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FORM A

FILING SHEET FOR EASTERN CAPE JUDGMENT

ECJ no : 41

PARTIES: STANDARD BANK OF SOUTH AFRICA LTD

AND

THE MASTER OF THE HIGH COURT +4 OTHERS

REFERENCE NUMBERS -

• Registrar: 535/2005

• Magistrate:

• Supreme Court of Appeal/Constitutional Court:

DATE DELIVERED: 27 JULY 2006

JUDGE(S): LIEBENBERG J AND PLASKET J

LEGAL REPRESENTATIVES -

Appearances:

• for the State/Applicant(s)/Appellant(s): ADV J SUTTNER SC , ADV R HUTTON

• for the accused/respondent(s): 2^ND RESPONDENT: ADV F TERBLANCHE SC,

ADV. M VAN ROOYEN

3^RD RESPONDENT: ADV T PLEWMAN

5^TH RESPONDENT: ADV J BRETT SC,

ADV J WILSON

Instructing attorneys:

• Applicant(s)/Appellant(s): WHITESIDES ATTORNEYS

• Respondent(s): WHEELDON, RUSHMERE AND COLE AND

NETTELTONS ATTORNEYS

CASE INFORMATION -

• Nature of proceedings : REVIEW

• Topic:

• Keywords:

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION)

CASE NO: 535/05

DATE DELIVERED:27/7/06

IN THE MATTER BETWEEN:

THE STANDARD BANK OF SOUTH AFRICA APPLICANT

LIMITED

AND

THE MASTER OF THE HIGH COURT 1^ST RESPONDENT

(EASTERN CAPE DIVISION)

INTRAMED (PTY) LIMITED (IN LIQUIDATION) 2^ND RESPONDENT

(REPRESENTED HEREIN BY ITS JOINT

LIQUIDATORS, BASIL BRIAN NEL & MICHAEL

LEO DE VILLIERS NNO)

BASIL BRIAN NEL 3^RD RESPONDENT

MICHAEL LEO DE VILLIERS 4^TH RESPONDENT

MACMED HEALTHCARE LIMITED 5^TH RESPONDENT

(IN LIQUIDATION) (REPRESENTED BY ITS JOINT

LIQUIDATORS BASIL BRIAN NEL, LAURENCE

FRANCISCO PEREIRA, OLIVER MICHAEL POWELL,

NORMAN DAVID SIMON, BRIAN ST CLAIR COOPER,

BLESSING GCABASHE NNO)

_____________________________________________________________________

JUDGMENT

_____________________________________________________________________

LIEBENBERG, J et PLASKET, J

[A] THE FACTS

[1] Macmed Healthcare Limited (Macmed) was the holding company of the Macmed group of companies. The group included some 90 subsidiary companies.

[2] On or about 2 March 1999 Macmed entered into an agreement with Aspen Healthcare Holdings Limited (Aspen) in terms whereof Macmed purchased three businesses from Aspen. They were conducted under the style of Intramed, Fine Chemicals and Seravac. The purchase consideration for the businesses was R472.8 million made up as follows:

1. R325 million for Intramed.

2. R112 million for Fine Chemicals.

3. R38.8 million for Seravac.

[3] Macmed also acquired a shelf company known as Zenith Medical and Surgical (Pty) Limited (Zenith). On or about 26 May 1999 Zenith changed its name to Intramed (Pty) Limited (Intramed). Intramed thereafter acquired the Intramed business. At all material times Intramed was a wholly owned subsidiary of Macmed.

[4] The purchase price payable by Macmed for the three businesses was to be funded from the following three sources:

1. The proceeds of a R200 million rights offer made by Macmed to its shareholders;

2. R200 million by way of term loans;

3. R72.7 from Macmed’s own resources.

[5] In order to fund the acquisition of the Intramed business Macmed acquired a R100 million loan from BOE Bank limited (BOE). In a letter by BOE to Macmed confirming the granting of the loan the borrower is indicated as ‘Macmed Health Care Limited and/or its nominated subsidiary (Newco)’. The purpose of the loan is stated to be ‘to facilitate the acquisition of Intramed …’. It also acquired a further R100 million from ABSA Bank.

[6] To give effect to the facility granted by BOE three loan agreements were entered into between BOE, Intramed and Macmed. The three agreements were in respect of amounts which in total amounted to R100 million. In the three agreements Intramed is described as the borrower and it is recorded that the loan is required for the purpose of purchasing the Intramed business.

[7] It is in dispute whether the Intramed business was acquired by Intramed or whether Macmed, after it acquired the business from Aspen, placed it into Intramed. Whatever the true mode of acquisition was, it is to be accepted on the papers that the Intramed business became the business of Intramed on 1 March 1999.

[8] On 17 June 1999 a series of agreements were entered into which are referred to in the papers as the ‘Peregrine structure’. The principal parties to the Peregrine Structure were Peregrine Holdings Limited, Peregrine Finance (Peregrine), Macmed and Intramed. Several other subsidiaries of Macmed as well as two shelve companies acquired by Peregrine for purposes of the structure namely Leoridge and Willridge also participated in the structure.

[9] The purpose given for the creation of the Peregrine structure was to facilitate the payment of the purchase price for the acquisition of the abovementioned three businesses from Aspen in a finance efficient manner. It appears that whereas the Intramed business ended up in Intramed, the other businesses ended up in another subsidiary company of Macmed namely Parkland Finance (Pty) Limited (Parkland). Stripped to its basics the Peregrine structure entailed that Macmed invests the funds it obtained to pay to Aspen for the three businesses in the two Peregrine shelf companies and that Peregrine thereafter lends the money to Intramed and Parkland to pay for the acquisition by them of the businesses. The facts, however, show that the monies obtained by Intramed and Parkland by means of the loans from Peregrine were paid by them to Macmed who paid it over to Aspen.

[10] On 15 October 1999 disaster struck when Macmed was placed in provisional liquidation ushering in what has been referred to as the biggest commercial collapse in the history of South Africa. On 9 November 1999 Macmed was finally liquidated. This was followed by the liquidation of some 45 of its subsidiaries including Intramed. The latter was provisionally liquidated on 29 November 1999 and finally liquidated on 16 February 2000. Both Macmed and Intramed were liquidated because they were unable to pay their debts.

[11] The fourth respondent was appointed as provisional liquidator of Intramed on 29 November 1999 and the third respondent as joint provisional liquidator on 3 December 1999. On 31 May 2000 they were finally appointed as joint liquidators of Intramed. The third respondent was also appointed as joint liquidator of Macmed and all its other subsidiaries which were placed in liquidation.

[12] The first meeting of creditors of Intramed was held in Port Elizabeth on 10 May 2000. The following claims relevant to the present proceedings were proved at this meeting.

