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[2021] ZAGPJHC 612
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Munsamy and Another v Astron Energy (Pty) Ltd and Others (2019/27101) [2021] ZAGPJHC 612; 2022 (4) SA 267 (GJ) (15 September 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
CASE
NO: 2019/27101
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES: YES
REVISED.
YES
DATE:
15 September 2021
In
the matter between:
MAHENDRAN
MUNSAMY
First Applicant
LEEGALE
FRANCESCA ADONIS
Second Applicant
and
ASTRON
ENERGY (PTY)
LTD
First Respondent
THE
STANDARD BANK OF SOUTH
AFRICA
LIMITED
Second Respondent
THE
MASTER OF THE HIGH COURT,
JOHANNESBURG
Third Respondent
RICHARD
KEAY POLLOCK N.O.
Fourth Respondent
JUDGMENT
WEINER
J
Introduction
[1]
There are four applications involving the
applicants herein, Dr Mahendran Munsamy (Dr Munsamy), together with
his wife, Ms Leegale
Adonis (Ms Adonis), which were referred for case
management). The applications relate to the following:
(a)
The rescission of an order granted by
Bhoola J on 16 September 2019, made pursuant to an application
brought by Astron Energy (Pty)
Ltd (‘Astron’) and the
Standard Bank of South Africa Limited (‘Standard Bank’)
under case number 2019/27101,
to appoint the fourth respondent, Mr
Pollock (cited herein in his capacity as the provisional / final
liquidator of Castle Crest
Properties 16 (Pty) Ltd (‘Castle
Crest’). (the Bhoola J rescission application).
(b)
The application brought under case number
2020/16290 for the review and setting aside of the decision by the
Master to appoint Mr
Pollock, as the final liquidator of Castle Crest
(the review application).
(c)
The rescission of an order granted under
case number 2019/24506 by Judge Mia (at the instance of Mr Pollock
and Mr Hasum Yunus Ismail)
extending their powers as provisional
liquidators to institute proceedings to evict the applicants herein
from the property situated
at 112A 9
th
Avenue, Hyde Park
(the ‘Hyde Park’ property),
which is owned by Castle Crest. (‘the Mia J
rescission application’).
(d)
An application brought by Mr Pollock under
case number 2019/13587, seeking the eviction of the applicants from
the Hyde Park property
(‘the eviction application’).
[2]
The present application, which the parties agreed should be
heard first, is the Bhoola J rescission application.
Background and chronology
of events
[3]
Castle Crest is a property owning company, and does not actively
trade.
It owns three immovable properties, one of which is the Hyde
Park property. On 21 July 2009, Castle Crest concluded a home loan
agreement with Standard Bank for approximately R11 million in respect
of this property. On 18 February 2010, a mortgage bond was
registered
over the property. Castle Crest failed to make payments in respect of
the mortgage bond from approximately October 2011.
Dr Munsamy and Ms
Adonis, the applicants herein, have been in occupation of the
property since before the provisional winding-up
of Castle Crest and,
according Standard Bank and Mr Pollock, have been occupying it
without compensation to Castle Crest, and without
paying any rental
in respect thereof.
[4]
On 21 October 2015, Castle Crest was placed under provisional
winding-up
at the instance of Standard Bank, based upon both the home
loan agreement and a suretyship provided by Castle Crest for a
company
styled Gas2Liquids (Pty) Ltd (Gas2Liquids), which was also
secured by a surety mortgage bond of R16 million, as Gas2Liquids was
indebted to Standard Bank in terms of both an overdraft and a letter
of credit. Gas2Liquids was also placed under provisional winding-up
at the same time.
[5]
On 16
November 2015, Mr Pollock and Mr Ismail were appointed as provisional
liquidators of Castle Crest. All legal proceedings involving
the two
companies were suspended until the appointment of a final liquidator
in terms of s 359 of the Companies Act 61 of
1973 (the 1973
Act).
[1]
On 2 February 2017,
Castle Crest was placed in final liquidation.
[6]
The first meeting of creditors was held on 24 November 2017. Standard
Bank proved a claim of approximately R49 million for the home loan
and the suretyship debt in respect of Gas2Liquids. At the meeting,
convened by the Deputy Master of the High Court (Mr Maphaha), Mr
Pollock and Mr Ismail were nominated as the joint liquidators.
[7]
On 27 March 2018, Dr Munsamy applied to the third respondent (‘the
Master’) to remove Mr Pollock as the liquidator. In the
interim, a s 417 enquiry (in terms of the 1973 Act) was convened
into the liquidation of Castle Crest.
[8]
The enquiry in terms of s 417 was to be held on 9 April 2018.
For
various reasons, the applicants contended that the enquiry should
not proceed. They referred
inter alia
to the fact that Mr
Pollock had been appointed as the joint liquidator of Gas2Liquids,
and Midnight Feast Properties 2 (Pty) Ltd,
as well as Castle Crest
(all companies in which the Dr Munsamy is involved).
[9]
The applicants contended that there were disputes between Standard
Bank
and Astron in regard to debts owing to them. Mr Maphaha was
requested to remove Mr Pollock as joint liquidator of Gas2Liquids on
the basis of him not having
locus standi,
as he was unable to
prove the claims of Standard Bank and Astron. It was accordingly
requested that the s 417 enquiry be adjourned
and that the
duties and powers of the liquidators of the three companies be
suspended, pending the Master’s decision to remove
the
liquidators.
[10]
On 6 April 2018, the assistant Master, Mr Mpande addressed a letter
to the Commissioner
of the s 417 enquiry, Bertelsmann J,
informing him that he had received an application for the removal of
the joint liquidators
in all of the above matters, and therefore the
Commissioner was directed to stay the enquiry pending the outcome of
the removal
application.
