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[2012] ZAGPPHC 187
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Mabaso and Others v Barnard NO and Others (6962/2011, 15956/2012) [2012] ZAGPPHC 187 (31 August 2012)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
Case
number: 6962/2011,15956/2012
DATE:31/08/2012
In
the matter between:
THOMAS
MBONAKULU MABASO & 236
OTHERS
......................................
APPLICANTS
and
BARNARD,
HENDRIK JACOBUS RUST N.O.
&
9
OTHERS
…......................................................................................................
RESPONDENTS
JUDGMENT
J.W
LOUW, J:
[1]
The applicants are 237 erstwhile employees of Sawina Logistics (Pty)
Ltd (Sawina) which went into final liquidation on 27 June
2006. I
shall refer to the applicants as the employees. The first to ninth
respondents are the appointed liquidators of Sawina.
[2]
A directive was issued in this matter by the Deputy Judge President
which provides that the further affidavits which needed
to be filed,
had to be filed by the dates which were agreed upon. Certain of the
applicants' affidavits were filed late. It was
submitted on behalf of
the respondents that, in the absence of a substantive application for
condonation, those affidavits should
not be allowed. Applicants'
counsel applied for condonation from the bar and explained that it
was difficult to get the affidavits
filed in time due to the large
number of applicants and because they were not within easy reach. In
my view, those affidavits should
be allowed in the interests of
justice.
[3]
The employees have brought a number of applications against the
respondents and the respondents have, in turn, brought a number
of
applications against the employees. These applications are briefly
the following:
(a)
An application by the employees under case no. 6962/2011 in which
they claim an order that the liquidators produce accounting
records
and bank statements of the insolvent estate of Sawina, an order
freezing the bank accounts, an order claiming payment of
the
employees' claims out of the free residue in the estate and an order
suspending or barring the liquidators from being appointed
or
nominated as liquidators or directors of any company in South Africa
("the main application").
(b)
An application by the liquidators to rescind an order taken by the
employees in the main application on 15 March 2011 ("the
liquidators' rescission application"). The order, which was
granted on 15 March 2011 in the absence of the liquidators, ordered
the liquidators to comply with all their duties towards the Master
and ordered the Master to enforce the provisions of s. 394 against
the liquidators.
(c)
An application by the employees to rescind the rescission order
obtained by the liquidators and for payment of their claims
("the
employees rescission application"). The order granted by Goodey
AJ on 13 March 2012, again in the absence of the
liquidators, did not
rescind the rescission order obtained by the liquidators, but ordered
them to pay the employees' claims and
to comply with their duties to
the Master.
(d)
An urgent ex parte application brought by the employees in terms
whereof a rule nisi was granted freezing the liquidators' business,
trust, personal and investment accounts ("the employees' rule
nisi application").
(e)
An urgent application by the liquidators to suspend the operation and
execution of the rule nisi and of the order taken in their
absence in
the employees' rescission application, pending the return date of the
employees' rule nisi application ("the liquidators'
urgent
application").
(f)
An application by the employees to anticipate the order obtained by
the liquidators in the urgent application ("the employees'
anticipation application").
(g)
An application by the liquidators to vary or rescind the order
granted in the employees' rescission application ("the
liquidators'variation/rescission application").
[4]
I shall deal firstly with the liquidators' variation/rescission
application. The basis of the application is that the order
granted
in the employees' rescission application was erroneously sought and
granted in the absence of the liquidators. As previously
mentioned,
the order granted by Goodey AJ was not for the rescission of the
liquidators' rescission application. Instead, the liquidators
were
ordered to pay the employees' claims and to comply with their duties
to the Master.
[5]
The liquidators' explanation for their absence is that the
application had a history of being set down on short notice to their
attorneys' Pretoria correspondents. On the occasion when the order
was granted, the application was set down on four days' notice.
Mr.
Levy from the correspondent attorneys attended court on the day of
the hearing and looked for the matter on the motion court
roll. The
matter did not appear on the roll. He then enquired at the
registrar's office where the staff confirmed that the matter
was not
on the roll. Mr. Levy did not find this surprising in view of the
history of the matter, and returned to his office. The
explanation
for the liquidators' absence is clearly reasonable in the
circumstances and must be accepted.
