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[2010] ZASCA 25
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Miller and Others v Nafcoc Investment Holding Company Ltd and Others (324/09) [2010] ZASCA 25; [2010] 4 All SA 44 (SCA) ; 2010 (6) SA 390 (SCA) 2011 (4) SA 102 (SCA) (25 March 2010)
Links to summary
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA
JUDGMENT
Case No: 324/09
In the matter between:
R
MILLER
.............................................................................................
First
Appellant
A
I SURMANY
….............................................................................
Second
Appellant
R
M KGOSANA
…...............................................................................
Third
Appellant
B
K MAMOSEBA
…..........................................................................
Fourth
Appellant
N
Y SERITI
…........................................................................................
Fifth
Appellant
and
NAFCOC
INVESTMENT HOLDING COMPANY LTD
….................
First
Respondent
M
LEAF
…...................................................................................
Second
Respondent
L
BAYA
….......................................................................................
Third
Respondent
T
SAUL
…......................................................................................
Fourth
Respondent
K
H HLONGWANE
….......................................................................
Fifth
Respondent
Neutral citation:
R Miller v Nafcoc Investment
Holding Company
(324/09)
[2010] ZASCA 25
(25 March 2010).
Coram:
CLOETE, MHLANTLA, SHONGWE JJA, GRIESEL
et
MAJIEDT AJJA
Heard:
9 March 2010
Delivered:
25 March 2010
Summary:
Companies Act 61 of 1973; ss 417 and
418: Master in ordering enquiry does not have to act on an
application by a limited category
of persons, or any application at
all; it is competent and sensible for the Master to delegate to the
Commissioner the decision
as to who may attend the enquiry or have
access to the record; s 73: effect of deregistration of company;
liquidators: power of
liquidators to delegate responsibility to third
persons.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
South Gauteng High Court
(Johannesburg) (Snyders J
sitting as court of first instance):
1. The appeal succeeds with costs, including the costs
of senior counsel.
2. The order made by the court a quo is set aside and
the following order substituted:
'The application is dismissed
with costs, including the costs of the urgent application; and the
costs of senior and junior counsel
where such were employed, and of
senior counsel where senior counsel alone was employed, shall be
allowed at all stages of the
proceedings.'
3. The cross-appeal is dismissed with costs, including
the costs of senior counsel.
______________________________________________________________
JUDGMENT
______________________________________________________________
CLOETE JA (MHLANTLA, SHONGWE JJA, GRIESEL et MAJIEDT
AJJA concurring):
[1] On 23 May 2006 a company known as Serveco (Pty) Ltd
was finally liquidated at the suit of its major shareholder Nafcoc
Investment
Holding Company Ltd. Nafcoc and four individuals, each of
whom was at some time a director or employee of Serveco or Nafcoc or
both (and to whom I shall refer as 'the individual applicants'),
brought urgent proceedings in the South Gauteng High Court,
Johannesburg.
The second to fourth respondents in that application
were the joint liquidators of Serveco (to whom I shall refer as such)
and
the first respondent, Mr Miller, was a professional liquidator
who acted on behalf of the joint liquidators. His authority to do
so,
as well as the joint liquidators' ability to confer such authority on
him, are in dispute.
[2] The relief sought by the individual applicants was
aimed at preventing their examination and that of their attorney, and
also
preventing the attendance of Miller, at an enquiry into the
affairs of Serveco authorised by the Master in terms of ss 417 and
418 of the Companies Act 61 of 1973. The application to the Master
for the enquiry had been made ex parte by Miller acting on behalf
of
the joint liquidators and the Master made the order on 27 March 2008.
In terms of the order an attorney, Ms Rene Bekker, was
appointed as
the Commissioner in terms of s 418 of the Companies Act. (The Master
and the Commissioner were respondents a quo but
took no part in those
proceedings or this appeal.)
