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[2017] ZASCA 177
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City Capital SA Property Holdings Limited v Chavonnes Badenhorst St Clair Cooper NO and Others (85/2077) [2017] ZASCA 177; 2018 (4) SA 71 (SCA) (1 December 2017)
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THE SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 85/2017
In the matter between:
CITY CAPITAL SA PROPERTY
HOLDINGS
LIMITED
APPELLANT
and
CHAVONNES
BADENHORST
ST CLAIR
COOPER NO
FIRST RESPONDENT
JOHANN
DEMETRIUS APPIES NO
SECOND RESPONDENT
SADECK AHMED
NO
THIRD RESPONDENT
Neutral citation:
City Capital SA Property Holdings Ltd v
Chavonnes Badenhorst St Clair Cooper NO
(85/2017)
[2017] ZASCA 177
(1 December 2017)
Coram:
Leach and Saldulker JJA and Plasket, Tsoka and Schippers
AJA
Heard
:
20 November 2017
Delivered:
1 December 2017
Summary:
Companies Act 71 of 2008
: when making an
order under
s 20(9)(
a
),
a court has no power to order a person to act as the liquidator of a
company : only the Master may do so : relief sought by appellant
having no practical effect : for this reason appeal dismissed.
ORDER
On
appeal from
:
Western Cape Division , Cape Town (Van Rooyen AJ sitting as court of
first instance):
1
Paragraph 2 of the
order of the court a quo is set aside and replaced with the
following:
‘
2(a)
The counter application of the intervening party for the relief in
paragraph 3.1 and 3.2 of the notice of counter-application
is
dismissed, as such relief is unnecessary.
(b)
There is no order as to
the costs of the counter-application.’
2
Save as aforesaid, the appeal is dismissed
with costs, including the
costs of two counsel.
JUDGMENT
Schippers
AJA (Leach and Saldulker JJA and Plasket and Tsoka AJJA concurring):
[1]
On 8 July 2014 the
Western Cape High Court made an order that five separate companies,
all of which had been wound up, were declared
‘a single entity
as envisaged by
ss 20(9)
,
22
,
141
(2)(
c
)
and 141(3) of the
Companies Act 2008
’; that the five companies
would henceforth be known as the Dividend Investment Scheme; and that
the respondents, who had
already been appointed as liquidators
in the winding-up of two of the five companies, would be the
liquidators of the Dividend
Investment Scheme.
[2]
The central issue in
this appeal is whether the order appointing the existing liquidators
of the two companies as liquidators of
the Dividend Investment
Scheme, was competent. The appellants say that it was not: they
contend that only the Master of the
High Court (the Master) has the
power to appoint a liquidator and consequently, the order is a
nullity.
Factual
background
[3]
The matter arises from
a property syndication scheme conducted by the Dividend Investment
Group, which consisted of Div-Vest Holdings
(Pty) Ltd (Div-Vest
Holdings)] and its two wholly-owned subsidiaries.
[4]
The Dividend Investment
Group promoted some 70 syndications. The typical property syndication
was structured as follows. Members
of the public acquired 100% of the
shareholding in a holding company. The holding company usually
acquired about 85% of the shareholding
in a property owning company
with the balance of 15% of the shareholding held by one of the
promoter companies. The property owning
company would acquire a
commercial property with funds borrowed mainly from the holding
company and in some instances, a financial
institution. The
scheme was promoted on the basis that the property would be sold at a
profit. This would allow the property
owning company to repay the
holding company. The profit would then be distributed as a dividend
to the shareholders in the holding
company and the remaining minority
shareholder.
[5]
City Capital contends
that it acquired the minority shareholding of Div-Vest Holdings in
the property owning companies and that
it is a creditor of those
companies because it made loans to them. This is in dispute, but need
not be decided for purposes of
this judgment.
[6]
The two property
syndications in issue in this case relate to a single commercial
property development, a shopping centre called
‘Zambezi Retail
Park’ in Pretoria. This shopping centre was developed in two
phases involving a single sectional title
scheme. Two property owning
companies, Div-Prop 11 (Pty) Ltd (Div-Prop 11) and Div-Prop 12 (Pty)
Ltd (Div-Prop 12), each owns about
half of Zambezi Retail Park.
