About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2013
>>
[2013] ZAWCHC 156
|
|
Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic and Others (21325/11) [2013] ZAWCHC 156; 2014 (1) SA 381 (WCC); [2014] 1 All SA 592 (WCC) (22 October 2013)
Reportable
Republic
of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case No:
21325/11
Before: The Hon. Mr Justice Binns-Ward
In the
matter between:
PENINSULA
EYE CLINIC (PTY) LTD
..............................................................................
Applicant
and
NEWLANDS
SURGICAL CLINIC
..........................................................................
First
Respondent
THE
MINISTER OF TRADE AND INDUSTRY
........................................
Second
Respondent
THE
MINISTER OF FINANCE
...............................................................................
Third
Respondent
Arbitration – application for order in terms of s 31(1)
of
Arbitration Act No. 42 of 1965
– approach by court when it
is contended by unsuccessful party in the arbitration that to make
the award an order of court
would be to permit enforcement of
unlawful agreement rehearsed. Held that agreement in issue did not
offend against s 38(1)
of the Companies Act No. 61 of 1973.
Company – proper construction of
ss 82
and
83
of the
Companies Act No. 71 of 2008
in respect of restoration of the
registration of company removed from the register by the Companies
and Intellectual Property Commission
in terms of
s 82(3)
–nature
and extent of retrospective effect of reinstatement to the register
in terms of s 82(4) of the Act determined.
Held that corporate
personality and property restored retrospectively ipso factoupon
reinstatement, but any validation of corporate
activity during period
of deregistration falls to be dealt withon applicationby a court in
terms of s 83(4) of the Act if
necessary.
JUDGMENT: DELIVERED: 22 OCTOBER 2013
BINNS-WARD
J:
The relief sought by the applicant in terms of its supplemented
notice of motion is essentially twofold. Firstly, it seeks a
declaration confirming that the reinstatement of the registration of
the respondent company
1
in
terms of s 82(4) of the Companies Act 71 of 2008has occurred
with retrospective effect, with an attendant re-vesting in
the
company of the property it had owned when it was deregistered and a
validation of ‘all acts done by or against [it]
from the date
of its deregistration until the date of its reinstatement’;
alternatively, for an order to be granted in
terms of s 83(4)
of the Act directing that the reinstatement should have the
aforementioned effects. Secondly, it seeks
relief in terms of
s 31
of the
Arbitration Act 42 of 1965
making the arbitral awards
obtained in its favour against the respondent an order of court. By
way of ancillary relief, orders
are also sought directing the
respondent to furnish the applicant with a copy of its signed,
audited financial statements for
2011in terms of
s 31(1)(b)
of
the
Companies Act, 2008
, and directing the company to comply with
its statutory obligations, in particular to file its annual returns.
The applicationfirst came before me last year. It
was not clear then that the registration of the respondent company,
which had
been deregistered for failing to render its annual
returns, had been effectively reinstated in terms of
s 82
of
the
Companies Act, 2008
. In the circumstances described in the
judgment given at the time (which is reported
sub
nom
Peninsula
Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and
Others
2012 (4) SA 484
(WCC),
[2012] 3 All SA 183)
, the matter was postponed in order to allow the
status of the respondent company to be confirmed. I had declined to
enter into
the merits of the application until Ihad been satisfied
on supplemented papers that the registration of the respondent had
been
effectively reinstated.
The application has been re-enrolled on supplemented papers, as
permitted in terms of the order made in the previous judgment.
It is
plainly established on the additional evidence now before the court
that the registration of the respondent company had
been effectively
reinstated on 3 April 2012. The Companies and Intellectual
Property Commission (‘the Commission’)
effected the
reinstatement in terms of
s 82(4)
of the
Companies Act, 2008
.
The respondent’s opposition to the application is
multi-layered.It contends that the arbitration award is not amenable
to being made an order of court because of the illegality of the
underlying transaction, which it alleges fell foul of s 38
of
the Companies Act 61 of 1973. It further contends that the
reinstatement of the registration of the respondent company in
terms
of
s 82(4)
of the
Companies Act 2008
did not have retrospective
effect in respect of the corporate activity purportedly conducted on
its behalf during the period
when it was not on the register and
that the arbitration proceedings that were purportedly conducted in
its name during the period
of its deregistration were thus void and
of no effect. In answer to the applicant’s contention,
advanced in the alternative
to its principal submission that the
reinstatement of the respondent’s registration had the effect
of deeming the company
never to have been deregistered, the
respondent argued that s 83(4) of the 2008 Act did not find
application when the dissolution
of a company had been reversed
administratively by reinstatement of its registration by the
Commission in terms of s 82(4).
It also contended that an
interested person which had obtained the administrative
reinstatement of a company’s registration
in terms of s 82(4)
could not thereafter apply for and obtain consequential relief in
terms of s 83(4) from a court.
Is the arbitral award one that qualifies for endorsement by the
court in terms of
s 31
of the
Arbitration Act?
It
is convenient to deal first with the question whether the
arbitration award is amenable to being made an order of court, for
if that question is answered in the negative it would be
unnecessary, indeed academic, to deal with the other issues. The
arbitration
was conducted in two stages; a hearing before a single
arbitrator at first instance, and thereafter an appeal from the
award
of that arbitrator to a tribunal comprised of three
arbitrators. The issue in dispute between the parties was the extent
of the
shareholding held by the applicant in the respondent.
However, as the arbitrator at first instance observed in his reasons
for
making the award, ‘
The real issue between the parties
is not so much the shareholding per se as the right to receive
substantial dividends which
are payable in respect of these shares
’.
The award made by the arbitrator at first instance was in the
following terms:
Claimant, Peninsula Eye Clinic (Pty) Ltd, is declared
to be the holder of 640 shares in the Respondent, Newlands Surgical
Clinic
(Pty) Ltd., i.e. 16% of the issued share capital of the
Respondent.
Respondent is directed to accord Claimant all rights as
a 16% shareholder including the right to receive dividends that may
be
declared in respect of the said shares and to share
proportionately in any distribution of assets that may take place
while Claimant
is such a shareholder.
Respondent is directed to pay Claimant R732 000.00
in respect of dividends declared on 7 February 2007 with interest
thereon
at 15% per annum from 7 February 2007 to date of payment.
Respondent is to pay the costs of this arbitration,
including the costs of the two interlocutory applications brought by
Claimant,
the costs of the venue, the costs of transcription and the
fees of the arbitrator.
Respondent is to pay Claimant’s costs in the High
Court application under Case No. 4695/07.
The decision of the appeal tribunal was simply that ‘
the
appeal is dismissed with costs
’.
The order in terms of
s 31
of the
Arbitration Act is
being
sought because the respondent has refused to pay the amount due to
the applicant in terms of the arbitration award. The
relief sought
in this regard in the notice of motion is an order that the
arbitration award and the arbitration appeal award
be made orders of
court. The application that the appeal tribunal’s award be
made an order of court indiscriminately is
misdirected in my view.
The purpose of an order in terms of
s 31(1)
is to render an
arbitral award enforceable ‘in the same manner as any judgment
or order to the same effect’ (see
s 31(3)).
The
substantive determination of the appeal tribunal left the first
instance arbitrator’s award unaffected. Thus the only
relief
that the applicant requires for the purpose of enforcing the
arbitral awards is one making (a) the terms of the award
at
first instance and (b) the costs award of the appeal tribunal
orders of court. The applicant’s counsel (Mr
Butler
SC, assisted by Ms
Ioannou
) appeared to accept as much
when I put the proposition to them during argument.
As mentioned, the respondent opposes the relief sought in terms of
s 31(1)
of the
Arbitration Act on
the basis of its contention
that to make the arbitration award at first instance an order of
court would be to give effect to
a transaction concluded in breach
of the prohibition in
s 38(1)
of the since repealed 1973
Companies Act. It
is not in dispute between the parties that a
contract which contravened the statutory prohibition against the
giving by a company
of financial assistance, whether directly or
indirectly, for the purchase of its own shares would, subject to
considerations
of severability, be illegal and void. It is also
conceded by the applicant, correctly, that it would not be proper
for a court
in the exercise of its powers in terms of
s 31(1)
of the
Arbitration Act to
make an order placing its
imprimatur
on an arbitral award if the effect would be to purport to give
respectability and enforceability to an unlawful or legally
unenforceable transaction.
A party to an arbitration which makes application in terms of
s 31(1)
for an award in its favour by the arbitrator to be made
an order of court ‘
accepts an onus to prove that
[it]
is in possession of an award that can properly form the subject
of an order of court
’ (
Vidavsky v Body Corporate of
Sunhill Villas
2005 (5) SA 200
(SCA), at para 17
2
).
Thus, if it were to be apparent
ex facie
the award, or the
reasons given for it, that it could not properly form the subject of
an order of court, the application would
be refused. A respondent in
an application in terms of the sub-section is entitled to oppose the
application on the ground that
the award is not amenable to properly
being made an order of court; it is not obliged to be proactive and
take steps, in terms
of
s 33
of the
Arbitration Act, to
have
the award set aside.
This does not imply, however, that an unsuccessful party in
arbitration proceedings may legitimately use its right to oppose
an
application by the successful party in terms of s 31(1) of the
Act as a surrogate means to obtain an appeal to or review
by a
court. Save in cases in which evidence
dehors
the award
might, as in
Vidavsky
,
3
demonstrate a fundamental failure of the arbitration process, the
court’s enquiry in a s 31(1) application will be
limited
to the award and any reasons given for it by the arbitrator if those
reasons are furnished as part of the award. If the
unsuccessful
party should allege that what on its face might appear to be an
unexceptionable award was obtained irregularly or
improperly, then
it would beincumbent on it, should it wish to avoid the effect, to
make application in terms of s 33 of
the Act for the setting
aside of the award.
In considering an application in terms of
s 31(1)
of the
Arbitration Act a
court will not concern itself with possible errors
of fact or law by the arbitrator in making the award, but only with
the propriety
of lending the award the force of an order of the
court. This approach reflects the policy of the courts, not only in
this country,
but also internationally, to strike the balance
between party autonomy and judicial control (or curial intervention)
in a way
that attaches considerable weight to party autonomy (see
Telcordia Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA)
(2007 (5) BCLR 503
;
[2007] 2 All SA 243
, at para 4 -in
the context of international commercial arbitrations, and cf.
LufunoMphaphuli& Associates (Pty) Ltd v Andrewsand another
2009 (4) SA 529
(CC)
(2009 (6) BCLR 527)
at paras 28 and 73 and
Road Accident Fund v Cloete NO and others
2010 (6) SA 120
(SCA) at para 36 - in the context of domestic arbitrations).
