. The statement on oath signed by Shaheed Noor in support of the second resolution refers to the provision of services in the electrical industry. The veracity of this allegation is doubtful, however, when one considers that Alderbaran submitted annual returns to CIPC for the 2014, 2015 and 2016 years which indicated zero turnover. This is incompatible with the notion of a services provider actively engaged in the electrical industry which has hit upon cash flow problems due to non-payment by its debtors. This description of the business of Alderbaran also appears to be inconsistent with the contents of the supplementary affidavit which strongly suggest that Alderbaran is, in truth, nothing more than a property holding company seeking to exploit an opportunity to make a profit through the subdivision of the property into plots for sale.

43. The full extent of Alderbaran’s assets and liabilities has not been disclosed by the applicants. The only liability of which one can be certain is Bouwer’s claim under the default judgment for R 950 000.00, excluding interest and costs. In my view the documents which purport to substantiate the alleged claims of Shaheed Noor, Zayd Noor, Faizel Begg and Attorney P F Sonnenberg against Alderbaran, all dated 21 August 2017, are inadequate and unreliable. It seems to me that the alleged claims may well be contrived in an attempt to lend credence to the second resolution and the subsequent attempts to comply with the formalities relating to business rescue. (At that stage the applicants were evidently not aware that reliance on the second resolution was a futile exercise in the light of the Panamo judgment.)

44. What is clear on the papers is that the procedural requirements set out in section 129 were not satisfied by Aldebaran in respect of the first resolution, for it is not disputed that:

44.1. no statement on oath was signed in support of the first resolution, as envisaged in section 129(3)(a)(i);

44.2. there was no publication of the first resolution to affected persons, as required in section 129(3)(a)(i);

44.3. there was no publication of notice of the appointment of Faizel Noor as business rescue practitioner to affected persons, as required in section 129(4)(b).

45. In the circumstances I am satisfied that the first resolution falls to be set aside in terms of section 129(5)(a) read with section 130(1)(a)(iii).

46. The next enquiry is whether, in the light of all the facts, it would be just and equitable to set the first resolution aside and terminate the business rescue.

47. In my view the enquiry postulated in section 130(5)(a)(ii) is similar to that in section 344(h) of the Companies Act 61 of 1973 (“the old Act”) which dealt with the liquidation of companies on the ground that it appeared just and equitable to the Court. As in the case of section 344(h) of the old Act, the conclusion that the termination of the business rescue would be just and equitable involves the exercise, not of a discretion, but of a judgment on the relevant facts, but once that conclusion has been reached, the making of an order to set aside the resolution and terminate the business rescue does involve the exercise of a discretion. (See Henochsberg on the Companies Act, commentary on section 344(h) of the old Act.)

48. In my judgment the following facts and circumstances are relevant in relation to the question whether or not it would be just and equitable to set aside the first resolution and terminate the business rescue.

48.1. In the first instance, the timing of the first resolution is suspicious: it was passed on the same day the rescission application was dismissed, which suggests that it was motivated by the ulterior purpose of warding off execution of the default judgment. That suspicion is compounded when one considers that no steps were taken to comply with the procedural requirements of section 129 after the passing and filing of the first resolution. No business rescue plan was drafted let alone adopted pursuant to the first resolution. Indeed it appears that Faizel Noor took no steps whatsoever to implement the business rescue after 13 September 2016.

48.2. Second, it emerges from correspondence attached to the supplementary affidavit that Faizel Noor, although nominally in control as the BRP, was not truly in control of the affairs of Alderbaran, and that the real driving force behind the efforts to promote the subdivision and development of the property was Shaheed Noor, the director of Alderbaran.

48.3. Third, the circumstances referred to in the two preceding paragraphs lead me to the ineluctable conclusion that first resolution was not passed in

good faith in that there was no genuine intention to attain the objectives of the Act in regard to business rescue. The remedy of business rescue was used as a stratagem to defeat Bouwer’s enforcement of the default judgment. (See Griessel and another v Lizemore and others [2015] 4 All SA 433 (GJ) at paras 83 and 84, where it was held that a resolution to commence business rescue must be passed in good faith, and that business rescue must not be used as a “litigation strategy” or to prevent a creditor from enforcing a claim to the full extent.) In my view the real reason for the resort to business rescue in this case is clear: Alderbaran is desperate to hold onto the property as it hopes to subdivide the property and make a handsome profit on the sale of the subdivided units. Its ambitions in this regard will be dashed if the property is transferred to Trade Off pursuant to the sale in execution, allowing Trade Off to pursue the development and reap the rewards.

48.4. Fourth, Bouwer has not been paid what he is owed for the property. If the business rescue if not set aside, the result will be that he is effectively compelled to act as Alderbaran’s banker against his wishes inasmuch as he will be prevented from enforcing his right to payment in terms of the default judgment. And it is significant in this regard that no indication is given in the supplementary affidavit as to whether the installation of services on the property has commenced, how this work is to be financed, when the approval of the subdivision is anticipated, and how long it will take for the plots to be sold and sufficient funds generated to pay Bouwer - and other possible creditors of Alderbaran.

49. In view of these circumstances I consider that justice and equity will best be served by setting aside the first resolution and terminating the resultant business rescue.

74. I respectfully agree that the regulation 124 might well be ultra vires what may lawfully be prescribed under section 131 (2)(b) (and 130(3)(a)) if, properly construed, it requires service of the whole application on all affected parties. However I humbly disagree with this interpretation of regulation 124. It seems to me that regulation 124 requires delivery of a copy of the application in accordance with regulation 7 to all affected persons known to the applicant. Regulation 7 specifically refers to section 6(11) of the Act, which, in terms of section 6(11)(b)(ii), allows for a summary of the contents of the application to be delivered by email where the whole application cannot be printed conveniently by the recipient, for instance because it is too voluminous to be printed quickly and cheaply. Furthermore regulation 7(1) permits delivery in any manner referred to in Table CR 3, which provides for a number of delivery options and includes any method of delivery authorised by the High Court. It therefore seems to me inaccurate to say that regulation 124 requires service of the whole application on all affected parties. The scope of regulation 124 is limited to affected persons known to the applicant, and delivery in accordance with one of the methods sanctioned in section 6(11) or Table CR 3, read with regulation 7(1), is what is required.

75. In this case the counter-application for the setting aside and termination of business rescue in terms of section 130 was served on the applicants’ attorneys of record. That constitutes proper service in terms of rule 4(1)(aA) of the Uniform Rules, and I am therefore satisfied that there has been due compliance with section

130(3)(a) insofar as Alderbaran is concerned. However the Commission has not been joined as a party to the counter-application and there has been no service whatsoever of the application on the Commission. The requirements of section 130(3)(a) have therefore not been met.

76. I cannot grant an order in terms of section 130(5) until I am satisfied that the Commission has been duly served with a copy of the counter-application and that it has waived it right to be joined as a party to the proceedings. In the circumstances I intend to deal with this difficulty by issuing a Rule Nisi with directions regarding service of the counter-application and the Rule on the Commission.

77. The requirements of section 130(3)(b) have also not been met inasmuch as a copy of the counter-application was not delivered in any manner or form to any affected persons as defined in section 128 (1)(a) of the Act. In the nature of things Bouwer cannot reasonably be expected to know the identity of the shareholders, creditors and employees of Alderbaran. However, an attempt could and should have been made to obtain the information from Alderbaran through its attorneys. At the very least Bouwer’s attorney ought to have furnished a copy of the counter-application to the alleged creditors of Alderbaran who were named in annexures “X” and “Y” to Bouwer’s answering affidavit, namely Shaheed Noor, Zayd Noor, Faizel Begg and Sonnenberg & Associates. I intend to deal with this omission by directing that the applicants’ attorney furnish Bouwer’s attorney with email and/or physical addresses for these particular creditors and ordering that a copy of the counter-application and the Rule Nisi be delivered to these creditors by email or registered post, as permitted in Table CR 3.

78. The reason why I have decided not to dismiss the counter-application for non-compliance with the peremptory requirements of section 130(3) and to rather issue a Rule Nisi with directions as to service and notice, is that there is a good case on the merits for the relief sought in the counter-application. I have found that it would be just and equitable in all the circumstances to grant the relief, and it follows that it would not conducive to justice and equity to refuse the relief on the technical ground of defective service. I am satisfied that the interests of all affected persons can satisfactorily be catered for by way of the service and notice directions which I intend to make.

COSTS

79. It follows from what has been set out above that the application stands to be dismissed while the counter-application succeeds. The costs must follow the event in accordance with the ordinary rule.

80. Mr Montzinger requested that costs on the attorney and client scale be ordered against Shaheed Noor and Faizel Noor in their respective personal capacities, the one paying the other to be absolved.

81. For reasons already referred to in this judgment I consider that both Shaheed and Faizel Noor have been guilty of an abuse of the business rescue process. I have found that Shaheed Noor did not act in good faith in passing the first resolution. Faizel Noor’s conduct is, in my view, equally reprehensible. He took no steps whatsoever to comply with the requirements of the Act in relation to the first

resolution, and no attempt has been made to explain his supineness. In my view the inference is inescapable that he had no intention of implementing the business rescue pursuant to the first resolution, and that he was a party to Shaheed Noor’s stratagem to prevent Bouwer from executing the default judgment in order to preserve the property in the name of Alderbaran.

82. Another aspect which requires mention is the failure of both Shaheed and Faizel Noor to make full disclosure of the real business and financial position of Alderbaran. The founding affidavit is woefully devoid of relevant details pertaining to the business rescue. Selective portions of the truth – like the contents of Pandora’s Box – emerged piecemeal in response to pertinent enquiries from the Court and challenges by Bouwer. I am left with the uneasy feeling that the full story has not been told. The supplementary affidavit of 6 February 2018 was a desperate attempt to ward off the relief sought in the counter-application, but even then the facts put up were bald and skimpy and raised more questions than they answered. More importantly, these facts should have been put up in the applicants’ founding affidavit, and there was no explanation at all – let alone an acceptable one – why they had not been disclosed at an earlier stage.

83. In all the circumstances I have no hesitation in ordering that the costs of this application be paid on the attorney and client scale by Shaheed and Faziel Noor jointly and severally in their personal capacities, both as a mark of disapproval at the manner in which they have abused the business rescue process, and also because it would not be fair to saddle Alderbaran (and therefore possibly its creditors) with these costs.

84. There is another issue in relation to costs which I feel should be addressed. Given the particular circumstances of this case, I consider that it would not be right for Faizel Noor to charge Alderbaran for remuneration as BRP. But since no relief was sought in this regard, and since the issue was not argued, fairness requires that I give Faizel Noor an opportunity to be heard before making any order in this regard in terms of section 130(5)(c) of the Act. He will be afforded such an opportunity on the return day of the Rule Nisi which I intend to issue.

CONCLUSION

85. In the result I make the following order:

1. The Rule Nisi issued on 22 November 2017 is discharged.

2. The application is dismissed.

3. A Rule Nisi is issued calling upon any interested person to appear before this Court at 10h00 on TUESDAY 24 APRIL 2018 and give reasons, if any, why this Court should not make an order that:

3.1. It is declared in terms of section 129(5)(a) of the Companies Act 71 of 2008 (“the Act”), as read with sections 129(3) and (4) of the Act, that the first applicant’s resolution dated 13 September 2016 to begin business rescue proceedings and place Alderbaran 11 (Pty) Ltd under supervision (“the resolution”) has lapsed and is a nullity.

3.2. The resolution is set aside in terms of section 130(5)(a) of the Act as read with sections 130(1)(a)(iii) and 129(3) and (4) of the Act and it is declared that the business rescue has ended in accordance with section 132(2)(a)(i) of the Act.

3.3. It is declared in terms of section 130(5)(c) of the Act that the sale in execution on 15 June 2017 of Portion 241 (a portion of Portion 63) of the farm Melkhoute Fontein Nr 480, in the Hessaqua Municipality, Division Riversdale, Western Cape, 79,7029 hectares in extent (“the property”) to the Third Respondent is valid and operative.

3.4. The Sheriff, Riversdale is authorised to proceed with transfer of the property to the Third Respondent in accordance with the sale in execution.

3.5. The costs of the first respondent in the application and the counter-application are to be paid on the attorney and client scale by Shaheed Noor, the director of the first applicant, in his personal capacity, and by Faizel Noor, the second applicant, in his personal capacity, jointly and severally, the one paying the other to be absolved.

3.6. The second applicant is precluded from claiming any remuneration from Alderbaran 11 (Pty) Ltd for his services as business rescue practitioner.

Maree and another v Bobroff and others [2018] JOL 39863 (GJ)

Sequestration application – Misjoinder- undesirable that two individuals should ever be joined in an application for the sequestration of respondents in one application.

Having obtained a provisional sequestration order of the estate of the respondents, the applicants now sought confirmation of the order.

Brought in terms of section 8(a) and (b) of the Insolvency Act 24 of 1936, the claim was based on the departure of the respondents from South Africa for Australia, and their alleged absence with the intention to evade or delay the payment of the debts due to the applicants and several other former clients of the respondent’s law firm. The alleged indebtedness to the applicants was based on a judgment in their favour. The applicants contended that the respondents were jointly and severally liable in terms of section 19(3) of the Companies Act 71 of 2008 read with section 23 of the Attorneys Act 53 of 1979.

In the provisional sequestration application, the respondents had raised a misjoinder objection which was rejected by the court. They persisted with that objection before the present Court. In response, the applicants argued that it was permissible to join the respondents because they were jointly liable for the debt and that the court should find that in the circumstances, that it was convenient to allow the separate estates of the respondents to be jointly sequestrated.

Held that while acknowledging authority for the proposition that joining the two respondents in one application was a fatal misjoinder, the court granting the provisional sequestration order went on to find that it was permissible for the applicants to have joined the respondents in this case. The present Court disagreed. It aligned itself instead with the view that misjoinder in applications of this nature was fatal to the case of the applicants. It referred to case law in which it has been held that it is undesirable that two individuals should ever be joined in an application for the sequestration of respondents in one application. A joinder of more than one respondent in an application for sequestration is permissible where there is a complete identity of interest or where there is consent by the parties.

The application was consequently dismissed.

Nutrigrun (Pty) Ltd v Odendaal and Another (5603/2017) [2018] ZAFSHC 52 (3 May 2018.

Sequestration application-advantage to creditors-trustee can investigate

This is an opposed application for the provisional sequestration of the joint estate of the respondents. The applicant is a company with limited liability duly incorporated in terms of the laws of the Republic based at Senekal, Free State and trading in the agricultural sector. The 1st respondent is a farmer residing at Marquard, Free State. He is married in community of property to the 2nd respondent.

It is common cause that the respondents are indebted to the applicant in the sum of R467 992.30. This is for goods sold and delivered by the applicant to the respondents at the latter’s special instance and request. On 11 August 2016 the applicant instituted an action against the 1st respondent for payment of the aforementioned amount together with interest at the rate of 10.26% per annum a tempore morae. The 1st respondent defended the matter. The applicant responded by launching an application for summary judgement which was granted by my sister Gela AJ. The application for leave to appeal that decision was unsuccessful before my sister Reinders J. Despite every effort to enforce this judgement, the respondents have been unable to make payment. The respondents are admitting indebtedness to the applicant and inability to liquidate the debt.

[3] The entire application turns on the following issue. Whether sequestration of the joint estate of the respondents will be to the advantage of the creditors. The opinion of the counsel for the applicant is that it will be while counsel for the respondents is vehemently opposed to such an action.

[10] The respondents procured the fertilizers to plough their farmland. The disposition of the crop and others assets is not dealt with sufficiently to support the allegations made. The respondents are residing on the farm with equipment, livestock and crops. The surrounding circumstances regarding the manner in which attachment of assets took place and the timing of the interpleader proceedings are matters that must be scrutinized at length. These can be investigated if a Trustee is appointed and proper investigation is undertaken. I do not agree with counsel for the respondents that the applicant’s hopes are pinned solely on the Trustee to investigate. There are cogent reasons given the surrounding circumstances that such investigation may reveal or recover some assets to the benefit of the creditors. The argument also that there are less “draconian” procedures like section

65A of the Magistrate’s Court is also misplaced. The said section is designed to deal with the enquiry into the financial position of the judgement debtor. It is much more limited in scope and intensity as opposed to an interrogation in terms of section 64 of the Insolvency Act.

[11] In the exercise of my discretion. I am satisfied that there is a prima facie reason to believe that the sequestration will be to the advantage of the creditors.

Cruzn Motors (Pty) Ltd v Hussen Family Partnership and Others (10250/2017P) [2018] ZAKZPHC 15 (15 May 2018)

Sequestration application- partnership –no proof of partnership

Sequestration application-not for purpose to establish a debt

On 8 February 2018 the applicant sought the provisional sequestration of the six respondents. The applicant alleged that the first respondent, The Hussen Family Partnership, is an existing partnership, which is indebted to the applicant in an amount of R14 528 627 and that the respondents should be sequestrated since they are unable to pay the said debt.

[2] The application is opposed by all of the respondents inter alia on the grounds that there is no partnership in existence and none of them are indebted to the applicant as alleged. In addition it has been submitted that the application is procedurally fatally flawed. It has been alleged that the applicant has failed to establish compliance with s 12 of the Insolvency Act 24 of 1936 (the Act) more importantly that there are material factual disputes on the papers. The respondents submitted further that the application is an abuse of process since the present application has been launched for purposes of enforcing the payment of a debt which is bona fide disputed. Mr Harpur SC, acting for the second, third, fifth and sixth respondents, has submitted that absent a declaratory order that a partnership existed, especially in light of the material disputes of fact, no relief can be granted against a non-existent entity. Ms Lennard, on behalf of the fourth respondent, contended that there are irreconcilable disputes of fact on the papers that are incapable of resolution without a referral to oral evidence.

[7] It is necessary for purposes of this judgment to consider the essentialia of a partnership and to measure the conduct of the respondents against the said requirements in order to determine whether any partnership has been established.

[8] In Badenhorst v Northern Construction Enterprises (Pty) Ltd the court held:

‘A winding-up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed and under circumstances may be stigmatised as a scandalous abuse of the process of the Court.’

[12] The applicant argued that the following facts support the contention that a partnership exists between the second to sixth respondents. These are:

(a) the respondents share a common home;

(b) they share common offices;

(c) all of them contribute to the business of Dimo’s which is a partnership business;

(d) monies received by Dimo’s and monies paid on behalf of Dimo’s pass through the bank accounts of the various partners; and

(e) the arrangement represents a typical joint family type arrangement where the family members pool their reserves and energies for their mutual benefit.

“I assume that this submission was made on the basis that the probabilities relating to the indebtedness are balanced on the papers and that oral evidence might tip the balance of probabilities in favour of the applicant. I am not persuaded that I should accept the invitation. Not only was the existence of any partnership not proved on the papers, the Badenhorst rule militates against settling of disputes of this nature by referring the matter to oral evidence. In my view it is expected of me to determine whether the respondents in their papers advanced reasonable grounds disputing the alleged indebtedness to the applicant. The applicant has failed in this application not only in law but also on facts.”

[27] Applicant has failed on these papers to show that any partnership existed between the respondents, or that the respondents committed the acts of insolvency as alleged. In conclusion the applicant failed to discharge its onus.

[28] Order The application is dismissed with costs, such costs to include senior and junior counsel where so employed.

Ragavan and Others v Klopper N.O. and Others (12897/2018) [2018] ZAGPPHC 230 (3 May 2018)

Business rescue-business rescue practitioners-functions-access to premises-- obstructing rescue practitioners to enter premises not allowed

This is an urgent appeal in terms of section 18 of the Superior Courts Act 10 of 2013 (the Act).

[2] The four respondents are the duly appointed business rescue practitioners (the rescue practitioners) of Optimum Coal (Pty) Ltd and seven other related companies (the rescue entities) forming part of the Oakbay Group of companies (the Oakbay Group).

[3] For convenience and in order to interact with the directors, the management and administrative personnel of the rescue entities, the rescue practitioners elected to utilize premises situate at Grayston Ridge Office Park, Biock A, Lower Ground, 144 Katherine Street, Sandton, Johannesburg, Gauteng (the premises) in order to comply with their statutory duties and obligations in rehabilitating the rescue entities. According to the respondents, although five of the companies which are under business rescue, conduct business elsewhere other than the premises, the control and management of all these rescue entities is centrally operated from the premises.

[4] However on 5 April 2018, the matter took a different turn. The appellants denied the rescue practitioners access to the premises resulting in the latter being unable to execute their statutory duties and obligations, which included the management of the

rescue entities and the development and publication of the business rescue plans within the statutorily determined deadlines, which were imminent. The respondents contend that all the information relating to the rescue entities is collated and retrieved from the records kept at the premises. In addition, the financial records, post the commencement of business rescue, such as the revenue and expenses of the rescue entities are kept at the premises.

[5] On 10 April 2018, pursuant to appellants' denial of access to the premises, the rescue practitioners brought an urgent application to regain access to the premises and to direct the appellants to co-operate with the rescue practitioners in the execution of their duties. On 13 April 2018, Fisher J, after having heard argument, handed down a written judgment and order in favour of the rescue practitioners.

[6] Dissatisfied with the order of Fisher J, the appellants, on 16 April 2018 brought an application for leave to appeal the order granted. As the appellants' application for leave to appeal suspends the operation and execution of the order granted on 13 April 2018, the rescue practitioners brought an application in terms of section 18 of the Act for the execution of that order on the basis that exceptional circumstances exist and that they will suffer irreparable harm if the order is not executed. At the same time, they contended that the appellants would not suffer such irreparable harm if the order is executed.

[7] On 17 April 2018 Fisher J dismissed the application for leave to appeal and granted the counter-application for execution of the order in favour of the rescue practitioners. Simultaneously with the order of dismissal, the learned Judge ordered, that "paragraphs 2, 3 and 4 of the said order are to have full force and effect pending any further application for leave to appeal to the Supreme Court of Appeal and/or the outcome of any appeal as contemplated in section 18(4) of the Act" The appellants were ordered to pay the costs occasioned by the application for leave to appeal, and the Section 18(1) application on the scale between attorney and client Such costs were to be joint and several.

[8] In terms of paragraphs 2, 3 and 4 of the order of 13 April 2018, the appellants were interdicted from obstructing and/or refusing the respondents or their nominated agents, access to the premises. The court further ordered the appellants to provide and continue providing the respondents and their nominated agents unrestricted access to the premises. In addition, the appellants were further ordered to co-operate with and assist the respondents and their nominated agents in the performance of their duties as the appointed business practitioners of the eight companies (in business rescue) as required by Chapter VI of the Companies Act No 71 of 2008.

[15] It is self-evident that the conduct of the rescue entities be thoroughly examined to establish whether these rescue entities conducted themselves unlawfully and whether this unlawful conduct put these companies in distress in the first place. To enable the rescue practitioners to have unrestricted access to the premises to perform their statutory duties and obligations is therefore in the public interest. If indeed R66 million was siphoned off the shores of this country in contravention of the Exchange Control Regulations, this needs to be investigated. Should the allegations prove to be true, this substantial amount of money would be returned to Tegeta to benefit the people of South Africa. However, should the order not be put into operation and executed, the money would be lost The public would suffer.

[16] To refuse to allow the order to be executed would put the economy of this country at risk and would cause irreparable harm. This is beyond question.

27.1 The application for leave to appeal against the execution of the order of 13 April 2018 is refused; The appellants are ordered to pay the costs of the appeal jointly and severally on the scale as between attorney and client, such costs to include the costs of two counsel where so employed.

Venditor Asset Management (Pty) Ltd v The Master of the High Court, Pretoria and Others (38885/2017) [2018] ZAGPPHC 332 (10 May 2018)

Liquidators-joint liquidators- must act jointly-auctioneer feeling aggrieved

This application pertains to a direction issued by the Master of the High Court ("the Master'') on 29 April 2017. The applicant was aggrieved by the direction and launched the present application in terms of the provisions of section 407(4)(a) of the Companies Act, 61 of 1973, which section has been incorporated in the present Companies Act, 71 of 2008 by virtue of Item 9 of Schedule 5 to the Act.

[2] Section 407(7)(a) reads as follows:

"The liquidator or any person aggrieved by any direction of the Master under this section, or by refusal of the Master to sustain an objection lodged thereunder, may within fourteen days after the date of the Master's direction and after notice to the liquidator apply to the Court for an order setting aside the Master's decision, and the Court may on any such application confirm the account in question or make such order as it thinks fit "

[3] The applicant is a private company which specialises in the auction industry.

[4] The first respondent is the Master of the High Court, Pretoria cited in his/her statutory capacity for purposes of the relief claimed herein. The Master does not oppose the relief claimed herein.

[5] The second, third, fourth and fifth respondents are the duly appointed liquidators in the insolvent estate of Moco Steel Engineering CC (in liquidation) ("the company").

[6] The application is only opposed by the third, fourth and fifth respondents.

The master said: “In view of the above, it is clear that there is plurality of joint liquidators and section 382(1) of the Companies Act 61 of 1973 (as amended) provides that when two or more liquidators have been appointed they shall act Jointly in performing their functions as liquidators and shall be jointly and severally liable for every act performed by them jointly. From the factual matrix of the objection it is apparent that Venditor never received mandate from all the joint liquidators and allowing costs of these magnitude to stand the ground since it would be disingenuous on my part as Master's official to irrationally accept this claim and if Venditor is opined that they have against this estate it would have been prudent to pursue that claim but if they do not procure a mandate from all the joint liquidators like in this instance, the objector do not

have a claim against the said estate. Section 382(2) of the Act supra provides that whenever two or more liquidators disagree on any matter relating to the company of which they are liquidators like the matter in issue; this matter had been referred to my office which has determined the question in issue and thereby confirming that the said objection is out rightly rejected. "

[24] In my view, the facts pertaining to the objection are correctly summarised in the Master's direction. Mr van Twisk, counsel for the applicant, quite correctly did not rely on any factual inaccuracy in the direction.

[25] Section 382(1) of the Act is applicable to the aforesaid facts and reads as follows:"When two or more liquidators have been appointed they shall act jointly in performing their functions as liquidators and shall be jointly and severally liable for every act performed by them. "(own emphasis)

[27] Mr van Twisk submitted that the Master erred in not finding that the actions of Van der Westhuizen, purportedly acting on behalf of the second respondent, were not ratified by the third, fourth and fifth respondents.

[28] This submission is based on the fact that the third, fourth and fifth respondents accepted and included the proceeds of the first auction in the first and final liquidation-and-distribution account.

[29] Differently stated, the submission entails that any unauthorised act of a joint liquidator will be ratified once the act yields proceeds for the insolvent estate.

[30] The clear wording of section 382 and the authorities thereon does not support this submission. Section 382 was no doubt enacted to protect the interests of the body of creditors by, inter alia, preventing the haphazard disposal of assets belonging to the insolvent estate.

[31] The section envisages a process of collective thinking and careful planning by all the joint liquidators to ensure the best possible outcome for the body of creditors.

[32] In the premises, I do not agree with Mr van Twisk and the application stands to be dismissed.

[33] The third to fifth respondents were successful in their opposition of the matter and costs should follow suit.

In the premises, I grant the following order: The application is dismissed with costs.

Osborne v Cockin NO and Others (549/2017) [2018] ZASCA 58 (17 May 2018)

Sequestration application-against trust as alter ego-Where no contractual or other claim lies against a trust, and the creditor alleges that the trust is the alter ego of the debtor, it cannot claim the sequestration of the trust unless it can show that the trust is its debtor and is insolvent. An unliquidated claim for damages cannot found a

claim for sequestration and sequestration is not the appropriate remedy for resolving a dispute about a debt.

