THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case no: 1175/2022
In the matter between:
THE STANDARD BANK OF SOUTH AFRICA LIMITED APPELLANT
and
PYGON TRADING CLOSE CORPORATION RESPONDENT
(Case no. 14097/2020 in the court a quo)
and in the matter between:
THE STANDARD BANK OF SOUTH AFRICA LIMITED APPELLANT
and
JCICC NETWORK 100 CLOSE CORPORATION RESPONDENT
(Case no. 4293/2021 in the court a quo)
and in the matter between:
THE STANDARD BANK OF SOUTH AFRICA LIMITED APPELLANT
and
JEROME BENJAMIN SWARTZ FIRST RESPONDENT
LUCILLE SWARTZ SECOND RESPONDENT
2
(Case no. 4294/2021 in the court a quo)
Neutral citation: Standard Bank of South Africa Limited v Swartz and Others
(Case no 1175/2022) [2024] ZASCA 28 (22 March 2024)
Coram: MBATHA, GORVEN and MOLEFE JJA and BLOEM and
KEIGHTLEY AJJA
Heard: 29 February 2024
Delivered: 22 March 2024
Summary: Practice and pr ocedure – application for business rescue – no leave
given to intervene and bring such application – no application before court – order
placing close corporation in business rescue and allied orders not competent.
Practice and procedure – application for business rescue – any such application
withdrawn – order placing close corporation in business rescue and allied orders not
competent.
Practice and procedure – compromise – court has no jurisdiction to decide
compromised dispute.
Practice and procedure – court order – binding nature – order to be enforced.
3
__________________________________________________________________
ORDER
______________________________________________________________________________
On appeal from: Western Cape Division of the High Court, Cape Town (Goliath
DJP, sitting as court of first instance):
1 The appeal is upheld with costs.
2 The orders of the court a quo are set aside and the following orders are
substituted:
In case number 14097/2020
‘The provisional order of liquidation granted on 18 May 2021 is made final.’
In case number 4293/2021
‘The provisional order of liquidation granted on 9 June 2021 is made final.’
In case number 4294/2021
‘The provisional order of sequestration of the joint esta te granted on 10 June 2021
is made final.’
__________________________________________________________________
JUDGMENT
__________________________________________________________________
Gorven JA ( Mbatha and Molefe JJA and Bloem and Keightley AJJA
concurring)
[1] If the errors and their consequences were not so serious, this appeal could be
said to arise from a comedy of errors. It concerns three related applications. They
were heard simultaneously in the Western Cape Division of the High Court, Cape
Town (the high court) by Goliath DJP. The first was an application for the liquidation
of Pygon Trading CC (Pygon) . The second for the liquidation of JCICC Network
4
100 CC ( JCICC). And the third sought the sequestration of the joint estate of
Dr Jerome Benjamin Swartz and Mrs Lucille Swartz (the joint estate).
[2] Dr and Mrs Swartz were married to each other in community of property. I
shall refer to Dr Swartz as Swartz for the sake of brevity. The joint estate held a 100
percent members’ interest in both Pygon and JCICC (the CCs) . Swartz was the
controlling mind of the CCs and of a number of other entities. The CCs and the joint
estate held various commercial accounts with The Standard Bank of South Africa
Limited (the bank).
[3] The essential background follows. The application to liquidate Pygon was
launched by The Body Corporate of the Montana Sectional Title Scheme
(the Montana BC) on 2 October 2020. On 3 February 2021,1 the bank was granted
leave to intervene and the application was postponed to 17 March. On 16 March,
Swartz launched a business rescue application in respect of Pygon but withdrew it
on 14 May. The Montana BC withdrew from the application on 18 May, on which
date a provisional order liquidating Pygon , and returnable on 15 June, was granted
at the instance of the bank.
