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[2023] ZAFSHC 195
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Xpharm (Pty) Ltd v Emoyamed Hospital (Pty) Ltd (36/2023) [2023] ZAFSHC 195 (24 May 2023)
IN THE HIGH COURT
OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.:
36/2023
In the matter between:
XPHARM
(PTY) LTD
Applicant
[REGISTRATION NO:
2020/560236/07]
and
EMOYAMED HOSPITAL
(PTY) LTD
Respondent
[REG. NO. 2017/225961/07]
CORAM:
VAN RHYN, J
HEARD ON:
20
APRIL 2023
DELIVERED ON:
24
MAY 2023
[1]
This is an application for the provisional winding-up of the
respondent on the
basis that it is both commercially and factually
insolvent and is unable to pay its debts as envisaged in section
344(f) read with
section 345(1)(c) of the Companies Act
[1]
(the “1973 Act”).
[2]
The applicant is XPharm (Pty) Ltd, a private company with limited
liability incorporated
as such with registered address at 7 F[…]
Kl[…] Road, Bloemfontein, Free State Province. The respondent
is Emoyamed
Hospital (Pty) Ltd a private company with limited
liability. The applicant averres that the respondent’s
registered address
is also at 7 F[…] K[…] Road,
Bloemfontein, Free State Province.
[3]
The application for the provisional liquidation was issued on 6
January 2023. A notice
of intention to oppose the application was
filed on 1 February 2023 and on 2 February 2023 an order was granted
in terms whereof
the matter was postponed to the opposed roll on 9
March 2023 with specified dates for the filing of further affidavits
to be exchanged
by the parties. Subsequent to a further postponement
to file a substantive application for condonation, the matter
eventually came
before this court on 20 April 2023.
[4]
At the hearing, Mr Grobler SC, counsel on behalf of the applicant
informed the court
that an employer of the respondent company has
filed an application in terms of the provisions of section 131(1) of
the Companies
Act
[2]
(the “2008
Act”) for the respondent to be placed under supervision and for
business rescue proceedings to commence.
Applicant received
notice that the business rescue application was filed the previous
day, 19 April 2023, in the Gauteng
Division of the High Court,
Pretoria.
[5]
The court was therefore requested to determine whether the
application for business
rescue has the effect of suspending the
application for the provisional liquidation of the respondent in
accordance with the provisions
of section 131(6) of the 2008 Act. Mr
Grobler SC contended that the Pretoria High Court does not have
jurisdiction to entertain
the application for business rescue and
that a provisional liquidation order is therefore sought by the
applicant. Mr Grobler SC
finds support for his argument in
Sibakhulu
Construction (Pty) Ltd v Wedgewood Village Golf Country Estate (Pty)
Ltd (Nedbank Ltd & others intervening)
.
[3]
In
Sibakhulu
the
question of jurisdiction under the 2008 Act and the determination of
where a company’s principal place of business
or principal
office is situated and the requirement in section 23 that a company’s
registered office be at the place of its
principal office came under
scrutiny.
[6]
In the
Sibakhulu
matter the salient facts were as follows: The
applicant, sought the winding up of the respondent. At the hearing of
the matter
in the Western Cape Division of the High Court, Cape Town,
the effect of an application for an order placing the respondent
under
supervision for business rescue, not in the Cape Town division,
but in the Port Elizabeth High Court had to be decided. Initially
the
argument advanced by the applicant was that the Port Elizabeth High
Court lacked jurisdiction because both the registered office
and the
principal place of business of the respondent company were situated
in Cape Town. It was common cause between the parties
that the
respondent company’s registered office was in Cape Town. It was
however disputed that the respondent company’s
principal place
of business was also in Cape Town.
[7]
In terms of the 1973 Act any division of the High Court where a
company’s registered
office or its principal place of business
is located, would have jurisdiction.
[4]
More than one court could, as a consequence, have jurisdiction in
proceedings where a company was involved. The 2008 Act, which
to a
large extent repealed the 1973 Act, does not have similar wording to
section 12(1) of the latter Act that provides for more
than one
address.
[8]
In
Sibakhulu
, Binns-Ward J therefore held that jurisdiction in
respect of matters arising under the 2008 Act had to be determined on
common-law
grounds unless it can be argued that a proper reading of
the said Act reflects a different intention. Section 23(3) of the
2008
Act provides as follows:
Each
company or external company must-
(a)
continuously maintain at least one office in the Republic; and
(b)
register the address of its office, or its principal office if it has
more than one office-
(i)
initially in the case of-
(aa)
a company, by providing the required information on its Notice of
Incorporation; or
(bb)
an external company, by providing the required information when
filing its registration in terms of subsection (1); and
(ii)
subsequently, by filing a notice of change of registered office,
together with
the prescribed fee.
