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[2016] ZAGPPHC 927
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Staden N.O. and Others v Consolidated Auctioneers Pretoria CC and Others (66559/2011) [2016] ZAGPPHC 927 (30 September 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
I
GAUTENG
DIVISION, PRETORIA
DATE:
30/9/16
CASE
NO.:
66559/2011
In the
matter between:
PETRUS
JACOBUS
MARYN
VAN
STADEN
N.O.
First
Applicant
MOHERANE
WILLIAM HARRY MATHIBEDI
N.O.
Second
Applicant
HENDRIE
STEPHANUS GREEFF
Third
Applicant
and
CONSOLIDATED
AUCTIONEERS PRETORIA CC
First
Respondent
HERMAN
VORSTER
Second
Respondent
THE
REGISTRAR OF
DEEDS
Third
Respondent
THE
MASTER OF THE NORGH CAUTENG HIGH COURT
Fourth
Respondent
ABSA
BANK
LTD
Fifth
Respondent
THE
SHERIFF
WONDERBOOM
Sixth
Respondent
Date
heard: 27 July 2016
Date
delivered: 30 September 2016
J
U D G E M E N T
DE VOS
J:
[1] This
is an application by the applicants for the setting aside of a
default judgement granted by this court on 16 January 2012
under case
no. 66559/2011.
In
terms
of this order the pre liquidation sale of a property known as
Portion 141 (a portion of Portion 94) of the Farm De Onderstepoort
300, Registration Division JR, Gauteng Province, in extent of 8.5653
hectares (hereinafter referred to as 'the property') was ratified
and
ABSA Bank Ltd (the fifth respondent in the present application) was
granted leave to proceed with the transfer of the property
to
Consolidated Auctioneers Pretoria CC (the first respondent), the
purchaser of the farm at a sale in execution.
[2]
The background to this application is as follows.
It
is common cause that the
first and second
applicants
are
the
joint and final
liquidators of a
company
known as
Mannus
Homes (Pty) Ltd (hereinafter referred to as 'the company').
The company was winded-up
by virtue of a
special
resolution registered on 26 April 2011.
Prior to the liquidation
of the company the property was -
and is still
-
registered in
the name of
the insolvent company.
The property was sold in
execution on 15
April
2011,
prior
to the liquidation of
the
company, at
the
instance of
the
fifth respondent,
who
held
a
bond
over
the
said
property. The
property
was
sold
to
the
first respondent for the
amount of R710 000.
The
first respondent paid the full purchase price as well
as VAT
in the
amount
of
R99400
over to
the
sixth respondent
(the Sheriff,
Wonderboom).
In
addition thereto, the first respondent also paid an amount of R269
835,87 to the City of Tshwane Metropolitan
Municipality,
due for outstanding
rates and taxes,
in order to effect
transfer of the property onto the name of the first respondent.
The first and second
applicants confirm that the first respondent paid an amount to the
local authority and should not be out of
pocket
in this regard
but will have to be
reimbursed;
they
furnish an undertaking
that
the
first respondent
would
be
repaid
the
said amount; this
meaning,
as
I understand
it,
the
amount
of R269 835,87 which
was
made
to the
City
of Tshwane
Local Municipality.
[3]
Upon liquidation
of
the company, the first
and second applicants
were appointed as
the
provisional
liquidators
of the
insolvent
company,
before
the
property
could
be
transferred
to the
first
respondent. Their
refusal
to
transfer
the
property
to
the
purchaser
caused
the
first respondent
to
apply
to this
court for an order which
was
granted
on
16 January
2012
by
Van der
Byl
AJ,
declaring
that
the
first
respondent
is
entitled
to
proceed
with
the
transfer
of the property
to
himself
as
the
purchaser thereof.
The
order
granted
by
Van
der
Byl
AJ
was granted
on
an
unopposed basis
as
set
out
hereunder.
In
turn,
this
led
the
first
and
second applicants to
bring
an
urgent
application
as set out in para
[4]
infra.
[4] In
this application before me the first and second applicants apply for
the following relief in their notice of motion:
4.1
On an urgent basis,
pending
finalisation
of the relief
sought in the normal
cause, that the transfer
of the property
be
stayed;
4.2
In the normal
cause:
4.2.1
that the order granted against the liquidators on
16th
January
2012
be
rescinded;
4.2.2
that the first respondent (Consolidated Auctioneers Pretoria
CC) pay the cost of the application including the urgent part
thereof.
The
application by the first respondent in which an order was granted
against the liquidators by default on
16
January
2012
will,
for purposes of this judgement, be referred to as 'the main
application'. The urgent relief sought in
4.1
has already been granted by this court. Only the question of
costs of the urgent application remains to be decided.
[5] I am
called to decide on para
[4.2]
above.
It
is common cause that the urgent application was brought by the
first and second applicants after default judgement was granted. The
declaratory order was granted as the first and second applicants were
in default to oppose the matter. The applicants' failure
to oppose
the matter was caused by a misunderstanding on the side of the first
and second applicants' attorney regarding the rules
of this court. I
will deal with this aspect at a later stage as the first and second
applicants also seek condonation for their
failure to file an
opposing affidavit within the prescribed time period as provided for
in the Uniform Rules of Court.
It
is common cause that the main application was brought after
the first respondent became aware that all execution steps against
the
company became suspended upon winding-up of the company, as
provided for in s
359(1)
of the Companies Act
61
of
1973,
as
amended. At that stage there was a dispute between the parties. The
first respondent contended that the first and second applicants,
in
their capacity as provisional liquidators, have ratified the sale in
execution in terms of extended powers granted to them by
the Master
of the High Court. The first and second applicants contend that they
declined to ratify the sale. On the
16th
January
2012
the
default judgement was granted, declaring that the property can be
transferred. It is this order that the applicants now seek
to set
aside.
