South Africa: North West High Court, Mafikeng

PG Bison Limited v Master od High Court and Others (655/03) [2004] ZANWHC 14 (24 June 2004)

LEEUW J:

[1] The Applicant Company (P G Bison) is a major creditor of the company Garveni Creations (Pty) Ltd (Garveni) which company is indebted to it in an amount of R902 886-56.

[2] Garveni was wound up by creditors in terms of section 349 and 351 of the Companies Act No 61 of 1973 (“The Companies Act”) per special resolution authorizing the winding up (“Special Resolution”) adopted and passed on the 22 July 2003. The Special Resolution was lodged and registered with the Registrar of Companies and Close Corporations (Registrar) on 25 July 2003 in accordance with section 200 of the Act. The winding up process commenced on this date.

[3] The Special Resolution was lodged with the First Respondent, The Master of the High Court, Mmabatho (“The Master”) on the 18 August 2003 purportedly in accordance with section 352 (2) of the Act.

[4] The Master appointed the Second Respondent (Motala) as a Provisional Liquidator on the 18 August 2003 on the strength of the Special Resolution registered on the 25 July 2003. He subsequently re-issued a certificate of Appointment in favour of Motala and the Third Respondent (Langford) as Joint Provisional Liquidators on the 4^th or 5^th September 2003. (The Appointment Certificate is dated 5 September 2003 but the date appearing on the Date Stamp is 4^th September 2003). The reason therefor was the change of the Registered address of Garveni to Brits or Rustenburg.

[5] The Registered Address of Garveni as at the time of registration of the Special Resolution was stated on the Notice of Registered Office and Postal Address of Company Form (CM22) form dated 25 August 2000 as “Ground Floor Autoparks House 13 Cross Road, Glenhazel Johannesburg 2192" and its principal place of business as “20 Blumberg Street, Industria West, Johannesburg.”

[6] The Applicant brought an application to this Honourable Court on an urgent basis for an order inter alia in the following terms:

“2. reviewing and setting aside the decision of the First Respondent in terms whereof it appointed the Second and Third Respondents as Provisional Liquidators of the Insolvent Estate of Garveni Creations (Pty) Limited (“the Company”);

3. that the Certificates of appointment issued by the First Respondent in terms whereof the Second and Third Respondents were appointed as Provisional Liquidators of the Company are hereby set aside and nullified;

4. that the Second Respondent pay the costs of this Application on the scale between Attorney and own Client, alternatively, that the costs of this Application be paid by the Insolvent Estate of the Company;”

and the following Additional Prayers filed later after the commencement of the hearing:

“2. Reviewing and setting aside the decision of the First Respondent in terms whereof it appointed the Second and Third Respondents as Provisional Liquidators of the Insolvent Estate of Garveni Creations (Pty) Limited (“the Company “) under and in terms of Certificates of Appointment dated the 5 September 2003 (“the Certificates”);

3. that the Certificates issued by the First Respondent indicated in Prayer 2 in terms whereof the Second and Third Respondents were appointed as Provisional Liquidators of the Company are hereby set aside and nullified;

4. that the First Respondent pay the costs of this Application on the scale as between Attorney and own Client, alternatively, that the costs of this Application be paid by the Insolvent Estate of the Company and in the event that the Second and Third Respondents oppose this Application then they pay the costs of this Application, jointly and severally with the First Respondent, on the scale as between Attorney and own Client”;

[7] The matter was argued before Court on the 15 September 2003 and postponed to the 29^th April 2004 for further argument. In the interim, P G Bison brought an application for the final winding up of Garveni, which order was granted at the Transvaal Provincial Division on the 11 November 2003. Blieden J held that the change of address by Garveni to Brits or Rustenburg had no validity because of the fact that it occurred after Garveni had already wound itself up on the 29 July 2003. I agree with this finding. The present application was overtaken by events and I consequently granted the prayers in paragraphs 2 and 3 of the Notice of Motion and prayers 2 and 3 of the Additional Prayers in favour of the Applicant on the 29 April 2004 and reserved judgment on the issue of costs. What follows are the reasons for judgment as well as the issue of costs.

[8] It is necessary at this stage to outline the events that preceded the appointment of Motala and Langford by the Master as Provisional Liquidators. This will be the determining factors for granting an appropriate order of costs.

Background information

[9] I have already alluded to the fact that after the Special Resolution was lodged with the Registrar on the 25 July 2003, the Registered Address of Garveni in Johannesburg was changed to “70 Harrington Street Brits”. According to the CM22 signed on 8 July 2003, the Registrar signed the CM22 on 27 August 2003 and the change of address was to take effect retrospectively on the 29 July 2003.