[11]
However, on 25 May 2018, Mr Maphaha wrote to the applicants’
attorneys stating that
the enquiry proceedings would proceed until
the Master received an order issued by the High Court that the
enquiry proceedings
should be suspended or stayed.
[12]
On 11 July 2018, the applicants’ attorney laid complaints with
the Minister of Justice
and Constitutional Development accusing Mr
Pollock of various offences.
[13]
On 20 February 2019, Astron and Standard Bank instructed their
attorney to call upon the
Master to either issue certificates of
final appointment, alternatively, to decline to accept the
nominations. The Master did not
respond to the letter.
[14]
On 5 April 2019, the Master directed a letter Mr Pollock, requiring a
status report and
restricting his powers. In response, on 24 April
2019, Mr Pollock set out that Castle Crest owned three immovable
properties (one
of which is the Hyde Park property). It was also
stated that, despite the lapse of 18 months since the first meeting
of creditors,
the Master had failed, or neglected, to issue a final
certificate of appointment.
[15]
On 21 June 2019, on application by Mr Pollock and Mr Ismail, Mia J
extended the powers
of the provisional liquidators to bring an
application for the eviction of the applicants. (This order is the
one in which rescission
is also sought).
[16]
On 2 August 2019, Standard Bank and Astron’s application to
have the liquidators
appointed as final liquidators was issued. Such
application was not served on the applicants herein. Standard Bank
and Astron,
contended that it was not necessary to do so. It was
served on the Master (apparently on Mr Maphaha) who the applicants
herein
allege had concealed the file; thus no notice to oppose was
filed.
[17]
In the application which came before Bhoola J, Astron and Standard
Bank sought an order
in the following terms:
‘
1.
Directing the first respondent [being the Master] to:
1.1
within five days of this Order appoint the second and third
respondents [being Mr Pollock and Mr Ismail] as
the final liquidators
of Castle Crest Properties 16 (Pty) Ltd (Registration Number:
2006/016587/07) (in liquidation) (“Castle
Crest”) in
terms of Section 369(2)(a) of the Companies Act, 61 of 1973 and, to
issue certificates of appointment to second
and third respondents in
accordance with the provisions of Section 375(1) of the Companies Act
61 of 1973 (“the 1973 Act”);
Alternatively
1.2
within five days after this Order, and in the
event of the first respondent declining to accept the nomination of
second and third
respondents as the final liquidators of Castle Crest
to give written notice to second and third respondents of that
decision in
terms of the 1973 Companies Act that the first respondent
so declines to accept the nomination of the second and third
respondents;
and
1.3 to
convene a meeting of creditors and members or contributories of
Castle Crest for the purposes of nominating
another person for
appointment as liquidator, stating in the notice that the first
respondent declined to accept the nomination
for appointment as
liquidators of the second and third respondents, and the reasons
therefor.’
[18]
Astron and
Standard Bank set out the chronology of events referred to above and
stated that, that in term of s 359 of the 1973
Act, all legal
proceedings, including the arbitration proceedings against
Gas2Liquids and Castle Crest, were suspended pending
the appointment
of a final liquidator. Thus, they had been unable to complete their
work in this regard. Astron and Standard Bank
contended that the
Master was unable to convene a second meeting of creditors and the
winding-up of Castle Crest had come to a
standstill. The creditors
submitted that the intention of the legislature is that the
winding-up of an insolvent company should
be dealt with expeditiously
when regard is had to the provisions of s 391
[2]
read with s 403 of the 1973 Act.
[3]
[19]
On 16 September 2019, the order by Bhoola J was granted. It was
ordered that:
‘
The
First Respondent is directed within 5 (FIVE) days of this order to
appoint the Second and Third Respondents, being the persons
nominated
by the meeting of creditors and members of 24 November 2017 as the
final liquidators of Castle Crest Properties …
and,
simultaneously to issue certificates of appointment to Second and
Third Respondents in accordance with the provisions of Section
375(1)
of the Companies Act 61 of 1973.’
[20]
On 27
September 2019, the Master apparently unaware of the order that had
been granted, drafted a letter to the provisional liquidators,
Mr
Pollock and Mr Ismail, referring them to the application for their
removal, which was dated 27 March 2018. He stated that he
was
declining to appoint them as final liquidators in terms of s 370
of the 1973 Act.
[4]
The
nominated liquidators had the right to remedy this situation as
provided for in terms of s 371 of the Act.
[5]
As appears below, this letter was apparently not sent.
[21]
On 27 September 2019, a letter was sent to Mr Pollock referring to
the fact that the Master
was withdrawing his certificate of
appointment, dated 13 February 2018, as a final liquidator of
Gas2Liquids.
[22]
According to the applicants, it was only in November 2019 that they
came to have knowledge
of the final appointment of the liquidators of
Castle Crest, pursuant to the order of Bhoola J.
[23]
In June 2020, a letter from Advocate Netshitahame of the Master’s
office to Dr Munsamy’s
attorneys set out the following:
‘
2.
Kindly take note that, it is the duty of the Master to appoint
liquidators and that no judge of
the High court of South Africa has
the authority to effect any appointment of any person as a
liquidator.
3.
Where the Master received a court order directing him to appoint a
particular liquidator,
the Master has a duty to obey such a court an
order.
4.
The decision made by the Master to remove the liquidator in this
matter was made after having
considered the application for removal
of the liquidator and is therefore valid. Such a decision and the
court order cannot simply
be ignored they remain valid until set
aside by the court.
5.
When the Master made the decision to remove the liquidators and to
issue a certificate to
the liquidator without challenging the court
order, he became functus officio and can’t change his decision.
6.
Any person who is aggrieved by any decision of the Master has the
right to review the decision
of the Master.’
[24]
In a letter dated 17 June 2020 to Vathers Attorneys, Mr Mpande
pointed out that the letter
of removal dated 27 September 2019 was
erroneously not sent to the relevant parties. Thus, although he
intended to remove the liquidators,
he could not effect this by
virtue of the court order. On 26 July 2020, this rescission
application was issued by the applicants.
