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IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

Case number: 18152/2013

Date: 4 SEPTEMBER 2015

In the matter between:

MOTO HEALTH CARE MEDICAL SCHEME.............................................................APPLICANT

And

JOHANNES ZACHARIAS HUMAN MULLER N.O..........................................1^ST RESPONDENT

MICHAEL MMATHOMO MASILO N.O...........................................................2^ND RESPONDENT

HMI HEALTHCARE CORPORATION (PTY) LTD..........................................3^RD RESPONDENT

AGILITY GLOBAL HEALTH SOLUTIONS – AFRICA (PTY) LTD..............4^TH RESPONDENT

MEDSHIELD MEDICAL SCHEME....................................................................5^TH RESPONDENT

MASTER OF THE HIGH COURT.......................................................................6^TH RESPONDENT

JUDGMENT

PRETORIUS J,

[1] In this application the applicant is seeking an order against the respondents in the following terms as set out in the notice of motion:

“1. Declaring that the first and second respondents waived the requirement of written notice required in terms of section 359(2)(a) of the Companies Act 61 of 1973 (“the Companies Act”) before the applicant could institute action against Calabash Health Solutions (Pty) Ltd (“Calabash”) in the above honourable Court under case number 67638/2009.

2. Alternatively to prayer 1, declaring that the first and second respondents condoned the applicant’s failure to deliver a written notice required in terms of section 359(2)(a) of the Companies Act before the applicant could institute action against Calabash in the above honourable Court under case number 67638/2009.

3. Alternatively to prayers 1 and 2, condoning, in terms of section 359(2)(b) of the Companies Act, the applicant’s failure to provide written notice in terms of section 359(2)(a) of the Companies Act before the applicant instituted action against Calabash in the above honourable court under case number 67638/2009.

4. Declaring that the applicant’s claim in the sum of R30,776,615.00 together with interest a tempore morae and legal costs that form the subject of the action instituted against Calabash in the above honourable court under case number 67638/2009 has not prescribed.

5. Granting the applicant leave to pursue the action against Calabash in the above honourable court under case number 67638/2009 to judgment.”

And the relevant cost orders.

[2] The third and fourth respondents (“respondents”) are opposing the application.  The first, second, fifth and sixth respondents did not file opposing papers.

BACKGROUND:

[3] The applicant seeks the court’s leave to prosecute the action instituted against Calabash Health Solutions (Pty) Ltd (“Calabash”) on 6 November 2009 to its final conclusion.  The applicant’s claim is for an amount of R30 776 615.00 together with interest and legal costs.

[4] Calabash was liquidated by way of a special resolution on 17 July 2009 in terms of section 349 read with section 351 of the Companies Act 61 of 1973 (“the Companies Act 1973”).  The applicant did not prove a claim against Calabash.

[5] The issue presently is whether the applicant’s summons, which was served on Calabash after the date of liquidation, interrupted the running of prescription having regard to section 359(2)(a) and (b) of the Companies Act 1973 (“1973 Act”) which provides:

“(2) (a) Every person who, having instituted legal proceedings against a company which were suspended by a winding-up, intends to continue the same, and every person who intends to institute legal proceedings for the purpose of enforcing any claim against the company which arose before the commencement of the winding-up, shall within four weeks after the appointment of the liquidator give the liquidator not less than three weeks' notice in writing before continuing or commencing the proceedings.

(b) If notice is not so given the proceedings shall be considered to be abandoned unless the Court otherwise directs.”

[6] The reason for the failure to give notice in terms of section 359(2) (a) of the Companies Act 1973, is that the applicant was unaware that Calabash was in liquidation when the summons was served.  Therefor the court is requested to declare that the liquidators waived the requirement of written notice in terms of section 359(2)(a) of the Companies Act 1973, alternatively that the liquidators condoned the applicant’s failure to deliver a written notice of its intention to institute action against Calabash in terms of section 359(2)(a) of the Companies Act 1973 or alternatively that the court condone in terms of section 359(2)(b) of the Companies Act 1973 the applicant’s failure to provide written notice before instituting the action against Calabash for the recovery of the debt due.

[7] The timeline in the present application is of utmost importance.  On the same date summons was served, 6 November 2009, applicant’s attorneys at the time, Werksmans, discovered that Calabash was in liquidation.  On 12 November 2009 Werksmans addressed a letter to Calabash’s attorneys seeking, inter alia, confirmation that the company was in voluntary liquidation.  On 17 November 2009 Werksmans was advised to communicate with Tshwane Trust for the first respondent.  Already on 19 November 2009 Werksmans had addressed a letter to Tshwane Trust, which is the company through which first respondent conducts its business.  On 19 November 2009 Tshwane Trust was thus advised that the applicant had instituted action against Calabash.  A copy of the summons was forwarded to the liquidators on 24 November 2009.  Thereafter Werksmans was replaced by the current attorneys, Barnard Inc.

[8] On 1 December 2009 a meeting took place between the attorneys of Barnards and the liquidators.  At the meeting on 1 December 2009 the first respondent did not object to the action on the basis that the liquidators had not received prior notice of the instituted action in terms of section 359(2)(a) of the 1973 Act.  The respondents contend that  this failure by the applicant to adhere to the provisions of section 359 of the 1973 Act makes the institution of the action void ab initio.