[3] The enquiry was due to resume on 29 August and
continue on 3 November 2008 and the individual applicants and their
attorney
(who was required to bring documents) were given notices to
attend. On 26 August 2008 and by consent Mokgoatlheng J granted an
interim order which inter alia reserved the costs of the urgent
application for determination by the court hearing the application
for final relief; prescribed time periods for the review of the
Master's decision to order the enquiry and the Commissioner's
decision to issue notices requiring the attendance of the individual
applicants and their attorney at the enquiry; put the parties
on
terms to deliver further affidavits, and recorded that the enquiry
convened by the Commissioner for 29 August and 3 November
2008 would
not take place.
[4] The matter came before Snyders J on 13 November
2008. Judgment was reserved. On 8 December of the same year the
learned judge
made an order:
1. Setting aside the decision of the Master and the
Commissioner:
(a) to convene the enquiry;
(b) to continue or permit the continuation of the
enquiry; and
(c) to issue the notices served on the individual
applicants and their attorney to attend the enquiry on 29 August and
3 November;
and
2. Interdicting Miller from access to the enquiry, the
record thereof and any inspection thereof 'in breach of s 417(7) of
the Companies
Act'.
Miller and each of the joint liquidators were ordered
jointly and severally to pay the costs of the application and the
costs incurred
in the enquiry out of their own pockets. Those parties
now appeal to this court against the whole of the order made by
Snyders
J, and Nafcoc and the individual applicants cross-appeal for
the costs of two counsel in the court a quo. Both sides obtained the
leave of the court a quo (granted by Blieden J).
[5] On appeal counsel representing the applicants sought
to justify para 1(a) of the order of the court a quo and to impugn
the
decision of the Master to order the enquiry into the affairs of
Serveco, primarily on the basis that there had been material
non-disclosures
by Miller in his ex parte application.
1
Three arguments were advanced. First, it was submitted
that Miller had not disclosed that a previous enquiry had been
authorised
by the Master on 7 June 2006 and that that enquiry had not
yet been finalised or alternatively, that Miller had not given
reasons
to the Master justifying the necessity for a second enquiry
when the earlier enquiry had not concluded. Second, it was submitted
that Miller had not disclosed that Serveco was about to be
deregistered. Third, it was submitted that Miller had not disclosed
that the joint liquidators had authorised him to bring the
application and to conduct the enquiry on their behalf.
[6] The first submission is patently untenable. Miller
said in the answering affidavit delivered on behalf of the joint
liquidators
and himself:
'In any event for purposes of
the second enquiry the grounds on which the joint liquidators wished
to hold an enquiry into the affairs
of Serveco were disclosed to the
Master in the application by the joint liquidators, represented by
me, to the Master on 27 March
2008. One of these grounds was the very
fact of the first enquiry and the First Applicant's conduct in
relation thereto.
. . .
It was disclosed to the Master
in the joint liquidators' application that there had been a previous
commission of enquiry also ordered
by the Master under Advocate
Slomowitz SC.
. . .
I admit that the existence of
the first commission of enquiry is material to the decision by the
Master whether to convene a second
one. The existence of the first
commission of enquiry was disclosed to the Master in the application
and indeed, as I have suggested
above, the manner in which the first
commission of enquiry was conducted and then left for dead by the
first applicant and its
attorneys was an important element of the
motivation to the Master to grant leave to convene the second
enquiry.'
[7] The Master filed two reports and refused to divulge
his reasons for granting the order at issue in the appeal. The
appellants
were specifically authorised by the order of Mokgoatlheng
J to launch an application for appropriate relief if they were of the
view that such records which might be filed by the Master and the
Commissioner pursuant to the review application in terms of Uniform
Rule of Court 53 were 'incomplete, deficient or in any other manner
not satisfactory in law'. They did not do so. In the circumstances
I
find the remarks of James AJP in
Foot NO v
Alloyex (Pty) Ltd & others
2
apposite, and I respectfully adopt them:
'It was also argued that it was
impossible to ascertain why the appointment of the commissioner was
made, or whether the commissioner's
investigations were of any value
to the ordinary shareholders because of the veil of secrecy imposed
by Thirion J's order, and
that at the very least I should, at this
stage, allow the respondents to peruse the reports (and even consider
the voluminous records
of the evidence before the commissioner) to
see whether the company's creditors had received any advantage from
the efforts of
the commissioner, and should delay the case until this
opportunity was afforded to them. I have no sympathy with this
submission.
