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[2015] ZAGPPHC 294
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Morgenrood v Companies and Intellectual Property Commission and Others (65849/2013) [2015] ZAGPPHC 294 (12 March 2015)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
(GAUTENG
DIVISION: PRETORIA)
CASE NO:
65849/2013
DATE: 12 MARCH
2015
AMELIA
MORGENROOD
........................................................................................................
APPLICANT
and
THE COMPANIES AND
INTELLECTUAL PROPERTY
COMMISSION
..................................................................................................................
1
ST
RESPONDENT
JOSEPH STEPHANUS
FRANS
DAUTH
.......................................................................
2
nd
RESPONDENT
WELIE
GRONUM
............................................................................................................
3
rd
RESPONDENT
MINISTER OF TRADE
& INDUSTRY N.O.
…...........................................................
4
th
REPSONDENT
MINISTER OF
FINANCE N.O.
…..................................................................................
5
th
RESPONDENT
THE REGISTRAR OF
DEEDS ,
PRETORIA
................................................................
6
th
RESPONDENT
JUDGMENT
KHUMALO J
[1] The Applicant
seeks an order in terms of the provisions of s 83 (4) (a) of the
Companies Act, 71 of 2008 ("The
Companies Act"
;), declaring
the Companies and Intellectual Property Commission's (“the
Commission") ("1
st
Respondent"),
deregistration of a company known as Enchanted Investments
Developments (Pty) Ltd ("Enchanted") void,
and or an
alternative or further relief that the reinstatement of Enchanted
just and equitable, restoring its registration with
the 1
st
Respondent and re-vesting its assets and liabilities prior to
deregistration.
[2]
The 1
st
Respondent is said to be cited as such due to its responsibility for
the registration and deregistration of companies whilst the
Minister
of Trade and Industry and that of Finance, 4
th
and 5
th
Respondents respectively due to their responsibility for the
financial issues and management of the
bona
vacantia
assets
that fall under the state after deregistration. J S F Dauth and Welie
Gronum, the 2
nd
and 3
rd
Respondents respectively, are the erstwhile directors of the
deregistered Enchanted who were active at the time of deregistration
(together referred to as "the directors" and individually
as "Dauth" and "Gronum") and 6
th
Respondent is the Registrar of Deeds whose function is to register
real rights over immovable properties. No specific relief is
sought
from any of these Respondents. They are said to have been cited only
as interested parties.
Factual
background
[3]
In November 2007 Applicant and Enchanted concluded a written building
agreement in terms of which Enchanted was to build a house
for the
Applicant on a piece of land that Applicant purchased from the 2
nd
Respondent. Enchanted was to start the construction after the
registration of the land to Applicant's name. The registration took
place on 4 December 2008 and the building commenced. Applicant also
paid the building price of R1 850 000 to Enchanted as
per
contract.
On completion of the house in March 2010 Applicant instituted an
action against Enchanted for defective work claiming
repayment of the
contract price alternatively of certain amounts she alleged are
payable as a result of Enchanted's failure to
comply with the
contract. A notice of intention to defend was delivered on behalf of
Enchanted in September 2010 followed by the
customary Plea. The
parties proceeded to exchange notices and correspondence and to set
the matter down for trial on 20 November
2013.
[4] In the meantime,
Enchanted was deregistered on 16 July 2010 due to 2
nd
and
3
rd
Respondent's failure to file its annual returns for
two or more years in succession as contemplated in s 82 (3) (a) of
the Act.
Applicant became aware of the fact only on 16 August 2013,
when Enchanted's new attorneys appointed by its directors on 13
August
2013 informed Applicant's attorneys that due to Enchanted's
deregistration they cannot act and the matter cannot proceed.
[5] Enchanted
therefore legally ceased to exist from 16 July 2010 and all actions
taken on its behalf since then were null and void.
Its assets became
bona vacantia with ownership thereof passing to the state and
liabilities rendered unenforceable.
[6]
Furthermore, due to the requirements set out by the provisions of s
82 (4) of the Act, and Regulation 40 (6) of the regulations
promulgated in terms of s 223 of the Act that regulates the process
to be followed and the terms upon which an application for
reinstatement of a deregistered company can be brought, requiring
inter alia,
the
annual returns which the deregistered company should have lodged to
be brought up to date and payment of the prescribed fees
before the
deregistered company could be reinstated, Applicant launched this
Application in the above honorable court as an alternative
to an
Application to the Commission, seeking deregistration of Enchanted to
be voided or it to be restored to the register on the
basis that:
[6.1] as an
outsider, she is neither in a position to compile and or to lodge
Enchanted's annual returns together with the payment
of the
prescribed fees nor to compel 2
nd
and 3
rd
Respondents as former directors to do what is required of them in
terms of s 82 (4) to facilitate Enchanted to be reinstated, that
is
to bring its affairs up to date.
