Cronje NO and Others v Hillcrest Village (Pty) Ltd and Another (325/08) [2009] ZASCA 81; 2009 (6) SA 12 (SCA) ; [2009] 4 All SA 383 (SCA) (17 July 2009)

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Cronje NO and Others v Hillcrest Village (Pty) Ltd and Another (325/08) [2009] ZASCA 81; 2009 (6) SA 12 (SCA) ; [2009] 4 All SA 383 (SCA) (17 July 2009)

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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case No: 325/08
PIETER ARNOLDUS CRONJE NO First
Appellant
ENVER MOHAMED MOTALA NO Second Appellant
NEDBANK LIMITED Third Appellant
and
HILLCREST VILLAGE (PTY) LTD First Respondent
CRYSTAL COOPER DE LA PIERRE NO Second Respondent
Neutral citation:
Cronje v Hillcrest Village
(325/08)
[2009] ZASCA 81
(17 July 2009)
Coram:
STREICHER ADP, LEWIS, VAN HEERDEN JJA, GRIESEL &
BOSIELO AJJA
Heard:
14 MAY 2009
Delivered:
17 JULY 2009
Summary:
Section 420 of Companies Act 61 of 1973 –
application to avoid dissolution of liquidated company - unlikelihood
of avoidance yielding
a financial benefit to applicant, inaction and
delay on the part of applicant factors to be taken into account in
exercise of court’s
discretion.
ORDER
On appeal from:
High Court,
Pretoria (Mavundla J sitting as court of first instance)
1 The appeal is upheld with costs. In the case of the
second and third appellants such costs are to include the costs of
two counsel.
2 The order by the court below is set aside and replaced
with the following order:
‘
The application is dismissed with costs.’
JUDGMENT
STREICHER ADP (LEWIS, VAN HEERDEN JJA, GRIESEL &
BOSIELO AJJA concurring)
[1] This is an appeal against a judgment in the High
Court, Pretoria in terms of which Mavundla J, in an application by
the first
respondent, Hillcrest Village (Pty) Ltd (‘Hillcrest’),
and the second respondent, the trustees of the CMT Trust (‘CMT’),

declared the dissolution of a company, Waterkloofspruit Projects
(Pty) Ltd (in liquidation) (‘WKP’), to have been void and
ordered
certain ancillary relief. The appeal is with the leave of the court
below.
[2] The respondents’ founding affidavit is only 11
pages long but after receipt of the appellants’ answering
affidavits they
filed a replying affidavit consisting of 131 pages
containing new matter. The appellants thereupon filed a supplementary
answering
affidavit dealing with the new matter. The court below
dismissed an argument by the appellants that it should not have
regard to
new matter in the replying affidavit and proceeded to deal
with the matter on the basis also of such new matter. However, it was

either unaware of the existence of the supplementary answering
affidavit or chose to ignore it. Mavundla J stated in his judgment:

‘Besides, the respondents, it would seem, never sought to file
further affidavits to deal with what they contend is now a new

ground, ie the fraud’ and later ‘I have taken note of the fact
that the fifth, sixth and seventh respondents did not seek leave
of
the Court to deal with what is alleged to be new matters being raised
in the replying affidavit.’ However, according to the
respondents
the appellants had been given leave to deal with the new matter.
Before us the matter was, therefore, argued as if
the replying
affidavit formed part of the founding affidavit and as if the
answering affidavit and supplementary answering affidavit
constituted
the answer to these founding affidavits. That is the sensible way to
deal with the matter. One can certainly not have
regard to the new
matter in the replying affidavit and ignore the supplementary
answering affidavit.
[3] The Plascon Evans rule applies and the facts will be
stated in accordance with that rule. On 19 October 1994 WKP purchased
Erf
1856 Waterkloof Ridge from the City Council of Pretoria (‘the
City Council’). The property was to be developed as part of an

upmarket security village, Waterkloof Boulevard, consisting of 113
residential stands and 107 cluster stands. In terms of the agreement

of sale WKP was obliged to create a nature park at a cost of not more
than R2 158 000 on the remainder of Erf 1856. At
that stage
the remainder of Erf 1856 comprised ‘29,5902 hectare of disturbed
land’ within a natural valley formed by the Waterkloofspruit
which
bisects the site. BOE Private Bank and Trust Company Ltd (‘BOE’)
guaranteed WKP’s obligation to create a nature park.
BOE also made
available to WKP an amount of R14 200 000 secured by a
mortgage bond over the property for purposes of
funding a turnkey
development on the property.
[4] On 3 February 2000 a lease agreement was entered
into between the City Council and WKP which committed WKP, in
addition to the
development of the park, to the long term maintenance
of the park at an initial rental amount of R5 000 per year. In
terms
of the lease agreement the lessee was obliged to commence with
the development of the park within 60 days of signing of the lease

agreement and to complete the park within a 12-month period. WKP
failed to do so. As a result the City Council, on 13 October 2000,
in
terms of the guarantee referred to above, claimed payment by BOE of
an amount of R2 158 000.
[5] It became apparent that the work that had already
been done in respect of the project had deviated from the approved
site and
landscape development plans resulting in substantial damage
being effected to an already seriously disturbed site. BOE thereupon

undertook to complete the project on behalf of WKP.
[6] WKP was entirely dependent on the funding provided
by BOE to complete the development and it had become clear prior to
2000
that it was unable to meet its obligations vis-à-vis BOE,
the City Council in respect of rates and taxes, and other creditors.

