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2024
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[2024] ZAECELLC 40
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Voight v Magistrate of Magistrates Court, East London (EL457/2023) [2024] ZAECELLC 40 (5 September 2024)
NOT
REPORTABLE
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, EAST LONDON CIRCUIT COURT)
CASE NO: EL
457/2023
In the intervention and
rescission application by:
GARTH
MERRICK VOIGT N.O.
First
Applicant
DEBORAH
JOUBERT N.O.
Second
Applicant
CAROL-ANN
SCHROEDER-MANN N.O.
Third
Applicant
In
re the urgent application between:
BAFANA
MVUYISI GCANGA
First
Applicant
PUMZA
GCANGA
Second
Applicant
and
THE
MAGISTRATE OF THE MAGISTRATE’S
COURT,
EAST LONDON
First
Respondent
THE
SHERIFF OF THE MAGISTRATE’S
COURT,
EAST LONDON
Second
Respondent
SOUTH
AFRICAN POLICE SERVICES,
EAST
LONDON
Third
Respondent
JUDGMENT IN RESPECT OF
APPLICATION FOR JOINDER AND RESCISSION
HARTLE J
Introduction:
[1]
The applicants in this opposed application for joinder and rescission
are professional insolvency practitioners (
The “liquidators”
).
They were appointed by the Master of the Eastern Cape High Court in
Makhanda (
The “Master”
) pursuant to the provisions
of
Section 386 (1) of the Companies Act, No. 61 of
1973 (“
The Companies Act”
),
read with
section 66
of the
Close Corporations Act, No. 69 of 1984
(“
The
Close Corporations Act&rdquo
;)
,
to take charge of the winding up of the Close Corporation known as
Abbotsford Service Station Close Corporation (“
The
Close Corporation”
).
[2]
The
Close Corporation was placed under final liquidation by order of the
Makhanda High Court on 29 November 2022.
[1]
[3]
The applicants in the urgent application in which the liquidators
wish to intervene are the sole members of the Close
Corporation (in
liquidation). They are married to each other. I will refer to them
individually as Mr. and Mrs. Gcanga or collectively
as “
the
members
” of the Close Corporation.
[4]
After their
official appointment as liquidators and in the course of their
administration of the winding up of the Close Corporation,
the
applicants caused subpoenas to be issued to the members using the
machinery at their disposal made provision for in sections
414, 415,
416 and 418 of the Companies Act to interrogate them at an official
enquiry. Their stated objective was to investigate
alleged
irregularities relating to the sale of the Close Corporation’s
business. (As an aside there appears to be a valid
concern underlying
the need for the enquiry which the members have not even attempted to
allay in the papers.)
[2]
[5]
The members failed to comply with the subpoenas ostensibly on the
advice of their attorney. They questioned the validity
of the final
liquidation order granted by the Makhanda High Court which they
consider to be “
void without the necessity for their set
aside
” by reason of the fact that it was purportedly
“
issued by a court with no jurisdiction or legal
competence”.
This is ostensibly because the notice of
motion in the liquidation proceedings supposedly lacked any reference
to a prayer for a
final liquidation order.
[6]
Indeed, so it was pointed out to the first applicant in a letter
addressed to the liquidators by an attorney acting on
behalf of the
members ahead of the enquiry, Investec (the creditor that sought the
liquidation order) had applied for a provisional
liquidation order
only. They purported to reason that there was no application for a
final liquidation order on the return day,
suggesting that “
no
one invoked the Court’s competence to grant final liquidation
”.
According to their attorneys, this could only have been done through
the mechanism of a notice of motion and an affidavit,
a step that was
purportedly not taken by Investec in this instance.
[7]
Not only did the members complain that the order was void, but so too
the liquidator’s “
notice
” and “
summons
”
flowing therefrom. They intimated that they would therefore not
“
honour
” the invitation to appear at the enquiry
but forewarned that if Investec or the liquidators contested their
“
position”
, they would seek a declarator that the
final liquidation order was void.
