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[2019] ZAGPPHC 613
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Wild & Marr (Pty) Limited v Intratrek Properties (Pty) Limited (27814/2018) [2019] ZAGPPHC 613 (20 May 2019)
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
(1)
REPORT ABLE:
YES/
NO
(2)
OF
INTEREST TO
OTHER JUDGES:
YES/
NO
CASE NO: 27814/2018
20/5/2019
In the matter between
WILD
&
MARR
(PTY) LIMITED
APPLICANT
and
INTRATREK
PROPERTIES (PTY) LIMITED
RESPONDENT
(Registration Number:
2000/017603/07)
JUDGMENT
SUTHERLAND
J:
Introduction
[1]
This application is for the winding-up
of the respondent company. The applicant is owed R14 638 660.00 plus
interest as from 22
June 2017. It is common cause that the respondent
cannot pay the debt. Only two controversies are ventilated; first,
whether this
court has jurisdiction over the respondent for the
purposes of a winding-up order and second, whether it is an
appropriate exercise
of the court's discretion to postpone the
application until 30 June 2019 by which date, so it is alleged from
the bar, the respondent
shall have been able to procure overseas
funders to provide it with the money necessary to pay the debt owed
to the applicant.
The Jurisdiction argument
[2]
The controversy arises from the fact
that service of the winding up application was served on the
respondent's principal place of
business at 136 10
th
Street, Parkmore, Johannesburg. This address is within this court's
territorial jurisdiction. The respondent's registered address
is said
to be at 21 Van Rensburg Street, Nelspruit. That address is not
within this court's territorial jurisdiction, but in the
province of
Mpumalanga. The contention advanced on behalf of the respondent is
that the only address at which effective service
of a winding up
application can take place is at the registered office. If that
contention is correct, it would follow that only
the Mpumalanga court
can entertain the application.
[3]
The argument is not novel. Several
decisions in the Cape Division, the Northern Cape Division and in the
Gauteng Division which
address this argument have been drawn to my
attention. The two Gauteng Divisions' decisions are said to be
against the proposition
that service may be effective only at the
registered address. Plainly, if that is so, these decisions bind me
unless I conclude
they are distinguishable or clearly wrong. The sole
decision which supports the proposition is in the Cape Division, but
has been
both followed and disapproved in that division. There is one
SCA decision on appeal from a Gauteng Division decision which, it is
argued, is against the proposition. These decisions are, accordingly,
examined.
[4]
The font of the debate lies in two
statutory provisions, one in the 1973 Companies Act and another in
the 2008 Companies Act.
Section
23(3) of the 2008 Act provides:
"Each company or external
company must-
(a)
continuously maintain at least one
office in the Republic; and
(b)
register the address of its office,
or its principal office if it has more than one office- initially in
the case of-
(aa)
a company, by providing the required information on its Notice of
Incorporation; or
(bb)
an external company, by providing the required information when
filing its registration in terms of subsection (1) and
(ii) subsequently, by
filing a notice of change of registered office, together with the
prescribed fee."
Section
12(1) of the 1973 Act provides:
"The Court which has
jurisdiction under this Act in respect of any company or other body
corporate, shall be any provisional
or local division of the High
Court of South Africa within the area of jurisdiction whereof the
registered office of the company
or other body corporate
or the
main place of business of the company or other body corporate is
situate."
(Emphasis supplied)
[5]
The thesis is that because the
2008 Act requires the main place of business to be
identical with the registered
address, applications for liquidation
must therefore be launched exclusively in that court which exercises
territorial jurisdiction
over the registered address. In other words,
the opportunity to serve on one of two addresses under the 1973 Act
is extinguished.
[6]
This notion was given its fullest
expression in the decision by Binns -Ward J in
Sibakhulu Construction (Pty) Ltd v
Wedgewood Village Golf Country Estate (Pty) Ltd (Nedbank Ltd
intervening)
2013 (1) SA 191
(WCC).
