Subject index outline

Roering NO and Another v Mahlangu and Others (581/2015) [2016] ZASCA 79 (30 May 2016)

Company law – Enquiry in terms of ss 417 and 418 of the Companies Act 61 of 1973 – summons to attend – application to set aside summons – abuse of process – what constitutes – fact that the issues canvassed may overlap with issues in pending or contemplated civil litigation not as such a ground for inferring abuse

The SCA unanimously set aside the High Court’s decision. It pointed to the importance in the public interest of an enquiry into the affairs of a company that has failed. Such enquiries are essential to ascertain what went wrong and who was responsible for it. The fact that civil litigation may flow from the enquiry, or be contemplated, or have been instituted by the liquidators, does not provide grounds for regarding the enquiry, or the summoning of a witness, as an abuse. There were plainly grounds for the liquidators and the commissioner to believe that Ms Mahlangu could give relevant evidence about the dealings between 3P Consulting and the Department. This was confirmed by her lawyers, who described her as a key witness in the case. In the result the summons stands and Ms Mahlangu will be obliged to give evidence in terms of it at the enquiry.

Palala Resources (Pty) Ltd v Minister of Mineral Resources And Energy and Others (479/15) [2016] ZASCA 80 (30 May 2016)

Companies-Deregistration -Mining and minerals – Companies – interpretation and application of s 56(c) of the Mineral and Petroleum Resources Development Act 28 of 2002 and s 73(6A) of the Companies Act 61 of 1973 – deregistration of a company which is the holder of a mineral prospecting right does not result in that company irretrievably losing that right – subsequent restoration of company’s registration having the legal effect of retrospectively reviving the lapsed prospecting right.

The Supreme Court of Appeal (the SCA) upheld an appeal against an order of the Gauteng Division of the High Court Pretoria. The court a quo had granted a review application brought by Hectocorp (Pty) Ltd, the third respondent, to set aside the decision of the Minister of Mineral Resources and Energy, the first respondent, who had upheld an appeal against a decision of the Acting Director-General in her department. The Acting Director-General had overruled the decision of the regional manager who had refused to accept the appellant’s (Palala Resources (Pty) Ltd) application for the renewal of its prospecting right for gold and pyrite on a designated prospecting area on the farm Malamulele 234 LT in Limpopo. The basis for the regional manager’s decision was that Palala’s prospecting right had lapsed due to Palala’s deregistration as a company. Palala’s deregistration on 16 July 2010 and its restoration to the company register on 13 September 2010 was common cause.

The crisp issue for determination was whether a mineral right which has lapsed due to the deregistration of a company which holds that right is revived when that company is restored to the register. Related to this question was the relationship between the provisions of section 56(c) of the Mineral and Petroleum Resources Development Act 28 of 2002 and section 73(6A) of the old Companies Act 61 of 1973, which was in force at that time. In referring to its decision in Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd 2015 (4) SA 34 (SCA), the SCA held that such a lapsed right is revived upon restoration, by virtue of section 73(6A). The SCA held further that there is no tension between section 56(c) and section 73(6A) and that the two sections can co-exist as they refer to two different situations at two different points in time.
The appeal was accordingly upheld and the matter was remitted to the Minister for her decision on Palala’s application to renew its prospecting right.

Swart v Starbuck and Others (20785/2014) [2016] ZASCA 83 (30 May 2016)

Insolvent person-Claim by insolvent on behalf of his insolvent estate for the payment of damages by his trustees in terms of s 82(8) of the Insolvency Act 24 of 1936 – section 82(8) does not find application where the trustees sold immovable properties of the estate prior to the second meeting of creditors – sale of the immovable properties of the estate valid and enforceable – claim for damages dismissed.

Insolvent person-has a reserved right in certain circumstances with rgards to his estate

This appeal concerns an action brought by the appellant (the insolvent) against the first to third respondents, the trustees of his insolvent estate (the trustees), for the payment of damages allegedly caused by them in the administration of his estate. The matter was heard by Strijdom AJ in the Gauteng Division of the High Court, Pretoria, who dismissed the claim with costs, but granted the insolvent leave to appeal to this court.