The
urgent application:
[8]
In
consequence of the members’ failure to comply with the
subpoenas, the liquidators procured warrants for their arrest and
these were about to be executed upon by the Sheriff (who warned them
telephonically of his instruction beforehand) when the couple
approached this court on an urgent basis (“
the
urgent application
”)
for what appears with hindsight to be a stay of their execution in
perpetuity. I say so because they have not yet sought
the declaratory
order that they threatened to obtain to determine the claimed issue
of the validity of the final liquidation order.
[3]
This is evident from the terms of the order in the urgent
application, granted in a Rule
nisi
format, as follows:
“
1.
The applicants’ non-compliance with the Rules relating to time
and service and this matter is heard as one of urgency.
2. A rule
nisi
hereby issues, calling on interested parties to show cause if any to
this court on
18th April 2023
as to why the following orders
are not made final:
2.1.1 That pending
the resolution of the dispute as to the validity of the final
liquidation order upon which the s 418 of
the Companies Act, 1973
summons and the warrant of arrest issued by the First Respondent are
founded, the implementation of the
warrant of arrest issued by the
First Respondent in the matter of Abbotsford Service Station CC under
Master's Reference No: E000042/222
is stayed.
2.1.2. The Second
Respondent and Third Respondents are interdicted and restrained from
executing the warrant of arrest by
the First Respondent in the matter
of Abbotsford Service Station CC under Masters reference No:
E000042/222, pending the resolution
of the dispute.
3. The relief
prayed for in sub-paragraph 2.1 and 2.2 operates immediately as
interim relief pending the return and or any
extension of the return
day.
4. The costs of the
application be borne by any of the parties opposing the relief sought
therein on a scale to be determined
by this Court.”
[9]
Needless to
say no notice of the application was given to the applicants, or to
the Master for that matter who formally appointed
the liquidators.
(Only the Magistrate, the Sheriff and the South African Police
Service are cited therein as respondents and interested
parties.
Although they plainly have nothing to do with the “
dispute
”
implicated in prayer 2.1.1 of the order referenced above, the
Magistrate and the Sheriff were officially engaged in their
respective capacities in the issue and execution respectively of the
relevant warrants at the instance of the liquidators.)
[4]
a. The liquidators
were additionally not served with a copy of the first Rule
nisi
dated 7 March 2023 after its granting that was extended on various
dates before it was made final by this court on 20 June 2023.
[10]
The first applicant explains that the existence of the urgent
application was co-incidentally brought to his attention
on the
return date by an attorney who happened to notice the matter on the
unopposed motion court roll of cases to be heard at
the Tribunal in
East London on 20 June 2023.
The
relief claimed by the liquidators:
[11]
The liquidators, citing their interest in the matter in their
official capacities in pursuit of their appointment and
formal
involvement in the liquidation processes concerning the Close
Corporation, not to mention their roles in having set the
enquiry in
motion and having themselves procured warrants for the arrest of Mr.
and Mrs. Gcanga, seek the leave of this court to
be joined as parties
as envisaged in Uniform Rule 10 read with Rule 6 (14). The submit
that if they had been given notice of the
application they would
certainly have opposed the relief that was being sought on the basis
that the warrants of arrest had been
procedurally correctly and
lawfully applied for and issued against the members.
[12]
They contend that their non-joinder is fatal to the urgent
application and that their absence from the proceedings provides
a
ground for the orders granted in their absence to be rescinded.
The
members’ bases for their opposition to the present application:
[13]
The members oppose the present application.
[14] They
have raised preliminary objections which all have at their core the
contention that the final liquidation order is
void and that it is
capable of being ignored without the necessity for its being set
aside. The voidness contended for also purportedly
justifies their
argument that the applicants therefore lack
locus standi
to
institute these proceedings and generally to conduct themselves
officially as liquidators responsible for winding up the affairs
of
the Close Corporation. They also take a stab at the argument that
this court does not have jurisdiction to entertain the present
application (given their claim of the invalidity of the final
liquidation order) on the basis that the so-called impugned order
was
granted by the Makhanda High Court as opposed to the present court.
