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[2015] ZAGPJHC 32
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Mncube and Others v Januarie N.O and Others (00674/2015) [2015] ZAGPJHC 32; [2015] 2 All SA 338 (GJ)) (16 February 2015)
REPUBLIC
OF SOUTH AFRICA
GAUTENG
HIGH COURT
Johannesburg
Local Division
CASE
NO: 00674/2015
DATE:
16 FEBRUARY 2015
In
the matter between:
Danny
Phillip Mncube and 55
Others
...................................................................................
Applicants
And
Eugene
Januarie
N.O
.......................................................................................................
1
st
Respondent
Johannes
Zacharias Human Muller
N.O
......................................................................
2
nd
Respondent
In
their capacities as joint provisional liquidators of
Cida
City Campus NPC (in provisional liquidation)
Master
of the High
Court
................................................................................................
3
rd
Respondent
Joffe
Charitable
Trust
......................................................................................................
4
th
Respondent
City
of
Johannesburg
.......................................................................................................
5
th
Respondent
Absa
Bank
Ltd
..................................................................................................................
6
th
Respondent
Cida
Empowerment
Trust
................................................................................................
7
th
Respondent
SRC
of Cida City Campus
NPC
.....................................................................................
8
th
Respondent
JUDGMENT
Introduction
1.
The
applicants approached this Court on an urgent basis seeking the
following relief:
“
1
Directing that the matter be heard as one of urgency and that the
applicants non-compliance with the rules of the court relating
to
compliance with time limits and the service of documents be condoned
on account of such urgency.
2
Directing that the first and second respondents convene an urgent
meeting of all creditors of CIDA City Campus NPC (in provisional
liquidation) and at such meeting:
2.1
allow the creditors to consider and vote on all offers that have been
made to purchase CIDA City Campus, including but not limited
to the
most recent offer made by Africa Integras LLC; and,
2.2
allow the creditors to consider and vote on any compromises in
accordance with
section 155
of the
Companies Act 71 of 2008
.
3
Directing that the first and second respondents be bound by the
majority vote of the meeting and take the necessary steps to execute
the relevant sale and purchase agreement within seven (7) days of the
date of the meeting.
4
Directing that the usual rules relating to notice requirements for
the calling of such a creditors meeting, in accordance with
the
Companies Act, be
set aside on account of the urgency and that the
meeting be convened within seven (7) days of the date of the order
5
Interdicting the first and second respondents from disposing of any
moveable or immovable assets of CIDA City Campus and/or entering
into
any agreement to dispose of such assets pending the outcome of the
creditors meeting referred to in prayer 2 above.
6
Permitting any party subsequently to set the matter down for hearing
on reasonable notice on these papers, duly supplemented as
appropriate.
7
The first and second respondents are ordered, jointly and severally,
to pay the applicants’ costs, including the costs of
two
counsel.”
2.
The
relief sought was really directed at the first and second respondents
only. The application was opposed by them. The fourth
and eighth
respondents made common cause with the applicants. The other
respondents were neutral to the application. Hence reference
to the
respondents in this judgment will be a reference to the first and
second respondents only.
3.
After
hearing full argument from the applicants as well as the respondents
I gave the following order and indicated that my reasons
would
follow:
1
The
applicants’ non-compliance with the rules of the court relating
to compliance with time limits and the service of documents
is
condoned and this application is to be heard on the grounds that it
is urgent.
2
The
third respondent is ordered to convene a meeting of CIDA’s
creditors on an urgent basis. The failure to comply with the
usual
rules relating to notice requirements for the calling of such a
creditors meeting, in accordance with the
Companies Act, is
condoned.
3
The
meeting envisaged in paragraph 2 above will take place on Friday 13
February 2015 at 10h00 hours at the offices of the third
respondent
in Johannesburg.
4
The
third respondent will preside over the meeting and allow the
creditors to consider and vote on all offers that have been made
to
purchase CIDA, including but not limited to the most recent offer
made by Africa Integras LCC, and to allow the creditors, if
necessary, to consider and vote on any compromise in accordance with
the provisions of
section 155
of the
Companies Act.
5
The
first and second respondents are ordered to:
5.1
give notice to all CIDA’s known creditors by way of prepaid
registered post or via email on Friday 30 January 2015; and,
5.2 publish a notice
of the aforementioned meeting in the Government Gazette on 6 February
2015.
