About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2021
>>
[2021] ZAWCHC 233
|
|
Ex Parte; Eckhoff N.O and Another; Ex Parte; Eckhoff N.O and Another (17697/21; 17696/21) [2021] ZAWCHC 233 (17 November 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
Before: The
Hon. Mr Acting Justice Montzinger
Hearing: 05
November 2021
Judgment: 17 November 2021
Case number: 17697/21
In the ex parte application of:
JOCHEN ECKHOFF N.O.
First Applicant
NURGEHAN ABDOOL GAFAAR OMAR
N.O.
Second Applicant
(in their capacities as the duly
appointed joint liquidators of
JCICC 100 CC – in
provisional liquidation)
Case number: 17696/21
In the ex parte application of:
JOCHEN ECKHOFF N.O.
First Applicant
SIFISO STEPHEN NYONI N.O.
Second Applicant
(In
their capacities as the duly appointed joint
provisional
trustees of the insolvent joint estate of
Jerome
Benjamen Swartz and Lucille Swartz)
JUDGMENT
DELIVERED
BY E-MAIL ON WEDNESDAY 17 NOVEMBER 2021
MONTZINGER
AJ:
[1]
Two ex parte urgent applications came before me on 27 October 2021.
In matter
under case number 17697/21 the applicants sought the
extension of their powers as joint liquidators in the insolvent
estate of
a provisionally liquidated close corporation known as JCICC
Network 100 CC (“the JCICC application”). In matter under
case number 17696/21 the joint provisional trustees in the insolvent
estate of Mr and Mrs Swartz sought substantially the same
relief
(“the Swartz application”).
[2]
In addition, in both matters, the applicants sought an order
authorising the South
African Police Services or the Sheriff of the
High Court to enter and search any premises at which property
belonging to the insolvent
close corporation and joint estate is
found and to take possession of such property.
[3]
Although the applications were launched on an ex parte basis both,
out of caution,
were served on the insolvents, Mr. and Mrs. Swartz.
The result of this cautionary approach was that Mr. Sitzer, the
Swartz’
attorney, and counsel appeared on the hearing date in
both applications seeking an opportunity for Messrs Sitzer and Swartz
to
file opposing papers in both applications. After argument
the request was granted and the matters were postponed with
directives
for the filing of affidavits, if any, by Wednesday 3
November 2021. Messrs Sitzer and Swartz filed affidavits.
The
applicants replied and both applications were argued on 5
November 2021.
[4]
This Court granted orders in respect of both applications
individually on Monday 8
November 2021, without reasons, but with the
undertaking that reasons will be provided at a later stage. Although
the two
applications are distinct from each other there is a
substantial amount of overlap between the parties involved and the
facts that
underlie both matters. For that reason, a single judgment
is handed down containing the reasons for both orders issued.
[5]
Two issues required consideration. Whether the applicants in
both applications
have made out a case for the extension of their
powers as liquidators and provisional trustees. Further,
whether the applicants
have made out a case for an interdict to
search and find property belonging to the insolvent estates.
THE
JCICC APPLICATION
[6]
Prior to JCICC’s provisional liquidation Mr Swartz was its sole
member. From
the record it appears that a commercial
relationship of significant value existed between JCICC and Standard
Bank. This relationship
was regulated by business loan, instalment
sales and commercial property finance agreements. JCICC defaulted on
its obligations
in terms of these agreements and its conduct resulted
in Standard Bank applying for its liquidation based on a claim of R
12 million
excluding interest and costs.
[7]
There was an attempt at opposing the liquidation application in the
form of a business
rescue application, which was unsuccessful.
Consequently, JCICC was provisionally liquidated on 09 June 2021. It
also appears from
the record that the final order of liquidation is
also opposed, is part heard and is set to conclude, before a
different judge,
on 22 November 2021.
[8]
On 7 July 2021 the applicants were appointed by the Master of the
High Court as the
liquidators of JCICC and soon after assumed their
positions to take control of the assets of the provisionally
liquidated close
corporation. Their appointment is final as
no
provisional liquidators are appointed in respect of a close
corporation
[1]
.