[1] Shaun Cockin, formerly a farmer and a cattle dealer in the Eastern Cape, committed suicide on 13 September 2015. He left in his wake numerous farmers and businessmen in the region whom he had defrauded. The appellant, David Osborne, was one of them. He brought an application in the Eastern Cape Division of the High Court, Grahamstown, for the sequestration of a family trust, the Cockin Trust, on the basis that the Cockin Trust was no more than the alter ego of Shaun, and that he had a claim in respect of the theft of some 1 501 head of cattle of an estimated value of R11 million against the Cockin Trust.

[2] The provisional sequestration application was brought by Osborne in early December of 2015, after the deceased estate of Shaun had been sequestrated, and after he had obtained an Anton Piller order against the trustees of the Cockin Trust, the three respondents: Mark Cockin, Shaun’s son; Marioth Cockin, his widow; and Andrew Smith. I shall refer to the Cockins by their first names to avoid confusion. (One of the trustees of the insolvent deceased estate, Werner de Jager was, for an unknown reason, cited as a respondent as well, but he did not in fact participate as such in the proceedings.)

[25] This is not such a case. It is a case where Osborne has contended that the trust is in fact a simulation. The evidence before the court simply did not support the contention, as Alkema J found.

[26] As the court a quo suggested, the proper procedure that should have been followed by Osborne was to make a claim against the trustees of the insolvent deceased estate, and to insist on enquiries or an investigation in terms of ss 64, 65 and 66 of the Insolvency Act. Proper investigation might establish which of his assets, if any, were on trust property, and whether the trustees of the Cockin Trust were liable to return any a cattle or pay damages.

[27] In the circumstances, the appeal must be dismissed. Osborne did not establish that the Cockin Trust was his debtor and was insolvent or had committed any act of insolvency.

[28] The appeal is dismissed with costs.

Mostert and Others v Nash and Another (604/2017) [2018] ZASCA 62 (21 May 2018)

Trustee-fees- Pension fund – curatorship in terms of s 5(2) of Financial Institutions (Protection of Funds) Act 28 of 2001 – trustee’s remuneration – court order that it be agreed with Executive Office of the Financial Services Board in accordance with the norms of attorneys’ profession – whether fee as a percentage of amounts recovered on behalf of fund in accordance with those norms – whether contrary to public policy or an infringement of Contingency Fees Act 66 of 1997.

The SCA upheld in part an appeal by Mr Antony Mostert against a high court judgment Dealing with the arrangements for his fees as curator of the Sable Industries Pension Fund. The high court held that the agreement concluded in respect of his fees was unlawful and contrary to public policy. The high court ordered him to render an account and repay all amounts received by him as fees, said to be some R23 million.

The agreement in respect of his fees had been concluded with the Executive Officer of the Financial Services Board (FSB) and entitled him to be paid 16.66% of all amounts recovered by him on behalf of the fund. The agreement was concluded on a contingency basis and obliged Mr Mostert to bear the costs of recovering amounts due to the fund.

The SCA held that an agreement that a curator could recover fees on a contingency basis was not contrary to public policy or the provisions of the Contingency Fees Act 66 of 1997. However, it was a requirement of the court order appointing Mr Mostert as curator of the fund that he receive ‘periodic remuneration in accordance with the norms of the attorneys’ profession’. The evidence showed that this did not contemplate an agreement to recover fees on a contingency basis as a percentage of the amounts recovered for the fund. Accordingly, the agreement was not in accordance with the court order and for that reason had to be set aside. Mr Mostert remained entitled to recover a reasonable remuneration for his services, but the amount would need to be determined by way of a fresh agreement with the FSB in accordance with the norms of the attorneys’ profession, or another basis approved by the high court. The SCA accordingly set aside the orders that Mr Mostert render an account at this stage and repay what he had received.

As both parties had achieved substantial success the SCA held that they should each bear their own costs of the appeal.

Zitonix v K201250042 (290/2017) [2018] ZASCA 63 (21 May 2018)

Insolvent person-signing lease as lessee, prior to sequestration-clause giving right to cancellation by lessor if person sequestrated-clause valid

[1] This is an appeal against a judgment handed down by Holderness AJ in the Western Cape Division of the High Court of South Africa, in an application seeking the confirmation of the cancellation of five leases, and the eviction of the tenants from the premises hired by them. She made the orders sought in the application, and authorized the Deputy Sheriff of the High Court to eject the tenants in the event of their failure to vacate the premises.

[2] The defences to the applications were dealt with comprehensively by the court a quo and were all rejected. I do not propose to deal with them all, in view of the fullness of the judgment of the court a quo, which cannot be faulted in any respect, and because in any event only two were pursued with any vigour on appeal.

The effect of the surety’s sequestration

[12] Zitonix alleged that Joubert had signed the leases oblivious to the consequences of his sequestration. He did not know that if he were sequestrated, the lessor would be entitled to cancel the leases in terms of clause 16.1(e) of the leases. He had thus erred and his error was iustus because at the time of signing, the lessor, through its legal representative, knew that he was on the brink of sequestration, yet allowed him to enter into long term leases despite its right to cancel in the event of his sequestration.

[13] The evidence adduced by the lessor showed, however, that it was not aware of the possibility of final sequestration at the time of signing the leases. Moreover, Joubert, an experienced businessman, who had entered into many similar leases beforehand, containing similar clauses, was represented in negotiations by his attorney. He had signed some 25 leases with this same clause with the lessor itself. There is no reason to believe that Joubert was misled in this regard. And equally there is no reason to accept the argument that clause 16.1(e) was ‘tucked away’ in the lease agreement. It appeared in the body of each lease under the heading ‘breach’. This defence must also be rejected.

[15] Accordingly, the appeal is dismissed with costs including those of two counsel, save that para 3 of the order of the Western Cape Division of the High Court is set aside.

Naidoo v Discovery Limited and Others (202/2017) [2018] ZASCA 88 (31 May 2018)

Insurance-beneficiary clause – stipulatio alteri – such policy cannot be an asset in the estate of the policyholder and of joint estate from marriage in community of property – such a policy not an insurance policy in terms of s 15(2)(c) of the Matrimonial Property Act 88 of 1984. Pieterse v Shrosbree confirmed regarding nominees.

This appeal raises two questions. The first is whether a risk-only life insurance policy with a beneficiary nomination clause is an asset of the policyholder during his or her lifetime; and the second, whether the nomination of a beneficiary by a policyholder married in community of property, constitutes an alienation of that policy as contemplated in s 15(2)(c) of the Matrimonial Property Act 88 of 1984 (the Act).The Gauteng Division of the High Court, Johannesburg, answered both questions positively. The appeal is with leave of this court.

[2] The basic facts are the following. The appellant and Mr Merglen Naidoo (the deceased) were married in community of property on 17 July 1996.

[3] On 23 May 2002, the deceased made an application to the first respondent (Discovery) for a joint life assurance with policy number 5100022093 (the policy). In terms of the policy, the deceased was defined as the principal life insured and the owner of the policy. The deceased nominated the appellant as the beneficiary of the proceeds of the policy upon his death. The policy provided further that the owner could instruct Discovery in writing to change the beneficiary at any time and that the appointment of a beneficiary was revocable at all times during his lifetime. Importantly, the policy provided that a nominated beneficiary was not entitled to any benefits during the lifetime of the principal life assured.

[4] It is common cause that the policy was a risk-only policy meaning that it had no monetary value unless and until the person whose life was insured died. It had no investment portion and thus no surrender value. It also provided that no benefits would be payable on its cancellation.

[5] On 11 October 2011 the deceased wrote to Discovery and requested a change of beneficiary details to reflect both his parents, his brother and his sister as

beneficiaries to the policy. It is common cause that the appellant was unaware of this change.

[6] After the deceased’s death on 6 March 2012, the newly appointed beneficiaries accepted the benefits of the policy by claiming payment of the proceeds in the total sum of R3 174 357 and Discovery duly made payment to them. The new beneficiaries were subsequently joined as third parties in the proceedings in the court a quo by Discovery on the basis that in the event the court were to find that the nomination of such third parties, who have since been paid the proceeds of the policy, was in breach of s 15(2)(c) of the Act, the third parties would be liable to indemnify Discovery. These conditional claims were based on unjustified enrichment. Discovery did not pay any amount to the appellant and denied that it had any liability to do so.

[7] Counsel for the appellant contended that the aggregate of rights and obligations under the policy vested in the joint estate, which included the right to nominate a beneficiary, receive payment of the sum insured and revoke a nominated beneficiary. Therefore, so it was contended, the deceased could not nominate the third parties as beneficiaries without the appellant’s written consent as envisaged in s 15(2)(c) of the Act.

Was the policy an asset of the policyholder during his lifetime?

[8] This court has authoritatively determined that a contract in favour of a third party underlies the legal concept of a beneficiary clause in a life insurance policy.[1] The policyholder (stipulans) contracts with the assurer (promittens) that an agreed offer will be made by the assurer to a third party (the beneficiary), with the intention that on acceptance of that offer by the beneficiary, a contract will be established between the beneficiary and the assurer. The offer involved is that the insurer will pay the proceeds of the policy to the beneficiary.

[9] The beneficiary clause is currently widely used in assurance contracts and this can be attributed to two main factors. First, the policy proceeds are immediately made available to the beneficiary on the death of the policyholder, without the beneficiary having to wait until the deceased’s estate is wound up before he or she can claim and receive the policy proceeds. Secondly, the policy proceeds do not form part of the deceased estate for purpose of the calculation of the executor’s remuneration. Clearly, at the heart of those two main advantages is the avoidance or bypassing of the deceased estate.

[10] When a policy is a risk-only policy, as in this case, payment of the policy proceeds occurs only upon the death of the insured life. It follows that by definition the policy proceeds can never be paid to the policyholder or the beneficiary during the lifetime of the insured life. The only rights that the policyholder has during his or her lifetime emanate from the policy itself. Typically these are the contractual rights to nominate a beneficiary and to change the beneficiary nomination, the right to cede the policy and the right to terminate the policy.

[11] This court has determined that the policy itself is not an asset in the estate of the policyholder. As Rabie JA described it in Borman en De Vos NNO (above at 507A):

‘where a person has paid the premiums but has no corresponding claim during his or her lifetime, it can be said that an asset has been separated or withdrawn from his estate’. (My translation.) This court affirmed that approach in Pieterse v Shrosbree NO & others and said that in the ordinary course the proceeds of an insurance policy will go directly to a nominated beneficiary.

[12] As the policy in issue was a risk-only policy which could not be an asset in the estate of the deceased, on the strength of the authorities referred to above, it follows that it could never be an asset in the joint estate. During the deceased’s lifetime the appellant had no right to receive the proceeds of the policy and therefore viewed from this perspective, the policy was also not an asset in the joint estate.

[21] The restrictions imposed by s 15(2)(c) of the Act apply only to alienation of insurance policies that are assets and form part of the joint estate. This section finds no application to the facts in this case.

The appeal is dismissed with costs.

De Villiers v GJN Trust (756/2017) [2018] ZASCA 80 (31 May 2018) Coram: Shongwe ADP and Seriti

Liquidation-dissolution of company after liquidation-Companies Act-order avoiding the dissolution of a company in terms of s 420 of the Companies Act 61 of 1973 – order granted in the absence of the appellants – whether the appellants were affected parties within the meaning of rule 42(1)(a) – ambit of s 420 and effect of order thereunder – appellants not affected parties and had no locus standi to challenge section 420 order

Liquidation and distribution account-finality thereof- creditor who has proved a claim against the estate after the confirmation of an account by the Master is excluded from the distribution under that account, but may share in the distribution under a subsequent account. In terms of s 408 of the Act the confirmation of a liquidation and distribution account by the Master ‘. . . shall have the effect of a final judgment, save as against such persons as may be permitted by the Court to reopen the account after such confirmation but before the liquidator commences with the distribution.’

The first appellant, Dr Francois Jean de Villiers, is the sole member of the second appellant, Cape Veterinary Wholesalers CC (the CC) and the duly authorized trustee of the third appellant, the trustees of the Francois de Villiers Share Trust (the Share Trust). As explained below, the Share Trust is the holder of all the shares in the second respondent, Cape Animal Health Brokers (Pty) Ltd (in liquidation) (the company). At the instance of the first appellant, acting as a creditor of the company, the Western Cape Division (the High Court) issued an order of liquidation of the company. As a result the company was in due course dissolved in terms of s 419 of the Companies Act 61 of 1973 (the Act).

[2] However, the first respondent, the trustees of the GJN Trust (the GJN Trust),launched an application for an order declaring the dissolution of the company to have been void in terms of s 420 of the Act (the section 420 application). Such order was granted by Blignault J in the High Court on 19 November 2015 (the section 420order). Pursuant hereto, the Master of the High Court appointed the third and fourth appellants (the liquidators) as joint liquidators of the company. The

appellants applied to the court a quo to have the section 420 order set aside on the ground that it had erroneously been made without notice to any of them, but Hack AJ dismissed the application (the rescission application). The appellants appeal against the dismissal of the rescission application with the leave of this court. The central issue in the appeal is whether any of the appellants should have been joined in the section 420 application. The determination of the issue calls for an analysis of the ambit of s 420 of the Act and the effect of the section 420 order.

Background

[3] Prior to the liquidation of the company, the Share Trust gave notice of

cancellation of the agreement in terms of which it had acquired the shares in the

company and tendered retransfer thereof to the sellers. The right of the Share Trust

to cancel this agreement is disputed by the sellers and forms the subject of pending

litigation. Thus, the Share Trust remained the only shareholder in the company.

By the same token the first appellant continued to be its sole director.

[4] It is not disputed that, at the time of the company’s liquidation and

immediately prior to dissolution, the first appellant was a creditor of the company in

the amount of approximately R2 million for moneys lent and advanced to the

company and for payments made as surety of the company. Nor is it in issue that the

company owed the CC some R4,6 million. The bulk of this amount was for goods

sold and delivered to the company and the balance for loans (payments to creditors

of the company) and payments as surety of the company. The company was

indebted to the GJN Trust in the amount of approximately R23 000 in respect of

arrear rental.

[5] The company was finally liquidated on 8 March 2013. Neither the first

appellant nor the CC proved claims in the liquidation. The GJN Trust also did not

prove its claim, because the erstwhile liquidators of the company alerted creditors of

the danger that a contribution might be payable by concurrent creditors. In the event,

only Standard Bank proved its secured claims of approximately R340 000 and

concurrent claims of approximately R370 000. Further unproved concurrent creditors

of the company amounted to some R308 000.

[6] The first and final liquidation and distribution account was confirmed by the

Master on 11 February 2014, whereafter a dividend equal to its secured claims and a

very small concurrent dividend were distributed to Standard Bank. In the result,

concurrent debts of the company of some R7,4 million remained unpaid.

[7] In terms of s 419 of the Act the Master reported that the affairs of the

company had been completely wound up. Although the precise date thereof does not

appear from the record, the parties are in agreement that the company was

thereafter dissolved in terms of s 419(2) of the Act. Therefore, the existence of the

company came to an end and the erstwhile liquidators were discharged.

All remaining assets of the company became bona vacantia (ownerless property)

and automatically passed to the state without any form of delivery. See Rainbow

Diamonds (Edms) Bpk en andere v Suid-Afrikaanse Nasionale Lewensassuransie

Maatskappy [1984] ZASCA 41; 1984 (3) SA 1 (A) at 10-12.

[8] The section 420 application was launched during November 2015.

The erstwhile liquidators of the company and the Master were cited as respondents.

In essence, the GJN Trust averred that, according to the financial records of the

company, the CC owed the company a debt in the amount of R1 232 847. 04, but

that during December 2012 that debt had been written off on the instruction of the

first appellant. The GJN Trust also alleged that trading stock of the company to the

value of R650 000 had, on the instruction of the first appellant at more or less the

same time, been transferred first to the CC and then to another business of the first

appellant. In this regard the GJN Trust presented the evidence of a person who had

at the time been the manager of both the company and the CC. The GJN Trust

accordingly contended that it had presented sufficient evidence to justify an order in

terms of s 420 of the Act for purposes of appointment of new liquidators to

investigate these matters with a view of retrieving assets for distribution to creditors.

[9] In the rescission application, the first appellant admitted that the books of the

company had been altered to remove the record of a debt owed to the company by

the CC, but said that that simply entailed the correction of an error in the books.

He explained that the CC supplied the company with products but had retained

ownership thereof until payment took place. Because the company defaulted in

paying for the products, the CC repossessed the products. This, according to the first

appellant, should have been accompanied by the issuing by the CC of a credit note

but instead the CC was erroneously invoiced for the products that it had

repossessed.

Section 420

[10] The Act was repealed by the Companies Act 71 of 2008 (the new Act),

subject to the transitional arrangements set out in Schedule 5 thereto. Item 9(1) of

Schedule 5 provides that, despite the repeal of the Act, Chapter 14 thereof continues

to apply to the winding-up and liquidation of companies, as if not repealed, until a

date to be determined. Chapter 14 of the Act comprises ss 337-426. Section 339 of

the Act provides for the application of the laws relating to insolvency in the windingup

of a company that is unable to pay its debts. Section 420 of the Act provides:

‘When a company has been dissolved, the Court may at any time on an application by the liquidator of the company, or by any other person who appears to the Court to have an interest, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void, and thereupon any proceedings may be taken against the company as might have been taken if the company had not been dissolved.’

It bears mentioning that the provisions of s 83(4) of the new Act are substantially

similar to those of s 420. [11] In Goodman v Suburban Estates, Ltd (in liquidation) and others 1915 WLD 15 at 26, Mason J stated the following with reference to s 193 of the Transvaal Companies Act 31 of 1909 (a forerunner of s 420 of the Act):

‘Having regard to all these matters it seems to me that the Court ought not to avoid a

dissolution unless some unforeseen event such as the discovery of new assets has occurred or unless there has been some fraud or concealment practiced or unless the dissolution has become either by reason of surrounding circumstances or through some contrivance of parties the instrument of injustice.’

In Henochsberg on the Companies Act 5 ed (2008) vol 1 at 902, it is contended that

the application of s 420 should not be limited to the grounds set out in Goodman.

The authors submit, with reference to inter alia Ex parte Liquidator Natal Milling Co

(Pty) Ltd 1934 NPD 312, that the court may avoid the dissolution of a company in

any circumstances where the interests of justice warrant such a cause.

[15] Paragraph 1 of the section 420 order, as rectified by agreement in respect of

the name and number of the company by the court a quo, declared the dissolution of

the company to have been void. Paragraph 2 of the order provided:

‘The Master is authorized and directed to appoint new liquidator(s), which liquidator(s) shall be clothed with all powers and competencies as if the company is liquidated de novo.’

[17] Section 104 of the Insolvency Act 24 of 1936 provides that a creditor who has

proved a claim against the estate after the confirmation of an account by the Master

is excluded from the distribution under that account, but may share in the distribution

under a subsequent account. In terms of s 408 of the Act the confirmation of a

liquidation and distribution account by the Master ‘. . . shall have the effect of a final

judgment, save as against such persons as may be permitted by the Court to reopen

the account after such confirmation but before the liquidator commences with

the distribution.’ Therefore, save possibly in the case of fraud, a confirmed account

may only be reopened before distribution in terms thereof commences. Even then,

reopening will only be ordered on grounds for restitutio in integrum such as justus

error or dolus. See Kilroe-Daley v Barclays National Bank Ltd 1984 (4) SA 609 (AD)

at 626F-G. See also Gilbey Distillers & Vintners (Pty) Ltd & others v Morris NO 1991

(1) SA 648 (AD) at 65G in respect of the similarly worded s 112 of the Insolvency

Act. As distribution in terms of the confirmed first and final liquidation and distribution

account of the company was completed during 2014, the section 420 order could not

in law have the effect of reopening that account.

[18] In the light of these considerations and of the explicit purpose of the section

420 application, namely investigation aimed at distribution of assets not dealt with in

that account, para 2 of the section 420 order must in my view be interpreted to mean

that the liquidators shall have the powers in terms of the Act to deal with further

assets of the company. It follows that further assets of the company recovered by the

liquidators must be dealt with in a further liquidation and distribution account in terms

of s 403 of the Act. Section 403(1)(b) of the Act also provides that the Master may at

any time and in any case where a liquidator has funds in hand, which ought, in the

opinion of the Master, to be distributed or applied towards the payment of debts,

direct a liquidator in writing to frame and lodge a liquidation and distribution account

within a specified period.

[19] Section 44(1) of the Insolvency Act provides for late proof of claims by

creditors. In terms thereof a creditor may prove a claim after the expiry of the

prescribed period, with the leave of the Master or a court and on payment of such

amount as either directs to cover the costs occasioned by the late proof. Where the

dissolution of a company has been avoided under s 420 for the very purpose of

distribution of further assets of the company, the Master or a court may well be

persuaded to allow late proof of claims, especially when the erstwhile liquidators had

discouraged proof of the claims.

[20] The phrase ‘any person who appears to the Court to have an interest’ in

s 420, is very wide. This broad language may encompass parties who do not have a

direct and substantial interest of the kind which would necessitate joinder. It certainly

encompasses an unpaid creditor, including, in my view, a creditor who intends to

prove a late claim under s 44(1) of the Insolvency Act. It follows that the GJN Trust

had locus standi to bring the section 420 application.

Rule 42(1)(a)

[21] Whether the section 420 order fell to be set aside on the ground that it had

been granted without notice to any of the appellants, must be determined against

this background. In the rescission application the appellants relied on Uniform

Rule 42(1)(a). In terms of rule 42(1)(a) a court may, upon the application of any party

affected, rescind or vary an order or judgment erroneously sought or erroneously

granted in the absence of any party affected thereby.

[22] In United Watch and Diamond Co (Pty) Ltd and others v Disa Hotels Ltd and

another 1972 (4) SA 409 (CPD), Corbett J held that in order to establish locus standi

under rule 42(1)(a), an applicant must show a direct and substantial interest in the

judgment or order that the applicant wishes to have varied or rescinded. This means

a legal interest in the subject matter of the action or application which could be

prejudicially affected by the order in that action or application. This judgment has

been cited with approval on numerous occasions, including by this court in, inter alia,

Aquatur (Pty) Ltd v Sacks and others 1989 (1) SA 56 (A) at 62.

[28] As a last resort, the appellants contended that the state, represented by the

Minister of Finance, should have been joined in the section 420 application on the

basis that the section 420 order deprived the state of the assets of the company

(including the alleged claims against the appellants) that had passed to it on the

dissolution of the company. I accept that in principle this is correct. But as the

appellants have no locus standi to challenge the section 420 order, the section 420

application is not before this court. This is not a case such as Amalgamated

Engineering Union v Minister of Labour 1949 (3) SA 637 (A), where both parties

before the court desired it to deal with the merits of the matter in the absence of a

necessary party thereto.

[29] For these reasons the appeal must fail. The following order is issued:

The appeal is dismissed with costs.

CDH INVEST NV v PETROTANK SOUTH AFRICA (PTY) LTD AND ANOTHER 2018 (3) SA 157 (GJ) Company — Directors and officers — Director — Fiduciary duty — Ambit — Powers of directors to increase authorised shares, or to issue shares, subject to fiduciary duty to act bona fide, for proper purpose, and in best interests of company — Nature of test to be applied — Relevant considerations — Companies Act 71 of 2008, ss 36(3), 38(1) and 76(3). Company — Shares and shareholders — Shareholders — Meetings — Application to court in terms of s 61(12) for order requiring company to convene meeting — Court intervention not simply there for asking — Unless special circumstances requiring otherwise, court having to be satisfied that calling members' meeting bona fide intended, with legitimate purpose, and in best interests of company — Companies Act, s 61(12). The applicant and the second respondent were, respectively, the majority and minority shareholders of the first respondent company (the company). In the High Court in terms of s 61(12) of the Companies Act 71 of 2008 (the Act), the applicant sought an order directing the company to convene a shareholders' meeting — after the company had failed to so do in response to a demand in terms of s 61(3) — for the purpose of considering and passing specified resolutions, including one instructing the board to sue the second respondent for an amount R1 million allegedly owed by the latter; and another instructing the board to consider a pro rata rights offer of 98 835 authorised but unissued shares. The second respondent disputed the applicant's relief. It brought a counter-application asking for an order interdicting the applicant from calling a shareholders' meeting to consider the abovementioned resolutions. As to the passing of a resolution relating to the rights offer, the second respondent pointed to the company's memorandum of understanding (MOU) which provided only for 100 000 authorised shares. As this amount had already been issued, it was argued, the proposed resolution offended the MOU's terms. Of particular relevance in the present matter was a prior board resolution amending the memorandum of incorporation (MOI) by increasing the number of authorised shares from 1000 to 1 000 000. The applicant relied on this as entitling the company to issue shares beyond the 100 000 originally envisaged in the MOU. The second respondent argued that this board resolution was unlawful, seeking its setting-aside, in the following circumstances: (1) The resolution for the amendment was proposed by the applicant directors with the stated objective of merely correcting an error in the MOI that placed the company in breach of the Companies Act, ie the MOI only provided for 1000 authorised shares, where it should have provided for 100 000 — the amount the shareholders had agreed to, and the MOU provided for. (2) The resolution was passed without the meeting of the shareholders or the full board of directors (in particular, the two out of the five directors who were nominees of the second respondent), despite the second respondent's having already indicated its understanding of the resolution: ie that it merely sought to increase

authorised shares to 100 000, and that the reference to 1 000 000 shares had to be a mistake. (3) The resolution was in breach of the MOI and the Act. Held Whether the board resolution, increasing authorised shares from 1000 to 1 000 000, was lawful The power of directors to authorise (in terms of s 36(3)) further shares or issue shares (in terms of s 38(1)) was constrained by s 76(3) of the Companies Act. Affirming a director's common-law fiduciary duties, it provided that a director had to act in good faith and for a proper purpose, and in the best interests of the company. The concept of bona fides did not have a wholly subjective content; there had to be a rational basis for a director's belief that he or she was acting in good faith. As for whether a director had acted in the best interests of a company, or for a proper purpose, the test was an objective one. (See [46] – [67].) Considering the present facts, the tenets of the parties' agreement in their pre-incorporation founding consensus was a significant consideration in judging fair dealing and probity, and the yardstick for measuring the exercise of a power against the purpose for which it was given in the first place was objective. (See [67] and [76].) In the manner the applicant directors had presented the resolution, they had misrepresented their true motive — to substantially increase the number of authorised shares, to enable the company to convert debt to equity. In doing so, they had acted mala fides. Further, it had not been shown that the resolution was passed in the best interests of the company or with a proper purpose. In the circumstances, and applying the principles referred to above, the resolution had to be declared void ab initio and set aside. (It followed that there was no scope for the proposed rights offer.) (See [68] – [78].) Whether company should be ordered to consider resolutions instructing board to sue second respondent, and whether counter-application should be granted Beyond asserting that a demand had been made, in vain, on the board to call a shareholders' meeting, the applicant had in its founding affidavit failed to state any facts or circumstances that ought to move the court in deciding whether or not to grant the relief claimed in terms of s 61(12). However, court intervention in terms of s 61(12) was not there simply for the asking. Conferring upon the court the power in terms of s 61(12) to direct that the board call a meeting, was company-law contra-intuitive, because courts generally declined interference in the management of company affairs. It could hardly have been intended, in those circumstances, that the court should act as a mere rubber stamp of technical compliance by means of a prior statutory demand. A court would generally, unless special circumstances required otherwise, have first to be satisfied that calling a members' meeting was bona fide intended, with a legitimate purpose, and in the best interests of the company. Here the applicant had failed to put facts before the court that would justify the inference that that threshold had been met. Accordingly, the main application had to fail. (See [81] – [83].) However, the court's disinclination to accede to the request to direct that a shareholders' meeting be called did not have the automatic corollary that the company and its board should be interdicted from convening such a meeting. In fact, the very considerations that persuaded a court to keep its distance from a company's internal management also applied against granting the interdict sought by the second respondent. (See [84].)