6
The
third respondent is ordered to prepare a report and to provide it to
the parties and this Court in relation to the decisions
or
resolutions adopted by the meeting referred to in paragraph 2 above,
on the return day, which is 24 February 2015.
7
The
first and second respondents shall be bound by the majority vote of
the meeting and, in the event that the majority of creditors
resolve
that CIDA should accept any offer to purchase, the first and second
respondents are directed to take the necessary steps
to execute the
relevant sale and purchase agreement within seven (7) days of the
date of the meeting.
8
The
first and second respondents are interdicted from disposing of any
moveable or immovable assets of CIDA City Campus NPC (in
provisional
liquidation) and/or entering into any agreement to dispose of such
assets pending the outcome of the creditors meeting
referred to in
paragraph 2 above.
9
Any
party may subsequently set the matter down for hearing on the urgent
roll on reasonable notice on these papers, duly supplemented
as
appropriate.
10
Each
party is liable for its own costs occasioned by this application.
4.
These
are my reasons.
The
factual narrative as relayed in the answering papers of the
respondents
5.
The
CIDA City Campus NPC (in provisional liquidation) (the university)
was established to provide persons from very poor backgrounds
with an
opportunity to obtain a tertiary education. It was hoped that this
would assist them and their families in their quest
to overcome their
poverty. Unfortunately, commercial factors, omnipresent as they are
in our social order, impacted negatively
on the operations of the
university. The operations of the university did not harvest
sufficient income for it to meet its financial
obligations. In such
circumstances of distress, the directors of the university took
advantage of the statutorily offered solution
of placing the
university under business rescue.
[1]
This
was done by virtue of a resolution adopted by the board of directors
of the university on 7 December 2012. The applicable statutory
requirements were complied with and the university was able to
operate until 4 March 2014, when the fourth respondent, who is a
creditor of the university, succeeded in an application in this Court
for the provisional liquidation of the university. Consequently,
the
university was placed in provisional liquidation in the hands of the
third respondent. The respondents were duly appointed
by the third
respondent as joint provisional liquidators of the university.
6.
The
order of 4 March 2014 placing the university in provisional
liquidation was issued in the form of
rule
nisi
returnable on 22 April 2014. The
rule
nisi
has been extended on various occasions for various reasons. The most
recent extension caters for a return date of 24 February 2015
when
the
rule
nisi
will either be extended, discharged or confirmed. In the event that
it is confirmed the third respondent will be at liberty to
appoint
final liquidators in accordance with the provisions of s 367 of the
Companies Act No 61 of 1973 (the old Companies Act).
7.
After
being appointed as joint provisional liquidators the respondents
applied to this Court for an extension of their powers so
that they
could ensure that the university continued with its trading
activities, and that they could obtain further funding for
the
continued operations. The relevant part of the order, which was
granted on 1 April 2014, reads:
“
2
The first and second applicants (the respondents in our case) are
granted leave:-
2.1
in terms of section 386(4)(f) of the Companies Act 61 of 1973 (the
Act) as read with item 9 of Schedule 5 of the
Companies Act 71 of
2008
to continue the business of CIDA City Campus NPC (in
liquidation) (“CIDA”).
2.2
In terms of section 386(5) of the Act to raise R 7,5 million (Seven
and a half million rand) on the security of the assets of
CIDA so as
to continue its business.
”
8.
They
continued to perform their functions after taking advantage of the
extended powers granted to them by this Court. They did
so by,
amongst others, obtaining funding from a bank,
viz
,
Absa, against the assets of the university. This was done in order to
ensure that the tuition of learners commenced as soon as
the
necessary funding from Absa was made available.
9.
By
this stage they were involved in extensive negotiations with an
entity styled Africa Integras LLC (Africa Integras) for the
acquisition of the university as a going concern. They entered into a
Memorandum of Understanding (MOU) with Africa Integras. The
MOU was
focused on the importance of the university surviving this difficult
financial period that it found itself in, and hopefully
prospering
thereafter. Africa Integras made a formal offer to acquire the
university, which offer was to expire at the end
of July 2014.
10.
In
the meantime on 23 June 2014 the respondents applied, once again on
an
ex
parte
basis,
for a further extension of their powers. Their application was
successful and the following order was made:
“
1.