1. A claim for R325 million by Macmed.

2. A claim for R100 million by BOE.

3. A claim for R107 728 483.64 by the applicant.

[13] At the request of the third and fourth respondents the claims by BOE and the applicant were expunged by the Master.

[14] After the expungment of the applicant’s claim the third and fourth respondents, in their capacities as joint liquidators of Intramed, instituted action against the applicant for payment of an amount of R15 283 144.68. The applicant in turn counterclaimed against Intramed for payment of the amount of its expunged claim (R107 728 463.64). The matter went to trial in the Witwatersrand Local Division where the claim of Intramed was dismissed and judgment given for the applicant in respect of its counterclaim.

[15] BOE also instituted action against Intramed and obtained judgment in its favour. The subsequent appeal by the third and fourth respondents to the Supreme Court of Appeal was also decided in favour of BOE.

[16] The Macmed claim was proved at the first meeting of creditors of Intramed without any objection from any of the creditors, including the applicant, who were represented at the meeting. It was also recorded in the first, second, third and the second amended fourth liquidation and distribution accounts, all of which were approved by the Master.

[17] Pursuant to the approval of the first and second accounts dividends of R15 647 916.13 and R6 706 249.77 (i.e. a total of R22 354 165.90) were paid to Macmed.

[18] After the BOE claim against Intramed was upheld by the Courts, the Macmed claim against Intramed was reduced to R225 million prior to payment of the two aforementioned dividends to Macmed.

[19] An amount of R36 million has been retained in the free residue account of Intramed by the third and fourth respondents. This amount has been retained pending the outcome of this application. It is common cause that the destination of this amount will change significantly should it be found that the Macmed claim is not a valid claim. Its effect will be that R25.1 million of the R36 million will become available to the applicant and other creditors of Intramed instead of the total of R10.9 available to them if the Macmed claim is found to be valid.

[20] In the first liquidation and distribution account the third and fourth respondents provided for payment of fees of approximately R21.2 million to themselves. This claim gave rise to a dispute between the Master and the two respondents concerning the amount of the fees claimed by them. The dispute culminated in a ruling by the Master in terms whereof he fixed the total remuneration of the two respondents at an amount of R3 250 000.00. An application brought in this Court by the third and fourth respondents in their representative capacities as joint liquidators to review the ruling of the Master was unsuccessful and so was an appeal by them to the Supreme Court of Appeal against the order of this Court. Both this court and the Supreme Court of Appeal ordered the third and fourth respondents personally to pay the costs of the litigation. It was held by the Supreme Court of Appeal that in bringing the review application and appealing against the order of this Court the third and fourth respondents were acting in their personal capacities and not in their representative capacities as joint liquidators.

[21] It is common cause that the third and fourth respondents caused the legal costs of the application to review the Master’s ruling to be paid out of the funds of Intramed. These payments were made prior to the date on which the Supreme Court of Appeal handed down its judgment. Since the Supreme Court of Appeal handed down its judgment the amount paid in respect of the legal fees has been repaid to Intramed with interest. During the process of repayment it was revealed that the money used to repay Intramed was collected from not only the third and fourth respondents, but also from the liquidators of Macmed and the liquidators of some of its liquidated subsidiaries. It is an admitted fact that a fee sharing agreement existed between these liquidators.

[22] An account dated 31 May 2000 was rendered by Hofmeyer Incorporated, a firm of attorneys, for work done in connection with the proving of the claim by Macmed against Intramed. This account was erroneously paid by the third and fourth respondents from the funds of Intramed. It is common cause that this amount should have been paid by Macmed and it has subsequently been repaid by Macmed to Intramed.

[23] The relief sought by the applicant in this application is contained in 12 pages in the notice of motion. It is unnecessary to burden this judgment with a verbatim repetition thereof. An appropriate summary of the relief has been set out in the answering affidavit of the second respondent. In essence we adopt that summary. The summarised relief is as follows:

1. That the third and fourth respondents be removed as liquidators of Intramed; (prayer 1.1)

2. That the third and fourth respondents render a full account setting forth every payment made other than for the sole benefit of Intramed; (prayer 1.2)

3. Debatement of the account referred to in 23.2 above (prayer 1.3)

4. Forfeiture by the third and fourth respondents of all fees earned by them to date; (prayer 1.4)

5. That the claim proved by Macmed in the Intramed estate in the amount of R325 million and recorded in the amended fourth liquidation and distribution account be expunged; (prayer 1.6)

6. A declaration that Macmed is not entitled to any further dividends from Intramed; (prayer 1.7)

7. In the alternative to the relief set out in 23.5 and 23.6 above, that the decision of the Master to confirm the claim by Macmed as recorded in the amended fourth liquidation and distribution account be reviewed and set aside; (prayer 1.8)

8. That certain alternative relief be granted relating to the conduct of the third and fourth respondents and the appointment of a commission of enquiry by the court either in terms of s 381 or s 417 of the Companies Act 61 of 1973; (prayers 1.5 and 1.9)

9. Costs of the application (1.10)

[24] The first respondent abides the decision of the Court.

[25] In the answering affidavit filed on behalf of the second respondent it was indicated that it opposes all the relief prayed for by the applicant including the relief set out in paragraphs 23.2, 23.3 and 23.4 above. Before us Mr Terblanche, who, together with Ms Van Rooyen, appeared for the second respondent, indicated that the second respondent opposes the relief sought by the applicant other than the relief set out in paragraphs 23.2, 23.3 and 23.4 above.

[26] The third and fourth respondents in their personal capacities oppose the relief set out in paragraphs 23.2, 23.3 and 23.4 above.

[27] The fifth respondent opposes the relief set out in paragraphs 23.6, 23.7, 23.8 and 23.9 above.

[28] A number of points in limine have been raised by the second and fifth respondents, it having been agreed by the parties that these points would be argued at this stage and that the remaining issues would be dealt with, if needs be, at a later stage.

[B] LOCUS STANDI OF THE APPLICANT

[29] The first point in limine is that the applicant has no locus standi to bring this application. Although they did not raise the point, the third and fourth respondents expressed support for it during argument.

[30] The facts on which the applicant relies in its founding affidavit for its locus standi to bring this application can be summarised as follows:

1. At the first meeting of creditors the applicant proved a claim in Intramed in the amount of R107 728 463.64.

2. The claim was subsequently expunged by the Master resulting in a action brought by the applicant against Intramed.

3. The action was decided in favour of the applicant resulting in an order in its favour for the aforementioned amount plus interest thereon at the prescribed rate, a tempore morae, and costs.

4. The interest payable by Intramed to the applicant amounts to approximately R83 million calculated on the basis of simple interest of 15.5 % per annum on the judgment debt from the date of proof of the claim namely 10 May 2000.