[4] JCICC was provisionally liquidated o n 9 June. On 10 June, a provisional
sequestration order was issued against the joint estate. On 14 June, Swartz launched
an application for leave to intervene in the Pygon application so as to seek an order
placing it in business rescue. That application closely mirrored the earlier application
withdrawn by Swartz. The application for leave to intervene was stayed until a
provisional trustee in the joint estate had been appo inted. On 9 July, provisional
1 After this point, all the dates referred to are 2021 dates unless otherwise indicated.
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trustees were appointed to the joint estate. The application for leave to intervene and
to launch a business rescue application , the liquidation applications and the
sequestration application were all ultimately directed to be heard together on
25 October and the various rules nisi were extended to that date.
[5] The provisional trustees of the joint estate put up a report dated 21 October
analysing the financial statements, assets and liabilities of Pygon . They concluded
that it was hopelessly insolvent, both actually and commercially. They reported that
there was no prospect of rescuing Pygon . A ccordingly, they did not support the
application to intervene or to seek leave to launch the intended business rescue
application. They also declined to grant Swartz permission to launch such
application himself.
[6] On 23 November, a settlement agreement was concluded. On the same date
Goliath DJP made it an order of court. This provided, in essence:
(a) that the business rescue application in respect of Pygon was withdrawn;
(b) that the application for the final liquidation of Pygon was postponed and the
rule nisi extended to 10 February 2022;
(c) that by no later than seven calendar days before 10 February 2022, an amount
of R18 million plus VAT would be paid to the conveyancing attorneys appointed by
the liquidators of Pygon in terms of a sale agreement envisaged to be concluded
between the liquidators and Zylec Investments (Pty) Ltd (Zylec);
(d) for the distributions to creditors to be made from that amount;
(e) that if the payment and distributions were made as indicated, the provisional
liquidation orders in respect of Pygon and JCICC and the provisional sequestration
order in respect of the joint estate would be discharged on the return date;
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(f) that if the payment and/or distributions were not made as indicated, final
liquidation orders in respect of Pygon and JCICC and a final sequestration order of
the joint estate would be granted on the return date.
[7] The bank put up a supplementary affidavit deposed to on 24 January 2022 to
inform the court of what had transpired in the interim. It annexed the sale agreement
in which a signed offer in the sum of R18 million was ostensibly made on
21 November by Zylec for three sections in the Montana Sectional Title Scheme
which were owned by Pygon . The offer was accepted by the joint liquidators for
Pygon on 25 November. The sale agreement provided for payment of a deposit of
R1,8 million within 48 hours from acceptance. The af fidavit explained that the
deposit had not been paid timeously. Due to non -performance by Zyle c, the
provisional liquidators for Pygon cancelled the sale agreement.
[8] The bank’s affidavit set out allegedly fraudulent behaviour on the part of the
person who had been on record as the attorney for the joint estate and the two CCs.
This person was said to have forwarded supposed proofs of the payments of both the
deposit and the full purchase price into an account of the conveyancers held with
Nedbank Limited (Nedbank). Not only that but he claimed that the amount for the
deposit had been paid by Zylec into his trust account. Nedbank put up an affidavit
showing that both documents purporting to show that deposits had been made were
fraudulent and that the moneys concerned had not in fact been deposited into any
account held with it . A letter was also put up from the relevant Legal Practice
Council which stated that it had ‘no record that [the person who had been on record
as attorney was ] a practising /non-practising member of the Legal Practice
Council . . .’. It is common ground that no payment of R18 million was made by the
due date or at all.
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[9] The bank submitted that, since the R18 million had not been paid, the consent
order of 23 November should be put into effect. As such, final liquidation orders
should be granted in respect of Pygon and JCICC and the joint estate should be
finally sequestrated.
[10] On 10 February 2022, at the commencement of the hearing , counsel for the
CCs and the joint estate handed up from the Bar an affidavit deposed to by Swartz.
This did not in any way contradict the events following the grant of the order set out
in the supplementary affidavit of the bank. H e acknowledged the settlement
agreement of 23 November and that it had been made an order of court by consent.
He agreed that the amount of R18 million had not been paid on the due date or at all.