[9] There has been no indication from the liquidators at any time that the applicant had to amend the summons and serve it upon them personally to comply with section 359(2) (a) of the 1973 Act.  This is understandable as the liquidators have been aware of the action since at least 19 November 2009.  The first respondent chose not to oppose the present application.  According to the applicant it would be placing form above substance to notify the first respondent in writing at a later stage of the action which had already been instituted and the summons served on 6 November 2009 to comply with the provisions of section 359(2) of the 1973 Act.

[10] Barnard on behalf of the applicant confirmed this position in his letter of 5 April 2012 that through their conduct the liquidators waived their right to be given written notice in terms of section 359(2)(a) of the 1973 Act.  The liquidators did not deal with the non-compliance at all in the reply to the letter of 5 April 2012.  It cannot be found that it was unreasonable for the applicant to accept that the liquidators had waived their right to compliance with section 359(2).

LOCUS STANDI:

[11] This court has to determine whether the respondents have locus standi in this application.

[12] The subject matter of this application is whether the applicant had complied with section 359(2) of the Companies Act.  It is significant that the applicant had cited the respondents as third and fourth respondents.

[13] The respondents contend that they have a substantial legal interest in the application, as according to them:  “if the application is successful, it could ultimately have a massive effect on the assets and liabilities of Calabash”.  The respondents have to prove that they have a direct and substantial interest in “the subject matter of the litigation”.

[14] According to the respondents they are creditors of the company but both their claims had been expunged in July 2012 by the Master of the High Court in terms of section 45 of the Insolvency Act 24 of 1936 and no steps have been taken by the respondents to pursue their respective claims against the company.  Their claims would have prescribed by no later than October 2012 in terms of section 13(1)(g) read with section 13(1)(i) of the Prescription Act 68 of 1969.

[15] According to the applicant the respondents have to show that they have a direct and substantial interest in the subject matter of the application.  In this instance the subject matter is the compliance or non-compliance of the applicant with the provisions of section 359(2) of the Act which is in issue.

[16] In order to make a decision in this regard the court has to consider the purpose of the statutory provision in question.  Counsel for the applicant argues that the purpose of section 359(2) is to afford the liquidator an opportunity to consider the claim and to adopt a course of conduct best suited to the interests of the company.  The applicant’s default arises from the fact that it was unaware that Calabash was in liquidation when the summons was served.

[17] The liquidators did file a notice of intention to oppose the application, but took the matter no further by not filing affidavits disputing the factual allegations which were made relating to them.  The third respondent (“HMI”) and the fourth respondent (“Agility”) oppose the relief.  Calabash and Agility were wholly owned subsidiaries of HMI.  Messrs Barendrecht and Rimmer were directors of Calabash at the time of the passing of the special resolution to wind up Calabash.  They were both directors of HMI.  Mr Barendrecht deposed to the answering affidavit, which was confirmed in confirmatory affidavits by Messrs Rimmer and Roper.  At the time Mr Barendrecht had deposed to the answering affidavit on 31 July 2013, Agility and HMI’s claims had prescribed.  HMI and Agility can thus no longer be regarded as creditors of Calabash.

[18] HMI is the sole member of Calabash.  The third and fourth respondents are relying on the dictum in Ronbel 108 (Pty) Ltd v Sublime Investments (Pty) Ltd (In Liquidation) 2010(2) SA 517 (SCA) where Streicher JA held at paragraph 11:

“Having omitted the requirement of a reasonable excuse in s 359(2)(b) it is clear, in my view, that the legislature intended to give a court an unfettered discretion to decide whether or not to direct that proceedings should not be considered to be abandoned. In exercising this discretion a court should naturally have regard to the interests of all interested parties, being the creditors, liquidator and members.” (Court’s emphasis)

[19] In Muller v De Wet NO & Others 2001(2) SA 489 (W) the Full Bench found at p500 F:

“A debate about locus standi was envisaged in the heads of argument. The true substance of respondents' contention is that the unlawfulness which has occurred, is not of a type with which the Court will interfere at the instance of the insolvent. I doubt whether it is correct to refer to this as a matter of locus standi. The real enquiry is whether the events constitute a wrong as against the insolvent. Thus the insolvent is not wronged if creditors exercise their powers in a bona fide manner but the insolvent thinks it should have been done differently eg if he believes creditors are selling at too low a price. The insolvent does suffer a wrong if a duty is disobeyed which exists partially or wholly to protect the insolvent in his present or future interest. An example is when the trustee fails in his obligation to obtain possession of an estate asset. Compare Mears v Rissik; MacKenzie NO and Mears' Trustee 1905 TS 303. I find it unhelpful to discuss matters in terms of so-called locus standi or to attempt to define generally when an insolvent has or does not have 'locus standi'. Attention must be focused on the question whether a legal interest of the insolvent has been harmed by the behaviour which did not comply with the statute. Compare the reference to 'onreg' in Jordaan v Richter en Andere1981 (1) SA 490 (O) at 496H - 497A. Because that must be answered affirmatively in this case it is not necessary to decide whether wronging of the insolvent is an exhaustive yardstick.” (Court’s emphasis)

[20] A further ground offered by counsel for third and fourth respondents is that these respondents have a substantial legal interest in this application.  The contention is that should the application be successful it would have a massive effect on the assets and liabilities of Calabash.  According to the third and fourth respondents the prospect of them recovering their claims will be affected, as well as HM1 recovering the value of its shareholding in Calabash, although the claims have been expunged and have prescribed.