In consequence of WKP’s financial constraints BOE, during 2000,
advanced a further loan of R10,8m to WKP secured by a mortgage
bond,
for purposes of restructuring the development. In that year and at
the request of Mr Edward de la Pierre (‘De la Pierre’)
who acted
on behalf of WKP, BOE mandated Pam Golding Properties to launch a
marketing campaign in respect of the stands in the
development. BOE
incurred all the costs of this campaign. But although the campaign
was driven with the assistance of De la Pierre
it failed, mainly
because potential purchasers were interested only in stands in
respect of which transfer could not yet be given
because of problems
with the sub-division and installation of services. As a result BOE
considered itself as not having any alternative
but to foreclose its
mortgage bond. At about this time another creditor applied for the
liquidation of WKP. In an attempt to avoid
the liquidation De la
Pierre was willing to conclude a sale agreement with one Da Silva, on
whom BOE pinned its hopes to undertake
the completion of a
substantial portion of the development. Da Silva purchased the
cluster stands and undertook to pay to BOE the
purchase price in
respect of each cluster stand purchased upon completion of building
operations on the relevant stand and the
sale thereof to a third
party. In terms of the Da Silva agreement BOE undertook to provide
services to the cluster stands at its
cost.
[7] The Da Silva agreement was signed by De la Pierre on
18 July 2000. Three days later, on 21 July 2000, WKP also gave a
general
power of attorney to BOE in respect of the disposition of the
remaining unsold subdivisions of Erf 1856 and undertook not to
interfere
or in any way participate in the marketing and selling of
the properties. In terms of the general power of attorney BOE
undertook
to effect payment of an amount not exceeding R5,1m in
reduction of any lawful and current debt due by WKP to its sundry
debtors.
Pursuant to the general power of attorney serious attempts
were made to market the properties and BOE settled the claims of
various
creditors of WKP involving an amount of approximately R5m.
[8] BOE believed that with Da Silva’s involvement at
least a substantial portion of the project could be successfully
completed.
However, subsequent to the conclusion of the agreement of
sale, WKP contended that De la Pierre had no authority to conclude
the
agreement and refused to ratify it. By that time Da Silva had
commenced with construction. De la Pierre then claimed that the
stands
had a value which BOE considered to be unrealistic and adopted
an attitude which BOE considered to be unreasonable, unreliable and

uncooperative. In the circumstances BOE considered itself not to have
any option other than to apply for the liquidation of WKP.
[9] On 14 February 2001 WKP was placed in liquidation
and Mr Cronje, the first appellant, and Mr Motala, the second
appellant (hereinafter
jointly referred to as the liquidators), were
appointed as provisional liquidators. The liquidators applied to the
Master for authority
in terms of s 386(2A) and (2B) of the
Companies Act 61 of 1973 to sell the immovable property of WKP by way
of public auction
‘met bekragtiging onmiddelik na afloop van die
veiling’. In its request for authority it stated that the amount
owing by WKP
to BOE as mortgagee was R29 442 461.59, that
it would not be possible to recover the amount from the proceeds of
the
auction, that in addition to a capital loss BOE would also have
to write off approximately R400 000 interest per month and
that
BOE would have to pay rates and levies of approximately R180 000
per month to the Local Transitional Council. The liquidators
stated:
‘Die voorwaardes van die voorgenome verkoop van die onroerende
eiendomme is kortliks soos volg:
(‘n afskrif van die voorgenome Verkoopsvoorwaardes hierby aangeheg
vir u meer volledige verwysing)
1 Die eiendomme word elkeen apart opgeveil, en word voetstoots
verkoop, elk onder `n aparte koopkontrak.
2 10% van die verkoopprys in kontant op ondertekening van die
verkoopsvoorwaardes.
3 Die balans koopprys tesame met 16% rente per jaar, bereken vanaf
datum van veiling tot datum van oordrag in die naam van die
koper,
beide dae ingesluit, binne 30 dae vanaf veilingsdatum per bank of
bouvereniging waarborg.
4 Die verkoping vind plaas met onmidelike bekragtiging na afloop van
die veiling, en is geen bekragtigingsperiode van krag nie.
. . .
8 Voor dat die individuele standplase opgeveil word, word dit in die
vooruitsig gestel dat die ontwikkeling as `n geheel opgeveil
sal
word, om sodoende te verseker dat die maksimum voordeel vir die
verbandhouer verkry sal word.’
The conditions of sale provided that the auctioneer
could reject any bid without giving a reason.
[10] The auction took place on 20 March 2001. Although
it was well attended no bidding interest was shown and there was no
realistic
expectation of a selling price in respect of the stands
which would be remotely close to the outstanding balance owed to BOE
at
the time. As a result BOE considered itself not to have any choice
‘but to buy in the project as it was the only creditor’.
It did
so by offering a nominal amount of R100 000 and that bid was
accepted by the auctioneer obviously on instruction of
the
provisional liquidators.
[11] Before the auction, on 6 March 2001, an agreement
of settlement was concluded between Gilboa Properties Ltd (‘Gilboa’),

