Subject index outline

INSOLVENCY LAW CASES JANUARY TO END JUNE 2016
(Cases were researched on SALR, SACR, All SA Law Reports, SAFLII, JOL and JDR.¹ Cases include business rescue cases, securities and the Companies Act, 2008.)

CONTENTS:
SUBJECT INDEX OUTLINE

Subject Index

Case Names
Case summaries

SUBJECT INDEX OUTLINE

A Insolvency Law

A1 Voluntary Surrender

A2. Compulsory Sequestration
A3. Effect of Sequestration-Assets and exempted assets

A4 Effect of Sequestration-Voidable dispositions (including companies)
A5 Administration of the insolvent estate
A6 Rehabilitation
B CORPORATE INSOLVENCY LAW: LIQUIDATION (WINDING-UP) OF COMPANIES AND CLOSE CORPORATION
B1 Voluntary Liquidation of companies
B2 Liquidation by court order in terms of the 1973 Companies Act, read with the Companies Act 71 of 2008

B3 Close corporations-liquidations

B4 Administration of the insolvent company/cc
B5 Administration of the insolvent company/cc-Interrogations

C STATUTORY “FRESH START” PROCEDURES: BUSINESS RESCUE AND COMPROMISES

C1Business rescue in terms of Chapter 6 of the 2008 Companies Act

C2 Compromises

D1 COMPANIES ACT AND CLOSE CORPORATIONS IN GENERAL

E SECURITIES IN GENERAL

END OF OUTLINE

SUBJECT INDEX

A Insolvency Law

A1 Voluntary Surrender
Voluntary surrender — Application — Multiple applications brought on batch basis — Permissible, provided applications dealt with on merits, were bona fide, and not shoehorned into predetermined formula designed only to achieve a favourable result. Ex Parte Concato and similar cases 2016 (3) SA 549 (WCC)
Voluntary surrender — Application — Requirement that surrender be brought in good faith — Where outcome of order of voluntary surrender predetermined — Lack of good faith. Ex Parte Concato and similar cases 2016 (3) SA 549 (WCC)
Voluntary surrender — Application — Requirement that surrender be to advantage of creditors — Strong likelihood that order of voluntary surrender would result in buy-back agreement under which insolvent would buy back assets at forced-sale value in instalments — Unlikely to be in best interests of body of creditors. Ex Parte Concato and similar cases 2016 (3) SA 549 (WCC)
Voluntary surrender – Formulaic applications – Bona fides and advantage to creditors – Court held that provided that the process was conducted in accordance with the law, the interests of the general body of creditors were given due and proper consideration, and such application was dealt with by the practitioner on its merits, was bona fide, they should not be dismissed due to the manner in which the attorney dealt with them – In casu, it was found that insolvent retains the use of all his assets, and eventually reaches an arrangement with the trustee to purchase them back, and is immune from his existing creditors by virtue of the voluntary surrender order which has been granted. Ex parte Concato and similar matters [2016] 2 All SA 519 (WCC)

Voluntary surrender-no advantage to creditors-attorney moves similar applications-insolvent to buy property back-refused. Ex parte: Connoway and Four Others (5873/2016, 6168/2016, 6167/2016, 6166/2016, 6002/2016) [2016] ZAWCHC 62 (24 May 2016)

A2. Compulsory Sequestration

Provisional sequestration – Application for final order. Voltex (Pty) Limited trading as Voltex Bramley v Mnguni [2016] JOL 35898 (GJ)

Application for sequestration-nulla bona-sheriff did not execute the writ of execution-application dismissed-only return that was filed, was signed by Mr Barkhuizen-On Mr Barkhuizen's own version he was never duly appointed as a deputy sheriff and never had the authority to fulfil the duties of a deputy sheriff. Absa Bank Ltd v Van Zyl NO and Another (35976/2015) [2016] ZAGPPHC 247 (22 April 2016)

Sequestration application- attorney’s estate- s.8 (b) of the Insolvency Act 24 of 1936-nulla bona return-immaterial that nulla bona six months old-Investec Bank Limited v Le Roux (575/2014) [2016] ZAGPJHC 11 (11 February 2016)