[6]
Subsequent to the granting of the default judgement, the first and
second applicants brought the urgent application referred
to above.
The first and second applicants based their application thereon that
they did not ratify the sale in execution, neither
as provisional nor
final liquidators. Both liquidators confirm that the reason for their
refusal was that the property was sold
far below its market value and
in such an event the final liquidators have the right to sell the
property afresh. They say that
as a result of the winding-up of the
company the execution sale was suspended in terms of the provisions
of s
359(1)(a)
of the Companies Act. They confirm that they were
originally appointed as the provisional liquidators. As the
provisional liquidators
of the company they had no authority to
dispose of immovable or movable property of the company, and
therefore they could not sell
the property. In order to sell the
property, the provisional liquidators had to obtain the authority of
the Master in terms of
s 386 (2A) and (2B) of the Companies Act.
[7] The
dispute between the parties relates to the time period between the
appointment of the first two applicants as provisional
liquidators
until their appointment as final liquidators.
It
is common cause that the Master appointed the first and second
applicants provisional liquidators on 21 July 2011 and that they were
appointed as final liquidators on 05 October 2011. Before the joint
liquidators were appointed as final liquidators they applied
to the
Master of the North Gauteng High Court, Pretoria to extend their
powers in terms of the provisions of s 386 of the Companies
Act to
sell the property referred to above. On 24 August 2011 the Master
granted such extended powers in terms of the provisions
of s 386(2A)
and (2B) of the Companies Act.
[8]
Hendrie Stefanus Greeff, the intervening applicant, and herein cited
as the third applicant, has joined the present proceedings
and was
granted leave to intervene and be joined as the third applicant in
the rescission application on 10 November 2015.
[9] The
third applicant also applies for an order to set aside the default
judgement and to join him as eighth respondent in the
main
application, in the event that the rescission of the default
judgement is granted. The third applicant also prays for an order
that the first respondent be ordered to pay the costs of Part A and
Part B of the intervening application and, in the event that
any of
the other respondents to the intervening application oppose the leave
sought in Part B of the application, that a cost order
be granted
against such opposing respondents. In Part C of his intervening
application the third applicant applies for the dismissal
of the main
application instituted by the first respondent under case no.
66559/2011, with costs. There will be referred to the
third
applicant's application to intervene and be joined as a party, as
reflected in Part A of the notice of motion, and further
seeking the
rescission of the default judgement in Part B of such a notice of
motion, and ultimately seeking the dismissal of the
main application
in Part C of the notice of motion, as the third applicant's
intervening application.
[10] The
third applicant's intervening application is based on the provisions
of Uniform Rule 42, ie that the default judgement
was wrongly
granted. The third applicant also supports the application
brought by the first and second applicants although
on a slightly
different basis.
[11]
Apart from the first respondent, none of the other parties or
entities cited as parties to the main application, the rescission
application, and/or the third applicant's intervening application,
opposed any of the applications.
[12]
It
is common cause that the third applicant was the only member
and former director of the insolvent company before its liquidation
and that he is also a creditor of the insolvent company.
It
is common cause that when the third applicant liquidated the
insolvent company by way of special resolution the outstanding bond
owing to ABSA Bank Ltd was approximately R2.2 million. Four years
prior to the sale in execution the immovable property was bought
by
the liquidated company for the amount of R5.4 million. The special
resolution liquidating the insolvent company was registered
on 26
April 2011, eleven days after the sale in execution. The third
applicant stood surety for the liabilities of the insolvent
company
towards the fifth respondent.
[13]
It
is not in dispute that the third applicant has the necessary
and required
locus standi
to apply for the rescission of the
default judgement as well as to be joined as a respondent to the main
application. Leave was
accordingly granted to the intervening
applicant to be joined as the third applicant in the application for
the rescission of the
default judgement and in the event of granting
the rescission application to be joined as the eighth respondent in
the main application.
[14]
It
is common cause that after the first and second applicants
were appointed as provisional liquidators of the insolvent company,
and
after applying for the extension of their powers to sell the
property, the first and second applicants received offers from third
parties wanting to purchase the said property from the insolvent
estate in the amount of RI,1 million and R l,8 million respectively.
[15] On
27 November 2011 the first respondents instituted the mam application
seeking a declaratory order that the sale in execution
of the
immovable property which was sold to the first respondent is not null
and void and that transfer of the immovable property
should be
effected in the name of the first respondent. The first respondent
contended that the first and second applicants have
ratified the sale
in execution and upon that version the default judgement was
granted. At the time when default
judgement was
granted, only the first respondent's version was before the court.
[16]
It
is the third applicant's case in the present application that
unless ratification can be proved the relief sought by the first
respondent
and granted to it in terms of the default judgement is and
was not legally competent and barred by the provisions of inter alia
s 386 of the Companies Act. Section 386(4) deals explicitly with the
powers of the provisional liquidator.
It
is common cause that the function of a provisional liquidator
whose powers the Master may restrict under s 386(6) is for all
intents
and purposes that of a receiver
pendente lite.
A
provisional liquidator acts as a steward and assumes control of the
property and affairs of the company pending the appointment
of a
final liquidator. A provisional liquidator stands for all intents and
purposes in a caretaker function. See
Ex Parte
Klopper
NO: In re Sogervim SA
(Pty)
Ltd (In
Liquidation)
1971
(3)
SA
791
(T)
at
797.
It
is not the function of the provisional liquidator to liquidate
the company as no meeting of creditors has taken place and the
concursus
cannot take steps to enforce its rights. The
Master for this reason does not accord unto a provisional liquidator
any of the powers
under s 386(4) except in some cases as mentioned
under s 386(4)(/). In the present matter it is common cause that on
04 August
2011 when the alleged ratification occurred, the powers of
the provisional liquidators had not been extended under either ss
386(2A)
and (2B) or 386(4) of the Companies Act.
