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[2013] ZASCA 42
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Imperial Bank Ltd v Barnard NO and Others (349/12) [2013] ZASCA 42; 2013 (5) SA 612 (SCA) (28 March 2013)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 349/12
In the matter between:
Reportable
IMPERIAL BANK LIMITED
...............................................................................
Appellant
and
HENDRICK
JACOBUS RUST BARNARD N.O.
..................................
First
Respondent
NORMAN KLEIN N.O.
....................................................................
Second
Respondent
FAROUK SHARIEF N.O.
....................................................................
Third
Respondent
THEMBA BENEDICT LANGE
N.O.
.................................................
Fourth
Respondent
ITUMELENG BRENDA
MOHALE N.O.
...............................................
Fifth
Respondent
Neutral
citation:
Imperial
Bank Limited v Hendrick Barnard NO
(349/12)
[2013] ZASCA 42
(28 March 2013)
Coram:
MPATI P, CACHALIA, and PILLAY JJA, SCHOEMAN and SALDULKER AJJA
Heard:
22
February 2013
Delivered:
28
March 2013
Summary:
Company Law – winding-up – Liquidators –
Proceedings brought by liquidators in representative capacities
–
s 386(4)
(a)
of Act 61 of 1973 - whether process served on
company’s debtor interrupted prescription.
_____________________________________________________________________
ORDER
_____________________________________________________________________
On appeal
from
:
South Gauteng High
Court, Johannesburg (Weiner J, sitting as court of first instance).
The appeal is dismissed,
with costs.
______________________________________________________________________
JUDGMENT
_____________________________________________________________________
MPATI P (CACHALIA and
PILLAY JJA and SCHOEMAN and SALDULKER AJJA CONCURRING):
[1] On 3
August 2007 the respondents, acting in their representative
capacities as the duly appointed joint liquidators in the estate
of
Pro Med Construction CC (in liquidation)
1
(Pro Med), instituted action against the appellant, as
first defendant, and Land for Africa (Pty) Ltd (Land for Africa), as
second
defendant, claiming payment, from the appellant, of an amount
of R25 million, together with interest and costs of suit. The amount
claimed was said to be ‘in lieu of transfer’ of certain
fixed property allegedly purchased by Pro Med, prior to its
liquidation, from the appellant, in terms of an agreement of purchase
and sale concluded on 27 February 2003. Subsequent to the
conclusion
of that agreement the appellant apparently sold the property to Land
for Africa. However, no order was sought against
Land for Africa,
which, consequently, does not feature in this appeal.
[2] In the
particulars of claim the first respondent is described as ‘Hendrick
Jacobus Rust Barnard, an adult male liquidator
and practising
attorney . . .’. The rest of the liquidators are also cited in
their own names and the fourth and fifth respondents
are similarly
described as adult male and female liquidators and practising
attorneys respectively, while the second and third
respondents are
described as adult male liquidators practising as such. While
admitting the names of the respondents the appellant
has denied in
its plea, which was delivered on 13 November 2007, that the
respondents are ‘properly cited in compliance with
the
provisions of section 386(4) of the Companies Act 61 of 1973 (the
Act), or that they are entitled to bring [the] action in
their own
name’. Section 386(4)
(a)
of
the Act, which applies
mutatis mutandis
to the liquidation of close corporations by virtue of
the provisions of
section 66
of the
Close Corporations Act, 69 of
1984
, empowers liquidators -
‘
to
bring or defend in the name and on behalf of the company any action
or other legal proceedings of a civil nature. . .
’
.
[3] On 17 February 2011
the respondents served on the appellant a notice of intention to
amend their particulars of claim ‘in
the following respects’:
‘
Replacing
paragraphs 1.1 to 1.5 of their particulars of claim with the
following:-
“
The
Plaintiff is Pro Med Construction CC (In Liquidation) (“Pro
Med”), Master’s reference G2750/04 duly represented
herein by:-
Hendrik
Jacobus Rust Barnard N.O.,
Norman
Klein N.O.,
Farouk
Sharief N.O.