[6.2] the
requirement is a pure administrative act that prejudices her in the
prosecution of her ongoing action against Enchanted
whilst it affords
Enchanted a convenient excuse and means to escape liability, having
ignored the situation.
[6.3] the
deregistration was not caused by her fault and could never have been
intended to deprive her of her claim against the
company.
[6.4] Enchanted
continued to conduct business after deregistration and was not wound
up.
[6.5] As a result
its dissolution should be declared void in terms of s 83 (4) (a) of
the Act.
[7] Applicant
further alleges that after the deregistration of Enchanted, its
erstwhile directors (2
nd
and 3
rd
respondents)
and attorneys actively pursued the litigation process requesting
annexures to her notice of amendment delivered on
July 2011,
continuing to serve the relevant Notices and seeking compliance by
February 2012. They also insisted on the matter being
re enrolled and
the holding of a pre-trial conference post deregistration.
[8] The 2
nd
and 3
rd
Respondents ('the Respondents") are opposing
the Application raising only a question of law. They allege that
Applicant's
application to court is flawed and incorrect in that:
[8.1] there is no
provision in the Act for the restoration of a company by way of an
Order of Court.
[8.2] The Companies
Act of 1973 in terms of which reinstatement of a company can be by
way of a Court Order has been repealed by
the 2008 Companies Act that
came into effect on 1 May 2011.
[8.3] s 82 (4) of
the Act provides for the reinstatement of a deregistered company by
way of an administrative procedure that has
not been followed by the
Applicant.
[9] Their Notice on
the question of law was preceded by an Application for condonation
for the late filing of their Notice. At the
hearing of the matter
Applicant did not oppose the Application and condonation was thereby
granted. I however have to mention that
in the founding affidavit
supporting the Application, Gronum confirmed that Enchanted has not
filed its annual returns and stated
that it also has not carried any
business since 2008 as a result the reinstatement would be to
Enchanted's prejudice and will not
serve any purpose.
Applicable law
[10] Section 82 (3)
of the Act provides for a situation whereby the Commission may remove
a company from the companies register
only if, inter alia, -
(a) the company ...,
or-
(i) has failed to
file an annua! return in terms of s 33 for two or more years in
succession;
(ii) on demand by
the Commission, has failed to-
(aa) give
satisfactory reasons for the failure to file the required annual
returns; or
(bb) show
satisfactory cause for the company to remain registered;
[11] Then s 82 (4)
provides that if the Commission de-registers a company as
contemplated in the above subsection (3), any interested
person may
apply in the prescribed manner and form to the Commission, to
reinstate the registration of the company.
[12] The manner and
form prescribed for the reinstatement of companies that have been
de-registered is provided for under Regulation
40 of the Companies
Regulations published in terms of the Act that reads:
"(6) The
Commission may reinstate a deregistered company or external company
only after it has filed the outstanding annual
returns and paid the
outstanding prescribed fees in respect thereof.
(7) An Application
to re-instate a de-registered company or external company must be
made in a Form CoR 40. 5, and must comply with
such conditions as the
Commission may determine."
[13] The regulations
are in terms of Regulation 4 of the Regulations of the Commission to
be read with the Practice Note 7 of 2012
that is now applicable and
sets out the requirements for reinstatement in terms of the Companies
Act, 2008 (Act 71 of 2008)
[14] S 83 deals with
the effect of removal of a company from the register and reads:
(1) A company is
dissolved as of the date its name is removed from the companies
register unless the reason for the removal is that
the company's
registration has been transferred to a foreign jurisdiction as
contemplated in s 82 (5).
(2) The removal of a
company's name from the companies' register does not affect the
liability of any former director or shareholder
of the company or any
other person in respect of any act or omission that took place before
the company was removed from the register.
(3) Any liability
contemplated in subsection (2) continues and may be enforced as if
the company had not been removed from the register.
(4) At any time
after the company has been dissolved-
(a)
the liquidator of the company, or other person with an interest in
the company,
may apply to a court for an order
declaring the dissolution to have been void, or any other order that
is just and equitable in
the circumstances;
and
(my emphasis)
(b) if the court
declares the dissolution to have been void, any proceedings may be
taken against the company as might have been
taken if the company had
not been dissolved.(my emphasis)
[15] Removal of a
company from the register of companies can take place in terms of,
inter alia, s 82 (3) (a) (ii) due to a company
failing to file the
annual returns for two or more years in terms of s 33 as in this
case. In subsection 4, the removal in subsection
3 above is referred
to as a deregistration. Also, the removal of a company's name from
the companies register by the Commission
mentioned in subsection 2
(b) is referred to in subsection 3 as the duty to deregister a
company. Therefore the words removal and
deregistration in the Act
are used interchangeably to mean one and the same thing.