In that decision, it was concluded the aim of the 2008 Act was that a
company can reside at only one place. The reasoning
ran that there
had been no replication of provisions like those in
section 12 of the 1973 Act, and having regard to
section 23 of the
2008 Act, a company's principal office and its registered address
were to be one and the same. Thus, the dual
jurisdiction regime had
been abolished. At [22] - [23] it was held:
"[22] Questions of
interpretation of the 2008 Companies Act must be undertaken with the
provisions of ss 5 and 7 in mind. In
particular, s 5(1) provides that
the Act must be interpreted to give effect to the purposes set forth
ins 7. In determining the
effect of s 23 of the Act on the question
of a court's jurisdiction it seems to me that the provisions of s
7(k) and (I) have a
bearing. They provide:
'The purposes of this Act are to -
…
(k) provide for the efficient
rescue and recovery of financially distressed companies, in a manner
that balances the rights and
interests of all relevant stakeholders;
and
(I) provide a predictable and
effective environment for the efficient regulation of companies.'
[23] I consider that it would give
effect to the purposes set out in s 7(k) and (I) to interpret s 23 of
the Act to the effect that
a company can reside only at the place of
its registered office (which, as mentioned, must also be the place of
its only or principal
office). The result would be that there would
in respect of every company be only a single court in South Africa
with jurisdiction
in respect of winding-up and business rescue
matters. I think it admits of no doubt that winding-up and
supervision for business
rescue purposes are both matters going to
the status of the subject company, and that the power to make a
determination on a question
of status involves a
ratio
jurisdictionis
exercisable only by the court within whose
jurisdiction the company 'resides' or is domiciled (I do not perceive
there to be scope
for any distinction within South Africa between a
local company's residence and its domicile.) Furthermore, winding-up
and business
rescue are also matters which are interlinked in such a
manner by the provisions of the 2008 Act that it is undesirable for
reasons
of comity between courts of equal status, efficiency,
commercial convenience and certainty that they be amenable to
proceedings
in concurrent jurisdictions. These are considerations
militating in favour of the recognition of a regime that recognises a
company
only to be resident in one place rather than two, thereby
assuring that only one court will have jurisdiction."
[7]
Other than this decision, there is no
support for the proposition that the court exercising jurisdiction
over the registered address
has sole jurisdiction.
[8]
In the Gauteng Division, in the decision
in
Burmeister
&
Another v Spitskop Village Properties
&
Others
/2015]ZAPPHC 1094 (21/09/2015),
Makgoka J disapproved the decision in
Sibakhulu.
At [8] - [1O] of the judgment, the
issue is addressed, not by countering the reasoning in
Sibakhulu,
but by referring to, and relying on,
several other decisions said to disapprove the decision
in
Sibakhulu.
First,
there was reference made to a decision by Lacock J in
Lonsdale
Commercial Corporation v Kimberley West Diamond Mining Corporation
[2013] ZANHC 11 (17/5/2013), in
which the abolition of duality was rejected on the premise that to
interpret section 23 to have
such an effect amounted to an ouster of
the court's jurisdiction, which was an unsustainable proposition
where not articulated
in the clearest terms. Second, there was
reference to the decision in the Gauteng Division of
Firstrand
Bank Ltd v PMG Motors Alberton (Pfy) Ltd (In liquidation)
[2013]
4 All SA 117
(GSJ). Mayat J was dealing with litigation in the hands
of the liquidators, the company having been wound up by an order of
the
Kwazulu -Natal Division. Mayat J held that the Gauteng Division
had jurisdiction to deal with the conduct of the liquidators who
were
situated within the territorial jurisdiction of the Gauteng Division.
A third reference was made to the subsequent appeal,
reported as
PMG
Motors Kyalami (Pty) Ltd
&
Another v Firstrand Bank Ltd,
Wesbank Division
2015
(2) SA 634
(SCA). The passage in [9] is said to impliedly overrule
the
Sibakhulu
decision:
"It has long been recognised
as trite that artificial persons such as companies have no bodies and
therefore cannot reside
in a particular area. They do, however, have
directing minds and 'the residence of a corporation will be
determined by the periodic,
usual or habitual location of the
directing mind'. This has been held to be the company's 'seat of its
central management and control,
from where the general
superintendence of its affairs takes place, and where, consequently,
it is said that it carries on its real
or principal business'. To say
that a company resides at its principal place of business is simply a
convenient way of ensuring
that the nerve centre of the operations of
a company founds jurisdiction in proceedings taken against it.
