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IN THE NORTH WEST HIGH COURT

MAHIKENG

CASE NO.: M9/2015

 

In the matter between:

ADRIAAN JORDAAN N.O                                                           1^st Applicant

DALENE JORDAAN N.O.                                                           2^nd Applicant

VOLKER HELMUTH JOHANNES KRUGER N.O.                      3^rd Applicant

and

RUSTENBURG CREMATORIUM (PTY) LTD                          1^st Respondent

JOSLYN GELDENHUYS                                                        2^nd Respondent

FREDERICK GELDENHUYS                                                  3^rd Respondent

THE TRUSTEES OF THE RUSTY FAMILY TRUST                4^th Respondent

CIVIL MATTER

 

DATE OF HEARING            :        27 October 2016

DATE OF JUDGMENT         :        15 December 2016

FOR THE APPLICANT        :       Adv. R F De Villiers

FOR THE RESPONDENT    :        Adv. W J Botha

 

JUDGMENT

 

KGOELE J:

[1]   The Andrian Jordaan Trust (Andrian Trust) as 49% Shareholder of the first respondent and represented by the applicants initially sought to enforce their rights (shareholders meetings and financial statements) in terms of the provisions of the Companies Act 71 of 2008 (the Act).  The applicants stated as a reason in their first notice of motion that the first respondent is in a state of mismanagement because there is no accounting records, or financial statements, no shareholders meeting and the third respondent withdrew R641 609-72 from the first respondent’s bank account.

[2]   The first and second applicants are husband and wife and trustees of the Andrian Trust.  The second and third respondents, also husband and wife, are trustees of the Rusty Family Trust (Rusty Trust) and holds 51% shares in the first respondent.

[3]   The respondents opposed the application and filed their opposing papers.  In response thereto applicants filed their replying affidavit on 26 March 2015.

[4]   On 20 August 2015 applicants caused an amended notice of motion wherein they requested a provisional winding up order of the first respondent and in the alternative, the relief sought in their initial notice of motion to be served on the respondents.

[5]   At the hearing of the matter on the 10 September 2015 by agreement the parties consented to the following order:-

·   Applicants gave consent to the respondents’ supplementary affidavit;

·   Applicants were given an opportunity to file a further affidavit;

·  The amended notice of motion by the applicants was not opposed.

[6]   On the 3^rd March the matter served before Gura J.  Apparently the parties argued the points in limine raised by the respondents only.  I am saying this because there is a dispute between the parties on this fact.  Notwithstanding this the Court granted an order whereby the first respondent was placed under provisional liquidation.  On the 15^th September the Rule Nisi was extended and the parties were ordered to file heads.  The matter served before me on the 27^th October 2016 wherein submission for and against the making of a final order was made by both parties.

[7]   The applicants submitted that a final order should be granted firstly because the first respondent is insolvent and secondly, because it would be just and equitable to do so as Gura J found.

[8]   The respondents’ submissions are that the provisional order should be discharged because the applicants have not made out a case for the liquidation of the first respondent.  Their reason is that the founding affidavit attached to their initial notice of motion did not contain a single fact or allegation pertaining to the alleged insolvency or winding up of the first respondent and they must stand and fall by its case.  They further contend that it is not permissible to make out new grounds in the replying affidavit and or supplementary affidavit.  According to them the relief now sought by the applicant is a clear after thought.

[9]   The applicants’ answer to this is that they have amended the notice of motion which the respondents accepted and are now asking for liquidation of the first respondent on the strength of the averments made in the opposing affidavit of the second respondent that states that it is impossible for the shareholders to continue in business and furthermore, that the liabilities of the first respondent exceeds its assets.  Therefore, the order of Gura J should be made final because on the version of the respondents the first respondent is in such a state of illiquidity that it is unable to pay its debts and also for the reason that it is just and equitable to do so.

[10]   Although it is trite law that the applicant must stand or fall on his case made out in the founding affidavit, respondents loses sight of the fact that in this matter affidavits that were more than those permissible by the rules were filed by the parties.  They were filed pursuant to the agreement between the parties which agreement was also made an order of Court. In addition, both parties were able to deal with all the issues raised in the affidavits.  Both parties also submitted heads of arguments dealing with all the aspects raised therein.  It therefore becomes clear that a question of prejudice on the side of the respondents do not exist by the amended notice of Motion.  If there is still some form of doubt as to whether the respondents will be prejudiced, such prejudice has been completely removed by the fact that the respondents also lodged a Counter claim/application and the applicants had to reply thereto.  The respondents’ arguments therefore fall away because the replying affidavit serves as a founding affidavit to a counter application.

