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[2014] ZAWCHC 48
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Ellis v Saga Wine Farms (Pty) Ltd and Others (4469/2014) [2014] ZAWCHC 48 (4 April 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
CASE
NO.: 4469/2014
DATE:
04 APRIL 2014
REPORTABLE
In the matter
between:
DANIEL JACOBUS
ELLIS
..................................................................
APPLICANT
And
SAGA WINE FARMS
(PTY) LTD
.....................................
FIRST
RESPONDENT
ALFIRA LARINA
FARITOVNA
.................................
SECOND
RESPONDENT
BURKINA FLURA
FARITOVNA
..................................
THIRD
RESPONDENT
FREDRICK JAMES
COETZEE
.................................
FOURTH
RESPONDENT
ELDRIDGE
MULLER
....................................................
FIFTH
RESPONDENT
THE COMPANIES AND
INTELLECTUAL
PROPERTY
COMMISSION
.........................................
SIXTH
RESPONDENT
THE MASTER OF THE
HIGH COURT,
CAPE
TOWN
….......................................................
SEVENTH
RESPONDENT
SOUTH AFRICAN
REVENUE SERVICES
.............
EIGHTH
RESPONDENT
JUDGMENT
DELIVERED ON FRIDAY, 04 APRIL 2014
DLODLO, J
INTRODUCTION
[1] The Applicant in
this matter was appointed as financial manager of the First
Respondent in terms of various accounting services
agreements. These
agreements have never been terminated. The First Respondent is a
company duly incorporated in accordance with
the Company Laws of
South Africa. The First Respondent had only one shareholder and
director by the name of Roza Galimovna Sagazidinov
(hereinafter
referred to as “Roza”). Roza was a resident in Moscow,
Russia and she died on 3 August 2013. Even at the
time of Roza’s
demise, she was still the sole shareholder and director of the First
Respondent. At the time of Roza’s
death, the First Respondent
owned an immovable property which operated as a wine estate under the
name and style of Lushof Wine
Estate. Roza had two children cited as
Second and Third Respondents in this application. It does appear
though in the Founding
papers that the relationship between the
Second and third Respondents is estranged and/or that there exist
animosity between the
two. The Second and Third Respondents are
sisters and they are both resident in Moscow, Russia. It seems common
cause that Roza
died without a Will at least in respect of her
shareholding and directorship of the First Respondent. In other words
there is no
instrument she left that deals with the distribution of
her South African assets. For all intents and purposes Roza died
intestate
in respect of at least her South African assets. According
to the Founding papers there is currently nobody acting on behalf of
the First Respondent.
[2] It is, however,
common cause that the Fifth Respondent is the manager of the farm
owned by the company which is involved in
the growing of wine grapes
and making of wine. An Executor has apparently been appointed to the
deceased’s Russian estate.
However, in South Africa to date the
Master has not yet appointed either the Executor to the South African
estate of Roza, nor
has an Interim Curator been appointed by the
Master to such estate as envisaged in terms of Section 12 (1) of the
Administration
of Estates Act. The Fourth Respondent applied to the
Master on nomination of one of the two interstate heirs (the Second
and Third
Respondents), for his appointment as Executor. The Master
required the Fourth Respondent (if appointed) to put up security in
terms
of the Administration of Estates Act. The Fourth Respondent
failed to put up security. Another objectionable aspect is that the
Fourth Respondent is also the attorney of record of the Second
Respondent (with whom the Third Respondent is in conflict). An
objection was thus lodged with the master against the Fourth
Respondent’s appointment.
[3] The Third
Respondent according to the Answering papers has nominated an
independent third party as Interim Curator and who in
due course
would become the Executor of the deceased’s South African
estate. I understand that such a request has been submitted
to the
Master. The proposed appointee is a senior attorney (Mr. Johann
Jacobs) who is the director of the established law firm
Cliffe Dekker
Hofmeyr Inc and he specializes in the administration and winding up
of deceased estates. In truth the Administration
of Estates Act
provides for the manner in which the Master is to proceed in such
circumstances. Importantly, any appointment as
Executor or Interim
Curator is one to be made by the Master in terms of the Act and
subject to such person providing security to
the satisfaction of the
Master. No such appointments are made by Courts of law. The Applicant
seeks an order that he be appointed
as “Interim Receiver”
to the First Respondent. The Third and Fourth Respondents oppose this
application and in limine
they contend that:
(a) The application
is misconceived and the relief sought cannot and should not be
granted;
(b) The matter lacks
urgency and the launch of the application on urgent basis is an abuse
of Court process.
