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[2019] ZAGPJHC 342
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Wild & Marr (Pty) Ltd v Intratrek Properties (Pty) Limited (27814/2018) [2019] ZAGPJHC 342; 2019 (5) SA 310 (GJ) (16 May 2019)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 27814/2018
REPORTABLE
OF
INTEREST TO OTHER JUDGES
16/5/2019
In the matter between
WILD
&
MARR (PTY)
LIMITED APPLICANT
and
INTRATREK
PROPERTIES (PTY)
LIMITED RESPONDENT
(Registration Number:
2000/017603/07)
JUDGMENT
SUTHERLAND
J:
Introduction
[1]
This application is for the winding-up of the respondent
company. The applicant is owed R14 638 660.00 plus interest as from
22
June 2017. It is common cause that the respondent cannot pay the
debt. Only two controversies are ventilated; first, whether this
court has jurisdiction over the respondent for the purposes of a
winding-up order and second, whether it is an appropriate exercise
of
the court's discretion to postpone the application until 30 June 2019
by which date, so it is alleged from the bar, the respondent
shall
have been able to procure overseas funders to provide it with the
money necessary to pay the debt owed to the applicant.
The
Jurisdiction argument
[2]
The controversy arises from the fact that service of the
winding up application was served on the respondent's principal place
of
business at 136 1oth Street, Parkmore, Johannesburg. This address
is within this court's territorial jurisdiction. The respondent's
registered address is said to be at 21 Van Rensburg Street,
Nelspruit. That address is not within this court's territorial
jurisdiction,
but in the province of Mpumalanga. The contention
advanced on behalf of the respondent is that the only address at
which effective
service of a winding up application can take place is
at the registered office. If that contention is correct, it would
follow
that only the Mpumalanga court can entertain the application.
[3]
The argument is not novel. Several decisions in the Cape
Division, the Northern Cape Division and in the Gauteng Division
which
address this argument have been drawn to my attention. The two
Gauteng Divisions' decisions are said to be against the proposition
that service may be effective only at the registered address.
Plainly, if that is so, these decisions bind me unless I conclude
they are distinguishable or clearly wrong. The sole decision which
supports the proposition is in the Cape Division, but has been
both
followed and disapproved in that division. There is one SCA decision
on appeal from a Gauteng Division decision which, it
is argued, is
against the proposition. These decisions are, accordingly, examined.
[4]
The font of the debate lies in two statutory provisions, one
in the 1973 Companies Act and another in the 2008 Companies Act.
Section
23(3) of the 2008 Act provides:
"Each company or
external company must-
(a)
continuously maintain at least one office in the Republic; and
(b)
register the address of its office, or its principal office if
it has more than one office-
initially
in the case of-
(aa) a company, by
providing the required information on its Notice of Incorporation; or
(bb) an external company,
by providing the required information when filing its registration in
terms of subsection (1) and
(ii)
subsequently, by filing a notice of change of registered office,
together with the prescribed fee."
Section
12(1) of the 1973 Act provides:
"The Court which has
jurisdiction under this Act in respect of any company or other body
corporate, shall be any provisional
or local division of the High
Court of South Africa within the area of jurisdiction whereof the
registered office of the company
or other body corporate
or the
main place of business of the company or other body corporate is
situate."
(Emphasis supplied)
[5]
The thesis is that because the 2008 Act requires the main
place of business to be identical with the registered address,
applications
for liquidation must therefore be launched exclusively
in that court which exercises territorial jurisdiction over the
registered
address. In other words, the opportunity to serve on one
of two addresses under the 1973 Act is extinguished.