Sequestration application- employee misappropriated money-unliquidated claim-Badenhorst rule applied² Avantech Ltd v Fryer and Another (70750/14) [2016] ZAGPPHC 49 (5 February 2016)

Sequestration application- section 149- 12 months referred to in section 149 of the Act determining the jurisdiction of the court in sequestration proceedings for the lodging of the petition- how calculated Stander v Van den Berg (60296/2013) [2016] ZAGPPHC 7 (21 January 2016)

Sequestration application-advantage to creditors-no assets but many allegations of assets being hidden-granted Stander v Van den Berg (60296/2013) [2016] ZAGPPHC 7 (21 January 2016)

Sequestration application-liquidated claim-but basically claim for damages-can be determined. Avantech Ltd v Fryer and Another (70750/14) [2016] ZAGPPHC 49 (5 February 2016)

Sequestration application-benefit-trust to be sequestrated-opposed application-denial of joint venture false-order granted Osborne v Cockin and Others; Osborne v Cockin N.O. and Others (5618/2015, 6053/2015) [2016] ZAECGHC 19 (12 April 2016)
A3. Effect of sequestration-Assets and exempted assets
Creditors-rights-applying for sale of business as a going concern-application dismissed Liu v Roering NO and Another (25713/2016) [2016] ZAGPPHC 205 (15 April 2016)
Administrative law – Property – Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000 – Interpretation of – Whether security provided for in section 118(3) in favour of a municipality, for moneys owed to it for services delivered in respect of fixed property, is extinguished when the property is sold at a sale in execution and subsequently transferred to the purchaser – Debt not extinguished on transfer of property, but municipality must comply with jurisdictional requirements in terms of own by-laws before pursuing owner for debt. City of Tshwane Metropolitan Municipality v Mitchell [2016] 2 All SA 1 (SCA)

A4 Effect of sequestration-Voidable dispositions (including companies)

Voidable dispositions — Voidable preference — Interest — Debt created when court sets aside disposition and declares right to recover property — Mora begins and mora interest runs from this date — Insolvency Act 24 of 1936, s 32(3). Griffiths v Janse Van Rensburg and another NNO 2016 (3) SA 389 (SCA)

Voidable dispositions — Voidable preference — What constitutes — Semble: Payment under condictio ob turpem vel iniustam causam could be disposition in ordinary course of business — Insolvency Act 24 of 1936, s 29(1). Griffiths v Janse Van Rensburg and another NNO 2016 (3) SA 389 (SCA)

Dispositions- Liquidation of pyramid scheme – Consolidation of corporate entities Zwarts v Janse van Rensburg NO and others [2015] JOL 33678 (SCA)

Dispositions- Setting aside of dispositions in terms of section 29 of the Insolvency Act 24 of 1936 – Whether impugned dispositions were made in the ordinary course of business – Test is whether ordinary, solvent, businesspeople would, in similar circumstances, themselves act as did the parties to the transaction – Dispositions made pursuant to void agreement not satisfying test and fell to be set aside.

Griffiths v Janse van Rensburg NO and another [2016] 1 All SA 643 (SCA)

Voidable dispositions- Motion proceedings-for voidable preferences-allowed Button NO and others v Akbur and others [2016] JOL 34153 (KZD)

A5 Administration of the insolvent estate
Claims-employees-starting date of suspension-section 38(1) of the Insolvency Act, 24 of 1936-section 339 of the Companies Act 61 of 1973-suspended with effect from the date of the granting of a provisional or final liquidation order (if no provisional order was granted)- not from date of the presentment of the application for liquidation. Ngwato v Van der Merwe NO (2014/28470) [2016] GJ (6 May 2016)

Claims-investigating of-after being proved-a liquidator to a creditor’s substantiation of its claim in terms of s.45(3) of the Insolvency Act 24 of 1936-liquidator and Master ordered to accept more information. Constantia Insurance Company Limited v Master of the High Court, Johannesburg and Others (23968/2015) [2016] ZAGPJHC 121 (13 May 2016)

