IN THE HIGH COURT OF SOUTH AFRICA
(FREE STATE DIVISION, BLOEMFONTEIN)
In the matter between:
ALTERNATIVE FINANCE SOLUTIONS (PTY) LTD
and
MASTER OF THE FREE STATE HIGH COURT,
BLOEMFONTEIN
ELRICH RUWAYNE SMITH NO
ADEL DOREEN McQUARRIE NO
STANDARD BANK OF SOUTH AFRICA Reportable / Not Reportable
Case Number: 4006/2024
Applicant
First Respondent
Second Respondent
Third Respondent
Fourth Respondent
Neutral citation: Alternative Finance Solutions (Ply) Ltd v Master of the Free State
High Court, Bloemfontein, 4006/2024
Coram:
Heard on:
Delivered on: Daffue, J et Grobler, AJ
20 January 2025
13 February 2025
This judgment was handed down electronically by circulation to the parties' representatives by
email and release to SAFLI I. The date and time for hand-down is deemed to be 16H00 on 13
February 2025.
Summary: Review in terms of section 407(4) (a) of the Companies Act, 61 of
1973. The court is to look to all material placed before it, irrespective of if the
evidentiary material served before the Master. The procedure is sui generis. But the
objector may not venture beyond what the objection entailed before the Master. Even
disputes of fact must be put before the Master, so that the dispute is properly framed by
the time a court is asked to decide upon it.
2
ORDER
1. The late filing of the application is condoned.
2. The application is dismissed, and the Applicant is ordered to pay the Fourth
Respondent's costs, taxed or agreed to otherwise, on a party and party scale and the
costs of counsel is to be on Scale C.
3. Second and Third Respondents shall bear their own costs.
JUDGMENT
GROBLER AJ (DAFFUE J concurring)
INTRODUCTION:
[1] This review application is instituted on strength of s 407(4)(a) of the Companies
Act, 61 of 1973 ('the old Act'), in terms of which the Applicant ('Alternative Finance')
seeks the review and setting aside of several decisions the First Respondent ('the
Master') took on 14 June 2024. The application also joins the Second and Third
Respondent, who are cited in their capacity as joint liquidators of Country Meat Market
(Pty) Ltd (in liquidation) ('the liquidators') and the Standard Bank of South Africa, the
Fourth Respondent ('the Bank').
[2] The impugned decisions concern matters of administration in the liquidation
process, which Alternative Finance contends affect both its position as a secured
creditor and the administration of the insolvent estate otherwise.
[3] The application was filed late, and although not much was made of this in
argument before us, in sum I believe condonation should be granted. Alternative
Finance had an arguable case which, in my view, means that we should entertain the
merits. Justice dictates nothing less.
3
[4] It bears mentioning at this stage already that the liquidators were joined to the
proceeding because Alternative Finance sought a cost order against them on a scale as
between attorney and client de bonis propriis. Mr Tsangarakis for the liquidators
submitted during argument that had it not been for that request, the liquidators would
probably -as is the custom in this-and other divisions -have filed a report with the
Master only. Their version of events would have found its way to the court under the
heralding of the Master, reporting its position. I understood this to mean that the
opposition is proffered because costs are sought against the liquidators, the requested
scale only increased the determinat ion of the opposition. Mr Hitchings, for Alternative
Finance, stated that they persist in seeking costs against the liquidators because of
certain egregious missteps -so the argument goes -the liquidators had taken.
[5] The primary battle is between Alternative Finance, the Master and the Bank.
The Bank opposes the application -represented by Mr Zietsman -because of the
effect success of the application will have on its position as a secured creditor (ranking
above that of Alternative Finance).
[6] Both in the heads of argument Mr Hitchings filed as well as during argument ,
the nub of the dispute was punted as concerning the Master's decision on an objection
Alternative Finance made against the inclusion of what is described in the Liquidation
and Distribution account as 'claim 17'. This demands mentioning , because the Notice
of Motion attacked several decisions the Master had taken. Once again during
argument , Mr Hitchings said his client intends to be practical about those grounds and
contended errors, and I understood this to the extent that Mr Hitchings all but outright
conceded that those errors as exposed may be dealt with in subsequent liquidation and
distribution accounts submitted for approval to the Master, or have been practically
sorted out in the interim, or are just simply bad. Indeed, had it not been for Mr Zietsman
arguing these points, I do not believe that we would have heard any argument on these
at all. Mr Hitchings nevertheless insisted -and on instruction of his client -that we
deal with those in this judgment.