Although the commission was a secret commission and the
contents of the application and the terms of the order of Court were
not
to be disclosed without the leave of the Court (and the evidence
and the record of evidence was not to be disclosed without the
leave
of the Court or the commission) there is no suggestion that any
attempt by the respondents (or anyone else for that matter)
has to
this date been made to obtain such leave. It is true that there were
provisions laid down regarding secrecy but, if a proper
case had been
made for the lifting of the veil, I have no doubt that it would have
been lifted. Although the grant of the order
was secret it must have
been clear to anyone concerned in this matter, and particularly for
those summoned to give evidence before
the commissioner, that an
order had been made and, if any of them had grounds for believing
that justice might be denied unless
they were allowed to peruse the
application for the order and the reports, they should have applied
for leave to peruse them.'
Had there been any doubt whether the disclosures which
Miller said he had made to the Master, had in fact been made, the
court seized
with the application could have preserved the secrecy of
the proceedings by itself looking at the application to the Master.
[8] The second submission is equally without merit.
Miller said in the answering affidavit, and there is no reason to
doubt his
assertion, that he and the joint liquidators only became
aware of the pending deregistration of Serveco on 15 August 2008 ─
ie well after 27 March 2008 when the Master ordered the enquiry.
Miller obviously could not disclose what he did not know.
[9] The third submission is not maintainable in fact or
in law. As a matter of fact, Miller annexed to his application to the
Master
a power of attorney authorising him to bring the application
which was signed by each of the joint liquidators. A copy of the
power
of attorney was annexed to the answering affidavit. And as a
matter of law, the Master did not have to act on the application of
the liquidators or, indeed, pursuant to any application; and whether
or not Miller was authorised by the liquidators to make the
application, is accordingly irrelevant. Section 417(1) of the
Companies Act reads:
'In any winding-up of a company
unable to pay its debts, the Master or the Court may, at any time
after a winding-up order has been
made, summon before him or it any
director or officer of the company or person known or suspected to
have in his possession any
property of the company or believed to be
indebted to the company, or any person whom the Master or the Court
deems capable of
giving information concerning the trade, dealings,
affairs or property of the company.'
The section does not envisage an application, much less
an application from a limited category of persons ─ which is
eminently
sensible for otherwise the Master would be unable to act
unless he was given information from specified persons.
3
The submission that Miller had not disclosed to the
Master that he had been authorised by the liquidators to conduct the
enquiry
on their behalf need not be considered as it was not raised
in the papers. I shall deal later in this judgment with the question
whether it was competent for the liquidators to have given this
authority to Miller.
[10] I therefore conclude that there was no basis for
the order given by the court a quo setting aside the decision of the
Master
to convene the enquiry. I refuse to consider the submission
based on s 386 of the Companies Act
4
that because the liquidators did not have authority to
apply for an enquiry, they could not validly have authorised Miller
to do
so. This point was also not raised in the papers ─
perhaps because there is authority in the high court
5
that it is not open for persons in the position of the
applicants to attack the validity of the enquiry proceedings
initiated by
the liquidator. It is unnecessary to consider the legal
position as the applicants laid no factual foundation for the
argument.
