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[2020] ZAGPJHC 282
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Van der Merwe v Empedocles NO and Others (33977/2020) [2020] ZAGPJHC 282 (9 November 2020)
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REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
Case
no: 33977/2020
In
the matter between:
RUDI
VAN DER
MERWE Applicant
(ID
Number: […])
And
JULIAN
PETER EMPEDOCLES
N.O.
First
Respondent
(In
his capacity as Provisional Liquidator
of
Bio Schnell (Pty) Ltd (Reg No: 1969/009053/07)
MALEBO
RIAN ELIAS MOLOTO N.O.
Second
Respondent
(In
his capacity as Provisional Liquidator
of
Bio Schnell (Pty) Ltd (Reg No: 1969/009053/07)
MASTER
OF THE HIGH COURT, JOHANNESBURG Third
Respondent
JUDGMENT
MAIER-FRAWLEY
J:
Introduction
[1]
This matter came before me in the urgent court. Although the first
and second respondents raised an objection in their answering
affidavit to the matter being enrolled by way of urgency, the
objection was not pursued at the hearing of the matter on 5 November
2020. One of the grounds of urgency was,
inter alia,
that the
company sought to be compulsorily wound-up in these proceedings had
disposed of its assets to another entity, Cotect Industrial
Paints
CC, (‘Cotect’), both entities having been represented at
the time by one, Mr De la Rey (‘De La Rey’)
and that the
applicant had obtained reliable information that Cotect (controlled
by De La Rey) is presently taking active steps
to sell of all its
assets and that Mr De La Rey’s intended emigration to Australia
is likely imminent. I was satisfied that
the matter was urgent and I
enrolled it as such.
[2]
On 2 July 2020, De La Rey, a director of Bio Schnell (Pty) Ltd (‘the
company’), passed a special resolution that
the company be
placed under a creditors’ voluntary winding-up in terms of s
349, read with s 351(1), of the Companies Act
61 of 1973 (‘the
Act’). The special resolution was duly registered on 8 July
2020.
[3]
Pursuant thereto, on 6 August 2020, the first and second respondents
were appointed as the joint provisional liquidators in
the voluntary
winding-up of the company.
[4]
On 26 October 2020 the applicant, a creditor of the company, launched
an urgent application in terms of s 246(1)(e) of the Act,
seeking an
order that (i) the company be compulsorily wound up on grounds that
it was unable to pay its debts and was also both
factually and
commercially insolvent and (ii) that the special resolution
previously placing the company into voluntary liquidation
be set
aside, including the appointment of the first and second respondents
as provisional liquidators in the voluntary liquidation
process, as
envisaged in s 354 of the Act.
Background
facts
[5]
During September 2018, the applicant learnt that De La Rey had
unlawfully attempted to dispose of the applicant’s 10%
shareholding in the company to a third party without the applicant’s
knowledge or consent. Upon learning of this, the applicant
launched
an application in this court against the company under case number
18/45358 for the production of company records, as
envisaged in s
24(3)(b) of the Act, which relief was aimed at safeguarding his
interests as a registered shareholder of the company.
The
application, which was opposed, became settled between the parties,
inter alia,
on the basis that the company pay the applicant’s
taxed costs on a scale as between party and party. A bill of fees and
disbursements
was taxed by the Taxing Master on 25 May 2020 in the
amount of R107 272.66.
[6]
The amount remained unpaid, prompting the applicant to have a warrant
of execution issued for purposes of attaching the movable
property of
the company.
[7]
On 23 June 2020, the Sheriff proceeded to execute the warrant by
attending at the business premises of the company and demanding
payment of the sum of R107 272.66. The Sheriff’s return of
service filed of record indicates that De La Rey informed the
Sheriff
that the company was unable to pay the debt, either in part or in
full, however, certain movable assets of the company
were attached
having an estimated value in excess of the value of the company’s
indebtedness to the applicant. Pursuant to
such attachment, Cotect
(represented by De La Rey), laid claim to ownership of the attached
assets on the basis that same had been
purchased by it in March 2020
from the company (also represented by De La Rey) for the sum of
R500 000.00. Interpleader proceedings
were thereupon instituted
by the Sherriff and affidavits were filed by the relevant parties.
The proceedings were opposed. The
interpleader action was heard on 20
August 2020 in this court. In the absence of appearance on behalf of
Cotect or the company,
the court dismissed Cotect’s claim and
ordered it to pay the applicant’s costs. Interestingly,
the self-same
De La Rey was at all relevant and material times the
sole member of Cotect and in control of its business. It is not in
dispute
that Cotect then conducted and still conducts the same
business as that of the company (presently in voluntary liquidation).
When
the attorneys representing the company withdrew from
representing it on 7 August 2020, they notified the applicant that
the company
had ‘applied for liquidation’.
[8]
The applicant thereupon instructed his attorneys of record to obtain
confirmation of the status of the company. Various steps
were taken
by the attorneys, including,
inter alia
, addressing
correspondence to the Master’s office, which went unanswered
during the national lockdown period. Eventually
the applicant’s
attorney enlisted the help of a specific professional liquidator to
make enquires as to the status of the
company through the latter’s
own professional contacts.
