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[2015] ZAGPPHC 592
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Tsai v Master of the High Court, Pretoria and Others (17429/2015) [2015] ZAGPPHC 592 (23 July 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
NORTH
GAUTENG DIVISION, PRETORIA
CASE
NO: 17429/2015
(1)
REPORTABLE: NO
(2)
OF INTEREST TO OTHER JUDGES: NO
(3)
REVISED.
______________
_________________
SIGNATURE
DATE
In the matter
between:
JUNG-FU
TSAI
APPLICANT
and
ADVOCATE W SEKETE
N.O
The Master of the High Court
(Pretoria)
FIRST RESPONDENT
IVOR LANCELOT VAN DIGGELEN
N.O
SECOND
RESPONDENT
JAYANT DAJI PEMA
N.O
THIRD
RESPONDENT
THE REGISTRAR OF DEEDS (PRETORIA)
.
FOURTH RESPONDENT
SUNSET POINT PROPERTIES (PTY) LTD
…....
FIFTH RESPONDENT
COENRAD JOHAN
LAMPRECHT
.
SIXTH
RESPONDENT
JUDGMENT
BASSON, J
[1] The applicant
is the sole shareholder and co-director of a company which in turn is
the sole owner of a farm described as the
remainder of the Farm
Klipeiland no 524 (in liquidation). (I will refer to this farm as
“the property.) The second and third
respondents are the
provisional liquidators. The first respondent is the Master of the
High Court (Pretoria - “the Master”).
The sixth
respondent is Mr Lamprecht the sole creditor of the applicant.
[2] Acting in
terms of section 386(2A) and 386(2B) of the 1973 Companies Act,
[1]
and section
80bis
of the Insolvency Act
[2]
the second and third respondents sought authorisation from the Master
to sell the property by way of public auction.
[3] Before the
Master could take a decision in this regard a written offer to
purchase the said property was received by the provisional
liquidators (on 13 February 2015). Subsequently a further
recommendation for approval of the sale by way of private treaty was
made to the Master (on 24 February 2015). On 4 March 2015 the first
respondent authorised the sale of the property by private treaty.
It
is this decision made by the Master that would be the subject of a
review yet to be instituted by the applicant.
[4] The applicant brought an application to interdict and restrain
the second and third respondents (the provisional liquidators)
from
signing all such documents as may be necessarily required to give
effect to the transfer of the property into the name of
the 5th
respondent pending the final resolution of an application that the
applicant will institute in the future to review and
set aside the
decision by the Master to grant the aforesaid authorisation in terms
of section 386(2B). The applicant further seeks
an order that in the
event such documents have already been signed, the 4
th
respondent (the Registrar of Deeds) be interdicted from giving effect
to the actual registration of the transfer.
The
locus
standi
of the two liquidators
[5] At the
commencement of the argument, a point
in limine
was raised on
behalf of the applicant disputing the lawfulness of the appointment
of the two liquidators in light of the common
cause fact that the
Master did not subsequent to the discharge of the provisional
liquidation order re-appoint the second and third
respondents as
liquidators.
[6] In essence it was submitted that, although it is accepted in the
founding affidavit that the second and third respondents are
de
facto
exercising their powers as joint provisional
liquidators, it is not admitted that they are exercising their powers
ex
lege.
In any event, so it was
submitted, a party is entitled at any time to raise an objection
against the legal status of a party.
[7] In order to place this point in its proper context it is
necessary to briefly refer to the events that preceded the order
placing the applicant under final winding-up.
[8] The applicant
was placed under provisional liquidation on 24 April 2012 with 5 June
2012 as the return date. On the return day
the matter served before
Makgoka, J who discharged the provisional winding-up order with
costs. The matter was taken on appeal
and the matter served before
the Supreme Court of Appeal (“SCA”) on 3 September 2014.
Judgement in the matter was handed
down on 19 September 2014. The SCA
set aside the order of the High Court and “substituted”
the order with an order
placing the applicant under final winding-
up.
[9] The second and third respondents were appointed by the office of
the Master as joint provisional liquidators on 16 May 2012.
Although
the order of Makgoka, J was substituted by the SCA the Master did not
subsequently make a second appointment of the liquidators.
[10] In light of
the fact that the liquidators were not appointed (or re-appointed)
after the order of the High Court was substituted
by the SCA, the
applicant now raised the point that they have no
locus standi in
judico
(as the liquidators of the applicant). It was
submitted on behalf of the applicant with reference to the matter in
MV
Snow
Delta
Serva
Ship Ltd
v
Discount Tonnage
Ltd
[3]
that once an
interim
order is discharged the status
of the company (the applicant in this matter) was reinstated and
remained as such until the SCA granted
the final liquidation order.
Once that order was granted it necessitated the appointment of new
liquidators. In this regard it
was submitted that the effect of not
re-appointing liquidators after the SCA had placed the applicant
under final liquidation has
the consequence that the second and third
respondents are unable to act as liquidators and consequently not
empowered to sell the
property for an amount of R 17 500 000. 00.
[11] The Court in
MV
Snow
Delta
Serva
confirmed that once an interim order is
discharged, it cannot be revived by the noting of an appeal:
“[6] It is convenient at the outset to say something about the
judgment of Selikowitz J. The
ratio
of the decision was
based on
SAB
Lines
(Pty) Ltd v Cape
Tex Engineering
Works
(Pty) Ltd
1968
(2) SA 535
(C), where Corbett J had held that the granting of interim
relief as an adjunct to a rule
nisi
is to provide
protection to a litigant pending a full investigation of the matter
by the court of first instance.