Leave and permission is granted to the Applicants to institute these
proceedings (this application), in accordance with the provisions
of
Sections 386 and 387 of the Companies Act, No 61 of 1973, as amended,
read together with the provisions of the New Companies
Act, No 71 of
2008 (hereinafter referred to as “the Act”);
2.
Leave and permission is granted to the Applicants to dispose and/or
to sell and/or to alienate the immovable properties, referred
to and
contained in the valuation reports prepared by Mr. J.J du Toit,
attached hereto marked
Annexures “X1”
and “X2”
respectively,
either by way of public auction, or by way of private treaty, in
accordance with the provisions of Sections 386 and
387 of the Act,
and to utilize the proceeds derived from the sale of the
aforementioned immovable properties to effect payment
of the debts
and/or expenses of CIDA City Campus NPC (in provisional liquidation)
(hereinafter referred to as “CCC”)
as and/or when they
become due and payable;
3.
The powers of the Applicants in respect of CCC are extended, in
accordance with the provisions of Section 386(5) of the Act,
as
follows:
3.1
to compromise and/or admit any reasonable claim, of whatever kind and
form whatever cause, and to accept payment of any part
of a debt due
in settlement thereof or to grant an extension of time for the
payment of any debt due;
3.2
to terminate and/or negotiate and/or conclude agreements with, but
not limited to, end users and service providers of CCC;
3.3
to bring or defend in the name of CCC any action, arbitration or
other legal proceedings of a civil nature, including any action
or
legal proceedings for the collection of all outstanding debts due
(
including, but not limited to,
demanding payment of debts due to CCC in terms of section 345 of the
Act
) or the setting aside of any
apparent or suspected voidable and/or undue preference and/or
disposition of property and to take
steps to have these set aside;
3.4
to exercise the same powers as provided for in
Sections 35
and
37
of
the
Insolvency Act, No 24 of 1936
, conferred upon a trustee or
trustees, in accordance with the provisions of the
Insolvency Act, on
the same terms and conditions as provided for herein;
3.5
to carry on or to discontinue any part of the business of CCC insofar
as may be necessary for the beneficial winding-up thereof;
3.6
to sell or in any other manner dispose of any movable and immovable
property which belong to CCC, whether as a going concern
or
otherwise, by public auction or public tender or private treaty and
to give delivery thereof, with the mode and terms and conditions
of
the sale to be determined by the Applicants in their sole and
absolute discretion;
3.7
to appoint service providers, including attorneys, auditors,
accountants, counsel, consultants, auctioneers, valuers,
investigators,
forensic auditors, engineers, quantity surveyors and
other persons (including service providers who may be appointed by
creditors
or who may have rendered estate related services to
creditors) to assist the Applicants in the exercise or execution of
their duties
in the administration of the winding-up of the insolvent
estate of CCC, including but without limitation to take any legal
action,
institute or defend on behalf of CCC any action, arbitration
or legal proceedings and to proceed to the final determination of any
such action or proceedings, conduct enquiries and examination into
the affairs of CCC, investigate any apparent or suspected voidable
and/or undue preference and/or disposition of property, and collect
all amounts due to;
3.8
to pay all legal fees on an attorney and own client scale, provided
that the Applicants may at any time call for a detailed
bill of costs
to be prepared as if for taxation and such fees are to be taxed by
the Master of this Court in the event that the
Applicants are not
satisfied with the costs. Subject to the availability of funds the
agreed or taxed fees and charges may be paid
as and when the services
are rendered and against the obligation of the attorneys to repay the
estate any amounts are allowed upon
taxation or excluded from a
confirmed liquidation and distribution account;
3.9
to appoint and employ any employees of CCC to assist with the affairs
of CCC including the collection of any outstanding income
due to CCC,
compiling an inventory of the assets of CCC, tracing of assets and
provision of any other assistance required by the
Applicants in the
administration of winding-up CCC;
3.10
to investigate any apparent voidable and/or undue preference, and/or
any dispositions of property, and take any steps which
they in their
discretion may deem necessary, including the instituting of legal
action and the employment of Attorneys and/or Counsel,
to have these
preferences and/or dispositions set aside, and to proceed to the
final end or determination of any such legal actions
or to abandon
same at any time as they in their sole discretion may deem fit, all
costs incurred in terms thereof to be costs in
the winding-up of CCC
on the scale referred to in paragraph 3.8
supra
;
3.11
to call for tenders for the purchase of the business and/or assets of
CCC; and
3.12
to sign all the necessary documents as may be required to effect
transfer of the ownership of assets, including immovable property,
to
the purchasers thereof.