[9]
Through the said liquidator’s endeavours, on 2 October 2020,
the applicant obtained confirmation from documentation obtained
from
the Master’s office that the first and second respondents were
appointed as provisional liquidators on 6 August 2020
in the
voluntary winding-up of the company. On 19 October 2020, confirmation
was obtained from the CIPC that a special resolution
for the
voluntary liquidation of the company had been registered on 8 July
2020. On 23 October 2020, the applicant obtained copies
of the
certificates of appointment of the first and second respondents, the
CM 100 and the relevant resolution, from which it was
noted that the
company had been placed in voluntary liquidation by way of special
resolution in terms of ss 349 and 151 of the
Act, on 7 July 2020. The
statement of affairs that was lodged by the company recorded
unsecured creditors in a globular amount
exceeding R2 million,
preferent creditors in an undisclosed amount and that the company
possessed no assets whatsoever.
[10]
It is apparent from a reading of the papers that De La Rey had,
during March 2020, sold assets belonging to the company to
Cotect at
a time when he well knew that the applicant had been pursuing his
rights as shareholder of the company. He had also filed
a special
resolution to place the company in voluntary liquidation on 2 July
2020, at the time, well knowing that the applicant
had an unpaid
claim, as creditor, against the company in respect of the applicant’s
unpaid taxed bill of costs, yet De La
Rey failed to include the
applicant’s claim in the statement of affairs that was lodged.
It is clear from what is contained
in the statement of affairs that
the company is indeed factually insolvent in that its liabilities
(more than R2 Million) far exceed
its assets (nil).
[11]
The plot thickens, in that the applicant also managed to obtain
copies of letters that had been sent by De La Rey to all previous
customers of the company during February and March 2020. In one such
letter, dated 28 February 2020, De La Rey informed company’s
clients that the company was ‘closing due to insolvency’,
and that it had ‘applied for liquidation’. In
another
letter, dated 7 March 2020, De La Rey informed clients of the company
that ‘all invoicing should in future be done
through Cotect and
that payments should in future be made to Cotect’. It is not in
dispute on the papers that Cotect was
selling products that had been
manufactured by the company in the course of its business. The stage
was being set
[1]
for a diversion
of the company’s business to Cotect, a disposition of the
company’s assets to Cotect and a voluntary
winding-up of the
company (which eventuated in July 2020). The inference is inescapable
that all this was meticulously planned,
possibly so, to frustrate the
applicant’s rights as shareholder.
[12]
On 19 October 2020, the applicant discovered that De La Rey was
engaging in negotiations for the sale of the business of Cotect,
which, as irony would have it, happened to be pursued with the
applicant’s present employer, who not only informed the
applicant
thereof but also informed the applicant of the fact that De
La Rey had expressed his intention to emigrate to Australia as soon
as Cotect was sold.
[13]
Lastly, it is not in dispute that the company no longer conducts
business, and as such, has no employees. It also has no assets
as
indicated in the statement of affairs.
Evaluation
[14]
It is common cause between the parties on the papers that the company
should indeed be placed in compulsory liquidation and
that an
application be made to the Master in due course for a section 417 and
418 enquiry be conducted,
inter alia
, to: (i) establish what
led to the liquidation of the company; (ii) the actuality and extent
of possible wrongdoing on the part
of De La Rey in the management and
conduct of the affairs of the company; and (iii) whether an
impeachable disposition of assets
has taken place.
[15]
It is trite that section 417 does not apply in voluntary windings-up.
See:
Michelin Tyre Company (South Africa) (Pty) Ltd v Janse Van
Rensburg and others
(198/2001)
[2002] ZASCA 55.
[16]
The parties agreed that a compulsory winding-up order should be made
in respect of the company being voluntarily wound up,
as envisaged in
section 346(1)(e) of the Companies Act, given the state of the
demonstrated factual and/or commercial insolvency
of the company.
They are also of the same mind that the facts and circumstances
pertaining to De La Rey’s conduct, referred
to earlier, warrant
the conduct of a section 417 or 418 enquiry.
[17]
The parties however differ as regards the ambit of the relief sought
in terms of section 346(1)(e) of the Act and how the resultant
compulsory liquidation process is to be managed. The dispute may be
elucidated in reference to the opposing contentions advanced
on
behalf of the parties:
Applicant’s
case
[18]
The applicant seeks an order in terms of s 354 of the Act for the
setting aside of the voluntary winding-up of the company.
It is the
Applicant’s wish for the compulsory winding-up process to start
afresh, given that the voluntary winding-up proceedings
have been
tainted with the brush of deceit and duplicity of De La Rey,
evidenced by his calculated conduct in failing to disclose
the
existence of applicant’s claim in the voluntary liquidation
process, including his failure to disclose the duplicitous
sale of
company assets to Cotect, or indeed his membership in Cotect, to the
appointed liquidators and other stakeholders. Since
the present
liquidators were nominated by De La Rey (as well as by juristic
entities that are either under his control or with
which he is
associated) for appointment as provisional liquidators in the
voluntary liquidation process, they are thus perceived
by the
applicant to lack impartiality or to have been manipulated by De La
Rey.