[6]The
defence of the liquidators which has been set out in their founding
affidavit filed in support of the variation/rescission
application,
and which is not disputed, is the following. They have and continue
to comply with their statutory duties. The employees
have not pointed
out any non-compliance in their papers. As far as payment of the
employees' claims is concerned, the liquidators
point out that there
is no free residue in Sawina's estate. The first liquidation and
distribution account reflected a deficit
of approximately R12
million. Since then, there has been a surplus in 135 of the
encumbered asset accounts which has resulted in
a reduction of the
deficit to R5 894 936,00 which is reflected in the draft second
liquidation and distribution account. In order
for preferent
creditors such as the employees to have some prospect of payment
there must be a surplus in the account after payment
of the costs
specified in the Insolvency Act. The liquidators were on the verge of
submitting the second account when they learnt
of the court order.
The account will now have to be amended to provide for the additional
costs which have been incurred as a result
of the present litigation.
The defence put up by the liquidators is clearly bona fide and has
prospects of success.
[7]
It follows that the liquidators are entitled to the relief sought in
paragraphs 2.1 and 2.2 of the notice of motion in the
variation/rescission application.
[8]
The following further facts appear from the liquidators' founding
affidavit in the variation/rescission application. The liquidators
became aware of the court order of Goodey AJ when it was delivered to
their attorneys' correspondents' offices on 23 March 2012.
It was
delivered with the court order granted by Vorster AJ on 19 March 2012
in the employees rule nisi application. The relief
granted by Vorster
AJ against the liquidators was to freeze their business, trust,
personal and investment accounts pending the
return date of 24 April
2012. Similar relief is claimed against them in the main application.
The liquidators have filed answering
papers opposing the confirmation
of the rule nisi.
[9]
The order granted in the employees' rule nisi application resulted in
the bringing of the liquidators' urgent application. That
application
resulted in a court order by Claassen J in terms whereof the
immediate effect of the court order of Goodey AJ and the
rule nisi
was suspended pending the return date, the employees being entitled
to anticipate the return date "within"
48 hours' notice.
The employees anticipated the order with one and a half hour's notice
to the liquidators. The employees' anticipation
application was heard
by Tuchten J. During the hearing of that application, the employees
applied for Tuchten J's recusal. The
recusal application was refused
and the employees then withdrew their anticipation application.
[10]
What therefore remains to be decided are the main application and the
employees' rule nisi application. The principal relief
claimed by the
employees in the main application is for payment of their preferent
claims out of the free residue of Sawina's insolvent
estate. The
other relief which is claimed is ancillary thereto. The argument on
behalf of the employees only concerned their claim
for payment. That
was also the approach of counsel for the liquidators.
[11]
In terms of item 9 of schedule 5 of the
Companies Act, 71 of 2008
,
the winding-up and liquidation of companies continue to be governed
by the provisions of the previous Companies Act, 61 of 1973.
In terms
of s. 391 of the previous Act, a liquidator shall proceed to recover
and take possession of all the assets and property
of the company in
liquidation and shall apply same in satisfaction of the costs of the
winding-up and the claims of creditors,
and shall distribute the
balance among those who are entitled thereto. In terms of s. 342, the
assets shall be so applied 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.
[12]
The
Insolvency Act, 24 of 1936
, provides that the effect of a
winding-up order is to suspend any contracts of service of employees
with effect from the date of
granting of the winding-up order
(s.
38(1)).
In terms of
s. 38(2)(a)
an employee whose contract is
suspended is not required to render services in terms of the contract
and is not entitled to any
remuneration in terms of the contract. A
liquidator may terminate the contract of service of employees
(s.
38(4)).
Unless the liquidator and the employee have agreed on
continued employment, all suspended contracts of service terminate 45
days
after the appointment of the liquidator
(s. 38(9)(a)).
In terms
of
s. 38(11)
, an employee whose contract of service has been
terminated is entitled to claim severance benefits from the insolvent
estate in
accordance with
s. 41
of the
Basic Conditions of Employment
Act, 75 of 1997
. In terms of
s. 98A(l)(a)(iv)
of the
Insolvency Act,
a
claim by an employee who was employed by the company in liquidation
for payment of severance or retrenchment pay due to the employee
shall be paid out of the free residue of the insolvent estate. The
free residue is that portion of the estate which is not subject
to
the rights of secured creditors
(s. 2)).
The claims that may be made
against the free residue, and how they rank, are specified in
ss. 96
to
102
of the
Insolvency Act and
are referred to as preferent claims.
Employees' claims for severance and leave pay are paid from the free
residue after defraying
the costs of liquidation and of execution.