The allegation that the transaction in terms of which the applicant
acquired the holding of shares in the respondent that was
in dispute
between the parties was a nullity,on the grounds that it infringed
the prohibition in s 38 of the 1973
Companies Act, was
not
pleaded by the respondent in the arbitration. This, despite the fact
that the parties had providedin their arbitration agreement
that the
issues referred to arbitration should be defined in pleadings to be
exchanged between them, and also notwithstanding
the principle that
a person who relies on an illegality which is not apparent on the
face of the transaction, but arises from
its surrounding
circumstances, must plead it (
Yannakou v Apollo Club
1974 (1)
SA 614
(A) at 623G
4
).
The arbitrator at first instance therefore, understandably, did not
deal with the issue.
The respondent sought to prevail upon the arbitrator to re-open the
arbitration to deal with the implication of
s 38
for which it
contended, but he declined to do so. The respondent then applied to
this court for an order reviewing and setting
aside the arbitrator’s
refusal of its request and directing him ‘
to consider
whether the provisions of
s 38(1)
of the
Companies Act…apply
to the contract concluded between [the respondent and the applicant]
in and during June 2004, and if so, the impact of the said
provisions on the validity of the said contract
’. The
application was refused (by Riley AJ).
The award made by the arbitrator was thereafter unsuccessfully taken
on appeal, as mentioned earlier. It is evident from the
reasons
furnished by the appeal tribunal that the respondent argued the
question of the application and effect of s 38(1)
of the
1973
Companies Act at
the hearing of the appeal. The appeal
tribunal disposed of the respondent’s contentions in this
regard at para 29
of its reasons as follows (‘NSC’
denotes the respondent):
NSC raises a further argument, namely that the 2004
transaction is illegal because it contravenes
section 38
of the
Companies Act. Two
difficulties present themselves. First, a defence
of illegality must be raised in the pleadings (
Yannakou v Apollo
Club
1974 (1) SA (A) 614, 623 G-H) which was not done in the
instant case. Secondly, an appeal tribunal is not entitled to
adjudicate
on issues not included in the dispute referred to it
unless the parties have expressly or tacitly agreed to extend the
scope and
terms of reference of the arbitration (
Allied Mineral
Development Corporation (Pty) Ltd. v Gemsbok
VleiKwartsietEiendomsBeperk
1968 (1) SA 7
(C) at 14 to 15). An
arbitration tribunal does not enjoy the jurisdiction the High Court
has to decide issues which, although not
raised on the pleadings,
have been fully canvassed in the evidence
Hos+Med Medical Aid
Scheme v Thebe YA Bophelo Healthcare Marketing and Consulting (Pty)
Ltd and Others
[2007] ZASCA 163
;
2008 (2) SA 608
(SCA) at 617 para 31 to 32). The
section 38
issue was not included in the disputes referred to
arbitration or, for that matter, raised on the pleadings. We are thus
precluded
from considering it.
The correctness of the appeal tribunal’s
conclusion in this respect is supported not only by the authority
cited by it, but
also by the subsequentlydelivered judgment of the
Supreme Court of Appeal in
Gutsche
Family Investments (Pty) Ltd and Others v Mettle Equity Group (Pty)
Ltd and Others
[2012] ZASCA 4
(8 March 2012), [2012] JOL 28579 at para 18(c).
Section 38(1) of the 1973
Companies Act (which
has been
repealed by Act 71 of 2008, but was still in force at the time
applicant acquired its disputed shareholding in the respondent
company) provided:
No company shall give, whether directly or indirectly,
and whether by means of a loan, guarantee, the provision of security
or otherwise,
any financial assistance for the purpose of or in
connection with a purchase or subscription made or to be made by any
person of
or for any shares of the company, or where the company is a
subsidiary company, of its holding company.
It is well known that the application of s 38(1) - which has
not been replicated in the 2008
Companies Act
- and its equivalent
in the English statutes was frequently not free of difficulty, and
also the subject of trenchant criticism,
both here and elsewhere.
The Jenkins Company Law Committee (1962) reportedlyremarkedof the
then equivalent provision on the English
statute book that it had
‘
proved to be an occasional embarrassment to the honest
without being a serious inconvenience to the unscrupulous
’.
5
The provision required an enquiry into whether the transaction under
consideration involved the provision of financial assistance
by the
company,
6
and if so, whether the direct object of such assistance had been for
the purpose of, or in connection with the purchase of the
company’s
shares.
It is unnecessary for the purposes of this judgment to traverse the
import of
s 38(1)
in any detail. That has already been done in
a number of authoritative decisions, including notably
Lipschitz
NO v UDC Bank Ltd
1979 (1) SA 789 (A)
7
and more recently
Gardner v Margo
[2006] 3 All SA 229
(SCA).
In the latter case, van Heerden JA stated
8
‘
In
Lipschitz NO v UDC Bank Ltd
this
court appears to have accepted the distinction drawn by Schreiner JA
in
Gradwell (Pty) Ltd v Rostra Printers Ltd
[
9
]
between the “ultimate goal” of the transaction in
question and its “direct object”, and to accept that it
is only the direct object of the transaction that is relevant. If
the direct object is not the provision of financial assistance
by
the company for the purpose of or in connection with a purchase of
its shares, then it is irrelevant that the ultimate goal
of the
transaction was to enable a person to purchase such shares.
Moreover, financial assistance within the meaning of
section 38(1)
is given only when the direct object of the transaction is to assist
another financially –the
section 38
prohibition is not
contravened when the direct object of the transaction is merely to
give another that to which he or she is
already entitled.
’
10
11
Suffice
it to say that it is evident from the relevant jurisprudence that in
all but the most straightforward cases a detailed
factual enquiry
was needed to determine whether the transaction amounted to the
giving of financial assistance and, if so, whether
the direct
object, as distinct from the ultimate goal, of the giving of such
assistance was the purchase of the company’s
shares. Both
elements were linked to form a single prohibition.
12
Applying the principles described earlier, the only facts to which
regard can be had by this court to decide in the current context
whether the application should be refused on the basis for which the
respondent contends are those apparent from the factual
findings
reflected in the reasons furnished by the arbitrator and the appeal
tribunal. Consideration of the first instance arbitrator’s
reasons shows that he found that the applicant was ‘essentially
an association of ophthalmic surgeons’ which used
the theatre
facilities at the surgical clinic operated by the respondent. The
use of the facilities by the applicant generated
a ‘substantial
income’ for the respondent company. To encourage the use of
its facilities by surgeons, such as those
belonging to the
applicant, the respondent companyat the end of every financial year
provided financial rewards to the users
calculated with reference to
the extent of their usage. These payments were opprobriously
described as ‘kickbacks’
in the arbitrator’s
reasons, but nothing turns on that. The respondent was under no
obligation to make them, but the reference
in the appeal tribunal’s
reasons to the payments as having been incentives that it was
‘customary’ ‘up
until the end of the twentieth
century’ for privately owned hospitals to make suggests that
they were made, and so no doubt
also expected, in the context of a
wide-spread practice.
The arbitrator noted that at some stage (the context suggests that
it must have been in 1999 or 2000) the Health Professions
Council
published ‘draft guidelines’, the effect of which would
be to prohibit the giving of so-called ‘perverse
incentives’.
The loyalty incentives or ‘kickbacks’ mentioned earlier
would fall within the ambit of this proposed
prohibition. The
respondent thereupon ceased to make any further loyalty incentive
payments, but indicated its willingness to
give the applicant
equivalent financial rewards, provided this could be done in a
manner structured to avoid the prohibition
contemplated in terms of
the aforementioned draft guidelines.
The applicant’s claim to the 10% shareholding in issue rested
on an allegation that it had purchased the shares in the
respondentfrom the company for R570 000 in January 2002. The
respondent contended, however, that the transaction relied
upon by
the applicant was nothing more than a disguised ‘perverse
incentive’ of the nature stigmatised by the prohibition
in the
draft guidelines.
13
It
was apparent, however, that the respondent’s directors were
concerned that the transaction should bear scrutiny and not
be
susceptible to characterisation as having offended against the
prohibition. The respondent was subsequently advised by its
auditors
that the transaction did offend against the prohibition and
attention was then given to devising an alternative means
of
financially rewarding the applicant for its loyalty. This led to the
conclusion of an agreement in terms of which the applicant
would
pass ownership in certain equipment used by it at the respondent’s
clinic to the respondent company in exchange for
shares in the
respondent. For the purpose of the substitute transaction, which was
effected in 2004, the equipment was accorded
an attributed value of
R570 000 by the parties. The net effect of both the 2002 and
2004 transactions was that in monetary
terms the applicant paid the
respondent R570 000 for the shares, but was compensated by a
balancing transaction which resulted
in the applicant obtaining the
shares in lieu of the amount it would have been paid in loyalty
incentives for the period 1999-2001.
In 2006, the respondent
purported to cancel the 2004 transaction on the grounds of
misrepresentation by the applicant. The respondent
alleged that the
transaction had been concluded on the basis of a representation by
the applicant that the equipment was valued
at R570 000,
whereas it had been discovered to be worth considerably less.
The arbitrator found that the acquisition by the applicant of
additional shares in the respondent company had been under
discussion
since 2001. The notes surviving of discussions in this
connection confirmed that consideration had been given by the
parties
to offsetting the loyalty reward which the respondent would
traditionally have made to the applicant against the purchase price
of the shares to be acquired. The arbitrator also found that these
discussions were affected by the perceived need to structure
the
transaction in a manner that would not infringe any prohibition
against perverse incentives. He found the means used in this
regard
to have entailed the sudden raising of charges by the applicant
against the respondent which conveniently tallied with
the price of
the shares. These transactions, which were part and parcel of the
aforementioned 2002 transaction, aroused the suspicions
of the
respondent’s auditors. The arbitrator regarded the 2002
transaction as one which was intended to give effect to
the
applicant’s desire to obtain shares in the respondent company
‘
gratis
’. In context it is clear that what the
arbitrator meant by ‘gratis’ was in lieu of the monetary
payment which
the respondent would have made to it in terms of the
historical loyalty reward relationship described earlier. As a
consequence
of the concerns raised by the auditors, the parties
revisited the transaction, and the respondent advised its auditors
that it
was no longer proceeding with the sale of shares to the
applicant in terms of the 2002 transaction.
The arbitrator then proceeded as follows at para 13 – 21
of his reasons for the award (‘PEC’ denotes the
applicant):
13.
The subsequent conduct of the
parties, in particular the conduct of Drs.Scholtz and Stephenson,
further confirms my impression that
the sale of the shares in 2002
had been linked to the fate of the kickbacks. Although the proposed
way to pass the kickbacks had
not passed muster, both parties still
intended to exchange the shares for the kickbacks but they had to
find a different accounting
method to achieve their purpose. So far,
then, I accept the scenario contended for by NSC.