Once that interim order
is
discharged, it
cannot
be
revived by the
noting
of
an
appeal. This
approach
was
and
still
is
generally accepted
as
correct.
[4]
Dissenting views were, however, expressed in
Du Randt v Du
Randt
1992
(3) SA 281
(E) and
lnterkaap Ferreira
Busdiens (Pty)
Ltd v
Chairman,
National Transport
Commission,
and
Others
1
997
(4) SA 687
(T). The
essence of these judgments was that Corbett J had failed to have
regard to the common-law rule as received by our Courts
that an
appeal suspends the execution - or, in the words of Rule 49(11), the
operation and execution - of an order (cf
Reid
and
Another v
Godart and Another
1938 AD
511).
Unfortunately, the criticism was based upon a misunderstanding
of the concept of suspension of execution. For instance, an order
of
absolution from the instance or dismissal of a claim or application
is not suspended pending an appeal, simply because there
is nothing
that can operate or upon which execution can be levied. Where an
interim order is not confirmed, irrespective of the
wording used, the
application is effectively dismissed and there is likewise nothing
that can be suspended. An interim order has
no independent existence
but is conditional upon confirmation by the same Court (albeit not
the same Judge) in the same proceedings
after having heard the other
side (
Chrome
Circuit Audiotronics (Pty)
Ltd
v
Recoton European
Holdings
Inc
and Another
2000 (2) SA 188
(W)
at 190B - C). Any other conclusion gives rise to an unacceptable
anomaly: If an applicant applies for an interim order with
notice and
the application is dismissed,
he has no
order
pending
the appeal;
[5]
on the other hand, the applicant who applies without notice and
obtains an
ex parte
order coupled with a rule
nisi
and whose application is eventually dismissed, has an order
pending the appeal.”
[12] I am in agreement with the principles as set out by the SCA in
MV
Snow Delta
Serva
that once an
interim order is discharged, the effect thereof is that the
application is effectively dismissed. I am also in agreement
that the
power to appoint a liquidator vests in the Master and that the Court
has no power to appoint a liquidator.
[6]
[13] The issue raised by the point
in
limine
in this Court, however, deals with a different principle:
Although the interim order was discharged by the High Court, the SCA
subsequently
“
substituted”
the order of the
High Court with an order placing the applicant under final
winding-up. The question arises whether the order of
the SCA has the
effect of “reviving” the appointment of the provisional
liquidators as from the date of the order by
Makgoka, J.
[14] Unfortunately I have not been referred to any case law
pertinently dealing with this point. In all fairness to counsel for
the respondent it must be pointed out that the respondent had
received no prior warning that this point would be raised at the
commencement of argument. In fact, Mr De Koning submitted that the
respondent was effectively ambushed particularly in light of
the
statement made in the founding affidavit to the effect that it is
accepted that the second and third respondents are
de
facto
exercising their powers as joint provisional liquidators. To a
question from this Court as to why this point was not raised earlier,
the Court was informed that the validity of this point was not
appreciated until now. Be it as it may, the point has now been raised
and concerns the
locus standi in
judico
of
the second and third respondents.
[15] I have already referred to the fact that the SCA has substituted
the order of the High Court with an order placing the applicant
under
final winding-up. What is the effect of a substitution? It was
submitted that the order by the Supreme Court of Appeal is
a
substitution
nunc
pro
tune
meaning that the order (of the SCA) applies retroactively to
correct an earlier order as if it had been made on the earlier date.
The liquidators were appointed by the Master on 16 May 2012 and were
therefore at the time of the order of the High Court (5 June
2012)
the duly appointed liquidators. It follows in my view that the
substitution of the order by the SCA effectively restored
the
position to what it was at the time of the granting of the order
including the fact that the two liquidators have been duly
appointed
by the Master. In the event the
point
in limine
is
dismissed.
Merits of the
application
[16] At the
outset I must point out that it is accepted that the second and third
respondents as liquidators of the company owe
a duty to the company
to ensure that its assets are realised to the best possible advantage
of the company. It is also trite law
that any surplus assets
available (after payment of the costs incurred in the winding-up and
of the claims of creditors) must be
distributed
[7]
by the provisional liquidators amongst the members according to their
rights and interests in the company.
[8]
It is also accepted that a director's powers in respect of the
company ceases once a company has been placed in liquidation.
[9]
[17] The applicant alleged that the property has a value of R64
million and that the application made by the second and third
respondents to the Master to sell the property for R 17 500 000.00 by
private treaty is not in the best interest of the applicant.
It was
further submitted that neither the second and third respondents in
their capacity as liquidators of the company nor the
Master would
entertain any representations by the applicant regarding the consent
sought by the second and third respondents for
the sale of the
property. It is this decision by the Master to permit the second and
third respondents to sell the property by
private treaty for a
purchase price of R17 500 000.00 (which the applicant claims is well
below the true market value of the property)
that the applicant seeks
to review in due course.