[19]
The applicant’s counsel submitted that in terms of section 368
of the Act, in the normal course, a provisional liquidator
holds
office until the appointment of a final liquidator. However, where
the court is requested to exercise its discretion in making
an order
in terms of section 354 of the Act, if satisfied that the voluntary
winding-up proceedings should be discontinued or terminated
by way of
an order setting same aside, then once such an order is given, the
voluntary winding-up is terminated, resulting
ex
eo
in
the termination of the appointment of the liquidators. Reliance for
such proposition was placed on what is stated in Henoschsberg,
[2]
namely, that ‘
once
appointed, a provisional liquidator continues to hold office until a
liquidator is appointed or the winding-up terminates
.’
The applicant further submits that section 346(1)(
e
)
of the Act, which makes provision for a creditor’s winding-up
by order of court, is to be read with s 344 of the Act, which
section
enumerates various grounds of insolvency, one or the other of which
are required to be established in such an application.
[20]
The applicant submits that the only provision contained in the Act
for the discontinuance of voluntary winding-up proceedings
is that
contained in section 354 of the Act, which provides for the
termination of winding-up proceedings by an order of court
setting
same aside. Thus, once an order is given in terms of section 354 of
the Act, the voluntary winding-up terminates. If an
order is
thereafter given in terms of section 346(1)(
e
) of the Act, the
company is placed under compulsory winding-up in which event, so the
argument developed, section 368 of the Act
should again be applied
whereby the Master is tasked with appointing a suitable person as a
provisional liquidator to hold office
until the appointment of a
liquidator. The applicant submits that there is no provision in the
Act that expressly deals with a
conversion
of a voluntary
winding-up into a compulsory winding-up by order of court, nor do any
of the common law authorities, which make mention
of such
terminology, indicate how such a ‘
conversion’
is
to take place or what process will apply to such conversion.
[21]
The applicant’s case is essentially centred on the need for an
enquiry to be conducted in terms of ss 417 and 418 of
the Act.
First
and Second Respondents’ case
[22]
On behalf of the present liquidators, it was argued that the SCA and
lower courts have recognised the concept of a conversion
of a
voluntary liquidation into a compulsory liquidation under the
framework of section 346(1)(
e
)
of the Act. The liquidators oppose their removal by means of a
setting aside of their appointment, as sought by the Applicant,
contending that the applicant has not relied on, nor has he
established any irregularity committed by them in the execution of
their duties, nor any impropriety on their part on such as collusion
between De La Rey and themselves. They do, however, support
a
conversion from a voluntary liquidation into a compulsory
liquidation. The respondents submit that the date of the liquidation
is, in terms of s 352 of the Act, the date on which the special
resolution was registered. Reliance was placed on the provisions
of
section 388 of the Act
[3]
for
the proposition that the court may determine any question arising in
the voluntary winding-up of a company upon application
to it by the
liquidator or any member or creditor.
[23]
The first and second respondents submit that it would be just and
beneficial for the voluntary winding-up to be converted into
a
compulsory winding-up and to allow the liquidation process to
continue thereafter without having to start the process afresh
and,
given that there are currently duly appointed provisional
liquidators, if the voluntary winding-up is not set aside ie
terminated
by order of court, their appointment will continue.
It was submitted during oral argument presented at the hearing that
the
second meeting of creditors has been advertised in the Government
Gazette to be held on 11 November 2020 and at which meeting, the
creditors of the company, including the applicant, whose claim the
respondents will recognise, will all have the opportunity to
nominate
the Liquidator/s. In any event, so the argument developed, the
applicant could avail himself of the right in terms of
s 374 of the
Act to approach the Master for appointment of a third liquidator, as
nominated by the Applicant. It was further argued
that the urgency of
the matter (urgency having been recognised by the court) and the need
to conduct a section 417 enquiry, that
is, before Mr De La Rey has
the opportunity to leave the country, dictates that the whole process
should advance without delays
associated with having to start afresh.
[24]
Ultimately, so it was contended, the compulsory liquidation can
proceed without setting aside the voluntary liquidation or
removing
the current provisional liquidators from office. Upon conversion, the
process of compulsory liquidation can commence at
full tilt so that
(final) liquidator/s may be appointed.
Relevant
Jurisprudence
[25]
Before evaluating the opposing contentions of the parties, it is
apposite, at this juncture, to set out how courts have approached
the
debated issue of a conversion from voluntary liquidation to
compulsory liquidation. It has regrettably not been possible, in
the
short time in which I have had to prepare this judgment, to conduct
extensive research on the subject.