14. The (unsigned) minute of a directors’ meeting
of PEC on 19 January 2004 at which Dr.Scholtz and Mr. Hobbs were
present
reflects a discussion of the problem which had arisen because
NSC’s auditors had queried the 2002 transaction. Paragraph 5
of
the minute is particularly relevant and merits quotation here:
“
5. That
the PEC directors considered alternative options to the share
acquisition/deal with respect to the apparent perverse incentives
concerns by either suggesting
that NSC and its auditors
suggest options of managing the deal to promote progress
that PEC directors consider
outright purchase of the remaining 10 percent of shares by dropping
our claim to two years’
worth of consultancy fees/dividends.
that PEC directors consider
extracting the PEC from the whole deal and instruct NSC to repay the
money paid to them in lieu of
shares in NSC”
15. Even more compelling is a letter dated 23 February
2004 from Dr. Scholtz to Dr. Stephenson. It reads as
follows:
“
Dear
Hugh,
Re: Acquisition of 10% shares
in Newlands Surgical Clinic (Pty) Ltd (NSC)
We write with regard to the
several meetings we have had concerning the above.
N S C is unable to issue the
agreed shares (despite the shares having been paid for two years
ago!), on the grounds that your auditors
are of the opinion that the
transaction, as structured, may be perceived to be a contravention of
the guidelines issued by the
Health Professions Council with regard
to so called “perverse incentives”.
We have no intention of
contravening the above legislation. Nevertheless, we do have a
serious intention to acquire an interest
in NSC and believe that we
have a justifiable expectation in this regard.
Accordingly we propose the
following:
The transaction as structured be
set aside and funds paid and received be set-off in our respective
books of account,
Fresh negotiations be entered
into for the acquisition of 10% of the shares in NSC,
The 6% shares purchased from
individual members of NSC, and the price paid therefore, must be
addressed as an integral part of
the acquisition of the additional
10% referred to above.
Your auditors must be party to
this process, and
These negotiations must be
completed and the transaction fully concluded by 30 June 2004.
We place on record that we have,
in good faith, incurred significant costs in connection with the
failed acquisition of shares in
NSC and we reserve our rights in this
regard.
We look forward to an early
resumption of negotiations.
Yours sincerely,”
16. In the light of this it is abundantly clear that
both parties now regarded the 2002 transaction as dead and were
looking for
an alternative way of achieving their object. On 15 March
2004 Dr. Stephenson wrote to Dr. Scholtz in the following
terms:
“
Dear
Raoul,
Please find enclosed our cheque
for R56,250 being repayment of loan accounts attributed to Drs.Maske
(R6,
250), Rogers R12
,500), Steven (R12,500) and Wilson (R25,000) in
2001.
You may recall that, at the time,
there was uncertainty as to whether payment should be made to the
individual or to P.E.C. as you
were currently engaged in buying their
shares and thereafter the matter slipped my mind.
In addition I have enclosed
P.E.C.’s share certificate in anticipation of finding a
solution to our dilemma.
We at N.S.C. feel strongly that
whatever we agree should be in the spirit of our original plan and I
think I might have found a
way to achieve that.
With this in mind I’d like
to get together with you and Neil in the very near future.
Yours sincerely”.
The alternative that Dr. Stephenson had in mind was
an exchange of PEC equipment for NSC shares. In the light of these
two
letters it is clear that the delivery of the share certificate
did not occur in pursuance of the 2002 deal but in anticipation of
a
new deal yet to be concluded.
17. The idea to exchange equipment for shares was
acceptable to PEC and a list of equipment was compiled during June
2004.
The value of the 10% shareholding was still put at
R570 000.00 (i.e. the same amount as the unpaid kickbacks) and
obviously
the value of the equipment had to be put at the same figure
in order to make the exchange appear a genuine one.
18. In his evidence Dr. Stephenson was adamant that
NSC wanted payment for its shares and that he had insisted on the
equipment
being in actual use at the clinic and of being to the value
of R570 000.00. I accept that Dr. Stephenson insisted that
the exchanged equipment had to be equipment in use at the clinic but
cannot accept his evidence that it also had to have a market
value of
R570 000.00. As to the equipment being in use, that is a factor
which would have lent credibility to the transaction.
There is no
indication however that the parties intended a result which differed
totocaelo
from that which they had sought in 2002, namely
balancing payment for the shares by transferring the “outstanding”
kickbacks. Indeed, the words of Dr Stephenson in his letter of
15 March 2004, that “whatever we agree should be in the
spirit
of our original plan” confirms my impression. When I asked
Dr. Stephenson what had happened to the kickbacks
in 2004 he
replied that the kickbacks were built into the reduced price of the
shares, namely R570 000.00 (record p.1581).
In giving this reply
he however lost sight of the fact that the price was the same as in
2002 and that in NSC had then
in addition
been debited with
R570 000.00. Thus the kickbacks were obviously
not
taken
care of in the price of the shares; in fact, the price of the shares
was pitched in order to set off the kickbacks.
19. Accordingly I reject Dr. Stephenson’s
contention that the agreement was to transfer equipment with a market
value
of R570 000.00 to NSC in exchange for the 10%
shareholding. The transfer of the equipment and the value put on it
was in my
view only meant to camouflage the true intention of the
parties namely to pay for the shares by cancelling the kickbacks. The
surrounding
circumstances support my conclusion. Thus, NSC did not
ask for verification of the values placed on the equipment by PEC or
itself
attempt to verify the value of the equipment tendered by PEC,
which one would expect if this were an arms length transaction
involving
the transfer of assets to the value of R570 000.00.
Furthermore, it was intended that this equipment would continue to be
used by PEC members free of charge and NSC would derive no income at
all from such use. It must have been obvious that the equipment
would
depreciate and would also in due course be replaced by equipment to
which NSC would have no claim so that at best the value
of these
“assets” would fairly rapidly have wasted away to zero.
Clearly, therefore this equipment was not intended
to represent true
value to NSC, like money in the bank. My conclusion on this point is
that the exchange of equipment in 2004 had
no more substance than the
sale coupled with the debiting of charges against NSC in 2002.
20. In 2004 the parties were still contemplating a long
association in the future and the exchange transaction was intended
to cement
it. Circumstances changed in 2005, however, and the
relationship soured when NSC commenced negotiations for a sale for
the clinic
business. PEC applied in January 2006 for a hospital
licence, and this was opposed by NSC. A parting of the ways now
loomed. In
the course of having its assets valued for purposed of the
sale of business NSC was informed that the equipment it had received
from PEC had very little value in the market. It is only on the
strength of this information that NSC then sought to cancel the
2004
exchange deal, contending that there had been material
misrepresentation as regards its value on the part of PEC. I may add
here by way of a footnote that in my respectful view the proper
categorisation of the complaint should perhaps be breach of contract
and not misrepresentation, but niceties of pleading are irrelevant as
long as the true issues for decision have been thoroughly
canvassed,
which is certainly the case here.
21. As I am of the view that it was never seriously
intended by NSC that PEC was obliged to deliver equipment with a
market value
of R570 000.00 it follows that NSC’s
contention must be rejected. As between PEC and NSC, the 2004
transaction is unimpeachable.
Turning next to the reasons of the appeal tribunal. These
essentially upheld the reasoning of the arbitrator at first instance
and endorsed his factual findings on the evidence. The appeal
tribunal regarded the 2002 and 2004 transactions as a work in
progress with the sole object of achieving the transfer of a 10%
shareholding in the respondent company to the applicant in lieu
of
the amount that would have been paid over as kickbacks by the
respondent to the applicant for the period from 1999 to 2001
in a
manner that would withstand scrutiny in the context of the
guidelines of the Health Professions Council. The appeal tribunal
found that the work in progress achieved its culmination in the 2004
‘
equipment arrangement
’.
In my judgment it does not appear from the reasons given for the
arbitral award that the respondent gave the applicant financial
assistance. The valuable consideration given to the applicant was in
substitution for the payment which the respondent would
otherwise
have made to the applicant as a loyalty incentive. The direct object
of the transaction was to satisfy the applicant’s
insistence
on compensation for its contribution to the respondent’s
business. The fact that the respondent was not under
any obligation
to make the incentive payment does not transmute its provision of an
equivalent loyalty reward into ‘
financial assistance
’
within the meaning of s 38(1) of the 1973
Companies Act. The
fact that the purchase of equipment from the applicant in 2004 was a
sham also does not implicate
s 38(1)
if it is accepted, as I
consider it has to be on the facts ascertainable from the
arbitrators’ reasons, that the object
of the sham was to
disguise the provision by the respondent to the applicant of what in
undisguised form stood to be stigmatised
as by the Health
Professions Council as a ‘perverse incentive’. Stripped
of its disguise, the transaction is revealed
to have entailed the
payment by therespondent to the applicant of R570 000 as a
customer loyalty reward and the use by the
applicant of the accrual
to purchase shares in the respondent. While the transaction might
render the parties susceptible to
disciplinary action for acting
contrary to guidelines laid down by the Health Professions Council,
it did not give rise to a
contravention of s 38(1) of the 1973
Companies Act. The
first respondent’s ground for opposing the
application in terms of
s 31
of the
Arbitration Act thus
cannot
be upheld.
Was the reinstatement of the respondent’s registration in
terms of
s 82(4)
of the
Companies Act 2008
of retrospective effect?
Turning then to address the effect of the reinstatement of the
respondent company’s registration in terms of
s 82(4)
of
the
Companies Act, 2008
. As mentioned at the beginning of this
judgment, the aspect in issue is whether it was retrospective in
effect, and if so, whether
that validated the conduct of the
arbitration proceedings during the period that the respondent’s
name had not been on
the register. As observed in the previous
judgment in this application, the status of the respondentas an
existing company is
obviously a material issue.
14
If the apparent extinction of the company with effect from January
2008 has not been, or cannot now be, effectively reversed
with
retrospective effect in the respects relevant, the arbitration
awards might have been nullities because the respondent,
as an
ostensible party in those proceedings, had legally not been in
existence at the relevant times.
The differences between the manner in which the deregistration and
dissolution of companies are treated in the 1973 and 2008
Companies
Acts were touched on in the previous judgment in this application,
in particular as between
s 82
of the current statute and
s 73(6)
and (6A) of its predecessor.
15
Theywere also discussed in the subsequent judgment of the full court
(per Rogers J, Yekiso and Cloete JJ concurring)
in
Absa
Bank Ltd v Companies and Intellectual Property Commission and Others
2013 (4) SA 194
(WCC),
[2013] 3 All SA 34
, but there was no
determinative finding in either judgment of the retrospectivity
question presented in the current case.