Themba
Benedict Langa N.O.,
Itumeleng
Brenda Mohale N.O.,
who
bring this action in the name and on behalf of Pro Med pursuant to
the provisions of section 386(4) of the Companies Act 61
of 1973.”
’
The appellant objected to
the proposed amendment on the basis that the notice of intention to
amend was served more than three years
after the debt became due;
that Pro Med’s claim had become prescribed in terms of s11 of
the Prescription Act 68 of 1969
(the
Prescription Act) and
that it
would be prejudiced (in the sense that it would be deprived of the
opportunity to raise the defence of prescription) were
Pro Med to be
substituted ‘as the new plaintiff for the existing plaintiffs’,
being the respondents. The respondents
thereafter sought leave from
the court a quo to effect the proposed amendment. On 1 November 2011,
and despite the appellant’s
opposition, the court (Weiner J)
granted the amendment. This appeal is with its leave.
[4] There are two issues
in the appeal. The first, raised by the respondents, is whether the
order granting the amendment is purely
interlocutory and thus not
appealable. The second is whether the amendment amounted to a
substitution of parties or whether it
merely involved a correction of
a misdescription of the plaintiff. Although it appears to me, at
least prima facie, that the order
granting the amendment is
appealable, I shall, for purposes of the appeal, assume without
deciding, that the order is indeed appealable.
[5] It was
argued on behalf of the appellant that leave to amend the particulars
of claim should have been refused for the reasons
that the
liquidators did not have the necessary
locus
standi
to issue the summons in their own
name; that accordingly any attempt to now substitute the liquidators
with the Corporation amounts
to the introduction of a new plaintiff;
that the Corporation’s claim has become prescribed since the
issue was drawn to the
attention of the liquidators by the appellant
in its plea more than three years before the notice of intention to
amend was served;
and that, in the circumstances, granting the
amendment at this stage would prejudice the appellant by irreversibly
depriving it
of the defence of prescription.
[6] In
granting the amendment the court a quo, with reference to judgments
of the South Gauteng High Court
2
and of other High Courts,
3
observed that the authorities ‘are
divided on
the point as to how the plaintiff should be cited’ in claims
such as the one instituted by the liquidators in this
matter. It
reasoned that until this point is authoritatively decided ‘it
would not be equitable [for it] to refuse the amendment
on the basis
that the liquidators did not have
locus standi
when they brought this action and thus that such action
did not interrupt prescription’. Having said that, however, the
court
continued:
‘
It
is clear that a company being wound up never has standing; the
locus
standi
is
always conferred
on
the liquidator who litigates on the company’s behalf.
Therefore, at the time that proceedings were instituted the
plaintiffs
did have
locus
standi
, although,
according to the defendants (and some authorities) such citation was
defective
.’
The court a
quo concluded that the citation of the respondents, ‘even based
upon a
strict interpretation
of
section 386(4)
(a)’
,
was a mere misdescription.
[7] Counsel
for the appellant submitted that because the assets of a company
being wound up do not vest in the liquidator, but remain
vested in
the company, ie unlike the estate of an insolvent, which is vested in
the trustee, the company in liquidation retains
its
locus
standi
to institute its own actions. Its
liquidator, so the argument continued, is in the same position as its
directors were in prior
to its winding up. The liquidator, therefore,
has no
locus
standi
to institute action in his or her own name to recover
debts owed to the company. Counsel accordingly argued that the
statement in
Commentary on the
Companies Act
, Vol 3, by M S
Blackman
et al
,
4
that ‘[a] company being wound up never has
standing’ and that ‘standing is always conferred on the
liquidator’,
is erroneous. As will become apparent below, the
present is not an appropriate case for a consideration of the
question whether
or not a liquidator has standing where a debt owed
to a company in liquidation is sought to be recovered. This is
therefore not
the occasion for a discussion on the conflicting
decisions referred to in paragraph 6 above.
[8] An
application for amendment will always be allowed ‘unless it is
made
mala fide
or
would cause prejudice to the other party which cannot be compensated
for by an order for
costs or by
some other suitable order such as a postponement’.