4
[7] I deal with the salient facts first. Those are the facts relevant to the adjudication
of the claim 17 attack. I then turn to the additional grounds of review and incorporate
necessary facts omitted, and then deal with claim 17.
THE FACTS:
[8] I provide some elucidation as well on what_ was revealed in the affidavits before
court, and when. This is required because we must deal with a question that has arisen
as well, concerning the Alternative Finance case made.
[9] The Founding Affidavit reveals that a special meeting of creditors was held on
16 November 2022. At that meeting Alternative Finance proved a claim in its favour in
the amount of R1 ,256,512.98. Alternative Finance contends prior to this meeting one of
the liquidators -Mr Smith -lodged claim 17 for proof on the Bank's behalf.
[1 0] Claim 17 was supported by an affidavit of Ms Gugulethu Cynthia Modikwane,
who described herself as a manager in the Bank's Business Support Recoveries,
Business and Commercial Clients Credit Department. Her affidavit reveals that this
claim arose because of the conclusion of a credit agreement, in terms .of which the
Bank agreed to advance a credit facility to a company called Elskasys (Pty) Ltd
('Elskasys') in the amount of R1 ,964,396.25. The affidavit further says that the
liquidated company agreed to bind itself as guarantor in respect of debts due by
Elskasys, that Elskasys remains indebted to the Bank in this amount and accordingly
the Bank's claim should be satisfied out of the insolvent estate.
[11] It is common cause between the parties that this could only have been done in
the face of compliance with s 45 of the Companies Act, 71 of 2008 ('the new ActJ,
More about this later.
[12] The claim was initially rejected for non-appearance on behalf of Standard Bank,
but the liquidators subsequently admitted claim 17 in terms of s 78(3) of the Insolvency
Act, 24 of 1936 ("the Insolvency Act"). The claim was then included in the second
amended first liquidation and distribution account.
5
[13] I say more about this later as well.
[14] Alternative Finance objected to the admission of claim 17 and it was based
upon the claim being bad in law. Ex facie the documents that were submitted as part of
this claim, it was evidently clear thats 45 of the New Act had not been complied with.
That much is common cause.
[15] The Master dismissed the objection, because it opined the liquidators had
exercised a discretion [conferred upon them in terms of s 78(3) of the Insolvency Act],
to accept the claim. Alternative Finance was directed to approach court should they
feel aggrieved further. .
[16] The liquidators explained their actions for the first time in the opposing affidavit
they filed. They accepted that the tendered claim 17 had the wrong resolution attached
to it. Mr Smith says that after receipt and perusal of claim 17, he telephoned Ms
Modikwane and inquired if the resolution that was appended to the claim form was
mistakenly attached. His testimony is that Ms Modikwane confirmed that Elskasys had
also provided a guarantee in favour of Standard Bank for the indebtedness of the
liquidated estate. She further confirmed that she had had sight of the correct resolution
of the directors of the liquidated estate, as well as the requisite resolution of the
shareholders thereof, and the requirements of s 45 of the New Act had been complied
with.
[17] Based upon this revelation the claim was accepted.
[18] It warrants mention again that as far as Alternative Finance's position is
concerned, it saw the correct resolution -appended to the liquidators' opposing affidavit
-for the first time when the opposing affidavit was filed.
[19] In the reply Alternative Finance took issue with the correct documents on
several grounds, apart from the obvious fact that it (the resolution -the document itself)
had not been tendered at the special meeting of creditors. These include:
19.1 Ex facie, the document does not appear to be a resolution of the Board of
Directors, but is termed to be a certificate by the Board of Directors. 6
19.2 The certificate is a positive declaration by one director of the liquidated company,
where elsewhere in the document the plural is used, -referring to directors. It goes to
say the certificate itself is headed as being a statement by the Board of Directors, which
indicates that there is more than one director. The document is a statement only, and it
glibly states that s 45 had been complied with. Nothing in the document indicates
anything beyond that.
ADDITIONAL GROUNDS FOR REVIEW:
The claim 5 interest objection:
[20] The Bank submitted a claim ('claim 5') against the insolvent estate for an
amount in excess of R4 Million. The contractual interest payable in terms of the credit
thus extended was meticulously stated on page 1 of the credit agreement between the
Bank and the liquidated company. The clause is not worth repeating verbatim.