Section
23(4) provides:
A
change contemplated in subsection (3)(b)(ii) takes effect as from the
later of-
a)
the date, if any, stated in the notice; or
b)
five business days after the date on which the notice was filed.
[9]
In terms of the provisions of section 1 of the 2008 Act, the office
registered by
the company in terms of section 23 of the Act is its
'registered office' within the meaning of the Act. In
Sibakhulu
it was held that the determination of where a company’s
principal place of business or principal office is situated is a
question of fact and that “
…
notwithstanding
the evident intention of the Legislature that a company’s
legally chosen place of residence should be at the
same as its
factual place of residence for jurisdictional purposes
”
it
is possible that a company would be legally and factually resident at
two places in the event of its registered office not being
the same
as its principal office.
[5]
[10]
With reference to section 5 (1) which provides that the Act must be
interpreted to give effect to the
purposes set forth in section 7(k)
and (l), Binns-Ward J held that there would be in respect of
every company only a single
court in South Africa with jurisdiction
in respect of winding-up and business rescue matters.
[6]
The
court concluded that the business rescue proceedings have not been
competently instituted in the Port Elizabeth High Court on
the basis
that the company did not have its principal place of business at the
address in Port Elizabeth at the time when the business
rescue
application was instituted.
[11]
Mr Grobler SC, with reference to
Mfwethu
Investments CC t/a Recharger Prepaid Meters v Citiq Meter Solutions
(Pty) Ltd t/a Citiq Prepaid
[7]
contended
that, at the time when the application for the provisional
liquidation of the respondent was issued, jurisdiction was
established and admitted by the respondent. At the time, not only the
registered address of the respondent was situated at Frans
Kleynhans
Road, Bloemfontein, but also the principle place of business, in
other words, the hospital where medical services are
rendered by the
respondent.
[12]
It is common cause that even though the principal office used to be
at Frans Kleynhans Road, Bloemfontein
it has subsequently been
changed to be at Gauteng. Jurisdiction has therefore been established
at the time of the commencement
of the application for liquidation of
the respondent and service thereof upon the respondent
[8]
.
In any event, jurisdiction has been admitted by the respondent in its
answering affidavit. Jurisdiction having once been
established,
continues to exist to the end of the proceedings even though the
ground upon which the jurisdiction was established
ceases to
exist.
[9]
[13]
The question is whether the Pretoria High Court lacks jurisdiction in
respect of the business recue
application made subsequent to the
change of the respondent’s principal office being registered in
accordance with the provisions
of section 23(4) of the 2008 Act.
[14]
The controversy regarding whether a specific court has jurisdiction
over a respondent company for the
purposes of a winding-up order was
considered in
Wild
& Marr (Pty) Ltd v Intratrek Properties (Pty) Ltd
[10]
by
Sutherland J. The controversy arose from the fact that service of the
winding-up application was served upon the respondent company
at its
principal place of business at Johannesburg, which was within the
territorial jurisdiction of the court hearing the application.
The
respondent company’s registered address was however situated at
Nelspruit.
[15]
The two statutory provision namely section 23(3) of the 2008 Act and
section 12 (1) of the 1973 Act
were examined and Sutherland J, with
reference to the decisions in
Burmeister
& Another v Spitskop Village Properties & Others
,
[11]
Lonsdale
Commercial Corporation v Kimberley West Diamond Mining
Corporation
[12]
and
Van
der Merwe v Duraline (Pty) Ltd
[13]
came
to the conclusion that the reasoning by Gamble J in
Van
der Merwe v Duraline
that “
…
liquidations
of insolvent companies remain, for the time being, the preserve of
chapter 14 of the 1973 Act
”
is
to be followed.
[16]
Section 23(3) of the 2008 Act requires each
company or external company to continuously maintain at least
one
office and register the address of its office, or its principal
office, if it has more than one office in the Republic of South
Africa. The principal office of a company is not necessarily
equivalent to its principal place of business. Section 21(1) of the
Superior Courts Act
[14]
provides as follows:
“
A
Division has jurisdiction over all persons residing or being in, and
in relation to all causes arising … within its area
of
jurisdiction and all other matters of which it may according to law
take cognisance…”
[17]
The meaning of residence must of necessity be different when dealing
with juristic persons, inasmuch
as such persons cannot be said to
‘reside’ in the conventional sense of the word as natural
persons do. The residence
of a legal persona such as a company,
artificially created, must be a mere notional conception introduced
for purposes of jurisdiction
and law
[15]
.
