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[2018] ZASCA 178
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GCC Engineering (Pty) Ltd and Others v Maroos and Others (901/2017) [2018] ZASCA 178; 2019 (2) SA 379 (SCA) (3 December 2018)
SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 901/2017
In
the matter between:
GCC
ENGINEERING (PTY)
LTD FIRST
APPELLANT
GERT LOUWRENS
STEYN DE
WET
NO
SECOND
APPELLANT
FRANS
LANGFORD
NO THIRD
APPELLANT
KGASHANE
CHRISTOPHER
MONYELA
NO FOURTH
APPELLANT
ECSPONENT
INVESTMENT
HOLDINGS
(PTY)
LTD FIFTH
APPELLANT
MASTER
OF THE HIGH
COURT SIXTH
APPELLANT
and
LAWRENCE
MAROOS FIRST
RESPONDENT
ZETABOA
TRADING SECOND
RESPONDENT
ALL
OTHER THIRD
TO SIXTY-FIRST RESPONDENT
APPLICANTS
AS SET
OUT
IN THE NOTICE
OF MOTION IN THE
MAIN
APPLICATION
GCC
ENGINEERING (PTY) LTD SIXTY
SECOND RESPONDENT
MAHOMED
YASEEN CAMISA NO SIXTY
THIRD RESPONDENT
THE COMPANIES
AND SIXTY
FOURTH RESPONDENT
INTELLECTUAL
PROPERTY
COMMISION
Neutral
citation:
GCC Engineering &
others v Lawrence Maroos & others
,
(901/2017)
[2018] ZASCA 178
(3 December 2018)
Coram:
Cachalia, Seriti, Molemela, and
Schippers JJA and Mothle AJA
Heard:
16 November 2018
Delivered:
3 December 2018
Summary:
Interpretation of
s 131(6)
of the
Companies Act 71 of 2008
-application for business rescue proceedings
does not terminate the office of provisional liquidators nor does it
result in the
assets and management of the company in liquidation
re-vesting in the directors of the company in provisional
liquidation.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Fabricius J sitting as court of first
instance):
1. The appeal is
upheld.
2. The first and
second respondents are ordered to pay the costs of this appeal on an
attorney and client scale including the costs
of two counsel where so
employed, jointly and severally, the one paying the other to be
absolved.
3. Paragraphs 2 to 6
of the order of the court a quo are set aside and substituted with
the following:
‘
(a)
The application is dismissed.
(b) The first and
second applicants are ordered to pay the costs of the application,
and the costs of the counter-application, jointly
and severally, the
one paying the other to be absolved.’
JUDGMENT
Seriti
JA (Cachalia, Molemela and Schippers JJA and Mothle AJA):
[1]
This is an appeal against the judgment and some of the orders granted
by the Gauteng Division of the High Court, Pretoria (per
Fabricius J)
on 15 June 2017 at the instance of the first, second and third to
sixty first respondents herein.
[2]
The first to fourth appellants were granted leave to appeal to this
court by the court a quo. The fifth and sixth appellants
were not
parties to the proceedings in the court a quo. After the judgment of
the court a quo, the fifth respondent launched an
application to
intervene as a respondent in the court a quo and as a co-appellant.
On 2 August 2017 the court a quo granted the
fifth appellant leave to
intervene and leave to appeal. The sixth appellant was granted leave
to intervene in the appeal by this
court.
[3] The relevant
parts of the order made by the court a quo read as follows:
‘
2.
Mr E Naude is appointed as manager of the First Respondent with the
powers and capacity of a director of First Respondent, to
manage its
business affairs from date hereof until date of finalization of the
business rescue application for the business rescue
of First
Respondent, currently pending.
3. The said Mr E
Naude is to provide security to the satisfaction of the Master of the
High court for the proper performance of
his duties.
4. He may not
dispose of any assets of First Respondent without the written consent
of this Court.
5. Mr E Naude is
ordered to provide the Court hearing the business rescue application
with a full report of his management of the
company, and with
specific detail as to the possibility of the First Respondent being
rescued as a result of business rescue proceedings.
6. The costs of this
application shall be costs in the business rescue proceedings.’