[7]
The shares in Div-Prop
12 are held as follows: 45.5% of the shares are held by Blue Beacon
Investments 52 (Pty) Ltd (Blue Beacon
Investments 52) as one of the
holding companies; 44.5% by Div-Hold Income 12 (Pty) Ltd (Div-Hold
Income 12) as the other holding
company; and 10% allegedly by City
Capital (this is in dispute). The shares in Blue Beacon Investments
52 are held by 89 investors
and in Div-Hold Income 12, by 125
investors.
[8]
The shareholding in
Div-Prop 11 is as follows: 90% of the shares are held by Div-Hold 11,
the holding company; and 10% allegedly
by City Capital (this is also
in dispute). The shares in Div-Hold 11 are held by 201 investors.
[9]
In February 2013 the
three holding companies, Blue Beacon Investments 52, Div-Hold Income
12 and Div-Hold 11, applied for the winding-up
of Div Prop 11 and
Div-Prop 12. Provisional winding-up orders were granted and in March
2013 the Master of the High Court appointed
Mr C Cooper (the first
respondent), Mr G Gainsford and Mr J Appies (the second respondent)
as the provisional liquidators of Div-Prop
11. Subsequently, Mr
Cooper and Mr Appies were appointed as final liquidators of the
company. Mr Cooper and Mr S Ahmed (the third
respondent) were
appointed as the provisional liquidators and later final liquidators,
of Div-Prop 12.
[10]
In March 2013, the
board of directors of Blue Beacon Investments 52, Div-Hold Income 12
and Div-Hold 11 each adopted resolutions
in terms of s 129(1) of the
Companies Act 71 of 2008 (the 2008 Act), placing these companies in
business rescue. Mr J Van Rensburg
was appointed the business rescue
practitioner of all three companies. In June 2014, he applied to
court for an order discontinuing
the business rescue proceedings and
placing all three companies in liquidation, in terms of
s 141(2)
(a)
(ii)
of the 2008 Act.
[11]
In an application heard
on the same day as the liquidation applications, Mr Van Rensburg
successfully applied, inter alia, for an
order declaring that
Div-Hold 11, Div-Hold Income 12 and Blue Beacon Investments 52,
together with Div-Prop 11 and Div-Prop 12
(both in liquidation), ‘be
declared a single entity as envisaged by ss 20(9), 22, 141(2)(
c
)
and 141(3) of the 2008
Companies Act’ (the
s 20(9)
application).
[12]
The grounds for the
s
20(9)
application were essentially the following. The five companies
were part of an unsustainable syndication scheme which had engaged
in
reckless trading and defrauded members of the public. The use of the
companies, or the acts by or on behalf of them, constituted
an
unconscionable abuse of their juristic personality, justifying an
order that they should not be regarded as juristic persons
as
contemplated in s 20(9) of the 2008 Act. Members of the public had
invested some R140 million into Zambezi Retail Park, whereas
the
property was worth only about R45 million, leaving investors with a
loss of nearly R100 million. The syndication value of the
property
was about R125.5 million, its purchase price was some R107.3 million,
and the promoter of the scheme had made a profit
of more than R19
million, which immediately reduced the value of the investors’
money. In addition, investors were liable
for about R10 million
raised through a mortgage bond. The only way they would recover
anything in the liquidation proceedings was
if the promoter and other
companies in the scheme were held liable by holding the persons
behind the promoter personally responsible
for the losses incurred.
[13]
Zambezi Business Park
was run as a single indivisible commercial enterprise. The corporate
identity of the five companies had not
been maintained, their
financial affairs were not kept apart, and funds flowed to and from
the various companies as investors were
paid dividends promised to
them. It was therefore contended that the five companies had to be
treated as a single entity and the
liquidators of Div-Prop 11 and
Div-Prop 12 should be appointed as the liquidators of the Dividend
Investment Scheme because they
had extensive knowledge of the scheme,
had already incurred costs, and their appointment was to the
advantage of creditors.
[14]
On 8 July 2014, Samela
J made the following order in the s 20(9) application (the July
order).
‘
1.