Hillcrest and other debtors of WKP on the one hand and WKP and BOE on
the other hand. In terms of this agreement –
(i) it was recorded that R5,2m was owed by these debtors
to WKP and that some of these debtors had bound themselves as
sureties
and co-principal debtors to BOE in respect of the
obligations of WKP to BOE in terms of a loan by BOE to WKP;
(ii) the debtors undertook, jointly and severally, to
pay to WKP an amount of R10m together with interest at the rate of
16,5 per
cent per annum;
(iii) the debtors had to deliver share certificates in
respect of 20 million Gilboa shares together with share transfer
forms
as security in respect of the obligations undertaken by them.
(iv) the debtors waived any claims that they might have
against WKP and BOE.
[12] On 24 August 2001 the parties to the first
settlement agreement and the trustees of CMT, being De la Pierre, De
la Pierre’s
wife and one Jan Boshoff entered into a second
settlement agreement in terms of which it was agreed that CMT would
deliver share
transfer forms in respect of the Gilboa share
certificates that had already been delivered, that the liquidators
could sell the
shares on the Johannesburg Stock Exchange and that the
proceeds would be applied in reduction of the debt of R10m. Because
of ‘the
fact that there was a minimal market for the shares’
Hillcrest borrowed R3m against security of a mortgage bond over its
property
and paid the amount to WKP in reduction of the debt of R10m.
In terms of yet a further agreement of settlement (‘the third
settlement
agreement’) concluded on 23 August 2002 the parties to
the second settlement agreement agreed that Hillcrest would transfer
the
immovable property known as Gilboa House to BOE at a price equal
to the amount owing to BOE in terms of the mortgage bond over the

property (being R6,9m), that the Gilboa shares which had not been
sold (20 775 000 less 600 000) would be redelivered
to
CMT and that, against transfer of the property, CMT and the other
parties would be absolved from their obligation to pay the
amount of
R10m to WKP and from their obligations to BOE in terms of any
suretyships. Effect was given to this agreement.
[13] A first and final liquidation and distribution
account was confirmed by the Master on 13 December 2002 and WKP was
dissolved
on 25 June 2004. According to the liquidation and
distribution account BOE, having paid the other creditors, was the
only creditor
that proved a claim against WKP. It proved a claim of
R29 297 229,13 secured by a mortgage bond. Its security
realised
only R100 000 (plus VAT) and an additional R720 000
(plus VAT) in respect of two stands separately auctioned which, after
deduction of deductible costs, entitled it as a secured creditor to a
dividend of R784 527,23 leaving it with a concurrent
claim in an
amount of R28 512 701,90 in respect of which it received a
dividend of R3 619 804,73. The only
other assets reflected
are a cash balance of R688 008,92, an amount of R82 210,34
refundable by SARS and an amount of
R4 209 812,22 payable
by BOE. The latter amount is made up as follows:
Proceeds of Gilboa shares R 109 812,22
Proceeds of loan to Hillcrest R3 000 000,00
Net value of the Gilboa House property R1 100 000,00
[14] BOE suffered a loss of approximately R7m in respect
of the project. It recovered approximately R28,5m from the disposal
of
the stands it purchased at the auction. In addition it credited
its WKP account with an amount of R4,1m in respect of the Gilboa