[21] The fifth respondent, Medshield proved a claim against the insolvent estate of Calabash at a special meeting of creditors held on 5 April 2011 in the sum of R39 226 814.00.  This claim was similarly expunged by the Master in July 2012.  Medshield, contrary to what HMI and Agility did, instituted action against Calabash in this court in November 2012.  That action is also being opposed by HMI and Agility with the leave of the court.  It is however important to note that Medshield is not opposing the current application, although Medshield is cited as a respondent in the present application.

[22] The question is whether the respondents have any legal interest in the fact that the liquidator had waived non-compliance with the statutory provision, condoned the non-compliance or whether the court should condone the applicant’s non-compliance in failing to give notice.  It is significant that the liquidator does not contend that he had been embarrassed by the non-compliance nor that he would have altered his stance in any way had he received notice.  At present, having been given notice of the action instituted, they have not opposed the relief sought nor did they institute or pursue relief against the applicant by way of counterclaim.

[23] I have to find, after considering all the facts and the circumstances of the present application that the liquidator is the person to which section 359(2) of the 1973 Act applies and who is affected by non-compliance.  In this instance the liquidators made it clear that they are satisfied with the present state of affairs by not opposing this application.  Therefor I find that the third and fourth respondents have no legal standing to oppose this application as section 359(2) of the 1973 Act applies to the liquidators.

[24] However, in the event that I should be found to be wrong in this judgment, I will deal with the balance of the basis of opposition presented by the third and fourth respondents.

IS THE SERVICE OF THE SUMMONS VOID?

[25] Rule 4(1)(a)(iv) of the Uniform Rules of Court provides:

“(iv) if the person so to be served has chosen a domicilium citandi, by delivering or leaving a copy thereof at the domicilium so chosen;”

[26] The respondents contend that service of the summons on the “principal place of business” was null and void.

[27] Section 386(4)(a) of the Companies Act, 1973 provides:

“(4) The powers referred to in subsection (3) are-

(a) to bring or defend in the name and on behalf of the company any action or other legal proceedings of a civil nature, and, subject to the provisions of any law relating to criminal procedure, any criminal proceedings: Provided that immediately upon the appointment of a liquidator and in the absence of the authority referred to in subsection (3), the Master may authorise, upon such terms as he thinks fit, any urgent legal proceedings for the recovery of outstanding accounts;…”

[28] Accordingly it is recognised that legal proceedings may be instituted by or against the company or the liquidators jointly on behalf of the company.

[29] Theron JA found in Gainsford and Others NNO v Tanzer 2014(3) SA 468 (SCA) at para 14:

“A distinction between the locus standi accorded to the company in liquidation and that of its liquidators acting in their representative capacity, is pedantic or illusory.  To disqualify liquidators properly appointed from acting on behalf of a company in liquidation would truly be elevating form above substance.” (Court’s emphasis)

[30] If one have regard to the particulars of claim it is set out:

“The Defendant is CALABASH HEALTH SOLUTIONS (PTY) LTD, a company duly incorporated and registered as such in accordance with the company laws of the Republic of South Africa, and having its domicilium citandi et executandi, for purposes hereof, at Second Floor, Building A, Lakefield Office Park, 272 West Avenue, Centurion.”

[31] Rule 4(1) (a) (ix) of the Uniform Rules of Court is thus not applicable as the company itself was cited as defendant in the action and not the liquidators.  This has to be so as the applicant had not known at the time of service of the summons that the company had been liquidated.  The applicant immediately rectified the situation when it became aware of the liquidation by informing the liquidators that the action had been instituted and providing the liquidators with the summons.

[32] A company does not cease to exist as a legal entity consequent upon its liquidation.  The custody and control of the company and its property is placed in the hands of the Master of the High Court until a provisional liquidator is appointed, who subsequently take control over the company and its assets.

[33] In De Villiers and Other NNO v Electronic Media Network 1991(2) SA 180 (W) Kirk-Cohen J held at p184 C-H:

“Upon liquidation a company does not cease to exist nor do its assets vest in the liquidators — they remain vested in the company. In Letsitele Stores (Pty) Ltd v Roets and Others1958 (2) SA 224 (T) Williamson J said the following at 227A – C:

I think the effect of a liquidation is adequately and properly set out at 343 of Pyemont's Company Law of South Africa 6th ed, where it is stated as follows:

'Immediately upon the winding-up order becoming operative the control of the company's affairs passes out of the hands of the directors and, upon the appointment of a liquidator, into those of a liquidator; but the company's corporate identity remains and its property remains vested in the corporation. The essential difference, however, is that the business is  henceforth carried on not for the benefit of the members of the corporation but with a view only to its winding-up and the distribution of its assets among the creditors in satisfaction of their debts and, when these are satisfied, for the division of any balance among contributories.  The assets are therefore held upon a trust in which the creditors are interested, and they can apply to the Court to have their rights enforced.'