Alternative Finance contends that the Bank attached a certificate of balance in the
submission of its claim (which was ultimately allowed) that incorrectly records the
variable interest rate. This is on the back of a contention -by Alternative Finance -that
the correct rate of interest is the Bank's prime rate of interest from time to time plus
2.29% per annum. Further, that should the amount of R4 Million be exceeded, an
additional 2,5% may be charged by the Bank.
[21] In my view, Mr Zietsman conclusively answered this when he referred us to the
fact that the Bank had actually charged less interest than that to which it was entitled.
The second amended first liquidation- and distribution account shows that regarding
claim 5, 10,95% was charged. This seems to have been to the advantage of all
concerned, including Alternative Finance.
[22] Courts generally seek to remedy injustice and/or detriment -the correction of a
wrong -whether personal to the litigating parties or to the public at large Neither has
here been shown on this point.
7
Interest on Claim 10:
[23] Claim 10 is the Alternative Finance claim against the liquidat~d estate.
Alternative Finance contends that the liquidators had disregarded the portion of its
agreement which stipulated that interest would be increased in the event of default on
the part of the insolvent company at a rate being ' .... 3% per month compounded daily
and payable monthly from date of default to date of payment in full.' The Master
dismissed this complaint, and once again the Bank -I believe -conclusively answered
this with reference to what appears to have been Alternative Finance's own claim
submitted. A certificate of balance dated 21 June 2022, signed by Cuan Carden
Hopley, indicates that the liquidated company was at the date of liquidation indebted to
Alternative Finance in the amount of R1 ,256,512.98. No further claim for interest was
made. To this, we heard no answer in argument.
[24] Any misfortune for Alternative Finance on this is self-inflicted. It cannot be both
perpetrator and victim. Similarly, thus I view there is no merit in this complaint.
[25] En passant it merits mentioning that prayer 4 of the Notice of Motion specifically
asks we should order the liquidators to calculate interest on claims 5 and 10 in
accordance with the interest rate stipulated in the agreements filed in support of these
claims. As I have already dealt with the gist of these complaints, prayer 4 axiomatically
falls by the way side.
Trigger 1000 Investments:
[26] Prayer 5 of the Notice of Motion seeks the review and setting aside of a punted
decision on the part of the Master to 'allow the inclusion of the legal costs incurred in
the insolvent estate of Trigger 1000 Investments CC in the second amended liquidation
and distribution account.'
[27] The substance of this objection found its way into an earlier objection
Alternative Finance directed at an account. On 14 December 2022, the Master issued
a ruling upholding the Alternative Finance objection and directed that the liquidators
furnish the Master by 16 January 2023 with an amended first liquidation- and
8
distribution account. It appears to be common cause that this was not done, but the
liquidators -in the second amended first liquidation- and distribution account -
indicated that the costs for the enquiry had to be refunded by Trigger Investments. This
is to the sum of just over R500,000.00.
[28] By this I understood that the liquidators accepted that the monies paid out for
the holding of an insolvency enquiry where the affairs of a company called Tigger
Investments were at issue, must be repaid. That liability is accepted and although no
amended account has been provided as the Master has directed, it seems that the
substance of the complaint will be addressed in a subsequent account. Nothing serves
before us to indicate moreover that the liquidators do not accept responsibility for the
substantive portion of the Master's directive and ruling.
[29] Once again, I do not think that this point should delay us any further.
Interest accrued on advanced dividends declared:
[30] It is common cause that the liquidators made an advance payment of a
dividend declared to the Bank. This was the subject of complaint as well. On 14
December 2022 the Master ruled that because the liquidators did not provide any
authority1 that enabled them to so pay an advance dividend, this amount paid had to be
repaid to the Estate. The repayment was then made, but Alternative Finance suggests
that Standard Bank should account for -and repay to the estate -the interest it had
earned on this amount in the interim (i.e. betvveen the date of receipt of these funds and
the date of paying back). This argument denotes that the interest belongs to the estate.
[31] In my view Mr Zietsman _once again dispositively dealt with this argument. The
Bank's interest claim is also secured, which means that it [i.e., the interest claim] will not
form part of any free residue account. This is relevant, because it does not seem (as
the Bank also contends) that there will be any free residue available for distribution. The
upshot of course is that the paying out of the dividend had indeed -in the words of the
Bank -saved the estate a lot of money in the sense that the proven Standard Bank
1 Presumably this referred to Master's permission.
9
claim would only accrue further interest until date of final payment.