5. The applicant’s costs remain to be taxed.

6. In view of the above the applicant is a judgment creditor of Intramed and accordingly has the necessary locus standi to bring this application.

[31] The applicant’s claim against Intramed is in respect of a loan by the applicant to Macmed. Intramed and a number of other subsidiaries of Macmed executed suretyships in favour of the applicant for the indebtedness of Macmed. In respect of the applicant’s claim for R107 728 463.64 proved against Macmed and the relevant subsidiaries, including Intramed, the applicant has received total dividends from these companies amounting to R128 124 478.36. The correctness of the last-mentioned amount was accepted during argument by Mr Terblanche for the second respondent and Mr Brett who, together with Mr Wilson, appeared for the fifth respondent.

[32] The basis upon which the second and fifth respondents attack the locus standi of the applicant is that its claim against Intramed has been paid in full and that there is no further liability to the applicant on the part of Intramed.

[33] In its replying affidavit the applicant avers that, as it is a secured creditor, its claim in Intramed is a composite claim consisting of both capital and interest. As a result dividends ought to be first applied to interest and thereafter to capital. On this basis the applicant is still a creditor for the balance of its claim in the amount of R77 029 722.78 made up of capital amounting to R76 573 697.16 and interest amounting to R456 025.62.

[34] Should the allocation, however, have to be made first to capital and thereafter to interest, an amount of R52 368 418.60 representing outstanding interest is still owing to the applicant in respect of its claim.

[35] It is, therefore, the applicant’s contention that regardless of which method of allocation of dividends is applied, the applicant remains a substantial creditor in Intramed.

[36] The fifth respondent raised the preliminary point that the applicant’s allegations made in its replying affidavit amount to the raising of new matter which was not included in the founding affidavit. Consequently the applicant cannot rely on the new matter and it should be struck out.

[37] The new matter complained of concerns the allegations made by the applicant in respect of the interest on the capital amount of its claim and are those summarised in paragraphs [33], [34] and [35] above. In his heads of argument on behalf of the fifth respondent Mr Brett referred to the new matter as further evidence regarding the post liquidation interest that was allegedly due to the applicant and the application of the dividends to the capital and interest components of its claim and alternatively, the effect of the expungement of the Macmed claim on the applicant’s claim in Intramed.

[38] As a general rule all the necessary allegations upon which an applicant relies must be set out in the founding affidavit and an applicant will not be allowed to make out new grounds for the application in the replying affidavit. (Director of Hospital Services v Mistry 1979 (1) SA 626 (A).) This rule, however, is not absolute and should be applied with a fair measure of common sense. (Smith v Kwanonqubela Town Council 1999 (4) SA 947 (SCA), 954G-H). It is further apparent from the aforementioned decision that where the new matter raised in the replying affidavit does not provide any material or substantial advantage to the applicant there is no necessity to disallow it. So, too, will the new matter not be disallowed if the respondent is not prejudiced by allowing it. (Baeck and Co SA (Pty) Ltd v Van Summeren and another 1982 (2) SA 112 (W); Merlin Gerin (Pty) Ltd v All Current and Drive Centre (Pty) Ltd and another 1994 (1) SA 659 (C).)

[39] As indicated in paragraph [30] above, the applicant in its founding affidavit relied for its locus standi on its claim for capital and interest in a total amount of approximately R190 728 463.64 made up of R107 728 463.64 in respect of capital and some R83 million in respect of interest. The allegation in the answering affidavits that a total amount of R128 124 478.36 had been paid to the applicant required an explanation from the applicant. The explanation given consists of an admission that the payment had been made and an explanation that the payment does not dispose of the applicant’s claim for capital and interest. It points out that whichever method of applying the payment to capital and interest is adopted, it still has a claim for a substantial amount. The argument that this amounts to the raising of new matter cannot be sustained. Even if it does amount to the raising of new matter it has, in our view, not been shown, nor was it argued, that the applicant derived any material benefit or substantial advantage from the raising thereof in the replying affidavit. Mr Brett submitted that because of the allegations now made in the replying affidavit the fifth respondent was not able to put up evidence of its own regarding the amount of interest that was (on its version) payable to Standard Bank in respect of its judgment debt and the application of the dividends paid in respect of the claim to the capital and interest components thereof. In our view this complaint is not a valid one. It should have been clear to the fifth respondent that the amount paid to the applicant, namely the amount of R128 124 478.36 was, in terms of the allegations made in the founding affidavit, approximately R72 million less than the amount alleged by the applicant to be due to it in respect of capital and interest. It should also have been clear to the fifth respondent that this difference was the result of the interest claimed on the capital. If any need existed for the fifth respondent to deal with the two questions mentioned relating to the interest claimed by the applicant, it already arose from the founding affidavit and not only when the replying affidavit was filed. In our view no prejudice resulting from the inclusion of the purported new matter in the replying affidavit has been shown to have been suffered by the fifth respondent.

[40] In the result the preliminary point raised by the fifth respondent is rejected.

[41] Essentially the argument of the second respondent amounts to the following. The fact that the security provided by the cession of Intramed’s book debts to the applicant was not sufficient to cover the applicant’s claim the amount still outstanding becomes a concurrent claim. Only after the concurrent claims have been paid in full will interest on such claims be paid from any remaining free residue. (Insolvency Act 24 of 1936, s 103.) In the present instance the concurrent creditors in Intramed have not been paid in full and there is, therefore, no prospect of the payment of any interest. The result it, so the argument goes, that the moment the prospect of receiving payment in respect of interest disappeared, the applicant ceased to be a creditor.

[42] Mr Brett approached the matter from a different angle. He submitted in essence that the effect of s 103(1)(b) is to subordinate the payment of interest to the payment in full of all concurrent creditors. The payment of interest is, therefore, subject to the condition that concurrent creditors be paid. If the concurrent creditors are not paid in full the claim in respect of interest ‘dies a natural death’.

[43] For these propositions Mr Brett relied on Ex Parte De Villiers and another NNO: In Re Carbon Developments (Pty) Ltd (In Liquidation) 1993 (1) SA 493 (A) and Cape Produce Co (Port Elizabeth) (Pty) Ltd v Dal Maso and another NNO 2002 (3) SA 752 (SCA). In both these matters the court dealt with a subordination agreement in terms whereof a creditor agreed to subordinate its claims against its debtor to the claims of other creditors of the debtor. It was held that the effect of such an agreement is that the subordinated claim comes into existence or continues to exist, but its enforceability is made subject to the fulfilment of a condition the practical effect of which depends on the terms of the agreement. Such a creditor, however, in creating a moratorium for the benefit of other creditors, renders its own claim unenforceable unless the other creditors receive payment in full. In the event of insolvency of the debtor, sequestration would normally mean that the condition upon which enforceability of the debt depends, namely the payment in full of the other creditors, will have become incapable of fulfilment. In such an event, that creditor will have no claim to prove in the insolvent estate of the debtor. (Carbon Developments supra, 504H–505C; Cape Produce supra, 760 D–E.)

