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[2017] ZAGPJHC 408
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Sithole and Another v Cross Point Trading 65 CC (22007/2014) [2017] ZAGPJHC 408 (14 November 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO.22007/2014
Not
reportable
Not
of interest to other judges
Revised
14/11/2017
In
the Matter between:
OJ
Sithole
1
st
Appellant
D
Basson
N.O
2
nd
Appellant
and
Cross
Point Trading 54
CC
1
st
Respondent
JUDGMENT
D
S FOURIE, J:
[1]
The applicants apply in terms of
section 21(1)(c)
of the
Superior
Courts Act, No 10 of 2013
for an order declaring the respondent to be
liquidated as from 14 March 2014. The application is opposed by the
respondent and
a notice was filed in terms of
Rule 6(5)(d)(iii)
indicating that the respondent intends to raise a question of law
only. The notice is formulated very clumsy, but the real issue
appears to be the following: whether it is competent in law to
declare the respondent, which was converted from a company, to be
liquidated after a final winding-up order was granted against the
company.
BACKGROUND
[2]
During 2006 a private company known as Cross Point Trading 65 (Pty)
Ltd was incorporated. On 4 May 2010 this company was converted
in
terms of
section 27
of the
Close Corporations Act, No 69 of 1984
to a
close corporation. About four years later, on 14 March 2014, EG van
der Walt (trading as H D Transport) filed an application
for
liquidation against Cross Point Trading 65 (Pty) Ltd on the ground
that this company "is unable to pay its debts"
in terms of
an agreement entered into during July 2013 for services rendered in
the amount of R352 345.50.
[3]
On 6 November 2014 a rule
nisi
was granted against the said
company and on 12 December 2014 a final winding-up order was issued.
On the second day of an insolvency
inquiry into the affairs of Cross
Point Trading 65 CC, following upon the winding-up of Cross Point
Trading 65 (Pty) Ltd, a point
in limine
was raised to the
effect that an incorrect entity was cited in the liquidation
application and therefore liquidation proceedings
against Cross Point
Trading 65 CC are void
ab initio.
The result was that the
liquidators of Cross Point Trading 65 (Pty) Ltd have decided to apply
for an order declaring Cross Point
Trading 65 CC "liquidated as
from 14 March 2014".
[4]
It was contended on behalf of the applicants that the issue of
conversion does not make any difference and it cannot be said
that a
wrong party has been cited. The Court has a discretion to condone any
defect in a citation if one takes into account, so
it was submitted,
that these are not two separate juristic entities. Counsel for the
respondent argued that the company ceased
to exist as at the date of
conversion and therefore the application for liquidation was brought
against an entity which, on that
date, no longer existed.
[5]
Section 27
of the
Close Corporations Act has
since been repealed, but
at the time of the conversion (during 2010) the relevant part thereof
provided (in subsection (1)) that
any company having ten or fewer
members all of whom qualify for membership of a corporation, may be
converted into a corporation,
provided that every member of the
company becomes a member of the corporation. Subsection (2) provided
for,
inter alia,
the filing of a founding statement whereas
subsection (4) provided for the registration of the founding
statement and, simultaneously
with such registration, that the
registration of the memorandum and the articles of association of the
company concerned, be cancelled.
[6]
Subsection (5) provided that on the registration of a corporation
converted from a company, the assets, rights, liabilities and
obligations of the company shall vest in the corporation. It also
stipulated that any legal proceedings instituted by or against
the
company before the registration may be continued by or against the
corporation, and any other thing done by or in respect of
the company
"shall be deemed to have been done by or in respect of the
corporation".
[7]
Subsection (5) also provided (in terms of an amendment deemed to have
come into operation on 1 January 1985) as follows:
"(d) The juristic person which
prior to the conversion of
a
company into
a
corporation
existed as
a
company, shall notwithstanding the conversion
continue to exist as
a
juristic person but in the form of
a
corporation".