House property which was transferred to it as part payment of the
debt of R10m and received a dividend of approximately R4,4m from
the
liquidators. R4.1m is the difference between R11m which De la Pierre
claimed the value of the property to have been and the
R6.9m owed in
terms of the mortgage bond held by BOE over the property. The balance
owing by WKP to BOE at the time of the liquidation
was approximately
R29,3m to which should be added R14,5m in respect of post liquidation
interest and expenses.
[15] De la Pierre did not attend the auction and did not
object to the sale. But he became aware of articles in the Pretoria
News
to the effect that banks which were repossessing properties
bought these properties at reduced prices, resold them later at a
profit
and did not pass the profits on to the original owners.
According to the newspaper the ‘country’s banking adjudicator’
said
that this kind of profiteering ‘flies in the face of common
law and the Code of Banking Practice’. He then started
investigating
the matter and those investigations gave rise to the
present application by Hillcrest, of which De la Pierre is the sole
director,
as first applicant and CMT as second applicant. In terms of
the application the applicants prayed for an order:
1 That the dissolution of WKP be declared void in terms
of s 420 of the Companies Act 61 of 1973.
2 That the liquidation and distribution account be
re-opened.
3 That the Master of the High Court be ordered to
appoint new liquidators to wind up WKP.
[16] In their founding affidavit Hillcrest and CMT
alleged that the sale to BOE was void because, contrary to the
provisions of
s 82(1)
of the
Insolvency Act 24 of 1936
, the
auction had not been advertised in the Government Gazette as a result
of which the protection afforded by
s 82(8)
to a purchaser in
good faith was not available to BOE because BOE had acted mala fide.
They alleged furthermore that in the event
of the auction sale being
declared void Hillcrest would have a claim against WKP, Cronje and
BOE because of the transfer of Gilboa
House to BOE. CMT is alleged
also to have an interest in the matter as cessionary of all Gilboa’s
rights ‘in and to all claims
which Gilboa . . . may have against
BOE Bank Ltd . . . or any other third party, in respect of Gilboa’s
rights as shareholder
in Waterkloofspruit Projects (Pty) Ltd’ in
terms of a cession dated 7 May 2001. The cession provides that the
claims referred
to are in terms of the cession ‘not limited to any
specific cause of action and includes any claim or claims which
emanate or
might emanate from or in respect of the liquidation of
Waterkloofspruit Projects (Pty) Ltd and/or any claims in respect of
the
Waterkloof Boulevard Project.’
[17] Section 420 of the Companies Act reads:
‘When a company has been dissolved, the Court may at any time on an
application by the liquidator of the company, or by any other
person
who appears to the Court to have an interest, make an order, upon
such terms as the Court thinks fit, declaring the dissolution
to have
been void, and thereupon any proceedings may be taken against the
company as might have been taken if the company had not
been
dissolved.’
The court below held that Hillcrest and CMT as sureties
in respect of the indebtedness of WKP to BOE had an interest in the
setting
aside of the dissolution of WKP. It held that CMT also had
such an interest as a cessionary of the rights of Gilboa, the sole
shareholder
of WKP.
[18] As sureties Hillcrest and CMT, in the ordinary
course, would have had an interest in the winding-up of WKP in that,
upon payment
of WKP’s debt, they would have had a right of recourse
against WKP. However, they entered into agreements of settlement with
BOE and WKP in terms of which (i) they settled all claims which WKP
and BOE had or might have had against them and (ii) they waived
any
claims that they might have had against WKP. As a result they no
longer, as sureties, had any interest in the winding up of
WKP. As
cessionary of the rights of Gilboa, the sole shareholder of WKP, the
only interest that CMT can have in avoiding the dissolution
of WKP
can be its entitlement to a surplus upon completion of the winding
up.
[19] As indicated above the respondents contended in
their founding affidavit that the sale of the properties at the
auction was
invalid because it had not been advertised in the
Government Gazette as required by
s 82(1)
of the
Insolvency Act
24 of 1936
. The section reads as follows:
‘
82 Sale of property after second meeting and manner of sale
(1) Subject to the provisions of sections
eighty-three
and
ninety
the trustee of an insolvent estate shall, as soon as he
is authorized to do so at the second meeting of the creditors of that
estate,
sell all the property in that estate in such manner and upon
such conditions as the creditors may direct: . . . Provided that if

the creditors have not prior to the final closing of the second
meeting of creditors of that estate given any directions the trustee

shall sell the property by public auction or public tender. A sale by
public auction or public tender shall be after notice in
the
Gazette
and after such other notices as the Master may direct and in the
absence of directions from creditors as to the conditions of sale,

