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[2022] ZAGPJHC 314
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Blue Bulls Company (Pty)Ltd vs Mega Burst Oils and Fuels (Pty)Ltd (2021/18739) [2022] ZAGPJHC 314 (21 April 2022)

IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE
NO
.:
2021/18739
REPORTABLE:
Not
OF
INTEREST TO OTHER JUDGES: Not
REVISED.
21
April 2022
In
the matter between:
BLUE
BULLS COMPANY (PTY) LTD
Applicant
(Registration
No.: 1997/021796/07)
And
MEGA
BURST OILS AND FUELS (PTY) LTD
Respondent
(Registration
No.: 2016/227522/07)
Delivery:
This judgment was handed down electronically by circulation to
the parties' legal representatives by email, and uploaded on
caselines
electronic platform. The date for hand-down is deemed to be
21 April 2022.
Summary:
Urgent rescission application of a final winding-up order.
Application of rescission of a winding-up order to be brought under
section
354 of the Companies Act. Rule 42 of the Uniform Rules of the
High Court, not applicable. The court has wide discretion under
section
354 of the Companies Act to grant or refuse a rescission
application. Factors to consider in determining the rescission
application
amongst others include the interest of the creditors and
the liquidators.
JUDGMENT
Molahlehi
J
[1]
This
is an urgent rescission application in which the applicant, MEGA
Burst Oils and Fuels (Pty) Ltd (in Liquidation), seeks an
order
rescinding the winding-up order made by this court 18 January 2022.
The application is brought in terms of section 354 of
the Companies
Act,
[1]
read with Item 9
Schedule 5 of the Companies Act,
[2]
and rule 42 (1) of the High Court Rules (the Rules). In the heads of
argument, the applicant relies also on section 23A (1) of
the
Superior Courts Act,
[3]
and
section 149 (2) of the Insolvency Act.
[4]
[2]
The issue that led to the winding-up
application concerns a debt over the payment of the leased property
at Loftus Versveld Stadium
in Pretoria. The applicant leased suites
at the stadium for use during internal events and matches staged at
the stadium.
[3]
In the main liquidation application, the
first respondent claimed that the applicant was indebted to it in the
sum of R158 303.26,
which arose from the non-compliance with the
terms of the lease agreement. The first respondent obtained the
winding-up order in
the absence of the applicant.
[4]
Following the winding-up order, the
third and fourth respondents, Mr Venter N.O and Ms Cronje N.O, were
appointed provisional joint
liquidators by the Minister. (the third
and fourth respondents are hereafter referred to as "liquidators").
[5]
After discovering that the winding-up
order was issued, the applicant engaged with the first respondent to
discuss the rescission
of the order. The outcome of the discussion
between the two was that the first respondent consented to the
rescission of the order,
the applicant having paid the amount of
R80,876.63, including costs in the sum of R29 467.51. Attempts at
reaching a similar agreement
with the liquidators were unsuccessful.
The parties could not agree on the fees to be paid to the
liquidators. In light of the
failure to reach an agreement on the
issue of the rescission of the order the liquidators advised the
applicant's attorneys of
record that:
"19.1
they shall continue with the
administration process until the determination of the
Rescission
Application;
19.2
they "urgently" require the completion of a CM 100 form and
the Questionnaire
"without any further delay."
19.3
they required details of
the assets of the applicant and whether they are being
utilised, and
secured;
19.4
In the event of not being
provided with the aforementioned information, "the
provisional
liquidators will have no alternative but to secure and/or remove all
estate's assets in an endeavour to preserve and
protect the assets to
fulfil their statutory duty."
[6]
The liquidators insisted that they would
proceed with the administration of the estate, pending the outcome of
the rescission application.
They took this stand on the basis that
the order was enforceable until set aside and that they were lawfully
appointed to administer
the estate. They contended further that the
rescission application did not suspend the operation of the
winding-up order.
[7]
The reasons for urgency are set out in
the founding affidavit in the following terms:
"15.1
the matter has become settled as
aforesaid;
15.2
the order should never
have been granted for the reasons set out for hearing under;
15.3
the first respondent has consented to
the rescission and setting aside thereof.
15.4
notwithstanding the
foregoing, the Third and Fourth Respondents are forging ahead
with
the Winding Up process, displaying an attitude which suggest that
they are embarking on an unnecessary and unjustified money–making

exercise. In this regard, having been appointed as Provisional
Liquidators in February 2022, they are demanding that their alleged