The
jurisdiction of this court:
[15]
In the latter respect it beggars belief that the members obtained the
relief sought on an urgent basis and without notice
to the
liquidators in this very court and now suggest that it is not open to
them to assert their right in the same forum to be
joined and to
claim a basis that the prior orders granted by this court in their
absence (in circumstances where they ought to
have been joined)
should be rescinded.
[16]
Indeed Mr. Gcanga in his founding affidavit in the urgent application
rather ironically anticipated by the following
statement that the
liquidators (who he insists on referencing as “
provisional
”
despite the final order of liquidation and the Master’s
official letter of appointment) might have wished to participate
in
those proceedings:
“
I
am advised that it is not necessary for the provisional liquidators
to be joined as they do not have a real and substantial interest
in
this application, however should they wish to participate in these
proceedings, they would have to come show cause on the return
day as
to why this order is not made final.”
[5]
[17]
The application in my view is entirely incidental to the prior orders
granted by this court in the urgent application
which retains the
necessary jurisdiction to consider the present application for
joinder and rescission sought after the fact.
The
locus standi of the liquidators:
[18]
The members contend that the liquidators do not have authority to
have brought the present application since their appointment
was a
provisional one only which does not include in a liquidator’s
wherewithal at such a stage the authority to institute
legal
proceedings without the leave of this court or the Master.
[19]
The
liquidators maintain that such a contention is factually wrong and
rely in this respect on their certificate of appointment
which
coincidentally precedes the date of the final order of
liquidation.
[6]
[20]
Section 74
of the Close Corporation Act however provides that the Master shall
make an appointment “
as
soon as practicable after a
provisional
winding up order has been made
”,
which first event occurred on 25 October 2022. The liquidators were
appointed in this instance on 16 November 2022 with
the powers
according to the certificate set out in section 386 (1) of the
Companies Act read with section 66 of the Close Corporation
Act. In
terms of section 66 (1) of the latter act, the laws mentioned in item
9 of Schedule 5 to the new Companies Act
[7]
apply to the liquidators of a close corporation. One of those laws is
the 1973 Companies Act. Section 386 of that Act in turn provides
that
any liquidator in any winding up (or liquidation), whether of a
company or a close corporation, shall have the power,
inter
alia
,
to bring or defend on behalf of the company or close corporation, as
the case may be, any action or other legal proceedings of
a civil
nature.
[21]
Even for a
moment indulging the members’ argument that the final
liquidation order is void, the appointment of the liquidators
is a
function performed by the Master which stands separate from the final
liquidation order and which has legal consequences provided
for by
statute. As Mr. Kotze who appeared on behalf of the liquidators
pointed out, that decision of the Master stands and has
not been set
aside.
[8]
The Master’s
appointment of the applicants as liquidators as an objective fact can
therefore hardly be wished away and continues
to have effect in law
until set aside.
[22]
One such consequence is that the liquidators were empowered to invoke
the machinery of sections 414 - 418 of the Companies
Act at their
disposal to call the members to an interrogation and to take the
action which they did in causing a warrant to be
executed for their
arrest when they failed to appear. Another consequence that
self-evidently arises is their power to conduct
civil litigation
arising in the interests of the close corporation in liquidation
flowing from its winding up. In particular in
this unique situation
the liquidators are best placed to vindicate the fact that they have
been stymied in carrying out their lawful
objectives through the
interrogation proceedings by the final order granted in the urgent
proceedings.
[23]
There is simply no merit in this objection
in limine
either.
Was
the appointment of the liquidators a nullity?
[24]
In order to sustain this argument, the members argue that the final
liquidation order was a nullity which would infuse
everything flowing
therefrom including the appointment of the applicants by the Master
and everything done by them in terms thereof.