In early case law it was held that a corporation, similar to a
natural person, could have only one place of residence and that
place
was its principal place of business.
[18]
In
Bisonboard
Ltd v K Braun Woodworking Machinery (Pty) Ltd
[16]
the Appellate Division held that a company can also be regarded
as being resident at its registered office. Thus, where the
registered office and principal place of business of a company are at
two different places, the company is regarded as having two
places of
residence and if they are in different jurisdictions then either High
Court may assume jurisdiction. In
Sibakhulu
it was held that since commencement of the 2008 Act the only court
clothed with jurisdiction to liquidate a company and to adjudicate
on
business rescue proceedings, is the court in whose area of
jurisdiction that company has its ‘principal office’
as
contemplated in section 23(3) of the 2008 Companies Act.
[19]
In
Lonsdale Commercial Corporation v Kimberley West Diamond Mining
Corporation
Lacock J held as follows:
“
6.2
A finding that the
legislature intended the provisions of section 23(3) of the 2008
Act
to be construed “for purposes of jurisdiction” (a phrase
repeatedly used by Binns-Ward J in
Sibakhulu
(supra)
is, to my mind, tantamount to a finding that the legislature intended
to limit or oust a local and provincial division’s
jurisdiction
derived from the common law and/or section 29 of the Supreme Court
Act in respect of the liquidation and/or business
rescue proceedings
of a company that “resides” or has its principal place of
business within the court’s area
of jurisdiction, but not also
its registered address. I am not persuaded that the reasons advanced
by the learned judge justifies
such a drastic limitation of a court’s
jurisdiction.”
[20]
In
Wild
& Marr
Sutherland J disagreed with the reasoning by Lacock J in the
Lonsdale
matter
and agreed with the finding by Gamble J in
Van
der Merwe v Duraline.
Sutherland
J concluded that the thrust of Gamble J’s conclusions is that:
“…section 224(3) of the 2008 Act, read
with item 9 of
schedule 5 to the 2008 Act preserve chapter 14 of the 1973 Act in
operation. In that chapter the “court”
referred to must
be the “court” as defined in section 1 of the 1973 Act,
which in turn is the court referred to in
section 12 of the 1973
Act.”
[17]
Liquidations of insolvent companies remain, for the time being, the
preserve of chapter 14 of the 1973 Act. And further
that: “
… the procedural regime draws on other provisions of the 1973
Act, including section 12. To conclude otherwise
would be to produce
an intolerable incoherence if sections of the 1973 Act were to be
ignored and reliance placed on provisions
of the 2008 Act, including
section 23.”
[18]
[21]
It is furthermore recognised that a company’s “residence
will be determined by the periodic,
usual or habitual location of the
directing mind of the company”
[19]
.
In the
Mfwethu
Investments
matter, Rogers J (as he then was) reflected upon the ‘residence
of a company’ both in respect of the position before
the 2008
Act as well as corporate residence in terms of the 2008 Act. With
reference to
Sibakhulu
,
Rogers J held as follows:
“
The
learned judge’s statement, insofar as it concerns jurisdiction
in liquidation matters (as distinct from business rescue
proceedings), appears to me to have been
obiter
, and
subsequent decisions have cast doubt on the correctness in that
respect. The reasoning in the latter decisions has been based
on item
9 of Schedule 5 of the 2008 Act, which has preserved the provisions
of the provisions of the 1973 Act in liquidation proceedings,
including the old Act’s conception of a ‘court’ and
the provisions of s 12 of the old Act relating to a ‘court’s’
jurisdiction. Section 12(1) of the old Act provided that a ‘court’
had jurisdiction under that Act if the company had
its registered
office or main place of business within its area of jurisdiction.
(see, eg, Van der Merwe v Duraline (Pty) Ltd
[2013] ZAWCHC 213
; Wild
& Marr (Pty) Ltd v Intrartek [2019] ZAGPPHC 613 and decisions
discussed therein.) The 2008 Act does not have an equivalent
of s 12
of the 1973 Act. It appears that in Sibakhulu Construction Binns-Ward
J’s attention was not directed to the possible
implications of
item 9 of Schedule 5.
It
is unnecessary for me to decide whether the
obiter
dictum
in Sibakhulu Construction concerning jurisdiction in liquidation
proceedings is right. The
ratio
of the decision is that, at least in relation to matters entirely
governed by the new Act (including business rescue proceedings),
a
company can have only one place of residence, namely its registered
office. Later decisions do not impugn Binns-Ward J’s
reasoning
in regard to matters wholly governed by the new Act, and it was
followed in Navigator Property Investments (Pty) Ltd
v Silver Lakes
Crossing Shopping Centre (Pty) Ltd & others
[2014] ZAWCHC 103
;
[2014] 3 All Sa 591
(WCC) para19.”
