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[2021] ZAGPJHC 95
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Nzwalo Investments (Pty) Ltd v Infoguardian (Pty) Ltd (6950/2020) [2021] ZAGPJHC 95 (23 July 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
Case No: 6950 / 2020
NOT REPORTABLE
NOT OF INTEREST TO
OTHER JUDGES
REVISED
In
the matter between:
NZWALO
INVESTMENTS (PTY) LTD
Applicant
and
INFOGUARDIAN
(PTY)
LTD
Respondent
JUDGMENT
WILSON
AJ
:
1
The applicant (“Nzwalo”)
seeks the winding-up of the respondent (“Infoguardian”)
on the basis that Infoguardian
is unable to pay its debts within the
meaning of section 345 (1) (c) of the Companies Act 61 of 1973 (“the
Act”).
2
The application was originally
opposed. Answering affidavits and heads of argument were filed for
both parties. Counsel for both
parties submitted a joint practice
note after the matter was placed on my roll.
3
However, Infoguardian’s legal
representatives then withdrew, and Infoguardian was left
unrepresented. Nzwalo’s attorneys
contacted Infoguardian
shortly before the hearing to confirm that the matter would proceed,
but no-one ultimately appeared for
Infoguardian at the hearing.
4
The matter accordingly proceeded
unopposed, but Mr. Hollander, who appeared for Nzwalo, nonetheless
carefully presented the case,
and dealt fairly with the issues raised
in Infoguardian’s answering affidavit.
5
On a conspectus of the papers, I am
not satisfied that section 364A of the Act has been complied with,
and I will postpone the application
to permit that to happen. I
briefly set out my reasons for reaching this conclusion below.
6
The matter originally came before
Francis-Subbiah AJ, on 30 June 2020. Francis-Subbiah AJ granted a
provisional winding-up order.
All those with a legitimate interest in
the winding-up of Infoguardian were called upon to advance reasons
why the winding-up order
should not be made final on 30 September
2020. On 30 September 2020, the return day of the provisional order
was extended to 30
November 2020. It seems that on that date, the
papers had not been made available to the presiding Judge seized with
the matter,
and the matter was not entertained. The return date was
not extended further.
7
Section 346A (1) (b) of the Act
reads as follows –
(1) A copy of a
winding-up order must be served on-
(a) .
. . .
(b)
the employees of the company by affixing a copy of the application to
any notice board to which the
employees have access inside the
debtor's premises, or if there is no access to the premises by the
employees, by affixing a copy
to the front gate, where applicable,
failing which to the front door of the premises from which the debtor
conducted any business
at the time of the presentation of the
application;
(c)
. . .
8
At first blush, this provision
contains an anomaly, in that the opening phrase of section refers to
the service of the
order
,
but the body of section 346A (1) (b) refers to the
application
.
Whatever the cause of the anomaly, the least the section requires is
that both the application papers and any provisional winding-up
order
must be served.
9
Mr. Hollander accepted that the
provisional order had not been served in this manner (although the
application papers had). Francis-Subbiah
AJ’s order had been
served on Infoguardian’s erstwhile attorney, who had agreed to
send the order on to Infoguardian’s
employees.
10
This is plainly unsatisfactory. It
is inconsistent with the Act, and it fails to have regard to the fact
that, in these proceedings,
Infoguardian’s employees have a
fundamentally different set of interests to Infoguardian itself. In
those circumstances,
service on Infoguardian’s attorney,
whatever his undertakings, cannot be proper service, whether in terms
of the Act, or
otherwise.
11
Mr. Hollander very fairly conceded
this. However, he argued that it may be appropriate to consider the
provisional order as having
the effect of a
rule
nisi
, which lapsed when it was not
extended on 30 November 2020. A
rule
nisi
has a fixed period of validity.
Once that period of validity has expired, the
rule
lapses (see
Fisher v Fisher
1965 (4) SA 644
(W)). If the
rule nisi
has lapsed, there is nothing to be re-served on Infoguardian’s
employees, and the final winding-up application can be disposed
of
without further delay.