[25]
Ironically though, they felt it necessary to approach this court in
the urgent proceedings to stay the execution of the
warrants for
their arrest founded upon the final liquidation order which they
presently assert is a nullity capable of being ignored.
[26]
The void final order is said to have arisen in the supposed fact that
the notice of motion in the winding up application
did not seek an
order for “
final winding up
” as a result of which
the jurisdiction of the Makhanda High Court was never invoked to
grant such an order. This is offered
both as a fact and as a legal
submission.
[27]
Firstly from a factual perspective this does not appear to be an
acceptable premise. Although Investec asked for an order
in prayer 1
in the liquidation application “
that the
… Close Corporation is hereby placed in
provisional
liquidation
”
, prayer 2 of the
relevant Notice of Motion requested an order: “
That
a rule nisi is hereby issued calling on all interested parties to
advance reasons, if any, before this court at 09h30 on a
date to be
determined by the…Court, why the Respondent should not be
placed in final liquidation.”
When
that date arose, the final order within the contemplation of the
applicant in the liquidation proceedings was engaged with
and the
rule
nisi
confirmed.
[28]
As an aside
this is the customary procedure adopted in this division according to
which applications for the winding up of close
corporations are
expected to be dealt with.
[9]
The provisional liquidation of a corporation is an essential first
step and the notices of motion are framed in rule
nisi
format with the provisional orders being confirmed after the required
service and publication thereof.
[10]
[29]
The relevant rule
nisi
granted in favour of Investec in the
liquidation application is dated 25 October 2022. It is apparent that
interested parties were
invited in terms thereof to advance reasons
before the Makhanda High Court on Tuesday, 29 November 2022, as to
why the Close Corporation
should not be placed in final liquidation.
On that date the legal representatives of the Close Corporation were
present when Investec’s
entitlement to move the final order of
liquidation was argued. The order was thus granted and stands.
[30]
It is simply spurious to suggest therefore that the jurisdiction of
the court was not invoked or that that there is no
final order of
liquidation in place.
[31]
Mr. Mlanga on behalf of the members sought to maintain that since the
Makhanda High Court had no jurisdiction to make
the final order of
liquidation this is one of those instances where the
Motala
exception is of application.
[32]
The Supreme
Court of Appeal in
Motala
[11]
developed a rule that if a court without jurisdiction issues an order
it is not binding even where that order has not been challenged
in
subsequent legal proceeding. This is in fact the essential basis upon
which the members assert that they have no obligation
to heed the
final order of liquidation or to regard as valid in law anything
flowing therefrom.
[33]
Whilst the
Motala
exception exists and continues to provide justification in certain
unique situations where orders have been issued by a court without
authority notwithstanding the inviolate rule of law that court orders
irrespective of their validity are binding until set aside,
this does
not appear to be one of those situations where it can be said that
the Makhanda High Court did not have authority to
grant the final
order of liquidation.
[12]
On
the facts presented before this court such a finding simply cannot
prevail.
Do
the liquidators have an interest in being joined?
[34]
As for the
liquidator’s claim for joinder in these proceedings the test
for joinder is trite. In SA Riding for the Disabled
Association v
Regional Land Claims Commissioner the Constitutional Court stated
that:
[13]
“
[10]
If the applicant shows that it has some right which is affected by
the order issued, permission to intervene must
be granted. For it is
a basic principle of our law that no order should be granted against
a party without affording such party
a pre decision hearing.
This is so fundamental that an order is generally taken to be binding
only on parties to the litigation.
[11] Once the
applicant for intervention shows a direct and substantial interest in
the subject-matter of the case, the court
ought to grant leave to
intervene. In
Greyvenouw CC
this principle was formulated
in these terms:
“
In addition, when,
as in this matter, the applicants base their claim to intervene on a
direct and substantial interest in the subject-matter
of the dispute,
the Court has no discretion: it must allow them to intervene because
it should not proceed in the absence of parties
having such legally
recognised interests.”