16
The question was left open in the previous judgment because the
court had not heard argument on the point and the fact of the
reinstatement of the respondent’s registration as a company
had in any event not yet been confirmed to the court’s
satisfaction. I didnevertheless make some passing observations about
features of
s 82
, which, it seemed to me
prima facie
,
might support a construction of the provision to the effect that
reinstatement in terms of
s 82(4)
was retrospective in effect.
In
Absa Bank v CPIC
the discussion on the point was incidental
to the central question before the court in that case, which was
whether s 83(4)
of the 2008
Companies Act, which
provides that
a court may declare the dissolution of a company to have been
void,or make any other order that is just and equitable
in the
circumstances, is available in a case in which the dissolution has
happened consequent upon the company’s deregistration
in terms
of
s 82(3)
, rather than upon its winding up in liquidation. The
full court answered that question affirmatively.
The wording common to both
s 73(6)
and s 73(6A) of the
1973 Act that was pertinent to retrospectivity was contained in the
phrase that upon the restoration
of its registration under either
provision ‘
the company shall be deemed to have continued in
existence as if it had not been deregistered
’.
17
In
Kadoma Trading (Pty) Ltd v Noble Crest CC
2013 (3) SA 338
(SCA),
[2013] 3 All SA 126
(SCA) it was held, with reference to
essentially identical wording in
s 26(7)
of the
Close
Corporations Act 69 of 1984
18
,
that its effect was that upon the restoration of the corporation to
the register by the registrar all rights and obligations
that had
been extinguished by its deregistration were
ipso facto
revived
with retrospective effect. The court also held (at para 14-15)
that the observation in
Insamcor (Pty) Ltd v Dorbyl Light &
General Engineering (Pty) Ltd
2007 (4) SA 467
(SCA), at
para 23,concerning the effect of s 73(6) of the 1973
Companies Act that
re-registration ‘
seems to validate,
retrospectively, all acts done since deregistration –
including for example, the institution of legal
proceedings –
on behalf of a company that did not exist
’
19
applied upon an administratively determined restoration of a
corporation to the register in terms of
s 26(6)
and (7) of the
Close Corporations Act. The
judgment in
CA Focus CC v Village
Freezer t/a Ashmel Spar
[2013] ZASCA 136
(27 September 2013),
which was delivered after argument had been heard in the current
matter, is to the same effect.
The express retrospectivity provision that provided the basis for
the court’s reasoning in cases like
CA Focus
,
20
Kadoma
Trading
,
Insamcor
and
Ex Parte SengolInvestments (Pty)
Ltd
21
is,
however,absent from ss 82 and 83 of the 2008
Companies Act.
In
a recent judgment of this courtit was held that the omission of
any equivalent in the new
Companies Act of the
expressly provided
retrospectivity provisions in s 73(6) and (6A) of the 1973 Act
plainly manifested an intention by the legislature
to exclude any
retrospective effect upon the reinstatement of a company’s
registration in terms of s 82(4); see
Bright Bay Property
Service (Pty) Ltd v Moravian Church in South Africa
2013 (3) SA
78
(WCC). (The learned judge was not invited to consider, as I have
been, whether s 83(4) invests the court with the power to
direct that an administrative reinstatement of registration shall
have retrospective effect.) It would thus ordinarily be a simple
matter of following the precedent established by the judgment in
Bright Bay Property Service
unless I were of the view that it
was clearly wrong. Counsel for the applicant advanced various
criticisms of the decision in
Bright Bay Property Service
. On
closer consideration I have been persuaded that the judgment does
not afford safe authority for the meaning and effect of
subsection
82(4) with regard to retrospectivity. The deregistered company’s
application for the restoration of its registration
in that case had
been made in terms of s 73(6A) of the 1973 Act before the
commencement of the 2008 Act. The reinstatement
of the company’s
registration therefore fell to be determined under the old Act, and
the effect of the differently worded
equivalent provisions of the
new Act thus did not properly arise for consideration in that case.
This follows clearly, I think,
from item 3(1) inSchedule 5 to
the 2008 Act, which provides that matters pending before the
Registrar of Companies at the
date of the repeal of the 1973 Act
fell to be disposed of under that Act. (Such an interpretation would
also be supported by
the provisions of s 12(2) of the
Interpretation Act 33 of 1957.) I thus find myself in respectful
disagreement with the
reasoning at para32-35 of the judgment in
Bright Bay Property Service
and am impelled in the result to
conclude that the case was decided on the basis of an incorrect
appreciation of the applicable
statutory regime.
Whereas the absence fromss 82(4) and 83(4) of the 2008 Act of
any express equivalent of the express retrospectivity provisions
found in s 73(6) and (6A) of the 1973 Act is indeed an
important pointer to support an argument that the legislature
intended
to radically alter the regime applicable under the old Act,
I am, with respect, unable to subscribe to the approach that, by
itself, the omission plainly and unambiguously establishes the
meaning the learned judge arrived at by it in
Bright Bay Property
Service
. As the applicant’s counsel point out in their
written argument, ‘the question arises why the legislature
should
have intended such a drastic departure from the 1973 Act’,
especially in the context of the practical issues that fall to
be
addressed when a company that has been deregistered is resurrected.
The absence of an obvious or certain answer to that question
serves
as a reminder that the legislative intention falls to be established
primarily upon a contextual reading of the provisions
of the new
Act, bearing in mind also the provisions of ss 5 and 7 of the
statute, to which the learned judge in
Bright Bay Property
made
no reference.
22
They
enjoin a purposive construction of the provisions of the 2008 Act.
The omission of the expressly provided retrospectivity
clauses in
the earlier statute is but one of the factors to be considered in
the broader context. In my view, for the reasons
discussed later in
this judgment, a cogent argument can be made out on a purposive
reading of the provisions of s 82 that
there has not in fact
been a change of legislative intention and that subsection 82(4),
properly interpreted, does give rise
to reinstatement of
registration with at least some retrospective effect. The difficulty
is that an argument to the opposite
effect can also be advanced
persuasively.
In the result the unsatisfactory position is that the courts are
left in the position of having to decide between two very arguable,
but opposite meanings.Moreover, when regard is had to the relevant
history of the equivalent provisions in the previous
Companies Act
and
its English equivalents
23
the question arises, if one is to construe a reinstatement in terms
of
s 82(4)
of the current Act as retrospectively effective,
whether such retrospectivity pertains merely to the company’s
corporate
personality and the restoration to it of its property, or
whether it also includes any corporate activity undertaken
purportedly
on its behalf and in its name during the period that it
was deregistered. (Under the 1973 Act a restoration to the register
in
terms of s 73 had a fully retrospective effect, whereas an
order in terms of s 420 declaring the dissolution of a company
to have been void did not retrospectively validate any corporate
activity of the company between the date of its dissolution
and the
avoidance order.
24
)As
Rogers J pointed out in
Absa Bank Ltd v CPIC
(at
para 37), the 2008 Act brings together the concepts of
dissolution and removal from the register,in contradistinction
to
their disparate treatment under the 1973 Act. It does not, however,
expressly provide which (if indeed either) of the different
consequences that attended the resurrection of a company under the
old Act, whether by voiding the dissolution or restoring the
registration, should apply under the new regime. It is perhaps
hardly surprising therefore that the early jurisprudence on ss 82
and 83 of the 2008 Act has been inconsistent and somewhat tentative.
Apart from the judgments in this court already mentioned, the
question of whether the reinstatement of a company’s
registration
in terms of s 82(4) of the 2008
Companies Act is
with
retrospective effect has also been touched on in some of the other
divisions of the High Court.
In
Fintech (Pty) Ltd v Awake Solutions (Pty) Ltd and Others
2013
(1) SA 570
(GSJ), van Oosten J remarked on the evident
practical necessity for at least some such effect and expressed his
agreement
with the
prima facie
view expressed by me in the
earlier judgment in this matter that the import of the word
‘
reinstate
’ in the sub-section, with its
connotation of putting something back in its previous state, is
indicative of a legislative
intention that the restoration of a
company to the register in terms of the provision is with
retrospective effect. The learned
judge found it unnecessary,
however, to come to a firm determination of the question because he
found on the facts of the case
that the deregistration process of
the company concerned had been ‘cancelled’, with the
result, as I understand it,
that the company had never in fact been
deregistered.
Van Oosten J did nevertheless also postulate in
Fintech
that
there was ‘
no reason why the court should not be able to
exercise its inherent jurisdiction, in view of the absence of an
enabling statutory
provision under the 2008 Act, on application or
otherwise, to validate anything done by or against the affected
company between
deregistration and its reinstatement, and to make
such order as it makes appropriate
’. Counsel for both
sides in the current matter were
ad idem
, correctly in my
respectful view, that the court does not have an inherent
jurisdiction, in the ordinarily understood sense of
that term,to
make such orders.
25
26
They
were agreed that the only source of a power of the nature postulated
by van Oosten J lay in s 83(4) of the Act.
As mentioned,
counsel were at odds with each other, however, as to the
availability of that power in respect of a reinstatement
of a
company’s registration already effected by the Commission in
terms of s 82(4). It was the contention of the respondent’s
counsel (Mr
Albertus
SC) that the power was available
only to a court seized of an application for the a declaration that
a company’s dissolution
had been void, and that it was not
available, as a means independently of such an application, for a
court to supplement or vary
the effect of an administrative
reinstatement by the Commission in terms of s 82(4). The
respondent’s counsel effectively
submitted that the
administrative reinstatement of a company’s registration in
terms of s 82(4) of the 2008 Act had
the limited effect of
restoring retrospectively the company’s corporate personality
and its property, but not of validating
any activity conducted in
its name while it had been deregistered (in other words an effect
like that which followed an order
in terms of s 420 of the 1973
Act).
In
AmarelAfrica Distributors (Pty) Ltd v Padayache
[2013]
ZAGPPHC 87 (28 March 2013), the point was taken by the
defendant that the proceedings had been incompetent by
virtue of the
plaintiff company having not been on the register of companies when
the action had been instituted. It had been
removed from the
register in 2010 for being in default with the lodging of its annual
returns. Before the action came to trial
in October 2011, the
plaintiff company obtained the reinstatement of its registration
administratively.
27
It appears that the application for reinstatement had been submitted
in September 2011 (that is after the commencement of the
2008
Companies Act), and
dealt with by the Commission in terms of
s 82(4).