5
An amendment would cause prejudice if, for example, its
effect would be to deprive the other party to the action of the
opportunity
to raise an otherwise good plea of prescription.
6
Thus, a late amendment which has the effect of
introducing a new cause of action or new parties would inevitably
cause prejudice
to the other party in the action, as it would defeat
an otherwise good defence of prescription. However, a plaintiff is
not precluded
by prescription from amending his or her claim,
‘provided the debt which is claimed in the amendment is the
same or substantially
the same debt as originally claimed, and
provided, of course, that prescription of the debt originally claimed
has been duly interrupted’.
7
In
Neon and Cold Cathode
Illuminations (Pty) Ltd v
Ephron
1978 (1) SA 463
(A) Trollip JA, referring to
Churchill
v Standard General
Insurance Co. Ltd
1977 (1) SA 506
(A), said the following at 474A:
‘
In
Churchill’s
case,
supra
at
p. 517B-C, this Court, through Rumpff, C.J., pointed out that, while
the previous summons need not set out an unexcipiable cause
of
action, nevertheless, for its service on the debtor to interrupt
prescription of a right of action, the latter must at least
be
recognisable or identifiable (“kenbaar”) in the previous
cause of action
.’
[9] In
Sentrachem Ltd v Prinsloo
1997
(2) SA 1
(A) Eksteen JA expressed himself as follows (at 15J-16D)
with regard to an application for amendment to a summons:
‘
Die
eintlike toets is om te bepaal of die eiser nog steeds dieselfde, of
wesenlik dieselfde skuld probeer afdwing. Die skuld of
vorderingsreg
moet minstens uit die oorspronklike dagvaarding kenbaar wees, sodat
‘n daaropvolgende wysiging eintlik sou
neerkom op die opklaring
van ‘n gebrekkige of onvolkome pleitstuk waarin die
vorderingsreg, waarop daar deurgaans gesteun
is, uiteengesit word.
(
Churchill
v Standard General Insurance Co Ltd
1977
(1) SA 506
(A) op 517B-C;
Maluleka
se
saak
supra
op
279C;
Mokoena
v SA Eagle Insurance Co
Ltd
1982
(1) SA 780
(O) en
Frol
Holdings (Pty) Ltd v Sword Contractors CC
1996
(3) SA 1016
(O).) So ‘n wysiging sal uiteraard nie ‘n
ander vorderingsreg naas die oorspronklike kan inbring nie, of ‘n
vorderingsreg
wat in die oorspronklike dagvaarding prematuur of
voorbarig was, te red nie, of om ‘n nuwe party tot die geding
te voeg nie.
(Vergelyk
Churchill
se
saak
supra
;
Imprefed
(Pty) Ltd v National Transport Commission
1990
(3) SA 324
(T);
Neon
and
Cold
Cathode Illuminations (Pty) Ltd v Ephron
1978
(1) SA 463
(A) en
Park
Finance
Corporation
(Pty) Ltd v Van Niekerk
1956
(1) SA 669
(T).)
’
Thus, when
faced with an opposed application for an amendment to a summons the
fundamental question a court should consider is ‘whether
or not
the service of the summons in the previous action on the respondent
interrupted the running of prescription of the applicant’s
rights against the respondent’.
8
And in considering whether or not prescription was
interrupted by service of the previous summons the right sought to be
enforced
by means of the amendment must be the same or substantially
the same right as originally sought to be enforced, ‘(f)or the
substance rather than the form of the previous process must be
considered in determining whether or not it interrupted
prescription’.
9
[10]
Section 15(1)
of the
Prescription Act provides
that-
‘
[t]he
running of prescription shall . . . be interrupted by service on the
debtor of any process whereby the creditor claims payment
of the
debt.
’
For
prescription to be interrupted by service of a summons on the debtor,
therefore, the entity claiming payment of the debt must
be the
creditor
. Where the
claimant cited in the process by which payment is claimed is not the
creditor, service of the process will not interrupt
prescription.