And:

Williamson J then referred to the judgment of Rumpff J in R v Heyne en Andere (3) 1958 (1) SA 614 (W) and concluded at 227G – H:

"In my view the liquidation of the applicant company did not in this case destroy the identity of the company. The company continued to exist; and if the company owned rights — for instance a right to a personal servitude such as trading rights over portions of a farm — those rights were not lost upon liquidation. What could be done with such a servitude by the liquidator is, of course, another matter because, being a personal right, it could not be transferred.

(Approved in Grant and Another v Stonestreet and Others1968 (4) SA 1 (A) at 23A.)” (Court’s emphasis)

[34] This is currently the position.  The result of this is that the company is bound by any contracts it had entered into prior to its liquidation.  The liquidators can elect not to be so bound.  The liquidators could have done so by opposing the present application, which they chose not to do.

[35] In the present instance the summons was served on 6 November 2009 on Calabash’s chosen domicilium citandi et executandi in terms of a settlement agreement the parties had entered into on 1 April 2008 between the applicant and Calabash, together with the Motor Industry Bargaining Council.  The chosen domicilium citandi et executandi at the time was also the former business address of Calabash namely 2^nd Floor, Building A, Lakefield Office Park, 272 West Avenue, Centurion.  Counsel for the third and fourth respondents argued that the chosen domicilium address was not the chosen domicilium address of the joint liquidators and the summons was not served on each of the joint liquidators, therefor the service of the summons is void.  According to the third and fourth respondents the attorneys for the third and fourth respondents advised the applicant on 17 November 2009 as follows:

“1. We refer to the above matter and to the combined summons issued by your client, Moto Health Care Medical Scheme under case number 67638/2009 and served on Calabash Health Solutions’ previous principal place of business on 6 November 2009.

2. Kindly be advised that Calabash is currently in the process of voluntary liquidation.  You are accordingly advised to communicate with the duly appointed Liquidator, Mr Hannes Muller of Tshwane Trust regarding your client’s alleged claim.”

[36] The third and fourth respondents’ contention is that at that stage the applicant had to amend the summons by reflecting the joint liquidators representing Calabash and should have served the amended summons on the joint liquidators as required by the provisions of Rule 4(1)(a)(ix).

[37] The respondents rely on the dictum in Dada v Dada 1977(2) SA 287 (T) which dealt with a divorce matter which was granted.  It turned out that there was fraud involved in that matter and the summons had not been served personally on the defendant, as was required.  That is patently not the case in the present application and therefor Dada’s case (supra) is distinguishable from the present case.  In the present case the liquidators knew of the action instituted and chose not to oppose the present application on any grounds, including not being served personally.

[38] In Federated Insurance Co Ltd v Malawana 1986(1) SA 751 AD Trengrove JA found at p759 E-G:

“Giving the words in question their ordinary meaning, I am of the opinion that the effect of Rule 4 (1) (a) (v) can be stated as follows: (a) a summons may always be served upon a company at its registered office, wherever that may be situated; (b) if a company has no place of business within the Court's jurisdiction, the summons would have to be served at its registered office; (c) if a company has only one place of business within the Court's jurisdiction, that would be regarded as its principal place of business within that area, and the summons could accordingly be served there; and (d) if a company has more than one place of business within the Court's jurisdiction, the summons would have to be served at the company's chief or principal place of business within that area, unless, of course, it is served at its registered office.

[39] The test in such an instance is whether the defendant, in this instance Calabash, or the liquidators of Calabash have been prejudiced by service on the chosen domicilium citandi et executandi and not on the liquidator.  The liquidators have clearly indicated that they are not opposing this application and therefor the court is entitled to accept that the liquidators are not relying on the provisions of section 359(2) of the Companies Act, 1973 to avoid the consequences of action being instituted.  In Prism Payment Technologies v Altech Information Technologies 2012(5) SA 267 (GSJ) Lamont J held at p271 B-C:

“Prejudice is a prerequisite for success in the application.”

And at para 21 I to p272 A:

“Insofar as the substantive law is concerned, the requirement is that a person who is being sued should receive notice of the fact that he is being sued by way of delivery to him of the relevant document initiating legal proceedings. If this purpose is achieved, then, albeit not in terms of the rules, there has been proper service.” (Court’s emphasis)

[40] This applies in the present matter. There is no prejudice averred by the liquidators and I cannot find that the proceedings are void ab initio due to the applicant’s non-compliance.  The liquidators had known of the main action since at least 19 November 2009 and chose not to oppose the present application.

SECTION 359(2)(b): THE COURT’S DISCRETION:

[41] The further contention by the third and fourth respondents is that the court has no discretion under section 359(2)(b) of the Act where proceedings were instituted after the winding up and according to the third and fourth respondents the Applicant is proceeding with an action “invalidly instituted” and it is “void per se”.