[26]
In the
Michelin Tyre Company
supra
, at par 4, the
following was said:
“
T
here
are at least two ways of procuring a s 417 enquiry even in a
voluntary winding-up. The
first
is to convert the winding-up into a winding-up by the court under s
346(1)(e)
;
and the other is an application to court under s 388 for leave to
convene an enquiry.” (own emphasis)
[27]
In
Corigrain Trading SA v Resora (Pty) Ltd
2004 (2) SA 348
(W),
the court recognised relief in the form of a conversion of a
voluntary winding up into a winding-up by the court pursuant
to s
346(1)(
e
)
of the Act. In that case, the applicant had applied in a Local
Division for a voluntary winding-up in terms of ss 349 and 351
of the
Companies Act 61 of 1973 to be converted into a winding-up by the
Court pursuant to s 346(1)
(e)
of the Act. The founding affidavit stated that the respondent was
indebted to the applicant for the sum of R18 755.02, being the
taxed
costs of an order obtained against the respondent in March 2002, and
for a sum of money plus interest arising from a judgment
awarded in
favour of the applicant in the Cape Provincial Division in April
2003. It was alleged that the respondent was unable
to pay the debts.
On 13 March 2003 an attempted execution of the writ of execution
issued pursuant to the costs order and taxed
bill concerned was
unsuccessful in effecting any payment at all. The address at which
service of the writ occurred was the place
of business of the
respondent.
In para 4 of the judgment, the
following was said:
“
Much of
the debate before me concerned whether the applicant was entitled to
bring the present proceedings in terms of s 346(1)
(e)
,
or whether it ought, in terms of s 388, to have applied to Court for
a determination that the respondent is unable to pay its
debts and
may accordingly be dealt with in terms of such provisions as s 417.
It seems to me that there was no reason why the applicant
could not
choose the present route rather than that contended for by the
respondent.”
[28]
In
King Pie Holdings (Pty) Ltd v King Pie
(Pinetown) (Pty) Ltd; King Pie Holdings (Pty) Ltd v King Pie (Durban)
(Pty) Ltd
1998 (4) SA
1240
(D) under the heading: ‘
The
effect of s 354 of the Act’
,
the following was said:
“
The
section empowers the Court at any time after the commencement of a
winding-up to stay or set aside the proceedings in relation
to the
winding-up. Such an order may be made on the application of a
liquidator, creditor or member upon proof that such proceedings
'ought to be stayed or set aside'.
Plainly the
Court has a wide discretion to set aside winding-up proceedings.
But,
having held that the voluntary winding-up of a company is no bar to
the launching of an application for its compulsory winding-up,
I must
in logic hold that it is not necessary to have the voluntary
winding-up set aside before such an application can be launched.
Indeed, as I
have already pointed out, s 346(1)
(e)
of the Act
provides for the winding-up by the Court of a company 'being wound up
voluntarily'. This factor demonstrates that the
Legislature did not
contemplate that the voluntary winding-up must first be set aside in
terms of s 354 of the Act (for then,
ex hypothesi
,
the company would no longer be in a state of 'being wound up
voluntarily') before an application could be brought for its
winding-up
by the Court
.” (own emphasis)
[29]
Incidentally, what the applicant seeks in these proceedings, is
first
to set aside the voluntary winding-up under section 354 of the
Act (by setting aside the special resolution - upon registration of
which the voluntary winding-up had commenced - so that, on the
authority of Henochsberg
supra
, the appointment of the present
liquidators is thereby terminated, thus resulting in the very
situation mentioned in
King
whereby “
ex hypothesi,
the company would no longer be in a state of ‘being wound
up voluntarily,’ before the application for a winding-up order
by the court could be brought” as envisaged in section
346(1)(
e
) of the Act.
[30]
In the
King
case, a compulsory winding-up application had
already been brought by a creditor
prior
to the company being
placed in voluntary winding-up by registration of a special
resolution, some 4 months after presentation to
the court of the
application for the winding- up of the company by the court.
Thereafter, when the matter came before court, Mc
Call J gave an
order placing the company in provisional liquidation and issued a
rule nisi, calling on all interested parties to
show cause why the
voluntary liquidation should not be set aside and why the rule should
not be confirmed in respect of provisional
order for liquidation of
the company. The matter, which came before Magid J on the return
date, was opposed by the appointed provisional
liquidators. There
were thus two parallel processes at play, which was not optimal. A
decision had to be made to discontinue
one or the other. The court
stated that, p
lainly, it had a wide discretion
to set aside winding-up proceedings. In considering the matter, Magid
J stated:
“
As I have
already indicated, the voluntary winding-up of each company commenced
on 1 June 1998. On the other hand, if a winding-up
order is granted
by the Court, the winding-up commences, in terms of s 348 of the Act,
at the time of the presentation to the Court
of the application for
the winding-up - in this case on 19 February 1998.
In his
affidavits, the provisional liquidator said that his investigations
had revealed no apparent impropriety in the administration
of the
affairs of the respondents. But, when it is borne in mind that his
affidavits were dated barely a month after his appointment,
I do not
consider that great weight can be attached to his rather tentative
statement ('it does not appear' etc). Moreover, the
additional period
applicable to the winding-up by the Court can only enure to the
benefit of the creditors of the respondents if
it is ascertained that
anything untoward has occurred in the management of the respondents.
For this reason
I considered that it was in the interests of creditors that the
creditors' voluntary winding-up of each company
be set aside and that
the provisional winding-up order granted by McCall J be confirmed
.”