[44] Mr Brett submitted that the principles set out in the aforementioned two cases should also be applied to a claim for interest in an insolvent estate which is made subordinate to concurrent claims in terms of s 103(1)(b) of the Insolvency Act. The effect of the section is, therefore, to make the payment of interest subject to the fulfilment of the condition that all concurrent creditors be paid in full. If the condition cannot be fulfilled then the claim for interest ceases to exist.

[45] It was further argued by Mr Brett that since the applicant’s claim against Intramed is based on a suretyship in respect of the applicant’s claim against Macmed and, therefore, an accessory obligation, Intramed’s liability cannot exceed that of Macmed. He further submitted that, as the applicant’s claim against Macmed is unsecured in Macmed, any claim for interest would fall away for the reasons set out in paragraph [44]. As a result Intramed cannot be held liable for any interest because of the accessory nature of its obligation.

[46] In our view the arguments on behalf of the second and fifth respondents cannot be sustained.

[47] We find it convenient to deal with Mr Brett’s arguments first.

[48] In our view the principles applicable to subordination agreements as enunciated in the Carbon Development and Cape Produce cases cannot be made applicable to the provisions of s 103(1)(b) of the Insolvency Act. The purpose of a subordination agreement, as it appears from the judgments, is to provide a moratorium to other creditors. As we see it, the purpose of s 103 of the Insolvency Act is to provide a structured and equitable means of distributing the free residue in an insolvent estate. The cut off point for the claim to fall away is stated to be the sequestration of the debtor. In the present case liquidation (sequestration) has already occurred and s 103 deals with how distribution should be made. If a cut off point has to be found in this matter when interest will no longer be payable and the claims for it should fall away, that point can only be when the estate is finally wound up. (See Bank of Lisbon International Ltd v Neves 1992 (3) SA 349 (W), 353B.) Until then the claim for interest remains in existence. That point has not been reached.

[49] The submission that the claim in Intramed should be treated as an unsecured claim because it is unsecured in Macmed can also not be sustained. It is a common experience that a surety is required to provide security for its obligations in terms of a suretyship agreement. Whether the claim against the estate of a surety in the event of its insolvency is to be regarded as a secured claim depends on the agreement between the surety and the creditor and not whether the principal debtor provided any security for the debt. The fact is that in Intramed the claim is a claim secured by the book debts of Intramed. In Intramed’s liquidation the claim is, therefore, a secured claim irrespective of whether the claim is secured in Macmed. In our view this approach accords with logic and common sense.

[50] In his argument Mr Terblanche, in our view correctly, accepted the fact that the applicant’s claims in Intramed is a secured claim.

[51] The argument of Mr Terblanche cannot be sustained for similar reasons. We are unable to accept the proposition that the claim for interest falls away when it becomes clear that the concurrent creditors will not be paid in full. No authority for this proposition was referred to. In our view the claim for interest will remain a valid claim until the final winding up of the estate because it is only at that point that certainty can exist that concurrent creditors will not be paid in full. It would seem that the argument confuses the liability of the debtor and its ability to pay. A debt does not become invalid when it becomes clear that the debtor cannot pay. Despite the inability of the debtor to pay, the creditor with a valid claim against him remains a creditor. See Nel NO v Body Corporate of the Seaways Building and another [1995] ZASCA 83; 1996 (1) SA 131 (A), 139D-G.

[52] It was further contended on behalf of both the second and the fifth respondents that the payments made to the applicant from the various estates constitute payment in full of its capital and post liquidation interest. In fact the allegations are that the applicant has been overpaid.

[53] It is clear from the facts to be accepted that whether the applicant has been paid in full depends upon the time when post liquidation interest to which it is entitled begins to run. It is the applicant’s contention that it is entitled to post liquidation interest from date of liquidation in terms of the Insolvency Act.

[54] It was contended on behalf of the second and fifth respondents that the applicant relies for its claim on the judgment obtained by it in the Witwatersrand Local Division. In that judgment it was awarded interest a tempore morae at 15.5%. As the applicant relies on this order it is only entitled to interest from the date of judgment. That being so, the interest to which the applicant is entitled plus the capital amount of R107 728 463.64 totals less than the R128 124 478.36 it has already received. In the result the applicant’s claim has been paid in full and it ceased to be a creditor in Intramed.

[55] As is apparent from the aforestated facts, the action in the Witwatersrand Local Division was necessitated because the third and fourth respondents expunged the applicant’s claim. The practical effect of the judgment is to confirm the validity of the expunged claim which, as a result had to be re-instated. It appears to be common cause that, but for that judgment, the applicant would have been entitled to interest on the amount of its claim from the date of liquidation in terms of s 95(1) of the Insolvency Act. This right was not abandoned by the applicant when it instituted its counterclaim in the Witwatersrand Local Division and obtained the judgment, nor, in our view, does the judgment curtail the right which the applicant has in terms of s 95(1). It follows that as soon as the applicant’s claim was re-instated as a result of the judgment it became entitled to interest from the date of liquidation.

[56] It is apparent from the facts that if the applicant is entitled to interest from the date of liquidation a substantial amount is still unpaid in respect of its claim. Whether this outstanding amount represents capital, if the principles enunciated in Singer NO v The Master and another 1996 (2) SA 133 (A) are applied, or whether it represents interest only, does not, in accordance with our aforegoing conclusions, affect the matter. In either event the applicant remains a creditor in Intramed.

[57] In the result the applicant has locus standi to bring the present application and this point in limine stands to be dismissed with costs occasioned thereby.

[C] PRAYERS 1.6, 1.7, 1.8 AND 1.9 OF THE NOTICE OF MOTION

[58] The remaining points in limine are focused on the assertion that certain of the relief claimed by the applicant is incompetent in law. These points are directed at prayers 1.6, 1.7, 1.8 and 1.9 of the Notice of Motion.

[59] In prayer 1.6, the applicants first sought an order that ‘the claim proved by the fifth respondent in the second respondent in the amount of R325 million in the amended fourth liquidation and distribution account in the second respondent is expunged’. Mr Suttner, who appeared for the applicant, together with Mr Hutton, applied to amend prayer 1.6 after both Mr Terblanche and Mr Brett had argued the points in limine. The amendment would alter prayer 1.6 to read:

‘The claim proved by the fifth respondent in the second respondent in the amount of R325 million as recorded in the amended fourth liquidation and distribution account in the second respondent is reduced in the sense that no further dividends are to be paid to the fifth respondent in respect thereof.’