[14]
”
[15]
[35]
The liquidators have certainly not waived their right to be joined
and are vital parties since the interrogation proceedings
initiated
by them have in effect been thwarted by the final order granted in
the urgent proceedings in a scenario where they had
no opportunity to
state their position.
[36]
Ironically the members recognized the validity of the liquidators’
appointment in reaching out to them in an attempt
to avoid appearing
at such an interrogation, and in acknowledging that they might on the
return date of the urgent proceedings
have had an interest in coming
to court to oppose the relief sought yet assert a lack of material
interest by them in the subject
matter of the concluded urgent
proceedings.
[37]
I agree with Mr. Kotze’s submission that the liquidators were
indeed the parties “
most interested
” in being
joined in the urgent proceedings that sought to preclude the members’
from having to comply with the subpoenas
ostensibly lawfully issued
at their instance.
[38]
The
imperative for their joinder becomes clearer when regard is had to
the fact that the members have taken no steps to resolve
the
“
dispute”
highlighted on their behalf in the urgent application (and indeed
have stated that they have no intention of doing so) and that
the
effect of the relief granted in that matter is that the warrants for
their arrest cannot be executed upon for as long as the
orders
granted in their absence (incorporating the Rule
nisi
,
the extensions that kept it alive as well as the final order which
states simply that “
The
Rule Nisi is confirmed”
)
remain in place.
[16]
This
means that the liquidators are stalled in their entitlement to
interrogate the members concerning a substantial sum relating
to the
purchase price of the Close Corporation’s business that has
allegedly been unaccounted for and which they have to
answer for to
the general body of creditors whose interests they represent in their
formal capacities.
[39]
This issue must certainly be decided in favour of the liquidators.
They must be allowed an opportunity to respond. The
final order
granted in the urgent application amply demonstrates that a finding
adverse to the interests of the Close Corporation
(in liquidation)
which they are lawfully mandated to look out for has been made that
seriously needs to be ameliorated.
Should
the orders granted in the rescission application be rescinded:
[40]
The
Constitutional Court has confirmed that in situations where a court
should insist on the joinder of an interested party, something
it may
do
mero
motu,
and does not do so, it commits a procedural irregularity within the
ambit of Rule 42 (1)(a).
[17]
[41]
I take Mr. Kotze’s point that the fact that the liquidators
were mentioned by Mr. Gcanga in the founding affidavit
in the urgent
application, and that it was said that if the liquidators disagree
that they do have an interest then they could
“
come and show
cause on the return day as to why this order is (sic) not made
fina
l”, should have resulted in this court enquiring
whether proper notice of the application had been given to the
liquidators.
Having failed to do so, the court in my view granted the
final order in the urgent application in error.
[42]
That being the case, an order granted in the absence of the
liquidators is an order granted in error or by mistake meeting
the
requirements of Rule 42 (1)(a) for rescission purposes.
The
application to strike out:
[43]
The applicants filed an application to strike out certain averments
in the answering affidavit on the basis that they
constitute
inadmissible hearsay evidence.
[44]
The paragraphs of the answering affidavit implicated are the
following:
45.1
Paragraph 7
, which denies that the content of the principal
deponent’s affidavit is true and correct;
45.2
Paragraph 10
, which denies that the Close Corporation was
finally liquidated and alleges that no order for the final winding up
was sought in
the notice of motion in the application for its
liquidation;
45.3
Paragraph 13
, which deals with the letter from Precious Muleya
Attorneys, who previously appeared for the members, and which letter
sets out
various factual allegations that are also not confirmed by
the author of that letter;
45.4
Paragraph 17
, in which Ms. Moodley, the attorney who deposed
to the answering affidavit on behalf of the members, asserts that on
the return
day of the liquidation application the provisional order
lapsed because “
no one invoked the Makhanda High Court’s
competence
”; and
45.5
Paragraph 18
, alleging by implication that Investec had not
applied for “
final liquidation
”.