[18] The applicant accordingly claimed that its rights have been
violated in the following respects: (i) Firstly, the sixth
respondent's
claim against the company has not yet been proved. (ii)
Secondly, in his capacity as the sole shareholder of the company, he
has
been prejudiced in that the company's sole asset is not being
dealt with to the best possible advantage of the company and
consequently
of its shareholder. (iii) Thirdly, the applicant,
notwithstanding the fact that he is the sole shareholder of the
company, has
not been afforded any right to make representations
either by the second and third respondents in their capacity as
liquidators
of the company, or by the Master prior to his decision on
4 March 2015. The latter point seems to form the crux of the matter.
[19] The applicant therefore submitted that it has a
prima
facie
right in that he has a right as a sole shareholder
of the company that the company's property be dealt with to the best
possible
advantage of the company and that he has the right to any
surplus assets available after payment of the creditors of the
company.
In this regard the applicant submitted that he had a right
to be heard by the Master prior to the decision of 4 March 2015
having
been taken. The applicant further submitted that there is a
reasonable apprehension of irreparable harm if the agreement of sale
is concluded at the price well below the true market value of the
property. It was also submitted that the balance of convenience
favours the granting of interim relief should the applicant
ultimately succeeds in the review application, but should the sale
agreement be implemented, as the proverbial horse will already have
bolted. Lastly the applicant submitted that it has no other
satisfactory remedy.
[20] I have already pointed out that the applicant is seeking an
interim interdict pending the final determination of the review
of
the Master's decision of 4 March 2015. It is trite that in order to
succeed the applicant is required to establish a
prima
facie
right, a reasonable apprehensive of irreparable harm
if the interim relief is not granted, that the balance of convenience
favours
the granting of interim relief and the absence of any other
satisfactory remedy.
[10]
[21] I am mindful of the nature of these proceedings and of the fact
that the applicant only needs to establish a
prima
facie
case open to some doubt.
[11]
The value of the property
[22] Before
turning to the merits of the application it is necessary to briefly
refer to the following two issues that prominently
featured in the
papers. Central to the applicant's case is the claim that that the
property has a value of R 64 100 000.00. In
support of this
allegation the applicant attached a sworn valuation by Ryle Valuation
Services (“Ryle”) dated 3 February
2015 which indicates
that this is the current open market value of the property. With
reference to this valuation, it was contended
on behalf of the
applicant that the proposed sale price of R17, 500,000.00 is below
value and should the property be sold for this
price it will be
highly prejudicial to him in that the balance that will be available
for distribution to himself as a shareholder
in terms of section
342(1) of the 1973 Companies Act will be far less than it would be if
the property was sold for R 64 100 000.00.
[23] The provisional liquidators strongly criticised the Ryle
valuation and set out in great detail in the answering affidavit
why
the valuation relied on by the applicant is fatally flawed. I do not
intend to repeat the criticism in detail. Suffice to point
out that I
am in agreement with the submission that, if regard is had to the
valuation by Quality Valuations CC (“Quality”)
and relied
on by the provisional liquidators, the valuation relied on by the
applicant cannot be favoured over the one relied on
by the
respondents.
[24] For example, the valuator (Mr Ryle) notes in the Certification
of Valuation that he did not consult with a geotechnical engineer
regarding soil conditions and also did not undertake a structural
survey of the buildings. He points out that geotechnical conditions
will materially affect a valuation.
[25] The respondents also point out that the statement by the
valuator that bulk services are available up to street level is
patently incorrect in light of the information contained in an
affidavit deposed to by a professional engineer to the effect that
for the moment and the foreseeable future no water supply is
available for Cultura Park E8. The submission is made on behalf of
the respondents that, without bulk water supply being available
presently for the property and the foreseeable future, the
development
of the township cannot be implemented.
[26] More in particular, the Ryle valuation does not deal with the
existing land claim against the property which will materially
affect
the valuation of the property. The respondents also took issue with
the valuators estimation of the development costs in
the amount of R
182 236 660.00 in light of the fact that the valuator is neither an
electrical engineer nor a civil engineer and
therefore has no
authority for this calculation. The respondents submitted that the
estimated development costs of R242 857 015.35
is more accurate and
referred to the fact that more reliance should be placed on this
calculation as it was prepared by professional
engineers.
[27] With reference to the valuation prepared by Quality Valuations
CC it was submitted on behalf of the respondents that the open
market
value of the property is estimated at R20 million and the forced sale
value to be R 13 million. In this regard it was submitted
on behalf
of the respondents that if it is accepted that the property's open
market value is R20 million, a purchase price of R17,500
000.00 is
fair.
[28] Apart from
the fact that I am persuaded that the Ryle Valuation can be subjected
to critique in that it is fundamentally flawed,
there are further
reasons as to why the court should be reluctant to rely on the Ryle
valuation and accept the applicant's contentions
in respect of the
true value of the property. (i) Firstly, the Quality Valuation relied
on by the liquidators was obtained at the
instance of the applicant
in the course of the winding- up application. In this regard the
provisional liquidators point out in
the answering affidavit that the
Quality valuation was submitted to Mr Huang (who represented the
applicant at the time). The invoice
for the valuation was submitted
by Mr Mulder of Quality Valuations. Mulder was subsequently informed
that the applicant did not
intend settling the invoice as it was not
satisfied with the valuations and that he (the applicant) required a
valuation in excess
of R 80 000.00 per hectares and if Mulder was
prepared to increase the valuation of the property to their
satisfaction then the
invoice would be settled. In order to satisfy
himself that the valuation that he had submitted was reasonable,
Mulder consulted
with an associated professional valuator who
informed him (Mulder) that he was in agreement with the valuation as
submitted. The
invoice remains outstanding and due and owing by the
applicant. (ii) Secondly, the court was also referred to the fact
that the
applicant had produced evidence of an offer to purchase the
property at a purchase price of R 65 000 000.00. This alleged offer
to purchase was subsequently exposed to be a fabrication and a sham.