Factual
background
[4] The first
respondent was the director and the sole shareholder of the first
appellant. The first appellant was established in
1994, initially as
a close corporation and during 2012 it was converted into a company
with limited liability. In 2013 the company
experienced serious
financial problems. In 2016 after realising that the business was
ailing and would not survive, due to its
financial difficulties, a
business rescue application was launched and an order was granted.
The first appellant herein was subsequently
placed in business rescue
and Mr Gerhard Vosloo was appointed as the provisional business
rescue practitioner.
[5]
On 6 April 2017 Mr Vosloo launched an application wherein he sought
an order that the business rescue proceedings with regard
to the
first appellant be terminated and that the first appellant be placed
under liquidation in terms of s 141(2)
(a)
(ii)
of the Companies Act 71 of 2008 (the Act). In his founding affidavit
in support of his application, Mr Vosloo stated that the
proceedings
should be terminated as there was no longer a reasonable prospect
that the first respondent would be rescued. On 3
May 2017 an order
placing the first appellant under a provisional winding-up order in
the hands of the Master of the High Court
was granted. On 15 May 2017
the Master appointed the provisional joint liquidators, who after
their powers were extended, as contemplated
in s 386(4)
(f)
of the Companies Act 61 of 1973 (the 1973 Act), suspended the
company’s business for operational reasons on 18 May 2017.
[6] On 30 May 2017
the first respondent served and filed an urgent application. In the
said proceedings he sought an order and the
relevant parts thereof
read as follows:
‘
2
That Mr Etienne Naude be appointed as manager of the first
respondent, with full powers and capacity of a board of directors of
a company, to manage the first respondent from date hereof until date
of finalization of a business rescue application for the
business
rescue of the first respondent currently pending.
3. That Mr Etienne
Naude be ordered to provide the court hearing the business rescue
application with a full report of his management
of the company over
the interim period, with specific reference to the possibility of the
first respondent being rescued as a result
of business rescue
proceeding.’
[7]
On 6 June 2017 the first to fourth appellants served and filed a
counter-application. In the counter-application they sought
an order
that their powers as provisional joint liquidators be extended to the
extent that they be authorised in terms of s 386(4)
(a)
of the 1973 Act to oppose the application instituted by the
applicants in the court a quo. Furthermore they sought an order
authorising
them as provisional joint liquidators, on behalf of the
company in liquidation, to oppose the application launched by the
applicants.
[8]
On 15 June 2017 the court a quo granted the appellants an order
authorising them to oppose the application and to sign and file
all
necessary affidavits. The court a quo further granted the orders
mentioned in paragraph 3 above. It reasoned that since liquidation
proceedings that have already commenced are suspended by an
application for business rescue in terms of s 131(6) of the Act, the
powers of the liquidators are suspended and control of the assets of
the company ‘falls under the Master in accordance with
the
provisions of s 131(2)’. If the particular company trades, and
the powers of the liquidators are suspended, so the court
held, the
Master cannot assume the powers of the previous directors, which then
‘are re-vested with the particular directors
to control and
manage the company pending determination of the pending business
rescue application’.
[9] The main issues
to be considered in this appeal are the following:
(a) Whether the
appointment and the powers of the duly appointed provisional joint
liquidators are suspended in terms of s 131(6)
of the Act 71 of 2008.
(b) Whether the
control and management of the property of a company already placed in
liquidation by a court order, can validly
and legally be re-vested in
the director of that company.
(c)
Whether the Master has any role to play in business rescue
proceedings.
[10] Section 131(6)
of the Act reads as follows:
‘
If
liquidation proceedings have already been commenced by or against the
company at the time an application is made in terms of
subsection
(1), the application will suspend those liquidation proceedings
until-
(a)
the court has adjudicated upon the application; or
(b)
the business rescue proceedings end, if the court makes the order
applied for.’
[11]
The functions of a provisional liquidator are essentially to take
physical control and to manage the administration of the
property and
affairs of the company pending the appointment of a liquidator. In
Jansen van Rensburg NO & another v
Cardio-Fitness Properties (Pty) Ltd & others
[2014] JOL 31979
(GSJ) para 43 Kgomo J, correctly, remarked that the
responsibilities of the provisional liquidators are essentially to
take physical
control of and to superintend the administration of the
insolvent company’s property and affairs pending the
appointment
of a permanent liquidator. At paragraph 58 the learned
Judge stated that s 131(6) of the Act does not affect the appointment
of
provisional liquidators.