[10] The Master issued a Certificate of Appointment as Provisional Liquidator in favour of Motala on the 18 August 2003 having been advised by Motala that Brits was within the jurisdiction of the Master of the Bophuthatswana Provincial Division. According to the Master and Motala, they were both under the mistaken but bona fide belief that Brits fell within the Master’s jurisdiction.

[11] The Applicant approached this Court on an urgent basis on the 28 August 2003, asking for an order setting aside the appointment of Motala and Langford as Provisional Liquidators. I must here pause to observe that from the papers filed of record, Langford was not yet appointed as a Provisional Liquidator when he was cited as a party to this Application.

[12] The Application was postponed and in the interim, the Master issued a fresh Certificate of Appointment in favour of Motala and Langford as Provisional Liquidators on the 5 September 2003. Motala filed his Answering Affidavit with the Registrar on the 9 September 2003.

[13] The reason given by Motala for the fresh appointment was that the Director of Garveni changed the Principal or Registered Address of the Company to an address in Rustenburg. The CM22 was completed and signed on the 8 July 2003 and the Registrar’s Stamp indicates that the CM22 was received on the 10 July 2003. A Certificate of Confirmation of the Change of Address from the Registrar’s Office was issued on the 5 September 2003 confirming the effective date of the Change of Address.

[14] The Master re-appointed Motala and Langford despite the fact that he was made aware on the 27 August 2003, of the fact that he did not have jurisdiction to appoint Provisional Liquidators. In terms of section 356 r.w. section 1(c) of the Companies Act, the winding up procedure had already commenced on the 25^th July 2003 when Garveni’s Registered Address was still in Johannesburg.

[15] Motala concedes that at the time he was appointed as Provisional Liquidator on the 18 August 2003, the Master did not have jurisdiction to appoint him as such. He nonetheless avers that “for the sake of good order and ex abundante cautela,” a fresh appointment was necessary because the new Registered Address of the Company was now Rustenburg.

[16] The new appointment of Motala and Langford necessitated the Applicant to bring a further application wherein the additional prayers for the abovementioned orders were sought. The Master had initially elected not to oppose the application and to abide by the decision of the Court but on receiving the Replying Affidavit of the Applicant, wherein direct averments of mala fides, fraud or gross negligence and or collusion were levelled against the Master together with a prayer which sought costs against him, an Answering Affidavit was filed disputing the allegations.

[17] Furthermore a point in limine was taken against the Applicant by the Master based on lack of urgency and the fact that the Applicant had taken an irregular step by filing the Additional Notice of Motion and Affidavit and prayed that these proceedings be set aside. He further brought an application to strike out certain allegations which suggested a collusion in fraudulent conduct with Motala and gross negligence and incompetence in the execution of his duty.

[18] The Applicant opposed these applications and Counsel for Applicant submitted that the suggestions of fraudulent conduct were levelled against the Directors of Garveni and not directly at Motala but persisted in the allegations of gross negligence incompetence on the part of the Master.

[19] The Applicant, in his Founding Affidavit supporting the Additional Prayers, pertinently stated the following:

“ I again contend that the modus operandi of the Second and Third Respondents in collusion with the First Respondent is fraudulent and is designed to frustrate the Applicant’s rights and remedies in order that the Second and Third Respondents together with the ex-directors and officials of the Company are able to achieve an ulterior motive which can only have the effect of prejudicing the general body of creditors of the Company.”

Analysis of Issues: The conduct of Motala and the Master

[20] At the commencement of the liquidation process on the 25 July 2003, the Registrar was obliged in terms of section 252 (2) of the Companies Act to register the Special Resolution and submit or lodge same with the Master of the High Court at the Transvaal Provincial Division (TPD). That was not done.

[21] The Directors of Garveni have not come forth to explain the rationale behind changing the Registered address of Garveni to Brits or Rustenburg after the commencement of the winding up process;

[22] Motala submitted the Special Resolution to the Master on the 18^th August 2003. There is no explanation given as to why he had to lodge the Special Resolution with the Master, instead of the lodgement thereof by the Registrar to the Master of the High Court at the TPD. Motala is the one who approached the Master and requested him (the Master) to appoint him as Provisional Liquidator. He submitted the CM22 Form to the Master with the changed address to Brits or Rustenburg

[23] I am of the view that Motala was in regular and direct contact with the Directors of Garveni and would be in a better position to explain the wisdom behind the desperate attempt by them (the Directors) to change the Registered Address of the Company to Brits and later Rustenburg.