Mr Terblanche and Mr Brett opposed this amendment but also submitted in their replies that it does not alter the position in favour of the applicant: the amended prayer 1.6 would be as bad in law as the original prayer 1,6.

[60] Prayer 1.7 is for a declarator that the fifth respondent ‘is not entitled to receive any further dividends from the second respondent in respect of its claim of R325 million proved on 10 May 2000 and recorded in the amended fourth liquidation and distribution account’.

[61] Prayer 1.8 is for an order, in the alternative to prayers 1.6 and 1.7, that the ‘decision of the first respondent to confirm the claim by the fifth respondent in the fourth, alternatively the amended fourth, liquidation and distribution account of the second respondent is reviewed, set aside and replaced’ with an order that ‘the claim proved by the fifth respondent in the second respondent in the amount of R325 million is expunged’ and that ‘the fifth respondent is declared to be not entitled to receive any further dividends from the second respondent’. Mr Suttner abandoned this prayer, which therefore warrants no further consideration.

[62] Prayer 1.9 is for an order in the alternative to prayers 1.6, 1.7 and 1.8 that, inter alia, ‘a commission of enquiry be convened under the provisions of sections 417 and 418 of the Companies Act to investigate the trade, dealing, property and affairs of the second respondent’ and that this commission of enquiry be empowered in various ways specified.

(1) Prayers 1.6 and 1.7: The Expungement or Reduction of the Macmed Claim

[63] The facts relevant to the argument that prayers 1.6 and 1.7 of the Notice of Motion are bad in law are that, at the first meeting of creditors, on 10 May 2000, Macmed’s claim was proved in the amount of R325 million without objection from any of the creditors, including the applicant. This claim was recorded in the first, second, third and fourth liquidation and distribution accounts, all of which were approved by the Master.

[64] Indeed, the amended fourth liquidation and distribution account was approved after a specific request was directed to the Master to this effect by the applicant. Dividends have been paid to various creditors, at various times, including to the applicant. As with the approval of the amended fourth liquidation and distribution account, the applicant wrote to the fourth respondent to request that its dividend be paid promptly.

[65] Section 339 of the Companies Act 61 of 1973 provides that, in the winding up of a company that is unable to pay its debts, ‘the provisions of the law relating to insolvency shall, in so far as they are applicable, be applied mutatis mutandis in respect of any matter not specifically provided for by this Act’. The first relevant provision of the Insolvency Act 24 of 1936 that applies in this case is s 45. It creates the mechanism for claims proved at a meeting of creditors to be examined by the trustee and for them then to be confirmed, reduced or disallowed by the Master. The section also preserves a claimant’s right to establish a claim that has been reduced or disallowed. The section states:

‘(1) After a meeting of creditors the officer who presided thereat shall deliver to the trustee every claim proved against the insolvent estate at that meeting and every document submitted in support of the claim.

(2) The trustee shall examine all available books and documents relating to the insolvent estate for the purpose of ascertaining whether the estate in fact owes the claimant the amount claimed.

(3) If the trustee disputes a claim after it has been proved against the estate at a meeting of creditors, he shall report the fact in writing to the Master and shall state in his report his reasons for disputing the claim. Thereupon the Master may confirm the claim, or he may, after having afforded the claimant an opportunity to substantiate his claim, reduce or disallow the claim, and if he has done so, he shall forthwith notify the claimant in writing: Provided that such reduction or disallowance shall not debar the claimant from establishing his claim by an action at law, but subject to the provisions of section seventy-five.’

It has been held that, by virtue of s 339 of the Companies Act, s 45(3) of the Insolvency Act applies to the winding up of companies that are unable to pay their debts. (See The Master v Stuart 1981 (2) SA 472 (E), 474A-C.)

[66] Section 75(2) provides that no proceedings may be instituted after the Master has confirmed a trustee’s account in terms of s 112 of the Act, unless ‘the court in which it is sought to institute proceedings’ permits the institution of those proceedings after the confirmation of the account, on conditions it may impose, ‘if it finds that there was a reasonable excuse for the delay in instituting such proceedings’. Its equivalent in the Companies Act is s 355(2) which provides that in any review proceedings related to the winding up of a company the court ‘shall not authorise the re-opening of any duly confirmed account or plan of distribution or of contribution otherwise than is provided in s 408’.

[67] Section 112 of the Insolvency Act is the equivalent of s 408 of the Companies Act. (See Kommissaris van Binnelandse Inkomste en ‘n ander v Willers en andere 1994 (3) SA 283 (A), 322E-G, 326B; Standard Bank of South Africa Ltd v Nel and others ECD 2 April 2004 (Case no. 1032/03) unreported, para 7.) It follows that s 111 of the Insolvency Act is the equivalent of s 407 of the Companies Act. Both sets of sections deal with objections to accounts and confirmations of accounts. Section 407 of the Companies Act provides:

‘(1) Any person having an interest in the company being wound up may, at any time before the confirmation of an account, lodge with the Master an objection to such account stating the reasons for the objection.

(2) If the Master is of opinion that any such objection ought to be sustained, he shall direct the liquidator to amend the account or give such other directions as he may think fit.

(3) If in respect of any account the Master is of the opinion that any improper charge has been made against the assets of a company or that the account is in any respect incorrect and should be amended, he may, whether or not any objection to the account has been lodged with him, direct the liquidator to amend the account, or he may give such other directions as he may think fit.

(4) (a) The liquidator or any person aggrieved by any direction of the Master under this section, or by the refusal of the Master to sustain an objection lodged thereunder, may within fourteen days after the date of the Master's direction and after notice to the liquidator apply to the Court for an order setting aside the Master's decision, and the Court may on any such application confirm the account in question or make such order as it thinks fit.

(b) If any such direction given by the Master under this section affects the interests of a person who has not lodged an objection with the Master, such account as amended shall again lie open for inspection in the manner and with the notice as prescribed in section 406, unless the person affected consents in writing to the immediate confirmation of the account.’

[68] Section 408 of the Companies Act provides:

‘When an account has lain open for inspection as prescribed in section 406 and-

(a) no objection has been lodged; or

(b) an objection has been lodged and the account has been amended in accordance with the direction of the Master and has again lain open for inspection, if necessary, as in section 407(4)(b) prescribed, and no application has been made to the Court within the prescribed time to set aside the Master's decision; or

(c) an objection has been lodged but has been withdrawn or has not been sustained and the objector has not applied to the Court within the prescribed time,

the Master shall confirm the account and his confirmation shall have the effect of a final judgment, save as against such persons as may be permitted by the Court to re-open the account after such confirmation but before the liquidator commences with the distribution.’