[6]
This notion was given its fullest expression in the decision
by Binns -Ward J in
Sibakhulu Construction (Pty) Ltd v Wedgewood
Village Golf Country Estate (Pty) Ltd (Nedbank Ltd intervening)
2013
(1) SA 191
(WCC). In that decision, it was concluded the aim of the
2008 Act was that a company can reside at only one place. The
reasoning
ran that there had been no replication of provisions like
those in section 12 of the 1973 Act, and having regard to section 23
of the 2008 Act, a company's principal office and its registered
address were to be one and the same. Thus, the dual jurisdiction
regime had been abolished. At [22] - [23] it was held:
"[22] Questions of
interpretation of the 2008 Companies Act must be undertaken with the
provisions of ss 5 and 7 in mind. In
particular, s 5(1) provides that
the Act must be interpreted to give effect to the purposes set forth
ins 7. In determining the
effect of s 23 of the Act on the question
of a court's jurisdiction it seems to me that the provisions of s
7(k) and (I) have a
bearing. They provide:
'The purposes of this Act
are to –
…
(k) provide for the
efficient rescue and recovery of financially distressed companies, in
a manner that balances the rights and
interests of all relevant
stakeholders; and
(I) provide a predictable
and effective environment for the efficient regulation of companies.'
[23] I consider that it
would give effect to the purposes set out in s 7(k) and (I) to
interpret s 23 of the Act to the effect that
a company can reside
only at the place of its registered office (which, as mentioned, must
also be the place of its only or principal
office). The result would
be that there would in respect of every company be only a single
court in South Africa with jurisdiction
in respect of winding-up and
business rescue matters. I think it admits of no doubt that
winding-up and supervision for business
rescue purposes are both
matters going to the status of the subject company, and that the
power to make a determination on a question
of status involves a
ratio jurisdictionis
exercisable
only by the court within whose jurisdiction the company 'resides' or
is domiciled (I do not perceive there to be scope
for any distinction
within South Africa between a local company's residence and its
domicile.) Furthermore, winding-up and business
rescue are also
matters which are interlinked in such a manner by the provisions of
the 2008 Act that it is undesirable for reasons
of comity between
courts of equal status, efficiency, commercial convenience and
certainty that they be amenable to proceedings
in concurrent
jurisdictions. These are considerations militating in favour of the
recognition of a regime that recognises a company
only to be resident
in one place rather than two, thereby assuring that only one court
will have jurisdiction."
[7]
Other than this decision, there is no support for the
proposition that the court exercising jurisdiction over the
registered address
has sole jurisdiction.
[8]
In the Gauteng Division, in the decision in
Burmeister
&
Another v Spitskop Village Properties
&
Others
[2015]
ZAPPHC 1094 (21/09/2015), Makgoka J disapproved the decision in
Sibakhulu.
At [8] - [10] of the judgment, the issue is
addressed, not by countering the reasoning in
Sibakhulu,
but
by referring to, and relying on, several other decisions said to
disapprove the decision in
Sibakhulu.
First, there was
reference made to a decision by Lacock J in
Lonsdale Commercial
Corporation v Kimberley West Diamond Mining Corporation
[2013]
ZANHC 11 (17/5/2013), in which the abolition of duality was rejected
on the premise that to interpret section 23 to have
such an effect
amounted to an ouster of the court's jurisdiction, which was an
unsustainable proposition where not articulated
in the clearest
terms. Second, there was reference to the decision in the Gauteng
Division of
Firstrand Bank Ltd v PMG Motors Alberton (Pfy) Ltd (In
liquidation)
[2013] 4 All SA 117
(GSJ). Mayat J was dealing with
litigation in the hands of the liquidators, the company having been
wound up by an order of the
Kwazulu -Natal Division. Mayat J held
that the Gauteng Division had jurisdiction to deal with the conduct
of the liquidators who
were situated within the territorial
jurisdiction of the Gauteng Division. A third reference was made to
the subsequent appeal,
reported as
PMG Motors Kyalami (Pty) Ltd
&
Another v Firstrand Bank Ltd, Wesbank Division
2015 (2) SA 634
(SCA). The passage in [9] is said to impliedly overrule the
Sibakhulu
decision:
"It has long been
recognised as trite that artificial persons such as companies have no
bodies and therefore cannot reside
in a particular area. They do,
however, have directing minds and 'the residence of a corporation
will be determined by the periodic,
usual or habitual location of the
directing mind'. This has been held to be the company's 'seat of its
central management and control,
from where the general
superintendence of its affairs takes place, and where, consequently,
it is said that it carries on its real
or principal business'. To say
that a company resides at its principal place of business is simply a
convenient way of ensuring
that the nerve centre of the operations of
a company founds jurisdiction in proceedings taken against it.