4.
Leave and permission is granted to the Applicants to ratify and
finalise the sale agreement which was entered into and/or concluded
between THE RA WELFARE DEVELOPMENT TRUST (Reg No. IT2646/97) and CCC,
whereby CCC agreed to sell a Portion of Portion 368 of the
Farm
Syferfontein 51, Registration Division IR, Province of Gauteng,
measuring approximately 1,7317 hectares, to TE RA WELFARE
DEVELOPMENT
TRUST (Reg No. IT2646/97) in accordance with the terms and conditions
of the sale agreement, dated 27 November 2007.
5.
The costs of this application are costs in the administration of
CCC.”
11.
After
this order was obtained the respondents concluded an agreement with
an entity styled Barclays Africa (Barclays) wherein they
sold to
Barclays an exclusive right to conduct a due diligence investigation
of the affairs of the university at the price of R2.3m.
Barclays
bought this right on the understanding that they would consider
acquiring the university. The exclusive due diligence
right expired
in September 2014 at which point Barclays indicated that it had no
interest in acquiring the university. On 26 September
2014 the
Department of Higher Education and Training (DHET) gave notice to the
university that it was considering cancelling its
registration for
want of compliance with health and safety regulations. Around this
time negotiations with Africa Integras resumed.
The fourth respondent
(at whose instance the university was placed in provisional
liquidation) supported the efforts of Africa
Integras. Africa
Integras submitted a new offer which entailed creditors writing down
their debts. Another offer was also received
from a public company,
Curro Holdings Ltd (Curro), which offer was subject to Curro being
satisfied with a due diligence conducted
by itself. There is no
indication that Curro paid for a right to conduct a due diligence.
Nevertheless, Curro made an offer to
acquire the university, which
offer was open until 16h00 on 31 October 2014. The offer was made
known to Africa Integras. The offer
was accepted, but on 11 November
2014 Curro advised the respondents that it would no longer be
proceeding with the acquisition
of the university.
12.
An
informal meeting between the respondents and creditors of the
university was held on 14 November 2014. The meeting was focused
on
salvaging the operations of the university. A decision was taken to
give Africa Integras an opportunity to provide funding in
the amount
of R2.3m before 28 November 2014 so that the university could
continue with its operation in January 2015. Africa Integras
failed
to comply with this decision. It was further agreed that Africa
Integras would furnish the respondents with an acceptable
offer with
a 10% non-refundable cash deposit. Africa Integras failed to comply
with this too. On 17 November 2014 a further notice
of intention to
cancel the registration of the university was received from DHET.
13.
The
respondents have decided to close the university pending the final
adjudication of the winding-up application on 24 February
2015. This
despite the fact that Africa Integras has placed an offer to acquire
the university as a going concern.
The
application
14.
The
university is, at present, indebted to various entities in the amount
of R41 700 000.00. It is common cause that the university
is unable
to pay these debts and that if it is finally liquidated the creditors
will not recover all of the monies owed to them.
The applicants, who
are all employees of the university and who have not been paid their
salaries for some time now, may have to
suffer the fate of not
recovering all that is owed to them. With the explicit support of the
fourth and eighth respondents they
bring this application in the
quest to rescue the university and have its operations resume.
Whether they succeed in salvaging
the operations of the university or
not is dependent upon a decision to be taken by the creditors. But
for the creditors to take
that decision they need to be afforded an
opportunity to consider the proposal the applicants believe to be in
the best interests
of themselves, the creditors, the students of the
university and of the creditors. Hence, they asked for this
Court to compel
the respondents to call such a meeting and to be
bound by the decision taken there. They also ask that in the meantime
the respondents
be interdicted from disposing of any assets of the
university. The respondents agreed to the latter and had no
difficulty in this
Court making it an order. The grounds upon which
the applicants rely are three-fold:
14.1.
as
employees and creditors they have a real interest in protecting the
operations of the university and, more importantly, the offer
from
Africa Integras carries with it the prospect of their employment
being rescued;
14.2.
they
wish to protect the interests of the learners, all of whom are
indigent and are at risk of losing their education if the
respondents’
refusal to allow the creditors to consider the
offer from Africa Integras stands, and the university is wound-up.