Although s 12 of the
Companies Act refers to 'the main place of
business', this amounts to the same thing for jurisdictional
purposes. The dealerships
accepted that, on the above basis, the
court below had jurisdiction over PMG Kyalami and PMG Alberton prior
to their liquidation."
[9]
In my view these
decisions relied on in
Burmeister,
save for that of
Lacock J, are not dispositive of the proposition that duality has
been preserved. The post liquidation phase
in the PMG Motors
cases is a clear basis for distinguishing them.
To argue thus that these decisions
disapprove or overrule the
Sibakhulu
decision is, with
respect, doubtful.
[10]
The SCA's dictum in
PMG Motors
does not address
the duality issue expressly, and I am hesitant to read
into those remarks that the
court contemplated disposing of that
thesis.
[11]
The notion of the court's jurisdiction
being ousted in
Lonsdale,
is
in my view, an exaggerated proposition with which I cannot agree. The
jurisdiction of the court is conferred by statute in respect
of a
juristic entity which, by a fiction, is said to be at a place; if the
reforming statute creates a different arrangement that
is merely more
restrictive about the place where the fiction resides, it does seem
obvious to me that the re-arrangement infringes
on the court's
jurisdiction or inhibits reasonable access to a court by any
litigant. No threat is created by this procedural provision
to the
courts' basic functioning nor to litigants' constitutional rights of
access to justice.
[12]
Accordingly, what remains is one
decision in the Gauteng Division, which does not interrogate the
reasoning in
Sebakhulu,
against
the proposition, and one distinguishable decision, supposedly against
the proposition.
[13]
However,
Sibakhulu
was expressly disapproved in the
Cape Division in
Van der
Merwe v Duraline (Pty) Ltd
/2013]
ZAWCHC 213 (23/08/2013). Gamble J squarely
addressed the reasoning in
Sibakhu/u.
The thrust of his
conclusions are that liquidations of insolvent companies
remain, for the time being, the
preserve of chapter 14 of the 1973
Act. That procedural regime draws on other provisions of the 1973
Act, including section 12.
To conclude otherwise would be to produce
an intolerable incoherence if sections of the 1973 Act were to be
ignored and reliance
placed on provisions of the 2008 Act, including
section 23. I agree with this reasoning. Section 224(3) of the 2008
Act, read with
item 9 of schedule 5 to the 2008 Act preserves chapter
14 of the 1973 Act in operation. In that chapter, the "court"
referred to must be the "court" as defined in section 1 of
the 1973 Act, which in turn is the court referred to in section
12 of
the 1973 Act.
[14]
Gamble J at [20] - [23] of
Duraline
states thus:
"[20] Under
the Old Act, therefore, Section 12 was the source of the dual
jurisdictional power to liquidate,
a situation which has, for a
number of decades, been recognised under Section 344. At the risk of
stating the obvious, the entire
winding up process of an insolvent
company on the basis of inability of a company to pay its debts must,
until the transitional
provisions of the New Act are varied, take
place in terms of Chapter 14 of the Old Act. Once reliance is placed
on those sections
for such winding up, I consider that the
definitions, internal references and interpretations which have
applied to that Chapter
of the Old Act will continue to apply, and it
is not permissible to cross reference to provisions of the New
Act whilst so
applying Chapter 14 of the Old Act.
[21]
Chapter 14 of the Old Act does not only
deal with the application for winding-up itself, it governs,
inter
alia
the functions and duties of
liquidators, meetings of creditors, the interrogation of directors
and other persons in relation to
the affairs of the bankrupt company,
liability of directors for the mismanagement of the company and
importantly, the incorporation
of various provisions of the
Insolvency Act of 1936
. The many sections under this Chapter have
over the years been interpreted by our Courts and there is therefore
a substantial body
of authority and established jurisprudence which
continues to be of general application, notwithstanding the passing
of the New
Act.