[2] The estate of the insolvent was provisionally sequestrated by order of the Gauteng Division, Pretoria, on 4 October 2005 and a final order of sequestration was granted on 1 November 2005. On 24 January 2006 the trustees were appointed as the provisional trustees of the insolvent estate by the fourth respondent (the master). Their appointment as final trustees followed on 16 November 2006.

[3] At the time of his provisional sequestration the insolvent was the registered owner of certain immovable properties known as portions 5, 8 and 13 of the Farm Doorndraai 2A, Registration Division KR, Limpopo Province (the properties). Portion 5 had been granted water rights for agricultural purposes in terms of s 21(a) of the National Water Act 36 of 1998.

[10] In his pleadings the insolvent contended that the trustees did not, on 1 December 2005, have the necessary authority (or rather capacity) to accept the offers to purchase made by the trust, as they had not yet been appointed as provisional trustees. Nor had the powers of the trustees, when they purported to accept the offers to purchase, been extended in terms of s 18(3) of the Act to authorise them to sell the properties. Also that at 1 December 2005, the trustees had not been granted any authorisation by the master in terms of s 80bis of the Act, to sell the properties to the trust. Therefore, according to the insolvent, the sale of the properties and the resultant transfer thereof to the trust were irregular and constituted maladministration of his estate. He further alleged that the sale of the properties had to take place in terms of s 82(1) of the Act and as the trustees had failed to follow the prescripts of this subsection, they were liable in terms of s 82(8), to make good to the insolvent estate twice the amount of the loss which the estate had sustained as a result of their irregular dealing with the properties.

[11] In their plea, the trustees denied that on 1 December 2005 any agreements of sale were entered into by them in their capacities as trustees of the insolvent estate, but admitted that the first respondent signed and thereby accepted the offers to purchase on that date, ‘subject to the permission of the master being granted and by implication their formal appointment by the master.’ They further pleaded that, on 31 January 2006, they were granted authority in terms of s 80bis of the Act to sell the properties by way of private treaty. Therefore, the trustees contended, the properties had been validly transferred to the trust on 14 June 2006, which transfer took place after the master had granted the necessary authorisation in terms of s 80bis of the Act. They accordingly denied any maladministration on their part and disavowed liability for the payment of any damages.

[12] The court a quo, in essence, held that the trustees had been granted the necessary authorisation by the master in terms of s 80bis of the Act to sell the properties to the trust, and that compliance with s 82 of the Act was accordingly not required. Therefore the action was dismissed with costs.

[13] In evaluating the insolvent’s claim it has to be borne in mind that he is an unrehabilitated insolvent who would, save for the exceptions mentioned in s 23 of the Act (which do not apply in this instance), not have had locus standi to institute legal proceedings in his own name. However, as appears from the particulars of claim, the insolvent sought an order compelling the trustees to pay damages to his estate caused by their alleged maladministration of the estate. Our law has recognised that in certain circumstances an insolvent has locus standi by virtue of his or her real interest in the administration of the estate, to institute a claim on behalf of his insolvent estate. See Mears v Rissik, MacKenzie NO and Mears’ Trustee 1905 TS 303 at 305; Muller v De Wet NO & others 1999 (2) SA 1024 (W) at 1029D-1030H. Whether or not the insolvent had locus standi in this case is unnecessary to decide, for I will assume, without deciding, that he did.

[14] Turning to the insolvent’s cause of action, I must confess that I have some difficulty in appreciating the legal basis of the claim. As recorded above, the insolvent’s case on the pleadings appears to be that the sale of the properties and the transfer thereof to the trust were ‘irregular’, constituting maladministration of his estate, entitling him to claim damages on behalf of the estate from the trustees. In the heads of argument filed on his behalf and in argument on appeal counsel for the insolvent expanded on this submission by contending that the agreements in terms of which the properties were sold were in fact void ab initio. However, as I understood the argument on his behalf, the insolvent did not seek to attack the validity of the transfer of the properties and have the parties restored to the status quo ante, but only to recover damages for and on behalf of the insolvent estate.