[25]
It is common cause that the Master failed to make a final appointment
in regard to the
final liquidator of Castle Crest, and did not
appoint Mr Pollock (and Mr Ismail) as its final liquidators until the
court order
of Bhoola J was served on the Master.
[26]
As is evident from the chronology set out above,
it appears that this matter has been handled by many different
persons in the office
of the Master. In addition, it appears that
they have expressed contrary views to each other and have issued
conflicting directives.
There has been no uniformity in their
decision making. At the hearing of this matter, the applicants sought
to refer to further
reports emanating from the Masters office, which
had not been filed previously. These reports are the following:
(a)
On 28 July 2021, the Assistant Master (Adv.
Netshitahame) filed a report stating the following:
‘
2.
The notice of motion and annexures was served on the Master and I
have carefully considered the court order referred to in the
notice
of motion together with annexures.
3. The decision to remove
the liquidator in this matter was taken by the Master after having
considered all the submission made
by all the interested parties.
4. The duty to appoint
liquidators resides with the Master of the High Court. The
appointment of the final liquidator is guided
by the provisions of
the Insolvency Act and the Companies Act. Section 54 of the
insolvency Act requires, among other things that,
a person who enjoys
number and value must be appointed. The court order does not refer to
the insolvency provisions. What it does
among other things is to
direct the Master to appoint the respondents as final liquidators of
Castle Crest Properties 16 (PTY)
LTD. The implication of this court
order is that it took away powers of the Master to Act in terms of
the provisions of the insolvency
Act. When the Master decides as to
who should be appointed he does not only consider the provisions of
the Companies Act. The court
order referred to specific Sections of
the Companies Act.
5. The court order made
reference to section 369 (2)(a) of the companies Act, this section in
turn refers to Section 370 of the
Companies Act. The Master had
already declined to appoint the respondents and they were notified as
such. The Master did not notify
them that he has accepted their
nomination but he has done the opposite.
6. I think it is prudent
on my part to state that nomination at a meeting of creditors does
not mean that the nominee will automatically
be appointed. The Master
has the authority to set aside the purported election or to act in
terms of the nomination. I refer the
Honourable Court to the ex parte
application launched by the Master of the High Court South Africa
(Case number 28042/11)
7. In this case the court
found that no judge of the High Court of South Africa has the
authority or jurisdiction to effect any
appointment of any person to
any position of trustee, liquidator or judicial manager.
8. I refer to the case of
De Wet and Another v Khammissa and others (358/2020)
paragraph
15 which provides that once the Master has taken a decision he cannot
change it as he becomes
functus officio
and that there is
(sic) no empowering provisions that allows him to revoke his
decision.
9. As the Master, I am of
the considered view that the court order directing the Master to
appoint the respondents should be set
aside as it has far reaching
consequences.’ (sic)
(b)
In a second Master’s report, also
filed by Adv Netshitahame, on 28 July 2021, the following was stated:
‘
3.
I would like to state that, the decision to remove the liquidator in
this matter was made by the Master and as a result the Master
cannot
revoke or withdraw his own decision. This means that the removal
stands until it is properly set aside.
4. The information before
me reflects that the first responded was appointed based on the court
order which directed the Master
to appoint the first respondents. The
master cannot ignore the court order issued by the above court.
5. I refer to the matter
of Khammissa and others v the Master, where the court stated that the
Master is functus officio and that
there is no empowering provision
that allows him to revoke his decision.’ (sic)
Applicable Legislation
[27]
The administration of insolvent estates is
controlled by the Insolvency Act 24 of 1936 (the
Insolvency Act). The
Insolvency Act deals
with the appointment of trustees and provisional
trustees, responsible for the administration of insolvent estates of
natural persons,
and the manner and fashion in which trustees (and
provisional trustees) have to deal with such estates. These
provisions apply
mutatis mutandis
to the winding-up of insolvent companies, and the appointment and
control over liquidators and provisional liquidators. The Companies
Act 71 of 2008 (the 2008 Act) specifically preserves the winding-up
provisions of the 1973 Act in Item 9 of Appendix 5.
[28]
It
is trite that a liquidator has a position of trust towards creditors,
the company, the Master and the court, and must thus be
independent.
Section 55
of the
Insolvency Act lists
a range of factors which may
disqualify a person from being appointed as a trustee or
liquidator.
[6]
[29]
Section 57
gives the power to the Master to
set aside the appointment of a liquidator who was not properly
elected or is disqualified in terms
of
s 55
from being
appointed. It also grants authority to the Minister to set aside a
decision by the Master to confirm or to refuse to
confirm the
election of a liquidator. The court also has the power to declare a
person disqualified from appointment, but this
does not detract from
the Master’s capacity to do so. In addition,
s 60
of the
Insolvency Act empowers
the Master to remove a liquidator on the
grounds set out therein. It is important to note that the original
version of the section
granted that power to the court, but in 1965
an amendment transferred this capacity to the Master.
[30]
In
Ex
parte: Master of the High Court of South Africa (North Gauteng)
,
[7]
Bertelsmann J set out, in detail, the evolution of the Master’s
powers in terms of the
Insolvency Act in
regard to the appointment of
liquidators. What emerges,
inter
alia
,
from this decision is that—
‘
The
master is in control of the entire process of administration and
liquidation of insolvent estates, an important part of which
consists
of the oversight she or he exercises over the trustees in the
performance of their functions as mandated by the
Insolvency Act.’
[8
]
[31]
Many of the powers and duties that the
Master exercises in sequestration proceedings are applicable to the
administration of companies
that are liquidated. The Master has the
power to appoint liquidators and to decline the appointment of a
liquidator. Section 379(2)
of the 1973 Act provides that a court may
remove a liquidator if the Master fails to exercise this function.