[9]
Since 15 July to 13 September 2021 representatives from the
applicants’ office
have endeavoured to obtain information from
Mr Swartz with regards to the assets of JCICC. Mr Sitzer represented
Mr and Mrs Swartz
and was the channel of communication with the
applicants. On consideration of the correspondence in the record it
appears that
Mr Swartz have employed a Stalingrad approach to the
persistent but patient requests from the liquidators. On the
date the
applications were heard and even after the opposing
affidavits were filed uncertainty over the assets of JCICC still
existed.
[10]
By law the liquidators are only empowered to exercise the powers
listed in s 386(4)
[2]
of the 1973 Companies Act if they are granted authority to do so.
Section 386(3)(a) of the 1973 Companies Act specify that
the
authority can only be obtained from a meeting of creditors and
members or contributories or on the directions of the Master
under s
387. If the liquidators cannot obtain directions from
creditors
[3]
and none of the circumstances in s 387(2) of the 1973 Companies Act
is present, then the only other remedy open to the liquidators
is to
approach the court in terms of s 386(5) for such powers as are
necessary for the winding up of the affairs of the close corporation.
Conclusion
on the JCICC application
[11]
It is common cause that no creditors meeting has been convened yet.
The liquidators also
cannot approach the Master as they are not able
to refer any matter for the directions by creditors and members or
contributories
in a general meeting. It is apparent that Mr
Swartz is currently engaged in litigation against the liquidators.
Not
allowing the liquidators to defend and bring legal proceedings
can surely not be in the best interest of the creditors.
[12]
Considering the lack of cooperation from Messrs Swartz and Sitzer the
liquidators will possibly
be required to institute further legal
proceedings to compel the disclosure of vehicles and/or to interdict
the continued use of
the assets, by third parties, who is doing so
without the approval by the liquidators.
[13]
To therefore approach the court and seek to be granted the power to
institute and defend legal
proceedings and to ratify actions already
taken for purposes of this application, is the only feasible approach
and seems to be
the most prudent way to safeguard the liquidators and
the interest of the general body of creditors. There is no real
opposition
on the papers to this relief and the applicants are thus
entitled to an order.
[14]
JCICC seems to be the vehicle through which at least two businesses
were operated. The
main business of JCICC is described as
investment in immovable property
while allegations are also
made about a possible car rental business also conducted under the
auspices of JCICC. Section
386(4)(f) of the 1973 Companies Act
empowers the liquidators to carry on or discontinue any part of the
business of the company
in so far as may be necessary for the
beneficial winding-up thereof. Seems to me that Mr Swartz does
not want interference
in the management of the business of JCICC by
the liquidators, as he is likely still benefitting from the proceeds
of the continued
operations of the provisionally liquidated close
corporation. All assets of JCICC should be under the control
and management
of the liquidators.
[15]
Messrs Swartz and Sitzer, in their correspondence with the
liquidators, claim the existence of
various agreements concluded
between JCICC and various other entities. The nature and extent
of these agreements are not
explained or known. The liquidators
must get control over these agreements and determine whether they
benefit the general
body of creditors. I can therefore see no
reason why the liquidators are not entitled to this relief.
[16]
It seems Mr Swartz’s objection to the relief is the fear that
JCICC will suffer commercial
damage if the liquidators are allowed to
sell the assets, in particular the cars of the rental business.
This fear is not
well founded as it is apparent from a reading of the
founding affidavit that the liquidators simply seek the power to
secure the
assets of JCICC. In any event the liquidators are
only empowered to sell assets after compliance with prescribed
procedures
that requires either approval from the Master or at a
general meeting of creditors.
[17]
With regards to the powers to continue the business operated by JCICC
the attempt to oppose this
relief is self-defeating. Mr Swartz
appears to want the business operations of JCICC to continue but he
does not want the
liquidators to do so. As mentioned, it seems
to me Mr Swartz seek to keep control over the affairs and assets of
JCICC to
the detriment of the general body of creditors and the
lawfully appointed liquidators. Without a court empowering them
to
do so, liquidators are not empowered to continue the business of
the provisionally liquidated close corporation. They have
approached the court for exactly that purpose and has made out a
clear case why they should be granted the powers.
THE
SWARTZ APPLICATION
[18]
The joint estate of Mr. and Mrs. Swartz was provisionally
sequestrated by this court on 10 June
2021.
[19]
As mentioned Mr. Swartz is not only the sole member of JCICC, but
also of another close corporation
known as Pygon Trading CC.
Pygon Trading was also provisionally liquidated on 18 May 2021.