[15] According to the insolvent’s pleadings and the written heads of argument filed on his behalf on appeal, his cause of action was based squarely on s 82(1), read with s 82(8), of the Act. He contended that, in view of the absence of a valid authorisation by the master in terms of s 80bis of the Act, the sale of the properties had to take place in terms of s 82(1), in such manner and upon such conditions as the creditors may direct at their second meeting, failing which, the properties had to be sold by public auction or public tender. As the trustees had sold the properties in contravention of s 82(1), they were, in terms of s 82(8) of the Act, liable to make good to the estate twice the amount of the loss which the estate may have sustained as a result of their dealing with the properties in contravention of s 82(1). That this was the basis of the insolvent’s cause of action is borne out by the emphatic statement in his heads of argument, that ‘the case is based on s 82(8) as read with s 82(1) of the Act’.

[16] At the hearing of the appeal, counsel for the insolvent, however, attempted to change course by pinning his colours to the mast of a delictual claim for damages, based on a breach of their fiduciary duties by the trustees in disposing of the properties without the necessary authorisation by the master. As I understood the adapted cause of action, it was not based on s 82(8) as read with s 82(1) of the Act, but s 82(8) was invoked in order to recover twice the amount of the loss which the estate had allegedly suffered due to the breach of their fiduciary duties by the trustees. I should mention that, even on a liberal reading, the pleadings do not disclose a delictual claim advanced along these lines.

[17] In my view, both the insolvent’s original cause of action based on s 82(8), read with s 82(1) of the Act, and the more recently adopted delictual cause of action based on the breach of a fiduciary duty by the trustees, are misconceived and devoid of any merit. At the outset, it is clear that both causes of action depend, inter alia, upon the absence of a valid authorisation by the master for the sale of the properties. However, as recorded earlier, the master did on 31 January 2006 extend the powers of the trustees by authorising the sale of the properties in terms of s 80bis of the Act. This authorisation was granted by the master after the trustees had been appointed as provisional trustees. The granting of permission in terms of s 80bis of the Act is clearly an administrative act which has legally valid consequences until such time as it is set aside. See Oudekraal Estates (Pty) Ltd v City of Cape Town & others [2004] ZASCA 48; 2004 (6) SA 222(SCA) para 14. It is common cause that no application had been made to set aside the s 80bis authorisation granted by the master. It accordingly stands as a legally valid authorisation and on this basis alone the insolvent’s claim had to fail.

[18] Returning to the cause of action as originally pleaded, it is clear from the wording of s 82(1) that it deals with the sale of property of an insolvent estate after the second meeting of creditors, in circumstances where the trustee sells the property in a manner or on conditions contrary to those directed by the creditors at their second meeting, or, absent such direction, sells the property other than by public auction or public tender. Section 82(1) has no application in a case such as the present where the sale of the properties had taken place prior to the first meeting of the creditors. When the present sales took place there were obviously no directives given by creditors at a second meeting that the trustees had to comply with, nor were the trustees bound, to sell the properties by public auction or public tender. They were perfectly entitled to sell the properties, having been duly authorised thereto by the master in terms of s 80bis of the Act.

[19] In Cronje NO & others v Hillcrest Village (Pty) Ltd & another [2009] ZASCA 81; 2009 (6) SA 12 (SCA), this court dealt with an analogous situation where the liquidators of a company had sold the company’s property prior to the general meeting of the company’s creditors. Streicher JA, writing for the court, said the following at para 22:

‘Section 82(1) of the Insolvency Act deals with the sale of property after the second meeting of creditors and is not applicable to the auction of WKP’s [the company in liquidation] property. The auction sale was a sale authorised by the Master in terms of s 386(2B) of the Companies Act [the equivalent of s 80bis of the Act] before a general meeting of WKP’s creditors had been convened. The court below therefore erred in considering the section to be of application in respect of the auction sale.’

The present matter similarly did not concern a sale of property after the second meeting of creditors and therefore ss 82(1) and 82(8) did not find application.

[20] It follows that the insolvent’s claim, whether based on s 82 of the Act or a delictual claim as belatedly contended for, fell to be dismissed. It is in any event telling that this action, which the insolvent purportedly instituted for the benefit of his insolvent estate, ie in effect for the benefit of the creditors of the estate, did not carry the support of the creditors. On the contrary, as recorded earlier, the two secured creditors whose claims represented the lion’s share of the value of the total claims against the estate, actively supported the sale of the properties to the trust. Nor did any concurrent creditor respond negatively to the circular sent by the trustees advising them of the intended sale.