[45]
The answering affidavit was deposed to by the members’
attorney, Ms. Moodley, who claims to have had personal knowledge
of
the facts deposed to without providing any context under which she
could have acquired such knowledge of the assertions referenced
above.
[46]
Neither Mr. nor Mrs. Gcanga deposed to any affidavit confirming what
is said by attorney Moodley.
[47]
This
interlocutory application too was opposed on behalf of the members
citing the absence of a supporting affidavit setting out
any
prejudice to the applicants. In this respect however Rule 6(15) does
not require an affidavit, neither is it necessary in my
view for
prejudice to be shown in such purported affidavit when the evidence
sought to be struck out is self-evidently inadmissible
hearsay
evidence. Therein lies the objection, namely, that such evidence is
inadmissible. It is a trite principle that inadmissible
hearsay
evidence may always be struck out, simply because it is inadmissible,
even where no prejudice can be shown.
[18]
[48]
In the end the answering affidavit said nothing at all helpful. The
purported denials were also clearly at odds with
the factual
evidence, especially the most important fact, which is that the
Makhanda High Court competently and by following the
customary
procedure in liquidation proceedings in this Division granted a final
liquidation order, preceded by a rule
nisi
in exactly the
manner Investec prayed for it.
[49]
In the result the application to strike out also succeeds.
Costs:
[50]
In my view the members were ill advised to
have ignored the interests of the Close Corporation (in liquidation)
in the first instance
by failing to join them in seeking the adverse
order that now pertains in the concluded urgent proceedings, and
thereupon in strenuously
resisting the present application. In the
urgent application they did not even canvass the issue of the
supposed voidness (which
would have been counter-intuitive in the
light of the order requested) but they did seek to create the
impression that there was
a dispute to be resolved. Mr. Mlanga,
however, placed it on record quite unequivocally in the present
hearing that the members
have no intention of raising any dispute
with Investec, the Master, or the liquidators, on the facile basis
that they now consider
the final liquidation order to be void.
[51]
It was bizarrely suggested on behalf of the members that
punitive costs should be granted against the liquidators purportedly
acting
on a sortie of their own. The startling assertion is made in
the present application that “
it follows
therefore that until the Makhanda High Court pronounces that its
order is valid, it remains void without any further
ado and that the
appointment of the liquidators, the s 417 enquiry including this
application are void.
”
Despite
their presumptuousness that the final order has no validity, and
despite the order secured in the urgent proceedings that
grants them
impunity as it were on the exact opposite pretext that the warrants
had legal force, they have no intention whatsoever
of challenging the
final order of liquidation in the Makhanda High Court.
[52]
In my view such an approach is
opportunistic and to be deplored.
[53]
The legal expense of this entire exercise
on the part of the applicants in their representative capacity in
having to vindicate
the interests of the Close Corporation (in
liquidation) will have to come from the estate’s coffers to its
detriment unless
this cost to it is reimbursed by an appropriate
costs order. Whilst the members may well have acted upon advice, it
still remains
appropriate not as a tool to penalize them, but as a
measure to absolve the Close Corporation (in liquidation) of any
shortfall,
to order them to pay the costs of the application on the
scale of attorney and client out of their own pockets.
[54]
Concerning the proceedings of 16 May 2024,
the applicants were ready to argue the matter on this date on the
opposed roll. Mr. Mlanga
arrived late, having missed his flight from
Johannesburg. The members’ heads of argument were however also
filed late causing
the matter to have to stand down initially so that
the additional papers could be read. When the matter was recalled in
the afternoon,
I was informed from the bar that Mr. Mlanga had
requested that it stand down until the following day, with the costs
to be reserved.