The trial judge (Legodi J) rehearsed the
differences between s 73 of the 1973
Companies Act and
the
regime in terms of s 82 of the 2008 Act and appears to have
determined (i) that the reinstatement of the plaintiff’s
company’s registration had beenof retrospective effect and
(ii) that it had validatedthe company’s institution of
the
action, subject to the right of the defendant to raise in defence
any prejudice it might have sustained as a consequence
of the
retrospective reinstatement. As the defendant had failed to raise
any issue of prejudice, apparently despite an invitation
by the
courtto do so, the court proceeded to determine the action on the
merits of the contractual dispute between the parties.
The basis for
the court’s conclusion that the reinstatement of registration
had been of retrospective effect – including
a validation of
its corporate activity while it had been deregistered - is, however,
not apparent from the judgment, and noris
the provenance of the
power the learned judgeappears to have imputed to the court to
curtail the effects of retrospectivity with
regard to its
prejudicial effect on third parties. It seems to me that if such a
power exists, its source must lie in s 83(4)
of the 2008
Companies Act, which
, certainly on a literal construction, requires
an application for relief by an interested party.
In
Nulandis (Pty) Ltd v Minister of Finance and Others
2013
(5) SA 294
(KZP), the applicant nominally sought an order in terms
of
s 83(4)(a)
confirming that the registration of a company
against which it had obtained a judgment had been restored and that
the company’s
assets had re-vested in it. The court treated
the application as being one to avoid the dissolution of the
company, which had
occurred consequent upon its deregistration for
failure to file its annual returns. Much of the judgment in
Nulandis
concerning the proper construction of
ss 82
and
83
is in
conflict with the full court judgment in
Absa Bank Ltd v CPIC
and thus, by virtue of the binding character of the latter in this
division, need not detain me. On the issue of retrospectivity,
however,D. Pillay J did express the view (at para 53) that
‘
any interested person who wants reinstatement and
avoidance
[i.e. a declaration that a company’s dissolution
has been void]
retrospectively will have to motivate fully for
such effect in an application to court to either review the
Commission’s
decision about registration or void dissolution
by relying on the ‘just and equitable’ test in terms of
s 83(4)
of the new Act
’, thereby suggesting that the only
ways in which reinstatement of registration with retrospective
effect could be obtained
under the 2008
Companies Act would
be
either by way of application to court for a review -presumably in
terms of
s 6
of the
Promotion of Administrative Justice Act 3
of 2000
- of the Commission’s decision to remove the company
from the register under
s 82
, orby applying foran order with that
effectunder
s 83(4).
Thesecond part of that approach to the
interpretation of the 2008 Act - that is with reference to s 83(4)
- seems essentially
in keeping with the construction contended for
by the respondent’s counsel in the current matter. The bases
for Pillay J’s
interpretationappear to have been the
absence of any express provision in s 82 concerning the
retrospective effect of the
reinstatement of a company’s
registration, such as that found in s 73(6A) of the 1973 Act,
and the powers given to
the court in terms of s 83(4) of the
new Act of a nature comparable to those under s 73(6)(b) of the
old Act.
Pillay Jalso appears to have found fortification for her
viewpoint in a comparative consideration of the equivalent
provisions
concerning administrative reinstatement of registration
in terms of the English Companies Act, 2006 (c.46), where there is
provision
for an application to court by an interested party within
three years of the company’s administrative reinstatement on
the register for such directions and provisions as might be just for
placing the company and all other persons in the same position
(as
nearly as may be) as if the company had not been dissolved or struck
off the register. (That provision – in subsections
1028(3) and
(4) of the English Act –stands alongside and is supplementary
to the provision in subsection (1) that ‘
The general effect
of administrative restoration to the register is that the company is
deemed to have continued in existence
as if it had not been
dissolved or struck off the register
.’
28
)
Of course, the difficulty is that the wording of the English
Companies Act provisions is materially different from that of ss 82
and 83 of our new Companies Act. If the intention of the legislature
had been that the local dispensation should replicate that
under the
current English statute, the easiest manner of achieving that would
have been to faithfully copy the English provisions(an
approachmanifested in many provisions of the earlier Companies
Acts).Appropriate reference to foreign law for interpretative
purposes is enjoined in terms of s 5(2) of the 2008 Act. In my
view, however, the only value to be gained from an examination
of
the relevant broadly equivalent, but very differently worded,
statutory provisions in other jurisdictions in which the company
law
is of the same ancestry as ours is the confirmation to be obtained
thereby of the nature of the generally accepted practical
needs and
considerations related to the effects of the reversal of the
dissolution or deregistration of companies. Having regard
to the
provisions of ss 5 and 7 of the 2008 Companies Act, it would be
acceptable to construe our statute purposively in
a manner that
would effectively address such generally recognised needs and
considerations unless the language clearly excludes
that.
But what then is one to make of the omission from the 2008 statute
of the express provisions concerning the retrospective effect
of
restoration to the register that, in common with equivalent
provisions in the English,
29
Australian
30
and Canadian
31
companies legislation, was evident in the 1973 Companies Act?
Seeking an answer requires as a first step a close analysis of
the
remedies provided in terms of ss 82 and 83 of the 2008
Companies Act. To assist in that exerciseit is worthwhile to
set out
the relevant provisions in full.
Section 82 provides:
Dissolution of companies and removal from register
(1) The Master must file a certificate of winding up of
a company in the prescribed form when the affairs of the company have
been
completely wound up.
(2) Upon receiving a certificate in terms of subsection
(1), the Commission must-
(a) record the dissolution of the company in the
prescribed manner; and
(b) remove the company's name from the companies
register.
(3) In addition to the duty to deregister a company
contemplated in subsection (2) (b), the Commission may otherwise
remove a company
from the companies register only if-
(a) the company has transferred its registration to a
foreign jurisdiction in terms of subsection (5), or-
(i) has failed to file an annual return in terms of
section 33 for two or more years in succession; and
(ii) on demand by the Commission, has failed to-
(aa) give satisfactory reasons for the failure to file
the required annual returns; or
(bb) show satisfactory cause for the company to remain
registered; or
(b) the Commission-
(i) has determined in the prescribed manner that the
company appears to have been inactive for at least seven years, and
no person
has demonstrated a reasonable interest in, or reason for,
its continued existence; or
(ii) has received a request in the prescribed manner and
form and has determined that the company-
(aa) has ceased to carry on business; and
(bb) has no assets or, because of the inadequacy of its
assets, there is no reasonable probability of the company being
liquidated.
(4) If the Commission deregisters a company as
contemplated in subsection (3), any interested person may apply in
the prescribed
manner and form to the Commission, to reinstate the
registration of the company.
(5) ….
(6) ….
Section 83 provides:
Effect of removal of company from register
(1) A company is dissolved as of the date its name is
removed from the companies register unless the reason for the removal
is that
the company's registration has been transferred to a foreign
jurisdiction, as contemplated in section 82 (5).
(2) The removal of a company's name from the companies
register does not affect the liability of any former director or
shareholder
of the company or any other person in respect of any act
or omission that took place before the company was removed from the
register.
(3) Any liability contemplated in subsection (2)
continues and may be enforced as if the company had not been removed
from the register.
(4) At any time after a company has been dissolved-
(a) the liquidator of the company, or other person with
an interest in the company, may apply to a court for an order
declaring
the dissolution to have been void, or any other order that
is just and equitable in the circumstances; and
(b) if the court declares the dissolution to have been
void, any proceedings may be taken against the company as might have
been
taken if the company had not been dissolved.
Whereas the current legislation draws together in two provisions in
the same part of the Act the consequences of the deregistration
of
companies and the winding up of solvent companies, it provides three
different remedies for any interested party seeking to
avoid or
reverse the consequences of those dissolving actions:
administrative reinstatement of registration in terms of s 82(4)
– this remedy is available only when a company has
been
dissolved in terms of s 82(3) read with s 83(1),
a court order declaring the company’s dissolution to have been
void in terms of s 83(4), or
any order - also in terms of s 83(4) - that would be just and
equitable in the circumstances, which, on the authority of
Absa
Bank v CPIC
, might include an order restoring a company that had
been administratively deregistered to the register and regulating
the consequences
thereof.
As confirmed in the full court’s judgment in
Absa Bank Ltd v
CIPC
the remedies are not mutually exclusive.
The second of the aforementioned remedies seems, when considered
with the attendant provisions in s 83(4)(b) of the Act,
to be
in all material respects identical to that provided in s 420 of
the 1973 Act and, on the principle that the legislature
is deemed to
be cognisant of the judicial interpretation of its language, falls
to be interpreted in the same manner as that
provision has been.
32
The
wording of paragraph (b) of s 83(4) makes it plain, for the
same reasons given for the interpretation of s 420 of
the 1973
Act and its equivalents in successive English Companies Acts, that
an order declaring the dissolution of a company to
have been void
does not affect the fact of the dissolution or give validity to acts
purportedly carried on by, with or against
the company between the
date of the company’s dissolution and the making of the order
declaring the dissolution to have
been void.The company’s
corporate existence is restored with effect from the date of its
dissolution, but not its ‘corporate
activity’.
33
Much turned for purpose of that interpretation on the word
‘
thereupon
’ in s 420 and its equivalents.
34
The omission of that word from s 83(4) does not appear to me to
be of any significance, however, for its effect is replicated
by the
conditional ‘
if
’ which prefaces paragraph (b)
of the sub-section. If the order declaring a company’s
dissolution ‘to have
been void’ in terms of the first
part of s 83(4)(a) were not intended to bear the restricted
consequences that attended
orders under s 420 of the 1973 Act,
the provisions of paragraph (b) of the sub-section would be
superfluous. In the result
it is only the possibly retrospective
effects of the first and third remedies that have to be settled.
The third category of remedy is very broad and flexible. The court
may make any order that is just and equitable in the circumstances.
Despite its wording, which included a provision expressly declaring
the dissolution of the close corporation to be void, I consider
that
the order made by the full court in
Absa Bank Ltd v CIPC
resorted under this category. That much is evident from the fact
that the order did not employ wording declaring the dissolution
of
the corporation ‘
to have been
void’, as it would
were it to have followed the wording of s 83(4) in respect of
the second of the aforementioned
remedies. It is also confirmed, I
think, in the observation by Rogers J (at para 48) that
‘
An order that is just and equitable
[i.e. the third
category of remedy]
may entail a declaration that the dissolution
is void together with ancillary relief
’. The third
category of remedy is certainly broad enough to include an order
directing the restoration of a company to
the register coupled with
directions formulated to put the affected parties in the position
they would have been had the company
not been deregistered, or
simply directing that the company should be deemed never to have
been deregistered.An example of the
type of ancillary relief that
might be required and which a court might be empowered to grant
under the third category of remedy
was postulated in connection with
the equivalent English legislation in
Re The
People's Restaurant Group Ltd,
[2012]
EWHC B33
(Comm) (30 November 2012)
, at para 52, being
to
suspend the prescription period for creditors whose claims were not
time barred at the date of dissolution, but would otherwise
be so
when the company was restored.