[11] I turn to consider whether there was a basis for
the order setting aside the decision of the Commissioner to continue
or commit
the continuation of the enquiry. Serveco was deregistered
on 25 April 2008. The deregistration was effected by an official in
the
Companies and Intellectual Property Registration Office (CIPRO),
purporting to act in terms of s 73 of the Companies Act and on
behalf
of the Registrar of Companies. Deregistration was incompetent in as
much as Serveco had been wound-up on 23 May 2006 ─
a fact which
was pointed out to the official in a letter before Serveco was
deregistered ─ and the consequence of a winding-up
is not
deregistration but a dissolution in terms of s 419 of the Companies
Act, subsec (1) of which provides:
'In any winding-up, when the
affairs of a company have been completely wound up, the Master shall
transmit to the Registrar a certificate
to that effect and send a
copy thereof to the liquidator.'
Deregistration, on the other hand, puts an end to the
existence of the company. Its corporate personality ends in the same
way that
a natural person ceases to exist on death. Once there has
been deregistration there is obviously no purpose in a corporate post
mortem and no-one would have the authority to conduct one. Serveco
was restored to the register on 10 August 2008 pursuant to an
order
of the Johannesburg High Court made on 4 November 2008, after a rule
nisi
had been issued,
published in newspapers and the Government Gazette and served on
inter alios
the
applicants, requiring all interested persons to show cause why this
should not be done.
[12] The notices requiring the attendance of the
individual applicants and their attorney before the Commissioner were
authorised
by the Commissioner whilst Serveco was deregistered. They
were therefore void for that reason. (I should mention that the
Commissioner
was unaware of the deregistration.) But Serveco was
restored to the register on 10 August 2008, before the application
for final
relief came before the court a quo on 13 November of the
same year. I do not propose analysing what effect in law the
restoration
of the company to the register had on the notices served
on the individual applicants.
6
That would be an academic exercise as new notices will
have to be served on them if they are to be required to attend the
enquiry.
It was accordingly unnecessary for the court a quo to set
the notices aside as it did in para 1(c) of its order; and once
Serveco
had been restored to the register, there was no basis for the
order setting aside the decision of the Commissioner (or the Master)
to continue or permit the continuation of the enquiry. I reject the
submission on behalf of the applicants that the authority of
the
joint liquidators, the Master and the Commissioner ─ all of
which was conferred before the deregistration ─ did
not survive
the deregistration for the simple reason that all such authority was
conferred before Serveco was deregistered, and
there is no warrant
for holding that events that occurred before that event are in any
way affected by it.
[13] I shall now deal with the interdict against Miller
contained in para 2 of the order of the court a quo, which precludes
him
from attending the enquiry and access to the record thereof.
Section 417(7) of the Companies Act provides:
'Any examination or enquiry
under this section or s 418 and any application therefor shall be
private and confidential, unless the
Master or the Court, either
generally or in respect of any particular person, directs otherwise.'
The submission on behalf of the applicants was that the
interdict was justified because Miller did not have the permission of
the
Master to perform any of the acts he was interdicted from
performing. The answer to this, it seems to me, flows from the
provisions
of s 418(1)(b) of the Companies Act which provides:
'The Master or the Court may
refer the whole or any part of the examination of any witness or of
any enquiry under this Act to any
such commissioner, whether or not
he is within the jurisdiction of the court which issued the
winding-up order.'
In the present matter, the Master referred the whole
enquiry to the Commissioner. The order made contains the following
paragraph:
'The contents of this
application and the evidence to be taken at the commission be kept
confidential and private and not be disclosed
without the prior leave
of the Commissioner or the High Court or the Master having first been
had and obtained.'
The power thus conferred was in my view sufficiently
wide to authorise the Commissioner to allow Miller to attend the
enquiry and
to have access to the record. The Commissioner impliedly
exercised the power, well knowing (as appears from the record of the
enquiry)
that Miller was not one of the joint liquidators, by
permitting him to be present at the enquiry. It seems to me not only
competent
but eminently sensible for the Master, having decided to
invoke s 418 and appoint a Commissioner, to delegate to the
Commissioner
the power of deciding who might be allowed to attend the
hearing and have access to the record. Indeed, in such a case I would
find it extraordinary if for example every time an attorney wished to
have a candidate attorney present, or the liquidators wished
to be
advised by an accountant or other expert whilst a witness was being
examined, that permission for either to attend the enquiry
would have
to be sought from the Master or the court.