THE RELIEF SOUGHT
[4] As highlighted
supra the Applicant apart from seeking that he be appointed as
“Interim Receiver”, he also seeks
his appointment:
“pending the
finalization of the administration of the deceased estate of the late
Roza Sagazidinova” and “that
such interim receiver be
authorized and directed to take control of the business of the
company, including but not limited to all
assets, sales and finance
of the company.” The Applicant further seeks relief that the
Receiver (himself) be authorized and
directed to:
(a) Preserve all the
assets of the company; (b) Receive all income of the company, and to
pay all reasonable expenses and disbursements
of the company into the
company’s banking accounts; (c) Bring or defend any action or
legal proceedings on behalf of the
company; (d) Compromise any debt
of the company; (e) continue with agreements, cancel leases, or
employment agreements on behalf
of the company; (f) Employ
bookkeepers, accountants, auditors or any person on behalf of the
company; (g) Exercise the power to
borrow money required for the
business of the company; and (h) Approach the Court for further
directions and powers.
DISCUSSION
[5] Mr. Montzinger
prefixed his submissions by emphasizing the juristic nature of the
First Respondent. For this he relied on the
provisions of Section 19
(1) (a) and (b) of the Companies Act, 2008 (“the
Companies
Act&rdquo
;).
Section 19
(1) (a) and (b) reads:
“From the date
and time that the incorporation of a company is registered, as stated
in its registration certificate, the
company-
(a) Is a juristic
person, which exist continuously until its name is removed from the
companies register in accordance with this
Act;
(b) Has all the
legal powers and capacity of an individual, except to the extent
that-
(i) A juristic
person is incapable of exercising any such power, or having any such
capacity; or
(ii) The company’s
Memorandum of Incorporation provides otherwise.”
Mr. Montzinger also
placed reliance on the commentary to the above uoted section by
writers in Henochsberg (formerly edited by:
The late Hon Mr. Justice
PM Meskin, Authors being Professor Piet Delport and Professor Quintus
Vorster), namely:
“…It is
one of the cardinal principles of company law that “[a]
registered company is a legal persona distinct
from the members who
compose it…This conception of the existence of a company as a
separate entity distinct from its shareholders
is no merely
artificial and technical thing…”
I intend dealing
with Mr. Montzinger’s submission later on in this judgment.
[6] For present
purposes it suffices that I mention that the juristic nature of the
First Respondent has not been disputed. I may
add as well that this
is not an issue that plays a role in the determination of the
application brought by the Applicant. Substantiating
the application
it was submitted on behalf of the Applicant that the concept of
appointing a receiver is not a strange concept
in South Africa; this
is evidenced by Section 311 of the Companies Act 61 of 1973. Section
311 of the 1973 Companies Act provide
for a compromise or arrangement
between a company and its creditors or any class of them or between a
company and its members or
any class of them. Mr. Montzinger
contended that the duties of a receiver can be akin to that of a
liquidator. In this regard this
Court was referred to De Villiers v
Electronic Media Network (Pty) Ltd
1991 (2) SA 180
(W), a judgment by
Kirk-Cohen J where the judge inter alia held that, because the
receiver does not represent the company, even
if he is given “all
such powers as the liquidator would have had”, he cannot sue on
a cheque made in favour of the
company and endorsed “not
transferable”. In the latter event the company (which was in
liquidation) as payee was the
only one which could sue as holder of
the cheque.
In Mr. Montzinger’s
submission in the instant matter the
Administration of Estates Act 66
of 1965
does not provide a solution for the current position the
First Respondent finds itself in. I differ with this contention as it
would appear infra. In Mr. Montzinger’s submission even the
Articles of Association does not provide a solution. Concluding
his
submissions Mr. Montzinger insisted that the matter was urgent. I
hope to deal with urgency of the matter infra.
