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[2014] ZAWCHC 139
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Karl And Sarah Properties (Pty) Limited v Lane N.O and Others (16766/13) [2014] ZAWCHC 139 (30 April 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE division, CAPE TOWN)
Case
No
16766/13
DATE:
30 APRIL 2014
In the matter
between:
karl
& Sarah PROPERTIES
(Pty)
Limited
.........................................................................
Applicant
And
michael
john lane N.O
...............................................
First
Respondent
Hilmi
daniels N.O
..................................................
Second
Respondent
mflv
trading (Pty) LIMITED
(in
liquidation)
.........................................................
Third
Respondent
Mads
finn lindvig viuff
..........................................
Fourth
Respondent
lizzie
annie
viuff
.......................................................
Fifth
Respondent
master
of the high court
..........................................
Sixth
Respondent
magistrate
p andrews
..........................................
Seventh
Respondent
Court:
griesel J
Heard:
14 April 2014
Delivered:
30 April 2014
JUDGMENT
Griesel
J:
[1]
The applicant, Karl & Sarah Properties
(Pty) Limited, launched the present application, seeking wide-ranging
relief against
the various respondents herein. The first and second
respondents are the liquidators of the third respondent, MFLV Trading
(Pty)
Limited (in liquidation) (‘the company’), in their
capacity as such (‘the liquidators’). The fourth
respondent,
Mr Mads Viuff, was the sole director of the company,
whereas the fifth respondent, Mrs Lizzie Viuff, is his mother, who is
a loan
creditor of the company. The Master has been joined
ex
officio
as the sixth respondent, with
the magistrate who presided at a second meeting of creditors of the
company being the seventh respondent.
[2]
The application is being opposed by the
liquidators who have, in turn, launched a counter-application against
the applicant. The
other respondents abide the court’s
decision.
Factual
background
[3]
The company, which was previously known as
Maxabella (Pty) Limited, was prior to its liquidation engaged as a
developer in the construction
of upmarket homes for clients in
the Western Cape. It also owned two immovable properties at the
Arabella Estate, between Kleinmond
and Bot River.
[4]
On 9 November 2007 the company concluded a
written building contract with the applicant, for the construction of
a house on the
property of the applicant near Hermanus at a contract
price of approximately R10 million. In the course of the
contract, a
dispute arose between the parties, which dispute was
submitted to arbitration. In its statement of claim, delivered
on 12
April 2010, the applicant claimed payment of damages from the
company in an amount of R3 647 438,42.
[5]
On 30 April 2010, Mr Viuff, as sole
director of the company, passed a resolution to change the name of
the company from Maxabella
(Pty) Limited to MFLV (Pty) Limited. This
change was duly registered on 18 May 2010 without the knowledge of
the applicant.
[6]
In the interim, on 27 January 2010, the
company transferred one of its properties to Mr Viuff and his wife
for a purchase price
of R5,739 m. The purchase price was
allegedly discharged by set-off against the loan account of his
mother against the company.
On 1 March 2010, the company transferred
its second property to Mr Viuff’s father-in-law, Mr Dahl, for a
purchase price of
R3,876 m, again allegedly discharged by
set-off against the loan account of his mother.
[7]
On 10 June 2010, the recently renamed
company was provisionally wound up by this court under case no
12653/10, again without
the knowledge of the applicant. The
petitioning creditor was Mrs Lizzie Viuff, who claimed to be a
creditor on loan account in
an amount of R1 696 130,
whereas her son, Mr Viuff, allegedly had a loan claim for R216 861
against the company.
A final liquidation order was granted on 27 July
2010. Thus, in essence, this was a ‘friendly family
winding-up’, as
the applicant described it.
[8]
The
liquidators were provisionally appointed on 7 July 2010 and finally
on 18 October 2010. In the meantime, on 9 September 2010,
at a first
meeting of creditors, the applicant presented a claim (claim 1) for
R3 647 438,42, which is the full amount
claimed in the
pending arbitration. The claim was, however, rejected on the basis
that it was not liquidated.
[1]
No other claims were presented at that meeting.