[32] Mr Tsangarakis also refers to the cases of Ru/ten NO2 and Bosman's Trustee.
In terms of these decisions a liquidator may pay a creditor before the confirmation of a
liquidation and distribution account, albeit that he or she does so at own risk. The
power seems to extend beyond that even and the liquidator may even pay a creditor
before his claim has been formally proved.
[33] There seems to have been procedural issues that compelled the Master to
order the repayment, but the fact that the payment could have been made seems
beyond doubt. And of course, we are not to decide if the payment could be made. We
are to consider if interest has to be paid on the amount that was repaid.
[34] Obiter it seems to me thus objectively that there was nothing wrong with the
paying of the amount, and consequently it does not axiomatically follow that because
the Master had ordered repayment, interest should follow the repayment obligation as
well. A problem would notionally come in should it ultimately be found that the payment
was never due in the sense that the claim was unjustified. And once again, the
practical effect of what had been done here and ordered does not seem to impact upon
the true dispute between the parties at all. What the estate lost on the swings it gained
(or will gain) on the roundabouts.
CLAIM 17:
[35] The attack here is multipronged. Mr Hitchings raised these points:
35.1 Firstly, it cannot be said that Claim 17 was validly submitted at a meeting of
creditors, because the claim was rejected by the presiding officer. This is with reference
to s 45 of the Insolvency Act. The argument then is that the liquidators could not have
exercised any discretion under s 78(3) of the Insolvency Act.
2 Ru/ten NO v Herald Industries (Pty) Ltd 1982 (3) SA 600 (D) at 610 G -Hand land Bank of SA v Bosman's Trustee
1915 CPD 665 at 670.
10
35.2 Secondly and even if the liquidators could lawfully have done as they did, they
should not have. That is because they should not have accepted the Bank's mere.say
so, and especially since even the correct resolution appended to the opposing affidavit
suffers from serious deficiencies. Thus, the Master should consequently not have
deferred to the liquidators' opinion.
[36) I turn to the first attack.
Section 45 of the Insolvency Act:
[37) Mr Hitchings placed considerable reliance upon the provisions of s 45(2) of the
Insolvency Act. It states that trustees shall examine all available books and documents
relating to the insolvent estate for the purpose to ascertaining whether the estate in fact
owes the claimant the amount claimed. This follows after -in accordance withs 45(1)
-a meeting of creditors and where the officer who presided over that, delivers to the
trustees every claim proved against the insolvent estate at that meeting and every
document submitted in support of the claim.
[38) The way I understood Mr Hitchings on this point, the argument is that because
the claim was initially rejected it was not tendered at a meeting of creditors in strict
compliance with s 45. Mr Hitchings argues that this should be the end of the matter.
[39) It seems to me though that both s 78(3) ahd s 386(4) allow the liquidators to
accept a claim against the estate other than under circumstances provided for in s 45,
and thus at a meeting of creditors.
[40) Primarily claims are to be admitted in terms of s 44 of the Insolvency Act.
Mars3 writes that a tendered claim wholly or partially rejected by the presiding officer at
a meeting of creditors, but subsequently compromised or admitted by the trustee, or
settled by a judgment of a court, is deemed to have been proved and admitted against
the estate, unless the creditor within seven days informs the trustee in writing that he
3 Bertels man et al: Mars, The Law of Insolvency in South Africa 9th ed at p 391.
11
abandons his claim.4
[41] In Cachalia, 5 relied upon by Mars, the court held:
'When it provides that a claim compromised or admitted or settled by judgment shall be deemed
to have been proved and admitted in the manner set forth in sec. 44 it clearly refers to
admission by the officer presiding at a meeting of creditors in terms of sub-sec. (3) of that
section, because that sub-sec is the only portion of sec. 44 which deals with the admission of a
claim. The intention of sec. 78(3), so far as it relates to claims compromised or admitted by the
trustee, therefore appears to be that where proof of a claim is tendered 'duly', that is twenty-four
hours or more before a meeting, and is not admitted at that meeting by the presiding officer, but
is thereafter compromised or admitted by the trustee with the authorisation of the creditors, it is
to be deemed to have been proved and admitted at the meeting at which it was tendered; the
admission is retrospective to the meeting. '6
[42] In the present case it is common cause that claim 17 was tendered. And it is
common cause that it was initially rejected by the presiding officer. Thus, and
Jurisdictionally, nothing seems to have stopped the liquidators from admitting claim 17
which means, to my mind, that this first ground of attack should fail.7
[43] Section 78(3) reads:
'(3) If authorized thereto by the creditors or if no creditor has proved a claim against the estate, by the
Master, the trustee may compromise or admit any claim against the estate, whether liquidated or
unliquidated if proof thereof has been duly tendered at a meeting of creditors. When a claim has been so
compromised or admitted, or when it has been settled by a judgment of a court, it shall be deemed to
have been proved and admitted against the estate in the manner set forth in section forty-four ... (ad
finem).'