[69] Section 151 of the Insolvency Act allows for the review of unfavourable decisions and provides:

‘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: Provided that if all or most of the creditors are affected, notice to the trustee shall be deemed to be notice to all such creditors; and provided further that the court shall not re-open any duly confirmed trustee's account otherwise than as is provided in section one hundred and twelve.’

By virtue of s 339 of the Companies Act, s 151 of the Insolvency Act applies to the winding up of companies that are unable to pay their debts. (See The Master v Stuart supra, 474B-C.)

[70] Section 151 of the Insolvency Act must also be read with s 355 of the Companies Act. (See Blackman, Jooste and Everingham Commentary on the Companies Act (Vol 3) Cape Town, Juta and Co: 2002, 14-17 (footnote 11), hereafter referred to as Blackman, Jooste and Everingham.) Section 355 provides:

‘(1) In any review by the Court of any matter under the winding-up of a company where the general body of creditors, members or contributories is affected, notice to the liquidator shall be notice to them.

(2) The Court shall not authorise the re-opening of any duly confirmed account or plan of distribution or of contribution otherwise than as is provided in section 408.’

[71] As appears from the facts set out above, in this matter, the accounts in question have been confirmed and dividends have been paid, including to the applicant.

[72] The second and fifth respondents argue that prayers 1.6 (whether in its original or amended form) and 1.7 of the Notice of Motion are bad in law because: (a) the application, to the extent that it is an application made in terms of s 407 of the Companies Act, is defective as it was launched outside of the 14-day period prescribed by that section, no application for condonation has been made and no grounds upon which condonation could be granted are to be found in the applicant’s papers; and (b) to the extent to which the application is one brought in terms of s 151 of the Insolvency Act (made applicable by s 339 of the Companies Act), or directly for the expungement of the claim (as contemplated by Millman and another NNO v Pieterse and others 1997 (1) SA 784 (C), 786H-I, 789C-G), the relief sought is barred by the fact that the account concerned has been confirmed by the Master and dividends have already been paid by the liquidators. (In the light of the conclusion that we reach, it is not necessary for us to deal with a third argument to the effect that the claim concerned had, in any event, been extinguished by prescription.)

[73] The applicant has argued, in respect of the first attack, that it has applied for condonation. The deponent to the founding affidavit stated (at para 480) that the review of the Master’s decision – and he was referring to the relief claimed in the now abandoned prayer 1.8 – is in the alternative to the claim for the expungement of the Macmed claim and that it was ‘not physically possible to complete these papers, including a claim for the review and setting aside of the Master’s rejection of the applicant’s objection within a period of 14 days after the date of the Master’s decision as contemplated in section 407(4)(a) of the Companies Act’. To the extent that condonation may be required, the applicant applied for condonation. It is apparent that it is the applicant’s case that the relief claimed in prayers 1.6 and 1.7 of the Notice of Motion is not claimed by way of s 407, and that it applied for condonation in respect of the alternative, and now abandoned, relief claimed in terms of prayer 1.8 of the Notice of Motion.

[74] Be that as it may, in the light of the conclusion that we have reached in respect of the second attack, it is not necessary to determine whether the applicant is required to apply for condonation, if so, whether it has done so and, if it has, whether it has made out a sufficient case. Suffice it to say that while it is ‘trite that the 14-day provision is directory and not peremptory’ and that condonation may be granted if an application is launched outside of that period, it ‘is not granted merely for the asking’ (Swift Trailer Co (Pty) Ltd v The Master and others NNO 1983 (4) SA 781 (T), 785H-786A.)

[75] The expungement of a claim simply means the reduction or disallowing of the claim in terms of s 45(3) of the Insolvency Act. In this case, the Master decided not to expunge the Macmed claim despite being requested to do so by the applicant. Instead he confirmed that claim. Once he confirmed the account, that confirmation, in terms of s 408, acquired the effect of a ‘final judgment’ and could only be re-opened, with the approval of a court, ‘before the liquidator commences with the distribution’.

[76] It is not necessary for us to deal in any detail with the nature of the application for relief in terms of prayers 1.6 and 1.7 of the Notice of Motion. It does appear to us, however, that even if it is not framed as a review, it has the effect of a review in substance. Even though the review created by s 151 of the Insolvency Act is a particularly wide one, more akin to an appeal than a conventional review, a rational and justifiable basis for the interference by a court with the Master’s decision is still required. (On the nature of a s 151 review see Gore and another NNO v The Master 2002 (2) SA 283 (E); Nel and another NNO v The Master (ABSA Bank and others intervening 2005 (1) SA 276 (SCA).) Howsoever one approaches the matter, it seems to us inevitable that the applicant’s case must entail that the Master’s decision to confirm the account in question has to be re-considered. That is so even if the relief claimed is that the fifth respondent’s claim in the second respondent ‘is reduced in the sense that no further dividends are to be paid to the fifth respondent in respect thereof’ (as per the amended prayer 1.6 of the Notice of Motion) and a declarator is issued to the effect that the fifth respondent is not entitled to any further dividends (as per prayer 1.7 of the Notice of Motion).

[77] The applicant relies on Millman and another NNO v Pieterse and others 1997 (1) SA 784 (C) as its authority for the proposition that it may sue to expunge a claim directly and not have to use the procedure of s 151. Millman involved an action for the expungement of a claim. It was held, in exception proceedings, that the s 151 procedure was not exclusive and there could be circumstances – for instance, where material conflicts of fact were bound to arise – that justified an action rather than an application. Friedman JP and Farlam J held in this regard (at 789C-G):

‘The Legislature was doubtless aware that cases arise from time to time where the expungement of a claim admitted to proof is sought against the background of complicated factual disputes for which the application procedure on motion is clearly inappropriate. Can one impute to the Legislature the intention to exclude the Court's power to deal with such matters in actions and to insist on motion procedure being adopted (as required by s 151)? We do not think so. When one considers that there is a presumption operating the other way, with the need for clear provision to rebut that presumption, it is, in our judgment, plain that there is no basis for holding the Court's power, in an action to order the expungement of a claim admitted to proof, has been ousted by the Legislature.

The present case appears par excellence to be a case where the procedure by action is more suitable for the resolution of the dispute which arose from the facts set out in the particulars. It may well be that in cases which can more expeditiously, appropriately and cheaply be brought under the procedure provided in ss 45 and 151 of the Act, this Court may, in the exercise of its discretion, decline to hear actions brought in the normal way where expungement of claims is sought … or may disallow the costs or make some appropriate costs order so that the defendant will not have to pay more, by way of costs, than would have been the case if the statutory procedure had been followed.’

[78] The court in Millman did not deal at all with what precisely such an action entailed and the basis and the justification for the court’s power to expunge the claim. These issues were not relevant to the decision at that stage. Millman is, however, distinguishable from this matter because in it, the liquidators sought to expunge a proved claim before it had been confirmed.