[11]   The second submission that the respondent relies on for the provisional order to be discharged is to the effect that the merits of the matter have not been argued before Gura J who granted the provisional order.  Only the points in limine were.  The respondents rely firstly as a basis for this contention on paragraph 85 of the said judgment which states:-

“I am of the view that all these points in limine falls to be resolved, if need be, when I deal with the merits of the case”

In addition the respondents furthermore placed reliance on the letter from the applicants   dated 10 August 2016 which stated:-

“On the day of the enrolment, a number of point in limine were argued by Counsel acting for both sides.  The merits have yet to be argued.

[12]   Counsel for the Respondents further argued that the respondents

 have been prejudiced by the fact that Gura J granted a provisional order without affording them an opportunity to make submissions on the merits.

[13]  The applicants Counsel contended that there is still no prejudice suffered by the respondents because the points in limine that Gura J did not make a formal ruling on, were intertwined with the merits hence Gura J was correct to find that all those points in limine falls to be resolved, when he deals with the merits. 

[14]   I fully agree with the applicants’ Counsel that the Court as per Gura J was correct in the approach it adopted.  A careful reading of the paragraph quoted by the respondents from the judgment of Gura J, says it all.  It is quite clear that the Court as per Gura J  was also alive to the fact that the facts averred and argued in these points in limine are so intertwined with the merits to such an extent that it remarked: “if need be, will be dealt with when it analyses the merits”.  In my view, Gura J was satisfied that the parties addressed the factual averments of the merits sufficiently in their submission including their papers and heads of arguments to enable the Court to pronounce on them.

[15]   Even if I can be wrong in the interpretation of the judgment by Gura J, the following remarks in the case of Kalil v Decotec (Pty) Ltd and Another 1988 (1) SA 943 (AD) page 976 and 979 respectively clearly denotes that an application can be granted on the affidavits before Court:-

“Where the application for a provisional order of winding-up is not opposed or where, though it is opposed, no factual disputes are raised in the opposing affidavits, the concept of the applicant, upon whom the onus lies, having to establish a prima facie case for the liquidation of the company seems wholly appropriate, but not so where the application is opposed and real and fundamental factual issues arise on the affidavits, for it can hardly be suggested that in such a case the Court should decide whether or not to grant an order without reference to respondent’s rebutting evidence”

AND

“Where on the affidavits there is a prima facie case (ie a balance of probabilities) in favour of the applicant, then, in my view, a provisional order of winding up should normally be granted and, save in exceptional circumstances, the Court should not accede to an application by the respondent that the matter be referred to the hearing of viva voce evidence.  This does no lasting injustices to the respondent for he will on the return day generally be given the opportunity, in a proper case and where he asks for an order to that effect, to present oral evidence on disputed issues.  As it was put in the Wackrill case supra at 285H-286A.  [My Emphasis]

[16]   The just and equitable ground also postulates, not facts, but a broad conclusion of law, justice and equity as a ground for winding-up.  The power is to be exercised judicially with due regard to justice and equity of the competing interest of all concerned.  See Thunder Cats Investments 92 (Pty) Ltd and Another v Nkonjane Economic Prospecting And Investment (Pty) Ltd and Others 2014 (5) SA 1 (SCA) at 10 B-C.

[17]   The second respondent attached a report of Johan Ferreira in its affidavit wherein inter alia the following was said:-

“The company has no value ….. It is clear from the financial statements that the company is in financial distress and is or will not be in a position to trade itself into a position of solvency”

[18]   The second respondent further says in para 85 of its answering affidavit that the Court may:-

“Make an order that is just and equitable given all the circumstances of the case”

[19]   In addition to the above the second respondent further states in the answering affidavit that:-

“It is impossible for the shareholders to continue in business”

“I as director am not calling for annual general meeting as I am not obliged to do so”

[20]     From all of the above quoted averments from the answering affidavit of the second respondent it is clear that there is no dispute as to the facts that the relationship between the parties have irretrievably broken down (borrowed from the words of the  respondents) and they can no longer work together and are in the state of deadlock. The second respondent refuses to have shareholders meeting.  The first respondent is in state of mismanagement. In my view, the provisional order of Gura J, that it is just and equitable to wind the company (the firs respondent) cannot be faulted.