[26] Neither counsel relied on nor made reference to Legator McKenna, but counsel for the insolvent set much store by the decision in Simplex (Pty) Ltd v Van der Merwe & others NNO 1996 (1) SA 111 (WLD), where Goldblatt J held that an agreement of sale concluded by trustees who had not yet been authorised to act in that capacity, was null and void and could not be ‘resuscitated by subsequent ratification either by the Master or by the trustees after receipt of the necessary authority’.

[29] The lack of authority on the part of the trustees when they (represented by the first respondent) accepted the offers to purchase, was accordingly of no legal consequence and could not somehow have served as a basis for a claim for damages against the trustees.

[30] For these reasons the appeal is dismissed with costs, including the costs consequent upon the employment of two counsel.

Nova Property Group Holdings v Cobbett (20815/2014) [2016] ZASCA 63 (12 May 2016)

Company law –  interpretation of s 26(2) of the Companies Act 71 of 2008 – provides an unqualified right of access to a company’s securities register – person’s motive for access not relevant – right of access not subject to the provisions of the Promotion of Access to Information Act 2 of 2000 (PAIA).

Rule 35 (14) – appellants failed to demonstrate that the documents sought are relevant to a reasonably anticipated issue in the main application.

The Supreme Court of Appeal dismissed the appeal by Nova Property Group Holdings Limited (Nova), Frontier Asset Management & Investments (Pty) Limited (Frontier), and Centro Property Group (Pty) Limited (Centro) (the Companies) against a judgment of the Gauteng Division of the High Court, Pretoria (the court a quo) in an interlocutory application lodged by the Companies, in which it was found that the Companies were not entitled to an order to compel Moneyweb (Pty) Ltd (Moneyweb), a publisher of business and financial news, to provide the Companies with certain documents. The Mail & Guardian Centre for Investigative Journalism NPC, commonly known as amaBhungane, was admitted as an amicus curiae in the appeal. The appeal arose from the attempts of Moneyweb and Mr JP Cobbett (Cobbett) to exercise their statutory right in terms of s 26 of the Companies Act 71 of 2008 (the Companies Act) to access the securities registers of the Companies.

Cobbett is a financial journalist who specialises in the investigation of illegal investment schemes. As part of Moneyweb’s on-going investigation into the controversial Sharemax property syndication scheme, it commissioned Cobbett to investigate and write articles for publication in Moneyweb, on the shareholding structures of the Companies which were purportedly linked to the syndication scheme. On 24 July 2013, Cobett sent a request to the Companies for access to their securities registers, in terms of s 26(2) of the Companies Act. The Companies refused him access. As a result, Moneyweb launched an application, in the court a quo, to compel the Companies to provide access to them within five days of the date of the order (the main application). For purposes of providing them with a defence in the main application, the Companies then sought to be furnished with documents referred to in Moneyweb’s founding affidavit, as well as other documents which they claimed were relevant to an anticipated issue in the main application. Displeased with Moneyweb’s refusal to provide them with the requested documents, the Companies launched an application to compel them to do so under rule 35(14) of the Uniform Rules of Court (the interlocutory application).

The court a quo compelled Moneyweb to furnish the Companies with the documents referred to in its founding affidavit, but in respect of the other documents requested, it found that the Companies had failed to prove that they were relevant to an issue in the main application. Although the court a quo had not decided the main application, it nevertheless pronounced on the interpretation of s 26(2) of the Companies Act, in deciding whether to grant the interlocutory relief sought by the Companies. It concluded that s 26(2) did not confer an absolute right to inspection of the documents envisaged in the subsection, but that the court retained a discretion to refuse to order access.

Before the SCA, the issues were twofold. Firstly, the court had to determine whether the order of the court a quo, due to its interlocutory nature, was appealable. Secondly, whether the documents sought by the Companies in the application to compel were relevant to a reasonably anticipated issue in the main application, which concerned the proper interpretation of s 26(2) of the Companies Act and, in particular, whether it confers an unqualified right of access to the securities register of a company .