[42] Section 359(2) provides that firstly legal proceedings instituted prior to liquidation are suspended by the winding-up order and secondly legal proceedings instituted after the winding-up of a company, relating to a claim arising before the winding-up must within four weeks after the appointment of the liquidator give the liquidator not less than three weeks’ notice in writing before continuing or commencing the proceedings.

[43] There is no provision in section 359(2) (a) for a party failing to give notice of the proceedings in both abovementioned instances.  Section 359(2) (b) provides for the consequences should a party fail to give notice of the proceedings.  According to section 359(2) (b) of the Act there is no distinction between proceedings instituted before liquidation and proceedings to be instituted after liquidation in respect to a claim arising before the liquidation of a company.  According to the section such proceedings are regarded to be abandoned, unless the court directs otherwise.  Hence the current application.

[44] The applicant argues that if it was the intention of the legislature to render non-compliance with this section when instituting action void – it would have made an explicit provision for such an eventuality and it would not have granted the court a discretion.

[45] I must agree with the applicant’s interpretation that the purpose of section 359 of the 1973 Act is explicitly to inform the liquidator of the state of affairs.  This is done so that the liquidator has an opportunity to consider the claim and to decide how to deal with it.  This is to avoid embarrassment to the liquidator and to prevent the company in liquidation’s money to be wasted.  The purpose of this provision can never be to protect the third and fourth respondents in these circumstances.

[46] Although section 118(2) of the Companies Act 1926 is the predecessor to section 359(2) of the Companies Act 1973 there are differences.  In terms of section 118(2) of the Act, 1926, if an applicant had failed to give notice, it had to show good cause and had to have a “reasonable excuse” for the default.  In the 1973 Act this requirement was pertinently omitted.  The proviso in section 118(2) of the 1926 Act provided that the court could order the proceedings to continue or commence on such terms as the court deemed fit – this was also omitted from section 359(b) of the 1973 Act.

[47] The Appellate Division dealt with section 359(b) of the 1973 Act in Umbogintwini Land and Investment Co (Pty) Ltd (in liquidation) v Barclays National Bank Ltd and Another 1987(4) SA 894 (A) where Viljoen JA held at p910 H-J:

“The provision was designed, in my view, to afford the liquidator an opportunity, immediately after his appointment, to consider and assess, in the interests of the general body of creditors, the nature and validity of the claim or contemplated claim and how to deal with it - whether, for instance, to dispute or settle or acknowledge it.” (Court’s emphasis)

[48] This dictum confirms the applicant’s counsel’s contention that section 359(2) of the 1973 Act provides solely for the liquidator to be informed of any claims and to enable the liquidator to decide how to deal with such claims.

[49] In Ronbel 108 (Pty) Ltd v Sublime Investments (Pty) Ltd (in liquidation) (supra) it was held that the court has an unfettered discretion when deciding whether the proceedings have been abandoned or should proceed.

[50] According to the provisions of section 359(2) (a) of the 1973 Act the applicant had to give written notice to the liquidators of its intention to institute action by no later than 20 November 2009.  The summons was served on 6 November 2009, without complying with the provisions of section 359(2) (a) of the 1973 Act as the applicant had been unaware that Calabash was in liquidation.

[51] The first respondent did not dispute the recollection of what had taken place at the meeting between the applicant’s attorneys and the liquidators on 1 December 2009.  The third and fourth respondents’ counsel argues that the distinctions between sections 118(2) of the Companies Act 46 of 1926, the predecessor to section 359(2) of the 1973 Act are, inter alia, that the requirement which provides:

“…in default thereof the proceedings shall be considered to be abandoned unless the Court finds that there was a reasonable excuse for the default and allows the proceedings to continue or to be commenced on terms or otherwise as it may think fit.”must be considered by this court.

[52] According to the third and fourth respondents’ counsel it is clear that the court has no authority to grant leave in relation to proceedings that have already been instituted, subsequent to the winding-up of the company.  I was referred to Barlows Tractor Co Ltd v Townsend 1996(2) SA 869 (A) at 880 H where Nestadt JA held:

“Equally where, as in our matter, the creditor’s claim was duly tendered for proof, the need for notice in terms of s 359(2) falls away.  The withdrawal of the claim would not detract from or undo the knowledge acquired of the claim by the liquidator (who, incidentally, is not even taking the point).  The argument, if acceded to, would mean that the vast majority of cases a creditor who withdrew his claim from proof would be unable to institute legal proceedings for by that time the four-week period referred to in s 359(2)(a) would have expired.  This could not have been the Legislature’s intention.”

[53] In this instance it could equally be found that it was not the Legislature’s intention to require that the liquidators should be given notice in terms of section 359(2) if the liquidators already had knowledge of the action that had been instituted.

[54] The main purpose of the provision is to allow the liquidator to make a considered decision.  I find in this instance that the liquidators can waive compliance with section 359(2) or can condone such non-compliance.

[55] In the present instance the liquidators are not opposing this application and the court has to draw a conclusion of this fact, whilst considering all the facts, authorities and arguments presented to the court.  It is clear from the liquidators’ actions that they had treated the action as having been validly instituted, despite the applicant’s non-compliance with section 359(2).  The liquidators treated it as valid and gave no indication at all throughout the proceedings that they were relying on the non-compliance by the applicant with section 359(2) to defend the action.