He nevertheless contended that the two provisional liquidation orders and the
provisional sequestration order should not be made final, as had been agreed to and
ordered. The essential reason was that it had been envisaged that the R18 million
was to be paid to Pygon as proceeds from a sale agreement concluded between the
liquidators of Pygon and Zylec but that such agreement was never concluded. No
criticism was levelled at the bank, nor was any averment made that the bank had in
any way been involved in the conclusion or failure of the sale agreement. The only
criticism was of Zylec and the perso n who Swartz had instructed to represent the
CCs and the joint estate.
[11] After hearing argument, the high court reserved judgment . It was handed
down on 4 May 2022 . The upshot was an order which discharged the provisional
liquidation order for JCICC and the provisional sequestration order, placed Pygon
in business rescue and granted allied orders appointing a business rescue practitioner
and suspending the liquidation proceedings against Pygon in terms of s 131(6) of the
8
Companies Act 71 of 2008. In addition, the bank was ordered to pay the costs of all
the proceedings.
[12] The judgment of the high court did not mention or deal with the settlement
agreement. It likewise did not mention or deal with the consent order of
23 November providing that the business rescue application had been withdrawn
and that the two final liquidation orders and the final sequestration order had been
consented to should payment not be made . The gist of the judgment was that the
financial woes of the CCs and joint estate were brought about by the unreasonable
conduct of the bank in closing the accounts held with it by the CCs and the joint
estate.
[13] The bank sought the leave of the high court to appeal but this was refused. As
will be detailed below, in the judgment refusing leave, the settlement agreement was
mentioned in passing and the order not at all. The appeal before us is with the leave
of this court.
[14] As regards the business rescue application, the position on 10 February 2022
was that the application for business rescue had never been launched. This because,
in the first place, it was Swartz, a non-party to the Pygon application, who wished to
do so. It was therefore necessary, before a business rescue application served before
the court, for him to obtain leave to intervene in the Pygon application. The launch
of the business rescue application required Swartz to have been granted such leave.
No such leave was ever granted. As a result, the proposed business rescue application
was never launched.
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[15] In the second place, even if it could be said that Swartz had been given such
leave, the first provision of the agreement and order of 23 November was that the
business rescue application was withdrawn. By 10 February 2022, therefore, there
was no business rescue application in existence.
[16] On no basis can it thus be said that a business rescue application served before
the high court on 10 February 2022. Goliath DJP granted an order on a non-existent
application. It need hardly be said that doing so was impermissible and incompetent.
Clearly, therefore, whatever the outcome of the balance of the relief granted by the
high court, the order placing Pygon in business rescue, and the orders which flowed
from it, cannot stand.
[17] The balance of the relief granted by the high court now arises for
consideration. This involve s the liquidation applications and th e application to
sequestrate the joint estate. That dispute had been resolved by the settlement
agreement of the parties on 23 November. That settlement amounted to a transactio,
which is a compromise. It finally settles disputed or uncertain rights or obligations.2
The outcome of the applications in question was agreed upon. If payment was made,
the provisional orders in each matter would be discharged. If payment was not made,
the provisional orders in each matter would be made final.
[18] A transactio is an absolute defence to the matter compromised, having the
effect of res judicata.3 The object of a compromise is to ‘end, or to destroy, or to
2 The Road Accident Fund v Taylor and other matters [2023] ZASCA 64; 2023 (5) SA 147 (SCA) para 36 (Taylor).
3 Per Innes CJ in Western Assurance Co v Caldwell’s Trustee 1918 AD 262 at 270.
10
prevent a legal dispute’.4 In Taylor, a prior dictum of this court was approved to the
effect that once ‘the parties have disposed of all disputed issues by agreement inter
se, it must logically follow that nothing remains for a court to adjudicate upon or
determine’.5 Taylor concluded:
‘To sum up, when the parties to litigation confirm that they have reached a compromise, a court
has no power or jurisdiction to embark upon an enquiry as to whether the compromise was justified
on the merits of the matter or was validly concluded.’6
[19] In addition, the settlement agreement was made an order of court. When a
settlement agreement is embodied in a court order, the effect:
‘. . . is to change the status of the rights and obligations between the parties. Save for litigation
that may be consequent upon the nature of the particular order, the order brings finality to the lis
between the parties; the lis becomes res judicata (literally, “a matter judged”). It changes the terms
of a settlement agreement to an enforceable court order.’7
Needless to say, that dictum applies foursquare to the present matter.