[14] It will be convenient now to deal with an argument
which is related to the argument I have just dealt with and which was
also
advanced on behalf of the applicants. The submission was that it
was incompetent in law for the liquidators to delegate the conduct
of
the enquiry to Miller. Reliance was based inter alia on the following
statement by Innes CJ (Bristowe and Curlewis JJ concurring)
in
Goldseller v Hill
7
(in regard to joint trustees in insolvency):
'They are in law only one
persona
.
They jointly represent the estate, and together they are the channel
through which the estate can sue or be sued, and the proper
persons
to investigate all its affairs.'
But there is nothing in that statement to suggest that
the liquidators cannot have assistance in such an investigation or,
put conversely,
that all acts relative to the investigation have to
be performed by the liquidators themselves. A useful judgment in the
present
context is
Allan v Erlank's Trustee.
8
In that matter Bristow J held:
'But all the trustee was
appointed to do, all his powers and discretions, the supervision and
management of the liquidation ─
all that is left to Rossouw [an
attorney]. It seems to me, therefore, that the power of attorney is a
general delegation of Hopwood's
powers as trustee; and whether or not
the maxim
delegatus
non potest delegare
applies
under our law to the same extent as it applies in the law of England
─ I think it probably does not ─ it is
inconceivable to
my mind that the Insolvency Law intended that a person appointed as
trustee should be at liberty to delegate his
powers to a third
person. When creditors choose a trustee they choose a person whom
they can rely upon and trust, and the trustee
by accepting his office
binds himself to apply his mind to bring his discretion to bear upon
the various points which arise in
the course of his trusteeship.
Ministerial acts he can delegate, but not matters of discretion.'
[15] Miller said in the answering affidavit:
'I have practiced continuously
as a liquidator for more than 15 years. My business partner, the
Second Respondent, has practiced
continuously as a liquidator for
more than 12 years. Mr Christensen has practiced continuously as a
liquidator for more than 15
years. We all confirm that it is common
practice for the administration of the day to day affairs of a
company in liquidation to
be dealt with by a person who is not
necessarily one of the joint liquidators, but a colleague of one of
the joint liquidators
in the legal entity used by that joint
liquidator for the purposes of liquidating companies.
. . .
Those matters in the winding up
pertaining to a forensic investigation which was conducted into the
affairs of Serveco and to the
application to the Master of the High
Court Johannesburg for leave to convene the insolvency enquiry and
the insolvency enquiry
itself, have been handled by me. I have done
so as a co-member in RMG Trust CC and business partner of the Second
Respondent.
There is nothing whatsoever
unusual or improper in the division of labour I have referred to
above, which was agreed upon by the
joint liquidators, shortly after
they were appointed by the Master.'
Miller also claimed to have the following authority from
the joint liquidators in terms of the power of attorney:
9
'[To] attend on our behalf and
represent us at all hearings of the insolvency enquiry into the
affairs of the company, in respect
of which we sought and obtained in
our capacities as joint liquidators of the company an order from the
Master of the High Court
Johannesburg on 27 March 2008 granting leave
to convene such enquiry, to gain access to all documents in the
enquiry for the purposes
of so representing us, and to furnish
instructions on our behalf to our attorneys of record in that
enquiry, Messers Knowles Husain
Lindsay Inc.'
The applicants described this provision as having
'breathtaking scope'.