[44] It seems to me that claims are tendered validly or invalidly before the scheduled
meeting. There is a distinct difference between the tendering of a claim and it's
rejection or acceptance, because tendering is the necessary precursor to either the
4 This is also in keeping with s 78(3).
5 Cachalia v De Klerk NO and Benjamin NO 1952 (4) SA 672 (TPD).
6 Ibid pp 673 H -674 A.
7 Just as an aside further, it was not argued that the liquidators had acted outside authority bestowed upon them
by either the creditors or the Master. It is for that reason that I do not deal with this contingency and potential
hurdle in the way of what the liquidators had done any further.
12
acceptance or the rejection of it. It can't be rejected if it hadn't been tendered. Indeed,
it couldn't have been admitted either.
The second attack:
The proper approach:
45. It is necessary that I state the approach the court is to adopt in applications of
this nature. This somewhat casts the enquiry into its proper perspective and answers
the legal question that was argued before us as to the duties of the liquidators. It also
says why, even if we are to allow Alternative Finance to make a case in reply, the
application must fail. Mr Zietsman referred us to the case of Van Zyl NO8 Griese/ J in
that judgment held:
'As such the Master's rulings ordinarily deserve some deference. For this reason, I would
venture to suggest that, where no new facts have been placed before the court, the court
should hesitate to substitute its own opinion for that of the Master in exercising its wide powers
under s 407(4)(a) of the Act unless it is clear that any particular ruling by the Master is tainted
by irregularity or error. '9
46. This seems to suggest that the court is to approach reviews under s 407(4)(a)
of the old Act as if it were a review application proper. It warrants no argument that in
such cases, the court should be loath to interfere because of its deference obligations
and traditionally because such reviews are process focused.
47. This approach seems to clash with what the SCA held in Constantia.10 In Ne/,11
I
Van Zy/ was mentioned, but the ratio of the decision appears to differ as to the manner
of approach. There the SCA held that a proper enquiry in terms of s 407(4)(a) amounts
to an appeal or review type sui generis process. I quote:12
8 Van Zyl NO v The Master 2000 (3) SA 602 (C).
9 At para 20.
1° Constantia Insurance Company Ltd v Master Johannesburg High Court and others 2023 (5) SA 88 (SCA).
11 Net and Another NNO v The Master (ABSA Bank Limited and Others Intervening) 2005 .(1) SA 276 (SCA).
12 See also: Fourie's Poultry Farm v Kwanatal Food Distributors (Pty) Ltd 1991 (4) SA 514 (N) at p 524, referring to
South African Bank af Athens Ltd v Sfier (alsa known as Joseph) and Others 1991 (3) SA 534 (T) where De Klerk J
held at 536F:
'I agree with this reasoning. S 407 was enacted to lay down the procedure to be followed where a creditor wishes
to object to an account, and also to lay down the manner in which the objection may be prosecuted until finality is
reached. The authority created in s 407(4)(a) to apply to Court to have the Master's decision set aside is not
13
'[22) In terms of s 151 of the Insolvency Act, read together withs 339 of the Companies Act
" ... any person aggrieved by any decision, ruling, order or taxation of the Master ... may bring it under
review by the Court ... ".