SOUTH AFRICAN BANK OF ATHENS LTD v ZENNIES FRESH FRUIT CC 2018 (3) SA 278 (WCC)

Business rescue — Termination — Rejection of proposed business rescue plan — What constitutes — Adjournment of creditors' meeting without voting to approve plan on preliminary basis — Not amounting to rejection of plan — Companies Act 71 of 2008, ss 152(1)(d)(ii),152(1)(e)and 152(3)(a). Business rescue — Termination — Failure by business rescue practitioner to apply for extension of business rescue where not ending within three months of commencement — Where, as in present case, delay unreasonable, order terminating business rescue justified — Companies Act 71 of 2008, s 132(3). The second creditors' meeting of Zennies Fresh Fruit CC (Zennies), a close corporation under business rescue, was adjourned so that the business rescue practitioner could prepare and publish a revised business rescue plan. This without the practitioner conducting a vote on the preliminary approval of the plan as contemplated in ss 152(1)(d)(ii) and 152(1)(e). This case concerned two separate applications by different applicants for different relief against Zennies (the first brought after delay of some 40 days in finalising the revised plan) but heard together because both sought a declaratory order that the business rescue proceedings had ended or lapsed in terms of s 132(2)(c)(i) of the Companies Act 71 of 2008 (the Act). Both applicants placed reliance on s 152(3)(a) of the Act for the proposition that, because the business rescue plan was not approved on a preliminary basis (at the second meeting), that meant that it was automatically rejected; and that because it was not thereafter properly considered further in terms of s 153 of Act , business rescue ended. On Zennies' version the plan was not rejected: no voting was conducted, and the meeting was adjourned in order for the business rescue practitioner to obtain more information, the parties having agreed that the plan be amended as contemplated in s 152(1)(d)(ii). The court encapsulated the issue raised by these contentions as whether the fact that no vote was taken to approve the plan at the creditors' meeting, justified a conclusion that the plan was rejected as envisaged by s 152(3)(a) of the Act (see [21]). A further issue was the effect of the practitioner's failure to apply for an extension of the plan as contemplated in s 132(3) of the Act. This section provides that if a company's business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner may allow, the practitioner must prepare a progress report of the business rescue proceedings and update it at the end of each subsequent month and deliver it to each affected person until the end of the proceedings. Held It was apparent from the wording of s 152(1)(d)(ii), by the inclusion of the word 'and' at the end of the sentence, that it had to be be read in conjunction with s 152(1)(e). This meant that in the event that a practitioner were directed to adjourn the meeting in order to revise the plan for further consideration, the practitioner would have to call for a vote for preliminary approval of the proposed plan, as amended, unless the meeting had first been adjourned in accordance with para (d)(ii). There was no

evidence to suggest that the plan was rejected during a vote for preliminary approval. The applicants' reliance on ss 152(3)(a) and 132(2)(c)(i) was therefore misplaced. (Paragraphs [31] – [33].) A substantial degree of urgency was envisaged once a company decided to adopt the relevant resolution beginning business rescue proceedings. While it may be so that the main aim of business recue was to avoid liquidation proceedings, it could not mean that an extraordinary amount of time must be allowed to achieve that, at the expense of creditors' rights. The mechanisms of business rescue proceedings were not designed to protect a company indefinitely to the detriment of the rights of its creditors. Where, as here, the practitioner was not making progress (as far as the court could ascertain) in securing the specific information required to finalise the amended plan for consideration, the practitioner was under a statutory duty to file a notice of termination. The delay in the finalisation of the business rescue proceedings was unreasonable in the circumstances, and an order terminating the proceedings was justified. It was accordingly declared that the business rescue proceedings of Zennies had terminated.

FIRSTRAND BANK LTD v COWIN NO AND OTHERS 2018 (3) SA 322 (GP)

Company — Winding-up — Creditors — Locus standi — Whether s 387(4) giving creditor F standing to bring application to resolve whether creditor N or company in liquidation owned debts — Liquidators not resolving issue and refusing to approach court to do so — Companies Act 61 of 1973, s 387(4). FT Group Holdings (Pty) Ltd (in liquidation), a company, and Nedbank entered an agreement by which FT sold Nedbank, on an ongoing basis, its book debts. They also concluded a security cession, under which FT ceded Nedbank its other claims. Ultimately Nedbank came to cancel the sale agreement and at the same time FT was provisionally liquidated. (It was later finally liquidated.) At the time of cancellation Nedbank had bought and paid for and taken delivery of by cession, book debts to the value of R93 million. (See [14], [17] and [21.2].) The present application was by another creditor, FirstRand, which asserted, on its reading of the sale and security cession agreements, that on cancellation of the sale agreement, ownership of those book debts was restored to FT, and that they became part of FT's claims covered by the security cession and held merely as security by Nedbank. (See [17] and [20] – [21].) Nedbank contended its ownership was unaffected by cancellation of the agreement (see [18]). Held, on an interpretation of the agreements, that Nedbank's contention was correct (see [39]). The further issue was whether s 387(4) gave FirstRand standing to bring the application. It provides that: 'Any person aggrieved by any act or decision of the liquidator may apply to the Court . . . and thereupon the Court may make such order as it thinks just.' The apparent 'act or decision' of the liquidators was their non-resolution of Nedbank and FirstRand's dispute, and their refusal to bring a similar application. (See [41] and [51].) Held, that FirstRand was a 'person aggrieved' and given standing by the provision. (See [43] and [54].)

[41] It is common cause that FirstRand engaged in numerous attempts to persuade the liquidators to bring this application and that FirstRand's efforts were in vain. FirstRand went so far as to get its attorneys to draft the necessary papers to launch an application but one of the liquidators was advised not to cooperate, to avoid a possible accusation that the liquidators were preferring one creditor to the exclusion of the others. [42] As a result, FirstRand submits that the question as to whether it has locus standi can be determined simply by asking the question, 'how else can FirstRand bring that dispute to the court for determination?' It then proffers an answer to the effect that there is no other provision and/or avenue open to FirstRand to bring the dispute between itself and Nedbank to the attention of the court other than this application. Application upheld and declarators and other orders granted (see [57]). NOTE: The liquidators made the correct choice, the first and second respondents are the joint liquidators of FT, and they “did not oppose the relief sought herein.” So they at least did not pay the costs!

Broodie NO v Maposa and others [2018] 2 All SA 364 (WCC) Family Law and Persons – Matrimonial property – Transfer without spousal consent – Validity – Matrimonial Property Act 88 of 1984 – Section 15 – Court held that disposition by a spouse of the member’s interest in a close corporation for no consideration would be a donation or alienation without value as contemplated by section 15(3)(c) – Court considered the respondents’ reliance on section 15(9)(a) which deems the transaction concerned to have been entered into with the required consent if the person to whom the disposition was made did not know and reasonably could not have known that it was effected contrary to section 15(2) or (3) – Court believed that the third respondent was unaware that the deceased was married to the applicant at the time she entered into a customary marriage with him – Respondents’ reliance on section 15(9)(a) was thus upheld. The applicant’s husband died intestate in December 2016. The applicant was the executor of the joint estate of herself and the deceased, to whom she had been married in community of property in terms of section 22(6) of the Black Administration Act 38 of 1927.

The applicant sought an order that the registered transfer by the deceased, of a 25% member’s interest in a close corporation (the “CC”) to each of the first to third respondents be declared unlawful and void, and an order interdicting those respondents from alienating their registered interests in the CC pending the determination of the application for declaratory relief.

The third respondent was a woman with whom the deceased had a longstanding extramarital relationship until his death. The first and second respondents, who were now adults, were their offspring.

The application to have the registration of the transfer of the member’s interest set aside was based on three grounds. The applicant contended that the transfer was invalid because it occurred without her consent, and thus in breach

of section 15(2) and/or (3) of the Matrimonial Property Act 88 of 1984; it had been fraudulently procured by the third respondent; and the deceased had lacked the necessary mental capacity to appreciate the nature of his actions when the transfer was effected.

There were a number of preliminary issues for decision. Those included the respondents’ application for striking out and the applicant’s applications to introduce supplementary founding and replying affidavits, as well as the introduction of an affidavit by an assistant director in the Department of Home Affairs concerning the matrimonial property regime of the applicant’s marriage to the deceased. A copy of the declaration made by the applicant and the deceased confirming that their marriage was contracted in community of property – an issue in contestation in the main application – was attached to the affidavit. The respondents also raised a point of non-joinder, contending that the applicant was a necessary party in her personal capacity. Held – The assistant director’s affidavit was important in deciding the critical dispute regarding the applicant’s marriage being in community of property. The Court therefore admitted that affidavit, as well as the supplementary founding and replying affidavits. The non-joinder point was settled when the applicant indicated that she would abide by the judgment of the court in her personal capacity. In the striking-out application, only limited parts of the applicant’s replying were to be struck out on the grounds that the content was inadmissible hearsay or was scandalous, vexatious and/or irrelevant.

Turning to the claim based on lack of consent, the Court set out the provisions of section 15 of the Matrimonial Property Act. The Court held that disposition by a spouse of the member’s interest in a close corporation for no consideration would be a donation or alienation without value as contemplated by section 15(3)(c). The Court accepted the applicant’s allegation that she did not provide her consent to the transfer, but turned to consider the respondents’ reliance on section 15(9)(a) which deems the transaction concerned to have been entered into with the required consent if the person to whom the disposition was made did not know and reasonably could not have known that it was effected contrary to section 15(2)or (3). The Court believed that the third respondent was unaware that the deceased was married to the applicant at the time she entered into a customary marriage with him. The respondents’ reliance on section 15(9)(a) was thus upheld.

Mantis Investment Holdings (Pty) Ltd v Eastern Cape Development Corporation & others (857/2017) [2018] ZASCA 95 (1 June 2018)

Interrogations-company in liquidation – issue of subpoenas by Master – set aside- Master has no reservoir of power outside the statutory instruments that authorise an intrusion upon those rights and thus no general authority to make an order that impinges on those rights.

The Supreme Court of Appeal (SCA) dismissed an appeal by Mantis Investment Holdings (Pty) Ltd (Mantis) by the Eastern Cape Local Division of the High Court, Port Elizabeth (the high court) in favour of the Eastern Cape Development Corporation (ECDC). The appeal had its genesis in a suretyship issued by a company known as No 1 Watt Street (Pty) Ltd (the company in liquidation) in favour of the ECDC in respect of moneys loaned and advanced by the ECDC to the Bushman Sands Developments (Pty) Ltd (Bushman Sands). Bushman Sands was unable to repay the amount and as a result ECDC instituted action in the high court against Bushman Sands and the

company in liquidation claiming respectively repayment of the loan and enforcement of the suretyship undertaking in the amount of R19 357 645. Several defences were raised by the company in liquidation to the claim, but shortly before the commencement of the trial Mantis as the sole shareholder of the company in liquidation, successfully applied for its liquidation.

After the second meeting of creditors at which the claim of the ECDC was admitted, Mantis’ attorney wrote to the liquidators setting out a list of persons and documents they desired to have subpoenaed. That request was forwarded by one of the joint liquidators to the Master, who summoned a number of employees (past and present) of the first respondent to appear before him. Aggrieved, the ECDC successfully applied to the high court to review and set aside the subpoenas issued by the Master.

On appeal, the SCA held that it is the very essence of our Bill of Rights that an individual should not be subjected to unreasonable intrusions on their liberty or the privacy of their person, property or effects. The Master has no reservoir of power outside the statutory instruments that authorise an intrusion upon those rights and thus no general authority to make an order that impinges on those rights. Neither the Master nor the liquidator, who forwarded the request to the Master, deposed to affidavits in this matter. It was thus unclear what the legal basis was for the request to the Master or what the true legal basis was for the Master to issue the subpoenas. The SCA accordingly confirmed the conclusion reached by the high court, albeit for different reasons.

Southern African Shipyards (Pty) Ltd v MFV "Polaris" and others [2018] JOL 39881 (WCC)

Business rescue-general moratorium placed on all legal proceedings by section 133- Business rescue- section 10 of the Admiralty Jurisdiction Regulation Act 105 of 1983 (‘AJRA’) still refers to old act- the provisions of section 10 of AJRA and section 133 of the 2008 Companies Act appear to be in conflict with each other-AJRA followed Southern African Shipyards (Pty) Ltd v MFV "Polaris" and Others (AC42-2017; AC48-2017) [2018] ZAWCHC 48 (18 April 2018)

Shipping – Arrested vessel – Application for leave to sell vessel – Effect of section 133 of Companies Act 71 of 2008

The applicant conducted business as a shipyard and provided ship repair services in respect of vessels. In February 2016, the first respondent (“mfv Polaris”) was delivered by the third respondent to applicant’s shipyard in order for repairs to be effected to it. According to the applicant, it duly effected the requested repair services and submitted invoices to the third respondent in respect of such services. In or about April 2017, the third respondent communicated its inability to make payment to the applicant. As a result the applicant refused to release the mfv Polaris from its shipyard. The vessel was currently under arrest, at the instance of the applicant and a number of other creditors.

In the present application, the applicant sought leave to sell the vessel, her equipment, furniture, bunkers and her cargo in terms of section 9 of the Admiralty Jurisdiction

Regulation Act 105 of 1983 and for the appointment of a referee. The applicant averred that with the passage of time the vessel’s condition would inevitably deteriorate, and value fall. The longer the vessel was under arrest the greater the risk of equipment failing or some other damage or harm befalling her.

The respondents’ answering affidavit was filed out of time, and the applicant consequently opposed its admission. The court had to therefore consider the respondents’ application or condonation, the intended answering affidavit as well as the applicant’s reply thereto. In deciding whether the late filing of the answering affidavit should be condoned, the court had to deal with the merits of the case.

Held that the first issue to be determined was whether such the sale of the vessel could be ordered when the company owning it had been placed under business rescue in terms of the Companies Act 71 of 2008. The respondents said that it could not because of the general moratorium placed on all legal proceedings by section 133 of the Companies Act. The applicant on the other hand, contended that the order for the sale of the vessel could be made by virtue of section 10 of the Admiralty Jurisdiction Regulation Act which excludes property arrested in respect of a maritime claim from assets vesting in a trustee in insolvency or administered by a liquidator, judicial manager or any other person who might otherwise be entitled to such property.

The Court therefore had to address the novel issue of the interface between section 133 of the Companies Act and section 10 of the Admiralty Jurisdiction Regulation Act. The court undertook a proper interpretation of section 10 and concluded that the section does incorporate business rescue. It then acknowledged that the provisions of that section 10 and section 133 of the Companies Act appeared to be in conflict with each other. The sensible interpretation therefore was found to be that proceedings that do not involve maritime property belonging to a company under business rescue or maritime property arrested post business rescue would be unaffected by section 10 of the Admiralty Jurisdiction Regulation Act. Based on that interpretation, the applicant was found entitled to the order sought.

South African Property Owners Association v Minister of Trade & Industry and others [2018] JOL 39915 (GP)

Business rescue – Impact on lease agreements- financing intended in section 135(2) relates to the obtaining of financing in order to assist in managing the company out of its financial distress.

The applicant sought a declaratory order that the rights of a landlord in respect of rental and other services rendered to property utilised by a legal entity under business rescue fall within the ambit of either the phrase "post-commencement financing', or the phrase "costs arising out of the costs of the business rescue proceedings" as contemplated in section 135(2) and (3) of the Companies Act 71 of 2008.

The application was brought because companies are often lessees in terms of a lease agreement with property owners and business rescue proceedings usually commence while the lease agreement is still in force and in terms of the business rescue application such companies remain in occupation of the leased property but the lessor then has to incur the expenses which the company is supposed to be liable for. The question thus raised was whether those debts are preferent claims, either because

they are "costs of business rescue proceedings” or because they are "post commencement financing" within the meaning of section 135(2) of the Act.

Held that section 133 of the Act provides a general moratorium on legal proceedings against the company. Legal proceedings against that company may not be commenced, and if commenced, may not proceed without the written consent of the business practitioner or with leave of the court. A business rescue practitioner may in terms of the provisions of section 136(2) of the Act either entirely, partially or conditionally suspend, for the duration of the business rescue proceedings, any obligation of the company that arises, whether from any agreement to which the company is a party at the commencement of the business rescue proceedings.

The Court found that the financing intended in section 135(2) relates to the obtaining of financing in order to assist in managing the company out of its financial distress. It does not lean to an interpretation that encompasses existing obligations (other than to company employees) of the company that are utilised to assist in managing the company during the business rescue proceedings. Section 135(3) of the Act provides for two categories of costs. The first being those provided for in section 143 of the Act and other costs incurred due to the business rescue proceedings. The costs contemplated by the applicant and relating to the lease agreement were incidental to and consequent upon the existence of the lease agreement. Such costs cannot constitute "post-commencement financing” or be classified as costs occasioned by the business rescue proceedings.

The application was dismissed.

BODY CORPORATE SANTA FE SECTIONAL TITLE SCHEME NO 61/1994 v BASSONIA FOUR ZERO SEVEN CC 2018 (3) SA 451 (GJ) Winding-up — Application — Of close corporation on basis of inability to pay its debts — Effect of repeal of s 68(c) of Close Corporations Act which provided inability to pay debts as basis for winding-up — Close Corporations Act 69 of 1984, s 69; Companies Act 71 of 2008, ss 344(f) and 345. The repeal of s 68(c) of the Close Corporations Act 69 of 1984, which provided for the winding-up by order of court of a close corporation unable to pay its debt, does not mean that this ground is no longer available. A purposive interpretation of the deliberate retention of s 69 (which describes the circumstances under which a corporation is deemed unable to pay its debts) must be understood as a reference to s 344(f) of the Companies Act 1973, ie that one of the circumstances in which a company (also a close corporation) may be wound up was if it were deemed unable to pay its debts as contemplated in s 345. Therefore, when an applicant for winding-up of a close corporation has proven that a debtor is unable to pay its debts within the meaning of s 69, s 344(f) of the Companies Act will be applicable.

MINISTER OF ENVIRONMENTAL AFFAIRS v RECYCLING AND ECONOMIC DEVELOPMENT INITIATIVE OF SOUTH AFRICA NPC 2018 (3) SA 604 (WCC)

Winding-up — Application — Locus standi — Extended standing to apply for remedies under s 157 of Companies Act, 2008 — Whether extending standing to applicant for liquidation of solvent company not otherwise having standing — Companies Act 71 of 2008, ss 88(1) and 157(1)(d). Under s 81 of the Companies Act 71 of 2008 a court may order the winding-up of a solvent company on application of a number of specified applicants: the company, its directors, its shareholders, its creditors and its business rescue practitioner if the company is in business rescue. Section 157, however, provides for 'extended standing to apply for remedies', and more specifically s 157(1)(d), that '(w)hen in terms of this Act, an application can be made to . . . a court . . . the right to make the application . . . may be exercised by a person acting in the public interest, with leave of the court'. Here the Minister of Environmental Affairs applied, on an ex parte basis, for the provisional winding-up of the Recycling and Economic Development Initiative of South Africa (Redisa), a solvent non-profit company, and in a separate application also of Kusaga Taka Consulting (Pty) Ltd (KT), also a solvent company, both on the ground in ss 81(1)(c)(ii) and 81(1)(d)(iii) that it was 'just and equitable for the company to be wound up'. Not being one of the applicants specified in s 81, the Minister in both applications also applied for leave in terms of s 157(1)(d) to bring the applications, which were granted, as were the provisional liquidation orders the Minister had sought.

The applications were consolidated on the anticipated return date of the provisional orders. Redisa and KT raised a number of points in limine against the winding-up order being made final, including that the Minister had no locus standi to bring the application. This, they contended, was because s 157(1) was listed under ch 7 of the Companies Act which dealt with remedies and enforcement and so did not extend to other applications that may be brought in terms of the Companies Act (more specifically to applications under s 81(1)) but instead was restricted to alternative procedures for addressing complaints or securing rights contained in s 156; nor did it extend to other categories of person authorised to apply for the winding-up of a solvent company under part G of ch 2. Held Section 157(1) clearly stated when in terms of this Act application can be made to a court. It would be absurd and nonsensical to exclude an application which could be made in terms of s 81(1) of the Act. On a plain reading of s 156, it did not only deal with alternative procedures for addressing complaints or dispute resolution or securing rights; while it made provision for alternative procedures for addressing complaints or securing rights to a person referred to in s 157, it also granted such a person the right to apply for appropriate relief to the division of the High Court having jurisdiction over the matter. The wording of s 157 also did not restrict the remedies available to the applicants contemplated in s 157(1)(a) – (d) to only those remedies in terms of ch 7. The title of s 157 ('Extended standing to apply for remedies') clearly intended to extend locus standi to the categories of people referred to in ss (1)(a) – (d). Accordingly, the Minister in terms of the provisions of s 157(1)(d) could bring this application for the winding-up of Redisa and KT in the 'public interests'.


Liquidators– Application for removal of liquidators of company – Locus standi – In terms of section 379(2) of the Companies Act 61 of 1973, the court may, on application by the Master or any other interested person, remove a liquidator from office in any of the circumstances referred to in section 379(1) or for any other good cause – Liquidators owe a fiduciary duty not just to proven creditors, but also to shareholders and the company being wound up

Although three applications were brought in this matter, only the main application eventually required the court’s determination. In that application, an order was sought declaring the deregistration of the first applicant (“Eurocoal”) to be void. That was met with a counter-application by the ninth to eighteenth respondents (“the Wishart respondents”) for the removal from office of the second and third applicants as Eurocoal’s liquidators.

Held that the main application was disposed of by agreement between the parties, making it unnecessary for the court to consider it in any detail. It did take note of the applicant’s submissions, which were that the Registrar was not empowered to deregister Eurocoal on the basis he had. Once a company is being wound up on the basis of insolvency, it no longer has any obligation to submit annual reports to the Registrar in terms of section 173 of the Companies Act 61 of 1973. The deregistration of Eurocoal was therefore incompetent. A draft order reflecting that was presented to court, and the court made it an order of court.

That left the counter-application for consideration. The application or removal of the liquidators was met with the submission by the applicants that the Wishart respondents did not have the locus standi to launch the application. The respondents conceded that the eleventh, thirteenth and eighteenth respondents lacked the necessary locus standi, but stated that the ninth and tenth respondents did have locus standi.

The removal application was based on section 379(2) of the Companies Act, and was premised on the assertions that the liquidators had a conflict of interests, had been derelict in their duties, and lacked independence. In terms of section 379(2), the court may, on application by the Master or any other interested person, remove a liquidator from office in any of the circumstances referred to in section 379(1) or for any other good cause.

In challenging the Wishart respondents’ locus standi, the liquidators stated that none of the said respondents had proven claims in Eurocoal, and without such claim could have no pecuniary or proprietary interest in the winding up. The court pointed out that liquidators owe a fiduciary duty not just to proven creditors, but also to shareholders and the company being wound up. The ninth and tenth respondents at all times remained shareholders of Eurocoal, and even though Eurocoal had been liquidated, its shareholders retained a residuary interest in the company. Setting out several other grounds on which the ninth and tenth respondents had shown an interest in the matter, the court confirmed that they did have locus standi to present their counter-application for determination by the court. The counter-application was postponed sine die.

Razzmatazz Trading Investment 19 (Pty) Ltd v Q-Civils (Pty) Ltd (CPMS Civil Road Rehabilitation (Pty) Ltd and another as Intervening Parties) [2018] JOL 39925 (FB)

Business rescue – Application for leave to proceed with winding-up application -unable to pay its debts and that no reasonable possibility existed for it to be rescued and be able to pay its debts, the court found it just an equitable that the company be liquidated.

Business rescue- director lacked locus standi to represent and act on behalf of the company without the assistance and consent of the business rescue practitioner

In 2016, the applicant (“Razzmatazz”) advanced a loan to the respondent (“Q-Civils”) to enable the latter to execute a tender contract awarded to it by a third party (SANRAL). Q-Civils undertook to repay the amount out of the first payments received from SANRAL. When it became known to Razzmatazz that SANRAL had paid Q-Civils and that the latter failed to repay the loan, Razzmatazz brought an application for the winding up of Q-Civils. The latter then paid the amount owing, on condition that the winding-up application be withdrawn. However, the remaining part of the debt towards applicant, in respect of which Q-Civils had signed an acknowledgment of debt in the sum of approximately R4.8million, was not paid when due and another application for the winding up of Q-Civils was brought. Q-Civils subsequently brought an application to be placed under business rescue. That led to the present application for leave in terms of section 133(1)(b) of the Companies Act 71 of 2008 for Razzmatazz to proceed with its winding-up application.

Held that the court in the business rescue application held that the director of Q-Civils lacked the necessary locus standi to represent and act on behalf of the company without the assistance and consent of the business rescue practitioner. The present court was bound by that decision unless convinced that it was clearly wrong. It could not make such a finding, concluding that the director was not representing Q-Civils by virtue of any authorisation given by the business rescue practitioner. The finding was however only technical in result and had no material effect on the application.

Turning to the application for leave to proceed in terms of section 133(1)(b), the court stated that the language of section 133(1) clearly stipulates that the written consent of the practitioner is required failing which leave has to be obtained from the court. The court found that the facts of the present dispute required that leave be granted. It then went on to consider the winding-up application.

The evidence showed that the claim of the applicant was not disputed on any bona fide grounds. It however remained to be decided whether a provisional order of liquidation should be granted or not. It was significant that the business rescue practitioner deemed it necessary that Q-Civils be liquidated.

Convinced that Q-Civils was unable to pay its debts and that no reasonable possibility existed for it to be rescued and be able to pay its debts, the court found it just an equitable that the company be liquidated.

Mapalakanye and Others, In Re: Mapakanye and Another v Born-to-Protect Security Services (Pty) Ltd and Others (3437/2018) [2018] ZALMPPHC 28 (29 June 2018)

Business rescue-application when company already in liquidation-on facts cannot succeed

The Applicants brought an urgent application in terms of section 131(4) read with section 131(7) of the Companies Act, 71 of 2008 to place the First Respondent in business rescue. The First Respondent Company, Born-to-Protect Security Services (Pty) Ltd (In Liquidation) (“the Company”) was placed in final liquidation by order of this Court on 11 May 2018. Pursuant to this Court order the parties cited as Second, Third and Fourth Respondents herein were appointed joint provisional liquidators of the Company.

[2] This application is launched by Mr Joseph Karabo Mapalakanye and Mrs Nthabiseng Emily Mapalakanye, the First Applicant and the Second Applicant respectively. The Applicants were employees of the First Respondent at the date of the final liquidation of the First Respondent.

[3] The First, Second, Third and Fourth Intervening Applicants are all employees of the First Respondent. The proceedings for the final liquidation of the First Respondent were instituted by the four Intervening Applicants.

The liquidation order was granted on the ground that the Company (First Respondent) is factually and commercially insolvent and unable to pay its creditors including its employees.