No claim has
been proven against the company
[29] The
applicant also states in the founding affidavit that no claim has
been proven against the company and that until such time
as the sixth
respondent submits his claim, there are no creditors. It is also
alleged that if the sixth respondent did not succeed
in proving a
claim, alternatively should he succeed in proving a claim and the
applicant makes payment of that claim in full, the
liquidators would
have no reason to dispose of the property in the first instance,
provided that all administration expenses, including
liquidators'
fees are paid. The applicant further tenders to make payment of such
costs.
[30] This averment by the applicant is patently at odds with what is
contained in the papers and in light of what has already been
found
to be the factual position in previous litigation involving the sixth
respondent (the only creditor) and the applicant. Furthermore
this
averment essentially amounts to a denial of the final liquidation
order granted by the SCA. In this regard the SCA in
Lamprecht v
Klipeiland (Pty)
Ltd
[12]
placed the applicant under final winding up by substituting
the order of the North Gauteng High Court (in terms whereof the
court
discharge a provisional winding- up order with costs).
[31] Of importance to this application are the following facts and
findings recorded by the SCA in its judgment. The SCA expressly
dealt
with the claim by the appellant (the sixth respondent in this
application) that he was to be paid R6 million as remuneration
for a
project under the agreement. This contract was subsequently
terminated and the appellant regarded this as a repudiation of
the
agreement which he accepted. Based on the alleged repudiation or
cancellation of the contract, the appellant demanded the R6
million
from the respondent as his compensation. A final demand for payment
was served in terms of section 345 (1)(a) of the 1973
Companies Act.
As no payment was forthcoming, the appellant instituted motion
proceedings to have the respondent wound- up.
[32] The respondent raised numerous points
in limine,
inter
a/ia,
that the appellant had not proved that his
claim was
liquid.
More in particular the respondent denied
that it had agreed to pay the sixth respondent a sum of money and
averred that he had agreed
to pay the appellant in kind. When the
matter initially served before Ranched, J he declined to deal with
the provisional winding
-up and instead referred the matter to oral
evidence. Whilst oral evidence was led the parties on 20 March 2012
reached an agreement
which was made an order of Court by Kruger AJ in
terms whereof the respondent admitted and conceded that the appellant
is in fact
a creditor within the meaning of section 345(1)(a) of the
1973 Companies Act. With reference to this order, which the SCA held
is valid, the Supreme Court of appeal reiterated the principle that,
in order to meet the threshold laid down in section 345(1)(a),
three
essential requirements must be met: The first requirement is that the
applicant is a
creditor
of the respondent for an amount of not
less than a R100.00 which must be due and payable: “
In
other
words, the
debt
must
be
liquid.”
[13]
The SCA concluded that the jurisdictional requirements as set out
in section 345(1)(a) have been met in this instance and that the
section 345(1)(a) demand was served on the respondent.
[33] The effect of this judgement therefore is to settle the dispute
as to whether the claim of the sixth respondent is liquid.
In fact,
the SCA concluded that “
the
respondent
is
either
being
ingenious
in
denying
that
he
knew
what
he signed
and
agreed to,
or
that
he
was
plainly dishonest with
the
court
and appellant.
This
conduct
is
reprehensible and
deserving of
censure.”
[14]
It is clear from the founding affidavit that the applicant is
persisting with his claim that there are no creditors and that, in
any event, the claim of the sixth respondent is not liquid in that,
at best for the sixth respondent, his claim is one sounding
in
damages consequent upon a cancellation of an agreement.
[34] I am in agreement with the sentiments expressed by the SCA that
this conduct of the applicant to continue disputing his indebtedness
and the liquidity of the claim is “reprehensible”. There
can, in my view, be no doubt in light of the findings of the
SCA that
the sixth respondent is a creditor and that the debt is liquid. To
persist with raising the same arguments in the current
application,
the applicant is clearly attempting to disavow the order (by consent)
by Kruger, AJ but, more importantly, the findings
of the SCA to the
effect that the sixth respondent not only is a creditor, but that the
debt is liquid. Any attempt in the present
application to dispute
these findings is not only disingenuous but plainly dishonest.
[35]
Does the applicant have a
prima
facie right? Although
it is accepted that the applicant has the right to share in the
surplus assets
(dies
credit),
this right to
share in any surplus will only become enforceable after confirmation
of the liquidators liquidation and distribution
account in terms of
section 408 of the 1973 Companies Act
(dies
venit)
at which time he will obtain an enforceable
ius in
ersonam
ad rem
acquirendam.
[15]
[36] Does the
applicant have a right to be heard before the Master may take a
decision in terms of sections 386(2A) and 386(2B)
of the 1973
Companies Act? This question directly impacts on the prospects of
success in the envisaged review application. The
applicant submitted
with reference to correspondence that it was conveyed to the Master
that it wished to place certain facts before
the Master prior to him
taking a decision regarding the recommendation to sell the property.
More in particular the point is made
that the applicant has inspected
the file content at the Masters office but was unable to locate any
documents indicating that
any steps had been taken by the liquidators
to obtain the necessary consent to sell the property. It was also
brought to the attention
of the Master that the shareholder of the
applicant has a direct and material interest in the property. The
averment is also made
that the applicant is deliberately being kept
in the dark and that it is severely prejudiced.