[A] RELIEF SOUGHT
SEEMINGLY CONTRARY TO THE PROVISIONS OF THE
COMPANIES ACT, 2008
AND
THE ARTICLES OF ASSOCIATION OF THE CONPANY
[7] The corporate
governance and business of a company is conducted pursuant to the
provisions of the
Companies Act, 2008
read together with the
Memorandum and Articles of Association of the company. The Memorandum
and Articles of Association stipulate
how the company is to be
governed and matters related thereto. The
Companies Act, 2008
, makes
provision; inter alia, for fiduciary duties and obligations of
Directors of a company; has provisions protecting against
the
reckless conduct of the business of a company (which would include
borrowing money) and provides for personal liability of
directors to
creditors in certain circumstances; and further provides for the
responsibilities of the accounting officers of the
company.
[8] The problem with
the relief sought by the Applicant is that it seeks to give him (and
he is neither a shareholder nor a Director
of the company) the power
to conduct the affairs of the company:
(a) Without regard
for the provisions of the
Companies Act, 2008
or the Articles and
Memorandum of Association of the company; (b) In a manner not
provided for or envisaged in either the companies
Act, 2008 or the
Articles and Memorandum of Association of the company; (c) Without
the Applicant being a director of the company;
(d) Without regard for
the rights of the shareholder of the company, which is the deceased
estate of the late Roza and in whose
deceased estate dominium in
respect of the shares of the company vests.
[9] Regard being had
to the aforegoing, I agree with Mr. Gess that the relief sought (if
granted) would place the control and management
of the conduct of the
company in the hands of the Applicant. Mr. Gess contends that the
relief sought is incompetent. The relief
sought would also (if
granted) authorize the Applicant to continue as Receiver until the
finalization of the administration of
the deceased estate of the late
Roza despite the fact that the Articles of Association of the company
make it clear that the Executor
or curator of the deceased estate of
the shareholder is entitled to be registered as a member of the
company (nomine officii),
and would then have the power to appoint
Directors and exercise all the rights of the shareholder of the
company. The Applicant
would furthermore usurp the functions and
rights of the Executor, and of the deceased estate, in the conduct of
the business of
the company. Clearly the relief sought would also
entitle the Applicant, who is not a director or liquidator of the
company, to
bring and defend legal proceedings on behalf of the
company. The Articles of Association of the company provide in clause
16 to
20 as to what is to happen in the event of the decease of the
sole shareholder of the company. Clause 16 provides as follows:
“20. Any
person who submits proof of his appointment as executor,
administrator, trustee, curator or guardian in respect of
the estate
of a deceased member of a company…..shall be entered in the
register of members of the company nomine officii,
and shall
thereafter, for all purposes, be deemed to be a member of the
company.”
[10] In paragraph 15
of the Founding Affidavit the Applicant suggests that even if the
Fourth Respondent were to be appointed as
Executor, the First
Respondent will still require the Applicant as its “representative”
(presumably as “Receiver”).
This evidences the failure on
the part of the Applicant to appreciate the manner in which the
affairs of a company are conducted.
Perhaps this is deliberately
overlooked for reasons best known to the Applicant. It does appear
that the Applicant overlooks the
fact that the Executor or Interim
Curator (once appointed) will be recognized as the shareholder, and
will appoint a director or
directors of the company in terms of the
Companies Act, 2008
and the Articles and Memorandum of Association of
the company. The Legislature made provisions for the control of a
company that
is wound up, whether that company is a solvent company
or an insolvent company. In either event, a liquidator is appointed
subject
to the supervision of the Master, and the furnishing of
appropriate security, and subject to the prescripts of the Insolvency
Act
and/or the
Companies Act. It
is of cardinal importance to note
that no provision is made for the appointment of a person such as the
Applicant in the manner
sought in the Notice of Motion.