35
(It is not necessary to determine in this case
whether the particular relief postulated in
The
People's Restaurant Group
could
competently be granted under our law in view of the effect of the
Prescription Act 68 of 1969
.
36
).
It might also include orders validating and corporate activity
purportedly conducted on the company’s behalf during the
period of its deregistration.
The circumstances in which the administrative dissolution and
reinstatement of a company are permitted in terms of s 82(3)
and (4) of the 2008 Act are mostly of a nature that reinstatement
(i.e. by resort to the first category of remedy) is likely
to be
sought only for the purposes of restoring formal existence to a
company that has remained operative notwithstanding its
deregistration. The circumstances contemplated in terms of
s 82(3)(a) (failure to lodge annual returns) are, as the
current
matter illustrates, more often than not symptomatic of
administrative neglect by a company’s management rather than a
cessation
by the company of its corporate enterprise. The purposes
of the Act set forth in s 7 would not be furthered by treating
the administrative reinstatement of the registration of the company
in such circumstances as effective only from the date of the
reinstatement and not from the date of the dissolution. Certainly,
there would be little practical purpose in administrative
reinstatement if it did not have the effect of retrospectively
restoring the company’s personality and reinvesting it with
title to its property. As to the validation of its corporate
activity, an argument could be made that if that were not to be
implied, there would be a need in many cases also for an application
to court in terms of s 83(4) for an order regularising
and
validating the company’s corporate activity during the period
that it had been legally, but not factually, moribund,
and that to
imply such a requirement would be subversive of the objects of
simplicity, costs saving and business efficiency evidently
contemplated by the very provision of the administrative remedy as
an alternative to an application to a court. Against that
argument
is the consideration that the potentially undesirable effects of the
automatic retrospective validation of invalid acts
on third parties
is a powerful factor weighing in favour of judicial regulationof any
such acts as might be too contentious to
be catered for by voluntary
ratification by the affected parties.
Dissolution in terms of s 82(3)(b)(i) is likely to occur only
when all the objectively determinable indications are that
the
company has been inactive for a long period and no person would have
any interest in its continued existence. It is probable
that
reinstatement of the registration of a company that has been struck
off the register for this reason will most commonly
be sought in
circumstances in which the deregistration has occurred in error
because the company has in fact been active, or
there was in fact a
person who had - and retains - an interest in its continued
existence. Therefore, in such a case too, practical
considerations
suggest that any person applying for the reinstatement of the
registration would obtain effective relief only
if the reinstatement
were with retrospective effect, thereby acknowledging the fact of
the actual corporate activity of the company
after its
deregistration, or the actual interest of the person concerned that
the company should not have been struck from the
register. A
consideration of the position with ss 5 and 7 of the Act in
mind would thus also in this category militate in
favour of
construing the effect of reinstatement in terms of s 82(4) to
be retrospective, with the result that upon reinstatement
to the
register the company would be regarded as if it had not been
dissolved. The fact that parties other than the person who
is
sufficiently interested to obtain the reinstatement of the company’s
registration might have conducted themselves on
the basis that the
company had ceased to exist and might be prejudiced by the
indiscriminate restoration of an ‘as you
were’ situation
weighs equally in this division of the first category cases in
favour of an interpretation that the company’s
corporate
activity while it was deregistered should not be treated as having
been automatically validated upon the reinstatement
of the company’s
registration; being an issue that, if necessary, is better regulated
in terms of s 83(4) by a court
according to what might appear
to be just and equitable in the circumstances.
Removal from the register in terms of s 82(3)(b)(ii) is an
alternative to formal winding up. The provisionappears to bedirected
at facilitating the discarding of deadwood from the register of
companies in circumstances in which a company has ceased to carry
on
business and where, because its assets are non-existent or
inadequate, a formal winding-up is unlikely to occur. The persons
most likely to request deregistration in terms of s 82(3)(b)(ii)
would be the same as those who in other circumstances would
procure
the company’s voluntary liquidation. The persons most likely
to apply for the reinstatement of a company deregistered
for this
reason would be those who had claims against the company which they
considered could be satisfied either by execution
or in the context
of a compulsory liquidation. They would be persons who could show
that the deregistered company did have sufficient
assets to warrant
them pursuing either of those courses. Their purpose in obtaining
the reinstatement of the company’s
registration would often
not be served if the reinstatement were not with retrospective
effect. However, in cases falling under
this division of s 82(3)
read with s 82(4), the need to validate post-deregistration
corporate activity is unlikely
to be a consideration in most cases.
Counsel for the applicant pointed to other considerations that
demonstrated the practical need for reinstatement in terms of
s 82(4) to be accepted as being with retrospective effect.
Theseincluded that if there were no retrospectivity the
reinstatement
of the registration of a company would give rise to
the reconstitution of companies without their governance structures
and the
re-vesting in the company of its assets would be susceptible
unduly to complications. The other considerations that counsel
contended
militated in favour of reinstatement operating with
automatically retrospective effect were expressed in the following
rhetorical
questions posed in their heads of argument: ‘[I]
f
the reinstatement occurs
ex
tunc
, but not retrospectively
(illogical as that may be), what of the rights and obligations that
may have arisen in the interim?
For example if (as here) money is
held in an account, and interest accrues thereon, is no tax payable
on the interest?
’
and ‘
What
is to occur to duties and obligations of directors that previously
existed? The notion that the reinstatement is not retrospective
would lead to the logical consequence that the company’s
directors who face claims could, by failing to file returns, cause
the company to be deregistered and then upon reinstatement escape
the obligations that they faced previously
’
.
Some (but not all) of the considerations identified by the
applicant’s counsel do afford support for the intended
retrospective
effect that I ventured tentativelyat para 21 of
the earlier judgment might be denoted by the legislature’s
choice
of the word ‘reinstate’ in s 82(4). I agree
that there would ordinarily be little practical point in the
reinstatement
of the existence of a company if it were not thereby
also to be reinvested with its assets, including any accretion to
such assets
as might have occurred during the period of
deregistration. I also agree that in the absence of any statutory
mechanism for the
re-establishment of the company’s board it
would seem to be implied that,save as might otherwise be expressly
directed
(say, in terms of an order made in terms of s 83(4)),
directors in position when the company was administratively
deregistered
should be deemed to have remained in office upon the
reinstatement of the company to existence.
37
However,
the obligations of a company are not extinguished by its
administrative dissolution
38
and the same applies in respect of the liability of natural persons
who might have incurred such liability through the delinquent
management of the company or through undertaking an accessory
liability such as by way of suretyship.
39
So not all of the considerations offered by the applicant’s
counsel seem to me to offer support for their contextual
construction of s 82(4) as having the blanket retrospectivity
that the courts gave to restoration in terms of
s 26(7)
of the
Close Corporations Act as
it read prior to its recent substitution.
None of the considerations argued by counsel would necessarily
require that the corporate
activity purportedly conducted in the
name of the company during the period of deregistration should be
automatically validated
by virtue of the reinstatement of
registration. On the contrary, the potentially prejudicial effect on
third parties of a necessary
or inevitable validation of purported
corporate activity inherent in the indiscriminately automatic
retrospective reinstatement
of companies is a consideration weighing
against the ready acceptance of giving reinstatement in terms of
s 82(4)
unqualified retrospective effect of the nature provided
in terms of the materially differently worded s 73(6A) of the
1973
Act and
s 26(7)
of the
Close Corporations Act prior
to its
substitution with effect from 1 May 2011. As a matter of
general principle consequences with a potentially prejudicial
effect
on third parties should not be allowedto occur administratively
without an opportunity for such parties first to be heard.
Indeed, in the previous judgment (at footnotes 10 and 12) I noted
the doubts expressed in
Henochsberg
about the
constitutionality of s 73(6A) of the 1973 Companies Act
40
and observedthat by introducing the unqualified retrospectively
deeming provisions in the subsection the legislature could perhaps
have unwittingly overlooked the potentially prejudicial consequences
to third parties. That observation bears repetition:
The automatically operative retrospective effect of a
restoration to the register by the registrar in terms of s 73(6A)
of
the 1973 Companies Act appears to have been determined upon by the
legislature without insight into the potentially prejudicial
effect
on third parties of the restoration of the registration of a
de-registered company identified and discussed in
Insamcor (Pty)
Ltd v Dorbyl Light & General Engineering (Pty) Ltd; Dorbyl Light
& General Engineering (Pty) Ltd v Insamcor
(Pty) Ltd
2007 (4)
SA 467
(SCA), and overlooking the considerations identified in
Ex
parte Sengol Investments (Pty) Ltd
1982 (3) SA 474
(T) and
Ex
parte Jacobson: In re Alec Jacobson Holdings (Pty) Ltd
1984 (2)
SA 372
(W). As suggested in note 10, the resultant vulnerability
in the legislative scheme could have been remedied by the manner
in
which the administrative functions under the scheme were executed.
An administrative process is not as well suited as a judicial process
to determine and afford appropriate remediesapplying justness
and
equity to address the prejudicial consequences to third parties that
can arise as a consequence of the restoration of deregistered
companies to the register. The need for some process to deal with
such potential issues is manifest. Such a process was provided
under
s 73(6)(b) of the 1973 Act. It was a judicial process applied in
the context of judicially directed re-registration.
Judicial
processes to address the consequences of administratively determined
re-registration are afforded in terms of the comparable
English and
Australian statutes. The absence of any provision in the statutory
framework in the 2008 Act for an administrative
process to meet the
need suggests that remedial relief, if required, falls to be given in
s 83(4) of the Act, i.e. judicially.
The ambit of s 83(4) is wide enough to empower a court to deal
not only with the validation, conditionally or otherwise,
of
corporate activity purportedly conducted on behalf of the company
during its period of deregistration, but also, if it is
just and
equitable to do so, with any prejudicial consequences of the
ordinarily retrospective effects of reinstatement, viz.
the
re-establishment of corporate personality, the reinvestment of
ownership of property and the reconstitution of the company’s
board of directors and general body of members. The wide breadth of
the court’s power in terms of the second category of
remedy
affords the ability to make the effect of any restoration of the
company retrospective, whether generally or selectively.