[31]
The
King
case was decided within a different factual context
to that which applies in the present matter. There, the voluntary
liquidation
occurred
after
the application for the winding-up
of the companies had been presented to the court. In the present
matter, the voluntary winding-up
occurred
before
the
application for winding-up by the court was brought. The court in
King
exercised its discretion in favour of setting aside the
voluntary winding-up, because it was considered to be in the
interests of
creditors, least of all, so that it could be ascertained
if anything untoward had occurred in the management of the companies.
[32]
King’s case is not authority for the proposition advanced by
the applicant, namely, that the proper approach is for this
court to
first of all
set aside the voluntary winding-up in terms of
section 354 (if of course it is satisfied that such a course is
warranted) and thereafter,
in terms of section 346(1)(e), to order
the winding-up of the company.
[33]
In
Furniture Bargaining Council v AXZS Industries (Pty) Ltd
Trading as Don Elly Enterprises
2020 (2) SA 215
GJ, Levenberg AJ
considered the differences between a creditors’ voluntary
winding-up and a winding-up by the court under
the old Companies Act.
There too, a voluntary winding-up had occurred
after
the
applicant had brought an application for the winding up of the
company by the court.
[34]
At paras 36 & 37 of the judgment, the following was said:
“
T
here
is a fundamental and important difference between the effect of a
creditors voluntary winding-up and a winding-up by the Court.
Liquidators and creditors cannot apply for the appointment of a
Commissioner to conduct an enquiry under sections 417 or 418 of
the
Old Companies in the case of a voluntary creditors winding-up.
In
the case of a creditor’s voluntary winding-up an enquiry can
only be convened after making application to court under section
388
of the Old Companies Act or
converting
the winding-up into a winding-up by the court under
section 346(1)(e).
”
[citing
Michelin
Tyre
as authority]
In
the present case, where there is good reason to suspect wrongdoing,
the inability of the liquidator or creditors to follow the
streamlined enquiry procedure set out in sections 417 and 418 of the
Companies Act is a matter of serious concern. The inference
is
inescapable that the shareholders chose to voluntarily wind the
company up in order to avoid an enquiry. The timing of the voluntary
winding-up and the background facts of this case suggest that there
has been an abuse of process by the Respondent and its officers
.”
[35]
The court reasoned as follows in paras 48 & 49, of which I quote
only the relevant portions:
“…
if this Court grants a
winding-up order at this stage, this winding-up will be deemed to
have commenced when the winding-up application
commenced, being 29
October 2018
This means that, if a liquidation
order is granted by this Court in this application, the voluntary
winding-up must be deemed to
have commenced
after
the date of commencement of the compulsory winding-up proceeding.
The
effect of the granting of a winding-up order would therefore be to
invalidate and void (albeit retrospectively) the voluntary
winding-up
.”
(own emphasis)
[36]
The court went on to say, in par 51 of the judgment, that “
if
the legislature intended that a supervening voluntary winding-up
would have the effect of superseding a pending compulsory liquidation
proceeding, the legislature would have said so expressly.”
[37]
It should be noted that in the present matter, a supervening
winding-by of the company by the court is being sought
after
a voluntary winding up has commenced. Guidance on what procedure may
be employed in such a situation, may be found in
Afrisam
(SA) (Pty) Ltd v Maleth Investment Fund (Pty) Ltd
(651/2018)
[2019]
ZASCA 139
(01 October 2019) (
Afrisam
)
There, the SCA held that an
intervening
voluntary winding-up does not extinguish a pending application for
compulsory winding-up and where compulsory winding-up
supersedes
[4]
the pending voluntary winding-up, the provisions of s 340(2)
(a)
of
the Companies Act 71 of 1973 apply.
[38]
In
Afrisam
,
an
application for compulsory winding-up was brought but, before any
order was granted, the company was placed in voluntary winding-up.
That continued for some eighteen months after which the company was
compulsorily wound-up in terms of the original application.
On 4
December 2015 the Gauteng Division of the High Court, Johannesburg
(per Windell J) granted a court order that a company, Cemlock
Cement
(Pty) Ltd (Cemlock), be finally wound up ‘with effect from 31
October 2013’. Cemlock’s winding-up started
on 31 October
2013 when Maleth, a creditor of Cemlock, presented an application
before the High Court, seeking an order that Cemlock
be wound up as
it was unable to pay its debts. Cemlock opposed the winding-up
application. In January 2014, Cemlock withdrew its
opposition to its
compulsory winding-up. Cemlock’s sole shareholder was Scarab
Investment Holdings (Pty) Ltd (Scarab). On
12 March 2014, Scarab
passed a special resolution that Cemlock be placed under a creditors’
voluntary winding-up in terms
of
s
349
,
read
with s 351(1), of the Companies Act 61 of 1973. The resolution was
registered with the Companies and Intellectual Property
Commission
(CIPC) on the same day, thus placing Cemlock under voluntary
winding-up in terms of s 349 of the Act.