[4] In the present application the following facts are common cause:

4.1. The Applicants, as employees of the Company are the interested and affected persons and thus have the necessary locus standi to bring the application for business rescue.

4.2. The First Respondent Company is financially distressed and apart from that failed to make payment to its employees in terms of a contract of employment.

[5] What has to be assessed or determined therefore is whether there is a reasonable prospect for rescuing the First Respondent. Section 131(4) of the Companies Act provides that the Court may, after considering an application for business rescue in terms of section 131(1) make an order placing the Company under business rescue proceedings if the Court is satisfied that the Company is financially distressed and there is a reasonable prospect for rescuing the Company. It is quite evident that this subsection grants a Court a discretionary power to issue or refuse an order for the business rescue of a Company.

[6] The Company in the present case is already in liquidation pursuant to the order of this Court on 11 May 2018. The question arises as to whether a Company in final liquidation can still be placed into business rescue. This question was authoritatively answered in the case of Richter v ABSA Bank Ltd 2015 (5) SA 57 (SCA).

[7] In that case the Supreme Court of Appeal decided that:

Section 131(6) of the Companies Act 71 of 2008 provides that if liquidation proceedings have already been commenced by or against the Company at the time an application for business rescue is made, the application will suspend those liquidation proceedings. The term “liquidation proceedings” does not refer only to a pending application for a liquidation order but includes the process of winding-up of a Company after a final order has been granted, i.e it includes proceedings that occur after a winding-up order to liquidate the assets and account to creditors, up to deregistration of a Company.

[8] Accordingly, it is trite that even if a Company has been finally liquidated it is

still competent for the Court to grant an order for business rescue in terms of section 131(4) of the Companies Act, 2008.

l the other parties with whom the Company contracted had indicated that they would no longer be interested to utilise the Company’s services.

[25] In my view there are no reasonable prospects that in the event of a business rescue order being granted the Business Rescue Practitioner will be able to procure new contracts for the Company to continue its business operations. The goodwill of the Company has been dented. No reasonable business man will desire to do business with a Company that is emerging from liquidation. Liquidation in itself signals the death of a Company. There is no iota of evidence furnished by the Applicants to prove that a Business Rescue Practitioner will be able to revive the contracts or acquire new clients for the Company.

[26] I am inclined to believe that the real purpose behind the application for business rescue, in the circumstances of this case, is an endeavor by the Applicants to regain control over the financial affairs of the Company. I am of the view that it cannot be in the interests of justice to hand back control of the Company to those who made themselves guilty of gross mismanagement of the Company before liquidation. There is indeed a real and cogent fear that if the Company does not remain in liquidation assets will be dissipated, income will be siphoned off and money of the Company will be stolen, just as it happened before liquidation.

[27] In the result the application for business rescue fails and the following order is granted:

The Application is dismissed with costs.

Reezen Limited v Excellerate Holdings Limited and Others (11899/2018) [2018] ZAGPJHC 409 (22 June 2018)

Company Law – Companies Act 71 of 2008 – Interpretation of s 41(3). Section 38(1) empowers the board of a company to issue shares and s 41(3) limits that power and requires shareholder approval inter alia for (a) the issue of shares, if the voting power of the class of shares that are issued or issuable as a result of the transaction will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction; or (b) the conclusion of ‘a series of integrated transactions’, if the voting power of the class of shares that are issued or issuable as a result of the transaction will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction. Whether the conclusion of one indivisible share sale and subscription agreement constitutes ‘a series of integrated transactions’ –

whether the shares issued or issuable as a result of the conclusion of the share sale and subscription agreement exceeded the 30% restriction in s 41(3) – whether share sale and subscription agreement concluded in contravention of s 41(3) ought to be declared void in terms of s 218(1).

[29] The illegal part of the share sale and subscription agreement cannot be severed from the rest of the agreement. (See Bal v Van Staden 1903 TS 70 at 82.) As stated by the learned authors in Wille’s Principles of South African Law at 771, which statement of the law was accepted and applied by this court in Malasela para 55:

‘Whether the portions of an agreement are severable or not depends in the first instance on the probable intention of the parties as appears in, or can be inferred from, the terms of the contract as a whole. Since the intention of the parties in this regard is seldom clearly expressed, the courts have devised certain guidelines to assist in arriving at such intention . . . .’

Here, the intention of the parties is clearly expressed in clauses 3.2 and 15.1 of the share sale and subscription agreement. These clauses make it plain that BT, in one indivisible transaction, purchase the shares and subscribe to the new shares. The implementation of the subscription of shares followed immediately upon the implementation of the sale of shares. It was specifically agreed that the subscription will only be implemented if and once the sale has been implemented and that should the sale have been implemented but the subscription is not, the sale shall be unwound and the parties restored to their positions prior to the implementation of the sale.

[30] In the result the following order is made:

1. The share sale and subscription agreement is declared void and the issue by the first respondent of its shares to the second respondent and the sale of the first respondent’s treasury shares to the second respondent are set aside.

2. The security register of the first respondent is to be rectified to reflect paragraph 1 above.

3. The respondents are to pay the applicant’s costs of the application, including the costs reserved in terms of the order dated 27 March 2018 and the costs occasioned by the employment of two counsel, jointly and severally, the one paying the others to be absolved.


Liquidators – removal of liquidators of company – Locus standi – In terms of section 379(2) of the Companies Act 61 of 1973, the court may, on application by the Master or any other interested person, remove a liquidator from office in any of the circumstances referred to in section 379(1) or for any other good cause – Liquidators owe a fiduciary duty not just to proven creditors, but also to shareholders and the company being wound up- shareholders retained a residuary interest in the company

Although three applications were brought in this matter, only the main application eventually required the court’s determination. In that application, an order was sought

declaring the deregistration of the first applicant (“Eurocoal”) to be void. That was met with a counter-application by the ninth to eighteenth respondents (“the Wishart respondents”) for the removal from office of the second and third applicants as Eurocoal’s liquidators.

Held that the main application was disposed of by agreement between the parties, making it unnecessary for the court to consider it in any detail. It did take note of the applicant’s submissions, which were that the Registrar was not empowered to deregister Eurocoal on the basis he had. Once a company is being wound up on the basis of insolvency, it no longer has any obligation to submit annual reports to the Registrar in terms of section 173 of the Companies Act 61 of 1973. The deregistration of Eurocoal was therefore incompetent. A draft order reflecting that was presented to court, and the court made it an order of court.

That left the counter-application for consideration. The application or removal of the liquidators was met with the submission by the applicants that the Wishart respondents did not have the locus standi to launch the application. The respondents conceded that the eleventh, thirteenth and eighteenth respondents lacked the necessary locus standi, but stated that the ninth and tenth respondents did have locus standi.

The removal application was based on section 379(2) of the Companies Act, and was premised on the assertions that the liquidators had a conflict of interests, had been derelict in their duties, and lacked independence. In terms of section 379(2), the court may, on application by the Master or any other interested person, remove a liquidator from office in any of the circumstances referred to in section 379(1) or for any other good cause.

In challenging the Wishart respondents’ locus standi, the liquidators stated that none of the said respondents had proven claims in Eurocoal, and without such claim could have no pecuniary or proprietary interest in the winding up. The court pointed out that liquidators owe a fiduciary duty not just to proven creditors, but also to shareholders and the company being wound up. The ninth and tenth respondents at all times remained shareholders of Eurocoal, and even though Eurocoal had been liquidated, its shareholders retained a residuary interest in the company. Setting out several other grounds on which the ninth and tenth respondents had shown an interest in the matter, the court confirmed that they did have locus standi to present their counter-application for determination by the court. The counter-application was postponed sine die.

Body Corporate of the Grove Sectional Title Scheme No 16/1983 v Sehri Trading (Pty) Limited [2017] JOL 37796 (GP)

Winding-up order – Inability to pay debt- levies not paid to Body Corporate

The applicant was the body corporate of a sectional title scheme. It applied for the liquidation of the respondent on the ground that it was unable to pay its debt and was not a solvent entity. According to the applicant, the respondent had since 2006, failed or refused to pay the applicant levies due and amounts payable for water and electricity usage.

After filing its answering affidavit, the respondent sought leave to have an additional affidavit accepted by the court, it also challenged the locus standi of the applicant to bring the present application.

Held that Rule 6(5) of the Uniform Rules of Court regulates the number of affidavits to be filed and their sequence. Any additional affidavits may only be filed with the court’s leave. The court was not satisfied with the reason for deviation from the rules in this case and exercised its discretion against the respondent.

The basis on which the respondent challenged the applicant’s locus standi was that the body corporate of the scheme no longer existed and that the proper applicant should have been the administrator appointed by the court. The Court stated that the submission that the appointment of the administrator dissolved the body corporate and rendered it incapable of suing was incorrect. The objection regarding locus standi was thus dismissed.

In terms of section 344(f) of the Companies Act 61 of 1973, a company may be wound up if unable to pay its debts. The court has a discretion as to whether or not to grant a winding-up order. Winding-up proceedings are not to be used to enforce payment of a debt.

The Court found that the applicant had established an entitlement to a winding-up order against the respondent in this case. The respondent was placed under final liquidation.

Alderbaran (Pty) Limited and another v Bouwer and others [2018] JOL 39938 (WCC)

Business rescue proceedings – Application to set aside resolution to place company under business rescue –section 130(5)(a)- court may set aside the resolution on any of the above grounds or if, having regard to all of the evidence, the court considers that it is otherwise just and equitable to do so’

In 2014, the first applicant (“Alderbaran”) purchased immovable property from the first respondent (“Bouwer”). The sale agreement provided for payment of a deposit and the balance to be paid in monthly instalments, Alderbaran failed to pay any of the monthly instalments due to Bouwer who consequently sued for payment of the balance of the purchase price and obtained default judgment against Alderbaran. Pursuant thereto the property was attached and advertised for sale in execution. Alderbaran launched an application for rescission of the default judgment as well as the setting aside of any warrant of execution issued in respect of the property and the staying of any sale in execution pending the determination of the rescission. That application was dismissed. Immediately thereafter, the sole director of Alderbaran passed a resolution (“the first resolution”) in terms of section 129(1) of the Companies Act 71 of 2008 to place Alderbaran under business rescue.

During the course of the following year, a sale in execution was held and the property was sold to the third respondent (“Trade Off”). Bouwer’s attorneys were informed that the sale in execution was invalid because Alderbaran was in business rescue, and the sale in execution was therefore precluded by the moratorium on “legal action or execution of judgments already obtained” (presumably a reference to section 133(1) of the Act). The attorney requested proof of compliance with the requirements of

sections 129(3)(a) and (4) of the Act. Only the Notice of Beginning of Business Rescue Proceedings (Form CoR 123.1) and a Notice of Appointment of Business Rescue Practitioner (Form CoR 123.2) were furnished. No statement of facts relevant to the first resolution was furnished; nor was proof provided of publication to all affected persons of the notices of commencement of business rescue and appointment of a business rescue practitioner, as required by sections 129(3)(a) and 129(4). As a result Bouwer’s attorney indicated that the first resolution was nullity and that he intended to proceed with the transfer of the property pursuant to the sale in execution.

The second applicant, as Alderbaran’s business rescue practitioner, alleged that it was discovered in August 2017, that Alderbaran was described in the Companies and Intellectual Properties Commission database as being “In Business”, that is, no longer in business rescue. He believed that to have occurred as a result of a processing error on the part of the Commission. Therefore, in August 2017 Alderbaran, represented by its sole director, passed another resolution in terms of section 129(1) of the Act to begin business rescue proceedings (“the second resolution”).

Bouwer was convinced that the resort to business rescue was not genuine and was a delaying tactic aimed solely at preventing the transfer of the property in satisfaction of the judgment debt. He refused to halt the transfer of the property and proceeded to lodge the transfer documents.

That led to the two applications presently before the court. The main application sought to interdict the transfer of the property and to declare such transfer unlawful in terms of section 133 of the Act. The second application was a counter-application by Bouwer for the setting aside of the resolution placing Alderbaran under business rescue and the termination of the business rescue in terms of section 130.

Held that the question for determination was whether the relief sought in the counter-application should be granted. In particular, the question was whether the first resolution should be declared invalid and set aside, in terms of section 129(5)(a) read with section 130(1)(a), and the resultant business rescue proceedings terminated in accordance with 132(2)(a)(i) of the Act, and, if so whether a consequential order should be granted confirming the validity of the sale in execution as a necessary and appropriate order of the type envisaged in section 130(5)(c).

Section 130(1)(a) provides for setting aside of a company resolution to place a company under business rescue if there is no reasonable basis for believing that the company is financially distressed; there is no reasonable prospect for rescuing the company; or the company failed to satisfy the procedural requirements set out in section 129. In terms of section 130(5)(a) , the court may set aside the resolution on any of the above grounds or if, having regard to all of the evidence, the court considers that it is otherwise just and equitable to do so.

It was clear that the procedural requirements set out in section 129 were not satisfied by Aldebaran in respect of the first resolution. As a result, the first resolution fell to be set aside in terms of section 129(5)(a) read with section 130(1)(a)(iii). The next enquiry was whether, in the light of all the facts, it would be just and equitable to set the first resolution aside and terminate the business rescue. The conclusion that the termination of the business rescue would be just and equitable involves the exercise, not of a discretion, but of a judgment on the relevant facts, but once that conclusion has been reached, the making of an order to set aside the resolution and terminate

the business rescue does involve the exercise of a discretion. Setting out the relevant facts and circumstances, the court concluded that justice and equity would best be served by setting aside the first resolution and terminating the resultant business rescue.

The Court then had to decide whether any further order was necessary and appropriate. It was regarded as necessary and appropriate, in all the circumstances of this case, to make an order confirming the validity of the sale in execution of the property and authorising the finalisation of transfer of the property in terms thereof.

That left Bouwer’s counter-application. An affected person who applies in terms of section 130(1) of the Act to set aside a company resolution to commence business is obliged to comply with the requirements of section 130(3). That entails service of a copy of the application on the company and the Commission, and notification of each affected person of the application in the prescribed manner. The court considered what wold constitute service for purposes of section 130(3)(a). In the case of the company, it refers to service by the sheriff in one of the manners referred to in Rule 4(1) of the Uniform Rules of Court. And, in the case of the Commission, it is service by electronic mail at the dedicated email address provided by the Commission. Although there was compliance with section 130(3)(a) insofar as Alderbaran was concerned, the Commission had not been joined as a party to the counter-application and there was no service whatsoever of the application on the Commission. The requirements of section 130(3)(a) had therefore not been met. The Court decided to deal with the defect by issuing a rule nisi with directions regarding service of the counter-application and the rule on the Commission, as there was good case on the merits for the relief sought in the counter-application.

The main application was thus dismissed and the counter-application succeeded.

Siyahlanza Engineering CC v Hornet Properties Pty Ltd (in liquidation) and another [2018] JOL 40055 (GJ)

Business rescue application – Court’s discretion-liquidated CC-no proof company could be resued

As a creditor of the first respondent(“Hornet”), the applicant sought to have Hornet placed under business rescue. Although Hornet had been liquidated and was under the control of duly appointed liquidators, the applicant persisted with the application, claiming to be a creditor in the liquidation.

Hornet owned property which had been leased to a third party which was subsequently placed in final liquidation. Since then, the property had been without a tenant and thus Hornet had received no income. The applicant maintained that the proposed business rescue would have prospects of success, in that the plant and equipment on Hornet’s property could be put to use at the property thus generating a rental income for Hornet.

Held that the true enquiry was what the business of Hornet could generate.

The court may make an order placing the company under supervision and commencing business rescue proceedings, if satisfied that it is just and equitable to do so for financial reasons and there is a reasonable prospect of rescuing the company. This can mean not only bringing the company back to commercial viability,

but also the bringing about of the situation where the creditors get a better dividend than they would in a liquidation. An applicant must place before the court a factual foundation for the existence of a reasonable prospect that the desired object can be achieved.

In this case, the applicant failed to establish any reasonable prospects that the desired objects of rescue of the company or a greater dividend could ever be realised. A further obstacle was that the bringing of the application was non-compliant with the requirements of the Companies Act in that all interested parties were not notified of the process.

Finding no basis upon which it should exercise its discretion in putting the company into business rescue, the Court dismissed the application.

Freedom Property Fund Limited and another v Stavridis and others [2018] JOL 30034 (ECG)

Insolvent– Director of company – Disqualification – Unrehabilitated insolvent disqualified from being a director of a company or a trustee of a trust – Section 69(8)(b)(i) of the Companies Act 71 of 2008 – Disqualification does not automatically result in the invalidity of the appointment of an insolvent director, or in a person ceasing to be a director upon sequestration –point not ruled upon, only the exception to the pleadings-exception dimissed-point could therefore come up again in the trial

Although twelve defendants were involved in the litigation in this matter, only seven of them were relevant to the present exception hearing. Those were the first, third to sixth and eighth to fourteenth defendants, and reference to the “the defendants” in the judgment was a reference to them.

The first plaintiff (“Freedom”) was a listed company, referred to as a “closed listing” as the property owners (vendors) who transferred immovable property to Freedom would initially be shareholders of the company. The immovable property would ordinarily not be transferred directly to Freedom but to a special purpose vehicle which would be a subsidiary of Freedom. Thereafter, shares in Freedom would be issued to the special purpose vehicle. In turn, the special purpose vehicle would transfer Freedom shares to the vendor a payment in respect of the immovable property.

The second plaintiff (“Platsak”) owned immovable property which it sold to the twelfth defendant (“Sunrise High”) allegedly on the false misrepresentation that Sunrise High was a special purpose vehicle of Freedom.

The first and third defendants (Stavridis and Pretorius respectively) were alleged to have been some of the promoters of Freedom prior to and at the date of listing. Both were alleged to have been part of Freedom’s executive management team. The fourth defendant (“Cawood”) was alleged to have been a business associate of Stavridis. The fifth and sixth defendants were trusts in which Stavridis was alleged to have a beneficial interest. The eighth (“Leucadia”), ninth (“Bond Connect”), eleventh (“Halcyware”), twelfth (Sunrise High) and thirteenth (“All Wide”) defendants were companies alleged to have been recipients of corporate opportunities diverted from Freedom. In its action, Freedom claimed from them delivery of the alleged corporate opportunities - alternatively damages.

In July 2016, the plaintiffs issued a summons together with particulars of claim. The particulars of claim comprised seven claims, six by Freedom and one by Platsak. Freedom’s claims were grouped into Claim A described as “the Allendale Property Transaction” and Claim B related to the alleged diversion from it of five corporate opportunities. The cause of action in each of Freedom’s six claims was an alleged breach of fiduciary duties as recognised in terms of the common law and partially regulated in terms of Companies Act 71 of 2008. Platsak claimed delictual damages arising from alleged misrepresentation inducing a contract.

The defendants raised eighteen exceptions to the particulars of claim. The first sixteen exceptions related to the claims by Freedom, and the seventeenth related to the claim by Platsak. The exceptions were all taken on the basis that the particulars of claim did not disclose a cause of action alternatively that they were vague and embarrassing.

Held that each of the exceptions would be considered individually.

The first exception was predicated on the contention that there had been misjoinder of Cawood, the two trusts and the tenth defendant (“Bilko”) as the particulars of claim did not disclose a cause of action against them. However, the court agreed with the plaintiffs that where a third party has an interest in the subject matter of the action which is less than direct or substantial, or the extent of the party’s interest is unclear, the party may be joined as a matter of convenience. A joinder of convenience does not give rise to a misjoinder. The exception was not sustained.

The second exception related to the allegation that Stavridis was an unrehabilitated insolvent, and that despite his sequestration, he was reflected in the records of the Master as being a trustee of the two trusts. The exception was based on the averment that the allegation was vague and embarrassing as it was not asserted that Stavridis was a trustee but simply that he was recorded as being one.

The approach to an exception that a pleading is vague and embarrassing is that it ought not to be allowed unless the excipient would be seriously prejudiced if the offending allegations were not expunged. The onus is on the excipient to show both vagueness amounting to embarrassment and embarrassment amounting to serious prejudice. Facts stated in public documents are prima facie proved upon mere production of the public document. The other point to the exception was that Stavridis was alleged in the particulars to be a director of companies, it being contended that as a matter of law, an unrehabilitated insolvent can neither be a director of a company nor a trustee of a trust. The court pointed to section 69(8)(b)(i) of the Companies Act 71 of 2008, and stated that disqualification does not automatically result in the invalidity of the appointment of an insolvent director, or in a person ceasing to be a director upon sequestration.

In the third exception, defendants asserted that the allegation in the particulars of claim that Stavridis had a beneficial interest in the two trusts was vague and embarrassing. It was submitted there was no allegation in the particulars that Stavridis was a beneficiary of the trusts despite the assertion that he had a beneficial interest in each trust. The court agreed that the plaintiffs needed to aver that Stavridis was a beneficiary of the trusts to enable them to allege a beneficial interest. The exception was therefore upheld.

The remaining exceptions were all dismissed, based as they were on incorrect meanings attributed to the particulars of claim, or on incorrect averments regarding the plaintiffs’ claims.

Insofar as the third exception was sustained, the plaintiffs were given leave to amend their particulars of claim.

Woa Fuels and Oils CC v Mzumbe Oil (Pty) Ltd [2018] JOL 40054 (GJ)

Winding up application – Commercial insolvency-respondent did not pay because its own employee committed fraud!

As a petrol and diesel to companies, the applicant had as one its customers, the respondent. It alleged that it had sold and delivered fuel to the respondent in the amount of R 4 497 935, which amount remained unpaid. As a result, the applicant sought the liquidation of the respondent on the basis that it was unable to pay its debts.

The respondent alleged that it had a bona fide and reasonable defence to the claim of the applicant. It contended that the liquidation procedure is not designed for the resolution of disputes as to the existence or non-existence of a debt (the “Badenhorst rule”).

Held that the high-water mark of the respondent’s opposition to the application was that it had been defrauded by an employee who had placed orders with the respondent when no customer had placed any order. The Court referred to the principle of ostensible authority. If the principal has made a representation that the employee has the requisite authority to conclude a particular type of contract, then he is bound, even if the employee is perpetrating a fraud.

The applicant was, in the circumstances, found to have established its claim and its case for liquidation – having established the respondent’s commercial insolvency. The respondent was placed under final liquidation.

MFV “Polaris”: Southern African Shipyards (Pty) Ltd v MFV “Polaris” and others [2018] 3 All SA 2019 (WCC) Business rescue-maritime property arrested post business rescue- unaffected by section 10 of the Admiralty Jurisdiction Regulation Act. The applicant conducted business as a shipyard and provided ship repair services in respect of vessels. In February 2016, the first respondent (“MFV Polaris”) was delivered by the third respondent to applicant’s shipyard in order for repairs to be effected to it. According to the applicant, it duly effected the requested repair services and submitted invoices to the third respondent in respect of such services. In or about April 2017, the third respondent communicated its inability to make payment to the applicant. As a result, the applicant refused to release the MFV Polaris from its shipyard. The vessel was currently under arrest, at the instance of the applicant and a number of other creditors.

In the present application, the applicant sought leave to sell the vessel, her equipment, furniture, bunkers and her cargo in terms of section 9 of the Admiralty Jurisdiction Regulation Act 105 of 1983 and for the appointment of a referee. The applicant averred that with the passage of time the vessel’s condition would inevitably

deteriorate, and value fall. The longer the vessel was under arrest the greater the risk of equipment failing or some other damage or harm befalling her.

The respondents’ answering affidavit was filed out of time, and the applicant consequently opposed its admission. The Court had to therefore consider the respondents’ application or condonation, the intended answering affidavit as well as the applicant’s reply thereto. In deciding whether the late filing of the answering affidavit should be condoned, the Court had to deal with the merits of the case. Held – The first issue to be determined was whether the sale of the vessel could be ordered when the company owning it had been placed under business rescue in terms of the Companies Act 71 of 2008. The respondents said that it could not because of the general moratorium placed on all legal proceedings by section 133 of the Companies Act. The applicant on the other hand, contended that the order for the sale of the vessel could be made by virtue of section 10 of the Admiralty Jurisdiction Regulation Act which excludes property arrested in respect of a maritime claim from assets vesting in a trustee in insolvency or administered by a liquidator, judicial manager or any other person who might otherwise be entitled to such property.

The court therefore had to address the novel issue of the interface between section 133 of the Companies Act and section 10 of the Admiralty Jurisdiction Regulation Act. The Court undertook a proper interpretation of section 10 and concluded that the section does incorporate business rescue. It then acknowledged that the provisions of that section 10 and section 133 of the Companies Act appeared to be in conflict with each other. The sensible interpretation therefore was found to be that proceedings that do not involve maritime property belonging to a company under business rescue or maritime property arrested post business rescue would be unaffected by section 10 of the Admiralty Jurisdiction Regulation Act. Based on that interpretation, the applicant was found entitled to the order sought.

Minister of Constitutional Development and Another v South African Restructuring and Insolvency Practitioners Association and Others (CCT13/17) [2018] ZACC 20 (5 July 2018)

Trustees-appointment — section 158 — policy for the appointment of provisional trustees — ultra vires — displacement of the Master’s discretion

Trusteees-appointmnetInsolvency Act 24 of 1936 — section 158 — policy for the appointment of provisional trustees — arbitrary — exclusion of citizens born on and after 27 April 1994 — no reasons justifying exclusion

Insolvency Act 24 of 1936 — section 158 — policy for the appointment of provisional trustees — irrational — failure to show policy is reasonably capable of achieving equality On 5 July 2018 at 10h00 the Constitutional Court handed down a judgment in an application by the Minister of Justice and Constitutional Development (Minister) and the Chief Master of the High Court of South Africa (Chief Master) for leave to appeal against an order of the Supreme Court of Appeal (SCA). The order of the SCA confirmed a decision of the Western Cape High Court (High Court) which declared the Policy on the Appointment of Insolvency Practitioners (Policy), promulgated by the Minister on 7 February 2014, unconstitutional in that it fails to meet the

requirements of a restitutionary measure under section 9(2) of the Constitution and is irrational.

The High Court held that the policy unlawfully fettered the discretion of a Master to appoint a provisional insolvency practitioner to an estate. This was because the relevant Master had to appoint the next-in-line practitioner with no regard to the practitioner’s relevant skills in relation to the complexity of the estate in question. The Policy was also found to be irrational for a number of reasons, including the failure of the Minister to have regard to the current underlying demographics of insolvency practitioners and how such demographics would impact the realisation of the goals of the Policy. The High Court also held that the Minister did not have the power to promulgate the Policy.

On appeal, the SCA found the Policy to be irrational. The SCA agreed with the High Court that the Minister did not have the power to promulgate the Policy and that the Policy failed to meet the requirements of a restitutionary measure under section 9(2) of the Constitution. The SCA held that the Policy did not unlawfully fetter a Master’s discretion regarding the appointment of an insolvency practitioner.

In a majority judgment, penned by Jafta J (Zondo ACJ, Cameron J, Kathree-Setiloane AJ, Mhlantla J, Theron J and Zondi AJ concurring), the Constitutional Court found that the Policy removes the Master’s discretion to appoint insolvency practitioners in certain cases. This majority found that, while the Policy targets persons who were disadvantaged by unfair discrimination, it does not appear from the information on record that the Policy is likely to transform the insolvency industry. It concludes that the failure to prove that the policy is reasonably likely to achieve equality must mean that there is no proof of a rational link between the Policy and the purpose sought to be achieved.