This power, however,
is not expressed in the Act where a Master has
failed to
appoint
a
liquidator – only where a Master has failed to remove a
liquidator. Bertelsmann J went on to state:
‘
Every
stage of the administration of insolvent estates and companies and
close corporations under winding-up, from the launching
of the
original sequestration or liquidation application to the
rehabilitation of the insolvent or the deregistration of the
corporate
entity, is controlled by the master’s office. Its
duties include many specialised functions and administrative tasks
that
can only be carried out efficiently by a dedicated organisation
that exists specifically for that purpose.
An organisation of this
nature has the institutional knowledge and expertise to apply policy,
and to assess the ability and integrity
of trustees and liquidators,
and is therefore able to judge whether or not individuals are duly
qualified to be appointed, either
at all or to a specific estate. In
this respect
Lipschitz v Wattrus NO
1980 (1) SA 662
(T), a
full-bench decision of this court, provides useful guidance. It
upheld the master’s decision no longer to allow a
particular
individual to be appointed to any of the provisional offices under
the former’s control. In doing so, the court
emphasised the
intricacy and volume of work that the master’s office has to
perform, and recognised that the master keeps
lists of the names of
potential trustees, liquidators and judicial managers composed of
persons who are prima facie qualified to
be appointed. If the master
comes to the bona fide conclusion that a particular person is no
longer fit to fulfil the role of provisional
trustee, liquidator or
judicial manager, he has the power, but also the duty, to prevent
such person’s appointment. See further
Krumm and Another v
The Master and Another
1989 (3) SA 944
(D).
It is
clear that the master has knowledge concerning the ability,
integrity, honesty and dedication of persons who may wish to be
considered as trustees, liquidators and judicial managers, whether
provisional or otherwise. This enables the master to carry out
the
policy to appoint persons from a previously disadvantaged background
as additional trustees or liquidators, in addition to
those elected
by the creditors. The master’s office is also more likely to be
aware of any potential or actual conflict of
interest a candidate
might have in a particular instance that would prevent her or his
appointment. This is information that is
built up in the office
dedicated to the administration and oversight of insolvencies and
liquidations over a period of many years.
It is information that the
court simply does not possess, and that does not form part of the
facts that are disclosed to the court
when application is made for a
provisional sequestration or liquidation.’
[9]
[32]
Bertelsmann J issued the following order in
regard to the appointment of liquidators:
“
1.
It is declared that the Master of the High Court of South Africa is
the only person authorised to appoint:
1.1.1
trustees and provisional trustees of sequestrated and provisionally
sequestrated estates;
1.1.2
liquidators and provisional liquidators of companies and close
corporations in liquidation or provisional liquidation; and
1.1.3
judicial managers and provisional judicial managers of companies in
judicial management and provisional management; and
1.2
no judge of the High Court of South Africa has authority or
jurisdiction to effect any appointment of any person to any of the
positions referred to in para 1,
nor to make any recommendations
to the master in respect of any appointment to any of these
positions
.’ [emphasis added]
[33]
In
Master
of the High Court (North Gauteng High Court, Pretoria) v Motala
NO
,
[10]
the SCA referred with approval to the findings of Bertelsmann J in
Ex
Parte The Master
.
The SCA stated:
‘
Any
doubt as may have existed as to the power of the high court to
appoint judicial managers — and to my mind there ought
to have
been none — has now been laid to rest by the judgment of
Bertelsmann J in
Ex parte The Master of
the High Court South Africa (North Gauteng)
2011 (5) SA 311
(GNP). In that matter the Master saw fit to approach
the high court for declaratory relief. What motivated the application
appears
from the reported judgment (paras 2 – 4), which reads:
“
The
application has been necessitated by a practice that has developed
over the past years that attorneys who apply for the sequestration
of
individuals or the liquidation of companies (or, for that matter,
close corporations), or for judicial management of a company
in terms
of the Companies Act 61 of 1973 (see now Act 71 of 2008), include a
prayer in the notice of motion and draft order for
the appointment of
a specific individual as trustee or provisional trustee, as
liquidator or as provisional liquidator or judicial
manager or
provisional judicial manager.
Advocates
who are instructed to appear in these applications, usually in the
unopposed motion court, move for orders in these terms,
and, as is
apparent from a number of orders granted by judges of this court, do
so successfully.
The
Master contends that such orders are in conflict with the clear
provisions of the relevant statutory provisions, and that officers
of
the court should not apply for, and this court should not grant,
orders that interfere with the exercise of the applicant’s
functions.”’
[34]
Counsel
for Astron and Standard Bank submitted that
the
South African insolvency system is creditor-driven and thus, the
majority of creditors in number or claims have the right to
elect
trustees and liquidators, and to take decisions in respect of the
manner in which assets falling into the estate or constituting
property of a corporate body in winding-up should be dealt with. They
referred
in this regard to
Minister
of Justice and Another v South African Restructuring and Insolvency
Practitioners Association and Others
,
[11]
where it was held that
:
‘…
the
fundamental purpose of insolvency legislation … is to secure
the realisation of the remaining assets of the insolvent
and the
distribution of the resulting amounts among creditors in accordance
with the order of preference laid down by law. Although
the master
plays a vital role in overseeing the process of winding up an estate,
the process is nonetheless creditor-driven. It
is the majority of
creditors in number or value of claims that have the right to elect
trustees or nominate liquidators. …
It is the creditors who
stand to lose as a result of the insolvency. They are the best judges
of their own interests and they are
the people best situated to
instruct the trustee or liquidator how to go about the process of
liquidation or winding-up.’