[24] When the Master issued a fresh appointment of Provisional Liquidators in favour of Motala and Langford on the 5 September 2003, both Motala and the Master were aware of the fact that the winding up process had commenced on the 25 July 2003 and that the applicant, being one of the major creditors, was taking issue with them with regard to the competence of the Master to appoint Motala and Langford as Provisional Liquidators and that such proceedings were pending before this Court.

[25] This conduct of Motala and the Master nullifies the preliminary point raised on behalf of Motala, wherein reliance is placed on the provisions of section 4 (3) of the Administration of Estates Act No 66 of 1965 which provides that:

“ No act performed by a Master in the bona fide belief that he has jurisdiction shall be invalid merely on the ground that it should have been performed by another Master.”

I find reference to this section unsound and without merit in that section 4(1) of this Act clearly provides for and deals with the jurisdiction of the Master in respect of the estates of deceased persons. Section 1 of the Companies Act defines that jurisdiction of the Master in relation to a company would be the Master in the area which the registered office of where that company is situated. In the circumstances, I dismiss the point in limine in this regard raised by the Second Respondent.

[26] The Master alleges that Motala informed him that Brits was within his jurisdiction. Without verifying the source of this information, he relied on the word of Motala and appointed him as provisional liquidator. This was grossly irresponsible and incompetent on the part of an officer occupying an office of this nature.

[27] Having been made aware of the fact that he had no jurisdiction to appoint a provisional liquidator in this matter, it was expected of the Master to mero motu act in accordance with section 379 (1) of the Companies Act, and rescind the appointment of Motala. Instead, he made out a new appointment in favour of Langford and issued a fresh Certificate of Appointment in favour of Motala.

[28] According to the Master, he had not been placed in possession of Langford’s undertaking and Bond security when he initially appointed Motala on the 18 August 2003. Because he had already decided to jointly appoint Langford and Motala on the 18 August 2003, he requested Motala to furnish him with the original letter of appointment so as to enable him to issue a fresh one in favour of both which he did on 5 September 2003 after Langford had submitted the required documentation.

[29] These allegations are a direct contradiction to Motala’s reasons which I alluded to namely that he sought a fresh appointment from the Master in view of the fact that the Rustenburg address was within the area of the Master. The reasons he gave for his conduct are far from satisfactory and can be calculated as an attempt on his part to mislead the Court.

[30] It is hard for one to comprehend the reasons for the fresh appointment by the Master on the 5 September 2003. The only reasonable inference to be drawn from the conduct of both Motala and the Master is that there was a desperate attempt to regularize the position and cover the irresponsible conduct of the Master in the execution of his duties.

[31] Having made these observations, I have decided to dismiss the Application to strike out brought by the Master. I will not make a finding with regard to the allegations of collusion between Motala and the Master to commit fraud and frustrate the interests of the Creditors of Garveni on the papers before me, but wish to remark that the Master was grossly incompetent in the execution of his duties and his conduct is censured in the strongest terms.

[32] Motala admitted that the Master did not have jurisdiction to appoint him. He initiated the whole process by approaching the Master to have him appointed as Provisional Liquidator. When the error of his appointment was discovered, he again approached the Master with the CM22 Form, wherein the Registered Address of Garveni was changed.

[33] This conduct by Motala necessitated further pleadings and arguments by the parties which could have been avoided at an earlier stage of these proceedings. The Applicant as a major creditor, was justified in bringing this application to set aside the appointments of Motala and Langford in view of the unsatisfactory manner in which they were appointed by the Master. I have decided to dismiss the point in limine regarding urgency. I will attribute conduct of the Master as vitiated by lack of experience and incompetence, and even though I have reproached his conduct, I shall not make an order for costs against him.

[34] In the circumstances I grant the following order:

“The Second Respondent is ordered to pay costs of the Application per Notice of Motion filed with the Registrar on 26 August 2003 and the Notice of Motion - Additional Prayers dated 12 September 2003.”

M M LEEUW

JUDGE OF THE HIGH COURT

Applicant’s Attorneys : J J F Cameron

Care of Minchin & Kelly

1^st Respondent’s Attorneys: State Attorneys

2^nd & 3^rd Respondent’s Attorneys: Knowles Husain Lindsay Inc

Care of Smit Stanton Inc