[39]
About a year later, on 18 March 2015, Maleth filed what it termed a
‘conversion application’ in which it sought
to have the
voluntary winding-up converted to a compulsory winding-up which would
be effective from 31 October 2013, the date on
which it had presented
its original winding-up application. The conversion application
sought to rekindle the original winding-up
application launched by
Maleth, and, at the same time, convert the voluntary winding-up into
a revived compulsory winding-up. Although
in the conversion affidavit
Maleth asserted that the pending voluntary winding-up should be set
aside, no order to that effect
was sought in the conversion notice of
motion. It is this conversion application that led to the December
2015 order by Windell
J.
[40]
As regards the replacement of a voluntary winding-up with a
compulsory winding-up, Dambuza AJ, writing for a wholly concurring
bench, stated as follows:
“
[21]
As
is evident from
s
340(2)
(a)
,
[5]
the Act envisages replacement of a voluntary winding-up with a
compulsory winding-up
.
That
section then provides, in terms, that where a compulsory winding-up
order replaces a voluntary winding-up, the deemed date
of
commencement shall be the date of registration of the special
resolution for the winding-up as provided in s 200 of the Act,
rather
than the date of presentation of the application for compulsory
winding-up
.
This means that the six month period for impeachable transactions
will be determined with reference to the date of registration
of the
special resolution to wind up the company, rather than the date of
presentation of the winding-up application.
[22]
Other sections in the Act that envisage the replacement of a
voluntary winding-up by a compulsory winding-up court order includes
346(1)
(e)
of the Act
, which expressly
provides as follows in regulating who may apply to court for a
winding-up order:
‘
(1)
An application to the Court for the winding-up of a company may,
subject to the provisions of this section, be made-
(a)
by the company;
(b)
…
(e)
In
the case of any company being wound up voluntarily
, by the Master
or any creditor or member of that company…’ (Emphasis
supplied).
[23]
Also, in terms of s 347(4)
(a)
of the Act
:
‘
Where
the application is presented to the Court by –
(a)
any applicant under section 346(1)(e),
the
Court may in the winding-up order or by any subsequent order confirm
all or any of the proceedings in the voluntary winding-up
.’
[24]
The facts in this case fit squarely within the provisions of the Act
referred to above, particularly s 340(2)
(a)
.
The December
2015 winding-up order superseded the voluntary winding-up that had
commenced in March 2014
. It follows, therefore, that in terms of
s 340(2)
(a)
the effective date of Cemlock’s winding-up
was the date of registration of the special resolution, i.e 12 March
2014 and not
31 October 2013.
[25]
… it is appropriate to deal with a submission by the appellant
that a compulsory winding-up order cannot be obtained
unless the
voluntary winding-up has been set aside. In
King Pie Holdings
(Pty) Ltd v King Pie (Pinetown) (Pty) Ltd; King Pie Holdings (Pty)
Ltd v King Pie Durban (Pty) Ltd
the court was confronted with
similar issues, except that, unlike in this case, a provisional
winding-up order had been granted
in the compulsory winding-up
proceedings. The applicant had launched court proceedings for the
winding-up of each of the two respondents
and had obtained a
provisional winding-up order in respect of each of them. Each of the
respondents subsequently passed a special
resolution for its
voluntary winding-up. On the return date, the court had to decide:
(i) whether section 359(1)
(a)
of the Act had the effect of
suspending the applications for compulsory winding-up of the
respondents from the date of commencement
of the voluntary
winding-up; (ii) whether it was necessary before proceeding with the
applications for compulsory winding-up, to
stay or set aside the
voluntary winding-up; (iii) whether a compulsory winding-up order
ought to replace the voluntary winding-up;
and (iv) what order for
costs would be appropriate in the circumstances.
[26]
Although the provisions of s 354 are not central to the issues in
this appeal, certain findings made by the court in
King Pie
are
relevant.
Section 354 of the Act provides
that:
‘
(1)
The Court may at any time after the commencement of a winding-up, on
the application of any liquidator, creditor or member,
and
on
proof to the satisfaction of the court that all proceedings in
relation to the winding-up ought to be stayed or set aside, make
an
order staying or setting aside the proceedings or for the continuance
of any voluntary winding-up on such terms and conditions
as the Court
may deem fit
.
(2)
The Court may, as to all matters relating to a winding-up, have
regard to the wishes of the creditors or members as proved to
it by
any sufficient evidence.’
[27]
In
King Pie
, the Court held that a voluntary winding-up of a
company was no bar to the launching of an application for its
compulsory winding-up.
That application for winding- up did not
constitute ‘civil proceedings’ as envisaged in s 354, and
therefore no stay
of the voluntary winding-up process was
consequential therefrom. The court also held that it had a wide
discretion to set aside
the pending voluntary winding-up process; but
it was not necessary to have the voluntary winding-up set aside
before an application
for compulsory winding-up could be launched.
However, on the facts before it, the Court found that it was in the
interests of the
creditors that the voluntary winding-up of each
company be set aside and that the provisional winding-up order be
confirmed.
[28]
The decision of the court in
King Pie
is
consistent with the provisions of the Act, which allude to the
granting of a winding-up court order in the context of a pending
voluntary winding-up
. The wide discretion which the court has
when considering that application was described in
Ward &
another v Smit & others: In re Gurr v Zambia Airways Corporation
Ltd
as follows:
‘
The
language of the section is wide enough to afford the Court a
discretion to set aside a winding- up order both on the basis that
it
ought not to have been granted at all and on the basis that it falls
to be set aside by reason of subsequent events.’