They invoke s
29 of the
Constitution
of the Republic of South Africa Act 108 of 1996
(the Constitution) as a basis for bringing the application;
14.3.
the
third ground they rely upon is the public interest in ensuring that
the university be sold as a going concern, as it not only
protects
their employment but also serves to increase the number of qualified
persons available to serve the public once the learners
graduate from
the university.
15.
The
respondents vigorously opposed the application. In so doing they
initially claimed that the applicants lacked legal standing
to bring
the application. However at the hearing they abandoned this claim
altogether – apart from accepting that the applicants
had
standing as creditors and employees, they took no issue with the
applicants’ right to bring the application on behalf
of the
learners, whose rights in terms of s 29 of the Constitution may be
violated, or the applicants’ right to bring the
application on
the basis that they were acting in the public interest. Their
opposition is based on a single premise: they are
legally incapable
of calling for the meeting of creditors until the university has been
wound-up, which according to them will
take place on 24 February
2015, i.e. on the return day of the
rule
nisi
.
Apart from saying that the university is insolvent they lay no basis
for their contention that the university will be wound-up.
The fact
that it is insolvent is no guarantee that it will be wound-up.
Nevertheless, the respondents believe that this Court will
confirm
the
rule
nisi
and
therefore, they contend, this application should be dismissed with
costs. They contend that once the
rule
nisi
is confirmed and the university is wound-up the applicants can raise
their request for a meeting of the creditors with the liquidator
who,
according to them, is the only person empowered to accede thereto.
16.
In
order to assess the contention of the respondents it is necessary to
have regard to the general powers conferred by law upon
provisional
liquidators, and to the specific powers conferred upon the
respondents by the two orders of this Court.
The
Companies Act (old
and new)
17.
In
regard to the powers of liquidators the new
Companies Act has
left
the old
Companies Act intact
. The powers are spelt out in
sections
386
–
390
of this Act. The relevant portions read:
“
386
General powers
(1)
The liquidator in any winding-up shall have power-
(a)
to execute in the name and on behalf of the company all deeds,
receipts and other documents, and for that purpose to use the
company's seal;
(b)
to prove a claim in the estate of any debtor or contributory of the
company and receive payment in full or a dividend in respect
thereof;
(c)
to draw, accept, make and endorse any bill of exchange or promissory
note in the name and on behalf of the company: Provided
that no
liquidator shall, except with the leave of the Court or the authority
referred to in subsection (3) or (4), or for the
purposes of carrying
on the business of the company in terms of subsection (4) (f) have
power to impose any additional liabilities
upon the company;
(d)
to summon any general meeting of the company or the creditors or
contributories of the company for the purpose of obtaining
its or
their authority or sanction with respect to any matter or for such
other purposes as he may consider necessary;
(e)
subject to the provisions of subsections (3), (4) and (5), to take
such measures for the protection and better administration
of the
affairs and property of the company as the trustee of an insolvent
estate may take in the ordinary course of his duties
and without the
authority of a resolution of creditors.
(2)
Subject to the consent of the Master, a liquidator may, at any time
before a general meeting contemplated in subsection (1)
(d) is
convened for the first time, terminate any lease in terms of which
the company is the lessee of movable or immovable property.
(2A)
At any time before a general meeting contemplated in subsection 1 (d)
is convened for the first time the liquidator shall,
if satisfied
that any movable or immovable property of the company ought forthwith
to be sold, recommend to the Master in writing
accordingly, stating
his reasons for such recommendation.
(2B)
The Master may thereupon authorise the sale of such property or any
portion thereof on such conditions and in such manner as
he may
determine: Provided that if such property or a portion thereof is
subject to a preferential right, the Master shall not
authorise the
sale of such property or portion unless the person entitled to such
preferential right has given his consent thereto
in writing.
(3)
The liquidator of a company-
(a)
in a winding-up by the Court, with the authority granted by meetings
of creditors and members or contributories or on the directions
of
the Master given under section 387;
(b)
in a creditors' voluntary winding-up, with the authority granted by a
meeting of creditors; and
(c)
in a members' voluntary winding-up, with the authority granted by a
meeting of members,
shall
have the powers mentioned in subsection (4).
