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[2016] ZAGPPHC 1021
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Proud Afrique Trading 256 (Pty) Ltd v Tikon Projects SA (Pty) Ltd (60328/2016) [2016] ZAGPPHC 1021 (9 December 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 60328/2016
9/12/2016
Reportable:
No
Of
interest to other judges: No
Revised.
In the matter
between:
PROUD AFRIQUE
TRADING 256 (PTY)
LTD Applicant
and
TIKON PROJECTS SA
(PTY)
LTD Respondent
DATE OF
HEARING
:
30 NOVEMBER 2016
DATE OF
JUDGMENT
:
09 DECEMBER 2016
JUDGMENT
MANAMELA AJ
Introduction
[l] In
this application for the liquidation of the respondent company, I
reserved judgment after submissions by counsel in the unopposed
motion court of Wednesday, 30 November 2016. I mentioned at the time
that, the application raised very interesting, but yet critical
issues not directly addressed in the papers, requiring further
reflection. Consequently, I requested counsel appearing for the
applicant to furnish me with heads of argument, among others,
addressing what the effect or impact of the liquidation order sought
would be on the existing voluntary liquidation process. I am grateful
to counsel for both written and oral submissions in this
regard.
[2]
The application was evidently unopposed and therefore there is no
need to delve deeper into the issues, save to state only what
is
necessary to ground the order to be made. I commence the discussion
with a brief narration of the background to the matter,
only to the
extent that it predicates the current application.
Background
[3]
During or about July 2015, the applicant and respondent concluded a
sub-contracting agreement in terms of which the applicant
rendered
services to the respondent. I gather from the annexures that
the services related to electrical works possibly in
a construction
engagement the respondent, as a construction company, was the
principal con1ractor.
[4]
The applicant rendered invoices to the respondent. When the invoices
were not paid, the applicant initially sent an ordinary
letter of
demand on 1 March 2016, but thereafter - during April 2016 - sent a
formal demand in terms of section 345(1)(a) of the
Companies Act 61
of 1973 (the Companies Act).
[5]
Subsequent to section 345(1) demand, the par.ties engaged each other
in discussions and exchanged letters in an attempt to resolve
the
matter amicably, but in vain. However, according to the applicant the
respondent admitted part ·of the amount demanded
by the
applicant, even though no payment was made.
[6]
The applicant issued and served this application in August 2016 and
in September 2016 the respondent delivered a notice of intention
to
oppose the application. The applicant submits in terms of this
application that this Court should presume the respondent to
be
unable to pay its debts as contemplated in section 345 of the
Companies Act.
[7] It
is what happened after the respondent noted its opposition to the
application which appears to locate the nub of this application.
The
parties again engaged each other in discussions even after the court
application was launched, but ultimately the applicant
requested that
the respondent deliver the opposing affidavit. Initially, the
applicant's attorneys directed courtesy letters to
the respondent's
attorneys, which did not yield the intended result. The applicant
enrolled the matter as an unopposed application
in early November
2016, but the matter was postponed and eventually came before me as
stated above.
[8] On
22 November 2016 the applicant's attorneys received a letter from
respondent attorneys advising that the respondent, through
a special
resolution passed dated 21 October 2016 was placed in voluntary
liquidation through registration of the resolution on
27 October
2016. Evidently, this was after this liquidation application was
issued and the respondent had indicated their intention
to oppose
same. It may be opportune to state that the respondent bas not
withdrawn its opposition to this application, although,
as stated
above, no opposing papers were filed. Therefore, I only have the
applicant's submissions to consider against applicable
legal
principles.
Applicant
'ssubmissions
[9] As
indicated above, the applicant submits that the respondent had to be
wound up on the basis of inability to pay its debts
as provided in
section 345(1Xa) of the Companies Act, which is to be read with
section 344(f) of the Companies Act.
[1]
Initially it sought provisional winding up but later submitted that
the responded ought to be finally wound up. I will revert to
this
below. Obviously, the applicant persists in pursuit of this relief
despite the respondent being in voluntary liquidation.