[20]
[22]
In the matter at hand neither party has proffered evidence about
where the respondent’ company’s
principal place of
business is situated at. In order to know which court is clothed with
jurisdiction, at least in respect of the
business rescue application
is concerned, the parties are better served by treating the
registered office as dispositive.
[21]
The information registered with the CIPC is easily ascertainable as a
matter of public record. Similar to the facts in
Mfwethu
Investments,
the respondent’s registered office was changed to the address
reflected in its current registration. “By law, this
is where
the company’s records, and particularly its financial records,
must be located or accessible.”
[22]
[23]
Accordingly, I am unable to find that the Pretoria High Court lacks
jurisdiction in respect of the
business rescue application made in
terms of the provisions of section 131 of the 2008 Act.
[24]
Mr Snyman SC, counsel on behalf of the respondent submitted that the
business rescue application was
properly made with the result that
section 131(6) of the 2008 Act suspended the liquidation proceedings.
To my mind it is necessary
to consider whether a business rescue
application was “made” precluding this court from
deciding the provisional winding-up
application and resulting in the
suspension of the liquidation proceedings.
[25]
A copy of the Notice of Motion and founding
affidavit deposed to by Shereen Jurakan on 19 April 2023 in
the
business rescue application “made’ in the Pretoria High
Court were submitted by agreement between the parties.
Mr
Snyman SC furthermore submitted a copy of an “Affidavit of
Service” deposed to by Bianca Potgieter, attorney employed
as
such at Tintingers Incorporated, Attorneys, Pretoria confirming that
a copy of the business rescue application was submitted
to Court
Online and a case reference number, HCGS192603 was allocated. A copy
of the application and proof of submission with Court
Online were
sent via email to all known creditors/suppliers, shareholders,
parties representing employees/staff of the respondent
and to the
respondent, the applicant and The Companies and Intellectual Property
Commission on 19 April 2023.
[26]
Section 131(1) of the 2008 Act provides that an
affected person may apply to a court at any time for an
order placing
the company under supervision and commencing business rescue
proceedings. In terms of the provisions of Section 128(1)(a)
of the
2008 Act an “affected person” include the following; a
shareholder or creditor of the company; any registered
trade union
representing employees of the company; and if there are employees who
do not belong to a registered trade union, each
of those employees or
their respective representatives.
[27]
A copy of the application to place a company
under supervision and commence with business rescue proceedings
must
be served on the company, the Companies and Intellectual Property
Commission and each affected party in accordance with the
provisions
of section 131(2) of the 2008 Companies Act.
[23]
In
Lutchman
N.O. and Others v African Global Holdings (Pty) Ltd and Others
[24]
Meyer AJA (as he was then) held as follows:
“
The business rescue
application must be issued, served on the company and the Commission
and all reasonable steps must be taken
to identify affected persons
and their addresses to deliver the application to them, to meet the
requirements of s 131(6) in order
to trigger the suspension of the
liquidation proceedings.”
[25]
[28]
In my view proper service and notification as set out in the relevant
service affidavit in respect
of the business rescue application has
been effected. The business rescue application was made by an
employee of the respondent
who has been appointed as the financial
manager of the respondent on 25 November 2022. It appears as if the
application for business
rescue is made,
inter alia
, in an
effort to save the employment of 183 employees of the respondent, a
hospital which in a relative short period of time has
become
successful and even more so since the former director of the
respondent, Mr Wiid was removed by vote of the majority of
shareholders as director of the respondent on 25 November 2022.
[29]
Mr Grobler SC furthermore
raised the issue that
the founding affidavit in respect of the business rescue application,
filed the previous day, has not been
properly commissioned. It
was pointed out by Mr Grobler SC that the founding affidavit was
commissioned by
Adeline Vorster, a commissioner of oath and
attorney with the same address, namely 7 Frans Kleynhans Road,
Bloemfontein, as the
main place of business of the respondent with
the result that the commissioning of the founding affidavit in
respect of the business
rescue application was irregular.
[30]
The proper commissioning and attestation of
affidavits is prescribed by the Justice of Peace and Commissioners
of
Oaths Act
[26]
and the
regulations issued in terms thereof (more specifically in terms of
section 10 of the Act). Regulations 1-4 of the Regulations
Governing
the Administration of an Oath set out the nature of the oath or
affirmation to be taken and the form in which it is administered.