Costs-unpaid municipality costs-debt incurred by a previous owner for municipal services supplied prior to transfer and the interpretation of s 118(3) of the Local Government: Municipal Systems Act, 32 of 2000 (the Act). City of Tshwane Metropolitan Municipality v PJ Mitchell (38/2015) [2016] ZASCA 1 (29 January 2016)

Cross-border insolvency – Recognition of foreign trustee – While a foreign trustee seeking recognition in South Africa must ordinarily establish that the insolvent party was domiciled within the jurisdiction of the foreign court that appointed him, that is not an inflexible rule, and in exceptional circumstances the requirement of domicile will not be insisted upon. Lagoon Beach Hotel (Pty) Ltd v Lehane NO and others [2016] 1 All SA 660 (SCA)

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

Insolvent person-has a reserved right in certain circumstances with rgards to his estate. Swart v Starbuck and Others (20785/2014) [2016] ZASCA 83 (30 May 2016)

Interest – Mora interest – Payment of mora interest on an award setting aside such disposition under section 32(3) of the Insolvency Act 24 of 1936 – Concept of mora relates to the time at which an obligation is due – Debt arises only on judgment and no amount due before judgment, on which mora interest can run. Griffiths v Janse van Rensburg NO and another [2016] 1 All SA 643 (SCA)

Interest – In duplum rule – Where interest is capitalised and interest is charged on interest, capitalised interest does not lose its character as interest and does not become part of the capital amount for the purposes of the in duplum rule – Casey and another v FirstRand Bank Ltd [2016] JOL 33584 (SCA)

Local authority — Rates — Imposition — Township — Rates payable by township owner to be calculated over extent or remaining extent of township as single entity, not on unsold erven separately. — Municipal service charges — Municipal clearance certificate — Rates payable by township owner when erven sold — Determination of — Municipal Systems Act 32 of 2000, s 118(1). TSHWANE CITY V UNIQON WONINGS (PTY) LTD 2016 (2) SA 247 (SCA)

Prescription – extinctive prescription – delay in completion – debt object of claim filed against company in liquidation – claim withdrawn after ‘admitted to proof’ under s 44 of the Insolvency Act 24 of 1936. Whether prescription delayed in terms of s 13(1)(g) of the Prescription Act 68 of 1969. Masilo N.O and Others v Betterbridge (Pty) Limited (37/2015) [2016] ZASCA 73 (25 May 2016)

Trustee — Foreign trustee — Recognition — Requirement that insolvent be domiciled within jurisdiction of court appointing foreign trustee. Lagoon Beach Hotel (Pty) Ltd v Lehane NO a.o. 2016 (3) SA 143 (SCA)

Trustee — Property passing to trustee — Warrant to take possession of insolvent's property — Issued in circumstances where assets already under judicial attachment — Whether magistrate precluded from issuing warrant — Insolvency Act 24 of 1936, s 69(3). Naidoo and others v Kalianjee NO and others 2016 (2) SA 451 (SCA)
A6 Rehabilitation
Application to intervene – Such application not a prerequisite to a party being heard in opposition to an application for rehabilitation – Abuse of court’s process – Court dismissed application were such is without merit, not bona fide and an abuse of the process of the court. Ex parte Harris (Fairhaven Country Estate (Pty) Ltd as intervening party) [2016] 1 All SA 764 (WCC)

Application-intervening creditor-intervenes for personal reasons-vendetta-turned down Harris v Fairhaven Country Estate (Pty) Limited (9357/2015) [2016] ZAWCHC 4 (26 January 2016)

Master’s report-criticized Harris v Fairhaven Country Estate (Pty) Limited (9357/2015) [2016] ZAWCHC 4 (26 January 2016)
B CORPORATE INSOLVENCY LAW: LIQUIDATION (WINDING-UP) OF COMPANIES AND CLOSE CORPORATION
Statute — Interpretation — 'Mutatis mutandis' — Meaning 'subject to necessary alterations' — Necessary changes must be required, not merely permitted. Mayo NO v De Montlehu  2016 (1) SA 36 (SCA) ³

B1 Voluntary Liquidation of companies
B2 Liquidation by court order in terms of the 1973 Companies Act, read with the Companies Act 71 of 2008