[11] In
Associated Paint & Chemical Industries
(Pty) Ltd v Smit
10
the plaintiff caused a simple summons to be served on
the defendant. When the declaration was filed subsequent to the
granting of
leave to the defendant to defend, it transpired that the
plaintiff cited in the summons was not the defendant’s
creditor.
The name of the correct creditor appeared in the first
paragraph of the declaration. It was conceded in an affidavit in
support
of an application for an amendment that the wrong company had
been cited in the summons and that the defendant had at no stage
concluded any contract or had any
dealings
with the plaintiff cited in the summons. It was thus common cause
that no debtor-creditor relationship ever existed between
the
plaintiff and the defendant. This court held that the summons ‘did
not constitute a process whereby
the creditor
claimed payment of the debt’ and that the running
of prescription in respect of the debt ‘was accordingly not
interrupted
by service of the summons on the defendant’.
11
[12] In the present
matter the particulars of claim disclose that the right sought to be
enforced against the appellant arose from
an agreement of purchase
and sale allegedly concluded between the appellant and Pro Med on 27
February 2003 and in terms of which
the appellant sold to Pro Med
certain immovable property. That an agreement was concluded as
alleged is admitted in the plea, but
it is pleaded further that the
agreement had lapsed. The agreement provided, inter alia, that the
purchase price of R10 million
was payable against registration of
transfer of the property into the name of Pro Med. Paragraph 7 of the
particulars of claim
reads as follows:
‘
7.1
Pro Med has complied with all its obligations in terms of the
agreement of sale . . . .
7.2
In particular, Pro Med has tendered payment of the purchase price of
R10 million and all costs which Pro Med is obliged to pay
to Imperial
Bank, and repeats, alternatively makes such tender herein
.’
The conclusion in
paragraph 8 is to the effect that Pro Med ‘is accordingly
entitled to transfer of the property into its
own name’.
[13] It appears from the
particulars of claim that subsequent to the conclusion of the sale
agreement the appellant sold the same
property to another entity (the
second purchaser). In paragraph 11.3 of the particulars of claim the
following allegation is made:
‘
In
the event that transfer of the property (or any portion thereof) is
registered in the name of [the second purchaser], it will
not be an
innocent purchaser, and Pro Med would be entitled to transfer of the
property . . . to it by [the second purchaser
].’
The conclusion is then
set out as follows:
’
12.1
In the premises, Pro Med is entitled to transfer of the property . .
. by [the second purchaser].
12.2
Pro Med tenders payment of the purchase price of R10 million and such
costs as are due
.’
The main prayer sought in
the particulars of claim is in the following terms:
‘
An
order declaring that the plaintiffs were, as at date of transfer to
[the second purchaser], entitled to the transfer of the immovable
. .
. into the name of Pro Med Construction CC (in liquidation) against
payment by [Pro Med] to [the appellant] of the purchase
price of R10
million
.
. . .’
In lieu of transfer of
the property, payment is sought in the sum of R25 million to the
appellants, less such costs as may be due,
together with interest and
costs of suit.
[14] Counsel
for the appellant submitted in this court, with reference to s
386(4)
(a)
of the Act,
that a liquidator acts ‘in the name of’ and ‘on
behalf of the company’ and therefore it is the
company that is
acting and not the liquidator in his own name. That is why, so the
argument continued, a company in compulsory
liquidation must be cited
by its own name with the sub-joined expression ‘(in
liquidation)’. Counsel submitted further,
correctly so, that
upon the winding-up order becoming operative the company’s
corporate identity remains and its property
remains vested in it even
though the control of its affairs passes out of the hands of its
directors upon the appointment of a
liquidator.
12
To cement their argument that the liquidators in the
present case were not entitled to institute action ‘in their
own name’
to recover a debt allegedly owed to Pro Med, counsel
placed reliance on the following passage from the judgment of
Kirk-Cohen J
in
De Villiers and others NNO v
Electronic Media Network (Pty) Ltd
1991 (2)
SA 180
(W):
‘
Thus,
where a liquidator wishes to sue for a debt owing to a company in
liquidation he only represents the company in that litigation.