[20] The power to make a settlement agreement an order of court derives from a
long-standing practice of courts to assist parties to give effect to their compromise .
It does not derive from any jurisdiction over the issues in the settled dispute due to
the nature of a transactio explained above. There are three consideration s which
determine whether a court should make a settlement agreement an order. 8
Presumably the high court was satisfied on all three scores since the settlement
agreement was made an order of court . There was certainly no attack launched
against the grant of the consent order of 23 November.
4 Estate Erasmus v Church 1927 TPD 20 at 26.
5 Taylor para 39. The reference is to Legal-Aid South Africa v Magidiwana and Others [2014] ZASCA 141; 2015 (2)
SA 568 (SCA) para 22.
6 Taylor para 51.
SA 568 (SCA) para 22.
6 Taylor para 51.
7 Eke v Parsons [2015] ZACC 30; 2016 (3) SA 37 (CC) para 31 (Eke). References omitted.
8 Eke paras 25-26.
11
[21] An order once made may not generally be altered. The only bases of which I
am aware to prevent the enforcement of a court order are if it is set aside or
abandoned. A party in whose favour an order has been g ranted has the power to
abandon it. The procedures available to set aside an order are stringent and few. The
power to do so arises on appeal and by way of rescission or amendment. Grounds to
rescind are narrow, the reasons for which were explained in Zuma v Secretary of the
Judicial Commission of Inquiry into Allegations of State Capture, Corruption and
Fraud in the Public Sector Including Organs of State and others (Council for the
Advancement of the South African Constitution and another as amici curiae):
‘It is trite that orders of this Court are final and immune from appeal. They are, however,
rescindable, and the Legislature has carefully augmented the common -law grounds of relief by
expressly providing for narrow grounds of rescission by crafting rule 42. Narrow those grounds
are, for good reason, for the very notion of rescission of a court order constitutes the exception to
the ordinary rule that court orders, especially those of this Court, are final. By its nature the law of
rescission invites a de gree of legal uncertainty. So, to avoid chaos, the grounds upon which
rescission can be sought have been deliberately carved out by the Legislature.’9
The Constitutional Court gave reasons why orders cannot be interfered with other
than on those narrow grounds:
‘Once a Judge has fully exercised his or her jurisdiction, his or her authority over the subject matter
ceases. The other equally important consideration is the public interest in bringing litigation to
finality. The parties must be assured that once an order of Court has been made, it is final and they
can arrange their affairs in accordance with that order.’10
9 Zuma v Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in
the Public Sector Including Organs of State and others (Council for the Advancement of the South African Constitution
and another as amici curiae) [2021] ZACC 28; 2021 (11) BCLR 1263 (CC) para 82, citing with approval Vilvanathan
v Louw NO 2010 (5) SA 17 (WCC); [2011] 2 All SA 331 (WCC) at 28J-29C.
10 Zondi v MEC for Traditional and Local Government Affairs and Others [2005] ZACC 18; 2006 (3) SA 1 (CC) ;
2006 (3) BCLR 423 (CC) para 28. See also Firestone SA (Pty) Ltd v Genticuro AG 1977 (4) SA 298 (A) at 306F-G.
12
[22] Setting the matter down for an order to be granted which gives effect to a prior
consent order has been recognised by the Constitutional Court as a form of
enforcement and is unobjectionable:
‘The type of enforcement may be execution or contempt proceedings. Or it may take any other
form permitted by the nature of the order. That form may possibly be some litigation the nature of
which will be one step removed from seeking committal for contempt; an example being a
mandamus.’11
[23] That is what took place here. The consent order , which embodied the
settlement agreement, had to be enforced if it was not set aside. No application was
launched to rescind or appeal the consent order. Nor was it abandoned. It was of full
force and effect. As such, the high court was not entitled to ignore it and to enter the
terrain of the previous lis between the parties. The court had no jurisdiction to do
anything other than give effect to the consent order. The only additional information
required was whether or not the amount of R18 million had been paid timeously or
at all. That undisputed information was before it. In the circumstances, it was obliged
to make the final orders sought by the bank.