Simultaneously with the liquidation orders pertaining to the first to
third
respondents (under case number 10687/2014, 10688/2014 and
10689/2014), the first to third respondents, Div-Prop 11 (Pty) Ltd
and
Div-Prop 12 (Pty) Ltd [are] declared a single entity as envisaged
by
Sections 20(9)
,
22
,
141
(2)(c) and
141
(3) of the
Companies Act
2008
;
2.
The five entities referred to in paragraph 1 above shall henceforth
be known
as the “Dividend Investment Scheme” to be
administered as a company in continuance of the liquidation
proceedings of
the 4
th
to 7
th
Applicants;
3.
It is declared that the appointed liquidators in the estates of the
4
th
to
7
th
applicants to be the appointed liquidators of the combined company
(“the Dividend Investment Scheme”).’
[15]
After the July order
was granted a dispute arose between the respondent and the Master as
to whether a first meeting of creditors
had to be held in the estate
of the single entity, the Dividend Investment Scheme. The Master’s
position was that the Scheme
was a new entity, and the fact that it
had been declared a single entity did not prevent him from exercising
his power to summon
the first meeting of creditors in terms of s 364
of the Companies Act 61 of 1973 (the 1973 Act); and that all
interested parties,
including investors, creditors and shareholders
could in this way nominate and vote for liquidators of their
choice.
[1]
[16]
The respondents’
stance was that the process of liquidation in relation to Div-Prop 11
and Div-Prop 12 included the single
entity, which merely had to
continue. They said that if the liquidation had to start afresh,
numerous practical problems would
arise. A first meeting of creditors
had already been held in the Div-Prop 11 and Div-Prop 12 estates at
which members and creditors
(including the holding companies) had
already proved claims, certain resolutions were adopted, and the
respondents had already
been appointed as liquidators of those two
companies. They had already commenced with s 417 and s 418 enquiries
under the 1973
Act. The respondents contended that in these
circumstances, there would be uncertainty about the status of: the
claims proved and
the resolutions adopted at the first meeting of
creditors; the s 417 and 418 enquiries; and their appointment as
liquidators of
the two companies.
[17]
The dispute could not
be resolved, and the respondents applied to the Western Cape High
Court for an order directing the Master
to comply with the July
order. Mr Cooper made the founding affidavit in that application and
it is necessary to refer to paragraphs
14, 16 and 25 thereof because
they were incorporated in the order issued on 3 December 2014 (the
December order), pursuant to the
application. Those paragraphs read
as follows:
’
14. It was
always our intention and the intention of the business rescue
practitioner that the
process of liquidation should merely continue.
16.
What was envisaged is that there would be a second meeting of the
combined entity “Dividend
Investment Scheme”, but for
some or other reason the Master differs from this interpretation of
the court order.
25.
Dealing with the problems to be encountered by the Applicants should
they have to go back
to a first meeting can be summarised as follows:
25.1
The Dividend Investment Scheme consisted of approximately 166
different companies representing approximately
70 syndications.
25.2
It is intended to join the companies to the Dividend Investment Group
and the applicants believe that
at the end of the day all 166
companies will be liquidated and will be declared to be part of the
same scheme.
25.3 If
the Master is correct in his attitude then that would mean that every
time companies are joined to the
dividend investment scheme the
position will revert to a time before the first meeting and we would
have various first meetings
of creditors.
25.4
In the meantime, the liquidation process, as we proceed, is being
held up for instance if a second
meeting of creditors was held
tomorrow then the liquidators would be entitled to sell Zambezi
Retail Park (the property owned by
the Investment Scheme) and pay
investors their dues [and as] far as is possible, bearing in mind
that the total syndicated value
of Zambezi Retail Park was some
R110 000 000,00 (approximately 145 investors), but the best
offer received to date is
approximately R54 000 000,00
provided that a problem with the electricity account is sorted out
with the City of Tshwane
(litigation is also underway in that
matter).
25.5
This would militate against the effective administration of the
various estates who will come into
the fold as soon as we get to
those companies.
25.6
The question we pose to our attorneys of record and counsel is that
what would happen if the estate
proceeds to a second meeting of
creditors and the resolutions of creditors are passed and thereafter
more companies are joined
to the scheme.
25.7
How can the status of the liquidation then revert to the position as
it was before the first meeting
of creditors and what happens to the
resolutions which [were] taken at the second meeting of creditors.’