(4)
The powers referred to in subsection (3) are-
(a)
to bring or defend in the name and on behalf of the company any
action or other legal proceedings of a civil nature, and, subject
to
the provisions of any law relating to criminal procedure, any
criminal proceedings: Provided that immediately upon the appointment
of a liquidator and in the absence of the authority referred to in
subsection (3), the Master may authorise, upon such terms as
he
thinks fit, any urgent legal proceedings for the recovery of
outstanding accounts;
(b)
to agree to any reasonable offer of composition made to the company
by any debtor and to accept payment of any part of a debt
due to the
company in settlement thereof or to grant an extension of time for
the payment of any such debt;
(c)
to compromise or admit any claim or demand against the company,
including an unliquidated claim;
(d)
except where the company being wound up is unable to pay its debts,
to make any arrangement with creditors, including creditors
in
respect of unliquidated claims;
(e)
to submit to the determination of arbitrators any dispute concerning
the company or any claim or demand by or upon the company;
(f)
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:
Provided that, if he considers it necessary, the liquidator may carry
on or discontinue any part of the business of the
company concerned
before he has obtained the leave of the Court or the authority
referred to in subsection (3), but shall not in
that event be
entitled, as between himself and the creditors or contributories of
the company, to include the cost of any goods
purchased by him in the
costs of the winding-up of the company unless such goods were
necessary for the immediate purpose of carrying
on the business of
the company and there are funds available for payment of the cost of
such goods after providing for the costs
of winding-up;
(g)
to exercise mutatis mutandis the same powers as are by sections 35
and 37 of the Insolvency Act, 1936, (Act 24 of 1936), conferred
upon
a trustee under that Act, on the like terms and conditions as are
therein mentioned: Provided that the powers conferred by
section 35
aforesaid, shall not be exercised unless the company is unable to pay
its debts;
(h)
to sell any movable and immovable property of the company by public
auction, public tender or private contract and to give delivery
thereof;
(i)
to perform any act or exercise any power for which he is not
expressly required by this Act to obtain the leave of the Court.
(5)
In a winding-up by the Court, the Court may, if it deems fit, grant
leave to a liquidator to raise money on the security of
the assets of
the company concerned or to do any other thing which the Court may
consider necessary for winding up the affairs
of the company and
distributing its assets.
(6)
The Master may restrict the powers of a provisional liquidator.
387
Exercise of liquidator's powers in winding-up by Court
(1)
Subject
to the provisions of this Act, the liquidator of a company which is
being wound up by the Court, shall, in the administration
of the
assets of the company, have regard to any directions that may be
given by resolution of the creditors or members or contributories
of
the company at any general meeting.
(2)
In
regard to any matter which has been submitted by the liquidator for
the directions of creditors and members or contributories
in general
meeting, but as to which no directions have been given or as to which
there is a difference between the directions of
creditors and members
or contributories, the liquidator may apply to the Master for
directions and the Master may give or refuse
to give directions as he
may deem fit.
(3)
Where
the Master has refused to give directions as aforesaid or in regard
to any other particular matter arising under the winding-up,
the
liquidator may apply to the Court for directions.
(4)
Any
person aggrieved by any act or decision of the liquidator may apply
to the Court after notice to the liquidator and thereupon
the Court
may make such order as it thinks just.
18.
For
our present purposes, the most notable aspect of these statutorily
conferred powers is sub-section 386(6) which empowers the
Master,
(the third respondent in our case), to restrict the powers of a
provisional liquidator (the first and second respondents
in our
case). It is common cause that the third respondent has not
restricted the powers of the first and second respondents at
all.
Thus, all the powers conferred by the statute remain within their
grasp. The second notable factor is that the sections refer
to
“
liquidator
”
only. The only reference to provisional liquidator is in sub-section
386(6). The respondents contend that these powers do
not avail them
as they are provisional liquidators and not the liquidators. The
liquidator(s) will only be appointed once the Court
grants a final
winding-up order, which it might do on the return day. Until then,
they claim they are paralysed and therefore incapable
of acceding to
the request of the applicants to host a meeting of the creditors.
This contention is without merit. Sub-section
1(1) of the old Act,
which defines the common terms found in the Act furnishes the
following definition of a liquidator:
“”
liquidator
“
in
relation to a company, means the person appointed under Chapter XIV
as liquidator of such company, and includes any co-liquidator
and any
provisional liquidator so appointed.
”
19.
During
the hearing, extensive debate on this issue was conducted with
counsel for the respondents, and, despite his valiant and
admirable
efforts to show that the respondents were paralysed in coming to the
assistance of the applicants, he was unable to escape
the clear and
unambiguous wording of the statute. The words employed leave no doubt
that all the statutory powers conferred upon
the liquidator remain
within the grasp of the provisional liquidator.