[79] The significance of the confirmation of an account and the payment of dividends has been commented on many times. For instance, in Wispeco (Pty) Ltd v Herrigel NO and another 1983 (2) SA 20 (C), 25H-26C, Tebbutt J held:

‘With regard to the first point it seems to me clear that the intention of the Legislature was to ensure that, once an account has been confirmed, without objection prior to such confirmation, and a dividend has in consequence been paid, the trustee should not be put in the position subsequently of having to try to recover that dividend from those to whom he has made distribution as is required of him by the Act. The Act states (in terms of s 113(3)) that as soon as an account has been confirmed the trustee should "immediately pay the dividend, if any, awarded in the account". That being so, and the trustee having forthwith paid out such dividend, it would be extremely difficult - and in many cases might even involve his having to proceed to litigation - to recover any dividend so paid out. This will be so whether he has paid a dividend to one creditor or to more than one. And it seems to me that it would make little difference if the dividend were large or small. As stated by De Villiers CJ in Stewart's Assignee v Wall's Trustee and Others 3 SC 243 at 247:

"It might be productive of the greatest injustice to vigilant creditors if, long after they have received their dividends and regulated their business accordingly, they can be compelled to refund what they have received merely because less vigilant creditors who have proved have not taken further pains to inquire how their proof has been dealt with by the trustee."’

In addition, Tebbutt J held that it is not possible to re-open a confirmed account once a dividend has been paid and that ‘the payment of a dividend to any one or more creditors would be sufficient to preclude the opening of an account’ (at 26E-F; see too Swift Trailer Co (Pty) Ltd v The Master and others NNO 1983 (4) SA 781 (T), 786A-C).

[80] In SA Clay Industries Ltd v Katzenellenbogen NO and another 1957 (1) SA 220 (W), 224E-F, Kuper J, after stating that the machinery of the Insolvency Act is ‘directed towards a speedy liquidation and distribution of the assets of an insolvent estate’, and that this was why the re-opening of an account is not permitted after a dividend has been paid, proceeded to hold that ‘[a]fter confirmation and before the payment of a dividend the aggrieved person must show something more than ignorance and prejudice: he must show that his failure to object has been induced by justus error or by fraud’. So too in Kilroe-Daley v Barclays National Bank Ltd [1984] ZASCA 90; 1984 (4) SA 609 (A), Galgut AJA, after confirming the correctness of SA Clay Industries on this point (at 626G-H) held (at 627E-F) that the stipulation in s 408 that the Master's confirmation of an account ‘shall have the effect of a final judgment’, does not ‘give each item in the account the quality of a judgment of a court’ but means rather that, ‘once the Master has confirmed an account, after objections if any have been dealt with, his confirmation of that account is final and it cannot be re-opened save where a Court authorises the re-opening’. Once the distribution has commenced, the court’s jurisdiction to interfere with a duly confirmed account is, in effect, ousted (Gilbey Distillers and Wintners (Pty) Ltd and others v Morris NO [1990] ZASCA 134; 1991 (1) SA 648 (A), 657D- 658G; Bank of Lisbon International Ltd v Neves 1992 (3) SA 349 (W), 353B-D; Wispeco (Pty) Ltd v Herrigel NO 1983 (2) SA 20 (C), 25F-28C; Blackman, Jooste and Everingham, 14-404 to 14-408.).

[81] On the basis of the above, we conclude that the applicant is not entitled, as a matter of law, to the relief claimed in prayers 1.6 (in either its original or amended form) and 1.7 of the Notice of Motion because the account that it challenges, and thereby seeks to re-open, has been duly confirmed and dividends have already been paid.

(2) Prayer 1.9: the Convening of a Commission of Enquiry

[82] In the alternative to the relief claimed in prayers 1.6, 1.7 and the now abandoned 1.8 of the Notice of Motion, the applicant also applies for an order convening and empowering a commission of enquiry, in terms of s 417 and s 418 of the Companies Act, to investigate the trade, dealings, affairs and property of the second respondent and, to this end, to authorise the commissioner to summons three people to attend the enquiry. Those three people are Mr Basil Brian Nel, Mr Laurence Francisco Perreira and Mr Henry Reginald Alexander Pankhurst Brooks. Nel is one of the second respondent’s liquidators and a liquidator of Macmed, Perreira is a liquidator of Macmed and Brooks is the Macmed liquidators’ attorney and was previously also the Intramed liquidators’ attorney.

[82] The purpose of the application for this relief is said to be to investigate the validity of the Macmed claim thoroughly. The three people to be summoned are said to be able to assist the enquiry because Perreira deposed to an affidavit in proof of the claim, and in so doing relied on a confirmatory affidavit made by Brooks. Nel, it is alleged, deposed to certain facts concerning the claim and thus is also in a position to assist the enquiry.

[83] It is argued by the second respondent and the fifth respondent that the extraordinary procedure created by s 417 and s 418 is not intended for investigations into the manner in which the liquidators did their jobs, that such subject matter is not intended to be included in the term ‘the trade, dealings, affairs or property of the company’ and that the people to be summoned are not part of the class of people that the section contemplates.

[84] Section 417(1) – the heart of the s 417 and s 418 process -- provides:

‘In any winding-up of a company unable to pay its debts, the Master or the Court may, at any time after a winding-up order has been made, summon before him or it any director or officer of the company or person known or suspected to have in his possession any property of the company or believed to be indebted to the company, or any person whom the Master or the Court deems capable of giving information concerning the trade, dealings, affairs or property of the company.’

[85] The procedure created by s 417 and s 418 was analysed in detail in Bernstein v Bester and others NNO [1996] ZACC 2; 1996 (2) SA 751 (CC); 1996 (4) BCLR 449 (CC). At paragraph 16, Ackermann J set out the objectives of the sections thus:

‘(a) It is undoubtedly meant to assist liquidators in discharging these abovementioned duties so that they can determine the most advantageous course to adopt in regard to the liquidation of the company.

(b) In particular it is aimed at achieving the primary goal of liquidators, namely to determine what the assets and liabilities of the company are, to recover the assets and to pay the liabilities and to do so in a way which will best serve the interests of the company's creditors.

(c) Liquidators have a duty to enquire into the company's affairs.

(d) This is as much one of their functions as reducing the assets of the company into their possession and dealing with them in the prescribed manner, and is an ancillary power in order to recover properly the company's assets.

(e) It is only by conducting such enquiries that liquidators can:

(i) determine what the assets and who the creditors and contributories of the company are;

(ii) properly investigate doubtful claims against outsiders before pursuing them, as well as claims against the company before pursuing them.