[9]
On 25 November 2010, at a second meeting of
creditors, the applicant presented and proved a claim for R108 300
(claim 2), consisting
of a liquidated portion of the larger claim 1
previously presented and rejected. This claim forms the subject of
the counter-application,
in which the liquidators seek an order
reviewing and setting aside the decision of the presiding magistrate
to admit the claim.
[10]
Again, no other claims were presented at
that meeting, which was thereupon adjourned to 17 February 2011. The
second meeting of
creditors was subsequently postponed on a number of
occasions.
[11]
During July 2011, the applicant applied to
the Master for the holding of an inquiry in terms of s 417 of
the 1973 Companies
Act, which request was granted by the Master. On
the eve of the first session of the inquiry, on 21 November 2011, the
Viuffs launched
an application under case no 23780/11, supported by
the liquidators, to set aside the s 417 inquiry. This
application was
unsuccessful and subsequently the Viuffs as well
as Mr Lane, the dominant liquidator, were compelled to testify before
the
commissioner.
[12]
After all this, Mr Lane addressed a letter
to the Master on 15 December 2011, stating that they (the
liquidators) had been advised
that the second meeting of creditors
had been adjourned to 29 March 2012. He proceeded:
‘
In
our view, no purpose is presently being served by keeping that
meeting open as, in our view, there is no business to conduct
thereat.
We request that you close this meeting as soon as
possible and let us have your confirmation that this has been done.
This will enable us to continue with our administration of the
estate as a number of creditors have expressed an interest in
submitting
claims for proof. This can only be done once the second
meeting of creditors is closed and a general and special meeting of
creditors
convened for the proof of further claims.’
[13]
The Master acceded to this request by the
liquidators and on 19 January 2012, without the knowledge of the
applicant, the magistrate
(the seventh respondent herein) prematurely
reconvened and closed the second meeting of creditors, more than two
months before
the date to which it had been adjourned. This opened
the way for the liquidators to convene a special and a general
creditors’
meeting in terms of ss 41 and 42 of the
Insolvency Act for 8 March 2012, at which meeting the creditors who
had previously
‘expressed an interest in submitting claims for
proof’, namely Mr Viuff and his mother, duly proved their
claims. Various
resolutions were also adopted – in the absence
and without the knowledge of the applicant.
[14]
When the applicant’s attorney arrived
at court for the postponed second meeting, on 29 March 2012, she
discovered that the
matter had not been enrolled for that date as it
had earlier been closed at the behest of the liquidators under the
circumstances
as outlined above. She thereupon prevailed upon the
magistrate to reopen the second meeting of creditors and to further
postpone
it. It was only at a much later date, on 29 April 2013, that
the applicant’s attorney discovered that a special and a
general
meeting of creditors had in fact been held on 8 March 2012 at
which certain claims were proved and resolutions adopted. This was
when a copy of the liquidators’ response to the application for
their removal was forwarded to them by the Master. These
events form
the subject of prayers 1 9 in the applicant’s notice of
motion, which was issued on 11 October 2013.
[15]
Against this background, I find it
convenient to deal first with the counter-application of the
liquidators before considering the
relief claimed on behalf of the
applicant.
Counter-application
[16]
As mentioned earlier, the liquidators seek
an order reviewing and setting aside the decision of the presiding
magistrate to admit
the applicant’s claim 2; alternatively, an
order setting aside the Master’s refusal to expunge claim 2.
[17]
Apart
from a number of procedural objections raised against the
counter-application, the applicant argued
in
limine
that the liquidators have failed to launch their counter-application
without unreasonable delay and not later than 180 days
after the
date on which they became aware of the administrative action sought
to be impugned, as required by s 7(1)(a) of
the Promotion of
Administrative Justice Act, 3 of 2000 (‘paja’).
[2]
(It was not disputed that the decision of the magistrate on 25
November 2010 to admit claim 2 amounts to ‘administrative
action’.
[3]
)
[18]
On the facts of the present matter, it
would appear that the period of 180 days commenced to run on 25
November 2010, as Mr Lane
was present at the meeting when claim 2 was
admitted. Within a week of that meeting, on 2 December 2010, C&A
Friedlander, who
had acted on behalf of the Viuffs, the company as
well as (at certain stages) the liquidators, wrote to the applicant’s
attorneys
that they had called upon the liquidators to obtain the
expungement of claim 2 on the basis that ‘the submission
to
proof of the claim was grossly irregular in that the claim was
both disputed and unliquidated’.