Although s 12 of the
Companies Act refers to 'the main place of
business', this amounts to the same thing for jurisdictional
purposes. The dealerships
accepted that, on the above basis, the
court below had jurisdiction over PMG Kyalami and PMG Alberton prior
to their liquidation."
[9]
In my view these decisions relied on in
Burmeister,
save for
that of Lacock J, are not dispositive of the proposition that duality
has been preserved. The post liquidation phase
in the PMG Motors
cases is a clear basis for distinguishing them. To argue thus that
these decisions disapprove or overrule the
Sibakhulu
decision is, with respect, doubtful.
[10]
The SCA's dictum in
PMG Motors
does
not address the duality issue expressly, and I am hesitant to read
into those remarks that the court contemplated disposing
of that
thesis.
[11]
The notion of the court's jurisdiction being ousted in
Lonsdale,
is in my view, an exaggerated proposition with which
I cannot agree. The jurisdiction of the court is conferred by statute
in respect
of a juristic entity which, by a fiction, is said to be at
a place; if the reforming statute creates a different arrangement
that
is merely more restrictive about the place where the fiction
resides, it does seem obvious to me that the re-arrangement infringes
on the court's jurisdiction or inhibits reasonable access to a court
by any litigant. No threat is created by this procedural provision
to
the courts' basic functioning nor to litigants' constitutional rights
of access to justice.
[12]
Accordingly, what remains is one decision in the Gauteng
Division, which does not interrogate the reasoning in
Sebakhulu,
against the proposition, and one distinguishable decision,
supposedly against the proposition.
[13]
However,
Sibakhulu
was expressly disapproved in the
Cape Division in
Van der Merwe v Duraline (Pty) Ltd
/2013]
ZAWCHC 213 (23/08/2013). Gamble J squarely addressed the reasoning in
Sibakhulu.
The thrust of his conclusions are that liquidations
of insolvent companies remain, for the time being, the preserve of
chapter 14
of the 1973 Act. That procedural regime draws on other
provisions of the 1973 Act, including section 12. To conclude
otherwise
would be to produce an intolerable incoherence if sections
of the 1973 Act were to be ignored and reliance placed on provisions
of the 2008 Act, including section 23. I agree with this reasoning.
Section 224(3) of the 2008 Act, read with item 9 of schedule
5 to the
2008 Act preserves chapter 14 of the 1973 Act in operation. In that
chapter, the "court" referred to must be
the "court"
as defined in section 1 of the 1973 Act, which in turn is the court
referred to in section 12 of the 1973
Act.
[14]
Gamble J at [20] - [23] of
Duraline
states thus:
"[20] Under the Old
Act, therefore, Section 12 was the source of the dual jurisdictional
power to liquidate, a situation which
has, for a number of decades,
been recognised under Section 344. At the risk of stating the
obvious, the entire winding up process
of an insolvent company on the
basis of inability of a company to pay its debts must, until the
transitional provisions of the
New Act are varied, take place in
terms of Chapter 14 of the Old Act. Once reliance is placed on those
sections for such winding
up, I consider that the definitions,
internal references and interpretations which have applied to that
Chapter of the Old Act
will continue to apply, and it is not
permissible to cross reference to provisions of the New Act
whilst so applying Chapter
14 of the Old Act.
[21] Chapter 14 of the Old Act does
not only deal with the application for winding-up itself, it governs,
inter alia
the functions and duties of liquidators, meetings
of creditors, the interrogation of directors and other persons in
relation to
the affairs of the bankrupt company, liability of
directors for the mismanagement of the company and importantly, the
incorporation
of various provisions of the
Insolvency Act of 1936
.
The many sections under this Chapter have over the years been
interpreted by our Courts and there is therefore a substantial body
of authority and established jurisprudence which continues to be of
general application, notwithstanding the passing of the New
Act.