(f) It is permissible for the interrogation to be directed exclusively at the general credibility of an examinee, where the testing of such person's veracity is necessary in order to decide whether to embark on a trial to obtain what is due to the company being wound up.

(g) Not infrequently the very persons who are responsible for the mismanagement of and depradations on the company are the only persons who have knowledge of the workings of the company prior to liquidation (such as directors, other officers and certain outsiders working in collaboration with the former) and are, for this very reason, reluctant to assist the liquidator voluntarily. In these circumstances it is in the interest of creditors and the public generally to compel such persons to assist.

(h) The interrogation is essential to enable the liquidator, who most frequently comes into the company with no previous knowledge and finds that the company's records are missing or defective, to get sufficient information to reconstitute the state of knowledge that the company should possess; such information is not limited to documents because it is almost inevitable that there will be transactions which are difficult to discover or understand from the written materials of the company alone.

(i) The liquidator must, in such circumstances, be enabled to put the affairs of the company in order and to carry out the liquidation in all its varying aspects.

(j) The interrogation may be necessary in order to enable the liquidator, who thinks that he may be under a duty to recover something from an officer or employee of a company, or even from an outsider concerned with the company's affairs, to discover as swiftly, easily and inexpensively as possible the facts surrounding any such possible claim.

(k) There is a responsibility on those who use companies to raise money from the public and to conduct business on the basis of limited liability to account to shareholders and creditors for the failure of the business, if the company goes insolvent. Giving evidence at a s 417 enquiry is part of this responsibility. This responsibility is not limited to officers of the company, in the strict sense, but extends also to the auditors of the company.’

[86] Blackman, Jooste and Everingham submit (at 14-451 to 14-452) that the purpose of s 417 is to ‘enable the court or the Master to help the liquidator obtain the truth of the circumstances concerning the affairs of the company in order that he may be able, as effectively as possible, and with as little expense and with as much expedition as possible, to discharge his duties and fulfil his responsibilities as a liquidator of putting the affairs of the company in order and carrying out the liquidation in all its various aspects’.

[87] Blackwell J, in Power NO v Bieber and others 1955 (1) SA 490 (W), emphasised that the corresponding section of the Companies Act 46 of 1926 was not intended to be a means of scrutinising the conduct of the liquidator in the performance of his or her functions. He held (at 502A-C):

‘It is next argued that an application such as the present is not competent under sec. 155 of the Companies Act. It will be remembered that this seeks an inquisition into allegations of mismanagement against the liquidator in his conduct of the liquidation. I do not think that sec. 155(1) was ever meant to give authority for such an enquiry. It may be possible, though I doubt it, to stretch the language of this section to cover a case like the present. But the obvious source of relief where neglect on the part of a liquidator is alleged, is to make a complaint to the Master under sec. 143, and the Master is compelled to investigate such a complaint. My doubts on this matter are strengthened by a reference to sec. 155(1) of the Companies Act which speaks of, “Information concerning the trade, dealings, affairs, or property of the Company” and a comparison of this with the corresponding section of the Insolvency Law, sec. 130 which speaks of, “The property and affairs of the debtor”.’

[88] On this conclusion, he expressed himself in agreement with Tindall J, in Mauerberger and Schrire and Others v Estate Patetz 925 W.L.D. 96, who had held that the corresponding section of the Insolvency Act 32 of 1916 did not contemplate an enquiry into post-insolvency matters (in the form of allegations of fraud in the realisation of assets) stating (at 101):

'Though the Court will not discourage enquiry into the affairs of an insolvent, the powers granted by sec. 130 are exceptional and the meaning of the section should not be extended to matters which are not covered by the language used. In my opinion it is quite clear that these words do not cover any irregularity in the realisation of the assets in the liquidation of the estate. An enquiry concerning the dealings of the creditors with the assets in the liquidation is not an enquiry concerning the property or affairs of the debtor in the sense in which these words are used in the section.'

[89] It is, in our view, evident that the purpose for which the applicant seeks an order in terms of prayer 1.9 of the Notice of Motion is to investigate the liquidation of the second respondent, rather than its ‘trade, dealings, affairs or property’ as this term is interpreted in the case law. This is not, on the authorities cited above, a proper purpose for the convening of a commission of enquiry in terms of s 417 and s 418 of the Companies Act and adequate procedures specifically designed to cater for the applicant’s concerns are to be found in the Act. The applicant is, accordingly, not entitled to the relief claimed in terms of prayer 1.9 of the Notice of Motion.

[D] COSTS

[90] In summary, the applicant has succeeded in resisting the attack on its locus standi but it has not succeeded in resisting the attack on its entitlement, as a matter of law, to the relief claimed in prayers 1.6, 1.7, 1.8, and 1.9 of the Notice of Motion. In the proceedings dealing with these points in limine, only the applicant, the second respondent and the fifth respondent crossed swords.

[91] Mr Plewman, who appeared for the third and fourth respondents, stated that, given the essentially neutral posture adopted by his clients in relation to the points in limine, no costs order should be made against them in the event of the points in limine not being upheld. In our view, he is correct in this submission and no order as to costs will be made in relation to the third and fourth respondents.

[92] The applicant, on the one hand, and the second respondent and the fifth respondent, on the other, have each achieved a significant measure of success: the applicant, by successfully resisting the challenge to its locus standi, has succeeded in keeping its case alive on the merits, to the extent that remains; the second and fifth respondents have succeeded in their objection to the competence of about half of the relief claimed by the applicant.

[93] In these circumstances, it appears to us that both sides can be said to have achieved substantial success. It would thus be just and equitable to order that the applicant pay the costs of the second and fifth respondents in respect of the challenge to the competence of the relief claimed in prayers 1.6, 1.7, 1.8 and 1.9 of the Notice of Motion, such costs to include the costs of two counsel for each party, and that the second and fifth respondents pay the costs of the applicant, jointly and severally, in respect of the challenge to the applicant’s locus standi, such costs to include the costs of two counsel. It is recorded for the benefit of the taxing master that an equal amount of time was spent on the issue of locus standi, and on the remaining issues.

[E] ORDER

[94] It is ordered that:

(a) The second and fifth respondents’ challenge to the locus standi of the applicant is dismissed with costs (for which they shall be jointly and severally liable), such costs to include the costs of two counsel.

(b) The second and fifth respondents’ challenge to the competence in law of the relief claimed in paragraphs 1.6, 1.7, 1.8 and 1.9 of the Notice of Motion succeeds, the application is dismissed to this extent and the applicant is directed to pay the costs of the second and fifth respondents in relation to this issue, such costs to include the costs of two counsel for each party.

_____________________________

HJ LIEBENBERG

JUDGE OF THE HIGH COURT

_______________________________

C PLASKET

JUDGE OF THE HIGH COURT

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