Liquidation application-what creditor must prove-claim not bona fide disputed Nation Unlished Trading CC t/a Engennering Drawing And Design v Bulk Petroleum Supplies (Pty) Ltd (4859/2016) [2016] ZAWCHC 70 (10 June 2016)

Application for final winding up-opposed- Section 345(1)(a) of the old Companies Engen Petroleum Limited v Plastic Brown Containers (Pty) Ltd (11693/2014) [2016] ZAKZDHC 20 (10 May 2016)

B3 Close corporations-liquidations

Winding up of close corporation during period of de-registration – Winding up of close corporation automatically retrospectively validated upon reinstatement – Section 82(4) – Companies Act 71 of 2008 Reddy v ABSA Bank Limited and others [2015] JOL 33305 (SCA)

Winding-up application by shareholders – Fraudulent conduct by company directors – Section 81(1)(e), Companies Act 71 of 2008 Pinfold and others v Edge to Edge Global Investments Limited [2016] JOL 35152 (KZD)

Winding up application- untaxed bill can be used- Werksmans Incorporated v Praxley Corporate Solutions (Pty) Limited
[2016] JOL 34039 (GJ)

Winding up order-discretionary power irrespective of the ground upon which the order is made. Werksmans Incorporated v Praxley Corporate Solutions (Pty) Limited

[2016] JOL 34039 (GJ)

Winding up-order declaring winding up proceedings as being vexatious and frivolous and thus amounting to an abuse of the court’s procedure is discretionary. Werksmans Incorporated v Praxley Corporate Solutions (Pty) Limited

[2016] JOL 34039 (GJ)

Winding-up — Application — Counterclaim that is bona fide and on reasonable grounds — Whether court has discretion to dismiss liquidation application. Gap Merchant Recycling CC v Goal Reach Trading 55 CC 2016 (1) SA 261 (WCC) 

Winding-up — Application — Debt that is basis of application bona fide disputed on reasonable grounds — Rule that winding-up precluded in these circumstances — Nature and scope of rule — Meaning of 'bona fide' and 'disputed on reasonable grounds'. Gap Merchant Recycling CC v Goal Reach Trading 55 CC 2016 (1) SA 261 (WCC) 
Winding-up application – Subordination of debt to other creditors of insolvent – Applicant a contingent creditor and was entitled to institute winding-up proceedings against the respondent ABSA Bank Limited v Hammerle Group (Pty) Ltd [2016] JOL 33570 (SCA)

B4 Administration of the insolvent company/cc
Claim against company in liquidation — Proof — Late proof — Statutory framework — Time period stipulated in s 44(1) of Insolvency Act 24 of 1936 not affected by s 366(2) of Companies Act 61 of 1973 — Three-month period for lodging of claims applying to both sequestrations and liquidations. Mayo NO v De Montlehu  2016 (1) SA 36 (SCA) ⁴

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

Directors- Aquilian action against-when possible Kingdom Films and others v Kaplan NO and another [2016] JOL 36001 (GJ)

Directors-personal lability- section 424 of the Companies Act, 1973 (Act No. 61 of 1973) (the Companies Act), alternatively in terms of section 218 (2) of the new Companies Act. Burco Civils CC v Stolz and Another (26201/15) [2016] ZAGPPHC 350 (19 May 2016)

Employees-starting date of suspension-section 38(1) of the Insolvency Act, 24 of 1936-section 339 of the Companies Act 61 of 1973-suspended with effect from the date of the granting of a provisional or final liquidation order (if no provisional order was granted)- not from date of the presentment of the application for liquidation. Ngwato v Van der Merwe NO (2014/28470) [2016] GJ (6 May 2016)
Liquidation costs-business rescue is superseded by a liquidation order- remuneration of the business rescue practitioner -paid from the free residue after the costs of sequestration set out in section 97 have been paid and cannot be paid from the proceeds of the secured asset. Diener NO v Minister of Justice (30123/2015) [2016] GP
Liquidator-duty to insurance assets-no duty on the liquidator of a company to insure assets of a wholly owned subsidiary of the company, facts not proved-Macadamia Finance BK en 'n ander v De Wet en andere NNO 1993 (2) SA 743 (A) referred to. Cilliers and others v Steenkamp and others [2016] JOL 34781 (WCC)