[35]
However,
in
City
Capital SA Property Holdings Limited v Chavonnes Badenhorst St Clair
Cooper NO
,
[12]
the SCA explained this as follows—
‘…
[Section]
367 of the 1973 Act makes it clear that the Master appoints
liquidators for the purpose of conducting the winding-up of
a
company. The Master’s office, which controls every stage of the
administration of companies under winding-up, from the
launching of
liquidation applications to the deregistration of companies, has the
institutional knowledge and expertise to apply
policy and assess the
ability and integrity of liquidators who may wish to be appointed.
Although the South African insolvency
system is creditor-driven and
the majority of creditors have the right to elect liquidators, their
choice of liquidator is subject
to the Master’s approval and
the performance of the functions of liquidators is subject to the
Master's control.’
[36]
The
wishes of the creditors, although persuasive, cannot take the pace of
the Master’s decision. Neither can a court exercise
such
function to the exclusion of the Master. This much is clear from
prayer 1.2 of the order made in
Ex
Parte The Master
which provided that a Judge may not make ‘any recommendations
to the master in respect of any appointment to any of these
positions.’
[13]
[37]
Most authorities relating to this issue have concerned the
court directly appointing a liquidator. Standard Bank and Astron
attempted
to distinguish the present case, as Bhoola J did not
herself appoint the liquidator, but issued an order that the Master
should
appoint Mr Pollock as final liquidator.
The
argument of Dr Munsamy is that the court could not have granted the
order because it had no power to do so; only the Master
has the power
to appoint the liquidator. This is a question of semantics and is
specifically prohibited in terms of the order issued
by Bertelsmann J
in
Ex Parte the Master
,
and approved by the SCA in
Motala.
The Master (erroneously) believed he could not disobey the court
order until it was set aside. Whether an invalid order must be
set
aside will be dealt with below.
[38]
The alternative relief sought by Astron and
Standard Bank may have been the appropriate relief to seek, in view
of the substantive
and inexplicable delay by the Master in appointing
a final liquidator. Such relief is competent in terms of s 370 and
s 371
of the 1973 Act.
Rescission and Delay
[39]
This matter was brought by way of an
application for rescission. It was brought on one of three grounds:
(a)
Rule 31(2)(b);
(b)
Rule 42(1)(a); or
(c)
The common law.
[40]
The application was argued on the basis of
Rule 42(1)(a):
‘
(1)
The court may, in addition to any other powers it may have,
mero
motu
or upon the application of any
party affected, rescind or vary:
(a)
An order or judgment erroneously sought or erroneously granted in the
absence of any party affected thereby; …’
[41]
The
purpose of Rule 42(1)(a) is to correct an obviously wrong judgment or
order. It requires proof that the judgment or order could
not lawfully have been granted; that it was granted in
the absence of a party; and that such party’s rights
or interests were affected by the judgment. Unlike a Rule 31 or
common law rescission, good cause need not be shown for an applicant
to succeed.
[14]
Standard Bank
and Astron argued that the 20 day period provided for in Rule
31(2)(b) would be a reasonable period in terms of this
Rule as well.
However, that time period is not set in stone and depends on the
circumstances of each case
[42]
In
regard to the delay, the applicants have provided a reasonable
explanation for the delay of approximately seven months. The relevant
reasons involved the onset of the lockdown, the COVID-19 regulations,
Ms Adonis contracting COVID-19 and, in addition, having to
undergo
lumbar spine surgery. There were also enquiries made with the SIU and
other entities during that period. Further, the conflicting
decisions
emanating from the Masters’ office as to whether the removal of
the liquidators had been effected, further delayed
the applicants
launching of the application. It is trite that the delay must be
judged together with the merits of the case. The
Constitutional Court
in
Geldenhuys
v National Director of Public Prosecution and Others
held that,
‘
[t]he
general rule is that non-compliance with the rules of this court will
be condoned when it is in the interests of justice to
do so.’
[15]
[43]
More
recently, the Constitutional Court in
Ferris
v FirstRand Bank Ltd
held that:
[16]
‘…
lateness
is not the only consideration in determining whether condonation may
be granted … the test for condonation is whether
it is in the
interests of justice to grant it. As the interests-of-justice test is
a requirement for condonation and granting leave
to appeal, there is
an overlap between these enquiries. For both enquiries, an
applicant's prospects of success and the importance
of the issue to
be determined are relevant factors.’
[44]
In the
present case, the order was clearly not only erroneously sought and
erroneously granted, but invalid, as the court had no
power to grant
it. The interests of justice thus demand that condonation should be
granted.
Must
the order be declared a nullity and set aside
[45]
In view of what is set out above, the order
of Bhoola J is invalid and thus constitutes a nullity.
[46]
The
courts, in respect of administrative and executive decisions, have
consistently held that such decisions are ‘legally
effective’
until set aside.
[17]
The
general principle in respect of court orders, which echoes this
position, is set out by the authors of
Erasmus:
Superior Court Practice
as
follows:
‘
An
order of a court of law stands until set aside by a court of
competent jurisdiction. Until that is done, the court order must
be
obeyed even if it may be wrong; there is a presumption that the
judgment is correct.’
[18]
[47]
A court order is therefore presumed to be
valid and correct until it is set aside. However, a somewhat
different approach was taken
by the SCA in the matter of
Motala
,
wherein it was held—
‘
[The
Judge] was not empowered to issue, and therefore it was incompetent
for him to have issued, the order that he did. The learned
judge had
usurped for himself a power that he did not have. That power had been
expressly left to the Master by the Act. His order
was therefore a
nullity. In acting as he did, [the Judge] served to defeat the
provisions of a statutory enactment. It is after
all a fundamental
principle of our law that a thing done contrary to a direct
prohibition of the law is void and of no force and
effect.... Being a
nullity a pronouncement to that effect was unnecessary. Nor did it
first have to be set aside by a court of
equal standing.’