upon such conditions as the Master may direct.’
[20] In their replying affidavit the respondents alleged
that BOE had committed a series of frauds and that the conduct of
Cronje
and Motala is inexplicable in the absence of them having
colluded with BOE. The properties had previously been sold to Da
Silva
for R30m and Cronje and Motala colluded with BOE to ensure that
they were sold to BOE for R100 000. They allege furthermore
that
in terms of
s 31
of the
Insolvency Act, in
the event of the
dissolution of WKP being set aside, Cronje, Motala and Nedbank, the
third respondent, as successor to BOE
1
would be liable to WKP for substantial amounts having regard to their
collusive dealings immediately prior to the liquidation.
[21] The court below referred to the fact that the
properties had been sold for R100 000 while they were clearly
much more
valuable and stated that the allegations of fraud and
collusion required to be investigated. The court expressed the view
that
had these facts, as also the non-compliance with the provisions
of
s 82(1)
of the
Insolvency Act, been
brought to the attention
of the Master, he would probably not have confirmed the liquidation
and distribution account. For these
reasons the court below declared
the dissolution of WKP void, ordered the re-opening of the
liquidation and distribution account,
ordered the Master to appoint
new liquidators and ordered the appellants to pay the costs
occasioned by their opposition to the
application.
[22]
Section 82(1)
of the
Insolvency Act deals
with the
sale of property after the second meeting of creditors and is not
applicable to the auction of WKP’s property. The auction
sale was a
sale authorised by the Master in terms of s 386(2B) of the
Companies Act before a general meeting of WKP’s creditors
had been
convened. The court below therefore erred in considering the section
to be of application in respect of the auction sale.
[23] In terms of
s 31(1)
of the
Insolvency Act
which
, in terms of s 340 of the Companies Act, applies mutatis
mutandis to companies being wound up and unable to pay their debts, a

court may after the liquidation of a company set aside any
transaction entered into by the company before the liquidation,
whereby
the company in collusion with another person disposed of
property belonging to the company in a manner which had the effect of
prejudicing the company’s creditors or of preferring one of his
creditors above another. Section 31(2) provides for the recovery
of
the loss suffered by the company as a result of the collusive
disposition from the other person, for the imposition of a penalty

payable by such person and for forfeiture of the other person’s
claim against the estate of the company if such person is a creditor

of the company. The section deals with transactions by the liquidated
company before its liquidation, ie at the time when De la
Pierre was
in control and before Cronje and Motala had been appointed as
liquidators. There is therefore no merit in the allegation
that, in
terms of the section, Cronje, Motala and Nedbank would be liable to
WKP for substantial amounts should the dissolution
of WKP be avoided.
[24] That several irregularities were committed in the
liquidation of WKP is clear. The Master authorised the sale of the
individual
stands subject to the whole development being auctioned
first to ensure that the maximum benefit for the bondholder be
obtained.
I interpret that authority to mean that the project as a
whole could be auctioned and thereafter the individual stands,
whereupon
the most advantageous offer or offers could be accepted.
None of the parties contended that the Master’s authority should be
interpreted differently. However, individual stands were never
offered for sale at the auction. According to Cronje it became clear

at the auction that ‘due inter alia to the failure by [WKP]
(controlled by De la Pierre) to comply with the provisions regarding

subdivision, the provisions regarding the development of the park . .
. and the generally incomplete and stagnant condition of
the
development as a whole no parties were prepared to purchase
individual erven.’ But according to Adams, at the time Regional

General Manager: Property Finance of BOE, BOE’s purpose in holding
the auction was to attract a willing and able contractor/developer
to
take over the project. He said that, based on BOE’s experience at
the time, BOE realised that it would not be legally possible
nor
financially viable to dispose of the stands individually, and that
there was no realistic prospect of a high enough bid to
settle the
total outstanding debt of WKP. There may well, therefore, never have
been an intention to offer the individual stands
for sale at the
auction. However that may be, the auction was not conducted in the
manner authorised by the Master.
[25] In terms of s 342 and s 391 of the
Companies Act the assets of a company being wound up must be applied
in payment
of the costs incurred in the winding-up and of the claims
of creditors and, unless the company’s memorandum otherwise
provides,
any surplus assets available must be distributed by the
liquidators among the members according to their rights and interests
in
the company. It follows that not only the creditors but also the
members of a company have an interest in the proper winding-up
of a
company. See in this regard
Van Zyl NO v
Commissioner for Inland Revenue
1997 (1) SA
883
(C) at 891C-E where Hodes AJ said: ‘It should be remembered
that a company in liquidation is administered not only for the
benefit
of creditors, but that the liquidator is obliged to take the
interests of members into account. In terms of s 342 (1)
of
the Companies Act, if there is a surplus after payment to creditors,
this goes to members. The interest of members in the proper

winding-up of the company is recognised in ss 360(1), 386(3)(a)
and 387(1) of the Companies Act.’ See also
Concorde
Leasing Corporation (Rhodesia) Ltd v Pringle-Wood NO & another
1975 (4) SA 231
(R) at 234
in fine
to
235A where Beadle ACJ said that it is clear from the authorities and
a matter of common-sense that the liquidator in the winding-up
of a
company owes a duty both to that company and to the creditors. ‘He
owes a duty to the company to see that its assets are
realised and
its liabilities minimised to the best possible advantage of the
company and he owes a duty to the creditors to see
that they suffer
the least loss and receive the most advantageous dividend.’
[26] In the liquidation application it was stated that
the properties had a value of R26,702m. People were interested in the
stands
as is evidenced by the Da Silva agreement, enquiries made by
one Rojahn before the sale, and the sale of stands by BOE to Dotcom