[22] That the application of Chapter
14 requires resort to, and reliance upon, the definitions and other
internal references to
the Old Act, is further borne out by the
following. There are several instances where definitions under the
Old Act have a different
meaning under the New Act, or where a term
is not defined under the Old Act but is defined under the New Act.
See for example
"Accounting Records", "Company”,
"Director", "External Company", "Member"
"Memorandum",
"Share" and "Special
Resolution".
[23] As I have said many of these
terms have been interpreted by the Courts over the years, and in the
continued interpretation
of Chapter 14 of the Old Act (that is until
the introduction of the promised winding up legislation referred to
below), the Courts
must continue to have regard to such definitions
and internal references. It would be chaotic to have to apply [the]
New Act definitions
and provisions to Old Act provisions in Chapter
14 without an express direction in the New Act to do so."
(Footnotes omitted)
[15]
Subsequently, in the Cape Division,
Navigator Property
Investments (Pty) Ltd v Silver Lakes Crossing Shopping Centre (Pfy)
Ltd
[2014] 3 AL SA 591 (WCC) was decided. The application was to
wind up the company in terms of Section 81(1)(d)(i) of the 2008 Act
as a result of an impasse amongst the directors, not the insolvency
of the company; thus chapter 14 of the 1973 Act was not implicated.
This decision followed
Sibakhulu.
The issue is dealt with at
[18] - [19] of the judgment by Ndita J. The
Duraline
decision
was apparently not brought to the attention of the court. Drawing on
the authority of
Sebakhulu,
the court dismissed a contention
that the Western Cape Court had no jurisdiction because the
registered office was in another jurisdiction
and held that as the
principal place of business was within the court's jurisdiction, the
company had improperly not registered
the "correct"
address, ie the principal place of business. It followed, that the
jurisdiction of the court was determined
by the principal place of
business and not the incorrectly registered address elsewhere. This
case is plainly distinguishable from
a winding-up on grounds of
insolvency. Paradoxically, in relation to the argument advanced by
the respondent in the present case
that only the actual registered
office can found jurisdiction, were section 23 indeed to apply in
this case, on the authority of
Navigator Property,
the
reliance by the applicants on the principal place of business would
suffice to found jurisdiction. In my view, however, it has
no
application to the present case.
[16]
Accordingly the challenge to the jurisdiction of the Gauteng
Division is without merit.
A
Postponement of the liquidation order
[17]
It is argued on behalf of the respondent that a discretion
should be exercised to postpone the application. A court has such a
discretion
in terms of section 347(1) of the 1973 Act, to be
exercised in deserving circumstances. The core rationale would be
that there
is a convincing prospect of the liquidation being avoided.
That prospect must be seriously evaluated.
[18]
Regrettably, such circumstances are not in evidence. The
respondent is the alter ego of its controlling mind, Ibrahim Sildsky
Yusuf.
The respondent seems to be no more than a corporate face of Mr
Yusuf, and it is not alleged that there are assets in the respondent
other than the supposed goodwill of Mr Yusuf's efforts to drum up
business. The business is said to be a consultancy and the substance
is the facilitating of deal-making by introducing persons to one
another, deriving an income from commissions for so doing. There
are
bland allusions to the prospects of making millions in the near
future but without a smidgeon of substantiation offered. The
request
is to postpone to 30 June 2019, some six weeks away. Altogether, the
proposal is unconvincing.
[19]
A postponement of the application must be refused.
The
Order
(1) The respondent is placed
under final winding-up in the hands of the Master.
(2) The costs of this
application are costs in the winding-up.
(3) The costs of opposition are
excluded from the winding-up costs.
______________________
ROLAND
SUTHERLAND
Judge
of the High Court
Gauteng
Local Division, Johannesburg
Date
of Hearing: 13 May 2019
Date
of Judgment: 20 May 2019
For
the Applicant: Adv L Hollander
Instructed
by Snaid & Edworthy
For
the Respondent: Adv D Block
Instructed
by Howard Woolf Attorney