The
courts have consistently held that regulations made pursuant to the
Justice of Peace and Commissioner of Oaths Act are directory
only. In
S v
Munn
[27]
Van den Heever J ( as she was then) held as follows:
“
Compliance with
the regulations provides a guarantee of acceptance in evidence of
affidavits attested in accordance therewith, subject
only to defences
such as duress and possible undue influence. Where an affidavit has
not been so attested, it may still be valid
provided there has been
substantial compliance with the formalities in such a way as to give
effect to the purpose of the legislator
as outlined above.”
[28]
[31]
In the present matter the oath was administered and both the deponent
and the Commissioner of Oaths
initialled every page. I am of the view
that these factors signify substantial compliance. The court seized
with the application
for business rescue of the respondent may, in
the event of the respondent not rectifying any non-compliance with
the regulations
prior to the hearing of the application at the
Pretoria High Court, order that the affidavit deposed to by Shereen
Jurakan be re-attested
with the result that the objection raised by
Mr Grobler SC does not, at this stage, invalidate the affidavit
deposed to by the
said deponent. I therefore find that the affidavit
substantially complies with the said Regulations. Furthermore, the
appropriate
forum to consider arguments regarding substantial
compliance and condonation will be the court adjudicating the
application for
business rescue of the respondent.
[32]
After perusing the copy of the business rescue
application it appears that reasonable prospect that the
business
rescue application may be successful exists and taking into account
considerations such as fairness, convenience and the
interests of
justice, I am of the view that the business rescue application was
made and as such triggered the suspension of the
liquidation
proceedings as contemplated in section 131(6) of the 2008 Companies
Act. For all the above reasons, I find that the
liquidation
proceedings may not proceed until such stage as the business rescue
application has been decided upon.
[33]
In the result the following order is made:
1. The
application for the provisional liquidation of the respondent is
suspended and the application is removed from
the roll.
2. The
issue of costs is reserved for later adjudication.
___________________
VAN
RHYN, J
On
behalf of the Applicant:
ADV
S GROBLER SC
ADV
R VAN DER MERWE
Instructed
by:
HENDRE
CONRADIE ATTORNEYS
BLOEMFONTEIN
On
behalf of the Respondent:
ADV
M SNYMAN SC
Instructed
by:
SYMINGTON
& DE KOK ATTORNEYS
BLOEMFONTEIN
[1]
Act 61 of 1973.
[2]
Act 71 of 2008.
[3]
2013 (1) SA 191 (WCC).
[4]
Section 12(1) provides as follows: “The Court which has
jurisdiction under this Act in respect of any company or other
body
corporate, shall be any provincial or local division of the High
Court of South Africa within the area of the jurisdiction
whereof
the registered office of the company or other body corporate or the
main place of business of the company or other body
corporate is
situate.”
[5]
Sibakhulu
(supra)
at [21].
[6]
Sibakhulu
(supra)
at [22]- [23].
[7]
2020 (6) SA 578 (WCC).
[8]
Terblanche NO v Damji
2003 (5) SA 489
(C) at 498E-F.
[9]
Coin Security Group (Pty) Ltd v Smit NO
[1992] ZASCA 55
;
1992 (3) SA 333
(A) at
344 A-C.
[10]
2019 (5) SA 310 (GJ).
[11]
[2015] ZAPPHC 1094 (21/09/2015).
[12]
[2013] ZANHC 11 (17/5/2013).
[13]
[2013] ZAWCHC 213
(23/08/2013).
[14]
Act 10 of 2013
[15]
T W Beckett & Co Ltd v H Kroomer Ltd
1912 AD 324
at 334.
[16]
1991 (1) SA 482 (A).
[17]
Wild & Marr
(supra)
at [13].
[18]
Wild & Marr
(supra)
at [13].
[19]
PMG Motors Kyalami (Pty) Ltd & another v Firstrand Bank Ltd,
Wesbank Division
2015 (2) SA 634
(SCA) at [19].
[20]
Mfwethu
(supra)
at [21] and [22].
[21]
Mfwethu
(supra)
at [26].
[22]
Mfwethu
(supra)
at [32].
[23]
Taboo Trading 232 (Pty) Ltd v Pro Wreck Scrap Metals CC & Others
2013(6) SA 141 (KZP) at [11.4].
[24]
2022 (4) SA 529 (SCA).
[25]
Lutchman N.O.
(supra)
at [28].
[26]
Act No 16 of 1963.
[27]
1973 (3) SA 734 (NC).
[28]
S v Munn
(supra)
at 737 H.