[12]
In
Knipe & another v Noordman NO &
others
2015 (4) SA 338
(NCK) the court
also dealt with the effect of s 131(6). At paragraph 24 Mamosebo AJ
said that the legislature did not intend to
create a situation where
the provisional liquidators would be disempowered to carry out their
function. The learned Judge further
said that the provisional
liquidators cannot be hamstrung by the business rescue application.
[13]
It is not the responsibility of the provisional liquidators to wind
up the company, although under certain circumstances a
provisional
liquidator can, in terms of s 386(4)(
f
)
request the Master or the court to extend their powers.
[14] In
Richter v
ABSA Bank Ltd
[2015] ZASCA 100
;
2015 (5) SA 57
(SCA) para 18,
Dambuza AJA said:
‘
[F]or
these reasons a proper interpretation of “liquidation
proceedings” in relation to s 131(6) of the Act must include
proceedings that occur after a winding-up order to liquidate the
assets and account to creditors up to deregistration of a company.’
[15]
Section 131(6) of the Act does not change the status of the company
in liquidation nor does it suspend the court order that
placed the
company under liquidation in the hands of the Master in terms of s
141(2)
(a)
(ii)
of the Act. The appointed provisional joint liquidators must proceed
with their duties and functions to protect the assets
of the company
for the benefit of all the creditors of the company.
[16]
Successful liquidation proceedings constitute a complete process by
which a company is brought to an end and the liquidation
process
culminates in the dissolution of the company up to its deregistration
(
See Richter
v
ABSA Bank
at 60D).
[17]
In terms s 131(6) of the Act, it is liquidation proceedings, not the
winding-up order, that is suspended. What is suspended
is the process
of continuing with the realisation of the assets of the company in
liquidation with the aim of ultimately distributing
them to the
various creditors. The winding-up order is still in place; and prior
to the granting or refusal of the business rescue
application, the
provisional liquidators secure the assets of the company in
liquidation for the benefit of the body of creditors.
[18]
In
Rentekor (Pty) Ltd & others v
Rheeder and Berman NNO & others
1988 (4) SA 469
(T), the court granted a winding-up order. Some of
the respondents were granted leave to appeal to the full court and
when granting
leave to appeal, the court, directed that rule 49(11)
of the Uniform Rules was applicable. The effect thereof was that the
operation
of the winding up order was suspended. In his judgment
Kriegler J at 504G said that ‘[t]he liquidator’s
appointment
and their powers and duties were suspended, as were all
the other consequences of winding-up. Suspended means lifted, removed
but
subject to future reimposition’. The facts of that case are
distinguishable. In the present matter, the winding-up order still
stands. There is no appeal pending against the winding-up order.
[19]
I find that the appointment, office and powers of the provisional
liquidators are not suspended. In s 131(6) the legislature
used the
word ‘suspend’ and which not mean termination of the
office of the liquidator. In my view the term ‘liquidation
proceeding’ refers only to those actions performed by a
liquidator in dealing with the affairs of a company in liquidation
in
order to bring about its dissolution. What is suspended is the
process of winding-up and not the legal consequences of a winding-up
order.
[20] The next
question is whether the control and management of the company already
placed in winding-up by the court order, can
validly be re-vested in
the director of that company. Section 361(1) and (2) of the 1973 Act
read as follows:
‘
1.
In any winding-up by the Court all the property of the company
concerned shall be deemed to be in the custody and under the control
of the Master until a provisional liquidator has been appointed and
has assumed office.
2.
In any winding-up of any company, at all times while the office of
the liquidator is vacant or he is unable to perform his duties,
the
property of the company shall be deemed to be in the custody and
under the control of the Master.’
[21]
In
Secretary for Customs and Excise v
Millman NO
1975 (3) SA 544
(A) at 552H,
Botha JA said ‘[u]pon the compulsory winding-up of a company
its directors cease to function as such . . . and
they are,
therefore, deprived of their control on behalf of the company of the
property of the company which is then deemed to
be in the custody or
control of the Master or liquidator’. As stated earlier the
order placing the company under winding
up is still in place and has
not been set aside. On the granting of the winding-up order, the
directors of the company cease to
function as directors and the
property of the company falls under the control of the Master or the
appointed liquidators. The directors
of the company in liquidation
have been stripped of their control and management of the company
placed in winding-up by the court.