[18]
On 3 December 2014 the
matter came before Meer J who issued the December order. It reads:
‘
The respondent
is ordered to immediately comply with the order of this court dated 8
July 2014 which is attached to the notice of
motion as annexure “A”
[the July order] and interpret the order as set out in paragraph 14,
16 and 25 of the founding
affidavit.’
[19]
In May 2015 City
Capital launched a counter-application in the court a quo in which it
sought, inter alia, the reconsideration and
setting aside of both the
orders granted on 8 July 2014 and 3 December 2014 in their entirety,
in terms of rule 6(12)
(c)
of the Uniform Rules of Court.
[2]
Subsequently, in the court a quo and in argument before us, City
Capital confined the relief sought to paragraph 3 of the July
order,
ie that the court was not empowered to appoint the respondents as
liquidators of the Dividend Investment Scheme. It contended
that
paragraph 3 was a nullity, and consequently that the December order
should suffer the same fate as it purported to give effect
to the
July order.
[20]
The court a quo
dismissed the counter application in October 2016. In essence it held
that paragraph 3 of the July order was a necessary
consequence of
paragraphs 1 and 2 thereof; that read contextually, it did not
constitute the appointment of liquidators contemplated
in Chapter 14
of the 1973 Act; and that as a result, the December order was not
impugnable. This appeal is with the leave of the
court a quo.
[21]
Before dealing with the
issues in this appeal, it is necessary to address a preliminary point
taken by the respondents for the first
time at the hearing of the
matter, namely that City Capital had no standing to challenge
paragraph 3 of the July order, and consequently,
the December order.
The point may be dealt with briefly. City Capital alleged that it had
acquired the minority shareholding of
Div-Vest Holdings in the
property owning companies and that it was a creditor of those
companies because it had advanced loans
to them. This, the
respondents submitted, did not give City Capital standing to
challenge the appointment of liquidators to the
holding companies,
namely Div-Hold 11, Div-Hold Income 12 and Blue Beacon Investments
52.
[22]
The question whether a
litigant’s interest is sufficient to clothe it with standing
must be determined in the light of the
factual and legal
circumstances of the case.
[3]
The founding affidavit in the counter-application states that City
Capital is a shareholder and creditor in all the respondent
companies
referred to in that application and, accordingly, that it has a
direct and substantial interest in the relief sought.
It appears that
those allegations were not challenged. But in any event, City
Capital was not given an opportunity to deal
with the point in its
papers, and it is impermissible for the respondents to raise it now.
The issues
[23]
Against the above
background, the first issue is whether paragraph 3 of the July order,
in terms of which the court ostensibly appointed
the liquidators of
the single entity, the Dividend Investment Scheme, was competent. Put
differently, can a court order a person
to act as the liquidator of a
company when making an order under s 20(9) of the 2008 Act? If the
answer to that question is ‘no’,
then the second issue
arises: whether, in the circumstances, that finding would have any
practical effect as contemplated in s
16(2)
(a)
(i)
of the
Superior Courts Act 10 of 2013
, given that the Master had on
10 December 2014 appointed the liquidators of the single entity.
[24]
As stated above, City
Capital abandoned its attack on paragraphs 1 and 2 of the July order,
in terms of which the five companies
in liquidation were declared a
single entity (the Dividend Investment Scheme) to be administered as
a company in continuance of
the liquidation proceedings of Div-Prop
11 and Div-Prop 12. It is thus unnecessary to consider the proper
construction and application
of s 20(9) of the 2008 Act in any
detail, which in any event was not argued before us. Consequently, s
20(9), which appears to
supplement the common law in relation to
piercing the corporate veil,
[4]
is construed only in the context of whether it authorises the
appointment of a liquidator.
[25]
Section 20(9) of the
2008 Act provides:
‘
If, on
application by an interested person or in any proceedings in which a
company is involved, a court finds that the incorporation
of the
company, any use of the company, or any act by on behalf of the
company, constitutes an unconscionable abuse of the juristic
personality of the company as a separate entity, the court may-
(
a
)
declare that the company is to be deemed not to be a juristic person
in respect of any
right, obligation or liability of the company or of
a shareholder of the company or, in the case of a non-profit company,
a member
of the company, or of another person specified in the
declaration; and
(
b
)
make any further order that the court considers appropriate to give
effect to a declaration
contemplated in paragraph (
a
).’