[19]
[48]
As the order granted by Bhoola J is a
nullity, the question arises whether it is necessary for this Court
to declare it invalid
and/or rescind or set it aside. This question
reflects the tension between legal certainty and the principle of
legality, principles
which both stem from the rule of law. The
tension between these two principles is reflected in the diverging
positions of the officials
of the Master’s office in respect of
the status of the Bhoola J order – that is – can it be
ignored, or must
it be considered binding until it is set aside or
rescinded?
[49]
This
tension has also found its way into the decisions (and dissents) of
the SCA and the Constitutional Court, as demonstrated in
Oudekraal,
[20]
Kirland,
[21]
Merafong
[22]
and
Magnificent
Mile.
[23]
In
Oudekraal
,
the SCA held that our law had long recognised that, ‘even an
unlawful administrative act is capable of producing legally
valid
consequences for so long as the unlawful act is not set aside’.
[24]
[50]
The
Constitutional Court first had occasion to consider the
Oudekraal
decision
in
Kirland
, where
it examined the status of an improper administrative decision made by
a state official. In
Kirland
,
the SCA had overturned a High Court’s order setting aside the
approvals for the establishment of two private hospitals on
the basis
that the validity of the approval was not an issue before the High
Court, and that the High Court was thus not entitled
to set it aside
– the Department had not taken the approval on review. As
Cameron J, in
Kirland
put it, ‘[t]hat was a fundamental error. For the decision does
exist. It continues to exist until, in due process, it is
properly
considered and set aside.’
[25]
The court found that ‘[t]he essential basis of
Oudekraal
was that
invalid
administrative action may not simply be ignored, but may be valid and
effectual, and may continue to have legal consequences,
until set
aside by proper process
.’
[26]
[emphasis added]
[51]
Cameron J stated further that—
‘
The
fundamental notion — that official conduct that is vulnerable
to challenge may have legal consequences and may not be
ignored until
properly set aside — springs deeply from the rule of law. The
courts alone, and not public officials, are the
arbiters of
legality.’
[27]
[52]
In
the majority judgment in Merafong
,
again penned by Cameron J, he stated that—
‘
The
import of
Oudekraal
and
Kirland
was that government cannot simply ignore an apparently binding ruling
or decision on the basis that it is invalid. The validity
of the
decision has to be tested in appropriate proceedings. And the sole
power to pronounce that the decision is defective, and
therefore
invalid, lies with the courts. Government itself has no authority to
invalidate or ignore the decision. It remains legally
effective until
properly set aside.’
[28]
[53]
Jafta J, in a dissenting judgment, found
that such an approach was at odds with the principle of legality. He
stated that the principle
of legality cannot countenance an invalid
administrative act for the simple reason that—
‘…
an
illegal administrative act, although it may exist in fact, does not
exist in law and consequently it may not be enforced because
it is
not binding. This is so because an administrative act derives its
legal force from its validity. Simply put an invalid act
is
unenforceable.’
[29]
[54]
However,
in
Magnificent
Mile
,
Jafta J seemed to have softened his stance somewhat. He stated that—
‘…
we
must acknowledge the principle that, just like laws, administrative
actions are presumed to be valid until declared otherwise
by a court
of law. What this means is that any person who disregards such law or
action does so at his or her own peril should
it turn out that the
law or action is valid. But the presumption like all presumptions is
rebuttable.’
[30]
[55]
Directly relevant to the present case was
Cameron J’s statement in
Kirland
,
which distinguished the position from an order granted by a court,
which did not have jurisdiction to grant such order. He referred
in
this regard to
Motala –
‘
In
The
Master of the High Court (North Gauteng High Court, Pretoria) v
Motala NO and Others
2012 (3) SA 325
(SCA) the Supreme Court of Appeal, reaffirming a line
of cases more than a century old, held that judicial decisions issued
without
jurisdiction or without the citation of a necessary party are
nullities that a later court may refuse to enforce (without the need
for a formal setting-aside by a court of equal standing). This seems
paradoxical but is not. The court, as the fount of legality,
has the
means itself to assert the dividing line between what is lawful and
not lawful. For the court itself to disclaim a preceding
court order
that is a nullity therefore does not risk disorder or self-help.
[31]
[56]
The present case is not on all fours with
any of the authorities referred to above. In
Motala
,
it was a subsequent contempt (of an invalid order) that Ponnan J held
was unenforceable. He stated—
‘
Being
a nullity a pronouncement to that effect was unnecessary. Nor did it
first have to be set aside by a court of equal standing.
For
as Coetzee J observed in
Trade
Fairs and Promotions (Pty) Ltd v Thomson and Another
1984
(4) SA177 (W) at 183E:
“
It
would be incongruous if parties were to be bound by a decision which
is a nullity until a Court of an equal number of Judges
has to be
constituted specially to hear this point and to make such a
declaration.”’
[32]
[57]
In
City
Capital
,
Schippers AJ held that, as City Capital did not seek to review the
Master’s decision appointing the respondents as liquidators,
or
to set aside that certificate of appointment, the finding that the
court orders were a nullity, would have no practical effect.
[33]
[58]
In the present matter, the applicants have
sought to do both. On the basis that the order of Bhoola J is a
nullity, no order to
that effect would be necessary, based upon
Cameron J’s reference to
Motala
in
Kirland
.
But the situation is different. Firstly, it is the actual order that
is under attack, not the later enforcement of it through
contempt
proceedings, as in
Motala
.
Secondly, the order led to the Master’s appointment of Mr
Pollock, which decision the applicant seeks to review and set
aside,
which was not the case in
City Capital
.
Thirdly, the applicants sought a rescission in terms of Rule 42. It
is clear from what is stated above, that the order, in addition
to
being a nullity, was, axiomatically erroneously sought and granted.
[59]
Thus, in view of the other applications,
which are pending (and in particular, the review application), I
believe that, to ensure
certainty, the Court should issue a
declaration of the order’s pre-existing invalidity and set it
aside. This order would
follow by virtue of the Bhoola J order being
invalid and/or by virtue of it being erroneously sought and granted.