[16]
The Act also seems to seek to do away with any distinction between
the concepts of dissolution and deregistration that differentiated
between a company's loss of its legal persona due to winding up from
those that lost it as a result of deregistration, by providing
a
provision that recognizes the end result of the two processes to be
the same (the removal from the companies register = dissolution)
hence both being considered to have been dissolved. The attempt to
differentiate between dissolution and de-registration, for the
purpose of s 83 (4) that took place in
Nulandis
v Minister of Finance
2013
(5) SA 294
(KZP) at 74 was uncalled for since the subsection does not
mention dissolution as a separate occurrence from deregistration but
as an all-encompassing term for companies whose names have been
removed from the register.
[17]
S 83 (4) deals with voidance of a dissolution that came about as a
result of a removal of a company from the companies' register.
It
could be due to either winding up or failure to comply with
administrative requirements set out in s 82 (3). In
Absa
Bank Limited v Companies and Intellectual Property Commission of
South Africa and Others
[2013]
JOL 30290
(WCC) on p205E-F, the court reasoned that:
"If s 83 (1)
applies to all companies dissolved by the removal of their names from
the register there is no reason that s 83
(4), which forms part of
the same section and applies 'at any time after a company has been
dissolved', should not apply to a company
dissolved by the removal of
its name from the register pursuant to s 82 (3)."
The
court confirmed that a dissolution pursuant to liquidation and one
pursuant to administrative deregistration are now dealt with
together; and that there is now a single judicial remedy. The section
also provides for an order just and equitable under the circumstances
therefore not ruling out declaring an order reinstating a
deregistered company just and equitable. In
Absa
at p 207
it
was confirmed that the section is broad enough to include an order
directing the restoration of a company to the register.
[18]
The full bench's overturning of the decision of the court a quo in
Absa
should
be commended. Henney J's decision was premised on a wrong assumption
that only a process described in s 82 (4) is applicable
to
deregistration effected in terms of s 82 (3). The full bench
correctly concluded in [43] that s 83 (4) applies as much to a
company or corporation dissolved pursuant to administrative
deregistration as to one dissolved pursuant to its liquidation as a
solvent company. Dissolution in both instances meaning the same
thing, that the company as a legal persona ceased to exists, and
that
it is now capable in either instances, of restoration of its legal
persona by a court order in terms of s 84 (3), that includes
voiding
the dissolution (its removal from the register). The dicta of
Binns-Ward J found in
Peninsula
Eye Clinic (Pty) Ltd v Newiands Surgical Clinic (Pty) Ltd
and
Others
2012 (4) SA 484
(WCC) at par [6], p488 that:
"the
deregistration of a company in terms of s 82 (3) of the Act falls
exclusively within the province of CIPC. There is no
provision in the
2008 Act for the restoration of the registration of a company by
order or application to a court."
Relied upon by the
2
nd
and 3
rd
Respondents is completely off the
mark.
[19] In the
case of voidance, the administrative deregistration process is
nullified or rendered ineffectual for the purpose
of enforcement of a
debt. I am not certain if it can be done for any other claim or
reason. The provision makes it possible for
a creditor or any person
with an interest to be able to approach the court even if it is
incapable of fulfilling the requirements
of the Commission, to obtain
an order nullifying the removal and or alternatively restoring the
deregistered companies to the companies
register. An Applicant does
not have to conform to the requirements that are prescribed under s
82 (4) and regulation 40. In that
instance the court will make an
order as it deems appropriate in respect of the requirements by the
Commission overseeing the practicality
of the reinstatement; see
Henochsberg on Company Law.
[20]
On the other hand
if
the court declares the dissolution to have been void, any proceedings
may be taken against the company as might have been taken
if the
company had not been dissolved.
As
a matter of caution its important to point out that in an application
for an order declaring the dissolution due to an administrative
deregistration void, the Applicant has to establish a good reason for
the court to render a validly effected process ineffectual.
There has
to be a legal basis for the relief. The reasons might range from the
process lacking definiteness or specificity or challenging
its
validity, or wanting access to its assets to satisfy a debt or to be
able to prosecute a claim that was already instituted
at the time of
deregistration and execute against the assets that were divested. The
question that arises is whether it is competent
to void a
deregistration for the purpose of practicality or convenience as it
is in this case?
for
the purpose of or circumventing a denial of meaningful access to
court.
This
position was not cleared in
Absa,
where
as a creditor, the bank was also not in a position to be able to
comply with the requirements to furnish the outstanding annual
returns and the prescribed fees as
in
casu,
approached
the court instead of the Commission, as the bank applied for an order
for restoration not one that declares the dissolution
void.