[56] In reply to the letter of the applicant’s attorney, Mr Barnard, on 5 April 2012, the first respondent set out:

“A special meeting will be convened for the proof of your claim as soon as your claim is ready.

Once you are a proved creditor you will have locus standi to intervene in the application under case no 17480/2011.

Please advise me when your claim is ready so that a special meeting can be convened for the proof thereof.”

[57] There is no mention whatsoever that the liquidators insisted on compliance with section 359(2) (b) at any stage.  I find that the liquidators had waived the applicant’s non-compliance with the provisions of section 359(2) (a) of the 1973 Act.

PRESCRIPTION:

[58] It is common cause that the period of prescription in the present claim is three years.  It is further common cause that the applicant had instituted action in the South Gauteng High Court on 15 May 2009 under case number 19786/2009.  This action was withdrawn by the applicant on 26 June 2009 against Calabash.  It is further common cause that due to the fact that the action was withdrawn it was not prosecuted to final judgment in the South Gauteng High Court and according to the third and fourth respondents did not comply with section 15(1) and (2) of the Prescription Act, 68 of 1969 which provides:

“(1) The running of prescription shall, subject to the provisions of subsection (2), be interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt.

(2) Unless the debtor acknowledges liability, the interruption of prescription in terms of subsection (1) shall lapse, and the running of prescription shall not be deemed to have been interrupted, if the creditor does not successfully prosecute his claim under the process in question to final judgment or if he does so prosecute his claim but abandons the judgment or the judgment is set aside.”

[59] According to counsel for the applicant the applicant had decided to withdraw the action in the South Gauteng High Court and to institute action in the North Gauteng High Court.

[60] The circumstances for doing so, according to the applicant, was that the applicant had been advised by senior counsel to do so as Calabash’s chosen domicilium was in Centurion and the settlement agreement had been concluded in Pretoria.

[61] On 9 July 2009, on advice from senior counsel, the applicant delivered a letter in terms of section 345 of the 1973 Act on Calabash’s registered address.  On 17 July 2009, eight days after having received the letter from the applicant, the company was liquidated by way of a special resolution of HMI, its sole member.

[62] At that stage the applicant was not advised of Calabash’s voluntary liquidation and Mr Rimmer, failed to disclose the applicant’s claim in the CM100 form.  On 28 July 2009 the attorneys for Calabash responded to the section 345 letter informing the applicant, inter alia:

“1. We refer to your letter of 7 July 2009.

2. Calabash Health Solutions (Pty) Ltd (“Calabash”) denies that it is indebted to Moto Health Care Medical Scheme (“MOTO”) on the grounds previously articulated in our letter to MOTO of 22 October 2008.

3. In addition, you are no doubt aware that Calabash disputes your authority and those of persons instructing your firm to act on behalf of MOTO.  This disputed authority also extends to the very agreement on which MOTO relies upon in the Section 345 notice.”

[63] There was no mention in this letter that Calabash had been liquidated ten days prior to addressing this letter to the applicant.  The liquidation had the effect that the attorneys could no longer act on behalf of Calabash on 28 July 2009.  On 2 November 2009 the applicant instituted action under case number 67638/2009 in this court.  It was only on 6 November 2009 that the applicant discovered that Calabash had already been liquidated on 17 July 2009.  The attorneys for Calabash confirmed the voluntary liquidation of Calabash when the attorneys, Werksmans, enquired from Gildenhuys Lessing Malatjie (“GLM”) and were advised by GLM on 17 November 2009 that Calabash had been voluntarily liquidated on 17 July 2009.

[64] Thereafter Werksmans, on behalf of the applicant, addressed a letter to Tshwane Trust, who had been appointed as liquidators.  On 23 November 2009 Mr Muller responded and requested a copy of the summons in respect of the action instituted in the North Gauteng High Court.  The copy of the summons was forwarded to the liquidators on 24 November 2009.  This resulted in the meeting between Barnard’s, the newly appointed attorneys for the applicant, and the liquidators on 1 December 2009.  At the meeting Barnards was informed by Mr Muller that the first and second meetings of creditors had already taken place.  He further informed Barnard’s that HMI and Agility were creditors of Calabash in the amount of R3.5 million and R9 million respectively.  At the meeting Barnard advised Mr Muller that applicant intended taking default judgment against Calabash.  Mr Muller indicated that the liquidators were not pursuing a counterclaim.

[65] Barnard requested certain documents from the liquidators to establish whether the applicant would be able to recover any monies from Calabash.  On 3 March 2010 Mr Muller advised the applicant that the directors of Calabash were refusing access to the books and records and therefor the applicant requested Barnard to prove a claim in the insolvent estate of Calabash.

[66] At the time the applicant had insufficient information to support an application for an order convening an insolvency inquiry due to the liquidators not providing the relevant information.  There is no evidence that the applicant elected to prove a claim against Calabash at the invitation of Mr Muller.  The applicant conceded that there were enquiries about the special meeting the liquidator offered to convene to prove a claim against Calabash.  However, according to the applicant it did not intend to abandon its claim and its intention to pursue its claim in court.