Costs
[60]
The applicants sought costs from the
respondents in the case of opposition. However, the applicant seeks
an indulgence and condonation
from this Court in this application.
The history of this matter also demonstrates that many delays have
been caused by the applicants
in this, and the related matters. The
founding affidavit with the annexures runs to over a 1000 pages.
Many, as yet, untested and
offensive allegations have been made
against the respondents. This matter turned on one crisp issue –
was the High Court
authorized to grant the order it did? The majority
of the allegations and annexures were not necessary for a decision on
this point.
I am accordingly of the view that the applicants should
pay the costs of the application up until the filing of the notice of
intention
to oppose. All subsequent costs should be costs in the
liquidation.
Accordingly, the
following order is made:
1.
Condonation is granted to the applicants
for the delay in launching of the application for rescission of the
order granted on 16
September 2019.
2.
The order granted by Bhoola J on 16
September 2019 is declared a nullity and set aside.
3.
The applicants are to pay the costs of the
application up until the filing of the notice of intention to oppose.
All subsequent
costs should be costs in the liquidation.
S
E WEINER
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION, JOHANNESBURG
This
judgment was handed down electronically by circulation to the
parties’ and/or parties’ representatives by email
and by
being uploaded to CaseLines. The date and time for hand-down is
deemed to be 10h00 on
15 September 2021.
Date
of hearing:
5 August 2021
Date
of judgment:
15 September 2021
Appearances:
Counsel
for the applicants:
S van Rensburg SC
Attorney
for the applicants:
Vathers Attorneys
Counsel
for the 1
st
& 2
nd
respondents:
J Smit; A McKenzie
Attorney
for the 1
st
& 2
nd
respondents:
Fairbridges Wertheim Becker
[1]
Section
351 titled ‘Legal proceedings suspended and attachments void’
provides:
‘
(1)
When the Court has made an order for the winding-up of a company or
a special resolution for the voluntary winding-up of a
company has
been registered in terms of section 200—
(a)
all civil proceedings by or against the company concerned shall be
suspended until the appointment of a liquidator; and
(b)
any attachment or execution put in force against the estate or
assets of the company after the commencement of the winding-up
shall
be void.
(2)(a)
Every person who, having instituted legal proceedings against a
company which were suspended by a winding-up, intends to
continue
the same, and every person who intends to institute legal
proceedings for the purpose of enforcing any claim against
the
company which arose before the commencement of the winding-up, shall
within four weeks after the appointment of the liquidator
give the
liquidator not less than three weeks’ notice in writing before
continuing or commencing the proceedings.
(b)
If notice is not so given the proceedings shall be considered to be
abandoned unless the Court otherwise directs.’
[2]
Section
391, titled ‘General duties’ provides:
‘
A
liquidator in any winding-up shall proceed forthwith to recover and
reduce into possession all the assets and property of the
company,
movable and immovable, shall apply the same so far as they extend in
satisfaction of the costs of the winding-up and
the claims of
creditors, and shall distribute the balance among those who are
entitled thereto.’
[3]
Section
403, headed ‘Liquidator’s duty to file liquidation and
distribution account’ provides:
‘
(1)
(a) Every liquidator shall, unless he receives an extension of time
as hereinafter provided, frame and lodge with the Master
not later
than six months after his appointment an account of his receipts and
payments and a plan of distribution or, if there
is a liability
among creditors and contributories to contribute towards the costs
of the winding-up, a plan of contribution apportioning
their
liability.
(b)
If the final account lodged under paragraph (a) is not a final
account, the liquidator shall from time to time and as the
Master
may direct, but at least once in every period of six months (unless
he receives an extension of time), frame and lodge
with the Master a
further account and plan of distribution: Provided that the Master
may at any time and in any case where the
liquidator has funds in
hand, which ought in the opinion of the Master to be distributed or
applied towards the payment of debts,
direct the liquidator in
writing to frame and lodge with him an account and plan of
distribution in respect of such funds within
a period specified.
(2)
…’
[4]
Section
370, titled ‘Master may decline to appoint nominated person as
liquidator’ provides:
‘
(1)
If a person who has been nominated as liquidator by meetings of
creditors and members or contributories of a company was not
properly nominated or is disqualified from being nominated or
appointed as liquidator under section 372 or 373 or has failed
to
give within a period of seven days as from the date upon which he
was notified that the Master had accepted his nomination
or within
such further period as the Master may allow, the security mentioned
in section 375 (1) or, if in the opinion of the
Master the person
nominated as liquidator should not be appointed as liquidator of the
company concerned, the Master shall give
notice in writing to the
person so nominated that he declines to accept his nomination or to
appoint him as liquidator and shall
in that notice state his reason
for declining to accept his nomination or to appoint him: Provided
that if the Master declines
to accept the nomination for appointment
as liquidator because he is of the opinion that the person nominated
should not be appointed
as liquidator, it shall be sufficient if the
Master states, in that notice, as such reason, that he is of the
opinion that the
person nominated should not be appointed as
liquidator of the company concerned.
(2)
(a) When the Master has so declined to accept the nomination of any
person or to appoint him as
liquidator
or the Minister has under section 371 (3) set aside the appointment
of a liquidator, the Master shall convene meetings
of creditors and
members or contributories of the company concerned for the purpose
of nominating another person for appointment
as liquidator in the
place of the person whose nomination as liquidator the Master has
declined to accept or whom the Master
has declined to appoint or
whose appointment has been so set aside.
(b)
In the notice convening the said meetings the Master shall state
that he has declined to accept the
nomination
for appointment as liquidator of the person previously nominated or
to appoint the person so nominated and the reasons
therefor, subject
to the proviso to subsection (1), or that the appointment of the
person previously appointed as liquidator
has been set aside by the
Minister, as the case may be, and that meetings are convened for the
purpose of nominating another
person for appointment as
liquidator….’