[22]
That the application of Chapter 14
requires resort to, and reliance upon, the definitions and other
internal references to the Old
Act, is further borne out by the
following. There are several instances where definitions under the
Old Act have a different meaning
under the New Act, or where a term
is not defined under the Old Act but is defined under the New Act.
See for example
"Accounting
Records", "Company':
"Director", "External
Company", "Member" "Memorandum", "Share"
and "Special
Resolution".
[23]
As I have said many of these terms have
been interpreted by the Courts over the years, and in the continued
interpretation of Chapter
14 of the Old Act (that is until the
introduction of the promised winding up legislation referred to
below), the Courts must continue
to have regard to such definitions
and internal references. It would be chaotic to have to apply [the]
New Act definitions and
provisions to Old Act provisions in Chapter
14 without an express direction in the New Act to do so."
(Footnotes omitted)
[15]
Subsequently, in the Cape Division,
Navigator Property
Investments (Pty) Ltd v Silver Lakes Crossing Shopping Centre
(Pfy) Ltd
[2014] 3 AL SA 591 (WCC)
was decided. The application was to wind up the company in terms
of Section 81(1)(d)(i) of
the 2008 Act as a result of an
impasse amongst the directors, not the insolvency
of the company; thus chapter
14 of the 1973 Act was not implicated.
This decision followed
Sibakhulu.
The issue is dealt with at
[18] - [19] of the judgment by Ndita J.
The
Duraline
decision
was apparently not brought to the attention
of the court.
Drawing on the authority of
Sebakhulu,
the court dismissed a contention that the Western
Cape Court had no jurisdiction because the registered office was in
another jurisdiction
and held that as the principal place of business
was within the court's jurisdiction, the company had improperly not
registered
the "correct" address, ie the principal place of
business. It followed, that the jurisdiction of the court was
determined
by the principal place of business and not the incorrectly
registered address elsewhere. This case is plainly distinguishable
from
a winding-up on grounds of insolvency. Paradoxically, in
relation to the argument advanced by the respondent in the present
case
that only the actual registered office can found jurisdiction,
were section 23 indeed to apply in this case, on the authority of
Navigator Property,
the reliance by the applicants on the
principal place of business would suffice to found jurisdiction. In
my view, however, it has
no application to the present case.
[16]
Accordingly the challenge to the
jurisdiction of the Gauteng Division is without merit.
A Postponement of the
liquidation order
[17]
It is argued on behalf of the respondent
that a discretion should be exercised to postpone the application. A
court has such a discretion
in terms of section 347(1) of the 1973
Act, to be exercised in deserving circumstances. The core rationale
would be that there
is a convincing prospect of the liquidation being
avoided. That prospect must be seriously evaluated.
[18]
Regrettably, such circumstances are not
in evidence. The respondent is the alter ego of its controlling mind,
Ibrahim Sildsky Yusuf.
The respondent seems to be no more than a
corporate face of Mr Yusuf, and it is not alleged that there are
assets in the respondent
other than the supposed goodwill of Mr
Yusuf's efforts to drum up business. The business is said to be a
consultancy and the substance
is the facilitating of deal-making by
introducing persons to one another, deriving an income from
commissions for so doing. There
are bland allusions to the prospects
of making millions in the near future but without a smidgeon of
substantiation offered. The
request is to postpone to 30 June 2019,
some six weeks away. Altogether, the proposal is unconvincing.
[19]
A postponement of the application must
be refused.
The Order
(1)
The respondent is placed under final
winding-up in the hands of the Master.
(2)
The costs of this application are costs
in the winding-up.
(3)
The costs of opposition are excluded
from the winding-up costs.
ROLAND
SUTHERLAND
Judge
of the High Court
Gauteng
Local Division, Johannesburg
Date
of Hearing: 13 May 2019
Date
of Judgment: 20 May 2019
For
the Applicant: Adv L Hollander
Instructed
by Snaid & Edworthy
For the Respondent: Adv D Block
Instructed by Howard Woolf
Attorney