[37] It is accepted that a person aggrieved by the Master's decision
authorising a sale is, in principle, subject to review by
this
Court.
[16]
It is, in any event, not disputed that the sole shareholder of the
applicant will have
locus
standi
to bring
the envisaged review application.
[38] It was, however, submitted on behalf of the applicant that the
Master had a duty to afford the applicant an opportunity to
make
representations prior to it (the Master) taking the decision to
authorise a sale by private treaty. The fact that such an
opportunity
was not afforded entitles the applicant - so it was submitted - to
challenge the decision.
[39] By way of comparison the Court was referred to
Friedland
and
Others
v
The
Master
and
Others
[17]
where the Court held in the context of an enquiry under sections
417 and 418 of the 1973 Companies Act that a prospective witness
does
have the right to be heard on the question whether he should be
summoned by the Master. However, the Court made it clear that
this
right to be heard is not unlimited: The first limitation appears to
be contained in section 417 itself. Section 417(7) expressly
stipulates that the application under 417 is in itself private and
confidential unless the Master or the Court directs otherwise.
The
Court endorsed the view held by Schreiner J in
Ex parte
Liquidators
Ismail
Suliman
& Co
(Pty) Ltd
1941 WLD 33
that should the
application to summon a person to attend for examination come to the
attention of the person to be summoned before
the order to summon him
had been made, such person would have the necessary
locus
standi
to oppose the application to summon him and he
should be afforded the opportunity to be heard on that question. The
learned Judge
said at 34:
“It seems to me that the Court can take into account the
hardship upon a witness in deciding whether to make an order under
s
155 or not. It may be that a strong case of oppression must be made
out before the Court will deny to a liquidator the rights
given under
s 155, assuming that the requirements of the section are satisfied;
but even if this is so, a witness must have
locus
standi
to make out such a case. If he could move to set an order aside,
he can equally oppose the grant of an order in the first instance
if
he happens to have had notice of the application... .”
[18]
“For the reasons I have already given I consider it to be clear
that the prospective examinees before such an enquiry do
not enjoy,
with regard to the question whether or not they should be summoned
before such an enquiry, all of the rights generally
comprehended when
the maxim
audi
alteram
partem
fully applies. They are not entitled to prior notice. It is only
if they happen to learn of an approach to the Master by the
liquidator,
and only if they claim the right to be heard before the
Master has made his decision, that they may acquire a right to be
heard
in terms of the
Ismail
Suliman
&
Co case. But those are not the only limitations. There are others. I
am not now in a position to define the limitations exhaustively.”
[19]
[40] The Court therefore made it clear that this right to be heard in
the context of section 417 and 418 is
not
enjoyed by a
party to the full extent of the rights usually understood as being
afforded when the
audi
alteram
partem
maxim
applies.
[20]
It therefore appears from this judgment that prospective witnesses
are not entitled to prior notice and it is only in circumstances
where they happen to learn of an approach to the Master that they may
acquire a right to be heard and even then the right to be
heard
appears to be limited. In the context of section 317 and 318 the
applicant must show that -
“(1) he has approached the Master and asked to be heard before
the Master had made the relevant order; (2) that he had something
relevant to say to the Master relating to:
(a)
the question of jurisdiction; or
(b)
the question of hardship to, or oppression of, himself; or
(c)
possibly some other circumstance that could be regarded as
unusual, special or exceptional, and as calling for consideration
before
the decision to grant the order is made.”
[21]
The application to review failed in the matter of
Friedland
because the applicants have succeeded in only showing (1).
[41] I am mindful of the fact that this application served before
this Court by way of an urgent application and that a detailed
exposition of the law regarding whether the applicant can claim a
right to be heard before the Master may take a decision in terms
of
section 386(2B) of the 1973 Companies Act may not be warranted.
However, in so far as it is necessary to consider the applicant's
prospects of success in the envisaged review application, I will
briefly consider the following:
[22]
(i) Does the applicant have a right to be heard
(
audit
alteram parte
m
)
before the Master may
take a decision in terms of section 386(B) of the 1973 Companies Act?
(ii) If not, will the applicant have
a right to be heard if it comes
to his attention that a recommendation has been submitted to the
Master and the Master has not
yet made a decision? (iii) If the
applicant has such a right, what are his prospects of success in
succeeding with a review of
the decision of the Master?
[42] In considering whether the applicant has a right to be heard
prior to the decision having been made, it is necessary to have
regard to the empowering provisions in terms of which the
administrative act was taken. Having regard to section 386(2B) I am
not persuaded that the applicant has - as a general right - the right
to be heard
prior
to the Master taking a decision in
terms of section 386(2B) of the Companies Act: Firstly, this section
does not afford the applicant
such a right. More in particular, this
section does not provide for
prior
notice to the
applicant of the fact that a recommendation is to be submitted to the
Master. Secondly, it is accepted that liquidators
are afforded
certain rights in respect of the winding -up of the company and that
effectively the company is placed in the hands
of the liquidators
under the supervision of the Master and the Court. Some of these
powers may only be exercised after the Master
has granted his
authorisation such as in the case of the sale of the property. The
Master will exercise a discretion taking into
account the
recommendation and it is only after he has satisfied himself as to
the merits will a decision be made. Implicit thereto
is the fact that
the Master will not simply accept and rubberstamp the recommendation
without proper consideration. Because the
provisional liquidators
have been seized with the financial affairs of the company, it may be
accepted that the Master may place
considerable weight on the
recommendation of the liquidators (provided of course that the Master
must still exercise an independent
discretion before approving the
recommendation). I should, however, point out that from the papers it
does not appear that the
Master did not properly consider the
documents that have been forwarded to him. This may partly be due to
the fact that the applicant
has not deemed it fit to request written
reasons from the Master. Thirdly, I am also of the view that the
applicant claim that
he had a legitimate expectation that he would be
heard prior to a decision having been taken.