It does not require any elaboration that these costs
should be borne by the members who instructed counsel only on the eve
of the
opposed hearing to come on board and represent their interests
at the hearing. I had also incidentally issued a directive to the
members’ attorneys to file their outstanding heads of argument
two days before, which was simply ignored.
Order:
[55]
In the result I make the following order:
1.
The application to strike out succeeds,
with costs.
2.
Garth Merrick Voigt, Deborah Joubert and
Carol-Ann Schroeder-Mann are joined as the fourth, fifth and sixth
respondents respectively
in the urgent application, under Case No. EL
457/2023.
3.
The provisional and final orders granted by
this Court in the urgent application on 7 March 2023 and 20 June 2023
respectively are
rescinded.
4.
Mr. and Mrs. Gcanga are personally directed
to pay the costs of the liquidators in their representative
capacities in the joinder
and rescission application.
5.
Mr. and Mrs. Gcanga are further directed
personally to pay to the applicants in their representative capacity
the reserved and wasted
costs of 16 May 2024.
6.
All the costs orders above shall be on the
attorney and client scale.
B HARTLE
JUDGE OF THE HIGH
COURT
DATE OF HEARING:
16 & 17 May 2024
DATE OF JUDGMENT :
5 September 2024
Appearances:
For the applicants in
the intervention and rescission application: Mr. D Kotze instructed
by BLC Attorneys c/o Bate Chubb &
Dickson, East London (ref. Mr.
P Van Zyl).
For the respondents:
Mr. M Mlanga instructed by Donald & Associates Inc. c/o Majali
Gwabeni Attorneys Inc., East London (ref.
Mr. A Gwabeni).
[1]
The applicants have filed in support of this application copies of
both the final order of liquidation as well as the provisional
rule
nisi
which on the face of it confirm that such orders were made by the
Makhanda High Court and exist as an objective fact. The final
order
has not been taken on appeal and is not the subject of any other
proceedings to set it aside.
[2]
Mr. and Mrs. Gcanga did not file any affidavits in the present
application. The answering affidavit was deposed to by an attorney
who avers that she acts as the members’ “
instructing
attorneys
”.
She claims that the facts deposed to in her affidavit fall within
her personal knowledge but evidently knowledge of the
denials raised
by her on behalf of the members in it are not given such context.
The legal submissions advanced by her are also
premised on the bald
denials which are her own without any supporting affidavits filed by
the members. One such bald denial is
in response to the serious
allegation that the members have not accounted to the Close
Corporation for the purchase price of
R16 250 000.00
arising from the sale of its business and stock and that Mr. Gcanga
may have indirectly benefited from
the receipt of amounts paid to an
entity of which he is the sole director. The other significant
denial is the existence of a
valid final order of liquidation of the
Close Corporation. These averments form the subject matter of an
application for striking
out on the basis of inadmissible hearsay
evidence that have frankly not raised any real disputes of fact on
the papers.
[3]
Mr. Mlanga who appeared for the members stated in terms during
argument that they have no intention of initiating any proceedings
to resolve the dispute. This is because they hold the view that the
final order of liquidation is a “
nullity
”
and void in law.
[4]
Mr. Mlanga sought to suggest in argument that the reason why the
members did not seek to interdict the liquidators in an urgent
application is because “
in
their eyes the liquidators are void
”.
He explained though that the urgent proceedings were necessary, this
despite the “
nullity
”
argument, since there was a “
danger
of the court order
”
in the hands of the sheriff or South African Police Service that
posed a threat to the members.
[5]
It
is not clear who, if any party was served with the urgent
application. In the opening paragraphs of his founding affidavit
Mr.
Gcanga states that the application will be brought on
no
notice to the respondents “
as
giving notice to could easily defeat its purposes
.”
(sic)
[6]
The
members’ argument instead is that absent a valid final order
of liquidation the winding up of the Close Corporation
at best
remained provisional.
[7]
No. 71 of 2008.