The applications for the
final liquidation orders of JCICC and Pygon
are also part heard and set to continue on 22 November 2021.
[20]
On perusal and consideration of the opposing affidavits by Messrs
Swartz and Sitzer, it was apparent
that no real opposition to the
relief is discernible. It is demonstrably obvious that the
trustees must engage in legal proceedings
on behalf of the insolvent
estate. They must do so since Mr. Swartz owned memberships in various
closed corporations, i.e., at
least JCICC and Python. In fact,
instead of assisting the trustees Mr. Swartz seems to be content to
rather litigate to the
prejudice of the creditors of the insolvent
estate. Furthermore, he refuses to cooperate with the trustees
to locate the
whereabouts of all the movable assets. Mr Swartz
has rather been deliberately evasive, notwithstanding his
responsibilities
imposed on him by the Insolvency Act
[4]
.
[21]
Since the collection and control of assets are at stake it is
important to point out that by
law and specifically in terms of s
20(1)(a) of the Insolvency Act
[5]
that:
“
The
effect of the sequestration of the estate of an insolvent shall be
(a) to divest the insolvent of his estate and to vest it
in the
Master until a trustee has been appointed, and, upon the appointment
of trustee, to vest the estate in him”.
[22]
Section 18(3) of the Insolvency Act empowers a provisional trustee,
on appointment, with all
the powers and duties of a trustee
[6]
.
Reading s 20 and ss 18(3) together it is self-evident that upon
sequestration and the appointment of the provisional trustee
all the
assets of the insolvent estate falls under the control of the
provisional trustee. The provisional trustee takes
control of
the assets within the limitation of the powers and duties of a
trustee prescribed by the statute. However, the
taking control
of the insolvent estate is done in the context and understanding that
it is not the function of the provisional
trustee to start winding up
the estate but merely to take physical control and preserve it for
creditors until a trustee is appointed
[7]
.
[23]
However, the Insolvency Act caters for two limitations to the
provisional trustee’s ability
to execute his/her duties.
Firstly, the sale of estate assets can only occur with the authority
of the court or the Master.
Secondly, the trustee cannot
institute or defend legal proceedings on behalf of the insolvent
estate, unless the court is approached
to obtain authority to
institute legal proceedings.
Conclusion
on the Swartz application
[24]
Should a situation arose that a provisional trustee is handicapped in
executing his/her functions
or should the need arise to legally
represent the interest of the insolvent estate the trustee has the
right to approach a court
for the extension of powers. In this
case the provisional trustees are demonstrably handicapped in their
endeavours to take
control of the assets of the insolvents.
With all the ongoing litigation it is reasonable to assume that a
first meeting
of creditors will not be held until sometime early in
2022. This situation is prejudicial to the body of creditors.
[25]
The conduct by Mr Swartz as highlighted when the JCICC application
was discussed above, is equally
applicable to the relief sought in
this application. There is in fact no opposition with a degree
of merit in respect of
this application. The applicants are
thus entitled to the relief they seek.
THE
INTERDICTORY RELIEF IN BOTH APPLICATIONS
[26]
The applicants seek an interim order to search and seize property,
wherever it may be, of both
the Swartz and JCICC insolvent estates.
The relief is interim in nature as the status of both matters
are ‘provisional’
and may be affected by whether final
orders are granted or not. To obtain interim interdictory
relief a litigant must overcome
four requirements as established in
the judgment of
Setlogelo
[8]
.
[27]
In both applications the applicants have established a clear right.
The liquidators in
terms of s 386 of the 1973 Companies Act while the
trustees in terms of s 69(1) of the Insolvency Act. Having
established
a clear right
this
Court was constrained to conclude that there is no further need to
enquire whether the right exists
[9]
,
in respect of both applications. Both sets of applicants are
thus entitled to protection of these rights.
[28]
Before an interim interdict may be granted, one of the requirements
to meet is that the applicant
must have a reasonable apprehension of
irreparable and imminent harm eventuating should the order not be
granted. The harm must
be anticipated or ongoing and must not have
taken place already
[10]
.
However,
if an applicant can establish a clear right an apprehension of
irreparable harm need not be established
[11]
.