[21]
The court in the
Absa's
full
bench decision although applying a broadminded approach seemed not to
have dealt with the issue of s 83 (4) decisively as it
failed to
pronounce on the measures to be applied by the courts in the exercise
of their discretion whether or not to grant an
order declaring the
deregistration void. It seems the court has to probe the reasons for
and the conditions prevailing at the time
when the deregistration
took place to determine if nullification thereof defendable. In that
regard a proposition was made in
Firstrand
Bank Limited v Companies and Intellectual Property Commission of
South Africa and Others
[2013]
JOL 30290
(WCC) that the power granted under the subsection to void
the dissolution is somewhat analogous to a review believing that
at
least some irregularity in the process must be alleged.
I
support Henochsberg's disagreement with that proposition but differ
with his notion of a dissolution being voided at the whim
of an
application by a creditor without any proper legal basis being laid
for the voidance. The promulgation of the subsection
was not intended
to create a fictitious or a fallacious situation for any creditor to
be able to nullify the process with an order
ensuing just on an
application. The mere existence of a debt or a claim cannot be the
sole ground that justifies the nullification
of deregistration.
[22] All the same in
this matter the Applicant argued that:
[22.1]
Gronum and Dauth defended the action that she instituted and served
upon Enchanted on March 2010 by filing a notice
of
intention
to defend notwithstanding Enchanted's final deregistration in July
2010.
[22.2] The directors
had not ceased to carry on business as contemplated in terms of s 82
(3) (a) and the company was not wound
up.
[22.3] The company
through the representation of its attorney filed a Plea and further
documents in the matter without any indication
of their status quo.
They also on behalf of Enchanted issued or instituted an action
against the Applicant in the Magistrate Court
in 2010.
[23] The directors
of the company indeed continued with the abovementioned conduct in
2010 even though according to Gronum they
were not filing their
returns and not operating since 2008. The statement will not
exonerate the directors, since that indicates
that they were fully
aware of the status of the company which renders their actions
illegal when they instituted and defended Applicant's
action.
[24] In such
instance Applicant may have a claim against the directors of the
company personally due to their engagement in commercial
transactions
and in litigation in breach of their onerous duty to make sure that
the company is registered at all times when they
engage in commercial
transactions and litigation.
[25] For the purpose
of this Application since practicality, convenience and effectiveness
are also factors to be taken into account
in exercising the
discretion whether or not to grant the order, the following
requirements must be satisfied prior to the granting
of an order
sought;
[25.1] there must be
prove that the company was in business at the time of deregistration,
having outstanding assets and liabilities
which must be transferred
or liquidated. Whether or not the company was in business can be
determined by proving that the company
has been conducting business
related activities at the time of deregistration. The examples given
by the Commissioner CIPC are
selling and buying of goods and
services, leasing or renting property or equipment, marketing goods
and services and or an active
bank account.
[26] Applicant
alleges that Enchanted was conducting business at the time of
deregistration and there were no proceedings during
that time of
winding it up, whilst Gronum denies that fact.
[27] From the
documents that have been referred to and attached in support of the
Application it is evident that Enchanted concluded
a contract to
start building Applicant's house after the land she bought was
registered in her name in December 2008. The construction
of the
house took place thereafter from 2009 and her claim was launched in
March 2010 on completion of the house. Gronum can therefore
not be
right that Enchanted was not conducting any business since 2008. From
the above facts it is obvious that Enchanted was conducting
business
at the time of its deregistration.
[28] Applicant's
allegation that there were no winding up proceedings at the time of
Enchanted's deregistration has not been refuted
or challenged by the
erstwhile directors.
[29] The non-filing
of the financial statements has been shown to have been deliberate.
Gronum confirmed that they knowingly did
not adhere to their
responsibilities as directors since 2008, breaching their fiduciary
duties whilst continuing to carry on business
to the prejudice of the
Applicant and others.
[30] The restoration
would therefore be just and equitable under the circumstances. Also
the deliberate causing of Enchanted's deregistration
by its erstwhile
directors justifies the nullification of the dissolution (its removal
from the register).
[31] The Applicant
has as a result made a proper case for the relief that he is seeking.
The granting of the relief will not validate
the actions that were
taken after deregistration of Enchanted, which remain invalid.
[32] Under the
circumstances, I make the following order:
[31.1] The
dissolution (deregistration) of a company known as Enchanted
Investments Developments (Pty) Ltd ("Enchanted")
on 10 July
2010 is declared void,
[31.2] The 1
st
Respondent is directed to restore Enchanted's name in the register of
companies with immediate effect.
[31.3] Enchanted's
assets and liabilities prior to deregistration are declared revested
in it.
[31.4] Enchanted
upon its revival to pay the costs of the Application.
N V KHUMALO J
JUDGE OF THE HIGH
COURT
GAUTENG DIVISION:
PRETORIA
Applicant's Counsel:
Adv D B DU PREES SC
Instructed by:
Hattingh & Ndzabandzaba Attorneys
Pretoria
Respondent's
Counsel: Adv L G F PUTTER
Van Zyl Le Roux Inc
Pretoria