[l0]
Counsel for the applicant submitted at the hearing that section 346
of the Companies Act provides for the liquidation of a
company
already under voluntary winding up. He grounded this submissions
primarily upon the decision in
King Pie Holdings (Pty) Ltd v King
Pie (Pinetown) (Pty) Ltd; King Pie Holdings (Pty) Ltd v King Pie
(Durban) (Pty) Ltd (King Pie)
.
[2]
Counsel further submitted that the facts of the current application
are at all fours with those in the
King Pie
decision and
therefore that this court can grant the relief sought despite the
intervening issue of the voluntary liquidation. It
was primarily on
this that I decided against disposing of the matter in the unopposed
motion court and decided rather to grant
an opportunity to the
applicant to address the issue by way of further heads of argument. I
will discuss this further under the
next heading.
Applicable
legal principles and the issues
[11] In my view the
point of departure herein is section 346 of the Companies Act. It
reads as follows in the material part:
"(1) An application to the court for the winding up of the
company may, subject to the provisions of this section, been made
-
(a)....
…
(e) in the case of any company being wound up voluntarily, by the
Master or any creditor or member of the company..."
[12] The provision
clearly grants the Court jurisdiction to make an order for the
winding up of a company already under voluntary
winding. However, the
situation is only clear to that extent and not beyond, in my view. As
to how the Court is to address the
existing voluntary liquidation
process and its effects, the
legislation did not
provide any
guidance. It is obviously unfathomable that a
company could be under· both
voluntary and compulsory
liquidation process, although I cannot immediately imagine the
ramifications of such co- existence. The
applicant's counsel directed
my attention to the decision of
King Pie
and submitted that
there is a beaten path in this regard.
[13] The highlights
of the
King Pie
decision are similar those in this mater, save
in minor respects like the fact that in
King Pie
the
respondent company withdrew opposition to the application for
liquidation after registration of the voluntary liquidation special
resolution, which wasn't the case in in this matter. In
King Pie
the Court when faced with the situation granted provisional
liquidation by way of a
rule nisi
with a return date, but
added a second
rule nisi
for the setting aside of the
voluntary winding up. The latter order appears to have been granted
by the Court
mero motu.
On the return date, the provisional
liquidator appeared and challenged the validity of the compulsory
winding up proceedings on
the basis of section 359 (1) of the
Companies Act
[3]
in that according to his reading of this provision civil proceedings
against the company once placed in liquidation are automatically
suspended. The provisional liquidator in
King Pie
further
argued that the setting aside of the voluntary liquidation as
contemplated in section 354 of the Companies Act, requires
a
substantive application which is to be served on the provisional
liquidator and the Master of the High Court and he was not served
with such notice. He further challenged the co-existence of the
voluntary and compulsory sequestration processes.
[14]
Faced with this situation the Court stated that determination based
on the following questions was necessary for a decision
on the
matter:
"(a) whether section 359(1Xa) of the Act had the effect of
suspending the applications for compulsory winding up of the
respondents
from the date of commencement of the voluntary winding
up;
(b) whether it was necessary before proceeding with the applications
for compulsory winding up to stay or set aside the voluntary
winding
up;
(c) whether a compulsory winding up order ought to replace the
voluntary winding up; and
(d) what orders for costs would be appropriate in all the
circumstances.”
[4]
[15]
The Court then proceeded to deal extensively with those questions or
issues. I do not intend revisiting them save to reflect
the outcome
of the determinations in the next paragraphs.
[16]
On the issue of "whether section 359(l)(a) of the Act had the
effect of suspending the applications for compulsory winding-up"
the court answered this as follows:
"The purpose of the provisions of section 359 of the Act "is
to ensure that when a company goes into liquidation the
assets of the
company are administered in an orderly fashion for the benefit of all
the creditors and that particular creditors
should not be able to
obtain an advantage by bringing proceedings against the company (per
Widgery LJ in
Langley Constructions (Brixham) Ltd v Wells
[1969]
2 All ER 46
(CA) at 47ID)."
[5]
And
further on as follows:
“In my opinion this language could well describe an application
for the winding up of a company.
And in
S
v
Swanepoel
1979 (I) SA 478 (A) at 488DH
Rumpff CJ pointed out that in seeking to determine the meaning of the
word "proceedings"
or its equivalent in legislation great
care must be taken to consider the context and ambit of the
legislation in question.