In relation to the appealability of the order, the SCA held that it is appealable; in the interest of justice.

On the second issue which concerned the proper interpretation of s 26 (2) of the Companies Act, the SCA held that the section confers an unqualified right of access to the securities register of a company, and that such right is essential for effective journalism and an informed citizenry. In doing so, it rejected the Companies’ contention that the right of access is subject to the provisions of the Promotion of Access to Information Act, 2000 (PAIA) and found that the requestor’s motive for seeking access to a company’s securities register is irrelevant.

Van Zyl N.O and Others v Master of the High Court of South Africa, Western Cape Division, Cape Town and Another (7892/2015) [2016] ZAWCHC 51 (11 May 2016)

Claims-liquidators not satisfied with-Master allowed -Master taken on review-liquidators succeed

The applicants in their capacity as the duly appointed liquidators of Chelsea West (Pty) Ltd (in liquidation) seek an order in terms of Sections 151 of the Insolvency Act No 24 of 1936 and Section 339 of the Companies Act No 61 of 1973 and read with item 9 of Schedule 5 of the Companies Act No 71 of 2008 for a review of a decision by the Master of the High Court, Cape Town, in terms of which the Master refused to expunge a claim of Chester Finance (Pty) Ltd, the second respondent, in the winding-up of Chelsea West (Pty) Ltd (in liquidation).

On 17 December 2008 Chelsea West (Pty) Ltd (“Chelsea West”) was placed in provisional liquidation by this court.  The application was brought on the grounds that Chelsea West was unable to pay its debts within the meaning of Section 344(1) as read with Section 345(1) (C) of the Old Companies Act.  On 6 January 2010 the applicants were appointed joint provisional liquidators of Chelsea West by the first respondent.  On 3 February 2009 Chelsea West was placed in final liquidation and on 21 April 2009 the applicants were appointed as final liquidators.

[11] It is not in dispute that no claims were lodged for proof at either the first or second meetings of creditors and that three special meetings were thereafter convened for the admission to proof of claims.

[12] On 15 July 2014 the applicants were requested by the second respondent to convene a third special meeting of creditors for the purpose of submission to proof of claim to be lodged by the second respondent.

[13] As the applicants were of the view that the claim by the second respondent was incorrect, the applicants instructed their attorneys, Edward Nathan Sonnenberg (“ENS”) to oppose the admission of proof of the second respondent’s claim.

[14] At the third special meeting which was presided over by Assistant Master, Mr Mabandla Dondolo (“Dondolo”) of the first respondent, both the applicants and the second respondent were allowed to advance oral argument whereafter written submissions were provided to Dondolo, by both parties.  On 5 August 2014 Dondolo admitted second respondent’s claim to proof in the amount of R2 916 006-14.

[15] The claim of the second respondent which is set out in an affidavit deposed to by Lewis Freidus, a director of second respondent, can be summarised as follows:

15.1 The claim allegedly arises as a result of monies owed and advanced by second respondent to Chelsea West prior to its liquidation in terms of a trade facility agreement (“TFA”) concluded on or about 6 May 1997;

15.2 The claim was secured by virtue of three general notarial bonds and a cession executed by Chelsea West in favour of the second respondent;

15.3 The total amount lent and advanced by second respondent to Chelsea West was in the amount of R13 205 610-18;

15.4 On 1 December 2008, second respondent obtained an order from this court in terms whereof it perfected the security held by it in terms of the general notarial bonds;

15.5 On 3 December 2008 second respondent concluded an agreement with Dreywin Finance CC (“Dreywin”) in terms whereof all the assets of Chelsea West which second respondent was authorised to take possession of in terms of the perfection order were sold to Dreywin for amount of R13 200 000-00;

15.6 On the 11^th and 12^th December 2008 Reichmans (Pty) Ltd (“Reichmans”) made payment to second respondent of the amounts of R2 749 516-69 and R166 489-72 respectively (“the Reichmans payments”).  It is necessary to point out in this regard that the Reichmans payments were purportedly made pursuant to the cession and were amounts that were held by Reichmans to which Chelsea West became entitled to on the termination of the facility which it had with Reichmans.