The majority reasoned that the most serious defect in the Policy is to be found in a particular category from which practitioners are to be appointed in alphabetical order. The problematic category (category D) is the largest category in the Policy and includes white male practitioners but also practitioners from other races if they became citizens on or after 27 April 1994. The majority found that appointing practitioners in alphabetical order from category D is unlikely to achieve equality in the future. Doing so only entrenches the status quo. Since white males are in the majority, most appointments would go to them. Moreover, the category impermissibly discriminates against other races on the ground that they became citizens on or after 27 April 1994. By placing all those who became citizens on or after 27 April 1994 in category D, the Policy effectively punishes all young practitioners who were born on or after that date. This undermines in a serious manner the progressive realisation of equality which the other parts of the Policy are designed to achieve. The arbitrariness of the Policy is apparent from the failure by the Minister to provide reasons justifying why disadvantaged people should be treated differently, on account of the date on which they became citizens.

In the result, the majority granted leave to appeal but dismissed the appeal with costs.

In a minority judgment, Madlanga J (Kollapen AJ and Froneman J concurring) holds that the appointment process in terms of the Policy should not be compartmentalised into discrete components but rather that what must be considered is what the policy seeks to achieve and whether the process as a whole is consonant with that.

Therefore, the minority judgment holds, there is no need to read Clauses 7.1 and 7.3 separately in order to determine whether the Master may exercise a discretion in the appointment process. The minority judgment argues that if all the practitioners on Masters’ lists are suitably qualified, there is no need for the Master to be able to exercise a discretion to not appoint a practitioner who is suitably qualified and is next-in-line to be appointed. For these reasons, the minority judgment holds that the Minister did have the power to promulgate the Policy and that it is not inconsistent with section 18 of the Insolvency Act.

With regard to the majority’s view that the Policy is not reasonably capable of achieving equality due to the paucity of information regarding its implementation, the minority judgment holds that the information on record plainly shows that if properly applied, the Policy will afford significant advantage to section 9(2) beneficiaries and that will in turn uplift those beneficiaries and transform the insolvency industry. In any event, the minority judgment holds, it is not a requirement under the Van Heerden test that a remedial measure must be able to predict its future outcomes with precision.

The minority judgment holds that there is no irrationality in the Policy’s distribution of work according to South Africa’s demographics in order to promote equality. The minority judgment also holds that because of the continued dominance of white practitioners – particularly white men – in the insolvency industry, using the current demographic make-up of the profession would perpetuate the very imbalance that the policy seeks to remedy. It therefore holds that the Policy bears a rational connection to the achievement of equality and that the differentiation of categories of persons affected by the policy is not one that was arrived at irrationally.

Finally, the minority judgment agrees with the majority that the placement of practitioners who became citizens on or after 27 April 1994 in category D is arbitrary and constitutionally invalid. However, it finds that this invalidity does not affect the Policy as a whole.

In the result, the minority would have granted leave and upheld the appeal except insofar as the policy places practitioners who became citizens on or after 27 April 1994 in category D. The minority would have invalidated the Policy to the extent of that placement.

CITY CAPITAL SA PROPERTY HOLDINGS LTD v CHAVONNES BADENHORST ST CLAIR COOPER AND OTHERS 2018 (4) SA 71 (SCA) Liquidators-appointment— Only Master authorised to appoint liquidators — Not competent for High Court to appoint liquidators — Where, as in present case, High Court declaring separate wound-up companies as single entity, its appointment of liquidators in respect thereof amounting to nullity — Companies Act 71 of 2008, ss 20(9), 22, 141(2)(c) and 141(3) In July 2014 the High Court declared that five separate companies, all of which had been wound up, were 'a single entity' as envisaged by ss 20(9), 22, 141(2)(c)and 141(3) of the Companies Act 71 of 2008. It also declared (in para 3 of the order) that the respondents, who had already been appointed as liquidators in the winding-up of two of the five companies, would be liquidators of the single entity.

A dispute subsequently arose between the respondents and the Master of the High Court (the Master) as to whether, as the latter insisted, a first meeting of creditors had to be held in the estate of the single entity, where all interested parties could nominate and vote for liquidators of their choice. Unable to resolve the dispute, the respondents approached the High Court for an order directing the Master to comply with the July order. This application was granted in December 2014. In the same month, the Master appointed the respondents as liquidators. In May 2015 City Capital SA Property Holdings Ltd (City Capital) launched a counter-application for, inter alia, the setting-aside of both the July and December orders. This on the basis that the court that made the July order was not empowered to appoint the respondents as liquidators, and accordingly its order was a nullity, as was the December order which purported to give effect to it. The court held that para 3 of the July order did not constitute the appointment of liquidators as contemplated in ch 14 of the Companies Act 71 of 2008, and dismissed the counter-application. In this case, City Capital's appeal, the issues were whether it was competent for the court to have appointed liquidators of the single entity when making an order as envisaged under ss 20(9), 22, 141(2)(c) and 141(3) of the 2008 Act; and if not, whether that finding would have any practical effect as contemplated in s 16(2)(a)(i) of the Superior Courts Act 10 of 2013 —quoted in [40] — given that the Master in any event appointed the liquidators of the single entity in December 2014. Held Whether non-compliance with a statutory prohibition nullified an act must be determined according to the language of the relevant statute. Section 367 of the 1973 Act conferred on the Master — exclusively — the power to appoint a liquidator in the winding-up of a company. By issuing para 3 of the July order, the court usurped this power. Consequently, para 3 was a nullity and of no force and effect. It was trite that, as a general rule, what was done contrary to the prohibition of the law was of no effect and must be regarded as never having been done. The December order was both erroneous and vague: erroneous because it directed the Master to comply with the July order when the latter did not require the Master to do anything; and vague because it did not tell the Master with any measure of certainty what he or she was required to do to comply with the order. Also, it was inextricably linked to para 3 of the July order, which was a nullity. (See [33] – [39].) The Master's decision to appoint the respondents as liquidators of the single entity constituted administrative action as defined in the Promotion of Administrative Justice Act 3 of 2000. It remained valid until reviewed and set aside, which relief City Capital did not pursue. Consequently, the Master's appointment remained unaffected. Accordingly, a finding that para 3 of the July order and the December order in its entirety was a nullity, would have no practical result as envisaged in s 16(2)(a)(i) of the Superior Courts Act. For this reason, the appeal fell to be dismissed.

Lutchman N.O and Another v Ferreira (15655/2014) [2018] ZAGPPHC 500 (3 July 2018)

Directors-section 424-personal liability-liquidators did not prove reckless trading

In the present instance, the application is launched by the applicants ("liquidators") in their capacity as joint liquidators of Leala Trading 107 (Pty) Ltd ("the company".) The application is brought on the basis that the respondent, a director of the company, conducted the business of the company recklessly.

The Company was registered on 25 February 2009 and conducted business in the mining industry. Save for the respondent, the company had six other directors. The only asset of the company was several mining permits and prospecting rights for the mining of Gold Ore and Uranium Ore. The company did not have the necessary financial means to conduct mining operations and consequently entered into two agreements in order to realise the value attached to the mining rights, to wit:On 10 April 2010 a Mining Management Agreement with Proudafrique Trading 225 (Pty) Ltd ("Proudafrique"), in terms of which Proudafrique would act as Mining Manager and would conduct mining operations to exploit current mining permits and all future mining operations; and On 13 August 2010 a Joint-venture Agreement with Shiva Uranium Limited ("Shiva"), in terms of which the parties would form a new company, which would in turn enter into a long-term contract to use Shiva's gold and uranium processing plant.

Allegations of reckless trading: In respect of the respondent's dealings with Proudafrique, the liquidators allege that the respondent implemented the agreement with Proudafrique: "11.6.3 without the banking arrangement contemplated in paragraph 37 of the MMA being implemented, despite Proudafrique’s repeated insistence;11.6.4 without ever having the intention to comply with and implement the bank arrangement agreed to as per clause 37 of the agreement and to this end defrauded Proudafrique to enter into the MMA on the terms and stipulations contained in the particular agreement,-11.6.5 receiving the proceeds of the gold ore processed into the Company's (Lea/a Trading) bank account and disbursing those funds contrary to the provisions of the MMA and without the consent of Proudafrique. "

The respondent answered as follows to the above allegations:

"33.2 Contractually, it was Proudafrique's obligation to pay any and all expenses relating to the mining operations. Proudafrique breached this obligation by failing and/or refusing to make payment of all the monthly expenses incurred by Lea/a. This amounted to roughly R 500, 000. 00 per month.

33.3 Faced with Proudafrique's failure, Lea/a found itself in a position where it could not pay all of its creditors. As such, Lea/a needed control over the funds paid by Shiva to make sure that it could pay its creditors before splitting the proceeds with Proudafrique.

33.4 In acting in the aforesaid manner I certainly advanced the best interests of Lea/a and attempted to ensure that Leala's creditors were paid despite Proudafrique's breach of its contractual obligations."

[13] In respect of the agreement with Shiva, a long list of allegations of reckless conduct was relied upon. The liquidators' allegations and the respondent's answers thereto appear infra.

[20] Objectively viewed, and measured against the standard of conduct of a notional reasonable person in the respondent’s position, I do not consider his failure to institute legal action against Shiva as being reckless in the circumstances. One should also bear in mind that the respondent was not the only director of the company.

[21] The respondent's evidence referred to supra clearly indicates that all the directors of the company were involved in finding a resolution to the company's problems. The directors jointly resolved that the best option would be to place the company in voluntary winding-up.

[22] In the result, the application must fail. The application is dismissed with costs.

V v V (7833/2016) [2018] ZAGPPHC 505 (6 July 2018)

Sequestration application-benefit for creditors-creditor is ex wife-judgment based on arrear maintenance-provisional order granted

This is an application for the provisional sequestration of the estate of Respondent. Applicant is the ex-wife of Respondent. Respondent is opposing the application

It is common cause that both the Applicant and Respondent were married to each other out of community of property. The marriage was unsuccessful and subsequently dissolved by way of divorce. During divorce proceedings, the parties concluded a written settlement agreement which was made an order of the Court.In terms of the said settlement agreement, Respondent was ordered to pay maintenance towards the parties' minor child. It is common cause that over a period of time, Respondent defaulted with this maintenance obligation and fell Into arrears. This default prompted Applicant to institute proceedings in the Magistrates' Court of Roodepoort against Respondent, for the recovery of outstanding money. She subsequently obtained judgment in the amount of R45,610.00 against him. On 12 May 2015, a warrant of execution was issued by the said Magistrates' Court.

Acting on the strength of the warrant, that the Sheriff did on 11 June 2015 attach a motor vehicle described as, a Renault Clio sedan with registration letters and numbers: [….]. The car apparently belongs to Respondent. The sheriff did not remove the vehicle at that time.

[2.7] On 23 September 2015, the sheriff again went to Respondent's premises in order to remove the attached vehicle. However, he was unable to do so. It appears that the vehicle was not at that stage in Respondent's possession, and also outside the jurisdiction of the Potchefstroom sheriff.

[2.8] On 13 June 2016, the sheriff made yet another attempt by visiting Respondent's premises. Again he was unable to remove the said motor vehicle or attach any other asset. For this reason, he issued a nulla bona return.

[2.10] What is of importance therefore, is the fact that to date, this judgment has not been satisfied.

In addition to that, and on his own version and admission under oath, he cannot and is not in a position to pay the amount of R183,000.00 he admits owing to Applicant.

ADVANTAGE TO CREDITORS:

[5.1] It was argued on behalf of Respondent that sequestration will not be to the advantage of creditors. This argument is based mainly on the fact that since 21 November 2016, Respondent has been placed under debt review in terms of the National Credit Act, 34 of 2005 (''the NCA").

[5.2] In this regard, counsel for Respondent conceded that only two (2) or three creditors benefit and or receive payments under this arrangement. It is common cause that no payment is made in respect of the maintenance Court judgment and or the amount of R183,000.00- which Respondent admits owing to Applicant as arrear maintenance.

[5.3] In his argument therefore, Respondent seems to suggest that he must first be allowed to pay and settle all of his debt in terms of the debt review arrangements, until all his listed creditors have been paid in full. Once this has been done, only then will he start to make monthly payments towards all that he owes Applicant in terms of the maintenance order. He is unfortunately not even able to say how long this will take. It is however, clear that such an exercise will take years.

[5.4] As I have pointed, Respondent admits that Applicant is not one of the creditors who receive payments under the debt review arrangements. He does not make any payments whatsoever towards maintenance. According to a document attached to his answering affidavit as Annexure "MVW1", the last payment was made during October of 20·14. This is common cause.

[5.5] Mr Jacobsz, for the Applicant, argued that this is just not good enough. He argued that any arrangement in terms of which Applicant is to be allowed to first pay all other creditors before starting to pay what he owes Respondent, cannot be said to be to the advantage of creditors.

[5.6] He further argued that in terms of the Court order, this amount continues to increase at a monthly rate of approximately R7,000.00. Annexure "MVW1" shows clearly that, the Respondent has been in default and has never made a single payment since November 2014.

[5.7] Taking into account all of these facts, I am satisfied that there is reason to believe that the sequestration will be to the advantage of Respondent's creditors.

[6] DISCRETION OF THE COURT:

[6.1] It is so that when considering an application such as this the first consideration by the Court is whether prima facie the three facta probanda set out in The Insolvency Act have been established. These are:

[6.1.1] Applicant has established against the debtor a liquidated claim of not less than R100.00,

[6.1.2] the debtor has committed an act of insolvency or is insolvent;

[6.1.3] has reasons to believe that it will be to the advantage of creditors of the debtor if the estate is sequestrated.

[6.2] If upon consideration, the court is satisfied that three facta probanda have been established, it has the power, but under no obligation to grant an order of provisional sequestration. In other words therefore, the Court has a discretion. This discretion is to be exercised judicially taking into account all the facts as well as the general history and circumstances of the case.

[6.3] In exercising my discretion, I have carefully considered the facts as well as the history of the matter. I am satisfied that there are no special circumstances and or considerations on the basis which the relief sought should not be granted.

[6.4] That being the case, and in the exercise of my discretion, I am of the view that Applicant is entitled to the order sought. I find no reasons or circumstances to disentitle her of this order.

The estate of the Respondent is placed under provisional sequestration;

The Respondent and any other party who wishes to avoid such an order being made final are called upon to advance reasons, if any, why the court should not grant a final order of sequestration of the said estate on the 13t h day of August 2018 at 10H00 or so soon thereafter as the matter may be heard.

First Rand Bank Limited v Master of the High Court Pretoria (53071/2016) [2018] GSJ 18 April 2018

Creditors-Contribution in terms of section 106 of the Insolvency Act 24 of 1936- petitioning creditor liable-section 14(3)

The body corporate as “petitioning creditor” is liable to contribute in terms of section 14(3) read with section 106 of the Insolvency Act.

First Rand Bank Limited and Nedbank, the bondholders, proved their secured claims in the insolvent's estate at meetings of creditors and relied exclusively on their security.

Section 15B(3)(a)(i)(aa) of Sectional Title Act 95 of 1986 provides as follows:

(3) The registrar shall not register a transfer of a unit or of an undivided share therein, unless there is produced to him-

(a) a conveyancer's certificate confirming that as at date of registration-

(i) (aa) if a body corporate is deemed to be established in terms of section 2(1) of the Sectional Titles Schemes Management Act, that body corporate has certified that all moneys due to the body corporate by the transferor in respect of the said unit have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof; or ...

The Master dismissed an objection to the account holding that the body corporate was not liable to pay a contribution.

The Body Corporate and the bondholders First Rand Bank Limited and Nedbank Limited are liable to contribute pro rata to the administration costs.

Commissioner for the South African Revenue Service v Logikal Consulting (Pty) Ltd (96768/2016) [2018] GNP (29 March 2018)

Compromise-section 155 of the Companies Act 71 of 2018-effect on SARS

Compromise-section 155 of the Companies Act 71 of 2018- faulty notice can lead to rescission.

SARS does not have the power to compromise their statutory duty to collect taxes, provided that if it is clear that SARS would in any event not receive a greater dividend in liquidation of the tax payer, nothing prevented such claim being compromised to the recoverable extent, whether by the creditor's actual consent or by sanction of the scheme by the court.

Where a despatcher of a notice of a meeting deliberately did not comply with the request by SARS to send the notice by email to a specified address the respondent did not give proper notice of the creditors' meeting to SARS and the application for the rescission of the order which sanctioned the offer of compromise must succeed.

Freedom Property Fund Limited and another v Stavridis and others [2018] 3 All SA 550 (ECG)

Insolvent person-rights-unrehabilitated insolvent disqualified from being a director of a company or a trustee of a trust – Section 69(8)(b)(i) of the Companies Act 71 of 2008 – Disqualification does not automatically result in the invalidity of the appointment of an insolvent director, or in a person ceasing to be a director upon sequestration. Although twelve defendants were involved in the litigation in this matter, only seven of them were relevant to the present exception hearing. Those were the first, third to sixth and eighth to fourteenth defendants, and reference to the “the defendants” in the judgment was a reference to them.

The first plaintiff (“Freedom”) was a listed company, referred to as a “closed listing” as the property owners (vendors) who transferred immovable property to Freedom would initially be shareholders of the company. The immovable property would ordinarily not be transferred directly to Freedom but to a special purpose vehicle which would be a subsidiary of Freedom. Thereafter, shares in Freedom would be issued to the special purpose vehicle. In turn, the special purpose vehicle would transfer Freedom shares to the vendor a payment in respect of the immovable property.

The second plaintiff (“Platsak”) owned immovable property which it sold to the twelfth defendant (“Sunrise High”) allegedly on the false misrepresentation that Sunrise High was a special purpose vehicle of Freedom.

The first and third defendants (Stavridis and Pretorius respectively) were alleged to have been some of the promoters of Freedom prior to and at the date of listing. Both were alleged to have been part of Freedom’s executive management team. The fourth defendant (“Cawood”) was alleged to have been a business associate of Stavridis. The fifth and sixth defendants were trusts in which Stavridis was alleged to have a beneficial interest. The eighth (“Leucadia”), ninth (“Bond Connect”), eleventh (“Halcyware”), twelfth (Sunrise High) and thirteenth (“All Wide”) defendants were companies alleged to have been recipients of corporate opportunities diverted from Freedom. In its action, Freedom claimed from them delivery of the alleged corporate opportunities – alternatively damages.

In July 2016, the plaintiffs issued a summons together with particulars of claim. The particulars of claim comprised seven claims, six by Freedom and one by Platsak. Freedom’s claims were grouped into Claim A described as “the Allendale Property Transaction” and Claim B related to the alleged diversion from it of five corporate opportunities. The cause of action in each of Freedom’s six claims was an alleged breach of fiduciary duties as recognised in terms of the common law and partially regulated in terms of Companies Act 71 of 2008. Platsak claimed delictual damages arising from alleged misrepresentation inducing a contract.

The defendants raised eighteen exceptions to the particulars of claim. The first sixteen exceptions related to the claims by Freedom, and the seventeenth related to the claim by Platsak. The exceptions were all taken on the basis that the particulars of claim did not disclose a cause of action alternatively that they were vague and embarrassing. Held – Each of the exceptions would be considered individually.

The first exception was predicated on the contention that there had been misjoinder of Cawood, the two trusts and the tenth defendant (“Bilko”) as the particulars of claim did not disclose a cause of action against them. However, the Court agreed with the plaintiffs that where a third party has an interest in the subject matter of the action which is less than direct or substantial, or the extent of the party’s interest is unclear, the party may be joined as a matter of convenience. A joinder of convenience does not give rise to a misjoinder. The exception was not sustained.

The second exception related to the allegation that Stavridis was an unrehabilitated insolvent, and that despite his sequestration, he was reflected in the records of the Master as being a trustee of the two trusts. The exception was based on the averment that the allegation was vague and embarrassing as it was not asserted that Stavridis was a trustee but simply that he was recorded as being one. The approach to an

exception that a pleading is vague and embarrassing is that it ought not to be allowed unless the excipient would be seriously prejudiced if the offending allegations were not expunged. The onus is on the excipient to show both vagueness amounting to embarrassment and embarrassment amounting to serious prejudice. Facts stated in public documents are prima facie proved upon mere production of the public document. The other point to the exception was that Stavridis was alleged in the particulars to be a director of companies, it being contended that as a matter of law, an unrehabilitated insolvent can neither be a director of a company nor a trustee of a trust. The Court pointed to section 69(8)(b)(i) of the Companies Act 71 of 2008, and stated that disqualification does not automatically result in the invalidity of the appointment of an insolvent director, or in a person ceasing to be a director upon sequestration.

In the third exception, defendants asserted that the allegation in the particulars of claim that Stavridis had a beneficial interest in the two trusts was vague and embarrassing. It was submitted there was no allegation in the particulars that Stavridis was a beneficiary of the trusts despite the assertion that he had a beneficial interest in each trust. The Court agreed that the plaintiffs needed to aver that Stavridis was a beneficiary of the trusts to enable them to allege a beneficial interest. The exception was therefore upheld.

The remaining exceptions were all dismissed, based as they were on incorrect meanings attributed to the particulars of claim, or on incorrect averments regarding the plaintiffs’ claims.

Insofar as the third exception was sustained, the plaintiffs were given leave to amend their particulars of claim.

Van der Merwe and others v Zonnekus Mansion (Pty) Limited (in liquidation) and another (Commissioner for the South African Revenue Service and another as intervening parties) [2017] JOL 39477 (WCC)

Business rescue application- company in liquidation- application procedurally defective- no resolution from the trust- first applicant not an “affected person”

In September 2016, the first applicant applied to have the first respondent (“ZKM”), a company in liquidation, placed under supervision, and for it to commence business rescue proceedings in terms of section 131(1), read with section 131(4)(a) of the Companies Act 71 of 2008 – as well as ancillary relief. The second to fourth applicants were cited in their capacities as trustees of a trust which was a shareholder in the company. They were the first applicant in his capacity as trustee, his 75 year old mother (“Ms Cameron”) and 23 year old daughter (“Candice”).

The application was the fourth in a series of business rescue applications brought in respect of ZKM, and was brought in the wake of the dismissal of the third of the business rescue applications referred to above.

ZKM’s sole director was Ms Cameron until recently, but despite being neither a shareholder nor a director of ZKM, the first applicant had for many years been the guiding mind and corporate controller of the company. It owned five immovable properties, including Zonnekus Mansion, an estate whose value was estimated to be

between R30 and 50 million. The first applicant stated that he had lived in the property for more than 20 years.

Held that the application was procedurally defective in a number of respects. First, the notice of motion was signed by the first applicant personally and on behalf of the trust. Yet, there was no resolution from the trust authorising either the institution of the application or the first applicant to represent it. Then the employees cited collectively as the second respondent were not identified in any manner in either the notice of motion or in the founding affidavit. Finally, two parties who had an interest in the matter were not joined, and had to make their own applications to intervene. The Court however, acceded to the request of the intervening parties, to determine the application finally on its merits so as to avoid the possibility of a further application.

The issues for determination were whether the first applicant had locus standi to bring the application personally; whether ZKM conducted a business; whether it had any employees; whether one of the intervening parties (SARS) was a creditor of ZKM, thus giving it locus standi to oppose business rescue; and whether a suitable business plan was put up in compliance with the criteria set out in Chapter 6 of the Act and the applicable case law.

An applicant for business rescue is not required to set out a detailed business rescue plan. However, the applicant must establish grounds for the reasonable prospect of achieving one of the two goals mentioned in section 128(1)(b) of the Act (that is a return to solvency or a better deal for creditors and shareholders than through liquidation). A reasonable prospect means a possibility that rests on objectively reasonable grounds.

The Court found that the first applicant had not shown himself to be an “affected person” as contemplated in section 128(1)(a) of the Act and he therefore had no locus standi to move an application for business rescue.

It was found further that ZKM did not conduct any business, and was no more than a property holding entity in final liquidation. The proposed business plan was also unsustainable, and the Court expressed the view that the application was intended to prevent the liquidators from discharging their statutory functions. The application was dismissed.

Anthony v Anthony and another [2018] JOL 39963 (KZP)

Divorce-Liquidator-Division of joint estate – Appointment of liquidator – Fiduciary duties

On dissolution of the marriage between the applicant and first respondent, the court made orders for division of the joint estate and the appointment of a liquidator. The second respondent was the current liquidator.

The nub of the applicant’s case concerned the failure of the second respondent to advance to her, funds to obtain expert evaluations of the assets of the joint estate. She challenged the correctness of the valuations in respect of various business interests and assets as provided by the respondents.

Held that the applicant raised genuine concerns regarding the estate and she had to be afforded an opportunity to obtain the required expert assistance. The second

respondent had a legal duty to assist the applicant by providing her with funds to get the valuations, which the second respondent demanded from her despite her indigent state. The second respondent appeared not to appreciate the nature of her duties. The court emphasised that she owed a fiduciary duty to both the applicant and the first respondent. It concluded that the respondents had without good cause, failed to come to the assistance of the applicant. The second respondent was directed to pay the applicant, out of funds forming part of the joint estate between the applicant and the first respondent, R1 000 000.

Naidoo v Discovery Life Limited and others [2018] JOL 39960 (SCA)

Assets-Insurance – Risk-only life insurance policy – Beneficiary nomination clause – Whether constituting asset of policy-holder – Effect of section 15(2)(c) of the Matrimonial Property Act 88 of 1984

The appellant’s husband (“the deceased”) had during his lifetime taken a life insurance policy from the first respondent (“Discovery”). The deceased nominated the appellant as the beneficiary of the proceeds of the policy upon his death. The policy provided further that the owner could instruct Discovery in writing to change the beneficiary at any time and that the appointment of a beneficiary was revocable at all times during his lifetime. Importantly, the policy provided that a nominated beneficiary was not entitled to any benefits during the lifetime of the principal life assured. The policy was a risk-only policy meaning that it had no monetary value unless and until the person whose life was insured died. It had no investment portion and thus no surrender value. It also provided that no benefits would be payable on its cancellation.

In October 2011, the deceased wrote to Discovery and requested a change of beneficiary details to reflect both his parents, his brother and his sister as beneficiaries to the policy. The appellant was unaware of the change.

After the deceased’s death in March 2012, the newly appointed beneficiaries accepted the benefits of the policy by claiming payment of the proceeds. Discovery did not pay any amount to the appellant and denied that it had any liability to do so. The appellant contended that the aggregate of rights and obligations under the policy vested in the joint estate, which included the right to nominate a beneficiary, receive payment of the sum insured and revoke a nominated beneficiary. Therefore, so it was contended, the deceased could not nominate the third parties as beneficiaries without the appellant’s written consent as envisaged in section 15(2)(c) of the Matrimonial Property Act 88 of 1984.

Held that the appeal raised two questions. The first was whether a risk-only life insurance policy with a beneficiary nomination clause is an asset of the policyholder during his lifetime; and the second was whether the nomination of a beneficiary by a policyholder married in community of property, constitutes an alienation of that policy as contemplated in section 15(2)(c) of the Matrimonial Property Act.

A contract in favour of a third party underlies the legal concept of a beneficiary clause in a life insurance policy. When a policy is a risk-only policy, as in this case, payment of the policy proceeds occurs only upon the death of the insured life and cannot be an asset in the estate of the deceased. It could therefore never be an asset in the joint estate.

When considering whether a spouse is prohibited in terms of section 15(2)(c) of the Act from dealing with impugned property without the written consent of the other spouse, the crucial enquiry is whether such property forms part of the joint estate. If the said property cannot be regarded as forming part of the joint estate then section 15(2)(c) of the Act is not applicable and the spouse may deal with such property as he pleases. The restrictions imposed by section 15(2)(c) of the Act apply only to alienation of insurance policies that are assets and form part of the joint estate. The section found no application to the facts in this case. The nomination of the third parties as beneficiaries did not constitute an alienation of the policy within the meaning of section 15(2)(c) of the Act and the appeal had to fail.