Administration Costs be paid. This includes payment of R56 000.00 in
respect of Security Bond which has been applied for, but not
paid for
yet. . ."
[8]
The deponent to the applicant's founding
affidavit alleges that he became aware of the winding-up order on 17
February 2022 and
immediately the following the day contacted the
applicant's attorneys of record about the matter. He then instructed
them on 21
February 2022 to proceed with the rescission application.
[9]
On 4 March 2022, the applicant received
an email from the First National Bank Business (FNB) informing them
that it had come to
their attention that the applicant was finally
liquidated. It also demanded immediate payment regarding the
Short-term Working
Capital Facility availed to the applicant, the
outstanding amount being the sum of R2 012 213.14. After that, and
following the
engagement between the parties, the first respondent
accepted the offer of settlement of R 80 876.63 and agreed to the
rescission
of the winding-up order.
[10]
It should be pointed out that at the
time of the hearing all the papers were before the court and the
issues raised were fully ventilated
during the hearing. I have
accordingly resolved that the matter should be entertained as urgent.
[11]
The
liquidators in opposing the application raised the following points
in
limine
:
(a)“The
locus
standi
of
the applicant to institute the application, the company being in
liquidation.
(b)The
deponent to the founding affidavit and the attorney did not have the
authority to institute the proceedings.
(c)
The matter is not urgent.”
[12]
In addition, the liquidators filed a
counter application to extend their powers to include the power as
envisaged in section 386
(4) (a) of the Act if the court found that
they did not have the power to oppose the application.
[13]
In my view, the liquidators derive their
authority in opposing this application from the reading section
386(1)(e) of the Act, whose
language is broad enough to incorporate
the power to oppose an application by the liquidators. Section 386
(1) reads as follows:
“
(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.
[14]
In
response to the
locus
standi
point
the applicant contends that it was entitled to institute the
rescission application on the authority of Praetor and Another
v Aqua
Earth.
[5]
In that case, the
court in dealing with a similar issue held that:
"[4]
The effect of
the winding-up order was to divest the first applicant
of his
functions as the company's director and to vest them instead in the
liquidator(s). That raises the question whether the
current
application by the company, ostensibly at the instance of Mr Praetor,
qua sole director, has been competently instituted.
It appears to be
generally accepted that a company's directors have what have been
described as 'residual powers' to act on the
company's behalf in
causing it to oppose the confirmation of the rule in a provisional
winding-up, or to appeal against a winding-
up order. . . It seems to
me that there is no rational basis to distinguish the standing of a
board of directors to appeal in the
company's name against a
winding-up order from its standing similarly to apply to set aside
such an order obtained without its
knowledge.” Indeed, in
Storti supra, loc. cit (Sorti v Nugent and Others
2001 (3) SA 783
(W))., it was stated that 'a company has the right to rescind ... a
winding-up order'. It is clear from the context that the learned

judge had in mind that the application to rescind would be mounted by
the company at the instance of its board, not its liquidators.
I am
willing to accept therefore that the second applicant has standing to
bring the rescission application, although it would
probably have
been correct in such circumstances to have cited it without the words
'in liquidation' after its name. Issues such
as security for costs
might arise in these circumstances, but they were not raised in the
current case."
[15]
In Attorney-General v Blumenthal the
court dealing also with the legal consequences of a company in
liquidation held that:
"All
the above show conclusively that on the granting of a compulsory
winding-up order, the powers, duties, remuneration, tenure
of office,
and any special contract of the director automatically cease. How
complete the ouster of the directors from their position
as such on
compulsory liquidation is, is borne out by what Gower says in his
Modern Company Law at p. 585: 'Perhaps the most important
rule of all
is the basic principle of company liquidation, namely that on winding
up the board of directors becomes
functus
officio
and
its powers are assumed by the liquidator. As we have seen, itis those
in control who have the power to cause harm, i.e.,
generally the
directors, or someone for whom they are nominees. Their removal is
therefore almost invariably an essential preliminary
to any remedial
action, and this removal automatically occurs on liquidation."
[16]
It seems to me that it can, on the above
authority, be accepted that in the circumstances the applicant had
authority to institute
these proceedings.
[17]
The issue of rescinding a winding-up
order is expressly provided for in section 354 (1) of the Act, which
provides as follows.
"(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."
[18]
In
interpreting section 354 (1) of the Act, the Supreme Court of Appeal
in
Ward
v Smit and 8 Others: In re Gurr v Zambia Corporation Ltd,
[6]
held
that the language of the section provides the court in considering an
application of this nature with a wide discretion to
set aside the
winding up order on either the ground that the order ought not to
have been granted or that the subsequent events
are such as to
dictate for a rescission.
[19]
In
Impac Prop CC v THF Construction,
[7]
the court held that the authorities are in agreement that an
application for rescission ought to be based on section 354 of the