It
is contended that the first respondent failed to deal with
this allegation in his answering affidavit and in fact admits same.
The
inevitable conclusion is, therefore, that the first and second
applicants had no authority under the circumstances of this case
and
as the provisional liquidators of the company to dispose of either
its immovable or movable property until they were appointed
as final
liquidators on 05 October 2011. However, after application to the
Master, their powers were extended and they were granted
the
authority to dispose of the property of the company in terms of s
386(2A) and (2B). This authority was granted by the Master
on 24
August 2011. Any alleged ratification of the sale in execution before
the 24th August 2011 by the first and second applicants
would be null
and void and would amount to a clear violation of the principles of
nemo
plus iuris
ad alium transferre
potest quam ipse habet.
It follows from the aforegoing
that any reliance placed by the first respondent on letters or events
that occurred before 24 August
2011 to prove that ratification has in
effect been given by the first and second applicants, are null and
void. The first and second
applicants had, in the circumstances, no
authority as the provisional liquidators of company to dispose of
either its immovable
or movable property.
It
must further be borne in mind that no sale took place at the
instance of the provisional liquidators. The sale in question was the
sale in execution by the sixth respondent.
[17] The
third applicant contends that the crux of this dispute is whether the
provisional liquidators were empowered to ratify
the sale conducted
by the Sheriff, and, if so, whether they did indeed ratify the
pre-liquidation sale in execution. The first
respondent, in his
application for default judgement and in opposition of this
application, relies on correspondence from Leonie
Vorster on 02
August 2011 and from the first applicant on 04 August 2011, recording
that the first and second applicants have ratified
the sale. The
letter dated the 04 August 2011 comes from the first applicant in his
capacity as joint liquidator and reads as follows:
'Kindly
take notice that the fixed property situated at, Portion 141 of the
Farm De Onderstepoort, 300 was sold at a Sale in Execution
and the
liquidators ratified the sale in the amount of R710 000.00'
Both
these instances of correspondence are dated before occurred before 24
August 2011, the date on which the first and second applicants'
received authorisation from the Master in terms of s 386(2A) and (2B)
to sell the property. Before the 24th August 2011, first
and second
applicants could not have been vested with extended powers under s
386 and could not have ratified the sale. The third
applicant
contends that before the first and second applicants' powers were
extended they were only provisional liquidators, simply
carrying out
caretaker functions and had no authority to liquidate the estate of
the company. The first and second applicants appreciated
their lack
of authority to ratify the sale, prompting the application for
permission to the Master of this court. It follows from
the aforesaid
that the facts relied on by the first respondent in the main
application before Van der Byl AJ are flawed and that
default
judgement could not have been granted in the circumstances. Ifthe
correct facts were brought to the attention of Van der
Byl AJ he
would no doubt not have granted the order.
[18] At
this stage of the judgement, and to explain the sequence of events
and subsequent delays, I deem it necessary to place the
following on
record. After default judgement was granted on 16 January 2012 the
first and second applicants brought an urgent application,
in
combination with the rescission application, seeking an interim
interdict to stay the execution of the order granted by Van
der Byl
AJ, pending the finalisation of the rescission application. The
interim interdict was granted and the rescission application
was
subsequently argued before Webster J on 12 May 2012. Judgement was
reserved. To date hereof, Webster J has not handed down
judgment in
the rescission application. The partaking parties to the rescission
application have subsequently been informed by
the Judge President of
this Division that no judgement would be forthcoming due to the
retirement of Webster
J.
Thereafter, on 03 July 2015, there was a new
turn
of events. The third applicant became aware thereof that the
first respondent was going to sell the immovable property per public
auction. This was in direct conflict with the provisions of the
existing interim order prohibiting transfer of the immovable property
pending the finalisation of the rescission application. After several
enquiries by the third applicant through his attorney of
record, it
was confirmed that discussions took place in terms whereof the first
applicant had allegedly confirmed the sale to the
first respondent.
Accordingly a public auction was held on 10 July 2015 and
notwithstanding objections by Mr Brand on behalf of
the third
applicant, the immovable property was again sold per public auction
for R4,l million.
It
is
the third applicant's case that at present the immovable property has
not been transferred and still vests in the insolvent estate
of the
insolvent company. The third applicant contends that the alleged
settlement was never finalised, neither was it reduced
to writing and
creditors never sanctioned such an agreement. Accordingly the
rescission application is still pending and the existing
interim
order prohibiting transfer is still in force. Following discussions
between the parties and the discussion in the chambers
of the Deputy
Judge President Ledwaba on 10 September 2015 it was subsequently
agreed that the rescission application will be argued
de novo.
As a result thereof the third applicant filed his application for
intervention and the order in terms of Part A of such an application
was granted on 10 November 2015.
[19] I
now turn to deal with the first and second applicants' version. The
uncontested version of the first and second applicants
is that they
were the joint liquidators of the insolvent company. They were
subsequently appointed as the final liquidators on
the dates set out
above. The third applicant was the only director and shareholder of
the insolvent company before its liquidation
and the said applicant
also bound himself as surety and co-principle debtor for the
obligations of the liquidated company's debts
to the fifth
respondent. They confirm the facts set out by the third applicant.
[20] Both
the first and second applicants confirm that the sale in execution
was a direct result of the company falling into arrears
with its bond
payments to the fifth respondent. Consequently the property was sold
in execution to the first respondent on 15 April
2011. They were then
appointed as joint liquidators. The essence of their version is that
they both deny that they ratified the
sale in execution. They also
seek a rescission of the default judgement granted by Van der Byl AJ.
[21] The
principles applicable to a rescission of a judgement are clear. A
party is entitled to the rescission of an order granted
against it by
default if good cause exists for the setting aside of the default
judgement.