Reezen Limited v Excellerate Holdings Limited and others [2018] JOL 40120 (GJ)

Company law – Sale of shares – Sale agreement in contravention of section 41(3) of the Companies Act 71 of 2008 – Shareholder approval – Voidness of agreement

The applicant (Reezen) sought an order that the sale by the first respondent (Excellerate) of 19 000 000 of its treasury shares to the second respondent (BT) and the issue by Excellerate of 56 892 489 new ordinary shares to BT, be set aside. Reezen was a shareholder and beneficial owner of Excellerate’s ordinary shares. The third respondent (Zanmet) was a wholly-owned subsidiary of Excellerate and it owned the 19 000 000 ordinary shares (the treasury shares) in Excellerate before they had been sold to BT.

Reezen’s case was that the share sale and subscription agreement ought to be visited with the sanction of voidness. First, it argued that the share sale and subscription agreement contravened section 41(3) of the Companies Act 71 of 2008 and, second, that the directors of Excellerate exercised their power to sell and to issue the shares contrary to their fiduciary duties and did not exercise their power bona fide for the benefit of Excellerate and for a proper purpose.

Held that the only questions capable of determination on the papers were whether the share sale and subscription agreement was concluded in contravention of section 41(3) of the Companies Act and, if so, whether it ought to be visited with the sanction of voidness, in whole or in part. The other issues involved the resolution of material disputes of fact, which were not capable of resolution on the papers without a referral to trial.

Section 38(1) of the Act empowers the board of a company to issue shares. Section 41(3) limits that power and requires shareholder approval inter alia for the issue of shares if the voting power of the class of shares that are issued or issuable as a result of the transaction will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction; or the conclusion of ‘a series of integrated transactions’ if the voting power of the class of shares that are issued or issuable as a result of the series of integrated transactions will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction. The board of directors of a company, therefore, has the power to issue shares without shareholder approval up to a maximum of 30% of the voting power of all shares of that class.

The new shares that were issued as a result of the sale transaction and the subscription transaction embodied in the share sale and subscription agreement constituted 33.2% of the voting power of all the shares held by the shareholders immediately before the series of transactions. The approval of the shareholders by special resolution was not obtained and section 41(3) of the Companies Act was thus contravened.

The next question was whether the share sale and subscription agreement that was concluded in contravention of section 41(3) should to be declared void in terms of section 218(1). The Court was of the view that the share sale and subscription agreement had to be declared void, failing which legal sanction would be given to the very situation which the legislature wished to prevent.

Tayob v Multi Furn Wholesalers and Retailers (Pty) Ltd (32604 / 2017) [2018] ZAGPPHC 548 (6 August 2018)

Business rescue-effect on contracts-lease agreement-sect 136 (2) (b)-dispute of facts

According to the applicant, the purposes of the application is to order the respondent to produce an alleged lease agreement between it and the Close Corporation, and if the respondent fails to do so, that it be declared that there is no valid lease agreement between the Close Corporation and the respondent in existence. If it is found that such lease agreement exists, the court authorise the applicant to cancel it in terms of section 16(2)(b) of the Companies ACT OF 2008.

The answering affidavit of the respondent was deposed to by one lnayet Hussein Hassen who described himself as a member and director of the respondent and that he is dully authorised to depose to the affidavit. He confirmed that Mr Omar is the attorney of I S Essack, the member of Resfam Investments

According to Hassen, who deposed on behalf of the respondent, during or about 1 April 2015 , a written lease agreement was concluded between the respondent and Resfam Investments CC and signed by I.S. Essack in order to lease a portion of immovable property known as Erf C / 166 Modimolle situated at No 123 Nelson Mandela Drive, Modimolle. The said immobile property specifically the portion which the lease related was previously a used car dealership and consisted of a vacant lot (the second portion of the property) and a used car sales room (the first portion to which the lease agreement related. On or about 13 April 2015, a further lease agreement was concluded between the respondent and Resfam Investments to lease the vacant lot. Attached to the papers, are copies of a lease agreement between Multifurn Pty Ltd and lnayet Husssein Hassen in respect of immovable property situated at 1223 Nelson Drive Mandela Drive Shop 1238 Nelson Mandela drive Modimolle dated 12 November 2015; Lease agreement between Multi Furn (Pty) Ltd and Vulani Funeral (Mrs Raisebe Funeral in respect of immovable property at 123 Nelson Mandela Drive Modimolle dated 18 October 2017.

In this matter, there are disputes of facts, which cannot be resolved on papers. The primary dispute pertain to whether: the lease agreement, sought by the applicant, produced in the answering affidavit , was backdated to suit the expediency of the

respondent; the respondent has effected any improvements on the immovable property and if so to what extent; the role played by either Ismail Silliman Essack lssack senior or junior, and the impropriator or lack thereof of Mr Omar. The answer to these questions can only be reached through cross examination. The applicant has not sought that the matter be referred to trial. In the circumstances, bearing in mind the relief sought, I find myself constrained to dismiss the application with cost. MANTIS INVESTMENT HOLDINGS (PTY) LTD v EASTERN CAPE DEVELOPMENT CORPORATION AND OTHERS 2018 (4) SA 439 (SCA)

Company — Winding-up — Interrogation — Subpoena to appear — Creditor asking for subpoena of persons — Master, without proper consideration of request, issuing same — Companies Act 61 of 1973, ss 415 and 417. Mantis, a creditor of a company in liquidation, asked one of the liquidators for the subpoena of certain persons and documents. The request was unmotivated, and the statutory source of the subpoena power was not suggested. (See [3] and [7].) The liquidator forwarded the request to the Master, who, under ss 415 and 417 of the Companies Act 61 of 1973, and apparently without deliberation, called the cited persons to appear before him. Eastern, † those persons' employer, then obtained the review and setting-aside of the subpoena in the High Court, and Mantis appealed to the Supreme Court of Appeal. (See [3] and [4].)

It dismissed the appeal: absent proper consideration of the request, the exercise of the subpoena power was invalid. LEVAY AND ANOTHER v VAN DEN HEEVER AND OTHERS NNO 2018 (4) SA 473 (GJ)

Company — Winding-up — Application — Intervention — Whether creditor or minority shareholder can intervene to oppose.

Mr and Mrs Levay had lent a company a sum of money and in return had been issued with 150 shares each. A third person was the holder of 600 shares. (See [33], [38] and [51].) The respondents had later instituted proceedings to liquidate the company, and the Levays applied here to intervene in those proceedings in order to oppose the liquidation. The issue was whether a creditor or minority shareholder could do so (see [8]). Held, that both could. With regard to a minority shareholder, her shareholding in itself was a legal and so sufficient interest to satisfy the interest requirement for intervention. (See [11] – [12], [15] and [28] (on creditors); and [6], [19] – [20] and [28] (on minority shareholders).) Application ultimately granted (see [62]).

Absa Bank Ltd v Murray and Another (CA338/2017) [2018] ZAECGHC 75 (28 August 2018)

Sequestration application-dismissed-appeal also dismissed- creditor made payment whilst under debt counselint to Buffalo City Municipality-not constituting an act of

insolvency contemplated in s 8(c) of the Insolvency Act 24 of 1936 when this was not the case made out in the founding papers’

This is an appeal against an order of Bloem J in which he discharged a provisional order of sequestration. He refused leave to appeal but, on petition to the Supreme Court of Appeal, leave to appeal to the full court was granted on a limited basis.

It is common cause that the first respondent, Mr Gary Murray, (Murray) was indebted to the appellant, Absa Bank Ltd, (Absa) in the amount of R13 532 636.48. The debt was secured by four mortgage bonds over immovable property owned by Murray in East London. During 2009, Murray applied for debt review in terms of s 86 of the National Credit Act 34 of 2005 (the NCA). As a result, his debts, including the debt owed to Absa, were re-arranged. The order in question directed Murray to pay Absa R47 303.73 per month (as opposed to R174 047.19 per month) and to pay through the National Payment Distribution Agency (the NPDA). That order was in force at all material times and is still in force.

On 4 September 2013, Absa issued summons against Murray, claiming R13 521 636.48 plus interest, this being the amount alleged to be outstanding and due to Absa at the time. Murray filed a special plea to the effect that because of the magistrate’s debt re-arrangement order and Murray’s compliance with that order, Absa was barred from instituting the action against him. No further steps have been taken by Absa in that matter subsequent to Murray filing the special plea.

On 26 August 2015, Absa launched an application for Murray’s sequestration. It was based on allegations that he was factually insolvent and had committed certain acts of insolvency. Murray opposed the application but a provisional order was granted by Cossie AJ. On the return day, Bloem J discharged the provisional order and dismissed Absa’s application with costs.

As a result of Absa’s petition to the Supreme Court of Appeal, Petse JA and Rogers AJA granted leave to appeal in respect of one issue only. It was:

‘Whether it is open to the applicant to rely on the fact that the first respondent had affected payment to the Buffalo City Municipality as constituting an act of insolvency contemplated in s 8(c) of the Insolvency Act 24 of 1936 when this was not the case made out in the founding papers’.

Determination of the issue

[16] Mr Coetzee, who appeared for Absa, argued that Absa was entitled to rely on the payment of the amount to BCM to establish an act of insolvency on Murray’s part. The principle, he said, was that as long as the necessary facts were on record, a party could argue any legal point that arose from those facts.

[19] The riders to the principle mentioned by Wallis JA must be stressed. They are, first, that the point must be apparent on the papers, secondly, that the facts have been fully canvassed and thirdly that no prejudice will be occasioned for the other party. I am not convinced that any of these qualifications is present in this matter.

[20] In the first place, the point does not emerge from the papers. The fact of the payment to BCM arose in the context of whether Murray was factually insolvent. No mention was made of any other of the elements of s 8(c) of the Insolvency Act. The matter was left there and not even mentioned in reply. It was later used – in the heads of argument for the first time – to found an argument that Murray had

committed an act of insolvency different to those expressly alleged in the founding affidavit.

[21] Secondly, because of the context in which the admission of payment to BCM was made, it cannot be said that the facts were properly canvassed. Murray was called upon to answer to an allegation that his liabilities exceeded his assets and that one of his liabilities was a debt owed to BCM of approximately R1.3 million. He did so by saying that while the debt he had owed to BCM was much smaller than that alleged, it had been paid, with the result that neither amount – the larger or the smaller – could be taken into account for purposes of determining his factual insolvency.

[22] If he had known that his admission would be used to argue that he had committed an act of insolvency in terms of s 8(c), he would no doubt have answered differently and more fully. His mind would have been directed to dealing with whether the payment to BCM had prejudiced his creditors or had preferred BCM over other creditors – and he would, no doubt, have dealt with these issues then. Facts directed at these core elements of s 8(c) would then have been before the court. Instead, he was found, on the basis of inference, to have committed an act of insolvency in terms of s 8(c) without ever having been heard on the issue. Because of the way in which the point was taken, the full facts were not before the court.

[23] Thirdly, it is fundamentally unfair for a party to direct a party’s attention in one direction, and strike in another. In Kali v Incorporated General Insurances Ltd,[12] Milne J said of an application to amend pleadings during argument that ‘[t]he purpose of pleading is to clarify the issues between the parties and a pleader cannot be allowed to direct the attention of the other party to one issue and then, at the trial, attempt to canvass another’. In Minister of Safety and Security v Slabbert[13] Harms DP explained that ‘[c]ases by ambush are not countenanced’.

[24] It is clear, particularly in the light of Absa’s silence in reply, that Murray had no knowledge that the point would be raised until he saw Absa’s heads of argument. As no case was made in the founding affidavit, or in reply, for that matter, for his payment to BCM constituting an act of insolvency, he was entitled to take the position he did. Mr Coetzee argued that Murray ought to have applied to file a supplementary affidavit when he saw the point being taken in Absa’s heads of argument. I cannot see how a duty can be cast on Murray to rectify Absa’s deficiency in raising the issue. Indeed, it highlights that the issue was not properly raised on the papers and the unfairness that Murray was subjected to, as a result.

[25] I conclude therefore that Bloem J concluded correctly, in relation to the payment of the BCM debt, that Absa could not, in its heads of argument, contend ‘that the respondent committed an act of insolvency, as envisaged in section 8(c) when no such case was made out in its founding affidavit’.

The order [26] The appeal is dismissed with costs, including the costs of two counsel.

Cross-Med Health Centre (Pty) Limited (in business rescue) and others v Crossmed Mthatha Private Hospital (Pty) Limited and another [2018] JOL 40146 (ECG)

Business rescue – Duties of company director to business rescue practitioners and company

The first applicant (“Cross-Med Health”) was a company, trading as a private hospital, which had been placed under business rescue. The second respondent (Yako) was a director of Cross-Med Health and was also a director and sole shareholder of the first respondent (“Cross-Med Mthatha”). His motivation for the business rescue of Cross-Med Health was accepted and the application was granted. The second and third applicants were appointed as business rescue practitioners. They subsequently applied to the High Court for an order freezing the bank account of Cross-Med Mthatha, pending the outcome of an action to be instituted. The order was granted. Yako had, without the knowledge of the business rescue practitioners, notified various medical aid societies that the bank account details of Cross-Med Health had changed to the account of Cross-Med Mthatha. Thereafter payments by medical aid societies due to Cross-Med Health were instead paid to the account of Cross-Med Mthatha.

In the present application, the business rescue practitioners sought to interdict Yako from conducting any form of medical practice from Cross-Med Health’s premises, and related conduct.

Held that in his application to place Cross-Med Health under business rescue, Yako made no mention of Cross-Med Mthatha or that he owned the hospital practice. He diverted funds to Cross-Med Mthatha from as early as July 2017 and continued to do so until discovered in January 2018. His conduct throughout was marked by dishonesty towards Cross-Med Health and the business rescue practitioners for his and Cross-Med Mthatha’s gain.

The Court confirmed that the application should be treated as urgent, and that the requirements for an interdict had been met. The application accordingly succeeded.

C Pro Construction PTY v Caliber Devco CC and Others (63054/15) [2018] ZAGPPHC 663 (3 September 2018)

Voluntary liquidation- winding up of the first respondent as a solvent company whilst the company was insolvent to the amount of more than R35 million, renders the purported voluntary liquidation null and void.

Prescription delayed- The liquidators -appointed by the court have not been appointed finally and prescription is delayed until compliance with Section 359 (2) after the date of their final appointment.

This is an application by the applicant, a creditor of the first respondent for an order;

1.1 declaring the voluntary liquidation of Caliber Devco CC the first· respondent to be null and void ab initio;

1.2 in terms of which the voluntary liquidation purportedly registered by CIPC, the ninth respondent on 10 November 2011 be set aside, including the appointment by the Master of the South Gauteng High Court of the second and third respondent' s as the liquidators of Caliber Devco CC;

1.3 declaring the liquidation proceedings in terms of the voluntary liquidation, including the first and general meetings of creditors and all further proceedings that have purportedly been adopted by the company under voluntary liquidation by the second and third respondent's to be null and void;

1.4 in terms of which the fourth, fifth and sixth respondent 's in their capacity as the joint liquidators appointed by the Master of the North Gauteng High Court consequent upon the court liquidation of the first respondent on 13 January 2012 in the North Gauteng High Court are authorised to reconvene and proceed with the first meeting of creditors.

The first respondent was finally liquidated by order of court in this division on 13 January 2012.

A provisional order was granted in this court dated 6 February 2017 granting the relief in terms of which the voluntary liquidation of the first respondent was declared null and void, that the appointment of the second and third respondent's as liquidators were set aside and declaring the liquidation proceedings in terms of the voluntary liquidation of 10 November 2011, including the meeting of creditors and the purported confirmation of a liquidation and distribution account, null and void and to be set aside.

In terms of the said provisional order the winding up proceedings of the first respondent pursued in this court under case number 55319/2011 were declared valid and binding on all parties. The application is now before this court for a final order.

[8] The first to fourth intervening parties who oppose the application, asserts that the applicant' s claim against the entity has become prescribed.

[9] It was submitted on behalf of C Pro that he completion of prescription was delayed by virtue of the liquidation order that was granted in this court on 13 January 2012. Section 359 (1) of the Companies Act 61 of 1973 provides for the suspension of legal proceedings until the appointment of a final liquidator.

[10] Counsel on behalf of the first to fourth intervening parties argued that final liquidators were appointed pursuant to the order that was granted on 13 January 2012 already on 16 May 2012.[2] Accordingly Section 13 (1) of the Prescription Act has no bearing on the matter and C Pro's claim was extinguished by prescription on 12 January 2015.

[11] The liquidators had not been finally appointed and their appointment had not been confirmed by creditors. By virtue of the supervening voluntary liquidation, the liquidators were precluded from investigating the affairs of the first respondent. Persons with rights of action against the company are prevented by operation of the 1973 Companies Act (Section 359 (1) (a) from interrupting prescription and consequently completion of prescription is delayed. Prior to the compliance with Section 359 (2) of the 1973 Act, prescription will not run. The liquidators the fourth, fifth and sixth respondent's appointed by the court have not been appointed finally

and prescription is delayed until compliance with Section 359 (2) after the date of their final appointment.

[14] As a consequence, the voluntary winding up proceedings did not comply with the prescripts of the provisions of the applicable legislation referred to and Section 363 (1) of the 1973 Act. The lack of compliance with Section 363 (I) of the 1973 Act of considering the resolution in a creditor' s voluntary winding up, the form CM100 considered with the representations with regard to the insolvency of the first respondent rendering the voluntary liquidation proceedings null and void.

[15] The purported adoption of a resolution by members on the date as aforesaid, also did not comply with the provisions of the 1973 Act, which still applies in terms of Act No. 71 of 2008, the new Companies Act. [16] The resolution was adopted in terms of Section 80 of the 2008 Act read with regulations 40 of the 2008 Act and the transitional arrangements issued in terms thereof, effective from 1 May 2011, which clearly prescribes how and in what manner a voluntary liquidation of a solvent company should be effected.

[17] As a consequence, the appointment of the liquidators, the second and third respondent's by the Master of the South Gauteng High Court in terms of the purported voluntary liquidation and the meetings of creditors and or any other steps taken in terms thereof are void ab inito.

[18] The first respondent was placed under voluntary liquidation in terms of a notice of resolution to wind up a solvent company.

[19] The resolution itself was effected on form CO R40. l, which provides for a notice in terms of Section 80 of the Companies Act 2008 pertaining to the resolution to wind up a solvent company.[4]

[20] Section 80 of the Companies Act No. 71 of 2008 provides for the voluntary winding up of a company that has adopted a special resolution to do by the company or by its creditors.

[21] The significance of solvent or insolvent where those terms are used in item 9 of schedule 5 of part G of Chapter 2 of the Act, the traditional arrangements pertain to the state of insolvency, which in our law is being accepted to mean "actual" or "literal" solvency or insolvency, which involves a comparative measurement of the value of the company's assets and its liabilities. If the total value of the liabilities exceeds of a company exceeds the total value of the assets of a company, it is actually insolvent.

[22] The winding up of the first respondent as a solvent company whilst the company was insolvent to the amount of more than R35 million, renders the purported voluntary liquidation null and void.

[23] It appears from the papers and from the form CM100 that the first respondent was at all relevant times insolvent, but had been purportedly placed under voluntary liquidation as a solvent company in contravention of the provisions of items 9 of Schedule 5, which prescribes that a close corporation is to be wound up voluntarily by members or creditors under XIV of the 1973 Companies Act. [24] The provisions of the 1973 Companies Act apply to a Close Corporation by virtue of the amendment of Section 66 of the Close Corporation Act by item 7 (1) of Schedule 3 of the 2008 Companies Act.

[25] In terms of item 7 (1) of Schedule 3 Section 67 of the Close Corporation Act had been amended by the deletion of the entire section and it being replaced by the provision that this part of the Close Corporation Act must be administered in accordance with the laws as mentioned or contemplated in item 9 of Schedule 5 of theCompanies Act of 2008.

[26] In terms of item 9 (2) of Schedule 5 of the new Companies Act No. 71 of 2008, Sections 343, 344, 346 and 348 to 353 do not apply to the winding up of solvent companies, which are now dealt with in terms of Sections 79 to 81 of the new Companies Act. Only companies that are " insolvent " may be wound up pursuant to the provisions of Chapter XIV of the 1973 Act, either voluntary or compulsory.

[27] A special resolution must be adopted in terms of Sections 199 to 203 of the 1973 Act. The notice of the resolution must indicate the proposed resolutions i.e. to wind up the corporation voluntary in terms of Section 199, the reason for the resolution as well as the effect of the resolution. The resolution must be submitted for registration to the Companies and Intellectual Property Commission on form CM26 together with a copy of the notice convening the meeting, alternatively the consent to propose and pass a special resolution at a meeting of which the required notice had been given. In terms of the evidence presented in relation to the voluntary liquidation adopted by Caliber Devco on 19 September 2011, a resolution was adopted irregularly in terms of Section 80 of the Companies Act of 2008 and Regulation 41 of the Company Regulations of 2011, which applies only to a solvent company.

[28] The minutes of the meeting clearly stated incorrectly so that the company was wound up in terms of Section 67 of the Close Corporation Act. Section 67 has been deleted and substituted by Section 224 (2) of Act No. 71 of 2008 and it is prescribed that Section 67 must be administered in accordance with the laws contemplated in item 9 of Schedule 5 of the new Companies Act.

[29] Messrs Swanepoel and Schlapaff represented that the form CM 100 was also consulted the members meeting on 19 September 2011 whilst in reality it was only signed and sworn to by Mr. Swanepoel before a Commissioner of Oaths on 12 January 2012 some four (4) months after the resolution was adopted on 19 September 2011. In terms of Section 363 (3) and (8) of the 1973 Act the form CM1OO has to be considered by a meeting of members in the process of adopting a resolution of voluntary winding up.

[30] The members of Caliber Devco could not have been presented with the form CM100 when the resolution was adopted on 19 September 2011. The incomplete CM100 (Annexure DD10) was completed and signed on 12 January 2012.

[31] Section 363 of the 1973 Act applies only to the voluntary liquidation of insolvent companies. In my view there was no compliance with the prescripts of Section 363. The appointment of the liquidators and the proceedings conducted in terms of the voluntary liquidation is therefore also void ab initio. The confirmation of a liquidation and distribution account with also be null and void.

[33] The court has an unfettered discretion to grant compulsory winding up.[5]

[34] The intervening applicants' purport to rely on two (2) resolutions in terms of which the members of the two (2) Close Corporations resolved to intervene in terms

of a resolution to that effect.[6] Annexure "FA3" is a resolution adopted by the members of Largo Development CC, which is not one of the intervening entities.

[35] It was submitted by counsel for the applicant that in respect of the other intervening party Askare Development CC, in terms of searches conducted in the records of the Companies and Intellectual Property Commission by the applicant's legal representatives that two (2) Close Corporations are registered in that name in respect of each of the registered Close Corporations under that name, additional members are registered who have not taken part in the resolution adopted. Moreover, the resolution does not make any reference to the registration number of the particular Close Corporation, no resolution was adopted in respect of the intervening applicant Caliber Management (Pty) Ltd.

[36] The objective facts in relation to the failure to comply with the provisions of the Act when the voluntary liquidation resolution was adopted, taints the entire proceedings thereafter as being null and void.

[37] In the result:

a) the applicant is entitled to a final order in terms of the rule nisi; and

b) that the costs of this application be paid out of the insolvent estate of the first respondent.

ALDERBARAN (PTY) LTD AND ANOTHER v BOUWER AND OTHERS 2018 (5) SA 215 (WCC)

Business rescue — Resolution to begin — Setting-aside — When permitted — 'Just and equitable' — Conclusion that termination of business rescue would be just and equitable involving exercise, not of discretion, but of judgment on relevant facts, but once that conclusion was reached, making of order to set aside resolution and terminate business rescue involved exercise of discretion — Companies Act 71 of 2008, s 130(5)(a)(ii). Business rescue — Resolution to begin — Setting-aside — Power of court to make 'any further necessary and appropriate order' — Discretion to be exercised judicially, and only limit on further order which may be made was that it had to be both necessary and appropriate — Companies Act 71 of 2008, s 130(5)(c). Business rescue — Resolution to begin — Setting-aside — Requirement that copy of application be served on company and Companies and Intellectual Property Commission — Type of service required — Both company and Commission to be joined — In respect of company, service in terms of Uniform Rule of Court 4(1)(a), ie service by sheriff in one of manners referred to in rule 4(1) — In respect of Commission, service in terms of Uniform Rule of Court 4A(c) as read with Commission's practice note 9 of 2017, ie service by electronic mail at email address provided by the Commission — Companies Act 71 of 2008, s 130(3). Mr Bouwer obtained default judgment against the company Alderbaran (Pty) Ltd (Alderbaran) for the balance of the purchase price Alderbaran had failed to pay in respect of the property it had bought from Mr Bouwer. Mr Bouwer subsequently attached the property on the strength of a mortgage bond that had been registered in

his favour as security for Alderbaran's obligations. Alderbaran's subsequent application to rescind the judgment and set aside the warrant of execution was dismissed. The same day of such dismissal Mr Shaheed Noor, the sole director of Alderbaran, passed a resolution in terms of s 129(1) of the Companies Act 71 of 2008 (the Act) to place the company under business rescue. Mr Faizel Noor was appointed as business rescue practitioner. After these events, and an unsuccessful appeal against the dismissal of the application for rescission, Mr Bouwer sold the property in execution. Alderbaran, with a view to halting the subsequent transfer of the property, then communicated to Mr Bouwer's attorneys its opinion that the sale of execution was precluded in light of the general moratorium on legal proceedings against companies in business rescue. Mr Bouwer responded that it would proceed with the transfer as the resolution commencing business rescue was a nullity for non-compliance with procedural requirements set out in s 129(3) and (4) of the Act. This communication prompted the present proceedings. Alderbaran sought an order interdicting the transfer of the property because it was in business rescue. And Mr Bouwer launched a counter-application, claiming an order for the setting-aside of the resolution placing Alderbaran underder business rescue and the termination of the business rescue in terms of s 130 of the Act. The major issues to be determined were the following: (a) Should the resolution be declared invalid and set aside, in terms of s 129(5)(a) — which provides for the nullification of a resolution to begin rescue proceedings that fails to comply with the procedural requirements set out in s 129(3) and (4) — read with s 130(1)(a) — which allows an 'affected person' to apply for the setting aside of a procedurally faulty resolution — and the resultant business rescue proceedings terminated in accordance with s 132(2)(a)(i) of the Act? (b) If the answer to the above was positive, should a consequential order be granted in terms of s 130(5)(c) — which allows a court setting aside a resolution to, in addition, make 'any further necessary and appropriate order' — confirming the validity of the sale in execution? (c) Had the respondent in respect of its counter-application for the setting-aside of the resolution complied with the requirements of s 130(3) — which provides that (a) it must serve a copy of the application on the company and the Companies and Intellectual Properties Commission (the Commission); and (b) notify each affected person of the application in the prescribed manner. As to (a), held In considering an application in terms of s 130(1)(a) for the setting-aside of a resolution to commence business rescue, a court, in terms of s 130(5)(a), may set aside the resolution '(i) on any grounds set out in [s 130(1)(a), which includes non-compliance with procedural requirements]; or (ii) if, having regard to all of the evidence, the court considers that it is otherwise just and equitable to do so'. It was law that 'the just and equitable requirement' had not to be understood as an independent ground for setting aside a resolution, but as an additional requirement to be satisfied along with the need to establish one or more grounds for setting aside in terms of s 130(1)(a). (See [39].) Further, the conclusion that the termination of the business rescue would be just and equitable involved the exercise, not of a discretion, but of a judgment on the relevant facts; but, once that conclusion has been reached, the making of an order to set aside the resolution and terminate the business rescue did involve the exercise of a discretion. (See [47].) It was clear that the procedural requirements set out in s 129 were not satisfied by Aldebaran in respect of the resolution, in that no statement on oath was signed in

support of the resolution, and there was no publication of the resolution to affected persons, as envisaged in s 129(3)(a); and there was no publication of notice of the appointment of Faizel Noor as business rescue practitioner to affected persons, as required in s 129(4)(b). (See [44].) It would be just and equitable to set aside the resolution and terminate the business rescue. The facts suggested that the resolution was not passed in good faith in that there was no genuine intention to attain the objectives of the Act in regard to business rescue; the remedy was instead used simply as a stratagem to defeat Mr Bouwer's enforcement of the default judgment, and hold on to the property to be sold in execution. (See [48] – [49].) As to (b), held A court when setting aside a resolution to commence business rescue was given, in terms of s 130(5)(c), a wide discretion to grant 'any further necessary and appropriate order', the rationale being to equip the court to deal equitably with the various circumstances which might arise and require regulation following the setting-aside of a s 129 resolution and termination of business rescue. The discretion had to be exercised judicially, and the only limit on the further order which may be made was that it had to be both necessary and appropriate. (See [52] and [54].) As such, it was necessary and appropriate, in all the circumstances, to make an order confirming the validity of sale in execution of the property. On the one hand, because business rescue, once validly initiated, remained operative until set aside by a court — even if affected persons have not been notified thereof as required in s 129 — it could not be said that there was a blanket rule that the setting aside of a s 129 resolution and termination of business rescue operated ex tunc, ie retrospectively with effect from the date of the s 129 resolution. On the other hand, it was established in law that action taken against a company in contravention of the moratorium on legal proceedings imposed by s 133 was not automatically invalid. As to (c), held As regards the requirement in terms of s 130(3) of service on the company and the Commission, both the company and the Commission had a direct and substantial interest in any order the court may make, and both were required to be joined as parties in the application to set aside business rescue. However, it may be appropriate to dispense with the requirement of formal joinder of the Commission as a respondent in proceedings where the Commission had been properly served with a copy of the proceedings and the court was satisfied that the Commission had waived any right to be joined as a party. (See [60].) Proper 'service' in terms of s 130(3) meant the following: in the case of the company, service in terms of Uniform Rule of Court 4(1)(a), that is, service by a sheriff in one of the manners referred to in rule 4(1); in the case of the Commission, service in terms of Uniform Rule of Court 4A(c) as read with the Commission's practice note 9 of 2017, that is service by electronic mail at the dedicated email address provided by the Commission. (See [66].) The Commission had not been joined as a party to the counter-application and there has been no service whatsoever of the application on the Commission. The requirements of s 130(3)(a) had therefore not been met. (See [75].) The notice requirements of s 130(3)(b) had also not been met inasmuch as a copy of the counter-application was not delivered in any form to any 'affected persons'. (See [77].) However, despite non-compliance with the peremptory requirements of s 130(3), the court would not dismiss the counter-application, but rather issue a rule nisi with directions as to service and notice, because there was a good case on the

merits for the relief sought. Having found that it would be just and equitable in all the circumstances to grant the relief in the counter-application, it would not be conducive to justice and equity to refuse the relief on the technical ground of defective service. The interests of all affected persons could satisfactorily be catered for by way of the service and notice directions as provided in the order.