[26]
It is settled that
words in a statute must be given their ordinary meaning unless to do
so would result in an absurdity. Statutory
provisions should always
be interpreted purposively, in context and consistently with the
Constitution.
[5]
Stated differently, when interpreting legislation, what must be
considered is the language used; the context in which the relevant
provision appears; the apparent purpose to which it is directed; and
the material known to those responsible for its production.
[6]
[27]
It is trite that a
company is a legal entity distinct from its shareholders. It has
rights and liabilities of its own, separate
from those of its
shareholders. Its property is its own and not that of its
shareholders.
[7]
This follows from the separate legal existence with which a company
is by statute endowed.
[8]
Thus, in
The
Shipping Corporation of India Ltd
[9]
Corbett CJ said:
‘
It seems to me
that, generally, it is of cardinal importance to keep distinct the
property rights of a company and those of its
shareholders, even
where the latter is a single entity, and that the only permissible
deviation from this rule known to our law
occurs in those (in
practice) rare cases where the circumstances justify “piercing”
or “lifting” the corporate
veil. And in this regard it
should not make any difference whether the shares be held by a
holding company or by a Government.
I do not find it necessary to
consider, or attempt to define, the circumstances under which the
Court will pierce the corporate
veil. Suffice it to say that they
would generally have to include an element of fraud or other improper
conduct in the establishment
or use of the company or the conduct of
its affairs. In this connection the words “device”,
“stratagem”,
“cloak” and “sham”
have been used …’
[28]
Section 20(9) of the
2008 Act provides a statutory basis for piercing the corporate veil.
On its plain wording, s 20(9) permits
a court to disregard the
separate juristic personality of the company where its incorporation,
use or an act performed by or on
its behalf ‘constitutes an
unconscionable abuse of the juristic personality of the company as a
separate entity’. The
term ‘unconscionable abuse’
is not defined in the 2008 Act and must therefore be given its
ordinary meaning.
[29]
The meaning of
‘unconscionable’ in the Oxford English Dictionary
includes, ‘Showing no regard for conscience .
. . .
Unreasonably excessive . . . . egregious, blatant . . . .
unscrupulous.’ It is in my view undesirable to attempt to
lay
down any definition of ‘unconscionable abuse’.
[10]
It suffices to say that the unconscionable abuse of the juristic
personality of a company within the meaning of s 20(9) of the
2008
Act, includes the use of, or an act by, a company to commit fraud; or
for a dishonest or improper purpose; or where the company
is used as
a device or facade to conceal the true facts.
[11]
[30]
Thus, where the
controllers of various companies within a group use those companies
for a dishonest or improper purpose, and in
that process treat the
group in a way that draws no distinction between the separate
juristic personality of the members of the
group, as happened in this
case, this would constitute an unconscionable abuse of the juristic
personalities of the constituent
members, justifying an order in
terms of s 20(9) of the 2008 Act.
[12]
This is not new. In
Ritz
Hotel
[13]
this Court referred to English authority in which Lord Denning MR
observed that, as regards piercing the corporate veil, there
was a
general tendency to ignore the separate legal entities of various
companies within a group and to look instead at the economic
entity
of the whole group, especially where a parent company owns and
controls the subsidiaries.
[14]
[31]
What is however clear
from the provisions of s 20(9) of the 2008 Act, is that they have
nothing to do with the appointment of a
liquidator to a company in
liquidation, let alone authorise a court to appoint a liquidator. The
respondents accept, as they must,
that the power to appoint
liquidators vests solely in the
Master.
[15]
However, on the authority of
Natal
Pension Fund
,
[16]
they contended that the court a quo’s interpretation of the
July order is sensible and businesslike: Div-Prop 11 and Div-Prop
12
and the three holding companies were to be regarded as a single
entity, the Dividend Investment Scheme, and administered ‘as
a
company’, ie as if the five companies were one entity; and that
the Div-Prop liquidators had to continue with the liquidation
of the
single entity (paragraphs 1 and 2 of the July order). The order
appointing the liquidators (paragraph 3), so it was contended,
was ‘a
necessary consequence’ of paragraphs 1 and 2 of the July order.