[23]
In arriving at this decision I have taken cognisance of the decision
in
Wa/e/e v
The
City
of
Cape
Town
and
Others
[24]
where the point was specifically discussed whether an owner of a
neighbouring property (Mr Walele) had the right to be notified of
building plans before they were approved by the City of Cape Town. In
that matter Mr Walele submitted that he was not notified
of the
proposed building nor given an opportunity to be heard in relation to
it. He therefore submitted that the administrative
action was
procedurally unfair, arbitrary and capricious and therefore fell to
be set aside. Of importance is the following statement
by O'Regan
(ADCJ - writing for the minority):
“[123] We
must be careful, in construing section 3(1), to bear in mind that it
is the key provision in PAJA that gives effect
to the right
entrenched in section 33(1) of the Constitution, which provides that
“everyone has the right to administrative
action that is
lawful, reasonable and procedurally fair.” There is no
challenge to the constitutionality of section 3(1)
of PAJA in this
case. Yet even in the absence of a challenge, our duty is to
interpret section 3(1) in a manner that is consistent
with the
constitutional right. Section 39(2) of the Constitution requires a
court, when interpreting legislation, to do so in a
manner that
promotes the spirit, purport and objects of the Bill of Rights.
That
administrative action
be
procedurally
fair
is
therefore
an
important constitutional
right
which
we should
seek
to protect. Yet,
the Constitution
does
not
require
a
knee-jerk
response
of
affording
a
right
to
a
hearing in every case regardless of the context or the
circumstances
of
those
affected.
[25]
There are countervailing considerations of equal importance to the
interpretation both of section 33 of the Constitution and section
3(1) of PAJA as I mentioned in
Premier,
Mpumalanga
and Another
v Executive Committee
,
Association
of State-Aided
Schools,
Eastern
Transvaal:
“In determining what constitutes procedural fairness in a given
case, a court should be slow to impose obligations upon government
which will inhibit its ability to make and implement policy
effectively (a principle well recognised in our common law and that
of other countries). As a young democracy facing immense challenges
of transformation, we cannot deny the importance of the need
to
ensure the ability of the Executive to act efficiently and
promptly.”
[26]
[43] If it is accepted in light of the
Friedland
decision
that at the very least the applicant had a right to be heard before a
decision was taken in light of the fact that the
process came to the
applicant's attention prior to the decision having been taken, the
question then arises what the prospects
of success in the envisaged
review application are? In the envisaged review application the
applicant will have to show that the
Master decision was wrong or
erroneous or misdirected.
[27]
The factual material that was before the Master must be considered
together with his reasons. I have already referred to the fact
that
the applicant in this matter has not, prior to launching this
application obtained the Master's reasons for endorsing the
recommendation. In fact, the Court simply does not know what the
Master took into account in arriving at a decision and what weight
was attached to the documents that were attached to the
recommendation. In the absence of the reasons for arriving at a
decision
the Court can only speculate as to the reasons for the
Master arriving at a decision.
[44] The applicant has indicated that the review will be brought in
terms of the Promotion of Administrative Justice Act (“PAJA”).
[28]
In terms of section 5 of PAJA any person who has been adversely
affected by administrative action and who has not been given the
reasons for such action may request that the administrator concerned
furnish written reasons.
[29]
I am in agreement that without the Master's reasons it is not
possible to determine whether the Master erred or misdirected himself
as regards the materials that served before him when he took the
impugned decision.
[45] In any
event, if regard is had to what was before the Master (even in the
absence of his reasons) when he took the decision,
I am of the view
that the applicant has not demonstrated any prospects of success: The
following was placed before the Master by
the provisional liquidators
in the recommendation for permission to sell the property by private
treaty: (i) The description of
the property and the fact that the
property is the property of the company in liquidation; (ii) That Mr
Lamprecht (the sixth respondent)
is the main creditor and supports
this application; (iii) The reasons for the urgency to sell the
property; (iv) The fact that
the creditor's claim against the estate
is in the amount of R12 million; and (v) Various attachments: The
consent of the creditor;
a letter regarding a possible land claim on
the property; sworn affidavits by the provisional liquidators; a copy
of the agreement
of sale; a draft of the Master's consent in
duplicate; a certificate of appointment and lastly the court order .
Also attached
to the recommendation is the valuation of the property
by Quality Valuations. I have already referred to the fact that the
sworn
valuation attached to the applicant's papers cannot be relied
on. That sworn valuation that was presented to the Master was the
one
attached to the applicant's own papers in the Application to
Liquidate the Company. The applicant now seeks to impugn the decision
of the Master by reference to a sworn valuation prepared by Ryle
which is dated 3 February 2015. This valuation was not before
the
Master when he took the decision and the applicant is not permitted
to introduce it now and to argue on the basis thereof that
the Master
erred or misdirected himself.
[46] The applicant also baldly asserts that the Master was biased or
that there is a reasonable suspicion of bias and that the
Master has
failed to take into account relevant considerations. The applicant
has not made an attempt in the papers to show where
the Master
demonstrated bias or what facts give raise to a reasonable suspicion
of bias on the part of the Master.