[8]
Oudekraal
Estates (Pty) Ltd v City of Cape Town & Others
[2004] 3 All SA 1
(SCA).
Magnificent
Mile Trading 30 (Pty) Ltd v Charmaine Celliers N.O.
[2019] ZA CC 36
at paras 50 – 51.
[9]
Paragraph
10.11
of the Gauteng Practice directives provides contrariwise that the
parties are directed to seek a final winding up order
in the notice
of application, but that the court may nonetheless in the exercise
of its discretion grant a provisional order
and direct that service
and publication of a provisional order can be effected. I mention
this since Mr. Mlanga who is from Johannesburg
where the custom is
obviously different from the Eastern Cape, referenced the Gauteng
Practice directive as according with his
understanding of what
Investec was supposed to have asked for in the liquidation
proceedings.
[10]
This
two tiered process mimics the model in
sections 9
–
12
of the
Insolvency Act No. 24 of 1936
.
[11]
Master
of the High Court, Northern Gauteng High Court, Pretoria v Motala
N.O. & Others
[2011] ZA SCA 238.
[12]
In an article entitled “
Invalid
Court Orders
”
Mitchell Nold De Beer (Constitutional Court Review 2019, Vol 9,
285-315) provides a useful summary of the judgments of
our courts
that have brought into tension the two competing principles of the
rule of law, i.e. legality and certainty. Whilst
the courts proceed
from the premise that all court orders are binding unless they are
overturned on appeal or through rescission
proceedings, there is one
exception. Where a judge issues an order outside of his or her legal
authority or competence, it is
invalid and not binding and, by
implication, can be ignored. It is unnecessary to explore the
exception any further in this instance
because there is simply the
absence of any factual basis to have brought the final liquidation
order under scrutiny in this instance
into question as an invalid
order. (See also
Municipal
Manager O.R Tambo District Municipality & Another v Ndabeni
2023 (4) SA 421
(CC) at [24]. This judgment postdates the article
but reinforces the view held that all court orders are binding until
set aside.
The Constitutional Court confirmed, citing
Department
of Transport v Tasima (Pty) Ltd
,
referenced in the article, that wrongly issued judicial orders are
not nullities. They are not void or nothingness but exist
in fact
with possible legal consequences. If the judges had the authority to
make the decisions at the time they did, then such
orders are
enforceable.)
[13]
2017
(5) SA 1
(CC) at paras 10 and 11.
[14]
Nelson
Mandela Metropolitan Municipality v Greyvenouw CC
2004
(2) SA 81
(SE) at para 9.
[15]
See
also Matjhabeng Local Municipality v Eskom Holdings Ltd
2018 (1) SA 1
(CC) at 33-E.
[16]
This was the very basis upon which the urgent application to stay
the warrant was premised, namely, that the underlying
causa
for the judgment is under dispute. The members in fact undertook in
the urgent application to bring an application within ten
days to
resolve that dispute, but never did so. Mr. Mlanga feebly contended
that since the undertaking was not carried forward
into the terms of
the order granted that the members therefore had no obligation to
give effect to their undertaking.
[17]
Morudi
and Others v NC Housing Services and Development Co. Limited and
Others
2019
(2) BCLR 261
(CC) at paras 31 – 34;
Occupiers,
Berea v De Wet NO and Another
2017 (5) SA 346
(CC) at paras 68 – 70.
[18]
Madikizela
v The Public Protector and Others; Mabuyane v Public Protector and
Others, Speaker : Winnie Madikizela Mandela Local
Municipality and
Others v Public Protector and Other
(800/2021; 802/2021; 818/2021) [2023] ZAECBHC 4 (10 February 2023)
at par 25 citing
Titty’s
Bar and Bottle Stores (Pty) Ltd v ABC Garage (Pty) Ltd and Others
1974 (4)
S 362
(T) at 368G in which the principle is asserted that
Rule 6
(15) is not exhaustive of the grounds on which the
application to strike out may be brought.