'Good cause
' means a reasonable explanation for
the default and a
bon
a
fide
defence. See in this
regard rule 31(2)(b) of the Uniform Rules. Before the first and
second applicant can succeed in their rescission
application they
must also be granted condonation for their late opposition of the
default judgement. The court must first decide
whether condonation
should be granted to them.
[22] The
first and second applicant filed an application for condonation. It
is common cause that the first and second applicants
filed a notice
of opposition to the main application on 09 December 2011. The first
and second applicants, however, failed to file
an opposing affidavit
timeously and the first respondent proceeded on the unopposed roll of
16 January 2012 to obtain the order
sought for by default which was
granted on that day. The applicants contend that the enrolment of the
main application on the unopposed
roll of 16 January 2012 was
irregular and not in compliance with the provisions of Uniform Rule
6(5)(/) and/or the practice directive
applicable in this division at
that time in light of the notice to oppose filed by the first and
second applicants. Therefore it
is contended that the default order
granted on 16 January 2012 was irregularly obtained and erroneously
sought and granted. Mr
Johan Loots acting on behalf of the first and
second applicants filed an affidavit attached to the papers as
annexure "MVS8"
on behalf of the first and second
applicants explaining the failure to file opposing affidavits as
follows. On 08 December 2011
a notice to oppose the main application
was telefaxed to the attorney acting on behalf of the first applicant
and same was served
on 09 December 2011. The reason for the failure
to file an opposing affidavit is also explained. Mr Loots was on
leave from 15
December 2011 to 15 January 2012. Mr Loots confirms
that he was under the impression that the main application would only
serve
before court on 16 January 2012 if no notice to oppose was
given, and should a notice of intention to oppose be given, the main
application will find its course to the opposed roll in which case a
notice of set down will be served. This impression was based
on the
last paragraph of the notice of motion of the main application which
reads as follows:
'GEL/EWE
VERDER KENNIS TE NEEM DAT indien geen kennisgewing van opponering
gemaak word nie die aansoek aangehoor sal word op 16
Januarie 2012 om
10h00 of so spoedig daarna as wat die Advokaat namens die Applikant
aangehoor kan word'.
Mr Loots
further confirms that due to the festive season and his leave, as
well as several other urgent matters he had to attend
to, he could
not see to the finalisation of the opposing affidavit in time.
It
is not contested by Mr Loots that, in terms of the practice
directive applicable at that time, an applicant is entitled to set
down
the application on the unopposed motion roll if an opposing
affidavit was not filed timeously; but says he was under the
impression
that a notice of set down on the unopposed roll should
also be served. It is common cause that such a notice of set down was
not
served. He was therefore under the impression that the opposing
papers could be served at a later stage. Mr Loots says in his
supporting
affidavit that on 16 January 2012, the first day after he
had returned from his vacation, he had a consultation with Mr Herman
Vorster who acted on behalf of the third applicant. In order to
finalise the opposing affidavit to the main application they
discussed
the merits of the main application. On the same day at
approximately 11h00 Mr Loots telephonically contacted the first
respondent's
attorney of record, Mr Bester, who was not available at
that time. Shortly thereafter and on the same day, Mr Bester
telephoned
Mr Loots while still in the company of Mr Vorster. Mr
Loots further states in the affidavit that during this telephone
conversation
he was brought under the impression that the application
was not set down for hearing on 16 January 2012.
The next
day, 17 January 2012, Mr Loots was informed that the default
judgement was granted, notwithstanding the telephonic conversation
referred to above. Mr Hester's stand was that there was no obligation
on him to inform
Mr
Loots
that the matter was indeed set down for hearing on 16 January 2012.
Mr Loots informed Mr Bester that the first and second
applicants
intend launching an application for rescission of the default
judgement whereupon
Mr
Bester responded that it was his instruction to proceed with
the transfer of the property.
[23] From
the aforegoing it is clear that the applicants were not to blame for
the fact that judgement was granted on 16 January
2012 and had
intended to oppose the application for default judgement all along.
The first and second applicants' intention to
defend the application
is corroborated by the fact that they subsequently launched an urgent
application, in combination with the
rescission application, seeking
an interim interdict that the execution of the 16 January 2011 order
be stayed pending the finalisation
of the rescission application. The
interim interdict was indeed granted on an urgent basis. The
rescission application was subsequently
argued before Webster J in
May 2012 as referred to above and judgement was reserved.
[24] The
third applicant subsequently filed his application for intervention
and the order set out in Part A of such an application
was granted on
10 November 2015.
[25] I am
satisfied that the first and second applicants have a reasonable
explanation for their default to file an affidavit in
opposition to
in the main application within the prescribed time limits. I accept
the explanation given by Mr Loots and therefore
conclude that the
first and second applicants were not wilful in failing to file their
answering affidavit and therefore their
negligence cannot be regarded
as gross negligence. Insofar as the third applicant is concerned it
is clear that he was not cited
as a party to the original proceedings
and therefore no condonation is sought on his behalf for the late
joining of the proceedings.
In
any event, the third applicant was entitled to rely on the
expertise of the joint liquidators to protect the interest of all
creditors
including himself. Accordingly condonation must be granted
to the first and second applicants.
[26] The
next issue to be decided is whether there is good cause for the
setting aside of the default judgement as required by Uniform
Rule
31(2)(b). In order to determine whether a
bon
a
fide
defence exists it is clear in terms of s 386(2A) and (2B)
of the Companies Act that the provisional liquidators could only sell
the said property once the Master has granted authorisation to do so.
Only thereafter were they entitled to ratify the sale in execution.
Once they became entitled to ratify, it must be determined if and
when thy exercised their extended powers.
[27] All
three the applicants rely on the decision of
Legh
v Nungu
Trading 353
(Pty)
Ltd
&
Another
2008 (2) SA 1
(SCA)
where in effect exactly the same relief was sought by the
purchaser of an immovable property prior to liquidation, as the
relief
sought by the first respondent in the main application.