Trading 635 (Pty) Ltd shortly after the auction. No bidding interest
may have been shown at the auction when the project as a whole
was
offered for sale but that did not prove that there were no buyers who
were interested in buying the properties. The mere fact
that the
auction was well attended indicated that there were people who were
interested in the properties. The properties constituted
BOE’s
security in respect of its claim of more than R29m against WKP. It
would therefore not have agreed to a sale of the properties
to a
third party at a price substantially lower than the value (R26,702m)
it had placed on the properties. Fourie, the deponent
to Nedbank’s
answering affidavit, himself stated that he did not dispute ‘that
it would have been obvious to potential bidders
that [BOE] would not
confirm any bid unless a substantial amount could be derived from the
proceeds of the auction for purposes
of settling at least part of
[BOE’s] exposure.’ The fact that no bidding interest was shown,
therefore, did not indicate that
the project had virtually no value;
all it indicated was that nobody was prepared to pay an amount which
was considered acceptable
to BOE. In these circumstances the offer of
R100 000 by BOE should not have been accepted. BOE was not
entitled to preferential
treatment as a buyer and an offer which
would not have been acceptable if made by another buyer should not
have been acceptable
if made by BOE. The offer was nevertheless
accepted by the liquidators. In doing so they did not act in the best
interests of WKP.
It should have been obvious to them that the
property as a unit was much more valuable than R100 000 and that
a much higher
price could be obtained for it. However, it would seem
that they did not realise that they owed a duty to the company.
Confirmation
that that was the case is to be found in the
supplementary answering affidavit deposed to by Cronje where he said:
‘BOE would
remain the preferent creditor and the largest creditor
by far would determine what the liquidators would or would not do.’
[27] Counsel for BOE submitted that it was ludicrous to
suggest that BOE paid R100 000 for the properties. According to
him
the purchase consideration was R100 000 plus the waiver of
BOE’s claim of R29m against WKP. However, there is no evidence
that
BOE waived its claim. On the contrary, it is clear that it did not do
so. But although BOE paid only R100 000 (plus VAT)
for the
properties, it in effect placed a value of R100 000 on its
security with the result that, in terms of the liquidation
and
distribution account, it, in the event, received a dividend of
R784 527,23 in respect of its secured claim and R3 619 804,73

in respect of the balance of its claim as a concurrent claim. Had it
not purchased the property it would have received (up to a
maximum of
R29m plus interest, being its secured claim) the selling price of the
properties plus the dividend of R3 619 804,73
less the
additional costs relating to the selling of the properties. The
additional costs would have included the costs relating
to the
installation of services. The amount that it would have received in
these circumstances less the dividends BOE received
plus the R100 000
(plus VAT) purchase price paid thus, in effect, constitutes the
amount it cost BOE to acquire the properties.
[28] In terms of the first settlement agreement an
amount of R10m was payable by Hillcrest and other debtors to WKP. R3m
was paid
by Hillcrest to WKP in reduction of the debt. In respect of
the balance of R7m payable by the debtors to WKP it was agreed that

Hillcrest would transfer the property known as Gilboa House to BOE at
a price equal to the amount owing to BOE in terms of BOE’s
mortgage
bond over the property and that the remaining debt of R7m would
thereby be extinguished. The liquidators were parties
to the
agreement and by agreeing as aforesaid they simply relinquished an
asset, namely WKP’s entitlement to R7m, in favour of
BOE. Once
again the liquidators did not act in the best interests of the
company. However, in calculating its loss as a result
of the project,
Nedbank did credit its WKP account with R4.1m being the difference
between the R11m De la Pierre claimed the value
of the property to
have been and the R6.9m owed in terms of the mortgage bond held by
BOE over the property.
[29] In the light of these irregularities I am satisfied
that in the event of the dissolution of WKP being avoided WKP may
well
have a claim against the liquidators in respect of the
dereliction of their duty to act in the best interests of the
company. The
question then arises whether in these circumstances the
dissolution of WKP should have been declared void by the court below.
[30] Section 420 confers a discretion on a court, on
application by a person who appears to the court to have an interest,
to make
an order, upon such terms as the Court thinks fit, declaring
the dissolution of a company to have been void. As stated above, the