As
shown above, the wide discretion of a court when considering an
application for winding- up is specifically given under s 347(4)
(a)
,
that the court ‘
may
in the winding-up order or by a
subsequent order confirm all or any of the proceedings in the
voluntary winding-up.’ (Emphasis
supplied)
[29]
Were it necessary for the voluntary winding-up to be set aside
before granting an order of compulsory winding-up, confirmation of
the proceedings under the voluntary winding-up would be an anomaly
.
The setting aside of Cemlock’s voluntary winding-up was
therefore not necessary
. Those proceedings could be set aside if
the court, in the exercise of its discretion, found that it was
necessary to do so.
[30]
Further, there is no indication in the Act that the voluntary
winding-up process extinguishes pending compulsory winding-up
proceedings, such as the court applications that were pending against
Cemlock in March 2014. There can be no basis for an applicant,
who
opts not to proceed for the time being with their application for
compulsory winding-up pending a parallel winding-up process,
to be
divested of its application of their rights under that application.
That is why, when a provisional winding-up order has
been granted by
the court, a creditor who believes that the provisional winding-up
order may not be confirmed, may on the return
day, seek leave to
intervene in the winding-up proceedings. Also, if the applicant seeks
to discharge the provisional winding-up
order, an intervening
creditor may be granted an extension of the rule to enable them to
bring his own winding-up application.
[31]
However, once it is accepted that the determination of the date that
for the purposes of setting aside dispositions is equivalent
to the
date of sequestration under is resolved in terms of s 340(2)
(a)
of the Act, the
contention by Afrisam that Maleth withdrew, abandoned or waived its
rights under the original application becomes
irrelevant. Afrisam
correctly did not persist with this submission.
Even
if the conversion application were to be considered to be a new
application for winding-up
as Afrisam insisted,
in
terms of s 340(2)
(a)
,
the commencement date for the winding-up remained the date of
registration of the voluntary winding-up resolution
.
” [footnotes omitted] (own emphasis)
[41]
Although the applicant’s notice of motion does not expressly
state that relief is being sought by him in terms of s 354
of the
Act, it is clear from the founding affidavit that the applicant seeks
the setting aside of the voluntary liquidation and
the termination of
all steps thus far taken thereunder, including the appointment of the
first and second respondents as provisional
liquidators. The
applicant has demonstrated that a first meeting of creditors has not
yet been held in the voluntary liquidation,
but has been advertised
to take place on the 11
th
November 2020. The relevant
advertisement in the Government Gazette expressly stipulates that on
that date, a first meeting of
creditors will be held,
inter alia,
for purposes of proof of claims against the company and the
nomination of liquidators for the purposes referred to in ss 364 or
461 of the Act. Nothing turns on the fact that a first meeting of
creditors, previously advertised to take place on 28 October 2020,
was postponed on that day.
[42]
The applicant’s suspicions concerning the potential lack of
objectivity or impartiality on the part of the appointed
provisional
liquidators (first and second respondents), given that one or both of
them were nominated for appointment by De la
Rey himself (acting on
behalf of the company or on behalf of different creditors) remain
speculative in the absence of primary
facts to justify the inference
sought to be drawn.
[6]
There is
no evidence to suggest that the appointed liquidators were privy to
manipulation by De La Rey or that they have unknowingly
been
influenced by him or that they will, in future, be biased in his
favour.
[43]
It is undisputed on the papers that the present provisional
liquidators had no knowledge, prior to the launch of the present
application, of the apparent underhanded conduct of De La Rey. Having
now been alerted thereto, they expressed their support for
an
interrogation process to be conducted in terms of ss 417 and 418 of
the Act, upon application to the Master for the institution
of the
relevant enquiries. Given that: (i) there is no evidence that the
appointed provisional liquidators have committed any irregularity
or
impropriety in the conduct of their duties, save that the applicant
holds the subjective opinion that they have been somewhat
slow-paced
in executing their duties, and (ii) the applicant, together with all
other creditors of the company, will have the opportunity
to vote on
the appointment of a Liquidator/s at the scheduled meeting of
creditors and (iii) the urgency inherent in the continuation
of the
liquidation process, including the urgent need for an enquiry to be
held in terms of ss 417 and 418 of the Act, I am not
satisfied that
it is competent in law or necessary on the facts or law, for the
voluntary liquidation proceedings to first be set
aside before
granting a final winding-up order. The final liquidation order to be
granted by this court will have the effect of
replacing the voluntary
liquidation of the company, and the process currently underway stands
to be confirmed by the order which
I propose making in the matter.
[44]
I am satisfied that a case for the winding-up of the company has
properly been made out on the papers. Although the first respondent
faintly took the point in the answering affidavit that proper service
of the application had not been effected on the second respondent,
the point was not pursued at the hearing of the matter, given that
the second respondent had indeed received notice of these proceedings
and that both first and second respondents are being represented by
the same attorneys in this matter. It stands to reason that
the
attorneys would have consulted with both the first and second
respondents for purposes of filing the answering affidavit. I
am also
satisfied that the applicant has complied with the necessary
statutory formalities set out in ss 346(3); 246(4A)a of the
Act.