At
para
10-11,
Ponnan
JA held that s
20(l
)(c)
of the
Insolvency Act 24 of 1936
, which reads as follows:
'The
effect
of
the
sequestration of
the
estate of
an
insolvent
shall be
-
(a)
…
(b)
….
(c)
as soon as any
sheriff or messenger, whose duty is to execute an
y
judgment
given
against an
insolvent, becomes aware of
the
sequestration of
the insolvent's
estate, to
stay
that
execution
unless
the
court
otherwise
directs
'
cannot be
viewed in isolation.
Section 20(1
)(a)
divests the insolvent of his estate and vests it in the Master, and
then, upon him in the trustee. Section
20(
2
STYLE="font-size: 11pt">
2)(a)
provides that for the purpose of s
20(1)
,
the estate shall include all the property of the insolvent at the
date of sequestration including property or proceeds thereof
which
are in the hands of the sheriff or a messenger under a writ of
attachment. The estate of a company in liquidation, on the
other
hand,
remains
vested
in the
company.
In
terms
of s 361(1) of the
Companies
Act
all
of the property
of a company
which has been winded-up
is deemed
to be
in the custody
and under control of the
Master until a provisional
liquidator has been
appointed and has assumed office. The
property
of the
company
of
whatever
kind,
although
it
is in his/her
custody
and
under his/her
control,
does not vest
in its liquidator
unless
the
court
so orders in terms of s
361(3). Sections
20( l
)(a)
and
20(
2)(a)
of the of the
Insolvency Act, insofar
as vesting the insolvent's
property
in the
trustee,
therefore
plainly
have
no
application
to
a
company
in
winding-up. Both sections
are therefore not rendered
inapplicable
to a company in
winding-up by s 339 of the Companies Act. The court found that such
relief is
not
competent
in
light of
the provisions
of
s
361
(1)
of
the
Companies
Act. In
para
21
of
the
said judgement Heher
JA
confirmed the majority
judgment
but
on a different ground and held that:
'Section
359(l)(a)
suspends
all
civil proceedings
(ie
both
those
already
commenced
before a
winding-up and those which would, but for the suspension, be
commenced after
the making of an
order
for
winding-up) until the appointment of a liquidator, whereafter they
may
be
commenced
or
continued
only
after
compliance
with
the provisions
of s 359(2). In
this case the claim against the company
for
transfer of the
property
sold
in execution had arisen before the commencement of the winding-up.
After the
provisional order
the
property remained
that
of
the
company
an
d
fell into
the
concursus
'.
[28]
In
the main application the first respondent said in para
13.1 of its founding
affidavit:
'Die
eerste
en
tweede
respondent
[the
first
and
second
applicants
in
the
present application
-
own
insertions]
het
nie in
die
skoene van
die
Sewende Respondent
[i.e.
The Sheriff
Wonderboom
-
the
sixth
respondent
in the
present
application]
getree
by likwidasie van
Mannus Homes (Pty)
Ltd nie. Slegs die
beheer van die eiendom het op
die Eerste en
Tweede respondent oorgegaan.
Sewende Respondent
het egter reeds bes/ag gele op
die
eiendom ingevo/ge
'
n
geldige
eksekusie lasbrief
en
die
eiendom verkoop
op 15
April 2011 voor
die likwidasie van Mannus Homes (Pty) Ltd.
Die likwidasie het
dus nie die
eksuekusieproses
opgeskort
of
ongedaan
gemaak
nie
'.
Van der
Byl AJ accepted this statement of fact and law as correct and granted
the said order.
[29]
The case
advanced
on behalf
of the
first respondent
and
on which
the
order
was
granted
by Van der
Byl AJ completely ignores
the meaning and effect of
s
359(1)
and (2)
of
the Companies Act.
A
sale
in
execution does
not divest
the first
and second applicants as
liquidators
of
the company of the import of these provisions.
Section 359(l
)(b) makes it clear
that after a special
resolution
for
the voluntary
winding
up of a company has been registered
'any
attachment
or execution
put inforce against the estate or
assets of
the company after the commencement of
the winding up shall be void
'.
Although the
sale in execution in terms whereof the first respondent purchased the
property in question took place prior to the
company being placed
into liquidation, the said immovable property forming the subject
matter of this application had not been
transferred. Accordingly
dominium in the immovable property still vests in the company. At
present the property is still registered
in the name of Mannus Homes
(In
Liquidation). As the dominium of the property has not been
transferred to the first respondent the first and second applicants
are
duty-bound to take into their reckoning everything which falls
into the estate of the company, which includes the said property.
[30] In
effect the property remains the property of the judgement debtor (and
hence the property of his curator in the event of
an insolvency)
right up to the moment of delivery. Kriegler
J
held in
Simpson v
Klein NO
&
Others
1987
(1) SA 405
(W)
at
412A
that:
'.
. .
it
is the actual transfer of
dominium
in goods attached in
execution pursuant to the
sale
which
divest
the
estate
of
the judgment
debtor
of
such
goods
'.
See also
in this regard
Liquidator
Mr Spares
(Pty) Ltd
v Go/dies
Motor Supplies
(Pty) Ltd
1982 (4) SA
607
(W)
at
609 and
Pols v
R Pols
-
Bouers en
Ingenieurs
(Edms) Bpk
1953 (3) SA
107
(T) at 112D-E.
[31] In
this application the first respondent has a different approach. The
first respondent contends that the first and second
applicants
applied to the Master of the High Court for authority to ratify the
auction sale on 04 August 2011 and in fact did ratify
the sale in
execution. The first respondent's contention is based on the contents
of two letters.