[8]
With regard to the cancellation of the memorandum and articles of
association of the company (as referred to in section 27(4)
of the
Close Corporation Act), section 298 of the Companies Act, 1973,
provides as follows:
"When
a
company is
converted into
a
close corporation in terms of the
Close
Corporations Act, 1984
, the Registrar shall, simultaneously with the
registration of the founding statement of the close corporation by
the Registrar
of Close Corporations in terms of the said Act, cancel
the registration of the memorandum and articles of association of the
company
concerned."
[9]n
Brodsky Trading 224
CC
v Cronimet Chrome Mining
SA
(Pty) Ltd
2017 (4) SA 610
(SCA) an estate agent company was
converted to a close corporation in terms of
section 27
of the
Close
Corporations Act. The
Estate Agency Affairs Board was not advised of
this conversion as a result whereof the fidelity fund certificate was
issued to
the former company and not the close corporation. The
appellant then instituted action for the recovery of estate agent’s
commission against the first respondent. One of the issues for
determination was whether the appellant had complied with section
26
of the Estate Agency Affairs Act No 112 of 1976.
[10]
The Supreme Court of Appeal considered,
inter alia,
the
application of
section 27
of the
Close Corporations Act, more
particularly subsection (5) thereof as well as section 298 of the
Companies Act of 1973. The learned Judge of Appeal then concluded
(in
par 12 and 13) as follows:
"It is, however, vital to
recognise that although the juristic person that existed before the
conversion, in the form of
a
company, continues to exist in
the form of a close corporation, the company ceased to exist as at
the date of conversion.
...
For
a
right to be
transferred from the company to the close corporation, it must have
been held by the company at the time of the conversion.
Likewise ‘any
other thing done by or in respect of the company' would have to be
done at a time when the company was in existence
for it to be deemed
to have been done in respect of the corporation. On 20 March 2006,
being the date of conversion, the company,
however, was not in
possession of
a
valid certificate that could be transferred to
the corporation. In addition, nothing had been done by, or in respect
of the company
before its conversion, with regard to an application
for
a
certificate in terms of s 16 of the Act, which could be
transferred to the appellant."
[11]
Section 27(5)(a)
of the
Close Corporations Act, which
provided for
the vesting of assets, rights, liabilities and obligations of the
company in the corporation, appears to have been
a statutory cession
and delegation of rights, liabilities and obligations. In the matter
before me it is common cause that the
outstanding debt or liability
forming part of the underlying cause of action in the liquidation
application, only arose during
2013, long after the date of
conversion during 2010. Notwithstanding the fact that the company
ceased to exist as at the date of
conversion, the company was not a
debtor of the applicant in the liquidation application, neither was
there a liability or obligation
of the former company that could vest
in the corporation as far as the outstanding debt is concerned.
Furthermore, nothing had
been done by, or in respect of the company
before its conversion, with regard to the cause of action relied upon
in the liquidation
application. In short, there is no link between
the former company and the close corporation as far as the underlying
cause of
action in the liquidation application is concerned.
[12]
In the result it appears to me that the liquidation application was
brought against an entity, i.e. the former company, which
was no
longer in existence and therefore the winding-up order should be
regarded as a nullity and may be disregarded
(cf The Master of the
High Court v Mota/a NO
2012 (3) SA 325
(SCA) par 11 - 14). The
order applied for can therefore not be granted and it follows that
this application falls to be dismissed.
[13]
This brings me finally to the question of costs. Following the usual
rule, costs should be awarded to the successful party.
In this
instance the applicants are the duly appointed liquidators of the
former company, acting in their official capacity. Nothing
was put
before me to indicate that any of the applicants acted unreasonably
or in such a way that would justify a costs order
de bonis
propriis.
Costs against the former company would be nonsensical
as this entity no longer exists. It therefore appears to me that,
under the
circumstances, no order for costs should be made.
ORDER
In the result I grant the following order:
1)
The
application is dismissed;
2)
There
shall be no order for costs.
__________________________
DS
FOURIE
JUDGE
OF THE HIGH COURT
PRETORIA
Date
14
November 2017