[11] The Applicant
argues that provision is made for appointment by a Court of a
Receiver in the case of a scheme of compromise
in terms of Section
311 of the Companies Act, 1973 or
Section 155
of the
Companies Act,
2008
. But, I agree with Mr. Gess that such reliance is also
misconstrued and does not provide a basis for the Court to appoint
the Applicant
as Receiver. Importantly, a Receiver appointed in terms
of
Section 155
of the
Companies Act, 2008
, is appointed as a
consequence of and arising from a contract concluded between the
relevant parties and which makes provision
for a compromise between
the company and its creditors. Such a Receiver has been described as
being a “creature of contract
whose powers are those which the
compromise confers on him.” The parties may agree to the
appointment of a Receiver to administer
the compromise subject to the
powers stipulated in the agreement, and the Court may sanction such
agreement. Such a person, whose
function is usually to dealing with
creditor’s claims and enforcing the compromise, is not vested
with all the powers that
a liquidator would have under the
Companies
Act. He
does not represent the company. See Henochsberg on the
Companies Act at
545 to 546; Blackman, Commentary on the
Companies
Act at
pages 12-11 to 12-14; Imperial Bank Ltd v Barnard and Others
NNO
2013 (5) SA 612
(SCA) at 618-620; South African Fabrics v
Millman, NO and Another 1972 (4)SAa 592 (a) AT 600; De Villiers and
Others v Electronic
Media Network (Pty) Ltd
1991 (2) SA 180
(W) esp.
at 184 J to 185 B.
[B] THE
ADMINISTRATION OF ESTATES ACT 66 OF 1965 (DOES IT APPLY?)
[12] Yes, the above
Act cannot be left out of the equation. In my finding it applies with
full force herein. I thus agree that the
proposed relief is also
incompetent by reason of the provisions of the
Administration of
Estates Act in
that it purports to permit the administration of the
estate of a deceased person or a significant part thereof, and
indirectly
the dealing with certain assets of a deceased estate
outside the provisions of this Act. The following provisions are of
cardinal
importance and are imperative:
(a) This Act makes
it clear that deceased estates are not to be liquidated without
letters of Executorship, or otherwise subject
to the discretion of
the Master of the High Court (Section 13); (b) The Master appoints an
executor in terms of this Act, to liquidate
and distribute the estate
of a deceased person (subject to the provisions of the Act); (c) Even
in exceptional circumstances provided
for in the Act under
discussion, all Executors are required to conduct the administration
of a deceased estate: (i) Subject to
the supervision and direction of
the Master; and (ii) After having given such security to the
satisfaction of the Master for the
performance of his functions.
Importantly, provision is made in the Act for a situation in which no
Executor has yet been appointed
to the estate of a deceased person,
and in those circumstances the Master may appoint a person as an
Interim Curator to the estate
to deal with the estate of a deceased
person until Letters of Executorship have been granted or signed and
sealed as provided for
in Section 12 of the Act.
[13] The appointment
of a person by the Master as Interim Curator in terms of the Act is
subject to two important qualifications
(both of which clearly the
Applicant proposes to avoid). The first is provided for in Section 12
(2) of the Act, in that every
person to be appointed shall (before a
Certificate of Appointment is issued to him) find security to the
satisfaction of the Master
in the amount determined by the Master for
the proper performance of his functions. The second is that an
Interim Curator is required
(in terms of Section 12 (6) of the Act)
to account for the property in respect of which he has been appointed
in such manner as
the Master may direct. An Interim Curator remains
in office only until such time as an Executor is appointed.
[14] The above shows
clearly that the appointment that the Applicant in the instant matter
seeks is:
(a) An appointment
which is not provided for in the Act; (b) Is one that is not subject
to the supervision of the Master and in
respect of which the
Applicant will not be required to account to the Master; (c) Is one
in respect of which the Applicant will
not be required to give
security to the Master for the performance of his functions; (d)
Envisages the administration and dealing
with an asset of the
deceased estate (shares in the company) in a manner at variance with
the way in which estates are dealt with
in terms of the Act.
[15] It remains
important to note that in those instances in which the Courts have
been prepared (on application made) to appoint
Interim Curators in
respect of assets or the business of a deceased person prior to (or
in the absence of) an Executor having been
appointed, the courts have
consistently required that such appointment be subject to the
supervision of the Master and the person
so appointed giving security
to the satisfaction of the Master for the performance of his
functions. See: Ex Parte Adkins 1937
ECL 188; Ex Parte McEwan
1930
WLD 325
; Meyerwitz, The Law and Practice of Administration of
Deceased Estates (2010 Edition) page 7-1 to 9-15 especially 7-3 to
7-6.