It
appears
that these two letters, dated 02 August 2011 and 04 August 2011
respectively, created the impression that the sale in execution
was
ratified by the liquidators. Leonie Vorster is an estate
administrator at St. Adens International Insolvency Practitioners.
On
02 August 2011, Ms Vorster - representing the applicants - indicated
to the fifth respondent in an email that she received instructions
from the liquidators to ratify the transaction and requested the
fifth respondent's permission to ratify the sale. The fifth
respondent
thereupon informed her to ratify the sale. The first
respondent contends that the first and second applicants then, on
that very
same day, did ratify the sale. Copies of the said
correspondence are attached to the opposing papers as "CAP2"
and "CAP3".
[32] The
first and second applicants deny that they have ratified the sale in
execution. The first applicant says in his founding
affidavit that
during the course of August 2011 himself and the second applicant
received confirmation from the fifth respondent
that they should
ratify the sale, meaning that they should as liquidators accept the
pre-liquidation sale. As they were not entitled,
as provisional
liquidators, at that point in time to enter into any agreement to
dispose of immovable property of the company,
unless their powers
have been extended in terms of the provisions of s 386(4) of the now
partially repealed Companies Act 61 of
1973, they applied to the
Master for the extension of their powers on 04 August 2011.
It
was only on 24 August 2011that their powers were ultimately
extended by the Master as set out in annexure "MVS7".
However,
subsequent to the fifth respondent's instruction, the first
and second applicants received far better offers for the sale of the
immovable property. As a result of these offers the first and second
applicants never signed any agreement, meaning a written agreement
of
sale, with the first respondent as the pre-liquidation purchaser, in
terms whereof the liquidators intended or agreed to dispose
of the
immovable property to the first respondent. Thus, they never
exercised the extended powers bestowed upon them.
[33] The
liquidators' powers were only extended on 24 August 2011. It follows
that any reference to ratification done by them on
04 August 2011
must be regarded as
pro non
scripto.
Unfortunately the confusion generated by the said
correspondence created the impression that ratification was effected
and that
the sale in execution was confirmed and that transfer could
proceed in the normal way.
Ex
facie
the
documentation before me no such ratification could have occurred
before the liquidators' powers were extended and any reliance
on
anything before that date appears to be
ultra
vires
as the first and second applicants lacked the powers
to ratify the sale in execution. The first and second applicants'
denial to
ratify the pre liquidation sale is supported by the
fact that at the time when the main application was brought no
meeting
of creditors had at any of the relevant times been convened.
As no meeting of creditors has taken place the
concursus
cannot take steps to enforce its rights. I find it totally
improbable that any diligent liquidator would ratify the sale of an
immovable
property not knowing what other claims have to be met.
[34] The
first respondent contends further that s 386(2A) and (2B) is of no
application to the present set of facts. Sections 386(2A)
and (2B)
provide that:
'(2A)
At
any
time
before
a general
meeting
contemplated
in subsection
(l)(
d)
is convene
d
for the first time
the
liquidator
shall,
if
satisfied
that
any
movable
or
immovable
property of the
company ough
t
forthwith to
be
sold, recommend to
the Master in
writing
accordingly,
stating his reaso
n
for such
recommendation.
(2B) The
Master may thereupon authorise the sale of such property or any
portion
thereof on such
conditions and in such manner as he may determine:
Provided that
if
such property or
portion thereof is subject to a
preferential
right, the Master
shall not authorise
the
sale
of
such
property or
portion unless
the
person entitled
to
such preferential
right
has
given
his
consent
thereto
in
writing'.
[35] It
is the first respondent's contention that this section is not
applicable as the sale by the sheriff had already taken place
before
liquidation. Therefore, the supervening liquidation does not
automatically terminate contracts entered into before liquidation.
The liquidator must make an election to abide by or to terminate the
contract. If he abides by the contract he steps into the shoes
of the
Sheriff (not the company) and is obliged to the other party to
perform. See in this regard
Bryant
&
Flanagan
(Pty)
Ltd v
Muller
&
Another NNO
1978
(2) SA 807
(A) at
812H-813A.
The
first respondent also referred the court to the decision of Kotze JA
in
Liquidators Union
&
Rhodesia
Wholesale
Ltd v Brown
&
Company
1922
AD 549
at 558-559.
Where the effect of a judicial
attachment was discussed, Kotze JA said the following:
'The
effect of such a
judicial
arrest is that the
goods attached are thereby
placed
in the hands or
custody of the officer of the Court.
They
pass out of the
estate of the
judgment debtor,
so that in the event of the debtor 's insolvency the curator of the
latter's estate cannot claim to have the property
attached delivered
up to him to be dealt with in the distribution of the insolvent
estate
. . .
But
although the effect of a
pignus
judiciale
is that the control of
the property arrested in execution passes from
the
judgment
debtor, and
therefore on his insolvency supervening does not come under the
administration of the curator of the insolvent estate,
the
dominium
remains in the debtor,
who can, up to the last
moment before
actual
sale,
redeem
his
attached
property:
that
is
to
say, the
property subject
to the
pignus
judiciale,
for
while the
pignus
lasts he remains
the owner of the
pledge".
[36] The
first respondent also relies on the following decisions in support of
their argument:
36.1
In
Syfrets
Bank Ltd
&
Others v Sheriff
of
The Supreme
Court Durban
Central
&
Another:
Schoerie NO v
Syfrets Bank
Ltd
&
Others
1997
(1) SA 764
(D&CLD)
at
7741-775A
the
court concluded:
'Executory
contracts entered into with the insolvent before the advent of
liquidation or insolvency, as the case may be, are not
automatically
terminated by the insolvency
.
. .
but the rights and
obligations thereunder become suspended until the trustee or
liquidator has had the opportunity to
decide, in the
light of the interests of
the
general body of
creditors and the
insolvent,
whether
to
abide
by
or
abandon the contract'.