COLLARD v JATARA CONNECT (PTY) LTD AND OTHERS 2018 (5) SA 238 (WCC)

Business rescue — Business rescue plan — Vote against its adoption — Voter's aim to frustrate damages claim that plan envisaged company bringing against it — Application to set vote aside — Companies Act 71 of 2008, ss 153(1)(b)(i)(bb) and 153(7). In this matter, employees of Jatara Connect, a company in business rescue, applied to set aside the vote of Edcon Ltd, a creditor, against the business rescue plan. This on the ground that it was inappropriate. Held, that it would be reasonable and just to do so: Edcon's aim, in voting as it did, was to frustrate a damages claim, which the plan envisaged Jatara bringing against it. This in a context where, assuming successful prosecution of the claim, the outcome for creditors and employee, would be better than in liquidation. (See [1], [6], [9], [20] and [26] – [27].) Edcon's vote set aside; and the business rescue plan declared adopted (see [28]).

THE POLARIS SOUTHERN AFRICAN SHIPYARDS (PTY) LTD v MFV POLARIS AND OTHERS 2018 (5) SA 263 (WCC)

Business rescue — Moratorium on legal proceedings in relation to property belonging to company — Not applying to property already under maritime arrest — Admiralty court may order sale of arrested property — Admiralty Jurisdiction Regulation Act 105 of 1983, s 10; Companies Act 71 of 2008, s 133(1). The applicant applied to sell property (a ship) under maritime arrest. The issue was whether such a sale could be ordered when the owner had been placed in business rescue. The respondents argued that the moratorium on legal proceedings against companies in business rescue contained in s 133 of the Companies Act 71 of 2008 prevented the court from ordering the sale. The court held that s 10 of the Admiralty Jurisdiction Regulation Act 105 of 1983 excluded property already under maritime arrest from the moratorium in s 133, and granted the application for the sale of the ship. Argent Industrial Limited v Gainsford NO and others [2018] JOL 40406 (KZP)

Voidable preferences- dispostion without value- sequestrated trust – Action by liquidators- Unjust enrichment-claim succeeded-appeal dismissed

Note: Although a trust is sequestrated and trustees appointed, the judgment speaks about liquidators, hence I leave it as is.

The background facts in this matter involved a convoluted scheme operated by two business associates (Holland and Scharrighuisen). The two stole a significant sum of money from a company (SOC), and deposited the stolen money into a secret bank account which they had opened. In March 2007, Holland established a trust, which was sequestrated in 2009.

The scheme was structured as follows. BMI was a subsidiary of the appellant (“Argent”). SOC purchased and paid for equipment in a foreign jurisdiction using BMI’s import number. Then it invoiced BMI for the equipment. SOC could not invoice the bank because it would then have been financing its own asset. BMI would approach a bank to finance the purchase of the equipment that SOC had already sold to BMI. Once the bank was satisfied that the asset was in the country, it would approach SOC for authorised signatures to the financing agreement. BMI resold the equipment to the bank and the equipment was delivered to SOC. BMI paid the money it received from the bank for the sale of the equipment to SOC. The net effect of the arrangements was that theoretically, SOC would have gotten both the equipment and the payment for it, in making payments to SOC, BMI or Argent drew cheques in favour of SOC. Over a period, Holland and Scharrighuisen deposited those cheques totalling R584 372 445.78 into the secret bank account. Then they drew cheques on the secret account in favour of the trust and deposited them into the trust’s bank account.

When SOC discovered the shortfall in its accounts, Holland told SOC that Argent owed the relevant amount. SOC demanded payment from Argent, and Holland and Scharrighuisen made several payments to Argent as a result, and Argent paid the amounts to SOC.

After the trust was sequestrated, the liquidators instituted action against Argent for the recovery of an amount of R8,8 million. Finding that the trust had title to the R8,8 million, the trial court granted an order in favour of the liquidators against Argent for payment of the claim with interest and costs.

In the present appeal, Argent denied liability to the insolvent trust on various grounds.

Held that as the bulk of the money in the trust’s bank account had been stolen, the stolen money had to be returned to its “owner” or, more precisely, the party entitled to it. The trust had not title to the stolen money. That aside, the payment to Argent had not been authorised by the trust. Furthermore, the disposition to Argent within two years of the sequestration of the trust resulting in the latter’s liabilities exceeding its assets was not made for value under section 26 of the Insolvency Act 24 of 1936. The disposition thus fell to be set aside, as the trial court correctly found.

As Argent had paid all the money it received from the trust to SOC, it relied on unjust enrichment. To succeed in its enrichment action, Argent had to prove that its transfer to SOC had been made in the bona fide and reasonable but mistaken belief that it had been owing. It clearly could not do so.

The appeal was thus dismissed.

Akbur and another v Button NO and others [2018] JOL 40314 (KZP)

Voidable preferences – appeal-succeeds-facts not proven

As applicants in the court below, the first to fourth respondents obtained an order declaring that amounts paid to appellants by a close corporation constituted voidable preferences of the property of the corporation. The respondents were appointed as joint liquidators of the corporation. The appeal was brought against the decision of the court a quo.

Held that section 29 of the Insolvency Act 24 of 1936 provides that, “Every disposition of his property made by a debtor not more than six months before the sequestration of his estate or, if he is deceased and his estate is insolvent, before his death, which has had the effect of preferring one of his creditors above another, may be set aside by the Court if immediately after the making of such disposition the liabilities of the debtor exceeded the value of his assets, unless the person in whose favour the disposition was made proves that the disposition was made in the ordinary course of business and that it was not intended thereby to prefer one creditor above another.”

An applicant for relief in motion proceedings must make out his case in the founding affidavit and not in reply. The admissible evidence in the founding affidavit fell short of establishing the facts which would support the relief sought. All that was established was that certain dispositions had been made within the 6-month period. However, it was not shown to whom the dispositions were made and whether the liabilities of the corporation exceeded its assets immediately after each disposition was made. The various disputes of fact meant that the application could never have been determined on the papers. The applicants should have contemplated a material dispute of fact arising and should not have proceeded by way of motion proceedings.

The appeal was thus upheld. Eksteen v Van der Merwe [2018] JOL 40301 (FB)

Sequestration application-friendly sequestration – Requirements-act of insolvency not proved

In a friendly sequestration application, the applicant was the respondent’s mother. The respondent had been placed under debt review in accordance with the National Credit Act 34 of 2005.

Held that section 12 of the Insolvency Act 24 of 1936 provides that a court may sequestrate the estate of a debtor if it is satisfied that the petitioning creditor has established against the debtor a claim such as is mentioned in section 9(1); the debtor has committed an act of insolvency or is insolvent; and there is reason to believe that it would be to the advantage of creditors of the debtor if his estate is sequestrated. Even if all three requirements of section 12(1) have been met, the court still has an overriding discretion which may be exercised in favour of or against the applicant for sequestration.

In friendly sequestrations, it is often accepted that the respondent is clearly insolvent and/or has committed an act of insolvency, usually by way of a letter to the applicant in accordance with the provisions of section 8(g) of the Act, indicating his inability to pay his debts. The third requirement – the advantage to creditors - then becomes the focal point in order to ascertain whether a proper case has been made out for sequestration.

On the evidence before it, the Court found that the applicant had failed to prove that she was a creditor of the respondent as defined in section 9(1) of the Act. The Court was also unable to find that an act of insolvency had been committed and that the sequestration would be to the advantage of creditors.

The application was refused. Barloworld South Africa (Pty) Ltd t/a Barloworld Equipment Rental and Cat Rental Store v Blue Chip Mining & Drilling (Pty) Ltd and others [2018] JOL 40387 (NCK)

Business rescue proceedings-moratorium-lease agreement – Cancellation of – Claim for return of leased equipment – Effect of

In 2013, the applicant and the first respondent ("Blue Chip") concluded a written rental agreement in terms whereof the applicant leased and delivered to Blue Chip certain equipment. The equipment was used by Blue Chip on a mining site for mining of manganese ore on contract for the holder of the mining right to the mine, Kudumane Manganese Resources (Pty) Ltd ("Kudumane"). In terms of the mining agreement between Blue Chip and Kudumane, the former was remunerated by the latter for ore extracted from the mine and delivered to Kudumane. Towards the end of 2014 Kudumane failed to honour its payment obligations to Blue Chip under the mining agreement. Blue Chip consequently fell in arrears on its monthly instalments payable to the applicant. In December 2014, Blue Chip resolved to begin business rescue proceedings and place itself under supervision in terms of section 129 of the Companies Act 71 of 2008. The appointed business rescue practitioners (the second to fourth respondents) entered into negotiations with the applicant in an attempt to honour Blue Chip's obligations in a manner acceptable to the applicant.

By reason of a number of events, the applicant cancelled the rental agreement with effect from 19 February 2015. It then brought an urgent application for the return of its equipment.

Held that section 133(1)(b) of the Companies Act 71 of 2008 places a moratorium on legal proceedings against a company during business rescue proceedings. Having regard to the authorities, the Court held that the notice of cancellation did not fall within the purview of section 133(3). It was not a legal proceeding or enforcement action, and required no leave of a court for its validity.

The first to fourth respondents were ordered to return the equipment in question.

Samons v Turnaround Management Association and CIPC Case 4939/2018 15 October 2018, High Court Johannesburg

Business rescue-business rescue practitioner-review application for license revoked-successful application

In this matter Mr. TH Samons applied to review and set aside the finding of guilt by the TMA and its decision to expel him as a member as well as the decision of the CIPC to revoke his license to practice as a BRP in terms of Section 126 (7).

The Court held that the decision of the disciplinary committee to amend the charge sheet without notifying Mr. Samons was unfair and contra the rules of natural justice. The Court held further that the TMA, in making a finding after a disciplinary hearing into one of its members, exercised a public power which amounted to administrative action and thus subject to review under PAJA.

The CIPC conceded that should the application succeed against the TMA, the application against the CIPC would succeed and its decision would be set aside.

The application was successful and both the decisions of the TMA and CIPC were reviewed and set aside.

Kriel NO v Born Free Investments 247 (Pty) Ltd [2018] JOL 40446 (WCC)

Liquidated company – Appointment of curator – Moratorium on legal proceedings

The associated legal entities (collectively referred to as "RAM"), was placed under provisional, and subsequently, final curatorship in terms of section 5 of the Financial Institutions (Protection of Funds) Act. The appellant was appointed its curator.

The appellant was appointed as curator of a company placed under final liquidation. The interim order had stated that pending the return date, all actions, proceedings, the execution of all writs, summonses and other processes against the company be stayed and not instituted or proceeded with, without the leave of the court. The final order stated that the rule nisi was confirmed in respect of the businesses of the liquidated company.

After the company was placed under final curatorship, the respondent sued the appellant, in his capacity as curator, for arrear rental. The appellant raised a special plea to the effect that the respondent had not obtained the leave of the court before instituting action. The respondent on the other hand, argued that the requirement had fallen away in the final order.

In terms of Uniform Rule 33(4) it was ordered that the special plea should be determined separate from the merits. The plea was dismissed, leading to the present appeal.

Held that the question for determination was whether the court a quo placed a proper interpretation on the two orders, in particular, on the phrase “subject to the terms of this order the rule nisi is confirmed in respect of the business of the first and second respondents and the appointment of a curator is made final” in paragraph 1 of the final order.

The phrase “subject to” merely subjected the provisions of the interim order to those of the final order, the provisions of the interim order continuing to be of force and effect unless they were in conflict with those of the final order, in which case the provisions of the final order would prevail. If there was an intention not to include the moratorium on legal proceedings in the final order the drafters would have expressly stated this in

clear and unambiguous terms. There was also good reason for the court’s having to be approached before action could be instituted, as set out in the judgment.

The appeal was upheld and the respondent’s claim dismissed.

Marais and 56 others v Shiva Uranium (Pty) Ltd (in business rescue) and others [2018] JOL 40497 (LC) Business rescue-moratorium-section 133(1) of the Companies Act – this LABOUR COURT has no jurisdiction to uplifting the moratorium on litigation against a company in business rescue. The applicants approached the Court by way of urgency seeking leave to institute these proceedings against the first respondent, in business rescue, in terms of section 133(1)(b) of the Companies Act1. In the main application, the applicants seek an order directing the first respondent to pay all unpaid remuneration and employment benefit contributions due and payable to all the applicants. The application is opposed by the second and third respondents, who are the first respondent’s Business Rescue Practitioners (practitioners), who take two points in limine. Firstly, the practitioners contend that this Court lacks jurisdiction to entertain the application to uplift the moratorium to institute legal proceedings against a company during business rescue proceedings in terms of section 131 of the Companies Act. Secondly, the practitioners contend that the matter is not urgent and therefore should be struck off the roll. Background.

It was submitted by the BRP that the reference to ‘court’ in terms of section 133(1)(b) must be interpreted to mean High Court specifically and exclusively.

The applicants on the other hand were adamant that the Labour Court has jurisdiction to uplift the moratorium in terms of section 133(1)(b). They assert that their claims for outstanding remuneration are rooted in the fundamental right which is offended by non-payment and as such the Labour Court has jurisdiction in terms of section 157(1) and (2) of the Labour Relations Act [66 of 1995] (LRA).

The Standard Bank of South Africa Limited v The Master of the High Court, Eastern Cape, Port Elizabeth and Others (2632/2017) [2018] ZAECPEHC 55 (2 October 2018)

Liquidator-investing funds in corporate saver account-lawfulness thereof-applicant bank was clearly wrong in bringing this to court

This is a review application in which the applicant (Standard Bank) seeks the following relief:

"1. Condoning the Applicant's failure to institute the application within the time period specified in section 7 of the Promotion of Administrative Justice Act 3 of 2000 (PAJA).

2. Reviewing and setting aside the decision of the First Respondent (the Master) taken on 21 November 2016 regarding the payment to the

Second Respondent (Lionel Shrosbree) of a commission on the investment of certain funds of Mario Levi Manufacturing South Africa (Pty) Ltd (in liquidation) (Mario Levi) during the course of the administration of Mario Levi;

3. Declaring that the Second Respondent had no lawful entitlement to receive payment of commissions in respect of the investment of the funds of Mario Levi, invested by the Third Respondent (Gary Shrosbree), in his capacity as joint liquidator of Mario Levi, with a financing house known as PW Harvey and Co.;

4. Directing Gary Shrosbree to provide to the Master and. the Applicant a full account of all amounts paid to Lionel Shrosbree from the funds of Mario Levi within 30 days of the date of this Order and upon the furnishing of such account, a debatement thereof, if necessary;

5. Directing Lionel Shrosbree, alternatively Gary Shrosbree in his personal capacity, to repay the commissions received by Lionel Shrosbree to Mario Levi within 5 days of the delivery of the debatement and accounting referred to in paragraph 3 above;

6. Directing that the costs of this application be paid as a cost in the winding-up of Mario Levi, alternatively that the costs be paid by any respondent opposing this application;

THE MAIN SUBMISSIONS AND DISCUSSION:

It is clear that what is intended by section 394(1)(a) is that all monies received by the liquidator on behalf of the company must be deposited into the current account. A savings account and/or interest-bearing deposit are to be additional to, and not instead of, the current account.

She concludes that, on the evidence, it is clear that the corporate saver account is not a current account as contemplated by section 394(1)(a);

For Shrobree: A corporate saver account is in effect a current account with the added benefit that interest is earned on funds deposited in the account; A current account is an account at a registered bank into which cash or cheques may be deposited and from which money may be withdrawn as required by the account holder;

The contention of Ms Adhikari in relation to the obligation of a liquidator to open a current account in terms of section 394(1)(a) of the 1973 Act is plainly correct. I do not think this is in dispute between the parties.

However, Mr Dyke's proposition that the corporate saver account was, for all intents and purposes, a current account in terms of section 394(a), is, in my view, incorrect. It ignores the fact that Mr Shrosbree did in fact operate a current

account in the name of the liquidated estate, as plainly demonstrated by the transfer instructions annexed to the founding papers as annexure "FA18C".

The existence of such a current account is furthermore evident from:

the liquidation accounts of Mario Levi where, under the heading "bank charges", provision is made for disbursements in respect of a "current account"; and

the cheque deposits and electronic transfers from the Mario Levi current account to the corporate saver, as reflected on the corporate saver investment register, annexed to the founding papers, marked "FA18B".

[63] It is not apparent from the application papers when the Mario Levi current account was opened. What is clear, however, is that a Mario Levi current account was operated by Gary Shrosbree during the liquidation process.

[64] It is also important to note that none of Mario Levi's creditors or disbursements in the liquidation were paid from the corporate saver account. The corporate saver account was therefore a savings account for surplus funds, and not a current account.

[65] In the circumstances I find that Gary Shrosbree indeed operated a current account for Mario Levi in terms of section 394(1)(a) of the Companies Act of 1973.

[66] I also find that Gary Shrosbree opened the corporate saver account with Nedbank, through the agency of PW Harvey, in terms of section 394(1)(b), alternatively section 394(1)(c) of the 1973 Act.

[67] I find it difficult to understand why the Respondents' case was not presented on the above basis, instead of attempting to massage the corporate saver facility into something which it never was.

[68] The next issue to determine is whether or not the manner in which Gary Shrosbree carried out his obligations as a liquidator, in relation to the corporate saver account, was tainted with illegality. As stated above:

68.1 Gary Shrosbree operated a current account in the name of Mario Levi;

68.2 He also opened a corporate saver account in the name of Mario Levi;

68.3 He transferred funds into the corporate saver account from the current account;

68.4 He did not, on the evidence placed before me, withdraw any money from the corporate saver account otherwise than by way of a transfer of the funds to the current account.

[69] The agency fees payable to PW Harvey were deducted directly from the corporate saver account. These fees were not reflected as disbursements on the final liquidation accounts of Mario Levi. It should be remembered,

however, that Mario Levi was only ever contractually entitled to receive the net interest which was generated on the corporate saver account. Mario Levi did receive this interest.

In my view Gary Shrosbree complied with his obligations in terms of the provisions of section 394.

[74] Even if I am wrong in my said finding in relation to Gary Shrosbree's compliance with section 394, this is not necessarily fatal to the legality of Gary Shrosbree's conduct. The question remains whether or not the purpose and object of section 394 have been achieved by the way in which the funds of Mario Levi were administered by Gary Shrosbree? It is, in this regard, a trite principle of our law that, where the purpose and object of a statutory provision have been achieved, or where there has been substantial compliance with such a provision, a failure to strictly comply with the statutory provision will not necessarily mean that the actions under scrutiny would be rendered invalid.

[75] The purpose and object of section 394 of the 1973 Act are, in my view, to ensure the secure investment of all monies of the company in liquidation received by the liquidator in a current account and (in the discretion of the liquidator), in a savings account, for purposes of the payment of disbursements and the fair distribution of the balance thereof, under the auspices and supervision of the Master, for the benefit of the entire body of creditors. There is no doubt that this purpose and object were achieved by the way in which Gary Shrosbree dealt with the funds of Mario Levi.

[76] I therefore find that, if there was not strict compliance with the provisions of section 394 in the circumstances of this matter, there was certainly substantial compliance therewith.

[77] Mr Dyke's further submissions in relation to the provisions of section 381 of the 1973 act are, in my view, compelling. However, having regard to my aforesaid conclusions regarding section 394 of the 1973 Act, I do not deem it necessary to make specific findings in this regard.

[78] The next and related issue is whether or not PW Harvey was legally entitled to earn an agency fee from Nedbank.

[86] There is no provision in the 1973 Act, nor have I been referred to any authority, requiring that the funds invested must be in an account which offers the highest possible interest rate, which proposition appears to be one of the key elements of Standard Bank's complaint herein.

[87] On the contrary, section 394 of the 1973 Act is conservative and compels the liquidator to invest the liquidated company's funds in a current account. If Gary Shrosbree had invested all the funds of Mario Levi in a current account, there would be no basis for a complaint against him, even if no interest was earned on such an investment. In this case, however, the net result of Gary Shrosbree's decision was to benefit the creditors to the extent of the interest earned on the investment.

[88] Furthermore, I agree with Mr Dyke that the commission sharing arrangement between Lionel Shrosbree and PW Harvey is historical and irrelevant for

purposes of the present matter. What PW Harvey did with its agency fees was its own business. Giving a portion thereof to Lionel Shrosbree was not unlawful and did not taint Gary Shrosbree's conduct with any degree of illegality.

[89] In this regard neither Gary Shrosbree himself, nor Shrosbree Trustees CC, has made a secret commission from the corporate saver investment, notwithstanding Standard Bank's persistent suspicions to the contrary.

[91] In all the circumstances set out above, I am constrained to find that Standard Bank has failed to prove any reviewable error on the part of the Master. In light of this finding, it follows that the remaining relief claimed by Standard Bank is also without merit.

[92] It is with some concern that I note the zeal with which this litigation has been driven, fueled by Standard Bank's unfounded suspicion that Gary Shrosbree's intention was to supplement his income in an unlawful manner. This culminated in application papers exceeding 600 pages (including the notices index and the joinder application of the seventh respondent), at huge costs, in circumstances where the monetary value of the amount in issue is less than R8 000,00. I think this is most unfortunate.

[93] As far as the costs of the application are concerned, Ms Adhikari fairly conceded that the joinder of the seventh respondent was reasonable, and that the seventh respondent's costs should form part of any cost order herein.

[94] In the circumstances I make the following order:

(a) The application is dismissed;

(b) The applicant is ordered to pay the respondents' costs of the application.

MINISTER OF JUSTICE AND ANOTHER v SA RESTRUCTURING AND INSOLVENCY PRACTITIONERS ASSOCIATION AND OTHERS 2018 (5) SA 349 (CC)

Trustee — Appointment — Ministerial affirmative action policy unconstitutional — Constitution, s 9(2); Insolvency Act 24 of 1936, s 158(2). The present respondents (the associations) challenged the government's policy on the appointment of insolvency practitioners (IPs), adopted in February 2014, in the High Court on constitutional grounds. The stated aim of the policy, which was promulgated under s 158(2) of the Insolvency Act 24 of 1936 (the Act), was the transformation of the IP industry. It was intended to govern, in addition to the appointment of insolvency trustees, the appointment of provisional liquidators under the Companies Act and liquidators under the Close Corporations Act. To achieve its goal the policy regulated the Master's power, under s 18(1) of the Act, to appoint provisional insolvency trustees. Clause 6 of the policy provided that IPs who became eligible to be appointed as trustees had to appear on the Masters list, which was under clause 7.1 divided into four categories. Category A comprised African, Coloured, Indian or Chinese females who became citizens before 27 April 1994; category B, African, Coloured, Indian or

Chinese males who became citizens before 27 April 1994; category C, white females who became citizens before 27 April 1994; and category D, white males and African, Coloured, Indian or Chinese persons who became citizens on or after 27 April 1994. Clause 7.1 in mandatory terms obliged the Master to appoint practitioners 'consecutively in the ratio A4:B3:C2:D1'. The Master was required to proceed sequentially from category A to category D, and could not appoint from other categories until four practitioners from category A had been appointed, and so forth. The Master was not permitted to deviate from this scheme, except if the matter was complex and the next-in-line practitioner was not suitable, in which case clause 7.3 permitted him to appoint a suitable senior practitioner in addition to the unsuitable practitioner. The Cape High Court ruled that the policy was irrational and imposed impermissible quotas, and declared it invalid. An appeal to the Supreme Court of Appeal failed. The SCA found that the policy (i) was irrational because it was arbitrary and capricious, with no saving discretion; and (ii) breached the principle of legality because it failed to promote the interests of creditors, in line with the purpose of the Insolvency Act. In Van Heerden, the leading case on s 9(2) of the Constitution, the Constitutional Court held that, for a restitutionary measure to comply with s 9(2) of the Constitution, it had to meet three requirements: it had to (i) target people or a category of people who had been disadvantaged by unfair discrimination; (ii) be designed to protect and advance such people; and (iii) promote the achievement of equality, ie be reasonably capable of achieving equality. In formulating the second requirement, the court pointed out that arbitrary, capricious or nakedly preferential measures were not 'designed to achieve a constitutionally authorised end'. Held by Jafta J for the majority The statement in Van Heerden regarding the unconstitutionality of arbitrary, capricious or nakedly preferential measures was a separate requirement that applied to all exercise of public power generally, which always had to be underpinned by plausible reasons. Arbitrariness and rationality are discrete, though overlapping, concepts. Rationality, which was about the link between the purpose and the means chosen to achieve it, was a lower standard than arbitrariness, which was established by the absence of reasons, or reasons which did not justify the action taken. While clause 7.3 retained a limited residual discretion for the Master, most of the appointments were made under clause 7.1, in respect of which the Master's discretion under s 18 of the Act was completely eroded. Clause 7.3 was therefore no answer to the displacement of the Master's discretion in respect of appointments to which clause 7.1 applied. But the policy's most serious defect was the lumping together in category D of white males and all practitioners who attained citizenship on or after 27 April 1994. This effectively punished all practitioners born on or after that date and undermined the realisation of equality which the other parts of the policy were designed to achieve. The policy was therefore not a restitutionary measure as envisaged in s 9(2) of the Constitution. (See [42] – [43].) The exclusion of disadvantaged persons who became citizens after 27 April 1994 meant that it was also arbitrary (see [50] – [54]). And the

absence of proof that the policy was reasonably likely to achieve equality meant that it was, in addition, irrational. Held by Madlanga J for the minority The policy was invalid only to the extent that it placed in category D citizens who, but for having attained citizenship on or after 27 April 1994, would otherwise have qualified for other categories (see [70], [104]). On the whole, the policy met the requirements of s 9(2) by seeking to eliminate unfair, unjustified preference by a transparent, consistent process (see [77] – [78], [81], [86], [104]). Since the policy was plainly and justifiably to the advantage of its beneficiaries, it could not be argued that it was unlikely to achieve the goal of equality (see [89], [94]). There was, moreover, no irrationality in distributing IP work in a way that used the demographic make-up of the country as a point of departure (see [98], [102]).