It is
the company in liquidation which litigates and, if the claim is upon
a cheque marked not transferable, the company in liquidation
is the
payee of the cheque and it, and only it, can sue as holder thereof
.’
13
[15] In that
case the three plaintiffs had been appointed liquidators of a
company, GBS South Africa (Pty) Ltd (GBS), but were later
appointed
as receivers for creditors in terms of a compromise subsequently
sanctioned by the high court. One of the consequences
of the
compromise was that GBS was discharged from liquidation, but the
receivers were granted ‘all such powers as the liquidators
would have had, including the right to take action against any
debtors of the company, other than in respect of the designated
debts
. . .’. In their capacities as joint receivers for the
creditors of GBS the plaintiffs sued the defendant, by way of
a
provisional sentence summons, on a dishonoured cheque that had been
drawn in favour of GBS prior to its liquidation. The words
‘or
bearer – of toonder’ where they appeared after the
payee’s name were deleted from the cheque, which
was then
marked, in capitals, ‘NOT TRANSFERABLE’. The
causa
upon which the plaintiffs relied was that they were the
legal holders of the cheque drawn by the defendant in favour of GBS
and
they were in physical possession thereof. When the matter came
before Kirk-Cohen J two points
in limine
were
raised on behalf of the defendant, namely (1) that the plaintiffs had
no right to claim provisional sentence on, or payment
of, the
dishonoured cheque; and (2) that the summons did not set out
allegations to establish the
locus standi
of the plaintiffs or an enforceable
causa
.
The learned judge found in favour of the defendant on the first point
in limine
and,
consequently, found it unnecessary to consider the second. In finding
for the defendant on the first point
the learned
judge rejected the submission by counsel for the plaintiffs, which
was to the effect that, as receivers for the creditors,
the
plaintiffs had the same powers as they had as liquidators of GBS and
that those powers included the right to sue for and recover
payment
of the amount of the dishonoured cheque. He held that the powers and
rights conferred upon the receivers in terms of the
agreement of
compromise ‘cannot and do not alter the drawer’s
obligations and rights on a dishonoured cheque marked
not
transferable’.
14
The learned judge emphasised the distinction between a
liquidator, whose powers and rights are regulated by the Act, read
with the
relevant provisions of the Insolvency Act, and a receiver,
who derives his or her powers and rights from a compromise, which
remains
a contract.
15
A receiver appointed in terms of a compromise, he said,
does not represent the company.
16
[16] In the present
matter, however, the respondents are cited, on the face of the
summons, in their names, followed by the letters
‘N.O.’.
After the names of the fifth respondent the following words appear,
in brackets:
‘
in
their representative capacities as the joint liquidators in the
estate of PRO MED CONSTRUCTION CC (IN LIQUIDATION)
’
.
These words,
read together with the reference that the respondents are acting in
their official capacities (
nomine officii
)
clearly indicate, in my view, that the respondents are not acting in
their personal capacities, but rather represent Pro Med in
the
litigation.
17
The allegations made in the particulars of claim
relating to the agreement of sale; the conclusions that Pro Med is
entitled to
transfer of the property and the tender made by Pro Med
to pay the purchase price clearly show that the claim is, and has
always
been, that of Pro Med and not the respondents’. And
because the respondents litigate in their representative capacities,
judgment in their favour will not enure for their personal benefit,
but for the benefit of creditors.
18
[17] In their founding
affidavit in support of the application for amendment the
respondents, as the liquidators, aver that at the
first meeting of
creditors held on 26 January 2005 they ‘were authorised in
general terms to institute any civil action in
the name and on behalf
of Pro Med, pursuant to resolution no. 6 of the list of resolutions
adopted by the creditors at that meeting
. . .’. Resolution no.