[32]
The respondents
are mistaken. First, there is nothing in either s 20(9) or any of the
other provisions of the 2008 Act referred
to in paragraph 1 of the
July order, which authorised a court to appoint the liquidators.
Second, s 367 of the 1973 Act makes
it clear that the Master
appoints liquidators for the purpose of conducting the winding-up of
a company.
[17]
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 exercise of the functions of liquidators is subject to the
Master’s control.
[18]
[33]
By issuing paragraph 3
of the July order, the court usurped a power expressly conferred on
the Master by the 1973 Act. Consequently,
I am driven to
conclude that paragraph 3 is a nullity and of no force and
effect.
[19]
[34]
This brings me to the
December order. It was founded on the relief sought in prayer 2 of
the notice of motion in that application,
which read:
‘
Ordering the
Respondent [the Master] to immediately comply with an order of this
Honourable Court, dated 8 July 2014 and which is
attached hereto as
annexure “A” and interpret the order as set out in
paragraphs 14, 16 and 25 of the Founding Affidavit.’
[35]
Section 165(5) of the
Constitution provides that an order or decision of a court binds all
those to whom and organs of state to
which it applies. This Court has
held that parties who are required to comply with court orders must
know with clarity what is
required of them; otherwise they risk being
held in contempt of court.
[20]
The doctrine of vagueness, which is founded on the rule of law, is a
foundational value of our constitutional democracy. It requires
laws
to be written in a clear manner, with reasonable certainty and not
perfect lucidity.
[21]
Orders of court must comply with this standard: vague provisions in a
court order violate the rule of law.
[22]
[36]
The December order is
both erroneous and vague. It is, firstly, erroneous as it purportedly
directs the respondent, the Master,
‘to immediately comply with
the order of this court dated 8 July 2014’. But the Master was
not ordered to do anything
at all in the order of 8 July 2014: it did
not apply to him. In terms of that order, two property owning
companies and three holding
companies were declared to be a single
entity known as the Dividend Investment Scheme; and the liquidators
of the property owning
companies were appointed as the liquidators of
the single entity.
[37]
Secondly, the December
order is ‘so open-ended and vague as to render the relief
incompetent’.
[23]
It states that the Master is ordered to ‘interpret the order as
set out in paragraph 14, 16 and 25 of the founding affidavit’,
whatever that may mean. In paragraph 14 of the founding affidavit, Mr
Cooper stated that it was always the intention of the liquidators
and
the business rescue practitioner that ‘the process of
liquidation should merely continue’. As already quoted, in
paragraph 16 he said that a ‘second meeting of the combined
entity’ was envisaged but that the Master ‘differs
from
this interpretation of the court order’. And in paragraph 25 of
the affidavit Mr Cooper outlined the difficulties which
the
liquidators would encounter if they had to convene a first meeting of
the single entity.
[38]
In the light of this,
the December order is vague. It does not tell the Master with any
measure of certainty, let alone reasonable
certainty, what he or she
is required to do to comply with the order of 8 July 2013
[24]
- which was never granted against him in the first place. It follows
that the December order is both void for vagueness, and because
it is
inextricably linked to paragraph 3 of the July order, which is a
nullity.
[39]
It is trite that, as a
general rule, what is done contrary to the prohibition of the law is
of no effect and must be regarded as
never having been done.
[25]
Whether non-compliance with a statutory prohibition nullifies an act
must be determined according to the language of the relevant
statute.
[26]
Section 367 of the 1973 Act confers on the Master, exclusively, the
power to appoint a liquidator in the winding-up of a
company.
Inasmuch as paragraph 3 of the July order and the December order in
its entirety, are nullities, a pronouncement to that
effect is
unnecessary.
[27]
[40]
The remaining issue is
whether the finding that the July and December orders are invalid,
would have any practical effect. The position
is governed by
s 16(2)
(a)
(i)
of the
Superior Courts Act. It
reads:
‘
When at the
hearing of an appeal the issues are of such a nature that the
decision sought will have no practical effect or result,
the appeal
may be dismissed on this ground alone.’
[41]
On 10 December 2014,
and presumably to regularise the liquidation proceedings, the Master
appointed the respondents as the
liquidators of the Dividend
Investment Scheme, in terms of
s 367
read with s 375(1) of the
1973 Act. According to the certificate of appointment, the five
companies in liquidation were registered
as ‘one file’
with the Master.