[7]
[45]
Both parties are in agreement that the date of the commencement of
the winding-up of the company should be deemed
to
be the date of registration of the special resolution for the
winding-up as provided in s 200 of the Act, rather than the date
of
presentation of the application for compulsory winding-up. That is
indeed the correct date, as indicated in
Afrisam,
supra.
[46]
Both parties submitted that it would be appropriate to grant an order
that the costs of the application are to be costs in
the winding-up
of the company. I agree.
[47]
In the result, the following order is granted:
1.
The matter is
urgent.
2.
Bio Schnell (Pty)
Ltd (Registration No.:1969/009053/07) (‘the company’) is
hereby placed under final winding-up in the
hands of the Master of
this court.
3.
The proceedings thus
far conducted in the voluntary winding-up of the company are hereby
confirmed, including the appointment of
the first and second
respondents as joint liquidators.
4.
The commencement
date for the winding-up will be the date of registration of the
voluntary winding-up resolution, namely, 8 July
2020.
5.
The costs of the
application are to be costs in the winding-up of the company.
_____________________________
A
MAIER-FRAWLEY
Judge
of the High Court
Gauteng
Division, Johannesburg
Date
of hearing:
5 November
2020
Date
of Judgment:
9 November 2020
For
the Applicant:
Adv
MA Kruger
Instructed
by Scholtz Attorneys
For
the First and Second Respondents:
Mr
MJ Kapp
Instructed
by Kapp Attorneys Inc
[1]
Meaning
that conditions were being made right for something to happen.
[2]
Extract from Lexisnexus online publication of
Henochsberg
on the
Companies Act, 71 of 2008
authored by Proffessor Piet
Delport, in the commentary on s 368 of the Companies Act, 61 of
1973, under Appendix 1, Part 1, ’Chapter
XIV of the 1973 Act
and Commentary’.
[3]
Section
388 stipulates as follows:
“
Court
may determine questions in voluntary winding-up.
-(1) Where a
company is being wound up voluntarily, the liquidator or any member
or creditor or contributory of the company may
apply to the Court to
determine any question arising in the winding-up or to exercise any
of the powers which the Court might
exercise if the company were
being wound up by the Court. (2) The Court may, if satisfied that
the determination of any such
question or the exercise of any such
power will be just and beneficial, accede wholly or partly to the
application on such terms
and conditions as it may determine, or
make such other order on the application as it thinks fit.”
[4]
i.e.,
succeeds
or replaces or takes the place of.
[5]
Section 340 of the Act regulates the impeachment of dispositions
made by a company prior to its winding-up. The section
provides
that:
‘
(1)
Every disposition by a company of its property which, if made by an
individual, could, for any reason, be set aside in the
event of his
insolvency, may, if made by a company, be set aside in the event of
the company being wound up and unable to pay
all its debts, and the
provisions of the law relating to insolvency shall
mutatis
mutandis
be applied to any such disposition.
(2)
For the purpose of this section the event which shall be deemed to
correspond with the sequestration order in the case of
an individual
shall be-
(a)
in the case of a winding-up by the Court, the presentation of the
application,
unless that winding-up has superseded a
voluntary winding-up, when it shall be the registration in terms of
section 200 of the
special resolution to wind up the company
;
(b)
in the case of a voluntary winding-up, the registration in terms of
section 200 of the special resolution to wind up the company;
(c)
. . .’ (Emphasis supplied)
[6]
See:
Dros
(Pty) Limited v Telefon Beverages CC
1 All SA 164
(C), para [28], where the following was said:
“
It
is trite law that the affidavits in motion proceedings serve to
define not only the issues between the parties, but also to
place
the essential evidence before the court (See:
Swissborough
Diamond Mines (Pty) Ltd & Others v Government of the Republic of
South Africa & Others
1999 (2) SA 279
(W) at 323G) for the
benefit of not only the court, but also the parties. The affidavits
in motion proceedings must contain factual
averments that are
sufficient to support the cause of action on which the relief that
is being sought is based. Facts may either
be primary or secondary.
Primary facts are those capable of being used for the drawing of
inferences as to the existence or non-existence
of other facts. Such
further facts, in relation to primary facts, are called secondary
facts (See:
Willcox & Others v Commissioner of Inland Revenue
1960(4) SA 599 (A) at 602A;
Reynolds N.O. v Mecklenberg (Pty) Ltd
1996(1) SA 75 (W) at 78I).
Secondary facts, in the absence of the
primary facts on which they are based, are nothing more than a
deponent's own conclusions
(See:
Radebe v Eastern Transvaal
Development Board
1988(2) SA 785 (A) at 793C-E) and accordingly
do not constitute evidential material capable of supporting a cause
of action.”
(emphasis supplied)
[7]
The
service affidavit filed of record records the steps taken by the
applicant to comply with the relevant statutory requirements,
including proof of compliance.