The employees' claims are therefore preferent claims which rank
before the claims of
concurrent creditors.
[13]
Sawina had 421 employees when it was liquidated in June 2006. The
contracts of service of all those employees were, as a result,
suspended. The liquidators subsequently sold the business of Sawina
as a going concern to a company called Calshelf Investments
(Pty) Ltd
Part of the transaction was that the contracts of a number of the
employees, referred to as "operationally necessary
employees",
would be transferred to Calshelf. The present employees did not fall
within that category. Their services were
terminated by the
liquidators.
[14]
One of the complaints of the employees is that the liquidators made a
so-called ex gratia payment of some Rl,5 million to the
operationally
necessary employees. The liquidators say that these employees were
necessary for the continuation of the business
of Calshelf. The
payment was made as a cost of administration and that the provision
for the payment is reflected in the first
liquidation and
distribution account which has been approved by the Master. Whether
or not the payment was correctly made is not
the subject matter of
the present application. The applicants' entitlement to payment is
dealt with below.
[15]
The liquidators do not dispute that the claims of the employees, to
the extent that they are for severance and leave pay, are
preferent
claims against the insolvent estate. What they say is that they are
not entitled to make any such payment before the
final liquidation
and
distribution account has been approved by the Master and that,
as matters presently stand, which position is reflected in the draft
second liquidation and distribution account, there will be no free
residue from which the employees' preferent claims can be paid.
The
account reflects a shortfall of some R5,8 million.
[16]
Section 40(l)(a)
of the previous Companies Act provides that a
liquidator shall, unless he receives an extension of time, frame and
lodge with the
Master not later than six months after his appointment
an account of his receipts and payments and a plan of distribution.
This
is generally referred to as a liquidation and distribution
account. Section 403(l)(b) provides for the lodging of further
accounts
if the first account is not a final account. Section 405
empowers the Master to approach the court if a liquidator fails to
lodge
an account or to perform his or her duties. In terms of s. 406,
an account lodged by a liquidator shall lie open for inspection
for
not less than 14 days and in terms of s. 407 any person having an
interest in the company being wound up may lodge an objection
against
the account, stating the reasons for the objection. Section 408
provides for confirmation of the account by the Master
if no
objection has been lodged or if an objection has been lodged and the
account has been amended as directed by the Master or
if the
objection has been withdrawn. Section 409 provides that, immediately
after confirmation of any account the liquidator shall
proceed to
distribute the assets in the estate in accordance with the account or
to collect from the creditors and contributories
liable to contribute
thereunder the amounts for which they may be liable.
[17]
It is clear from the aforegoing that the employees' claims for
payment of their preferent claims are premature. They are not
entitled to claim payment before a final liquidation and distribution
account has been approved by the Master. Once such account
has been
approved, they will also only be entitled to payment of their claims
if there is a sufficient free residue from which
the claims can be
paid. If not, they will not receive payment. The remedy of the
employees at this stage is to object to the second
liquidation and
distribution account, once filed, if they are dissatisfied with its
contents. If the liquidators fail to file the
second or final
account, the employees can approach the court in terms of s. 404(2)
for an order directing the liquidators to file
such account. There
are also further remedies in the Act which they can utilize.
[18]
In the result, the main application falls to be dismissed.
[19]
What remains, is the employees' rule nisi application for the
freezing of the liquidators' banking accounts. If the employees
are
not entitled to an order for payment of their claims by the
liquidators, as I have found, it follows that they are also not
entitled to an order freezing the liquidators' banking accounts. The
rule nisi must therefore be discharged.
[20]
In the result, I make the following orders:
(a)
In the first to ninth respondents' application (the
variation/rescission application) in case no. 6962/2011, an order is
granted
in terms of prayers 2.1 and 2.2 of the notice of motion.
(b)
The applicants' application in case no. 6962/2011 (the main
application) is dismissed with costs.
(c)
The rule nisi granted in case no. 15956/2012 is discharged and the
application is dismissed with costs.
(d)
The aforesaid costs orders will include the costs of two counsel
where two counsel were employed.
Applicants'
counsel: Adv. S.R.P. Masango
Respondents'
counsel: Adv. C.Q. Leech Adv. E. De Lange
Applicants'
attorneys: Ledwaba Attorneys, do Motloba Attrneys, Pretoria
Respondents'
attorneys:Rothbart Inc, c/o Jacobson & Levy Inc, Pretoria