[16] I am not satisfied on the papers as they stand that
the joint liquidators have done anything more in this case than
delegate
to Miller ministerial acts, ie acts that he is required to
perform as their subordinate agent; or, put conversely, I am unable
to find that the joint liquidators have delegated to Miller matters
of discretion that their office requires them to exercise both
jointly and personally. The papers do not show that Miller has taken
over the liquidation of the company (or, for that matter,
the running
of the enquiry) to the exclusion of the joint liquidators, as was the
position in
Allan
and
in
Smith & Co & others v Van Rensburg
10
where Curlewis J stated (of delegation of a trustee's
powers):
'If these facts are correct ─
and, generally speaking, I take them to be correct ─ the
respondent was in effect merely
a dummy trustee. He was not, and did
not intend to act the part of, a trustee, but allowed himself to be
nominated through the
instrumentality of Bekker and Bekker [a firm of
attorneys], and then divested himself of all his functions as
trustees by handing
over to Bekker and Bekker the complete management
and control of the estate.'
[17] I accordingly conclude that there was no legitimate
basis for the court a quo to have granted the interdict against
Miller.
That brings me to the question of costs.
[18] It was submitted on behalf of the applicants that
they should at least be awarded the costs in the court a quo of the
urgent
part of the application. On the one hand, they and their
attorney were faced with notices requiring them to attend an enquiry
on
29 August and 3 November under pain of possible criminal sanction.
On the other hand, Miller and the joint liquidators only became
aware
of the deregistration of Serveco on Friday 15 August; and after the
application was served on them on 19 August, they gave
an undertaking
within three days (on 22 August) that the enquiry would not proceed
on 29 August. They also consented to the order
given by Mokgoatlheng
J on 26 August which recorded that the enquiry would not proceed on
29 August or 3 November. Furthermore,
neither Miller nor the joint
liquidators were responsible for the deregistration of Serveco which
was the basis for the invalidity
of the notices, nor were they remiss
in not preventing it. In the circumstances, I consider that it would
be fair to make the costs
of the urgent application costs in the
cause of the main application.
[19] Before making the order I should mention that
counsel representing Miller and the joint liquidators indicated that
the taxing
master requires an order authorising the costs of senior
counsel if such costs are to be allowed on taxation. No submission to
the contrary was made on behalf of the applicants. This is
accordingly not a proper case to examine the practice of the taxing
master, and I express no opinion on it either way.
[20] The following order is made:
1. The appeal succeeds with costs, including the costs
of senior counsel.
2. The order made by the court a quo is set aside and
the following order substituted:
'The application is dismissed
with costs, including the costs of the urgent application; and the
costs of senior and junior counsel
where such were employed, and of
senior counsel where senior counsel alone was employed, shall be
allowed at all stages of the
proceedings.'
3. The cross-appeal is dismissed with costs, including
the costs of senior counsel.
_______________
T D CLOETE
JUDGE OF APPEAL
APPEARANCES:
APPELLANTS: A Subel SC
Instructed by Knowles Husain Lindsay Inc, Johannesburg;
McIntyre & Van der Post, Bloemfontein
RESPONDENTS: J Suttner SC (with him Ms P M Cirone)
Instructed by Werksmans Inc, Johannesburg;
Matsepes Attorneys, Bloemfontein
1
See
eg
Schlesinger v Schlesinger
1979 (4) SA 342
(W) at
348E-350C;
NDPP v Basson
2002 (1) SA 419
(SCA) para 21.
2
1982
(3) SA 378
(D) at 382B-G.
3
Venter
v Williams
1982 (2) SA 310
(N) at
313-4;
Lok v Venter
NO
1982 (1) SA 53
(W) at 58;
Foot NO v
Alloyex (Pty) Ltd
above, n 2, at
383-4.
4
Which
deals with the powers of liquidators.
5
Lok
above, n 3, at 55H-57E.
6
Cf
Tyman's v Craven
[1952]
2 QBD 100
(CA).
7
1908
TS 822
at 827.
8
1908
TS 1187
at 1193.
9
The
power of attorney annexed to the answering affidavit has been signed
by only two of the joint trustees.
10
1913
TPD 28
at 35.