36.2
In
Strydom
NO
v MGN
Construction
(Pty) Ltd
&
Another:
In
re Haljen
(Pty) Ltd
(In
Liquidation)
1983 (1) SA
799
(D&CLD) at 803G
the court stated:
'The
Legislature in
my view sought in
s
359(1)(b)
to
draw a
distinction
between, on
the
one
hand,
attachments and execution which had been
put
inforce prior to
the
commencement
of
winding-up
and, on the other hand, those which were only
put in force
thereafter.
The
last-mentioned
class of
executions and attachments were to be void and the first-mentioned
not.
This
it did
because
it wished only
those creditors who had taken steps to have execution put i
n
force
prior to the commencement of winding up to have the advantage
of s
391(2)
[sic]
ie
of being able to continue
with such
execution upon
notice to
the liquidator
'.
36.3
The first respondent contends that the reasoning in
Strydom
NO
is in accordance to what is said in
Lindley
On Companies
6th
ed
vol 2 at 903:
'The
court is
much
more reluctant to
stay executions
than
other
proceedings (under
the provisions
of
the Companies Act).
To interfere with
the creditor whose legal right is established and who is about to
reap the fruit
of
a successful litigation, is a strong measure scarcely to be justified
by
considerations of
hardship to
the
debtor,
but
possibly
justifiable
on
the
principle
that equality is
equity, and that it is unjust to
other creditors
that one shall obtain
payment in full
whilst little or nothing is left for them. Even
as
between
creditors,
however,
some
preference is
fairly the reward
of extra
diligence;
and
where
a
creditor
has
actually
issued
execution against
a company before a
petition to
wind up has been
presented, and the
Sheriff is in possession
when
it
is
presented,
the court will not
interfere and deprive the creditor of the
fruits of his
diligence, unless under very special circumstances, eg, of oppression
or fraud.
But,
as
a rule,
if
the Sheriff
does not
cease
before
the
commencement
of
the
winding up,
the
execution will be
stayed'.
I have
considered the first respondent's submission.
In
S
y
frets
Bank
Ltd
the bank held a mortgage bond over certain property as
security for a loan advanced to a close corporation. The bank
obtained judgement
and the sheriff attached and sold the property at
a sale in execution. The property was bought in by the bank. After
the sale was
concluded, another party, with the bank, approached the
sheriff to enquire whether it would be possible to allow them to
purchase
the property in place of the bank. After the sale in
execution, but before transfer of the property could be completed,
the corporation
was placed in provisional liquidation. The first
respondent's contention is therefore that in accordance with the
decision
in
Syfrets
Bank Ltd
it follows that in the instance execution was put
into force against the property when the sheriff attached it pursuant
to the writ
of execution issued on behalf of the fifth respondent.
That, and the resultant judicial sale of the property, preceded
liquidation
of the company. Consequently, transfer of the property to
the purchaser, which would constitute the final step in the execution
process in respect of the property, would not fall within the purview
of and thus be invalidated by the provisions of s 359(1)(b).
The
court adopted the view that if liquidation intervened after the
immovable property had been sold in execution, but before transfer
was completed, a sheriff was no longer entitled or obliged to give
transfer to a purchaser. The decision then rested with a liquidator
whether to abide by the contract or to repudiate it.
[37] I do
not agree with the reasoning of the first respondent.
It
conflates the notion of a sale in execution performed by the
sheriff (not the applicants) as the sale in execution within the true
intention of s 386(2A) and (2B). In
Natal
Joint
Municipal
Pension
Fund
v Endumeni Municipality
2012
(4) SA 593
(SCA)
Wallis JA held on behalf of the court
at
604B:
'A
sensible meaning is to be preferred to one that leads to insensible
or unbusinesslike results or undermines the apparent purpose
of the
document. Judges must be alert to, and guard against, the temptation
to substitute what they regard as reasonable, sensible
or
businesslike for the words actually used'.
Although
this quotation refers to the interpretation of contracts there is no
reason why the same logic should not apply in matters
of insolvency.
In
Meskin
Insolvency
Law Chapter
6
it is concluded that where prior to
the commencement of the winding-up property has been sold in
execution and after such commencement
the property is delivered to
the purchaser, the provisions of section 359(1)(b) of the Companies
Act
per se
do not operate to invalidate the delivery. However,
the delivery may be impeachable at the instance of the liquidator.
But whereas
at the commencement of the winding-up delivery has not
occurred, it is precluded as a result of the institution of the
concursus creditorum
and the purchaser's personal right to
obtain delivery as against the sheriff is enforceable only within the
limits arising from
such institution. While there is authority for
the view that the liquidator has this right to decide whether to
allow the sale
to proceed or to abandon it, it is respectfully
doubted that this is the case. The effect of the
concursus
is
that control of the property vests in the liquidator, and the sheriff
is therefore precluded by operation of law from passing
transfer of
the property to the execution purchaser.
In
Warricker NO
and Another
v Senekal
2009
(1) SA 509
(W)
at para 22,
the
court pointed out the differences between the two situations.
An
election by a liquidator not to abide by a pre-liquidation
contract of the company amounts to a breach which affords the other
party
an action for damages which he can prove as a creditor, whereas
in the case of a sale in execution which does not proceed because
of
the liquidation of the company, there is no breach and the creditor
does not have an action for damages, but must
'simply resort to
the winding-up procedure
to prove
and
obtain satisfaction
(to whatever extent other creditors
receive it) of its original debt which was the subject of the
execution process. The one
process is
substituted with another one
'.
I agree with
this line of thought. Taking into consideration ss 342(1) and 391 of
the Companies Act, the liquidation terminates
the
pignus
judiciale
over the property which, in turn, results in the
transfer of the custody and control of the property from the sheriff
to the Master
and thereafter to the liquidator, thereby precluding
the sheriff from passing transfer of the property to the execution
purchaser.