[24] Therefore, the position on 10 February 2022 regarding these three applications
was as follows. An order had been granted that i f the R18 million was paid by the
due date, it would be distributed as agreed and the provisional orders discharged. If
not, the provisional orders would be made final. The court no longer had jurisdiction
to determine the settled disputes in the three applications. There was no longer a lis
between the parties concerning those issues. The court’ s only jurisdiction was to
grant the orders which were agreed to and embodied in the order of 23 November.
11 Eke para 31.
13
Which of those orders was to issue depended solely on the payment or otherwise of
the R18 million.
[25] Despite having no jurisdiction to do so , the high court simply ignored the
consent order and purported to enter into the merits of the settled liquidation and
sequestration applications. What is of more concern is that the judgment did not even
mention the settlement agreement or the court order let alone attempt to provide any
grounds in law which entitled the high court to refuse to give effect to the latter. In
addition, the judgment did not consider, or in any way deal with, the lack of
jurisdiction of the high court to determine the compromised disputes.
[26] The high court accordingly made two fundamental errors. It granted an order
on a non-existent application. It then assumed jurisdiction to adjudicate or determine
issues which had been disposed of by agreement and over which it had no
jurisdiction.
[27] The bank had squarely raised the existence of, and had sought to rely on, the
settlement agreement, both in the main application and in that for leave to appeal.
The only reference to the settlement agreement made by the high court was in the
judgment on the application for leave to appeal, in the following terms:
‘Standard Bank also relied on a settlement agreement entered between the parties which provided
that the application for business rescue of Pygon was withdrawn subject to the sale of property for
18 Mill. It was subsequently discovered that the person who had negotiated the contract was a
fraud, and I concluded that the agreement was no longer binding on the parties.’
Apart from failing to give reasons why that conclusion was open to her , and the
failure to even mention, let alone consider, the law concerning transactio, Goliath
DJP did not even mention that a court order had been granted pursuant to the
14
agreement. More significantly, she did not mention or deal with the fact that she
herself granted the consent order or why it should not have been enforced.
[28] Courts are not entitled to simply wish away previous orders or to ignore them
totally when they bear on a matter at hand. In addition, where there is no application
to set aside the order or the agreement, it is not acceptable to deal with either in the
kind of offhand manner as was done in the judgment refusing leave to appeal . The
entire approach taken to the matter by the high court must regrettably be deprecated
in the strongest possible terms.
[29] All of this means that, in regard to the liquidation and the sequestration
applications, the high court lacked the jurisdiction to grant the orders in question.
Since it also granted relief on a non-existent application for business rescue, none of
the orders granted by the high court were competent. It is thus clear that the appeal
must succeed and the orders of the high court must be set aside. Effect must be given
to the order of 23 November whereby the CCs are to be placed in final liquidation
and the joint estate finally sequestrated. As was canvassed during the hearing, the
relevant legislation provides that the costs of litigation leading to such o rders form
part of the costs of administration in insolvency. As such, no orders relating to costs
need be made, either on appeal or in the high court substituted orders.
[30] In the result, the following order issues:
1 The appeal is upheld with costs.
2 The orders of the court a quo are set aside and the following orders are
substituted:
In case number 14097/2020
‘The provisional order of liquidation granted on 18 May 2021 is made final.’
15
In case number 4293/2021
‘The provisional order of liquidation granted on 9 June 2021 is made final.’
In case number 4294/2021
‘The provisional order of sequestration of the joint estate granted on 10 June 2021
is made final.’
____________________
T R GORVEN
JUDGE OF APPEAL
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Appearances
For the appellant: B J Manca SC (Heads of argument drawn up by B J Manca
SC with A H Cowlin)
Instructed by: Edward Nathan Sonnenbergs Incorporated, Cape Town
MM Hattingh Attorneys Incorporated, Bloemfontein
For the respondents: W A Fisher
Instructed by: Sylvester Vogel Attorneys, Cape Town
Ryan Ishmail Attorneys, Bloemfontein