6, which forms part of the list of resolutions annexed to the
founding affidavit, reads:
‘
THAT
the Liquidator be and is hereby authorised to bring or defend in the
name and on behalf of the Close Corporation any action
or other legal
proceedings of a civil nature and subject to the provisions of any
other law relating to criminal procedure, and
criminal proceedings.’
The allegations made and
conclusions drawn from them in the particulars of claim, as quoted
above, are in accordance with the authority
granted to the
respondents by the meeting of creditors, because, as has been said,
the claim is that of Pro Med.
[18] It is true that in
lieu of transfer of the property the respondents claim payment to
them in the amount of R25 million less
such costs as are due, but
this must be viewed in the context of them accepting the payment in
their representative capacities
and, as such, on behalf of Pro Med.
The payment will not be accepted for their own benefit. It will be an
asset in Pro Med, collected
for the benefit of creditors. It follows,
in my view, that the amendment sought and granted by the court below
does not have the
effect of substituting a different plaintiff. It
merely corrects a misnomer in the first paragraph of the particulars
of claim,
where it is not made clear that the respondents are not
acting in their personal, but representative, capacities. No new
cause
of action will be introduced by the amendment. It is clear from
the summons and particulars of claim that Po Med is the creditor,
represented by the respondents, which claims payment of the debt, viz
transfer of the property, or, in lieu thereof, payment of
a sum of
money, from the appellant, the debtor. The claim sought to be
enforced in the original summons and particulars of claim
will remain
the same after the amendment has been effected. It is not in dispute
that the combined summons was served on the appellant.
Prescription
was therefore interrupted in terms of
s 15(1)
of the
Prescription
Act. The
question of prejudice which would otherwise be caused by the
amendment does not arise.
[19] In the result the
appeal must fail and the following order is made:
The appeal is dismissed,
with costs.
.
___________________
L Mpati
President
APPEARANCES
For the Appellants: P G
Robinson (with him A Botha)
Instructed by:
The State Attorney,
Pretoria
The State Attorney,
Bloemfontein
Respondent W J Vermeulen
Instructed by:
Riaan Meyer Inc, Pretoria
McIntyre & van der
Post, Bloemfontein
1
Pro
Med Construction CC was finally liquidated on 8 December 2004.
2
See
Fey NO v Lala Govan Exporters (Pty)
Ltd
2011 (6) SA
1
81
(W) and
Airborne Express CC v Van
den Heever
NO
unreported case no. 05/18568 – WLD.
3
See
Shepstone and Wylie v Geyser NO
1998 (1) SA 354
(N) and
compare
Fundstrust (EDMS) Bpk (in likwidasie
)
v Marais
1997 (3) SA 470
(C).
4
At
14 – 335.
5
Four
Tower Investments (Pty) Ltd v André’s Motors
2005
(3) SA 39
(N) para 15;
Dumasi v Commissioner,
Venda Police
1990 (1) SA 1068
(V) at 1071B;
Devonia Shipping Ltd v MV Luis
(Yeoman Shipping Co Ltd Intervening)
1994 (2) SA 363
(C) at
369F-I.
6
Trans-African
Insurance Co. Ltd v Maluleka
1956 (2) SA 273
(A) at 279A-B. See
also
Four Towers Investments
, fn 5 para 16 and
Dumasi
,
fn 5 at 1071C-D.
7
Associated
Paint & Chemical Industries (Pty) Ltd t/a Albestra Paint and
Lacquers v Smit
2000 (2) SA 789
(SCA) para 13.
8
Neon
and Cold Cathode Illuminations (Pty) Ltd v Ephron
197
8
(1) SA 463
(A) at 470F-G.
9
Ephron
,
fn 8, at 471A-C.
10
Above,
fn 7.
11
Para
2 and 18.
12
See
Letsitele Stores (Pty) Ltd v Roets
1958 (2) SA 224
(T) at
227A-C.
13
At
184I-J.
14
At
184J-185A.
15
At
185B-D.
16
At
184J.
17
See
the passage in
De Villiers
quoted in para 14 above.
18
Compare
Rosner v Lydia Swanepoel Trust
1998 (2) SA 123
(W) at 127B-C.