[67] There was litigation between Medshield, HMI and Agility, which resulted in the applicant being furnished with an affidavit on behalf of Agility and HMI wherein the applicant’s claim was disputed and it was contended that the claim had prescribed.

[68] According to the third and fourth respondents the applicant was completely inactive from 8 March 2010 until 5 April 2012 in pursuing its claim in this court under case number 67638/2009.  The applicant sets out that this is not the case as the applicant was aware of the litigation between Agility and HMI on the one side and Medshield on the other side.  The applicant only became aware of the insolvency inquiry on 8 August 2011 when the applicant’s representative was subpoenaed to attend the insolvency inquiry on 22 August 2011.

[69] The applicant’s representative did not attend as he had delivered the necessary documents to Medshield.  On 15 November 2011 Mr Rimmer deposed to a replying affidavit and set out:

“35.11 Moto Health elected not to prove a claim against Calabash (such a claim would have no merits) and the alleged claim of Moto Health has prescribed.

35.12  Moto Health is not a creditor of Calabash.”

[70] Subsequent to this, the applicant sought senior counsel’s opinion in regards to the allegation that the applicant’s claim had prescribed.  There is no indication in any correspondence between any of the parties that the applicant had abandoned its claim.  Barnard addressed a letter to the liquidators on 5 April 2012 setting out:

“5. On 1 December 2009, Werner Barnard and Johan Krause met with you to advise you of the action.  During this meeting you advised that:

5.1 you did not intend to institute any counter-claim against our client;

5.2 save in the event of you receiving contrary directions from the general body of creditors, you did not intend to oppose the action.

6. By your conduct at the meeting of 1 December 2009, you waived the requirement of written notice in terms of section 359(2) (a) of the Companies Act and condoned the institution of the action proceedings against Calabash without the requisite written notice.

7. In the event that you disagree or dispute our construction of the events of 1 December 2009, we are instructed to forthwith bring a court application for an order declaring that on 1 December 2009 you waived the requirements of prior written notice in terms of section 359(2) (a) of the Companies Act, alternatively, for condonation for the failure to give written notice in terms of section 359(2) (a).”

[71] The liquidators did not respond to these statements, but replied and only dealt with a special meeting as set out above.  The first respondent in the letter of 16 April 2012 did not dispute that the liquidators had condoned the institution of the action against Calabash without notice in terms of section 359(2) (a) of the 1973 Act.  eHHere they were expressly invited to dispute that they had condoned written notice in terms of section 359(2) of the 1973 Act.

[72] It was argued that it has always been clear that the applicant had the intention to pursue the claim against Calabash. The applicant recorded in its replying affidavit in paragraph 52.1:

“It will be submitted that the applicant ought not to be criticised for its reluctance to prosecute the action where it is clear that due to the paucity of available information the applicant was of the view that there was no likelihood of the recovery of any funds in the estate of Calabash.  It was only towards the end of 2012 that it came to the knowledge of the applicant that there may be grounds for the recovery of debts against the former directors of Calabash and the setting aside of certain voidable dispositions.  The applicant ought not to be deprived of the opportunity to pursue its claim against Calabash or to explore the possible benefits of an insolvency enquiry into the affairs of Calabash.” (Court’s emphasis)

[73] The respondents contend that the applicant’s representatives realised that the applicant’s claim had prescribed which resulted in them trying to resurrect the claim in case number 67638/2009.  The reason, according to the respondents for this contention is that the applicant elected to prove a claim against Calabash.  There is, however, no indication that the applicant proved a claim against Calabash, although the applicant endeavoured to obtain information of Calabash’s position after Mr Muller had offered to set up a special meeting for the applicant to prove a claim.  This never took place as there was a possibility of a contribution being rendered.

[74] I cannot find that the applicant had abandoned his claim instituted in this court and that therefor section 15(1) of the Prescription Act must be applied in the present circumstances.  I find that the running of prescription has been interrupted by the institution of the action.

[75] This application is distinguishable from the facts in the Ronbel case (supra) as in this instance there is no evidence that the applicant had taken “a deliberate decision not to proceed with the action…”  To the contrary, applicant was aware of the legal challenges between Medshield and HMI and Agility and became aware in 2011 of the third and fourth respondents’ stance regarding the action brought by the applicant.

[76] The respondents’ counsel submitted that there will be prejudice to the third and fourth respondents as the defence of prescription would no longer be available.  There is no evidence of prejudice to the interest of Calabash, the liquidators, the member and the creditors if this court should grant relief in terms of section 359(2)(b) of the 1973 Act.