15.7 On 25 June 2013 the applicants obtained an order in this court under case number 25983/2010, (“the Binns-Ward judgments”), in terms whereof the Reichmans payments were determined not to form part of the sale agreement and were set aside as dispositions in terms of Section 29 of the Insolvency Act 24 of 1936.

15.8 On 25 April 2014 second respondent paid to the applicants the amount of R2 953 155-53 being the total amount paid in terms of the Reichmans payments. 

15.9 It is common cause that the second respondents claim is based on the repayment of such payments.

[16] In accordance with their duties in terms of Section 45 of the Insolvency Act the applicants examined the books and documents relating to Chelsea West for the purpose of ascertaining whether Chelsea West in fact owes the second respondent the amount claimed.  After studying the available books and documents relating to Chelsea West and after obtaining legal advice, the applicants formed the view that the claim by the second respondent that was admitted to proof, is not a genuine or valid claim and instructed their attorneys ENS to make application to the first respondent to expunge the claim of the second respondent.

[31] In the present matter the liquidators seek to have the claim of the second respondent expunged in terms of section 45. Section 45 (1) provides for the delivery by the officer presiding at a meeting of creditors to the trustee or a meeting of creditors to the trustees or liquidator of every claim proved against the estate. Sub-section (2) provides that the trustee shall examine the available books and documents relating to the insolvent estate for the purpose of determining whether the estate owes the claimant the amount claimed.

[54] On a consideration of the documents lodged in support of the claim I find that they are at variance with each other.  In short, the allegations made in the proof of claim affidavit do not reconcile with the facts which appear ex facie the documents lodged in support thereof.

[55] I have already referred to the agreement entered into between second respondent and Dreywin on 3 December 2008 hereinbefore.  Having considered the arguments advanced on behalf of the parties and considering the facts of the matter, I make the following findings:

1. In terms of clause 5.1 the purchase price for the assets which were the subject matter of the agreement was the amount of R 13.2 million;

2. In terms of clause 5.4 the purchase price was to be paid in full by Dreywin to second respondent on the advance date, which is defined in the agreement as the date on which the general notarial bond in favour of second respondent was registered over the assets of Dreywin (Clause 5.3.2 of the agreement)

3. On 8 December 2008 Dreywin paid the purchase price as set out in the agreement to second respondent.

4. Based on the schedule attached to the claim submitted by second respondent the second respondent’s claim against Chelsea West was reduced to an amount of R5610-18 (i.e. R13 205 610-18 less R13 200 00.00).

[77] In conclusion I find that the correct approach, as was set out in the submissions made by applicants to the presiding officer, is that the presiding officer should have decided to either:

“26.1  Admit the claim of Chesterfin against Chelsea in the reduced amount of R5610-18 as this is the extent of the claim disclosed on the papers before the presiding officer (provided that Chesterfin is in a position to persuade the presiding officer that the claim has not prescribed); or

26.2  To reject the claim of Chesterfin in order to allow it to redraw such claim in the lesser amount to be proved at a subsequent meeting of creditors, alternatively to allow Chesterfin the opportunity to establish its claims against Chelsea West at law”.

[78] I am satisfied that for the reasons hereinbefore set out, that the liquidators have established reasonable grounds of suspicion relating to the validity of the second respondent’s claim and that for these reasons, the claim should be disallowed.  I am however satisfied that second respondent has proved a claim in the amount of R5610-18.

[79] For the reasons as set out hereinbefore, I am satisfied that the ruling of Dondolo of the first respondent falls to be reviewed and set aside. Consequently the claim of the second respondent falls to be expunged and is hereby reduced to R5610-18.

[80] Accordingly, I make the following order:

1. That in terms of Section 151 of the Insolvency Act No 24 of 1936 read with item 9 of Schedule 5 of the Companies Act 71 of 2008, the decision of the Master of the High Court in terms of which the Master refused to expunge, alternatively reduce the claim of the second respondent against Chelsea West (Pty) Ltd (in liquidation) is hereby reviewed and set aside.

2. The claim of the second respondent is hereby expunged and reduced to the amount of R5610-18.

3. The second respondent is ordered to pay the applicant’s costs of this application including the costs of two counsel.