[19]
On 6 December 2010, the liquidators wrote
to the arbitrator, seeking a postponement of the arbitration and
mentioning,
inter alia
,
that claim 2 ‘will have to be expunged’.
[20]
The very next day, on 7 December 2010, Mr
Lane addressed the Master, requesting him to expunge claim 2 for the
reasons set out in
his letter of even date addressed to the
applicant’s attorneys.
[21]
On 19 July 2011, the liquidators again
requested the Master to expunge claim 2. The Master’s
representative responded, on
26 August 2011, that the presiding
officer at the Wynberg office had already ‘approved’ the
claim, with the result
that the Master was
functus
officio
.
[22]
This response caused C&A Friedlander,
on 5 September 2011, to address the Master and the arbitrator,
stating that they acted
on behalf of the liquidators and that they
‘are instructed to advise that our client is to bring an
application to the Western
Cape High Court for the review of the
decision of the Magistrate Wynberg to admit the claim of Karl &
Sarah Properties (Pty)
Ltd on 25 November 2010 in the amount of
R108 300 (“the review application”)’. (In
parentheses, it should
be noted, as the applicant repeatedly pointed
out, that the attorneys appear to have had an obvious conflict of
interest insofar
as they were at that stage representing not only the
company in liquidation, its sole shareholder and director, and
the petitioning
creditor; but also the liquidators.)
[23]
On the eve of the first session of the
s 417 inquiry, on 21 November 2011, C&A Friedlander wrote to
the applicant’s
attorneys, again stating that they had been
instructed ‘to brief senior counsel to move an urgent
application to
inter alia
,
review the master’s decision regarding his failure to
expunge your client’s claim’. The application that
was
subsequently launched, however, did not seek the expungement of claim
2. In an affidavit in support of an application by the
Viuffs to set
aside the s 417 inquiry, Mr Lane reiterated that the liquidators
‘remain of the view that the second claim
ought to be
expunged’.
[24]
It thus appears that, notwithstanding their
knowledge of the alleged irregular administrative action from
Day 1 and notwithstanding
their professed objective of assailing such
action, the liquidators have delayed from 25 November 2010 to 14
February 2014, ie
a period of more than three years, before launching
the present counter-application. In these circumstances, it is clear
to me
that they have failed to comply with the mandatory provisions
of s 7 of PAJA.
[25]
However,
in terms of s 9(2) of PAJA the court may extend the period of
180 days ‘for a fixed period’ on application
by the
person concerned ‘where the interests of justice so
require’.
[4]
[26]
In
Camps
Bay
Ratepayers’ and Residents’ Association v Harrison
,
[5]
these provisions were considered by the Supreme Court of Appeal,
where Maya JA (writing for the court) said the following:
‘
Section
9(2)
[of PAJA] however allows the extension of these time frames where
“the interests of justice so require”. And the question
whether the interests of justice require the grant of such extension
depends on the facts and circumstances of each case: the party
seeking it must furnish a full and reasonable explanation for the
delay which covers the entire duration thereof and relevant factors
include the nature of the relief sought, the extent and cause of the
delay, its effect on the administration of justice and other
litigants, the importance of the issue to be raised in the intended
proceedings and the prospects of success.’
[27]
In casu,
the
liquidators have not attempted to comply with these requirements,
nor have they asked the court to invoke the provisions
of s 9(2)
of PAJA; in fact, they have not even referred to the provisions of
PAJA. In these circumstances, it follows that
the counter-application
is fatally defective and falls to be dismissed for this reason alone.
It is thus not necessary to consider
the various arguments and
counter-arguments relating to the merits of claim 2.
Prayers 1–9
[28]
Turning to the main application, prayers
1–9 deal with the closure of the second creditors’
meeting on 19 January 2012;
holding of the special meeting of
creditors on 8 March 2012; proof of the Viuffs’ claims at that
meeting; and holding of
the general meeting of creditors on the same
date and acceptance of resolutions at that meeting.