Construing the provisions of s 82(3) and s 82(4) to the
effect that administrative reinstatement of a company’s
registration retrospectively re-establishes its corporate
personality and title to its property, but does not validate its
corporate activity during the period that it was deregistered seems
to me to give the preferred result given the choice of meanings
available. It is a construction that acknowledges the probably
intended significance of the omission from the currently applicable
provisions of the phrase ‘
the company shall be deemed to
have continued in existence as if it had not been deregistered
’
in the statutory predecessors of the provisions, but still allows
the inevitable practical needs bound up in the reinstatement
exercise to be addressed while minimising the incidence of
prejudicial ‘anomalies’ of the sort postulated in the
Supreme Court of Appeal’s judgment in
CA Focus CC
supra. When the subsections are construed contextually in that
manner with s 83(4) they are seen to afford a basis for the
role of judicial guidance or control that the judgment in
Kadoma
Trading
supra (at para 15) regarded as generally desirable,
but which the express retrospectivity provisions in
s 26(7)
of
the
Close Corporations Act and
s 73(6A) of the 1973 Companies
Act had excluded.
This conclusion disposes in effect of the respondent’s
argument that s 83(4) is not available when the registration
of
a company has already been administratively reinstated in terms of
s 82(4). In my judgment the interpretation contended
for by the
respondent that an interested person who obtains the reinstatement
of a company’s registration in terms of s 82(4)
is
thereby disqualified from subsequently obtaining additional relief,
if such is required, under the just and equitable relief
provision
in s 83(4)in any event finds no support in the wording of the
provision. Section 83(4) permits any interested
person to apply
for relief connected with or arising from the dissolution of a
company and the court is empowered upon such application
to make any
order that is just and equitable in the circumstances. According to
the tenor of the provision such an application
can be made at any
time after the company’s dissolution. In my view the phrase
‘
at any time after a company has been dissolved
’
is not bounded by the date of any subsequent revival of the company.
There is also nothing in the provision to suggest
that the concept
of an ‘
interested person
’ should be narrowly
construed so as to exclude a person who had applied for and obtained
a reinstatement of registration
in terms of s 82(4). The remedy
is directed at addressing any consequences of a company’s
dissolution in circumstances
in which it would be just and equitable
to do so.
Some of the practical consequences of the dissolution of a company
in terms of s 82(3) read with s 83(1) and the subsequent
reinstatement of the company’s registration in terms of
s 82(4) might only become apparent after the fact. Such a
need,
if it were to arise, would require to be addressed irrespective of
whether the restoration had been effected judicially
or
administratively. It might also be just and equitable that such
consequences be addressed at the instance of persons who had
no
knowledge of or involvement in the application for administrative
reinstatement.
The question thus arises whether it would be just and equitable to
make an order declaring that the conduct of the arbitration
purportedly on behalf of the respondent company during the period
that it was removed from the register be deemed to have been
valid
and effective. In its supplemented notice of motion the applicant
has actually sought an order declaring that all the respondent’s
corporate activity while it was not on the register should be
validated, but I do not think that would be appropriate; certainly
not without general notice to potentially affected parties. It is
appropriate in the circumstances to confine the enquiry to
the
validation of the arbitration proceedings.
In my judgment there is no doubt that it would be just and equitable
that the arbitration proceedings should be declared valid.
The
respondent’s directors were in
de facto
control of the
conduct of the proceedings on the respondent’s behalf and the
respondent’s interests were represented
by senior counsel
briefed to represent it at the arbitration hearings and in the
application to court for the review of the arbitrator
at first
instance’s decision to decline to reopen the arbitration. No
doubt both parties incurred considerable expenditure
in respect of
the arbitration proceedings in the
bona fide
but mistaken
belief that the respondent was legally existent. The only reason of
which I am aware for the reinstatement of the
respondent’s
registration was to allow for the current proceedings, which are
directly related to the outcome of the arbitration
proceedings, to
go ahead and be effectively determined. A further consideration in
favour of validating the arbitration proceedings
between the
applicant and the respondent is that the only reason the issue has
arisen is because the company was deregistered
through the failure
of its directors to ensure that its annual returns were duly lodged.
While it would be manifestly unjust
to the applicant were the
arbitration proceedings not rendered effective, deeming them to have
been validly conducted would occasion
the respondent no cognisable
injustice whatsoever.
In my view it is also necessary, by reason of the fact that the
current proceedings were commenced during the period that the
respondent company was deregistered,that an order be made declaring
that these proceedings be deemed to have been validly instituted
and
conducted.
The application for ancillary relief
I turn now to deal with the application for ancillary relief.
Section 31(1)(b)
of the
Companies Act 71 of 2008
entitles any person
who holds securities therein on demand to receive without c
harge
one copy of any annual financial statements of a company required by
the Act
. It is a criminal offence for a company to fail to
comply with its obligations under the provision.
The applicant had been given the financial statements and draft
statements for 2011. It seeks an order directing the respondent
to
furnish it with a copy of its ‘audited, signed financial
statements for the year 2011’. The applicant was informed
by
the attorneys then purporting to act for the respondent company
after its deregistration that ‘Draft financial statements
have
been prepared, but they have not yet been signed off by the auditors
because of the deregistration and furthermore the accountants
are
still working with SARS to resolve the issue of the refund that SARS
has to pay our client’. I am not persuaded in
the
circumstances that an entitlement to a mandatory interdict has been
established. The respondent had in any event not yet
had its
registration reinstated as at the date proceedings were commenced in
October 2011. There is no evidence before court
to suggest that
subsequent to the reinstatement of its registration the company is
not complying with its obligations in terms
of s 31(1).
I am also not persuaded that an order directing the respondent to
comply with its obligation to lodge annual returns is indicated.
It
may well be that the company was deregistered because its management
had been remiss in this regardhistorically, but there
is no reason
to believe that the omission will be repeated. Certainly, if the
applicant were able later to make out a case that
the directors of
the company had sought to frustrate the arbitral awards or the
effect of the this judgment by allowing the company
to be
administratively dissolvedagain by reason of a failure to lodge its
statutory returns, the directors concerned could expect
to find
themselves in real danger of being held personally liable for any
costs the applicant might incur to redress the situation.
Costs
The applicant has achieved substantial success in the application
and is entitled to costs against the respondent company. The
applicant has sought a costs order on the scale as between attorney
and client. It has also sought an order directing that the
respondent’s liability for the applicant’s costs should
not be paid by the respondent ‘out of any funds that
are
attributable to [the applicant] as a shareholder’. These
special orders are sought because it is contended that the
respondent’s conduct has been vexatious. In this regard the
applicant’s counsel called in aid the judgment in
In
Re Alluvial Creek, Ltd.
1929 CPD 532
in which it was held (per Gardiner JP) that an attorney and
client costs order might properly be made where the proceedings
had
had ‘the effect of being vexatious, although the intent may
not have been that they should be vexatious. There are
people who
enter into litigation with the most upright purpose and a most firm
belief in the justice of their cause, and yet
whose proceedings may
be regarded as vexatious when they put the other side to unnecessary
trouble and expense which the other
side ought not to bear’.
It is an approach that has since been endorsed in a number of
subsequent cases. I think it is
apposite in the current matter.
The parties had agreed that their dispute should be settled by
arbitration and that the issues between them should be defined
in
pleadings before that forum. The respondent should have pleaded any
reliance it wished to place on the alleged illegality
of the
underlying transaction. That much followed not only from the terms
of their arbitration agreement - which was entered
into specifically
to deal with the dispute concerning the extent of the applicant’s
holding in the respondent company -
but also as a matter of
well-established law. The consequences of the respondent’s
failure to plead what has been the essential
basis for its refusal
to comply with the arbitral awards are something to which it should
reasonably have reconciled itself before
the current round of
litigation. It should have done sowith regard to the outcome of the
review application before Riley AJ
and the reasoned
determination of the arbitration appeal tribunal. I also consider it
to have been objectively vexatious for
the respondent to rely on its
deregistration to try to avoid the outcome of the arbitration
process when the deregistration had
occurred as a result of the
failure by its own directors to ensure that the company complied
with its statutory obligations.
In the circumstances I intend to accede to the applicant’s
prayer that costs be awarded on the attorney-client scale. I
do not,
however,consider that there is a proper basis to give any direction
that would have the effect that the respondent’s
costs
liability be determined in such a way as would not adversely affect
any dividend that might accrue to the applicant qua
shareholder in
the respondent. Notwithstanding the order made in the review
application - apparently with the intention of achieving
such effect
-I doubt that it would be competent to make any such order. If the
dividends to which the applicant might be entitled
to receive from
the respondent are diminished as a consequence of the effect on the
company’s revenue or financial position
of delinquent conduct
by the respondent’s directors, the applicant may, if so
advised, have resort to appropriate remedies
to deal with the
position. I do not consider that the costs order that the applicant
seeks, so as todistinguishthe ultimate impactof
a costs order
against the respondent on itself from that on its fellow
shareholders, is a proper surrogate for those remedies.
In the result the following orders are made:
(a) It is declared that,insofar as the company’s corporate
personality and title to its property were concerned,the
reinstatement
in terms of
s 82(4)
of the
Companies Act 71 of
2008
of the first respondent’s registration as a company had
retrospective effect from the date upon which the first respondent
was deregistered, so that the property that was vested in it at the
date of its deregistration is deemed to have remained as its
property
as if it had not been deregistered.
(b) It is further declared, in terms of
s 83(4)
of the said Act,
that the arbitration proceedings between the applicant and the first
respondent before Mr WG Burger SC
at first instance
and thereafter before Messrs SF Burger SC,
HM Scholz SC and AC Oosthuizen SC,
constituted as
an arbitration appeal tribunal, during the period that the first
respondent was not registered as a company, as
well as the related
review application proceedings in the High Court, and also the
current proceedings shall be deemed to have
been validly and
effectively instituted and conducted.
(c) The arbitration award set forth in the ‘Arbitrator’s
Award and Reasons’, signed by W.G. Burger SC, dated
24 July
2008, and the costs provision in the arbitration award set out at
para 32 of the ‘Appeal Tribunal Award’,
signed by
S.F. Burger SC, H.M. Scholtz SC and A.C. Oosthuizen SC, dated
18 October 2010, are made orders of court in terms
of s 31(1)
of the Arbitration Act 42 of 1965.
(d) The first respondent shall be liable for the applicant’s
costs of suit on the scale as between attorney and client, including
the costs of two counsel. (Such costs shall include the costs
incurred in connection with the hearing on 27 February 2012.)
A.G. BINNS-WARD
Judge of the High Court
1
Three
parties were joined as respondents in the application. The second
and third respondents were the Minister of Trade and Industry
and
the Minister of Finance, respectively. The second and third
respondents did not take an active role in the proceedings; the
third respondent having filed a notice of intention to abide the
court’s judgment. It has therefore been convenient for
the
purposes of this judgment to refer to the first respondent, save in
the orders made, simply either as ‘the respondent’,
or
‘the respondent company’.