[42]
The consequences of the
certificate of appointment are that it is valid throughout the
Republic;
[28]
the respondents are entitled to act as liquidators of the Dividend
Investment Scheme from the date of the certificate of
appointment;
[29]
and all acts of the respondents as liquidators of the Scheme are
valid, notwithstanding any defects that may be discovered in their
appointment afterwards.
[30]
[43]
The Master’s
decision to appoint the respondents as liquidators of the Dividend
Investment Scheme constitutes administrative
action as defined in the
Promotion of Administrative Justice Act 3 of 2000
.
[31]
As such, the decision by the Master is valid and stands until it is
reviewed and set aside.
[32]
City Capital has not sought to review the Master’s decision
appointing the respondents as liquidators; nor has it applied
to set
aside that certificate of appointment.
[44]
Consequently, because
the Master’s appointment of the respondents as liquidators of
the Dividend Investment Scheme remains
unaffected, the finding that
paragraph 3 of the July order and the December order in its entirety
are nullities, would have no
practical result as envisaged in
s 16(2)
(a)
(i)
of the
Superior Courts Act. For
this reason the appeal falls to be
dismissed.
[45]
Although the appeal
falls to be dismissed because the decision sought will have no
practical effect, paragraph 2 of the order of
the court a quo insofar
as it sought to affirm the July order and the December order, must be
set aside. In my view, it cannot
be said that City Capital should
have succeeded in the court a quo and accordingly, that it should
have been awarded the costs
of the counter-application. It was in
exactly the same position in the court a quo, as it is in this Court:
paragraph 2 of the
court a quo’s order had no practical effect
because the Master’s decision to appoint the liquidators of the
Dividend
Investment Scheme had not been set aside.
[46]
On the other hand, it
appears from the record that the respondents did not take the point
that the relief sought in the court a
quo would be academic because
the Master’s decision appointing them had not been set aside.
Instead, they supported the July
and December orders. In the
circumstances, fairness dictates that there should be no order of
costs in relation to the proceedings
in the court a quo.
[47] In
the result, the following order is made:
1 Paragraph 2
of the order of the court a quo is set aside and replaced with the
following:
‘
2(a)
The counter-application of the intervening party for the relief in
paragraph 3.1 and 3.2 of the notice of counter-application
is
dismissed, as such relief is unnecessary.
(b) There is
no order as to the costs of the counter-application.’
2 Save
as aforesaid, the appeal is dismissed with costs, including the costs
of two counsel.
___________________
A Schippers
Acting Judge of Appeal
Appearances
For Appellant:
A Oosthuizen SC (with R
J Howie)
Instructed
by:
Werksmans
Attorneys, Cape Town
Rozendorff
Reits Barry Attorneys, Bloemfontein
For
Respondent:
S du Toit SC (with T D Prinsloo)
Instructed by:
Lombard & Kriek Attorneys, Cape Town
Webber Attorneys, Bloemfontein
[1]
Section 364 of the 1973 Act provides:
‘
Master
to summon first meetings of creditors and members and purpose
thereof
(1)
As soon as may be after a final winding-up order has been made by
the Court or a special resolution for a creditors' voluntary
winding-up of a company has been registered in terms of section 200,
the Master shall summon-
(a)
a
meeting of the creditors of the company for the purpose of-
(i) considering
the statement as to the affairs of the company lodged with the
Master under section 363;
(ii) the proof
of claims against the company; and
(iii) nominating
a person or persons for appointment as liquidator or liquidators;
and
(b)
a
meeting of the members of the company or, in the case where the
winding-up concerns a company limited by guarantee, a meeting
of the
contributories in respect of that company, for the purpose of-
(i) considering
the said statement as to the affairs of the company; and
(ii) nominating
a person or persons for appointment as liquidator or liquidators,
unless
the company in general meeting, when passing a resolution provided
for in section 349, has already disposed of the matters
referred to
in subparagraphs (i) and (ii).
(2)
Meetings of creditors under this section shall be summoned and held
as nearly as may be in the manner provided by the law
relating to
insolvency, and meetings of members or contributories in the manner
prescribed by regulation: Provided that, in the
case of a meeting of
creditors, the Master may direct the company concerned or the
provisional liquidator to send a notice of
such meeting by post to
every creditor of the company.’