[77] It is common cause that the applicant had been unaware of the liquidation of Calabash and that GLM on behalf of the third and fourth respondents withheld this information when dealing with the applicant in November 2009 – some months after Calabash had been provisionally liquidated.  These are the same parties opposing the present application.  It is material that the liquidators are not opposing this application, which deals with section 359(2) (a) and (b) of the 1973 Act and which provides only for the information of the liquidators not to embarrass them and to enable them to make an informed decision on how to handle such action.  In Scott and Another v Ninza 1999(4) SA 820 (ECD) at p8 F-I the court held:

“The defect amounts to a purely technical one, especially when regard is had to the promptness with which the applicants received service on the Monday following the Friday afternoon. The net effect of the services, as it in fact transpired on the Friday and the Monday, is that no prejudice has been suffered by the applicants other than the fact that they will no longer have the defence of prescription available to them. It appears that immediately after the applicants received the summons, they contacted their attorneys of record and notices of intention to defend were filed on their behalf. The respondent, on the other hand, will suffer irreparable prejudice and harm should the irregularity in the manner of the service of his summons upon the applicants not be condoned by this Court.” (Court’s emphasis)

[78] The liquidator had the opportunity to raise an objection due to the non-compliance with section 359(2) of the 1973 Act when he received the summons in November 2009, at the meeting of 1 December 2009 and then again during April 2012 when various letters were exchanged between the liquidators and the attorneys of the applicant.

[79] At the meeting of 1 December 2009 the applicant’s attorney made it clear that the applicant intended taking default judgment against Calabash.  There was thus no indication at this meeting that the action had been abandoned.  The liquidator did not object that section 359(2) had not been complied with at this meeting.  At no time did the applicant submit a claim, even though certain enquiries had been made regarding submitting a claim.  This cannot lead to the conclusion that the applicant had abandoned its action.

[80] The prejudice to the applicant, should the court find in favour of the third and fourth respondents will be immeasurable.  Such a finding will rest on a technicality regarding compliance with section 359(2).  I find that the circumstances in the present application is similar to the facts in the Scott case (supra) as the institution of an action had come to the attention of the liquidators who chose not to insist on compliance with section 359(2).  It came to their attention on 24 November 2009 – eighteen days after it had been served on the registered address of the company.  I also take into consideration that the attorneys representing Calabash and the third and fourth respondents deliberately did not inform the applicant of the liquidation of Calabash although they addressed a letter to the applicant after the liquidation of Calabash, denying any liability towards the applicant.

[81] In the present instance the applicant relies on a tacit waiver or condonation by the joint liquidators.  In Borstlap v Spangenberg en Andere 1974(3) SA 695 (A) at 704 G-H, Corbett AJA held:

“Dit is herhaaldelik deur ons Howe beklemtoon dat duidelike bewys van 'n beweerde afstanddoening van regte geverg word, veral waar op 'n stilswyende afstanddoening staat gemaak word. Dit moet duidelik blyk dat die betrokke persoon opgetree het met behoorlike kennis van sy regte en dat sy optrede teenstrydig is met die voortbestaan van sodanige regte of met die bedoeling om hulle af te dwing. Soos Hoofregter INNES die vereistes in Laws v Rutherford, 1924 AD 261 op b1. 263, gestel het -

"The onus is strictly on the appellant. He must show that the respondent, with full knowledge of her right, decided to abandon it, whether expressly or by conduct plainly inconsistent with an intention to enforce it. Waiver is a question of fact, depending on the circumstances. It is always difficult, and in this case specially difficult to establish."” (Court’s emphasis)

[82] In Traub v Barclays National Bank Ltd; Kalk v Barclays National Bank Ltd 1983(3) SA 619 (A) at p 635, Botha JA found in referring to Innes CJ’s explanation in Mutual Life Insurance Co of New York v Ingle 1910 TPD 540:

“When the renunciation, though not communicated, is evidenced by conduct inconsistent with the enforcement of the right, or clearly showing an intention to surrender it, then also the intention may be acted upon, and the right perishes.” (Court’s emphasis)

[83] The liquidators knew of their right and the purpose of section 359(2), and had been informed of the action as soon as the applicant realized that Calabash had been liquidated.  There can be no other interpretation, under the circumstances as set out above, that the liquidators had waived their right by their conduct.

[84] Therefor I find that the liquidators had condoned the applicant’s failure to inform them in writing in terms of section 359(2).  I find that prescription was interrupted by the action being instituted and the action has not yet been concluded. It follows that if I find that prescription had not taken place that the applicant will be able to pursue the action against Calabash under case number 67638/2009 to judgment. I do not deem it necessary to grant such an order.

[85] Therefor I make the following order:

1. It is declared that:

1.1 The first and second respondents condoned the applicant’s failure to deliver a written notice required in terms of section 359(2)(a) of the Companies Act before the applicant could institute action against Calabash in the above Court under case number 67638/2009.

1.2 The applicant’s claim in the sum of R30,776,615.00 together with interest a tempore morae and legal costs that form the subject of the action instituted against Calabash in the above court under case number 67638/2009 has not prescribed.

2. The third and fourth respondents are ordered to pay the costs of the application, jointly and severally, the one paying the other to be absolved.

Judge C Pretorius

Case number : 18152/2013

Application heard on : 5 August 2015

For the Applicant : Adv KW Lüderitz SC; Adv TD Prinsloo

Instructed by : Barnard Incorporated

For the Respondent : Adv JJ Brett SC; Adv E Kromhout

Instructed by : Gildenhuys Malatji Incorporated

Date of Judgment : 4 September 2015

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