Liquidators-Close corporation – Liquidation of – Contract signed by liquidators – Requirement that liquidators act jointly Shanmugam v Peter NO and others [2016] JOL 36072 (KZD)

Liquidators-joint liquidators-two of three signed contract-contract invalid Shanmugam v Peter N.O and Others (11638/2015) [2016] ZAKZDHC 16 (20 April 2016)

Liquidators-ordered to pay costs de bonis propriis-omitted to divulge information to the court -uberrimae fides Oelofsen NO and Another; In re: Oelofsen NO and Another v Bamboo Rock 1215 CC and Others (8949/16) [2016] ZAGPPHC 245 (21 April 2016)

Litigation by liquidators of company – Section 32(1) of the Insolvency Act 24 of 1936 – A creditor may take proceedings in terms of section 32(1)(b) only if the trustee has failed to do so, and only upon the creditor indemnifying the trustee against all the costs of the proceedings – Effect of indemnity being furnished after institution of proceedings instead of before – Object of section fulfilled in circumstances of present case Cowan v Hathorn NO and others [2016] JOL 33589 (SCA)

Piercing the corporate veil- Conduct of insolvent – Alleged fronting by trust – Anti-dissipation order – Piercing corporate veil – The corporate veil will be pierced where there is proof of fraud, dishonesty or other improper conduct in the establishment or use of a company and the conducting of its affairs – A court will not lightly disregard a corporate entity’s separate legal personality and will endeavour to maintain the separate personality Knoop NO and others v Birkenstock Properties (Pty) Ltd and others [2015] JOL 33788 (FB)

Provisional liquidator-duties- no powers to do what may amount to a liquidation of a company Knipe and Another v Noordman N.O. and Others (A230/2014) [2016] ZAFSHC 86 (2 June 2016)

B5 Administration of the insolvent company/cc-Interrogations
Interrogations-Company law ─ application for rescission of an order enabling enquiry into the affairs of a company in voluntary liquidation in terms of s 417 of the Companies Act 61 of 1973 ─ ex parte application made to enable enquiry met the requirements of s 388 of the Act ─ appeal dismissed with costs. Swart v Heine (192/15) [2016] ZASCA 16 (14 March 2016)

Interrogation-purposes-not revenge Harris v Fairhaven Country Estate (Pty) Limited (9357/2015) [2016] ZAWCHC 4 (26 January 2016)

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 Roering NO and Another v Mahlangu and Others (581/2015) [2016] ZASCA 79 (30 May 2016)
C STATUTORY “FRESH START” PROCEDURES: BUSINESS RESCUE AND COMPROMISES

C1Business rescue in terms of Chapter 6 of the 2008 Companies Act

Business rescue-application must not be an abuse of process and should be brought in good faith and for a proper purpose ie for the “rescue” of the company…and not for an ulterior motive such as to suspend liquidation or for a personal benefit.’ Loots v Nongoma Medical Centre CC and Another (5639/2016) [2016] ZAWCHC 76 (24 June 2016)

Business rescue-application one of many proceedings that have been brought by the applicant (‘Loots’) together with others whom I will mention later in this judgment. Loots v Nongoma Medical Centre CC and Another (5639/2016) [2016] ZAWCHC 76 (24 June 2016)

Business rescue-business rescue practitioner-knowledge of cancellation of franchise agreement Schickerling NO and Another v Chickenland (Pty) Ltd t/a Nando's (22712/2016) [2016] ZAGPPHC 208 (15 April 2016)

Business rescue-Ejectment application – Defence – Sections 133(1), 134(1)(c) – Companies Act 71 of 2008 Southern Value Consortium v Tresso Trading 102 (Pty) Limited (Klopper NO and another as intervening business rescue practitioners)
[2015] JOL 34787 (WCC)