[16] With regard to
the issue of giving security, it deserved to be pointed out that the
estate of the late Roza is that of a person
who was ordinarily
resident and domiciled in Moscow in the Russian Federation and not in
South Africa. The only mentioned assets
of the deceased are the
shares in the company. Ordinarily shares are considered in South
African law to be incorporeal movables.
There appears to be neither
cash nor any immovable property of any kind in the South African
estate of the late Roza. It would
appear thus that in the
circumstances the Master would be entitled to appoint an appropriate
person to liquidate the South African
estate in the manner as
provided in Section 25 (a) (ii) of the Act, in which event the Master
would not be required to insist on
security being given.
[17] It appears in
the Answering papers that the Third Respondent wishes that an
independent person (neither the Fourth Respondent
nor the Applicant)
be appointed by the Master as Executor to the South African estate of
her late mother (Roza) and that such person
be appointed in terms of
the
Administration of Estates Act. In
the interim and if there is to
be a further delay in the Master appointing an Executor, it would
appear to be appropriate that
an Interim Curator be appointed by the
Master to the estate of the late Roza in terms of Section 12 of the
Act. That person so
appointed will then be in a position to be
recognized as the shareholder of the company, nomine officii. The
latter person will
be appointed by the Master, and shall have
obligation to account to the Master and be required to give security
to the Master for
the performance of his functions. I am told that
the Third Respondent has already made such a request to the Master.
In the Answering
papers the Third and Fifth Respondents dispute that
the Applicant is a suitable person to be appointed. I hold that for
the reasons
advanced supra the relief sought must be refused. In
other words, this application qualifies to be determined only on this
point
in limine.
[C] URGENCY
[18] Mr. Montzinger
contended that on the basis of what the applicant set out in the
Founding Affidavit the matter is urgent. On
the other hand Mr. Gess
submitted that the matter hardly qualifies to be on this Roll in that
in his contention it is not at all
urgent. It is of importance to
note that Roza died in Moscow on 3 August 2013. According to the
Founding papers the Applicant has
been involved in discussions with
Kresfelder (as proposed Crisis Manager) and with the Fourth
Respondent relating to the affairs
of the company. These discussions
started in November 2013. It is not clear why these discussions could
not take place earlier
on. The application was lodged with the Master
on 14 January 2014 for the appointment of the Fourth Respondent as
Executor even
though Roza died on 3 August 2013. Accordingly, I would
not differ with Mr. Gess that “urgency” is of the
Applicant’s
own making. It is clear that on this aspect also
the Applicant has obvious difficulty. Lack of urgency entitles the
Court to strike
an application off Roll with the necessary costs
order to compensate a Respondent who is dragged to Court on short
notice. However,
this matter having been dealt with as shown above
qualifies itself to be dismissed on the point in limine correctly
raised on behalf
of the Respondents fully dealt with earlier on in
this judgment.
COSTS
[19] The purpose of
costs is to inter alia indemnify the successful party for the
expenses to which he has been put through having
been unjustly
compelled to defend litigation. The general rule of our law is that
costs follow the event; that is a successful
party is awarded costs.
An award of costs is always a matter of discretion in all the
circumstances of the case dealt with. Mr.
Montzinger contended that
the costs herein should be paid by the third and Fifth Respondnets in
the event the application is successful.
In the alternative,
contended Mr. Montzinger, should the Court dismiss the application
the costs should be borne by the First Respondent
in that (in his
view) the Applicant acted and is acting in the best interest of the
First Respondent. I do not agree with the latter
contention.
ORDER
[20] In the
circumstances the following order is made:
(a) The application
is dismissed with costs.
DLODLO, J
APPEARANCES:
For the
Applicant : ADV. ADRIAN MONTZINGER
Instructed
by : Heyns & Partners Inc.
(Ref: PF
Theron – 021 424 7008)
For Third &
Fifth Respondents : ADV. DAVID GESS
Instructed
by : Springer-Nel Attorneys
(Ref: A.
Springer – 021 426 1521)
First, Second,
Fourth, Six, Seventh
and Eighth
Respondents : NO REPRESENTATION