[2]
If
this was not the case then sub-section 386(6), which allows the
Master to curtail the powers of a provisional liquidator, would
not
be necessary. It follows then that the respondents are capacitated by
the statute to call a meeting of the creditors and such
capacity is
independent of any person or party requesting for such a meeting to
be held.
The
order of this Court issued on 1 April 2014
20.
As
mentioned above, prior to this hearing the respondents were, at their
instance, issued with two orders from this Court: the first
one being
issued on 1 April 2014 and the second one on 23 June 2014.
21.
This
order was necessitated by the need to ensure that the university
remained open and that its most important operations remained
active.
In particular, it was designed to ensure that the studies of the
learners were not compromised. In this regard the respondents
were
given wide and far-reaching powers to achieve this objective. The
respondents took advantage of it by raising capital (“
funding
”
as the respondents call it) from Absa and in return pledged the
assets of the university as security. By taking this action
the
respondents, no doubt, compromised the interests of any creditors
existing as of the date they accepted the funding from Absa.
There is
no indication in the papers that this was done with the approval of
the said creditors. Either way, it means that the
respondents were
confident that they could take this action without the approval of
the creditors or they would be able to secure
their approval, and to
secure the approval of the creditors the respondents would have had
to meet, either individually or collectively,
with the creditors.
Thus, they had no problem with holding a meeting with the creditors,
either individually or collectively.
22.
At
the same time they were actively involved in negotiations with Africa
Integras to acquire the university as a going concern because
“(t)
his
would have ensured that indigent students could continue with their
studies
.”
[3]
Two
facts are revealed by this approach:
22.1.
The
respondents were confident that they could dispose of the university
as a going concern with or without the approval of the
creditors.
22.2.
The
respondents accepted that the interests of the learners were crucial,
if not paramount.
The
order of this Court issued on 23 June 2014
23.
The
breadth and scope of the order of 23 June 2014 is so wide and so
extensive that it allowed the respondents to do almost anything
they
wish with regard to the university assets.
24.
It
allowed them to take decisions and actions that would have a direct
impact on the operations of the university. It bears remembering
that
this order was obtained at their instance. They brought the
application on an
ex
parte
basis and asked that it be entertained in terms of ss 386 and 387 of
the old
Companies Act read
with the relevant provisions of the new
Companies Act. Having
obtained the order they were now given
leave to “
dispose,
sell or alienate
”
any immovable properties of the university and to pay any debts or
expenses of the university that fell due. Furthermore,
in terms of
s
386(5)
of the old
Companies Act the
Court extended their powers to
such an extent that:
24.1.
they
can “
compromise
any claim
”
of the university, to grant any debtor of the university an extension
to pay her debts;
24.2.
they
can “
terminate
or conclude
”
any agreements on behalf of the university;
24.3.
they
can launch any legal proceedings on behalf of the university or
defend the university in any legal proceedings brought against
it;
24.4.
they
are empowered to exercise the same powers conferred upon a trustee by
ss 35
and
37
of the
Insolvency Act, 24 of 1936
;
24.5.
they
can “
sell
or
in any other manner
dispose
”
(emphasis
added) of any property of the university whether “ by public
auction or public tender or private treaty” on
“
terms
and conditions to be determined in their sole and absolute
discretion
”
(emphasis
added);
24.6.
they
can “
appoint
service providers, including attorneys, auditors, accountants,
counsel, consultants, auctioneers, valuers, investigators,
forensic
auditors, engineers, quantity surveyors and other persons (including
service providers who may be appointed by creditors
or who may have
rendered estate related services to creditors) to assist the
Applicants in the exercise or execution of their duties
in the
administration of the winding-up of the insolvent estate of
”
the university;
24.7.
they
can “
pay
all legal fees
”
incurred by themselves in the course of their duties
on
an attorney and client scale
”;
24.8.
apart
from having the power to appoint anyone to assist them, they can
“
employ
any employees
”
(sic) of the university “
to
assist them with the affairs
”
of the university as well as with the performance of their duties;
24.9.
they
are empowered “
to
call for tenders for the purchase of the business or assets of the
university
”;
24.10.
they
are given permission to “
ratify
and finalise
”
the sale agreement concluded with regard to certain immovable
property that belonged to the university;
25.