[29]
The
court’s power to review and set aside all these proceedings is
derived from s 151 of the Insolvency Act,
[6]
read with s 339 of the 1973 Companies Act. In
Nel
& another NNO v The Master (ABSA Bank Ltd & others
intervening)
,
[7]
the
Supreme Court of Appeal (per Van Heerden JA) succinctly summarised
the effect of these provisions:
‘
South
African Courts have long accepted that the review envisaged by s 151
of the Insolvency Act is the “third type of
review”
identified more than a hundred years ago in
Johannesburg
Consolidated Investment Co v Johannesburg Town Council
,
[8]
ie where Parliament confers a statutory power of review upon the
court. In the
Johannesburg
Consolidated Investment Co
case,
Innes CJ stated,
[9]
with
reference to this kind of review, that the Court could
“
enter
upon and decide the matter
de novo
. It possesses not only the
powers of a Court of review in the legal sense, but it has the
functions of a Court of appeal with the
additional privileges of
being able, after setting aside the decision arrived at . . .,
to deal with the whole matter
upon fresh evidence . . . ”
Thus,
when engaged in this third kind of review, the Court has powers of
both appeal and review with the additional power, if required,
of
receiving new evidence and of entering into and deciding the whole
matter afresh. It is not restricted in exercising its powers
to cases
where some irregularity or illegality has occurred.’
[30]
It follows that the court has the power to
set aside
in toto
the proceedings at which the Viuff’s claims were admitted to
proof and to expunge those claims.
The reviewability of
the closure of the second meeting of creditors on 19 January 2012
(prayers 1 3)
[31]
Section 386(1)(d) of the 1973 Companies Act
provides for the convening of a second creditors’ meeting,
while s 412(1)
prescribes the manner in which such meeting is to
be convened. This includes publication of the time and place of
the second
meeting in the Government Gazette and local newspapers,
and notice to persons claiming to be creditors who have registered
their
names with the liquidator.
[32]
The obvious legislative intention is to
ensure that all interested parties are given fair notice and
opportunity in order to exercise
their rights. It is intended to be
an open and public meeting: as stated in s 39(6) of the
Insolvency Act, ‘[t]he place
where a meeting of creditors is
held shall be accessible to the public…’.
[33]
Once a second meeting of creditors has been
duly convened, the presiding officer ‘may, if necessary or
desirable, adjourn
the meeting from time to time’, as provided
in s 39(5) of the Insolvency Act. Where a meeting has been
adjourned to
a fixed date, it is axiomatic that the proper time for
closing such meeting would be at the adjourned meeting, on the date
as fixed.
The second meeting in this instance having been adjourned
in the presence,
inter alia
,
of the applicant’s representatives, they were
legitimately entitled to expect that they would be afforded an
opportunity to exercise their rights to be heard on the adjourned
date. The seventh respondent could thus only lawfully and validly
have closed the meeting on the date to which it had been adjourned.
This follows, in my view, not only from the requirements
of
openness and publicity inherent in the applicable statutory
provisions, but also from the right to procedurally fair
administrative
action, as guaranteed by s 3(1) of
PAJA. Where the legislature has been at pains to ensure that a second
meeting of creditors
should be convened with due notice and publicity
and should be accessible to the public, I find it inconceivable that
such a meeting
could thereafter lawfully be closed informally and
without any notice to interested parties.
[34]
I am accordingly satisfied that the
premature closure of the second meeting of creditors by the seventh
respondent is a decision,
ruling or order of an officer presiding at
a meeting of creditors which is irregular, invalid and unlawful. It
accordingly falls
to be reviewed and set aside under s 151 of
the Insolvency Act at the behest of the applicant, who clearly is a
person aggrieved
by such decision, ruling or order. This appears to
have been recognised by the seventh respondent: when the irregularity
of the
procedure was pointed out to her by the applicant’s
attorney on the date to which the meeting had originally been
adjourned,
she immediately set aside the earlier closure and
postponed the second meeting once more.