[47] Accordingly,
the applicant's prospects of success in the envisaged review
application are insufficient for purposes of obtaining
an interim
interdict. In addition, the balance of convenience is against the
applicant because the granting of the interim interdict
will only
delay the winding-up of Klipeiland and cause further expenses which
Klipeiland cannot afford. In the premises the balance
of convenience
does not favour the applicant. Lastly, the applicant does not address
the absence of another satisfactory remedy
at all in the founding
affidavit. Absent an interdict, the applicant is not left without a
suitable remedy: The applicant does
not address the issue as to why a
claim for damages will not be a suitable alternative remedy to the
interim relief claimed.
[48] The second and third respondents seek the dismissal of the
application with costs on the scale as between attorney and own
client. I am in agreement with the submission that the application is
without merit and was brought precipitously and constitutes
a
perpetuation by the applicant of the type of litigation that the
Supreme Court of Appeal has already condemned. In the event
I am in
agreement that a punitive cost order falls to be made against the
applicant.
[49] In the event the following order is made:
1. The application
is dismissed with costs on an attorney-client scale such costs to
include the costs of two counsel.
___________________________
A.C.
BASSON
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION
Attorneys for the
Plaintiff: AFZAL LAHREE ATTORNEYS
Attorneys for the
second and third respondents: GERHARD BOTHA & PARTNERS
INCORPORATED
Counsel for the
second and third respondents: LW DE KONING
SC
ADV CP WESLEY
Application was heard on: 5 May 2015
Judgment was
delivered on
23/7/2015
[1]
Section
386(2A)
and
386(2B)
of the
Companies
Act 61 of
1973 reads as follows:
“
(2A)
At
any
time before
a
general meeting
contemplated in
subsection
1
(d)
is
convened for
the
first
time
the liquidator
shall,
if
satisfied
that
any
movable
or
immovable
property
of the
company
ought
forthwith
to be sold,
recommend to the Master in writing accordingly, stating his reasons
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
a
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.”
[2]
Section
80bis
of
the
Insolvency
Act
24
of
1936
reads
as follows:
Sale
of
movable
or
immovable property
on
authorization of
Master:
“
(1)
At any time
before the
second meeting of
creditors the
trustee
shall,
if
satisfied
that
any
movable or
immovable
property of
the
estate
ought
forthwith
to
be sold,
recommend
to the Master
in
writing
accordingly,
stating
his
reasons
for such
recommendation.
(2) The
Master
may
thereupon
authorize
the
sale
of
such
property, or
of
any
portion thereof,
on such
conditions
and
in
such
manner as
he
may
direct:
Provided
that,
if
the
Master has
notice that such
property
or
a
portion
thereof
is
subject
to
a
right
of preference, he
shall not
authorize
the
sale
of such
property or
such
portion, unless
the
person entitled
to
such
right
of
preference has
given his consent
thereto
in
writing or the
trustee has guaranteed
that person
against
loss
by such
sale.”
[3]
2000
(4) SA 746 (SCA).
[4]
My
emphasis.
[5]
Ibid.
[6]
Ex
Parte Bowman: In Re International Rock Products (Pty) Ltd
1985 (1) SA 70
(W) at 72F - I.
[7]
Section
342(1) of the 1973 Companies Act.
[8]
Cronje
NO
and
Others
v
Hillcrest Village
(Pty)
Ltd
and Another
2009
(6)
SA
12
(SCA)
at
paragraph [25].
[9]
Section
353 of the 1973 Companies Act. This is subject to the exceptions
provided for in section 353(2)(a) and (b) of the 1973
Companies Act.
[10]
Setlogelo
v
Setlogelo
1914
AD
221
at
227.
[11]
Olympic
Passenger
Service
(Pty)
Ltd
v
Ramlagan
1957
(2)
SA
382
(D):
“
It
thus
appears
that
where
the
applicant's
right
is
clear,
and
the
other
requisites
are
present,
no
difficulty
presents
itself about granting
an
interdict.
At
the
other
end
of
the
scale,
where
his
prospects
of ultimate
success
are
nil,
obviously
the
Court
will
refuse
an
interdict.
Between
those
two
extremes
fall
the
intermediate
cases
in
which,
on
the
papers
as
a
whole,
the
applicants'
prospects
of
ultimate
success
may
range
all
the
way
from
strong
to
weak.
The
expression
'prima
facie
established
though
open
to
some
doubt'
seems
to me
a
brilliantly
apt
classification
of
these
cases.
In
such
cases,
upon
proof
of
a
well-grounded
apprehension
of
irreparable
harm,
and
there
being
no
adequate
ordinary
remedy,
the
Court
may
grant
an
interdict
-
it
has
a
discretion,
to
be
exercised
judicially upon
a
consideration
of
all
the
facts.
Usually
this
will
resolve
itself
into
a
nice
consideration
of
the prospects
of
success
and
the balance
of
convenience
-
the
stronger
the
prospects
of
success,
the
less
need for
such
balance
to
favour
the
applicant: the
weaker
the
prospects
of
success,
the
greater
the
need
for
the
balance
of
convenience
to favour him.
I
need
hardly
add
that by
balance
of
convenience
is
meant
the prejudice to the applicant
if
the
interdict
be
refused,
weighed
against
the
prejudice
to
the respondent
if
it
be
granted.”
[12]
(753/2013)
[2014]
ZASCA
125
(19
September
2014).