There is no legal provision either
statutory or at common law that sanctions the re-vesting of control
and management of the company
in liquidation to the director of the
said company.
[22]
The other question that needs attention is whether the Master has any
role to play in business rescue proceedings. As stated
earlier the
sixth appellant was not a party to the proceedings in the court a
quo. In their notice of motion in the court a quo
the applicant never
sought any order which had any impact or effect on the sixth
appellant. In their founding and replying affidavits
the applicants
did not set out any facts which justified the granting of an order
requiring the sixth appellant to perform any
functions or duties. The
sixth appellant, (the Master) has a direct and substantial interest
in the order granted by the court
a quo. In
Molusi
& others v Voges NO & others
[2016] ZACC 6
;
2016 (3) SA 370
(CC) para 28, Nkabinde J said ‘[t]he
purpose of pleadings is to define the issues for the other party and
the Court. And
it is for the Court to adjudicate upon the disputes
and those disputes alone’. The court a quo granted an order
which was
not sought by any of the parties and consequently denied
the sixth appellant an opportunity to be head prior to the granting
of
an order under consideration.
[23]
The order of the court a quo required the sixth appellant to hold
security for the performance of the duties by a manager having
the
same powers as a board of directors in a company. It also required
the sixth appellant to monitor the utilisation or disposal
of the
assets of the company by the manager appointed by the court. The
sixth appellant is a creature of statute and may perform
only those
duties and functions empowered by the enabling legislation. The sixth
appellant exercises control and supervision over
the winding-up,
liquidation and sequestration processes, including rehabilitation of
the insolvent and the deregistration of the
company. The Master has
no powers to deal with a ‘manager’ appointed by the court
or the business rescue practitioner.
The appointment of the ‘manager’
by the court a quo falls outside the scope of the winding-up,
liquidation and sequestration
processes. There is also no statutory
provisions that permits the appointment of a ‘manager’ in
these circumstances.
Consequently paragraph 3 of the court a quo’s
order was incorrect.
[24]
The respondents were not represented in this appeal nor did they
serve a notice to abide. On 11 October 2018, on instruction
of the
presiding judge, the Chief Registrar of this court sent a letter to
the respondents attorneys asking them to indicate promptly
whether
they were opposing the appeal and if so to file the heads of argument
immediately. By way of correspondence dated 25 October
2018,
addressed to the parties, the Chief Registrar advised the parties
that the respondent must indicate to the court what they
intend to
do, failing which an adverse cost order might be made against them.
The respondents failed to advise the court about
their attitude to
the appeal despite the correspondence dispatched to them by the Chief
Registrar. In my view this court must express
its disapproval with
the respondents’ conduct. The respondents failed to indicate to
this court their attitude to the appeal.
The conduct of the
respondents in this respect is unacceptable.
[25]
As a result of the failure of the respondents to participate in this
appeal, at the request of the presiding Judge, Mr L M
Spiller
prepared heads of argument and appeared as amicus curiae. His
assistance is appreciated.
[26] For the reasons
mentioned here above I make the following order.
1. The appeal is
upheld.
2. The first and
second respondents are ordered to pay the costs of this appeal on an
attorney and client scale including the costs
of two counsel where so
employed, jointly and severally, the one paying the other to be
absolved.
3. Paragraphs 2 to 6
of the order of the court a quo are set aside and substituted with
the following:
‘
(a)
The application is dismissed.
(b) The first and
second applicants are ordered to pay the costs of the application,
and the costs of the counter-application, jointly
and severally, the
one paying the other to be absolved.’
__________________
LW
SERITI
JUDGE
OF APPEAL
APPEARANCES
For
the 1
st
to 4
th
Appellants: P A Swanepoel
C
A Boonzaaier
Serfontein
Viljoen & Swart, Pretoria
Van
Der Beg Van vuuren Attorneys, Bloemfontein
For
the 5
th
Appellant:
J
Hershensohn
Lewies
Attorneys, Pretoria
Bezuidenhouts
Inc, Bloemfontein
Amicus
Curiae: L M Spiller
For
the Respondent:
Instructed
by 1
st
and 2
nd
Respondents:
Prinsloo
Bekker Attorneys, Pretoria
Symington
& De Kok, Bloemfontein
Instructed
by the 3
rd
to 61
st
Respondent: Lucienne Murray
Attorneys, Pretoria