[35]
Once the premature closure of the second
meeting is set aside in terms of prayer 1, prayers 2 and 3 should
follow, ie that the second
meeting be declared to remain open and
ordered to proceed on the date to which it has been adjourned
(currently 5 June 2014, to
which it was adjourned on 30 January
2014).
The reviewability of
the holding of and proceedings at the special and general meetings of
creditors on 8 March 2012 (prayers 4
– 9)
[36]
Special meetings of creditors for the proof
of claims are convened in terms of s 42(1) of the Insolvency
Act, which expressly
provides:
‘
After
the second meeting of creditors
the
trustee shall convene by notice in the Gazette a special meeting of
creditors for the proof of claims against the estate in
question
whenever he is thereto required by any interested person who at the
same time tenders to the trustee payment of all expenses
to be
incurred in connection with such a meeting.’ (My emphasis.)
[37]
General
meetings are convened by a liquidator in terms of s 41 of the
Insolvency Act. They are convened ‘for the purpose
of giving
him (the liquidator) directions concerning any matter relating to the
administration of the estate’.
[10]
[38]
It was submitted on behalf of the applicant
that the special meeting held on 8 March 2012 was inherently invalid
and unlawful because
it was convened at a time when the second
meeting of creditors had not yet been lawfully closed. It therefore
did not occur
after
the second meeting of creditors, as prescribed by s 42(1) of the
Insolvency Act. In the light of my findings as set out above,
this
conclusion is unavoidable. It must accordingly follow that the
special meeting falls to be set aside as null and void (prayer
4);
that the claims of the Viuffs that were admitted at that meeting
likewise fall to be set aside (prayers 5 and 6); and that
the general
meeting held on the same date, together with the resolutions adopted
thereat must suffer a similar fate (prayers 7
– 9). Invalidity
of the special meeting necessarily invalidates the proof of claims at
that special meeting and without claims
having been validly proved
there could not have been any lawful voting for the resolutions at
the general meeting. Accordingly,
once the special meeting is set
aside, the general meeting and its procedures cannot stand.
[39]
In the light of these conclusions, it is
not necessary to deal with the applicant’s alternative basis
for assailing the validity
of the Viuff’s claims. Suffice it to
say that it is by no means clear that the claims would inevitably
have been admitted
by the presiding officer, had the applicant been
afforded the opportunity of interrogating the Viuffs with regard to
the validity
of such claims.
Prayer 10 removal
of the liquidators
[40]
Section 379(1) of the Companies Act
provides:
‘
(1) The
Master may remove a liquidator from his office on the ground—
(
a
)
. . .
(
b
)
that he has failed to perform satisfactorily any duty imposed upon
him by this Act or to comply with a lawful demand of the Master
or a
commissioner appointed by the Court under this Act; or
(
c
)
. . .
(
d
)
that the majority (reckoned in number and in value) of creditors
entitled to vote at a meeting of creditors . . . has
requested him in writing to do so; or
(
e
)
that in his opinion the liquidator is no longer suitable to be the
liquidator of the company concerned.’
[41]
In addition, s 381(1) imposes upon the
Master the duty
mero motu
to
‘take cognizance of the conduct of liquidators’ and where
‘
. .
. he has reason to believe that a liquidator is not faithfully
performing his duties and duly observing all the requirements
imposed
on him by any law or otherwise with respect to the performance of his
duties, or if any complaint is made to him by any
creditor, member or
contributory in regard thereto, enquire into the matter and take such
action thereanent as he may think expedient’.
[42]
On 29 November 2012, the applicant’s
attorneys addressed a substantive application to the Master in terms
of s 379(1), calling
upon him to remove the co-liquidators. This
request was motivated with reference to the history of the matter,
which was summarised
in some 38 pages (without annexures). Having
received the liquidators’ response on 5 March 2013, the Master
has to date failed
to make a decision regarding this request. In his
report to this court, the Master referred to the inquiry in terms of
s 417 which
had been authorised by him and explained that ‘the
Master felt to give this process a chance until it’s
finalized’.
[43]
The inquiry has in the meantime been
finalised and all the evidence led forms part of this record. There
can, accordingly, no longer
be any impediment to the Master making
his decision and no such impediment has been pointed out to me.