Commissioner, South African Revenue Service v Pieters and others (1026/17) [2018] ZASCA 128 (27 September 2018)

Claims-preferent creditors-PAYE deductions on employment claims due before liquidation-awards to employees are not subject to PAYE in terms of paragraph 2(1)(a) of Fourth Schedule to the Income Tax Act 58 of 1962.

The company had some 700 employees. Their employment contracts were in terms of section 38(1) of the Insolvency Act 24 of 1936 (the Act), suspended on the date of the commencement of the winding-up on 7 December 2012. The contracts came to an automatic end 45 days later by virtue of the provisions contained in section 38(9) of the Act. At the time of the commencement of the company’s winding-up, leave pay had accrued to the employees. (Par [2])

The central question is whether payments made in terms of section 98A of the Insolvency Act are subject to the deduction of PAYE contemplated in para 2(1) of the Fourth Schedule to the Income Tax Act 58 of 1962. It was common cause that the payments related to salaries, accumulated leave and severance pay. (Par [6])

Section 98A was inserted into the Insolvency Act by section 2 of the Judicial Matters Amendment Act 122 of 1998. The section affords a preference to the payment of the amounts in question to employees. The amounts are subject to limitations (a maximum of three months in respect of unpaid salaries and wages and subject to an overall cap in each of the categories determined by the Minister of Justice.). The claims of employees envisaged in section 98A(1)(a) need not be proved (section 98A (3)). (Par [8])

An initial attempt by the Commissioner to distinguish severance pay from the other two categories was eventually abandoned and counsel on his behalf accepted that such amounts are no different than unpaid salaries and wages and leave pay. That concession is sound - severance pay is clearly included in s 98A(1)(a)(iv). Furthermore, severance pay is calculated in terms of section 41 of the Basic Conditions of Employment Act 75 of 1997 - one week of pay for every year employed. That calculation clearly pertains to the pre-liquidation period, given the

fact that an employee is generally precluded from performing work after the commencement of liquidation (section 38(2)(a)). (Par [9])

The provisions contained in section 98A can rightly be described as having a social justice objective as they are clearly aimed at alleviating the plight of employees who are left unpaid by the financial woes of their liquidated employer company. More often than not, as the present instance demonstrates, these would be vulnerable blue collar employees. The Legislature plainly deemed it necessary to attenuate the impact which liquidation may have on a company’s employees. But it chose to do so carefully, by imposing a three month limit in respect of unpaid salaries and wages and in placing a cap on the various amounts. It is significant that the capped amounts are relatively modest. The objective is to ensure that the remainder of the free residue is applied equitably. The limited relief poffered by section 98A has the effect that employees have to stand at the end of the order of preference queue for the balance of their salaries (ie above the three month limit and the cap). Self-evidently, employee tax deductions would reduce the modest amounts under section 98A. (Par [11])

Against this backdrop it is difficult to conceive how PAYE deductions would apply to these modest amounts, legislated to relieve the burden on vulnerable, mostly blue collar workers, left stranded by a financially distressed employer company. A close analysis of para 2(1) of the Schedule leads to the compelling conclusion that its provisions do not apply to section 98A payments. First, the insertion of section 98A in the Act during 1998 caused a striking re-arrangement in the order of preference. Prior to its insertion, preference under certain statutory obligations (including PAYE under the Schedule) ranked above the salaries and wages of employees. That order was reversed by the insertion. The salaries and wages of employees now rank just below the costs of execution and above preference under certain statutory obligations, which includes PAYE under the Schedule. The change was plainly deliberate. (Par [12])

Business rescue-Business Rescue Practitioner-qualifications-Government Gazette 41970 dated 12 October 2018-section 138(1)-BRP’s will now have to lodge a certificate of good standing. Paragon Lending Solutions (Pty) Limited v Weybridge Properties (Pty) Ltd [2018] JOL 40468 (NCK)

Winding-up application – Inability to pay debts – Provisional liquidation

On 3 July 2012, the parties concluded a written term loan agreement in terms of which the applicant undertook to lend the respondent an amount of R3 287 050. The agreement made further provision for payment of interest on the loan.

It was alleged that despite demand, the respondent failed to make payment in terms of the agreement since early December 2012.

In July 2017, the applicant’s attorneys sent a written letter of demand in terms of section 345(1)(a) of the Companies Act 61 of 1973 read with the Companies Act 71 of 2008 to the respondent. it was pointed out that the respondent was indebted to the applicant in the amount of R6 754 301,02 together with interest at the rate of 41% per annum calculated daily and compounded monthly from 1 July 2017 to date of payment.

Immediate payment was demanded within a period of 3 weeks of receipt of the demand letter, failing which the respondent would be deemed to be unable to pay its debts in terms of section 345(1)(a). The respondent was advised that should it be unable to pay its debts, the applicant would proceed with an application for its liquidation.

The respondent filed a counter-application seeking orders declaring the applicant’s claim prescribed alternatively; declaring the applicant’s claim as being settled in full; and an declaring that payment to the applicant was not yet due and payable.

Held that following the applicant’s filing of its answering affidavit to the counter-application, the respondent filed a replying affidavit containing new allegations. In motion proceedings, an applicant must set out the facts which justify the relief sought in the founding affidavit. Although the rule is not absolute, in this case, the respondent was precluded from relying on the new defence which was made out in reply in the counter-application.

None of the arguments raised by the respondent in defence of the applicant’s claim were found to be sustainable. In the premises, the Court concluded that the respondent was unable to pay its debt, and placed it under provisional liquidation.

Fischer v Ubomi Ushishi Trading & others (1085/2017) [2018] ZASCA 154(19 November 2018) Deeds Registries Act 47 of 1937 (the Act) – transfer of immovable property formerly an asset in joint estate of spouses married in community of property – whether ownership of half share in immovable property vests immediately in spouse upon granting of divorce order or through transfer by way of endorsement under the Act – whether spouse acquires personal right to claim transfer by virtue of divorce order.

NOTE: THIS CASE IS SIGNIFICANT FOR INSOLVENCY PURPOSES !

Assets of spouse in divorce- Corporate Liquidators (Pty) Ltd & another v Wiggill & others 2007 (2) SA 520 (T) overturned-It is common for parties getting divorced, to enter in to an agreement for the distribution of assets which is made an order of court in terms of section 7(1) of the Divorce Act 70 of 1979- In Corporate liquidators it was ruled that the effect of such an order is to distribute the assets, and a party is entitled to assets in terms of the order even if the estate of the other party has been sequestrated after the divorce-now overturned by SCA

The Supreme Court of Appeal (SCA) dismissed an appeal by the appellant and awarded full ownership of the property to the third respondent. The issue before the SCA was whether a real right to a half share in immovable property vested in a spouse immediately following the dissolution of a marriage in community property pursuant to a court order incorporating a settlement agreement in terms of which one spouse foregoes his half share in the property in favour of the other, or whether the real right vested only after endorsement of transfer in the Deeds Registry. An ancillary issue concerned the nature of the right acquired by the spouse by virtue of a court order. The third respondent raised an alternative defence that her right to full ownership of the property preceded the appellant’s claim.

The appellant issued summons against the first respondent and the second respondent for payment of R566 500, based on an acknowledgement of debt by the first respondent and a suretyship agreement concluded by the second respondent for its indebtedness. The second and third respondents, respectively, were the registered owners of the immovable property. Their marriage in community of property was dissolved by an order of divorce dated 10 December 2012. In terms of a settlement agreement incorporated in the divorce order, the second respondent waived his right, title and interest in the property in favour of the third respondent, the wife. The second and third respondents however remarried on 28 April 2014, out of community of property, in terms of an antenuptial contract, with the exclusion of the accrual system. Precisely a year later, on 28 April 2015, they were divorced for a second time. The Cape Town Regional Court issued the order dissolving the second marriage, which included an order that each party would retain their respective possessions. The appellant applied to the court a quo for an order declaring the second respondent’s half share in the property executable. The third respondent resisted the claim on the ground that she now had full ownership of the property. The Western Cape Division of the High Court, Cape Town dismissed the application. It held that upon the granting of the decree of divorce, dominium of the property vested with immediate effect in the third respondent. In dismissing the application the court a quo considered two judgments: Corporate Liquidators (Pty) Ltd & another v Wiggill & others 2007 (2) SA 520 (T) and Middleton v Middleton & another 2010 (1) SA 179 (D). In Corporate Liquidators it was held that where parties entered into a settlement agreement regarding the division of their assets, which is made an order of court as contemplated in s 7(1) of the Divorce Act 70 of 1979, ownership of immovable property vested immediately. Registration of transfer of property to a spouse was, therefore, not a prerequisite for ownership. The court in Middleton held that a settlement agreement created only a personal right for the transfer of ownership and consequently that the divorce order did not vest ownership without traditio (delivery or transfer). The SCA held on a proper construction of s 16 of the Deeds Registries Act 47 of 1937, derivative acquisition of ownership in land required registration. The third respondent’s acquisition of the second respondent’s interest in the property was derivative: it arose from the settlement agreement which gave the third respondent a personal right to enforce registration of the second respondent’s undivided half share in the property. That agreement, though binding on the contracting parties, did not by itself vest ownership of the second respondent’s half share in the property in the third respondent any more than a contract of sale of land passed ownership to the buyer, and it therefore followed that Middleton was correctly decided. The SCA found further that the court in Corporate Liquidators overlooked the common law principles of co-ownership, as well as the requirement in s 26 of the Deeds Registries Act that co-ownership in land was only terminated on attestation of deeds of partition transfer by the registrar, when ownership was conveyed to the respective owners of the land. With regard to the second respondent’s alternative defence, the SCA held thus that at the time that the third respondent acquired the personal right to compel transfer of the second respondent’s half share in the property into her name, there was no other greater or competing right to defeat her claim. When the appellant

applied for an order declaring the property executable, the second respondent had already alienated his half share in the property to the third respondent by way of the settlement agreement.

CILLIERS v LA CONCORDE HOLDINGS LTD AND OTHERS 2018 (6) SA 97 (WCC) Company — Shares and shareholders — Shareholders — Appraisal rights of dissenting shareholders — Disposal of all or greater part of assets of subsidiary — Shareholders in holding company entitled to appraisal rights where disposal would amount to disposal of all or greater part of assets of holding company — Companies Act 71 of 2008, s 115(2)(b), s 164(2)(b). Section 164 of the Companies Act 71 of 2008 grants an 'appraisal right' allowing dissenting shareholders to exit a company at fair value if the majority votes to dispose of all or the greater part of the company's assets or undertaking. This right extends to dissenting minority shareholders of a holding company where a subsidiary company has implemented a transaction disposing of all or the greater part of its assets or undertaking that constitutes at the same time a disposal of all or the greater part of the assets or undertaking of the holding company. The applicant was a minority shareholder in company A, a holding company that owned 100% of the shares in its subsidiary, company B. On 11 May 2016 it was announced that company B would dispose of all of its operational assets to company C. This would at the same time have amounted to a disposal of all or the greater part of the assets of company A. At a general meeting of A's shareholders convened to approve the transaction, the applicant and the fourth to ninth respondents objected and voted against the enabling resolutions. While company A had initially advised its shareholders that s 164 appraisal rights were available to them, and made an offer to acquire the shares held by dissenting shareholders, the offer was rejected by the applicant, who instituted an application for appraisers to be appointed by the court. The parties agreed that the question whether rights of appraisal accrued to the applicant in the circumstances outlined above should first be determined as a question of law under rule 6(5)(d)(iii) of the Uniform Rules of Court. Held The introduction of appraisal rights in the 2008 Companies Act changed the nature of the rights and remedies available to lawfully outvoted shareholders by providing a right for dissenting minority shareholders to exit the company at fair value (see [4], [34]). A key policy objective of the Act was to protect smaller investors in companies by giving them the ability to make informed choices when they were unable to effectively influence company direction or pursue private actions (see [42] – [43]). To treat the dissenting shareholders in a holding company any differently from those in the subsidiary would undermine the Act's objective of protecting minority shareholders (see [47]). Correctly interpreted, the relevant provisions of the Act (in particular s 112, s 115(8) and s 164(5)(b)) gave appraisal rights to both sets of shareholders. Hence the applicant, as a minority shareholder in the holding company A, was capable of holding a shareholder appraisal right (see [50]).

Diener NO v Minister of Justice and Correctional Services and Others (CCT03/18) [2018] ZACC 48 (29 November 2018)

Companies Act – Chapter 6 – sections 135(4) and 143(5) – business rescue proceedings – interpretation – during liquidation – super preference

Insolvency Act – section 89(1) – ranking of claims – business rescue practitioners – secured creditors and unsecured creditors

Leave to appeal refused – plain reading – purposeful and contextual reading.

On Thursday, 29 November 2018 at 10h00 the Constitutional Court handed down judgment in an application for leave to appeal against a judgment of the Supreme Court of Appeal. The matter concerned whether, in terms of the Companies Act 71 of 2008 (Companies Act), a business rescue practitioner enjoys a “super preference” over all creditors, whether secured or not, during liquidation proceedings.

The applicant is Mr Ludwig Wilhelm Diener, a business rescue practitioner who brought an application against the Minister of Justice, the Master of the High Court of South Africa, Gauteng Division, Pretoria (Master), the joint liquidators of the estate at issue, and the estate’s only secured creditor FirstRand Bank Limited (FirstRand Bank). The South African Restructuring and Insolvency Association (SARIPA), the Banking Association of South Africa (BASA), the Independent Business Rescues Association of South Africa (IBRASA), and the Turnaround Management Association Southern Africa MPC (Turnaround Management) made submissions as amici curiae (friends of the Court) in the Supreme Court of Appeal and were therefore joined as respondents in the application made to this Court.

On 13 June 2012, the members of the business JD Bester Labour Brokers CC (JD Bester) passed a resolution voluntarily placing JD Bester in business rescue. Mr Diener was appointed as the business rescue practitioner for the company.

On 14 June 2012, after the commencement of business rescue proceedings but before Mr Diener’s appointment, JD Bester instructed Cawood Attorneys to launch an urgent application against FirstRand Bank, a secured creditor, to stay the sale in execution of JD Bester’s immovable property, its only asset of any value. An order to this effect was granted. Cawood Attorneys later submitted its account for its services to Mr Diener, which Mr Diener went on to claim as one of the expenses incurred in the business rescue proceedings.

During August 2012, Mr Diener instructed Cawood Attorneys to bring an application under the Companies Act 71 of 2008 (Companies Act) to convert the business rescue proceedings into liquidation proceedings. Mr Diener provided the jointly appointed liquidators with his and Cawood Attorneys’ accounts. The joint liquidators could not agree on whether the business rescue practitioners’ remuneration and expenses should be given a preference. The issue was referred to the Master, who approved the First and Final Liquidation and Contribution account (final account).

Mr Diener launched an application in the High Court challenging the Master’s decision and also sought that the final account should provide for the costs of a business rescue practitioner in finalising business rescue proceedings. The High Court agreed with the Master, finding that expenses incurred during business rescue, if not paid during

business rescue proceedings or during liquidation, can only be paid after the payment of costs of liquidation.

The matter was then brought to the Supreme Court of Appeal, where Mr Diener contended that in terms of the Companies Act business rescue practitioners’ claims for remuneration enjoy a “special and novel preference” which ranks them above creditors, whether secured or not. The Supreme Court of Appeal held that while the Companies Act provides for the business rescue practitioner to hold a preferential claim in some respects, they do not have a “super preference” to the extent contended for by Mr Diener. The Supreme Court of Appeal accordingly dismissed the appeal.

Before the Constitutional Court, Mr Diener argued that the Companies Act creates a “super preference” for the remuneration of a business rescue practitioner. Mr Diener’s application was supported by IBRASA and Turnaround Management.

In response Mr Cloete Murray N.O., one of the joint liquidators, submitted that JD Bester was never a suitable candidate for business rescue, and that claims by business rescue practitioners are only paid after payment of all claims arising from the costs of the liquidation. Mr Murray submitted that business rescue practitioners enjoy a statutory preference over unsecured claims, before employee claims arising after commencement of business rescue proceedings and before post-commencement financing charges. FirstRand Bank argued that business rescue practitioners do not enjoy a “super preference” over secured creditors. The alternative would incentivise business rescue practitioners to pursue unmeritorious business rescue. BASA contended that nothing in the Companies Act suggests that the Legislature intended to dilute the rights of secured creditors where such expenses are incurred during business rescue.

In a unanimous judgment penned by Khampepe J, the Constitutional Court finds that while the application for leave to appeal raised an arguable point of law of general public importance, it was not in the interests in justice to grant leave to appeal because there were no reasonable prospects of success that the Court would reverse or materially alter the decision of the lower court. In its judgment, this Court considered both the plain and purposive readings of the provisions in question. The Court held that there was no doubt that certain anomalies arose in both the interpretations put forward by the applicant and the respondents. While the Companies Act clearly ranks business rescue practitioners’ claim for remuneration and expenses before post-commencement financing and unsecured assets and subjects the practitioner’s payment to liquidation; it is not clear whether it extends to liquidation on a plain reading of the provisions. But ultimately, with regard to the context and purpose of the Companies Act, the Court found there was no way that the interpretation contended for by the applicant would be tenable. This Court therefore dismissed the appeal and made no order as to costs.

Vengadesan NO and Another v Standard Bank Limited (7415/2017) [2018] ZAKZDHC 59 (30 November 2018)

Business rescue-failure to produce minutes of meeting concerning adopted plan-rescue set aside

This is a dispute wherein the applicants, the business rescue practitioner and the business in rescue, seek an order directing the respondent (Standard Bank) to make payment of funds held in a bank account with the respondent bank. The respondent

in turn has instituted a counter-application seeking an order that the first applicant file a notice to terminate the business rescue proceedings and that the first applicant pay the costs of the counter-application.

Second applicant is a close corporation that provides flooring and tiling services. Its sole member is Mr Devanand Hurdayal. In March 2016, the aforesaid member was of the opinion that the second applicant was in financial distress but that there were reasonable prospects of rescuing the corporation as ascribed in s 128(1)(h) of the Companies Act 71 of 2008 (‘the Act’). After the necessary notice was lodged, the first applicant was appointed as the business rescue practitioner of the second applicant on 4 March 2016.

After a series of intended meetings, the first applicant sent out a notice of a meeting that would be held on 25 May 2016 at Imperative Financial Solutions. The first applicant avers that the respondent advised him that it would vote in favour of the business plan by proxy, and accordingly the proxy was sent to the respondent’s representative, Vinsen Pillay.

On 19 September 2016 the first applicant sent a letter to the respondent informing it that the funds in the second applicant’s account were required for paying creditors and to continue trading. The respondent acted in accordance with the instruction. However, when a further sum of R1 million was deposited into the second applicant’s bank account, the respondent placed a hold on the money and refused to release it. First applicant claims that the money is needed for trading and hence should be released.

The application is opposed by the respondent. The respondent contends that the business rescue plan has never been approved in terms of s 152 of the Act. Respondent denies that all of the known creditors were notified (see “AV3” and “VP2”) or that he received a notice as referred to in “AV13”. He requested from the first applicant a copy of the minutes of the said meeting. No minutes were filed as part of the record when the application was heard. It is this lack of proof that forms the basis of the respondent’s opposition to the application.

The issues that need to be considered are:

(a) Whether the applicants are entitled to the money in the account held at the respondent bank and whether the business rescue plan was approved?

(b) In terms of the counter-application, whether ss 151, 152 and 153 of the Act have been complied with. If not, whether the respondent is entitled to its relief?

[7] In relation to the money that was placed on hold, the respondent relied on “S-VP3” which is a banking facility agreement entered into by the second applicant and the respondent. The overdraft facility as per “S-VP3” was to the amount of R1 700 000. The expiry date of the overdraft was 22 June 2015. In terms of clause 4.2.1.9 of the agreement, the facilities were granted at the respondent’s sole discretion, with the following condition attached thereto:

‘If there is a Material Deterioration in your financial position we may immediately suspend or withdraw, without notice to you, all or part of the Limit, or Reduced Limit (if applicable), and all amounts owing will immediately become due and payable to us.’

Respondent dealt with the arranged limit in paras 23 to 26 of the answering affidavit and the allegations were not disputed by the applicants. In my view the applicants have failed to show that they are entitled to the funds in the account.

First applicant then relies on “AV6” in support of his contention that the respondent agreed to adopt the plan. “AV6” is an email that was sent to the legal representative of the respondent on 24 November 2016. Para 2 of the email reads:

‘Please note that there is no proxy vote from Standard Bank voting against the business rescue plan. If Standard Bank was not happy with the plan they were given an opportunity to vote against the plan. If Standard Bank did not vote for or against the business rescue plan then we can assume that the bank have wavered their right to vote.’[12]

The application and counter-application cannot in this instance be decided in isolation. I have found in the preceding paragraphs that the business rescue plan has not be adopted and have given my reasons for rejecting the first applicant’s version that there was compliance with s 152 of the Act.

Once the finding has been made that there was a failure on the part of the first applicant to comply with the Act, it follows that the business rescue proceedings have to come to an end. In the light of this finding the respondent would be entitled to the relief sought.

[21] Accordingly it is ordered:

(a) The first and second applicants’ application is dismissed.

(b) The counter-application succeeds and the first applicant is directed to file a notice of the termination of the business rescue proceedings in respect of the second applicant, forthwith.

(c) First and second applicants are directed to pay the respondent’s costs jointly and severally, the one paying the other to be absolved.

Shiva Uranium (Pty) Ltd (in business rescue) and others 5 v The Companies and Intellectual Property Commission and others6 case CT122OCT2018

Business rescue-appointment of business rescue practitioner-CoR123 forms-disputed appointments

NOTE: This matter was heard by the Companies Tribunal, it does give an indication as to how CIPC look at “requisitions” lodged in a business rescue, BUT do not try to use this as authority, there are shortcomings, for example the power of the CIPC to appoint BRP’s was not discussed, this ruling, my opinion, will be taken on review. I was also made to understand that there is a motion application pending in this case.

The company was placed in voluntary rescue by resolution on 20 February 2018 and it also resolved that Klopper and Knoop be appointed as BRP. They compiled and 5 K.G. Monyela as second applicant 6 M M Tayob and E Januarie as second and third respondents, and I Marais and J Marais, 1st and 2nd intervening parties, both are employees.

published a proposed business rescue plan. The plan was to sell the assets and pay a dividend to creditors. The meeting for adoption of the plan was postponed.

The IDC, a major creditor brought an urgent application to have Klopper and Knoop removed and replaced by Cloete Murray. CIPC appointed Murray and Monyela as BRP’s. They in turn, per special resolution, appointed Damons as senior BRP. The BRP’s were of the opinion that they may pass resolutions as they are effectively the board of directors. Murray then resigned as BRP. CIPC queried the appointment of Damons based on a possible conflict of interest.

A CoR123 was filed by an employee to have Tayob and Januarie appointed. But 2nd Applicant filed a notice in terms of regulation 168(6) objecting to the Cor123. In terms of regulation 168(7) a notice that challenges a filing, has to be removed and is a nullity.

Regulation 168 is based on section 187(4) : Functions of Commission

(4) The Commission must- (a) establish and maintain in the prescribed manner and form- (i) a companies register; and (ii) any other register contemplated in this Act, or in any other legislation that assigns a registry function to the Commission; (b) receive and deposit in the registry any documents required to be filed in terms of this Act; (c) make the information in those registers efficiently and effectively available to the public, and to other organs of state; (d) register and deregister companies, directors, business names and intellectual property rights, in accordance with relevant legislation; and (e) perform any related functions assigned to it by legislation, or reasonably necessary to carry out its assigned registry functions. The Tribunal found that the resolution passed and filed by the BRP’s were not at fault. The CIPC was at fault by refusing to accept it. CoR168 was filed on behalf of the applicants, the refusal by CIPC to accept this, was irregular. CoR168 was a challenge on the CoR 123 that was filed for the appointment of 2nd and 3rd respondents. The Tribunal found that in terms of regulation 168(7) a notice that challenges a filing, has to be removed and is a nullity. CIPC has no discretion in this regard.

Held: 1. Refusal to accept and process the filing whereby Damons was appointed , is a nullity.

2. Refusal to accept CoR168 is unlawful and should be set aside.

3. All respondents (including the intervening parties) to pay costs, inclusive of two counsel.

Per Tribunal members Sikhitha and Tootla.

In a minority judgment, Prof Delport agreed with the findings and orders made but on different grounds. Prof Delport opines that the refusal by CIPC is an administrate action where PAJA could find application. This then could be reviewable.

Prof Delport also opines that regulation 168 has limited applicability: it only looks at “identity” and “authority” not at other substantial issues.

Prof Delport reckons that the BRP did not have authority to file the CoR168 as he was the only BRP and there had to be two. But the challenge should have been against the CoR123 itself, having been filed by a single director “of the applicant who has a board of more than one. On the basis of section 66 of the Act and the common law, that appointment was void due to lack of authority…” Prof Delport cited cases and referred to Henochsberg on the Companies Act, 2008 at par 250(5).

Lastly, he mentioned that “filing” is a notice of appointment, which if void, cannot cure the defects.

End-FOR NOW

Documents

INSOLVENCY LAW JAN TO NOVEMBER 2018€¦ · Business rescue – Application for leave to proceed with winding-up application -unable to pay its debts and that no reasonable possibility