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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

Case Number: 28890/2016

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

In the matter between:

THE COMMISSIONER FOR THE SOUTH

AFRICAN REVENUE SERVICE                                                           Intervening Applicant

and

PRO-WIZ GROUP (PTY) LIMITED                                                             First Respondent

PETRUS JACOBUS MARYN VAN STADEN N.O                                 Second Respondent

DIMAKATSO ARNOLD MICHAEL VAN STADEN N.O                              Third Respondent

MARI HAWOOD N.O                                                                               Fourth Respondent

(acting in their capacities as the duly appointed liquidators

of OLJACO CC (in liquidation) Masters Ref:T3788/2012)

THE COMPANIES AND INTELLECTUAL

PROPERTY COMMISSION                                                                        Fifth Respondent

In re:

 

JUDGEMENT

 

MOKOSE AJ

[1] The applicant was seeking an order converting a liquidation order into business rescue proceedings.

[2] It is common cause that the application was served on 12 April 2016 on the liquidators of Oljaco who in turn elected to file their answering affidavit on 12 May 2016. On 17 May 2016, the intervening party (SARS) delivered an application for leave to intervene and the dismissal of the main application. The Honourable Deputy Judge President was then approached in order to obtain a date of hearing on special allocation which date of 6 to 8 September 2016 was granted. This was due to the size of the application which was in excess of 500 pages.

[3] The matter came before Rabie Jon 6 September 2016 who ordered, inter alia, that the application is postponed sine die and the liquidators and SARS ordered to file their further affidavits, if any, within 10 court days, as also the parties' respective heads of argument.

[4] The application then came before me and was then withdrawn by the applicant and the costs of the intervening party (SARS) were tendered and were accepted. The costs of the liquidators were not tendered as the applicant was of the view that they were not entitled to costs premised on the fact that they had no statutory authority to oppose the application and as such their conduct in opposing the application was unlawful. The respondents then made application to the court for their costs in light of the matter not being withdrawn by the applicant.

[5] Rule 41(1)(c) of the Uniform Rules of Court provide as follows:

"If no such consent to pay costs is embodied in the notice of withdrawal, the other party may apply to court on notice for an order for costs."

[6] The general principle is that the party withdrawing is liable, as an unsuccessful litigant, to pay the costs of the proceedings. The court however, has the discretion to deprive the successful litigant of its costs but such discretion must be exercised judicially i.e have regard to whether, objectively viewed, the applicant acted reasonably in launching the main proceedings but was subsequently driven to withdraw it in order to save costs because of emerging facts or because the relief was no longer necessary or obtainable.

[7] Counsel for the applicant was of the view that such application must be made on notice where the factual basis for such application would be embodied in an affidavit. Counsel for the respondents, on the other hand, was of the view that no additional affidavits need be furnished.

[8] The Superior Court Practice commentary by Erasmus notes that no affidavit is required since the relevant material is already before the court. The respondent would be entitled to oppose the application and to place the grounds of his opposition before the court on affidavit, especially if the facts he relies upon do not appear from the pleadings in the main file.

[9] I am of the view that the material was before the court and as such there is no requirement for the respondents to lodge a formal application for costs.

 

NO STATUTORY AUTHORITY TO OPPOSE APPLICATION

[10] Also at issue in this judgement is the application of Section 131(6) of the Companies Act 17 of 2008. Section 131(6) reads as follows:

"(6) If liquidation proceedings have already been commenced by or against the company at the time an application is made in terms of subsection (1), the application will suspend those liquidation proceedings until -

(a) the court has adjudicated upon the application; or

(b) the business rescue proceedings end, if the court makes the order applied for.

[11] Counsel for the applicant was of the view that the respondents, as liquidators of Oljaco, had no statutory authority to oppose the application and did so on a frolic oftheir own and that they should have approached the court to grant leave to oppose the business rescue application. He was also of the view that the liquidators opposed the matter because they had a bias towards the applicant and were not acting in the best interests of all the creditors. Evidence of such is seen from the affidavits in the main application in which the liquidators aver, inter alia, that one of the creditors is cohort to fraud in the liquidation and that they dispute the assets of Oljaco.

[12] Counsel for the applicant submitted that when an application for business rescue is made it stays all such powers of the liquidators. As such the liquidators are not entitled to oppose or institute legal proceedings in the liquidated estate. The headnote in the matter of Richter v Absa Bank Limited 2015 (5) SA 57 (SCA) was given in support of this. It reads as follows:

"The term 'liquidation proceedings' does not refer only to a pending application for a liquidation order but includes the process of winding up of a company after a final liquidation order has been granted, ie it includes proceedings that occur after a winding-up order to liquidate the assets and account to creditors, up to deregistration of a company."

[13] This view was followed by Fabricius J in the unreported matter of Maroos and Others v GCC Engineering (Pty) Ltd and Others dated 15 June 2017 who said that the complete process is suspended by the relevant application for business rescue proceedings in accordance with the provisions of Section 131(6) which means that the powers of the liquidators are suspended and the control of the assets fall under the Master of the High Court in accordance with the provisions of section 131(2). He further said that if the particular company trades and the powers of the liquidators are suspended, the Master cannot assume the powers and obligations of the previous directors and the powers in this context are re-vested with the particular directors to control and manage the company pending the determination of the pending business rescue application.

[14] Counsel for the liquidators did not agree with the reasoning of Fabricius J in the matter of Marcos and others v GCC Engineering and others (supra). He was of the view that suspension refers to the selling of assets and that the liquidators are not divested of their administrative powers. He however agreed with the decision of Kgomo J in the matter of Jansen Van Rensburg NO v Cardio-Fitness Properties (Pty) Ltd 2014 JDR 0406 (GSJ) at paragraph [49] in which he said -

"..the applicants (liquidators) are not strictly speaking dealing with the liquidation of the insolvent company but merely acting as night watchmen looking after the assets and affairs of the insolvent company. The directors of this company have ceased to be directors functionally, officially and nominally when the provisional winding-up order was granted, and they have been deprived of the company's property. The winding-up order automatically terminated their employment as directors and have operated to dismiss them. They are the people who brought the company where it is today."

[15] We are presented with two divergent views as to the correct interpretation of section 131(6) and the intention of the legislature in the enactment of this particular section. The objective of a business rescue application is firstly to facilitate the continued existence of the company in a state of solvency and secondly to facilitate a better return for the creditors or shareholders of the company in the event that the first goal proves not to be viable. In Richter v Absa Bank (supra) it was held that the proper interpretation of "liquidation proceedings" in relation to Section 131(6) must include proceedings that occur after a winding-up order to liquidate the assets and account to creditors, up to the de-registration of a company. As such, I am inclined to follow the decision in the Richter v Absa matter. On a proper reading of Section 131(6) there is no suggestion that the administrative powers of the liquidators would be retained thereby enabling them to continue to perform their duties as liquidators in an insolvent estate. Accordingly, I dismiss the application for costs and order costs for the argument for costs in favour of the applicant.

 

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MOKOSE AJ

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