Moreover, s 6(2)(g)
of PAJA empowers the court to judicially
review an administrative action if the action concerned consists of a
failure to take
a decision. Clearly the Master is under a duty to
make a decision one way or the other in terms of the statutory
provisions referred
to above; he cannot simply ignore it, nor does he
claim to be entitled to ignore it. In the circumstances, I am
satisfied that
the applicant is entitled to appropriate relief in the
form of a
mandamus
to achieve this. I do not find it necessary, as requested by the
applicant, to be prescriptive as to the facts to be taken into
account by the Master in making his decision, save to require such
decision to be made within one month from the date of this judgment.
The Registrar will be requested forthwith to convey this order to the
Master.
Costs
[44]
No reason has been advanced as to why costs
should not follow the result. The applicant has asked that the
liquidators be ordered
to pay the costs
de
bonis propriis
. On a conspectus of the
evidence as a whole, I am satisfied that such an order is justified.
Not only was the applicant obliged
to come to court as a result of
the liquidators’ conduct, but it was obliged to oppose the
abortive counter-application.
Moreover, as pointed out by the
liquidators, the company has no assets (save for its potential claims
against the Viuffs), with
the result that it would be unfair to
expect the successful applicant eventually to contribute to the costs
of unsuccessful opposition
to its claims.
Order
[45]
For these reasons, an order is granted in
the following terms:
1.1 The seventh
respondent’s closure of the second meeting of creditors of the
third respondent on 19 January 2012 is reviewed
and set aside.
1.2 It is declared
that the second meeting of creditors in the winding up of the third
respondent remains open and will proceed
on the date to which it has
been adjourned, namely 5 June 2014.
2. The special
meeting of creditors in the winding-up of the third respondent, held
on 8 March 2012, is declared null and void and
the seventh
respondent’s admission of the fourth respondent’s claim
for R13 244 049.95 and the fifth respondent’s
claim
for R216 861.48 at such special meeting is reviewed and set aside.
3. The general
meeting of creditors in the winding-up of the third respondent held
on 8 March 2012 as well as the resolutions approved
at such meeting
are set aside.
4. The sixth
respondent is directed to make a decision in the application
submitted to the Master 29 November 2012 for the removal
of the first
and second respondents as co-liquidators of the third respondent,
within one month of the date of this order.
5. The
counter-application is dismissed.
6. The first and
second respondents are ordered to pay the costs of this application
and the counter-application
de bonis propriis
.
B
M Griesel
Judge
of the High Court
[1]
In
terms of
s 44(1)
of the
Insolvency Act, 24 of 1936
, only a
liquidated claim, the cause of which arose before the sequestration
of that estate, may be proved.
[2]
‘
(1)
Any proceedings for judicial review in terms of
section 6(1)
must be
instituted without unreasonable delay and not later than 180 days
after the date –
(a) subject to
subsection (2)(c), on which any proceedings instituted in terms of
internal remedies as contemplated in subsection
(2)(a) have been
concluded; or
(b) where no such
remedies exist, on which the person concerned was informed of the
administrative action, became aware of the
action and the reasons
for it or might reasonably have been expected to have become aware
of the action and the reasons.’
[3]
Cf
P
G Bison Ltd v Johannesburg Glassworks (Pty) Ltd
[2007] ZAGPHC 274
;
[2008] 1 All SA 473
(W) para 3, 4 and 12.7; and
Steelnet
(Zimbabwe) Ltd v Master of the High Court, Jhb & Others
[2008] JOL 21948 (W).
[4]
Section
9(1)
and (2).
[5]
[2010]
2 All SA 519
(SCA) para 54 (footnote omitted).
[6]
‘151. Review – Subject to the provisions of section
fifty-seven any person aggrieved by any decision, ruling,
order
or taxation of the Master or by a decision, ruling or order of an
officer presiding at a meeting of creditors may bring
it under
review by the court and to that end may apply to the court by
motion, after notice to the Master or to the presiding
officer, as the case may be, and to any person whose interests are
affected …
’
[7]
2005 (1) SA 276
(SCA) paras 22 and 23
.
[8]
1903 TS 111.
[9]
At
117.
[10]
As stated in
s 41.