Act and not the common law.
[20]
The
proposition by the applicant that a winding-up order can be rescinded
under rule 42 of the Rules was rejected in Ragavan and
Another v Karl
Mining Services SA (Pty) Ltd.
[8]
In that case, the court held that the legislated basis for rescinding
a winding-up order is found in section 354, and that includes
orders
that are alleged to have been erroneously made or granted. The court
further agreed with the respondent's counsel that failure
to bring
the application within the purview of the provisions of section 354
of the Act was fatal to the application.
[21]
In my view, the applicant's application
stands to fail even if all the technical points raised in this matter
were to be ignored.
[22]
It
is trite that the court has broad discretion to exercise in deciding
whether or not to rescind a winding-up order. Of course,
the
discretion has to be exercised, having regard to the surrounding
circumstances of each case. The principles to apply in this
regard
are set out in Klaas v Contract Interiors C. C. (in liquidation) and
Others,
[9]
as follows:
"[65.1]
The court's discretion is practically
unlimited, although it must take into account surrounding

circumstances and the wishes of parties interest, such as the
liquidator, creditors and members.
[65.2]
The court should ordinarily not set aside a winding -up where
creditors or the liquidators
remain unpaid or inadequate provision
has been made for the payment of their claims.
[65.3]
Where the claims of the liquidator and
all creditors have been satisfied the court should
have regard to the
wishes of the members, unless (those members have bound themselves
not to object to the setting-aside order,
or the member concerned
will receive no less as a result of the order sought than would be
the case if the company remained in
liquidation.
[65.4]
In deciding whether or not to grant a
setting-aside order, the court should, where appropriate,
have regard
to issues of 'commercial morality', 'the public interest and whether
the continuation of the winding-up proceedings
would be a
'contrivance' or render the winding-up 'the instrument of injustice."
[23]
In the present case, even from the
applicant's own version, it is clear that at least one creditor is
still being owed money and
has in this regard, demanded payment of
the debt due by the applicant, and that is the FNB. As stated earlier
the debt is for R2
012 213.14. There is no evidence that this amount
has either been paid or that FNB, as a creditor, is aware of this
application.
In the circumstances, it cannot be said that the
interest of the FNB has been taken into account in instituting these
proceedings.
[24]
In
addition to the above, it is clear that the interests of the
liquidators have also not been taken into account. In Re: Calgary

Edmenton Land Co Ltd,
[10]
where the court held that:
"Second,
there is the liquidator. By s 309, all costs, charges and expenses
properly incurred in the winding-up, including
the liquidator's
remuneration, are made payable out of the assets of the company in
priority to all other claims. Where a liquidator
has accepted office
on this footing, I cannot see that in normal circumstances it would
be right to stay the winding-up unless
his position had been fully
safeguarded, either by paying him the proper amount for his expenses
or by sufficiently securing payment.
A liquidator who loses control
of the assets by reason of a stay ought normally to be properly
safeguarded in relation to his expenses
. . . "
[25]
It is clear from the applicant's version
that there is no intent in securing or safeguarding the remuneration
of the work that the
liquidators may have so far done in the present
liquidation.
[26]
In light of the above, I find that the
applicant has failed to persuade this court to exercise its
discretion in its favour and
rescind the winding-up order of 18
January 2022.
[27]
The respondent has requested that
punitive costs be imposed on the applicant, including the deponent in
the founding affidavit.
I am not persuaded that this would in the
circumstances of this matter be warranted. There is however no reason
why the general
principle that cost should follow the result should
not find application.
Order
[28]
The applicant's application is dismissed
with costs on a party and party scale.
E
Molahlehi
Judge
of the High Court,
Gauteng
local Division,
Johannesburg.
Representation:
For
the Applicant:

Adv. M Nowitz
Briefed
by:
Jardim

Attorneys
For
the Respondents:

Adv. R de Leeuw
Briefed
by:
Scharbots

& Portgieter Attorneys
Date
of the hearing
Heard:
29

March 2022
Delivered:
21

April 2022
[1]
Act number
61
of 1973.
[2]
Act
number 71 of 2008
[3]
Act number
10
of 2013.
[4]
Act number
24
of 1956.
[5]
Unreported
judgment case number 1624/2016.
[6]
1998
l2) SCA 175.
[7]
409
06/16] [2019] ZAGP JHC 497 [5 December 2020
[8]
[40723/2018]
[2019] ZAGP JHC (40723/2018) (2 August 2019]
[9]
2010
(5) SA 40 (W).
[10]
(1975)
1 All ER 1046
at 1051