[13]
Paragraph
[15] of the judgment.
[14]
Ibid
ad
paragraph [13] of the judgment.
[15]
De
Leef
Family Trust
and
Others
v
Commissioner
for
Inland
Revenue
[1993] ZASCA 46
;
1993
(3)
SA
345
(A):
“
The
Court remarked
further that it
was important
to bear
in mind,
as to the
vesting of an
unconditional
right in the
holder
thereof,
the
distinction
between
dies
cedit
(ie the
time
has come
when
the
right
is
due
or owing) and dies
venit (ie the
time
for the enjoyment of the right has arrived so that
possession,
delivery
or
transfer
of
its
subject-matter
could
be
claimed). The
Court
also pointed
out
that
a
share
in
a
joint
stock
company
was
a
ius in personam,
the ownership
of
which passed
by
cession
and that one of
the principal
rights
carried
by
a
share
was the
right
to participate, on
liquidation
of
the
company,
in
the distribution
of the assets
of the company.
Held,
that
the
second
and
fourth
appellants
already
had,
on
3 April 1983 when
the
special
resolution to
wind
up
the
company
voluntarily
was
adopted,
a
vested
right (dies
cedit)
to
participate
equally
in
the
distribution
of
the
surplus
assets
of
the
company
on
its
liquidation,
but
that
dies
venit
would
only occur
after
confirmation
of
the
liquidator's
liquidation and
distribution
account
by
the
Master
in
terms of s
408 of
the
Companies
Act
when
the
liquidator
was
obliged
in
terms of s
409
to proceed
with
the distribution
of the assets:
the
second and fourth appellants
would then have
enforceable
iura
in personam ad
rem
acquirendam
to
obtain
transfer
of
the
fixed
property in
their
own
names,
provided that
it
had
not
been realised to
liquidate debts
and
was
available
for
distribution.”
(Quoted
from
the Headnote.)
[16]
Henochsberg
on the
Companies
Act: “
It
is
submitted
that
the
Master's
decision
authorising
the
sale
is subject
to review
by
the
Court at the
instance
of
any person
aggrieved
by
such
decision
...
It
is
submitted
that
“a
person aggrieved”,
in this context, would
include
a
member or
a
creditor of the
company.”
[17]
1992
(2) SA 370 (W).
[18]
Ibid
at
page
375H
-
376
A.
[19]
Ibid
at
378E -
F.
[20]
Ibid
at
376C.
[21]
Ibid
at
379H
-
380A.
[22]
Court in
Ferreira
v Levin NO and Others; Vryenhoek and others v Powell NO and
Others
1
995
(2)
SA
813
(W)
made
it clear
that
a
preliminary
assessment
of the
merits of the
applicant's
case
is required.
[23]
See
in
this
regard
for
a
full
exposition
of
the
applicable
principles:
Walele
v
The
City of
Cape
Town
and
Others
2008
(11)
BLCLR
1067
(CC)
particularly
at
paragraphs
(27]
et
seq.
[24]
Ibid.
[25]
My
emphasis.
[26]
Footnotes
omitted.
[27]
Al-Kharafi
&
Sons
v
Pe
ma
NNO
2010
(2)
SA
360
(W): “
[11]
A court
hearing
a
review application
under
s
151 sits
both
as
a
court
of review
and
a
court
of
appeal
to reconsider
the
ruling
or
decision
of the
master. That does
not
mean
that the
court
may
disregard
the factual
material
before
the master
or the
master's
reasoning. It
is
only
where the
master,
in
granting
his
approval,
has
erred
or
misdirected
himself based on
the
material placed
before him, that
the
court can, on
review and/or
appeal, go further
and
decide
the
matter
de
novo. It
is
by
reference to
what
was placed before
the
master
that
the correctness
or otherwise
of the master's
decision
is
to be judged.
If, based
on
what
was before
the master,
there
was no
error or
misdirection
on
the
master's
part,
then that
is
the end of the
matter.
It is not
open
to parties to
introduce
the
new
material
that
they
seek
to place
before
this
court,
and
argue on
the
basis of
what
was
not
before the
master that the
master erred
or
misdirected
himself.
The
approach
is
to consider the factual material placed
before the master,
together with the
master's decision and his
report, and to
consider whether,
in the light of that material, the
master erred or
misdirected
himself
in
any
material
respect.
If any
basis
for interfering
with
the
master's
decision
does appear ex
facie the
documents before
the
master,
as
read with
his decision and
rulings, then the
reviewing
court
may
reconsider
the matter
based
on
the
material
before
it.”
[28]
Act
3
of 2000.
[29]
“
5 Reasons
for
administrative
action
(1)
Any
person whose
rights
have
been
materially
and
adversely
affected
by
administrative
action and
who
has
not
been
given
reasons
for
the
action
may, within
90
days
after
the
date
on
which
that person became
aware
of
the
action
or
might
reasonably
have
been
expected
to
have
become
aware of
the action,
request
that
the
administrator
concerned
furnish
written reasons
for
the
action.
(2)
The administrator
to
whom the request
is
made
must,
within
90 days after
receiving the request,
give
that person
adequate
reasons
in
writing for the
administrative
action.
(3)
If
an
administrator
fails
to
furnish
adequate
reasons
for
an
administrative
action
it
must,
subject to
subsection
(4)
and
in
the
absence of
proof to
the
contrary,
be
presumed in
any
proceedings for
judicial review
that the
administrative action
was taken
without
good
reason.”