Business Rescue-Disposition in terms of s 341(2) of the Companies Act 61 of 1973- recoverable by creditor or whether enforcement precluded by s 154(2) of the Companies Act 71 of 2008 – whether pre-business rescue debt – meaning of ‘debt owed’. Eravin Construction CC v Bekker NO (20736/2014) [2016] ZASCA 30 (23 March 2016)

Business rescue-liquidation proceedings are suspended in terms of section 131(6) of the Companies Act 71 of 2008, there must be-service of an application for business rescue in terms of section 131 of the Companies Act 71 of 2008 on the company (provisional liquidator if appointed) and on the Companies and Intellectual Property Commission; and notification of each affected person in the prescribed manner. Standard Bank of South Africa Limited v Gas 2 Liquids (Pty) Limited(45543/2012) [2016] GJ (10 March 2016)
Business rescue — Liquidation proceedings already initiated — Scope of suspensive provision — Whether encompassing application for provisional liquidation — Conflicting views on issue highlighted — Court finding that application for business rescue suspending application for liquidation — Companies Act 71 of 2008, s 131(6). STANDARD BANK OF SOUTH AFRICA v A-TEAM TRADING CC 2016 (1) SA 503 (KZP)
Business rescue plan – Failure to consult with shareholders – Interim interdict Hlumisa Investment Holdings (RF) Limited and another v Van der Merwe NO and others [2016] JOL 34326 (GP)

Business rescue- s.131 (1) of the Companies Act 71 of 2008 -intervening creditor- provisional winding-up order granted- Pouroullis v Market Pro Investments 106 (Pty) Ltd (South African Bank of Athens Ltd and Absa Bank Ltd (20370/2015) [2016] ZAGPJHC 12 (12 February 2016)

Business rescue-s 131-opposed-liquidation order was granted prior to application-liquidation in progress Van Der Merwe and Others v Zonnekus Mansion (Pty) Ltd and Others (4653/2015B) [2016] ZAWCHC 11 (18 February 2016)

Business rescue – Resolution by director of company – Setting aside of Griessel and another v Lizemore and others [2016] JOL 34038 (GJ)

Business rescue-variation of proved claim-tantamount to variation of plan-claimant received payments -delay to object Stalcor (Pty) Ltd v Kritzinger NO and Others (1841/2012) [2016] ZAFSHC 6 (21 January 2016)

Business rescue – Adoption of business rescue plan – Application for setting aside of plan – Non-joinder – Test for non-joinder – does party have direct and substantial interest in subject matter of litigation which may prejudice non-joined party – Creditors who would be prejudicially affected by setting aside of business rescue plan should be joined as parties to the matter. ABSA Bank Limited v Naude NO and others [2015] JOL 33323 (SCA)

Business rescue — Moratorium on legal proceedings against company — Where business rescue proceedings instituted at time when legal proceedings against company already commenced — Leave to proceed with legal proceedings may be sought during those proceedings themselves — Substantive, separate application not required — Companies Act 71 of 2008, s 133(1)(b). Safari Thatching Lowveld CC v Misty Mountain Trading 2 (Pty) Ltd 2016 (3) SA 209 (GP) 

Business rescue proceedings –– Resolution taken by company to commence business rescue –– Whether failure to comply with section 129(3) and (4) of the Companies Act 71 of 2008 renders proceedings a nullity –– Resolution to commence business rescue has not been set aside – Standing of business rescue practitioner appointed on strength of resolution – Standing of business rescue practitioner cannot be challenged on ground of non-compliance with procedural requirements – section 129. Newton Global Trading (Pty) Limited (Under Business Rescue) v Da Corte
[2015] JOL 34899 (SCA)

Business rescue proceedings-liquidation in terms of section 132 (2) of the Companies Act 71 of 2008 (the Act)-application by creditor forleave to institute liquidation proceedings against the applicant-granted2001 Management Services (Pty) Limited and Another v Anappa (88079/14) [2016] ZAGPPHC 353 (20 May 2016)

Business Rescue-Application to set aside business rescue proceedings – creditors have a direct and substantial interest – non-joinder of creditors is fatal to the relief sought in the application. Golden Dividend 339 (Pty) Ltd and Another v Absa Bank Limited (569/2015) [2016] ZASCA 78 (30 May 2016)