South African Courts have long accepted that the review envisaged by s 151 of the Insolvency
Act is the 'third type of review' identified more than a hundred years ago in Johannesburg
Consolidated Investment Co v Johannesburg Town Council, ie where Parliament confers a
statutory power of review upon the Court. In the Johannesburg Consolidated Investment
Co case, Innes CJ stated, with reference to this kind of review, that a Court could
" ... enter upon and decide the matter de nova. It possesses not only the powers of a Court of review in
the legal sense, but it has the functions of a Court of appeal with the additional privileges of being able,
after setting aside the decision arrived at. .. , to deal with the matter upon fresh evidence .... "
[23) Thus, when engaged in this third kind of review, the Court has powers of both appeal and
review with the additional power, if required, of receiving new evidence and of entering into and
deciding the whole matter afresh. It is not restricted in exercising its powers to cases where
some irregularity or illegality has occurred. However, while it is sometimes stated that the
Court's powers under this kind of review are 'unlimited' or 'unrestricted' , this is not entirely
correct. The precise extent of any 'statutory review type power' must always depend on the
particular statutory provision concerned and the nature and extent of the functions entrusted to
the person or body making the decision under review. A statutory power of review may be wider
than the 'ordinary' judicial review of administrative action (the 'second type of review' identified
by Innes CJ in the Johannesburg Consolidated Investment Co case), so that it combines
aspects of both review and appeal, but it may also be narrower, 'with the court being confined to
particular grounds of review or particular remedies'.' (authorities omitted)
48. Mr Zietsman argued that Griesel J's use of the words 'unless new facts are
shown' means that two different approaches may be married. Respectfully I don't
agree. To my mind, what the s 407(4)(a) review entails is a fresh consideration by a
court of all facts not only advanced before the Master, but all subsequent facts put
before it for consideration. The Master's rulings constitute quasi-judicial actions,
meaning that ordinary rules of deference as if the action were (for instance)
administrative in nature, do not apply. It is for that reason also that I believe the judicial
deference canon does not apply, even if it is said the Master had exercised a discretion.
intended to provide relief only where the Master erred on the facts before him or where his conduct is such that it
is open to criticism.'
14
49. The upshot on this point is that I believe a court is obligated to consider all such
rulings afresh. Indeed, it is as if the court should decide the issue first hand. But not -I
stress -without compliance of what the legislator as apex law maker determined on
whom should first and foremost deal with such objections.
50. And of course, there is a very important proviso. The grounds contended before
the Master remain -however -solid. No new additional grounds may be raised before
a court that did not serve before the Master.13 I believe that is the truism because the
legislator had intended that the primary repository of correcting power should be the
Master, and reference to a court should only be permissible when the Master refuses
the relief the objector seeks, cannot decide disputes of fact or fundamentally errs
otherwise.14
51. Moreover, and although the rudimentary correcting power is with the Master,
I
the power is inflexible and rigid. Mars15 writes that when dealing with an objection the
Master would not be doing right in using his power in such a way as to relieve those
concerned from the proper expense of protecting their own interests, or so as to decide
questions of fact upon which the rights of creditors inter se may depend.16
52. I highlight: the Master is not to deal with questions of fact, and there is no doubt
that cases such as CP Smaller say as much, because the Insolvency Act does not
provide for the Master to hear any evidence upon such questions. Fourie's Poultry17 is
authority for the proposition that in matters of complex factual disputes not capable of
being resolved by the Master, the correct procedure is for the objector to apply to the
court for a decision directly and by avoiding the Master altogether.18 Luckily we need
not decide this point, as I do not believe that would be correct.
13 Mars supra at p 528.
14 Sfier's case at fn 12; the procedure it advocates does not allow for the raising of new grounds for the first time
in the review. See also Mars foe cit at p 529, and Fourie's Poultry supra at p 525.
15 Loe cit at p 526.
16 See also: CP Smaller (Pty) Ltd v The Master 1977 (3) SA 159 (T) at p 163.
17 Supra at pp 522 -S28.
18 The authors of Mars seem to support this at p 527, fn 118 with reference to CP Smaller, supra at p 163.
15
53. It is accepted law that a case needs to be made in the founding affidavit. And it
is equally accepted that there are exceptions. A complete exposition on the law
concerning this will only burden this judgment. The application of these exceptions do
not apply here, not because I think the ultimate case made against the correct
resolution should as a matter of principle have found its way into the founding affidavit,
but because the case advanced is different to the objection put before the Master.
54. As to compliance with s 45 of the New Act, the relevant parts of the section
read:
"(1) .. .
(2) .. ..