[2]
Rule 6(12)(c) reads:
‘A person against whom an order
was granted in such person's absence in an urgent application may by
notice set down the
matter for reconsideration of the order.’
[3]
JDJ Properties CC & another v Umngeni Local Municipality &
another
[2012] ZASCA 186
;
2013 (2) SA 395
(SCA) para 27.
[4]
P Delport and Q Vorster
Henochsberg on
the Companies Act 71 of 2008
(Service Issue 13, 2017) Vol 1 at
100(3).
[5]
Cool Ideas 1186 CC v Hubbard & another
[2014] ZACC 16
;
2014 (4) SA 474
(CC) para 28.
[6]
Natal Joint Municipal Pension Fund v Endumeni
Municipality
[2012] ZASCA 13
;
2012 (4)
SA 593
(SCA) para 18.
[7]
Salomon v A Salomon & Co
[1897] AC 22
at 51, affirmed in
Dadoo Ltd & others v Krugersdorp Municipal Council
1920
AD 530
at 550.
[8]
Dadoo
fn 5
ibid
.
[9]
The Shipping Corporation of India Ltd v
Evdomon Corporation & another
[1993] ZASCA 167
;
1994
(1) SA 550
(A) at 566C-F.
[10]
Leslie
Brown
The New Shorter Oxford
English Dictionary on Historical Principles
(third edition 1993)
Vol 2 p 1466.
[11]
Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd
&
others
[1995] ZASCA 53
;
1995 (4) SA 790
(A) at 804C-D.
[12]
Ex Parte Gore & others NNO
[2013] ZAWCHC 9
;
2013 (3) SA
382
(WCC) para 33.
[13]
Ritz Hotel Ltd v Charles of the Ritz Ltd & another
1988
(3) SA 290
(A) at 315F.
[14]
DHN Food Distributors Ltd v Tower Hamlets London Burough Council
[1976] 1 WLR 852
(CA) at 860B;
[1976] 3 All ER 462
at 467b-c.
[15]
The Master of the High Court (North Gauteng High Court, Pretoria)
v Motala NO & others
2011 ZASCA 238
;
2012 (3) SA 325
(SCA)
paras 7 and 14, affirming
Ex Parte the Master of the High Court
of South Africa (North Gauteng)
[2011] ZAGPPHC 105; 2011 (5) SA
311 (GNP).
[16]
Natal Joint Municipal Pension Fund
fn 6 para 18.
[17]
Section 367 reads:
‘Appointment of liquidator
for the purpose of conducting the
proceedings in a winding-up of a company the Master shall appoint a
liquidator or liquidators
as hereinafter provided’
[18]
Ex Parte the Master of the High Court of South Africa (North
Gauteng)
fn 15 paras 25-28.
[19]
Motala
fn 15 para 14.
[20]
Minister of Home Affairs & others v Scalabrini Centre &
others
[2013] ZASCA 134
;
2013 (6) SA 421
(SCA) para 77.
[21]
Affordable Medicines Trust & others v Minister of Health &
others
[2005] ZACC 3
;
2006 (3) SA 247
(CC) para 108.
[22]
Minister of Water and Environmental Affairs v Kloof Conservancy
[2015] ZASCA 177
;
[2016] 1 All SA 676
(SCA) para 14.
[23]
Mazibuko NO v Sisulu NO & others NNO
[2013] ZACC 28
;
2013
(6) SA 249
(CC) para 24.
[24]
Kloof Conservancy
fn 20 para 13.
[25]
Schierhout v Minister of Justice
1926 AD 99
at 109;
Cool
Ideas
fn 5 para 90
[26]
Cool Ideas
fn 5 para 91.
[27]
Motala
fn
15 para 14.
[28]
Section 375(2) of the 1973 Act.
[29]
Section 375(3) of the 1973 Act.
[30]
Section 375(4) of the 1973 Act.
[31]
Nel & another NNO v The Master (Absa bank Ltd & others
intervening)
2005 (1) SA 276
(SCA) para 28.
[32]
Oudekraal Estates (Pty) Ltd v The City of Cape Town & others
2004 (6) SA 222
(SCA) para 26.