In my judgment the phrase "civil proceedings" where it
appears in section 359(1) of the Act must be limited in its
application
to proceedings iri which, as De Villiers CJ said in
Collett
v
Priest,
an "order in the nature of a
declaration of rights or of giving or doing something" is sought
against the company in question.”
[6]
[17]
Regarding effect of section 354 of the Companies Act, encapsulated in
the second and third questions in the
King Pie
decision above,
being "whether it was necessary before proceeding with the
applications for compulsory winding -up to stay
or set aside the
voluntary winding-up" and "whether a compulsory winding-up
order ought to replace the voluntary winding-up"
the Court had
this to say:
"Plainly the court has a wide discretion to set aside winding up
proceedings. But, having held that the voluntary winding
up of a
company is no bar to the launching of an application for its
compulsory winding up I must in logic hold that it is not
necessary
to have the voluntary winding up set aside before such an application
can be launched. Indeed, as I have already pointed
out, section
346(1Xe) of the Act provides for the winding up by the court of a
company "being wound up voluntarily".
This factor
demonstrates that the legislature did not contemplate that the
voluntary winding up must first be set aside in terms
of section 354
of the Act (for then,
ex hypothesi,
the company would no
longer be in a state of "being wound up voluntarily")
before an application could be brought for
its winding up by the
court”
[7]
[18] I am swayed by
the analysis and ultimate findings in
King Pie.
I am also of
the view that the exercise of the Court's discretion in favour of
curbing what may actually be an abuse of the law
is necessary. The
respondent company herein was fully aware of this liquidation process
and is still formally a party to it. It
appears that the respondent
whilst enagaging the applicant regarding the delivery of opposing
papers was taking steps towards its
voluntary liquidation. This
cannot be countenanced by the Court as it is not a
bona fide
application of our laws. The respondent and the appointed
provisional liquidator are urged to take advantage of the order to be
made herein and explain what actually transpired. Therefore, I will
proceed to grant the relief sought, but only as a provisional
order
with a return date, in order to grant the company or the appointed
provisional liquidator or any person who may be interested
to be
heard. The same rule will be issued for the setting aside of the
voluntary liquidation process. I reiterate that this, in
my view,
appears to be a just outcome under the present circumstances. I am
also of the view that costs form part of the liquidation
process
whether the provisional order is granted or not.
Order
[19]
In the premises, I make the following order, that:
1. the respondent is placed under a provisional winding-up order in
the hands of the Master of this Court and costs of the application
are costs in the liquidation;
2. a
rule nisi
is issued calling upon the respondent and all
other interested parties to furnish reasons, if any, to this Court at
10h00 or as
soon thereafter as the matter may be heard on 21 April
2017 why the respondent should not be wound up;
3. a
rule nisi
is issued calling upon the respondent and all
other interested parties to furnish reasons, if any, to this Court at
10h00 or as
soon thereafter as the matter may be heard on 21 April
2017 why the any voluntary winding-up implemented in terms of section
351
of the Companies Act 61 of 1973, in respect of the respondent,
should not be set aside.
4. this order shall be served forthwith upon the respondent at its
registered office address and on the appointed provisional
liquidator.
5. this order shall be published within 21 days from date of this
order once in the Government Gazette and the Times newspaper.
_________________________
K. La M. Manamela
Acting
Judge of the High Court
09
December 2016
Appearances/Representation
For the
Applicant
:
Kruger & Scharf Attorneys
Hazelwood, Pretoria
For the
Respondent
:
No appearance & opposing affidavit
Senekal Simmonds
Inc., Johannesburg
c/o MP Koekemoer
Attorneys
Clydesdale, Pretoria
[1]
These provisions remain applicable through item 9 of schedule S of
the
Companies Act 71 of 2008
.
[2]
1998 (4) SA 1240
(D); (1998] 4 All SA 179 (D).
[3]
Section 359(1)
reads in the material part: "When ...a special
resolution for the voluntary winding-up of a company has been
registered
in terms of
s 200
- (a) all civil proceedings by or
against the company concerned shall be suspended until the
appointment of a liquidator ..."
[4]
See King Pie at p 1245. '
[5]
See King Pie at p 1245.
[6]
See King Pie at p 1249.
[7]
See King Pie at p q49.