(3) Despite any provision of a company's Memorandum of Incorporation to the contrary, the
board may not authorise any financial assistance contemplated in subsection (2), unless-
(a) the particular provision of financial assistance is-
(i) pursuant to an employee share scheme that satisfies the requirements of section 97; or
(ii) pursuant to a special resolution of the shareholders, adopted within the previous two years,
which approved such assistance either for the specific recipient, or generally for a category of
potential recipients, and the specific recipient falls within that category; and
(b) the board is satisfied that-
(i) immediately after providing the financial assistance, the company would satisfy the solvency
and liquidity test; and
(ii) the terms under which the financial assistance is proposed to be given are fair and
reasonable to the company.
(4) In addition to satisfying the requirements of subsection (3), the board must ensure that any
conditions or restrictions respecting the granting of financial assistance set out in the company's
Memorandum of Incorporation have been satisfied.
' (5) ....
(6) A resolution by the board of a company to provide financial assistance contemplated in
subsection (2), or an agreement with respect to the provision of any such assistance, is void to
the extent that the provision of that assistance would be inconsistent with-
(a) this section; or
(b) a prohibition, condition or requirement contemplated in subsection (4).
(7) ... .'
16
55. I have no doubt that Mr Hitchings is correct when he relies on Constantia, and
when he submits that strict compliance is required with s 45 of the New Act re the giving
of such financial support. The problem is that was not the objection brought to the
Master. The actual objection -echoed in the founding affidavit -was that ex facie the
documents underscoring claim 17 there was no compliance with s 45 of the New Act at
all. That is a far cry from alleging that the resolution creates uncertainty because of its
wording.
56. Alternative Finance might immediately argue that the court was always to
decide on questions of fact fitting such objections, and for that reason it does not matter
-especially now -how it framed its objection to the Master initially. The problem with
this is that still, the framing of the objections in a proper way to the Master would have
enabled the dispute to crystalize there. And then when we were called upon to decide
the dispute of fact, the issue would have been properly ventilated. What we are left with
now is Alternative Finance arguing for inferences, speculations and nuanced, rather
strained legal conclusions on the back of complaints made in a replying affidavit. To
my mind, there is no way in which we may deal with the matter in such a way.
COSTS:
57. I do need to say something about the costs of this application. The application
was filed late because Alternative Finance had asked the liquidators whether there
were any further documents that were in play, submitted or considered for the purposes
of what they had done and what they had submitted to the Master, before launching the
present application . It is common cause that the liquidators did not answer that
request.
58. This is essentially why the main application -in the founding affidavit -was
prosecuted upon an initial basis that there was nos 45 resolution passed, rendering the
guarantee void and hence the argument that claim 17 should have been discarded. It
was only revealed in the opposing affidavit that the Bank had inadvertently appended
the wrong resolution, and it seems as if Alternative Finance was also alerted to the
telephone conversation between Mr Smith and the Bank official in the opposing affidavit
itself.
17
59. Now it is so that the applicant could have realised at that stage that it has been
somewhat led [by omission] up the garden path and could have reconsidered its
position. It could have abandoned the application, and at that stage issued a fresh
application based upon the case that was ultimately made before us in reply (forgetting
for the moment that that was not the objection that served before the Master). It did not
do so. What it did attempt to do was to change tack, to the extent that it apparently
accepted that the wrong document was appended by the Bank and impugn it for the
various reasons that have been stated.
60. Having found that there is no merit in the application, the cost order sought
against' the liquidators falls by the wayside. To a very large extent that ends their
involvement in the matter, and I believe that their costs should be borne by the insolvent
estate. Frank and open cards -from the outset -would have gone a long way in the
present case. As they are somewhat to blame for the way in which the case unfolded, I
do not believe that Alternative Finance should pay their costs.
61. The Bank has been successful in its opposition and I see no reason why the
ordinary rule applicable here should not prevail.
The following order must then follow:
1. The late filing of the application is condoned.
2. The application is dismissed, and the Applicant is ordered to pay the Fourth
Respondent's costs, taxed or agreed to otherwise, on a party and party scale and costs
of counsel to be on Scale C.
3. The Second and Third Respondents shall bear their own costs.
I concur
\
On behalf of the applicant:
On behalf of the 2nd and 3rd Respondents:
On behalf of the 4th Respondent: Adv BD Hitchings
On instruction of
HJ Booysen Attorneys
BLOEMFONTEIN
Adv. S Tsangarakis
On instruction of:
Hendre Conradie Inc
BLOEMFONTEIN
Adv P Zietsman SC
On instruction of:
Phatshoane Henney Inc
Bloemfontein 18