See
Syfrets Bank Ltd
at 782-783;
Cf
Shurrie v Sheriff
for
the
Supreme Court, Wynberg and Others
1995
(4)
SA
709
(C),
in which, it was respectfully submitted, it was incorrectly
concluded that the purchaser could obtain delivery of the property
from
the execution officer notwithstanding the commencement of the
winding-up.
[38] It
is common cause that in the event of liquidation of a company the
assets shall be applied in payment of the costs, charges
and expenses
incurred in the winding up and, subject to the provisions of s
435(1
)(b)
the claims of creditors as nearly as possible as
they would be applied in payment of the costs of sequestration and
the claims
of creditors under the law relating to insolvency and,
unless the memorandum or articles otherwise provide, shall be
distributed
among the members according to their rights and interest
in the company.
If
the first respondent's contention is to be accepted it would
mean that s 386(2A) and (2B) is of no application as the sale in
execution
has already taken place. In terms of the provisions of ss
343 and 398 of the 1973 Companies Act and the common law ownership of
the dominium continues to vest in the company until transferred.
There is no indication that the words
'sold
'
in s 386(2A) and
'sale
'
in (2B)
refer to a sale in a physical sense of entering into a sale
agreement. To give up dominium is the only business-like and
sensible
meaning that can be attributed to the words
'sold'
and
'sale
'.
I find no reason why the words
'sold'
and
'sale
'
should be read as references to the sale in execution.
The applicants' application to the Master to amplify their powers was
done
in the context to perfect a sale to which the applicants had not
been a party to. As the provisional liquidators merely acted as
caretaker pending the appointment of the final liquidators they had
no authority to liquidate the estate of the company. The applicants,
appreciating their lack of authority, applied to the Master to have
their powers extended to ratify the sale ie the transfer of
the
property sold in execution. In my view and for purposes of this
application I do not have to give a final decision on this
point save
to state that in my view the liquidation process stayed the execution
proceedings and in the absence of proof that the
sale in execution
was ratified the applicants have shown that they do have a
bona
fide
defence to the plaintiff s claim. The first
and second applicants deny that the ratified the sale in execution.
If it is to be accepted,
it will create a complete defence against
the first respondent's claim. The third applicant should also succeed
in its defence
based on the provisions of Rule 42. Firstly,
ratification could not have taken place on or before the Master
granted his consent
to sell the property and therefore any reliance
on the correspondence by Leonie Vorster must be regarded as
pro
non scripto;
and secondly if the liquidators' version is to be
accepted that they did not ratify the sale in execution, no sale
agreement was
concluded.
[39] As
far as costs are concerned there can be no doubt that the third
applicant is entitled to its costs as it was successful
in this
application. The position of the first and second applicants is
somewhat different. Mr Pelser SC on behalf of the first
respondent
contended that no costs should be awarded to the first and second
applicants due to the fact that the first and second
applicants were
partly responsible for creating the wrong impression that the sale in
execution was ratified. The first and second
applicants also delayed
their application to have the order set aside and if it was not for
the third applicant who joined in the
application the first and
second applicants should be held liable for the increased costs
caused by their failure to act immediately
in the interest of
creditors. It was further contended that the first and second
applicants never brought an application in terms
of the provisions of
Uniform Rule 42 and that in the absence of such an application, and
without the assistance of the third applicant,
the first and second
applicants would not have succeeded in their application to have the
order set aside as they failed to make
a full disclosure of the facts
to this court.
It
is further contended that the first and second applicants'
application should be refused with costs.
[40] I
have carefully considered the arguments raised by the first
respondent's counsel, but in light of the fact that I have come
to
the conclusion that the application of both the first and second
applicants as well as that of the third applicant, although
brought
on a different basis, should succeed I am of the opinion that the
normal rule should apply namely that the successful parties
are
entitled to their costs, including the costs occasioned by the urgent
application.
I
THEREFORE MAKE THE FOLLOWING ORDER:
(1)
The order granted by Van der Byl AJ on 16 January 2012 under
case no. 66559/2011, and attached to the third applicant's founding
affidavit deposed of on 30 September 2015 as "Annexure HSG4",
and in terms whereof the pre-liquidation execution sale
of the
immovable property known as Portion 141 (a portion of Portion 94) of
the Farm De Onderstepoort 300, Registration Division
JR, Gauteng
Province, in extent 8.5653 hectares, was ratified and in terms of the
sixth respondent was granted leave to proceed
with the transfer of
the property be rescinded and set aside;
(2)
The third applicant be and is hereby joined as the eight respondent
in the main application under case no.
66559/2011, instituted in
terms of the notice of motion dated 21 November 2011;
(3)
The relief sought in Part C of the third applicant's intervening
application is postponed to be adjudicated
at the hearing of the main
application;
(4)
The first respondent be and is hereby ordered to pay the costs of
Part A and Part B of the third applicant's
application;
(5)
Condonation is granted to the first and second applicants for their
failure to oppose the main application
within the time limits
prescribed by the rules of this court;
(6)
Leave is granted to the first and second applicants to file their
opposing affidavits in the main application
under case no. 66559/2011
within 14 (fourteen) days of this judgement;
(7)
The first respondent is ordered to pay the costs of the first and
second applicants in this application;
(8)
The first respondent is ordered to pay the costs of the first and
second applicants in the urgent application
staying the order of 16
January 2012 that has now been rescinded and set aside.
__________________________
DE
VOS J
JUDGE
OF THE GAU ENG DIVISION
OF
THE HIGH COURT OF SOUTH AFRICA
APPEARANCES
For
the first and second applicants:
Adv
Konstantinides
SC
For
the third applicant:
Adv N
C
Hartman
For
the respondent:
Adv
Q
Pelser
SC
Adv
J
Eastes