[5]
Section
371 ‘Remedy of aggrieved persons—
(1)
Any person aggrieved by the appointment of
a liquidator or the refusal of the Master to accept the nomination
of a liquidator
or to appoint a person nominated as a liquidator,
may within a period of seven days from the date of such appointment
or refusal
request the Master in writing to submit his reasons for
such appointment or refusal to the Minister.
(2)
The Master shall within seven days of the
receipt by him of the request referred to in subsection (1) submit
to the Minister,
in writing, his reasons for such appointment or
refusal together with any relevant documents, information or
objections received
by him.
(3)
The Minister may, after consideration of
the reasons referred to in subsection (2) and any representations
made in writing by
the person who made the request referred to in
subsection (1) and of all relevant documents, information or
objections submitted
to him or the Master by any interested person,
confirm, uphold or set aside the appointment or the refusal by the
Master and,
in the event of the refusal by the Master being set
aside, direct the Master to accept the nomination of the liquidator
concerned
and to appoint him as liquidator of the company
concerned.’
[6]
‘
Any
of the following persons shall be disqualified from being elected or
appointed a trustee:—
(a)
any insolvent;
(b)
any person related to the insolvent
concerned by consanguinity or affinity within the third degree;
(c)
a minor or any other person under legal
disability;
(d)
any person who does not reside in the
Republic;
(e)
any person who has an interest opposed to
the general interest of the creditors of the insolvent estate;
(f)
a former trustee disqualified under
section seventy-two;
(g)
any person declared under section
fifty-nine to be incapacitated for election as trustee, while any
such incapacity lasts, or
any person removed by the court, on
account of misconduct, from an office of trust;
(h)
a corporate body;
(i)
Any person who has at any time been
convicted (whether in the Republic or elsewhere) of theft, fraud,
forgery or uttering a forged
document, or per jury and has been
sentenced to imprisonment without the option of a fine, or to a fine
exceeding R2 000;
(j)
any person who was, at any time, a party
to an agreement or arrangement with any debtor or creditor whereby
he undertook that
he would, when performing the functions of a
trustee or assignee, grant or endeavour to grant to, or obtain or
endeavour to obtain
for any debtor or creditor any benefit not
provided for by law;
(k)
any person who has by means of any
misrepresentation or any reward or offer of any reward, whether
direct or indirect, induced
or attempted to induce any person to
vote for him as a trustee or to effect or assist in effecting his
election as trustee of
any insolvent estate;
(l)
any person who at any time during a period
of twelve months immediately preceding the date of sequestration
acted as the bookkeeper,
accountant or auditor of the insolvent;
(m)
any agent authorized specially or under a
general power of attorney to vote for or on behalf of a creditor at
a meeting of creditors
of the estate concerned and acting or
purporting to act under such special authority or general power of
attorney.’
[7]
Ex
parte: Master of the High Court of South Africa (North Gauteng)
[2011] ZAGPPHC 105;
2011 (5) SA 311
(GNP). (
Ex
parte the Master
)
[8]
Ibid
para 19.
[9]
Ibid
paras 25-27.
[10]
Master
of the High Court (North Gauteng High Court, Pretoria) v Motala NO
and Others
[2011] ZASCA 238
;
2012 (3) SA 325
(SCA) para 7. (
Motala
)
[11]
Minister
of Justice and Another v South African Restructuring and Insolvency
Practitioners Association and Others
[2016] ZASCA 196
;
2017 (3) SA 95
(SCA) para 55.
[12]
City
Capital SA Property Holdings Limited v Chavonnes Badenhorst St Clair
Cooper NO and Others
[2017]
ZASCA 177
;
2018 (4) SA 71
(SCA) para 32. (
City
Capital
)
[13]
See
para
[32]
above.
[14]
De
Wet and Others v Western Bank Ltd
1977
(4) SA 770
(T) at 777C–G.
[15]
Geldenhuys
v National Director of Public Prosecutions and Others
[2008] ZACC 21
;
2009 (2) SA 310
(CC) para 21.
[16]
Ferris
and Another v FirstRand Bank Ltd
[2013] ZACC 46
;
2014 (3) SA 39
(CC) para 10.
[17]
See
Mitchell Nold de Beer ‘Invalid Court Orders’ (2019) 9
Constitutional
Court Review
283 at 284.
[18]
D
E van Loggerenberg et al
Erasmus
Superior Court Practice
(RS 16, 2021) at D1-562.
[19]
Motala
(note 10 above) para 14. See also
City
Capital
supra
where
the order was a nullity but the appellant had not sought to review
the decision of the Master’s appointment of the
liquidator,
who was appointed by the Court. In the present case, a review
application has been brought and is pending.
[20]
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
[2004]
ZASCA 48; 2004 (6) SA 222 (SCA).
[21]
MEC
for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd
t/a Eye & Lazer Institute
[2014] ZACC 6; 2014 (3) SA 481 (CC).
[22]
Merafong
City v AngloGold Ashanti Ltd
[2016]
ZACC 35
;
2017 (2) SA 211
(CC).
[23]
Magnificent
Mile Trading 30 (Pty) Ltd v Charmaine Celliers NO and Others
[2019] ZACC 36; 2020 (4) SA 375 (CC).
[24]
Oudekraal
(note
20 above) para 26.
[25]
Kirland
(note
21 above) para 66.
[26]
Ibid
para 101.
[27]
Ibid
para 103.
[28]
Merafong
(note 22 above) para 41.
[29]
Ibid
par 107.
[30]
Midnight
Mile
(note 23 above) para 83.
[31]
Kirland
(note
21 above) at footnote 78.
[32]
Motala
(note
10 above) para 14.
[33]
City
Capital
(note
12 above) paras 43-44.