The
order is so wide that it certainly allows for the respondents to call
for a meeting of the creditors, if they deemed it necessary.
The
applicants ask that they place the offer before a body of creditors
at a duly constituted meeting. They refuse, citing lack
of powers to
call such a meeting. In this they are wrong. In fact, in the light of
the powers conferred upon them by the orders,
especially the order
dated 23 June 2014, their refusal to accede to the request of the
applicants, and their decision to vigorously
oppose this application,
is difficult to fathom. They were given a full opportunity to explain
their stance and they were unable
to furnish any explanation that was
reasonable or rational. They merely took the stance that they are not
empowered to call for
a creditors meeting as they are only
provisional liquidators. As I have shown above, they err in this
regard: they err with regard
to the powers conferred upon then in
terms of
sections 386
and
387
of the old
Companies Act and
they err
in regard to the powers conferred upon them by the two orders of this
Court. It is a matter of concern that the
respondents have not
really advanced any sound reasons for their attitude to the request.
This is particularly so when regard is
had to the fact that prior to
the request their conduct indicated that they were willing to take
far more radical action than that
called for by the applicants.
Throughout the hearing their counsel was pressed to furnish an
explanation for this and, valiant
as his efforts may have been, he
was unable to do so. Under the circumstances, it would not be
inappropriate to draw the inference
that their intransigence was
designed to be obstructive.
26.
Finally,
before closing it is necessary to deal with the contention of the
applicants that the respondents are legally bound to
give effect to
the rights of the learners as enshrined in s 29 of the Constitution
by taking every possible step to avoid closing
down the operations of
the university. Acceding to the request of the applicants falls
within the ambit of this legal duty, so
the contention of the
applicants goes. This may be so. The applicants’ counsel
referred to a number of authorities which
he claimed support this
contention, and asked that a finding on this issue be made as the
respondents have indicated that they
have decided to close the
university and sell its assets to the highest bidder without having
to consider the interests of the
learners or the public when taking
that decision. The finding, according to the applicants, will put a
halt to the decision of
the respondents to close the university.
27.
The
contentions of the applicants raise a constitutional issue. It is
settled, though often forgotten, law that if a matter can
be decided
without having recourse to constitutional issues then that is the
route to be followed by a court: if a non-constitutional
issue is
decisive of the case there is no need to engage the constitutional
issue(s) that are raised. This rule had been laid down
by the
Constitutional Court since its infancy and Ackermann J, writing for a
unanimous Court, recalls it in the plainest of language:
“
This
Court has laid down the general principle that `where it is possible
to decide any case, civil or criminal, without reaching
a
constitutional issue, that is the course which should be
followed.
”
[4]
28.
Thus,
tempting as it may be to deal with the constitutionally-directed
contentions of the applicants, it is neither necessary nor
prudent
for me to traverse them.
Conclusion
29.
On
account of what is said above, the order referred to in paragraph 3
above was issued.
Vally J
Gauteng
High Court, Johannesburg Local Division
Appearances:
For
the applicants : Adv J Brickill
Instructed
by : Legal Resources Centre, Grahamstown
For
the respondents : Adv F W Botes SC
Instructed
by : Rorich Wolmarans and Luderitz Inc
Dates
of hearing : 29 January 2015
Date
of judgment : 29 January 2015
Date
reasons given: 16 February 2015
[1]
This
solution is an innovation of the Companies Act No 71 of 2008 (the
new
Companies Act). See
chapter 6 of this Act.
[2]
Any
controversy resulting from a suggestion to the contrary was settled
in
Ex
Parte Provisional Liquidators, Pharmacy Holdings
1962 (2) SA 12
(W), where at 17B Trollip J dealing with the
predecessor to the 1973
Companies Act said
that the word “
liquidator
in
s 130(3)
undoubtedly includes a provisional liquidator”.
See further:
Millman
NO and Steub NO v Koetter
1993 (2) SA 749
(C) at 758D and
Fourie
v Le Roux
2006 (1) SA 279
(T) at 285G-286A
[3]
AA,
Para 8.8, p 206
[4]
Motsepe
v Commissioner for Inland Revenue
[1997] ZACC 3
;
1997
(2) SA 898
(CC) at
[21]
; See also
Brink
v Kitshoff NO
[1996] ZACC 9
;
1996
(4) SA 197
(CC) at
[9]
and the line of cases there cited.