[29]
This Court has already found that the applicants have established a
clear right that requires
protection. A harm analysis is thus not
necessary, but for the avoidance of doubt the suffering of harm is
obvious, for all the
reasons canvassed in this judgment, since
without protection neither the liquidators nor provisional trustees
will be able to execute
their statutory duties to the benefit of the
body of creditors.
[30]
Next is the balance of convenience consideration. This Court has
already found that the applicants
will suffer harm if the interim
interdict is not granted. Harm is also an element of the balance of
convenience enquiry
[12]
.
Since harm is present, the balance of convenience favours the
granting of an interdict.
[31]
Regarding the requirement that an applicant seeking an interdict
should not ask for one if an
alternative remedy is available, it was
contended in the opposing affidavit that the applicants do have an
alternative remedy in
terms of s 69(3)
[13]
of the Insolvency Act as it can issue writ of attachments in the
magistrate’s Court. It is so that the mentioned section
allows
for a situation where a liquidator or provisional trustee can
approach a magistrate court in the area in which assets of
the
insolvent estate is situated, to issue a warrant to search for and
take possession of the assets.
[32]
However, to succeed with an interim interdict and to comply with the
requirement that no other
alternative remedy is available the legal
position
[14]
is that the alternative remedy
must:
(a) be adequate in the circumstances; (b) be ordinary and reasonable;
(c) be a legal remedy; and (d) grant similar protection.
[33]
Considering the facts and circumstances of these applications
I
cannot agree that to embark on a process as prescribed in s 69(3)
will serve as an adequate alternative. The process does
not
appear to be logistically viable and neither cost nor time
effective. Moreover, I am of the view that Mr. Swartz caused
the ineffectiveness of s 69(3) as an alternative as the applicants
are still in the dark with regards to where all the movable
assets
are, to which extend they are safe and secure, and to which extend
the insolvent estates will not be prejudiced. Neither
the
liquidators nor provisional trustees have an idea of the true extent,
nature, and location of the assets in both insolvent
estates. It
would be highly impractical and superfluous to follow the steps in s
69(3) of the Insolvency Act.
Section 69(3)
therefore does not present an adequate alternative remedy.
[34]
In both applications the applicants have therefore made out a case
for an interim interdict.
CONCLUSION
AND ORDER
[35]
Having regard to the circumstances that compelled the applicants to
approach this Court for the
relief contemplated in the two notices of
motion, I am satisfied that a proper case was made out for the relief
in both applications,
and I thus granted the orders marked “X”,
respectively, on 8 November 2021 in matters with case numbers
17696/21 and
17697/21.
A
MONTZINGER
Acting
Judge of the High Court
Appearances:
Applicants’
counsel:
Adv B Manca SC
Applicants’
attorney:
ENS Attorneys
Counsel
for Messrs Swartz and Sitzer:
Adv Botha
Attorney
Messrs Swartz and Sitzer:
Sitzer & Associates
[1]
Section
66 of the Close Corporation’s Act
[2]
Read
with item 9 of schedule 5 to the 2008 Companies Act, further read
with s 66 of the Close Corporations Act
[3]
Who
have proved a claim against the estate
[4]
Inter
alia s 23 of the Insolvency Act
[5]
16 of
1943
[6]
Bremer
Meulens (Edms) Bpk v Tzerfos
1978
(3) SA 892
(O) at 895
[7]
Goodwin
Stabel Trust v Duohex (Pty) Ltd
1998
(4) SA 606
(C) at 620
[8]
Setlogelo
v Setlogelo
1914
AD 221
later confirmed in
Webster
v Mitchell
1948 (1) SA 1186 (W)
[9]
See
ft10
[10]
National
Treasury and Others v Opposition to Urban Tolling Alliance
and
Others
[2012]
ZACC 18
;
2012
(6) SA 223
(CC);
2012
(11) BCLR 1148
(CC) (
OUTA
)
at para 25
.
[11]
LF Boshoff Investments
(Pty) Ltd v Cape Town Municipality, Cape Town Municipality v LF
Boshoff Investments (Pty) Ltd
1969 (2) SA 256 (C)
267
[12]
Harnischfeger
Corporation & another v Appleton & another
1993
(4) SA 479
(W) at 491 B-E
[13]
This
section also applies to close corporation by virtue of s 339 of the
1973 Companies Act
[14]
See
inter alia:
Hotz
and Others v University of Cape Town
[2016]
4 All SA 723
(SCA),
2017 (2) SA 485
(SCA)