2
Citing
Butler and Finsen,
Arbitration in South Africa
at p.273. An
applicant for relief in terms of
s 31(1)
of the
Arbitration Act
ordinarily
discharges the onus by proving the arbitration agreement
and that the award was made consequent upon the implementation of
the
provisions of the agreement; cf.
Daljosaphat Restorations
(Pty) Ltd v Kasteelhof CC
2006 (6) SA 91
(C), at para 27.
3
Vidavsky
,
which involved a matter in which there had not been service of the
notice of setdown in respect of the arbitration hearing,
provides an
example of a case in which evidence
dehors
the award was
relevant to the determination of the question as to whether the
award could properly form the subject of a court
order.
4
See
also
F & I Advisors (Edms) Bpk en 'n Ander v EersteNasionale
Bank van SuidelikeAfrikaBpk
[1998] ZASCA 65
;
1999 (1) SA 515
(A) ([1998]
4 All SA
480)
at 525H – 526A and 526D – E.
5
See
Lipschitz NO v UDC Bank Ltd
1979 (1) SA 789
(A) at
797G-H.
6
The
import of the term ‘
financial
assistance
’
in the context of
the provision was also problematic. See
Lipshitz
NO
(note
5
)
at 798-9.
7
The
judgment in
Lipshitz NO
treated
of the import of
s 86
bis (2) of the 1926
Companies Act,
which
was replicated in s 38(1) of the 1973 Act.
8
Atpara 47.
9
1959
(4) SA 419
(A).
10
Footnotes
omitted.
11
The
facts in
Gradwell
, which afford an illustration of the
distinction between ‘
direct object
’ and ‘
ultimate
goal
’, are succinctly summarised in the judgment in
Lipshitz NO
at 799A-D.
12
Lipshitz
NO
at 799E.
13
It
is not apparent from the award whether the draft guidelines had been
adopted and put into effect by 2002. The appeal tribunal’s
reasons mention a process of the formulation of guidelines, which
culminated in the publication of a set of guidelines in July
2002.
14
See
Peninsula
Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others
supra, at para 20.
15
At
para 5-6, 9, 12,19, 21 and 23-24.
16
In
Absa Bank v CPIC
(at para 63), Rogers J was
prepared to assume that a court might make an order in terms of its
powers in terms of s 83(4)
of the 2008
Companies Act to
‘
to
validate things that happened during the period of dissolution’,
but found it unnecessary on the facts of the case that
any such
order should be made.
17
The
en passant
remark
in para 20 of the full court’s judgment in
Absa
Bank Ltd v CPIC
supra that ‘
if
the
interested party
could not
procure the lodging of the outstanding return and thus obtain
restoration from the Registrar in terms of
s 73(6A)
, he could
approach the court in terms of
s 73(6)
and obtain restoration
if this was just and equitable
’
was
plainly made
per incuriam
.
Section 73(6A) of the 1973
Companies Act provided
for an application
to the Registrar of Companies only by the deregistered company
itself, and not by an ‘
interested
party
’
.
Section 26(6)
of the
Close Corporations Act (which
predated the introduction of
s 73(6A)
of the
Companies Act) provided
by contrast for an application for
the re-registration of a deregistered close corporation to be made
on the application of ‘any
interested person’. The
structure of
s 26(6)
and (7) of the
Close Corporations Act
appears
to have been directed at facilitating the achievement by
administrative means what
s 73(6)
of the
Companies Act required
to be done judicially.
18
Before
its substitution in terms of
s 224(2)
of Act 71 of 2008 with
effect from 1 May 2011.
19
The
observation in
Insamcor
was
described in
CA Focus CC v Village Freezer t/a Ashmel Spar
[2013] ZASCA 136
(27 September 2013), at para 7,
as
‘
an obiter dictum…somewhat
tentatively
’
made. See also
Peninsula Eye Clinic (Pty) Ltd v
Newlands Surgical Clinic (Pty) Ltd and Others
2012
(4) SA 484
(WCC),
[2012] 3 All SA 183
, at para 23.
20
In
CA Focus
,Cachalia JA ventured
en passant
and
obiter that the omission from s 82(4) of the express
retrospectivity clause might be indicative of a realisation by
the
legislature that the retrospective restoration of the registration
of companies in a manner that deemed them not ever to
have been
deregistered could give rise to ‘potential anomalies’
(
at para 22)
.
An
example of a potential anomalous consequence was given at para 20
of the judgment.
21
1982
(3) SA 474
(T) at 477 C-D.
22
Section
5 provides in the respect most relevant for present purposes that
the Act ‘
must be interpreted and applied in a manner that
gives effect to the purposes set out in section 7
’.
It also permits, to the extent appropriate, the consideration of
foreign law for the purposes of interpreting and applying
the Act.
Section 7 sets out the purposes of the Act with an emphasis on
simplicity, flexibility, efficiency and predictability.
23
The
relevant history is usefully related in the full court’s
judgment in
Absa Bank Ltd v CPIC
supra.
24
See
Absa Bank Ltd v CPIC
supra, at para 25 and the other
authority cited there.
25
In
Bright Bay Property Service
supra, at para 28,
Henney J
also rejected the notion that the court could exercise an inherent
jurisdiction
. The learned judge appears to
have done so, however, on the basis that the exercise of such a
jurisdiction would negate an unambiguous
expression of legislative
will. The ‘legislative will’ identified by Henney J
was an intention to do away with
the retrospectivity provision in
s 73(6A) of the 1973
Companies Act. As
apparent in this
judgment, I do not share the learned judge’s view that such a
legislative will is unambiguously manifest
in the provisions of the
2008
Companies Act.
26
In
Re M. Belmont & Co., Ltd
[1952] Ch. 10
,
[1951] All ER
898
, Wynn-Parry J used the expression ‘
inherent
jurisdiction
’ to describe the powers conferred by the
phrase ‘
order, upon such terms as the court thinks fit
’
in s 352(1) of the 1948 English
Companies Act. Used
in the same
manner the expression could apply equally to the phrase ‘
any
other order that is just and equitable in the circumstances
’
in s 83(4)(a) of the 2008
Companies Act.
27
The
anomaly of the reinstatement having occurred upon the application of
the deregistered (and therefore legally non-existent)
company itself
does not appear to have been considered by the court of the parties.
28
In
Fabb&Ors v Peters &Ors
[2013] EWHC 296
(Ch) (18
January 2013) (at para 20) the effect of
s 1028(1)
was
considered to render effective proceedings commenced in the name of
the company before its restoration to the register. The
proceedings
were, however, struck out for reasons that are of no relevance in
the current matter. The effect of the juxtapositioning
of provisions
equivalent to sub-sections 1028(1), (3) and (4) in the 1985 English
Companies Act was
explained by the Court of Appeal in
Top
Creative Ltd and another v St Albans District Council
[2000] 2
BCLC 379
(CA); see also
Tyman's Ltd v Craven
[1952] 1 All ER
613
(CA),
[1952] 2 QB 100.
It is doubtful that the reasoning in
those judgments can be applied in respect of reinstatement of a
company’s registration
in terms of s 82(4) of the 2008
Companies Act because
of the effect of
s 83(1)
, which clearly
provides that the effect of deregistration is
ipso facto
to
dissolve the company and the absence of any provision with an
expressly retrospective deeming provision such as that in
s 1028(1)
of the English statute.
29
Sections
1028 and 1032 of the Companies Act, 2006 (c.46).
30
Section
601AH(5) of the Corporations Act, 2001
31
For
examples of the relevant provisions in Canadian legislation, which
are contained in the provincial statutes, see e.g.
The Queen v.
Lincoln Mining Syndicate Ltd.
,
1959 CanLII 44
(SCC),
[1959] SCR
736
,
Royal Bank of Canada v. Cressler Hotels Ltd.
,
1980
CanLII 1072 (AB QB)
and
Willow Green Developments Ltd. v. Lucas
Anderson Construction (1993) Co. Ltd.
,
1998 CanLII 4518 (BC SC).
32
Cf.
e.g.
Sidumo v Rustenburg Platinum Mines Ltd
2008 (2) SA 24
(CC) ((2007) 28 ILJ 2405
[2007] ZACC 22
; ;
2008 (2) BCLR 158
;
[2007] 12 BLLR 1097
at
para 245;
Shoprite Checkers (Pty) Ltd v Ramdaw NO
2001
(4) SA 1038
(LAC) (2001) 22 ILJ 1603;
[2001] 9 BLLR 1011)
at
para 57; and
R v Padsha
1923 AD 281
at 312
33
See
the speech of Lord Sumner in
Morris v Harris
[1927] AC 252
,
at 257.
34
See
Pieterse v Kramer N.O.
1977 (1) SA 589
(A), at 600-601H. The
court in
Pieterse
was dealing with the interpretation of
s 191(1) of the Companies Act 46 of 1926, which was closely
similar to s 420
of the 1973 Act and its equivalents in the
successive English statutes discussed in
Peaktone Ltd v Joddrell
[2013] 1 All ER 13
(CA).
35
See
also
Re Donald Kenyon Ltd
[1956]3 All ER 596 (Ch), approved
by the Court of Appeal in
Regent Leisuretime Ltd. v Natwest
Finance Ltd
[2003] EWCA Civ 391
, and compare
Re Huntingdon
Poultry Ltd
[1969] 1 All ER 328
(Ch).
36
Cf
Berrange
v Registrar of Companies
[2008] JOL 21225
(N),
[2007] ZAKZHC 35
and contrast
Village Freeezer t/a Ashmel Spar v CA Focus CC
2012 (6) SA 80 (ECG) at para 27-28.
37
The
editors of
Henochsberg on the
Companies Act 71 of 2008
express a contrary view without any motivation. The general effect
of the statute however goes against the notion of allowing
that a
company should be without directors; hence upon incorporation the
incorporator is deemed to be a director until directors
are elected
thereafter in the ordinary course (see s 67 of the Act). The
notion that the directors are reinstated as part
of the
reinstatement of the company’s registration does not, however,
imply that any conduct by them purportedly in that
capacity during
the company’s period of deregistration would be validated. It
would, however, be open to such directors
to resolve to ratify their
actions during this period. Any unjustly prejudicial effect of any
such ratification would be amenable
to amelioration by the court at
the instance of any affected party in terms of s 83(4).
38
See
e.g.
Barclays National Bank Ltd v Kalk
1981 (4) SA 291
(W) at 295;
Boland Bank Bpk v Mouton
[1997] 4 All SA 67
(C) at
73i.
39
See
e.g.
Kalk v Barclays National Bank Ltd
1983 (3) SA 619
(A) at 633–634.
40
See
also
Insamcor
(
Pty
)
Ltd v Dorbyl Light and General
Engineering
(
Pty
)
Ltd
2006 (5) SA 306
(W) at para 27.