court below did not have regard to the supplementary answering
affidavits filed by the appellants. It therefore, failed properly
to
apply its mind to the matter. It follows that we may substitute our
view as to how the court below should have exercised its
discretion,
whether or not the discretion to be exercised in terms of s 420
is a discretion in the wide or the narrow sense.
2
In the circumstances and as no argument was addressed to us as to the
nature of the discretion, I do not intend expressing any
view as to
whether it is a discretion in the wide or narrow sense.
[31] The appellants submitted that the avoidance of
WKP’s dissolution would not benefit CMT as, considering BOE’s
concurrent
claim, there is no prospect of a surplus being available
for distribution to the members of WKP. I agree that it would seem
highly
unlikely that CMT would be able to prove that had these
irregularities not been committed there would have been a surplus
available
for distribution to the members of WKP. De la Pierre used
to be in control of WKP and knew what the market conditions were
like.
On his version he was not even aware of the auction but was
under the impression, as a result of Deeds Office print-outs that he

had seen, that the properties had been sold for R100 000 each.
He says that it was only in about May 2004 that he ascertained
from
his attorneys that there had been an auction. The appellants deny
this version but if it were true his disinterest in the
winding-up
proceedings is a clear indication that he did not consider that there
was any possibility of the winding-up yielding
a surplus for
distribution to members. Moreover, De la Pierre said that R100 000
per stand would have been well below market
value but would possibly
have been acceptable in the circumstances. At that price the auction
would have yielded a mere R13,7m,
some R15,5m less than the amount
owing to BOE, and services still had to be installed. BOE took over
the project in order to minimise
its losses and was able to restrict
such losses to approximately R7m. There is no reason to believe that
the liquidators would
have been able to do any better.
[32] De la Pierre contends that the Da Silva agreement
proves that the reasonable market value of the unsold stands, some
six months
prior to the auction, was R30m, to which R8,4m should be
added in respect of the improvements erected by Da Silva on 14 of
them;
that BOE, Cronje and Motala had fraudulently ensured that
interested buyers would be under the mistaken belief that, sold as a
lot, BOE would not accept any bid unless it was way above a
reasonable market value; and that the intention was to ‘torpedo’

the auction so as to ensure that ‘BOE would acquire the lot at a
ridiculously low price so as to continue with the Da Silva
agreement’.
[33] Da Silva had a builder’s lien over the
improvements erected by him and, therefore, for purposes of
determining whether any
surplus for distribution to members could be
achieved, the amount of R8,4m should be left out of the reckoning.
Furthermore, the
Da Silva agreement does not afford evidence that the
stands could have been sold for R30m. First, if the unsold stands in
fact
had a market value of R30m, De la Pierre would never have
allowed the liquidators to proceed with the sale of the stands for
R100 000
each as he allegedly thought they were doing. Second,
Da Silva had to take transfer of the stands within a period of 12
months,
did not have to pay interest on the purchase price of the
first 20 stands he took transfer of for a period of nine months, and,

on the subsequent stands he took transfer of, for a period of six
months from date of transfer. Third, payment of the purchase
price in
respect of the stands had to be effected upon completion of building
operations on the stand and the sale thereof to a
third party only.
Fourth, BOE undertook responsibility for the provision of services to
the stands at its cost. As regards the
alleged fraud the appellants
deny that they ensured that interested buyers would be under the
mistaken belief that sold as a lot,
BOE would not accept a bid unless
it was way above a reasonable market value. It is improbable that
they would have done so but
in any event it is on the appellants’
version that the matter has to be decided.
[34] Counsel for CMT submitted that an interest relied
upon in an application for the avoidance of a dissolution in terms of
s 420
need not be one which is firmly established or highly
likely to prevail. In this regard he relied on
Re
Wood and Martin (Bricklaying Contractors) Ltd
[1971] 1 All ER 732
(Ch) at 736 in which Megarry J said in respect of
the similarly worded s 352 of the UK Companies Act 1948:
‘It does not, I think, have to be shown that the interest is one
which is firmly established or highly likely to prevail: provided
it
is not merely shadowy, I think it suffices for the purpose of s 352.’
In the present case the chances of an avoidance of the
dissolution of WKP yielding any financial benefit to CMT seems to me
to be
remote. But, even if they are such that it can be said that CMT
has a financial interest in the avoidance of the dissolution, the

remoteness thereof is in my view a factor to be taken into account in
the exercise of the discretion vested in a court to avoid
or not
avoid the dissolution.
[35] Other factors to be taken into account are the
following. WKP was placed in liquidation on 14 February 2001 and the
auction
took place on 20 March 2001. In terms of s 363 of the
Companies Act the directors of WKP were required to make out a
statement
as to the affairs of the company and lodge copies thereof
with the Master within 14 days of the winding-up order, and in terms
of s 364(1)(b) the Master should have convened a meeting of
members for the purpose of considering that statement and nominating