12
The problem in this case is that I
do not think that Francis-Subbiah AJ’s order can be read as
having the effect of a
rule nisi
.
In the first place, the order does not describe itself as a
rule
nisi
. Secondly, there is nothing in the
Act that suggests that provisional winding-up orders are
rules
nisi
by nature. This is to be
contrasted with section 11 of the Insolvency Act 24 of 1937, which
clearly states that provisional sequestration
orders are
rules
nisi
. Thirdly, there is nothing in the
language of Francis-Subbiah AJ’s order itself that suggests
that the provisional order
will lapse in the event that the return
day is not extended.
13
The concept of a
rule
nisi
is to be distinguished from that
of a provisional or interim order. A
rule
nisi
is an order to show cause on a
return day why a particular order should not be made. On its own, a
rule nisi
has no legal effect other than to put those to whom it is addressed
on notice that specified relief will be sought on the return
day.
14
An interim or provisional order is
different. The order has specified legal consequences beyond mere
notice of the prospect of final
relief being granted.
15
Often a
rule
nisi
and an interim interdict are
issued in the same order at the same time, but that does not mean
they are the same thing. When a
rule
nisi
is coupled with an interim
interdict, the order sought to be confirmed on the return day will
have interim effect until the return
day. If the return day passes
then both the
rule
and the interdict expire.
16
But, unless a Court specifically
directs that it should take the form of a
rule
nisi
, it seems to me that a provisional
winding-up order has a life of its own, underpinned by the Act, with
legal consequences that
do not depend on a court’s willingness
to extend them to a specified return day. The provisional order
subsists until the
final disposition, one way or the other, of the
winding-up application.
17
The return day in Francis-Subbiah
AJ’s order was simply a date on which an application for the
final winding-up order could
have been considered in light of the
submissions made by any person who responded to the provisional
order. It was not intended
to circumscribe the effect of the
provisional order itself.
18
There is nothing that suggests that
the provisional order would itself cease to have effect if the return
day came and went without
further action on the part of the court. It
seems to me that such a consequence would be inherently undesirable,
because it would
mean that a company could be placed in and out of
provisional winding-up simply because, as happened this case, a
clerical error
meant that the return day could not be extended.
19
Had the Act intended provisional
winding-up orders to have such a tenuous existence, it would surely
have provided specifically
for provisional winding-up orders to take
the form of
rules nisi
,
as section 11 of the Insolvency Act 24 of 1937 does.
20
It follows that Francis-Subbiah AJ’s
order remains in effect, but the provision of the Act requiring its
service on the respondent’s
employees has not been complied
with. The only relief to be granted in those circumstances is to
postpone the matter to permit
Nzwalo to comply with section 346A (1)
(b) of the Act.
21
In the circumstances, I make the
following order –
21.1
The application is postponed to the opposed
motion roll at 10am on 4 October 2021.
21.2
The applicant is directed to serve a copy
this judgment and the order of Francis-Subbiah AJ on the respondent’s
employees
in the manner provided for in 346A (1) (b) of the Companies
Act 61 of 1973.
21.3
All persons with a legitimate interest are
called upon to put forward their reasons why this court should not
order the final winding-up
of the respondent on 4 October 2021 at
10am, or as soon thereafter as counsel may be heard.
21.4
Costs are reserved.
S D J WILSON
Acting
Judge of the High Court
This
judgment was prepared and authored by Acting Judge Wilson. It is
handed down electronically by circulation to the parties or
their
legal representatives by email and by uploading it to the electronic
file of this matter on Caselines. The date for hand-down
is deemed to
be 23 July 2021.
HEARD ON: 19 July 2021
DECIDED
ON: 23 July 2021
For the Applicant: L
Hollander
Instructed
by Gjersoe Inc
For
the Respondent: No appearance