a person or persons for appointment as liquidator or liquidators. The
members could therefore have nominated a person as liquidator
and the
person so nominated would have been appointed by the Master unless he
was disqualified from being nominated or appointed
as liquidator, or
failed to give the security mentioned in s 375(1), or was a
person who in the opinion of the Master should
not be appointed as a
liquidator of the company (s 370(1)). Cronje and Motala were
appointed as liquidators. They prepared
a first and final liquidation
and distribution account which was confirmed by the Master on 13
December 2002. Confirmation by the
Master could have taken place only
after the account had lain open for inspection as prescribed in s 408
and if no objection
had been lodged or an objection had been lodged
but had been withdrawn or had not been sustained by the Master or a
court. Thereafter
the company was dissolved on 27 May 2004.
[36] Gilboa and not CMT was a member of WKP. It ceded
all claims that it could have against BOE or any other third party
‘in respect
of [its] rights as shareholders in Waterkloofspruit
Projects (Pty) Ltd’ and not its rights as a shareholder. It should
have been
aware of how the liquidators had dealt with WKP’s
property, it is not alleged that it was not so aware and it could
have done
something about the matter if it did not approve. De la
Pierre alleges that he became aware that there had been an auction
only
in 2004. Coming from the person who was in control of WKP up to
the time of its liquidation I find that hard to believe, especially

in the light of the fact that, in terms of the deed of cession he
took cession of Gilboa’s claims as a shareholder against WKP
on 7
May 2001, less than two months after the auction. However, if true,
CMT, notwithstanding its cession, must have been completely

disinterested in the liquidation process. In either event and having
regard to Gilboa’s inaction and the remote possibility of
an
avoidance of the dissolution yielding a surplus, the dissolution
should in my view not be avoided pursuant to an application
by CMT
launched some five years after the auction, more than three years
after the confirmation of the liquidation and distribution
account
and almost two years after the dissolution of WKP. See in this regard
Goodman v Suburban Estates Ltd (in
liquidation) & others
1915 WLD 15
at 26
where Mason J said in respect of an application for the avoidance of
the dissolution of a company:
‘I [do not] think this extraordinary relief should be afforded to
an applicant, who has acquiesced in the action which he complains
of,
or has been guilty of laches in invoking the assistance of the
Court.’
[37] Section 408 of the Companies Act provides that the
Master’s confirmation of a liquidation and distribution account
‘shall
have the effect of a final judgment, save as against such
person as may be permitted by the Court to re-open the account after
such confirmation but before the liquidator commences with the
distribution’. Because the confirmation has the effect of a final

judgment an applicant for a reopening of the account must show
grounds for
restitutio in integrum
such
as
justus error
or
dolus
before a court
will order the re-opening of the account (see
Kilroe-Daley
v Barclays National Bank Ltd
[1984] ZASCA 90
;
1984 (4) SA 609
(A) at 626G-H). No case of
justus error
or
dolus
in respect of
the account has been made out by the respondents.
[38] For these reasons the court below should in the
exercise of its discretion have dismissed the application.
[39] The respondents in their affidavits and in the
heads of argument filed in this court made numerous allegations of
fraud and
collusion on the part of the appellants. The allegations
were made without spelling out the factual basis thereof so as to
enable
a court properly to deal therewith and before us counsel for
the respondents was unable to give a coherent and comprehensible
exposition
as to precisely what constituted the fraud. Counsel for
the appellants submitted that the respondents should in the
circumstances
be ordered to pay the appellants’ costs on the
attorney and client scale. However, because it is the irregularities
referred
to above that gave rise to the application I do not think
that the appellants should be awarded their costs on the attorney and

client scale.
[40] The following order is made:
1 The appeal is upheld with costs. In the case of the
second and third appellants such costs are to include the costs of
two counsel.
2 The order by the court below is set aside and replaced
with the following order:
‘
The application is dismissed with costs.
_________________________
P E STREICHER
ACTING DEPUTY PRESIDENT
APPEARANCES:
For appellant: M P van der Merwe (1
st
)
S du Toit SC (2
nd
)
T A L L Potgieter (2
nd
)
J G Wasserman SC; G D Wickins (3
rd
)
Instructed by:
Tintingers Inc, Pretoria (1
st
)
Symington & De Kok, Bloemfontein
Savage Jooste & Adams, Pretoria (2
nd
)
Naudes, Bloemfontein
Cliffe Dekker Hofmeyr (3
rd
)
c/o Weavind & Weavind, Pretoria
Webbers, Bloemfontein
For respondent: D A Bregman SC
Instructed by:
Kobus Boshoff & Associates
c/o Van Rensburg Inc, Pretoria
E G Cooper Majiedt Inc, Bloemfontein
1
The rights and obligations of BOE were transferred to Nedbank Ltd in
accordance with the provisions of s 54 of the Banks Act
94 of 1990
with effect from 1 January 2003.
2
See the discussion in
Bookworks (Pty) Ltd v Greater Johannesburg
Tansitional Metropolitan Council and Another
1999 (4) SA 799
(W)
at 804H-808C.