[21]   It is trite law that the Court is not bound to order the final liquidation of a company when so prayed by the applicant at the first hearing of the matter because the Court has a discretion.  The accepted practice in various High Courts is to grant a provisional order to give effect to the audi alteram partem rule.  This is what Gura J did in this matter.  Equally so, the provisional order Gura J granted also disposes of the potential prejudice if any which the respondents might claim because the respondents were able to oppose the final granting of the order and made submissions in these regards before me.  This Court was alive to the fact that the test during the provisional granting of the orders is not the same as during the confirmation of the provisional order and it is clear that even at this stage, when the test to be applied is more stronger than at the time of the provisional order, the respondents’ submission cannot succeed.  Even the last argument which the respondents raised that I will deal with below cannot salvage their opposition.

[22]   According to the respondents’ Counsel, the provisional order should be discharged because:-

· It does not seem that the application was served on the employees of the first respondent; 

· Nor on the Trade Union where they belong inclusive of;

· On the Revenue Services (SARS).

According to the respondents’ Counsel the provisional order is therefore defective and is bound to be discharged.

[23]   This argument has been ill-conceived from the onset firstly because the service affidavit filed by the applicants found in paginated page 364 reveals that the service to SARS and the Master was done, inclusive of the filling of the Security of Costs before the provisional order was granted.

[24]  Secondly, the case of EB Steam v Eskom Holdings 2015 (2) SA 526 (SCA), which the respondents’ Counsel based his support on to the effect fact that the provisional order is defective does not support him.  In paragraph 23 it was decided:-

“To sum up thus far the position is as follows.  The requirement that the application papers be furnished to the persons specified in s 346(4A) is peremptory.  It is not however peremptory, when furnishing them to the respondent’s employees, that this be done in any of the ways specified in s346(4A) (a) (ii).  If those modes of service are impossible or ineffectual another mode of service that is reasonably likely to make them accessible to the employees will satisfy the requirements of the section.  If the applicant is unable to furnish the application papers to employees in one of the methods specified in the section, or those methods are ineffective to achieve that purpose and it has not devised some other effective manner, the court should be approached to give directions as to the manner in which this is to be done.  Throughout the emphasis must be on achieving the statutory purpose of so far as reasonably possible bringing the application to the attention of the employees”

[24]   In paragraph 24 the following was said:-

“That leaves one final question, whether the inability of the applicant, for whatever reason, to furnish the application papers to the employees before the hearing precludes the court from granting any relief.  Certainly the failure to provide a security certificate in terms of s346 (3) or the failure to lodge the papers with the master in terms of s346 (4) is fatal to the grant of immediate relief.  However, that is because of the nature and purpose of these requirements.  To permit an application for winding-up to proceed without security having been furnished may result in costs being incurred, including by public officials, without any means of recouping them.  As the master is the person who will have to oversee the winding-up there are obvious reasons for ascertaining in advance whether the master is aware of reasons why a winding-up order should not be granted.  The position in regard to the notification provisions in s346(4A) is different.  Their purpose is to ensure that certain specified persons, who may have an interest in the winding-up, in order to protect their own interests, are, so far as reasonably possible, furnished with the application papers in order to assess their own position in the light of the case made by the applicant.  They may well applaud and support the application as did some of the employees in Hendricks.”  [My Emphasis]

[25]   Finally in paragraph 25 the Court remarked:-

“ The fact that the requirement that these persons be furnished with the application papers is peremptory, means that it is not permissible for the court to grant a final winding-up order without that having occurred.  Does that mean that it is equally impermissible for the court to grant a provisional winding-up order? In my view it does not.  The position may well be that an overwhelming case is made on the papers for the grant of a winding-up order and that any delay will allow assets to be concealed or disposed of to the detriment of the general body of creditors and particularly the employees and SARS, who may have preferential claims.  It would be absurd to hold that the court was disabled from granting a provisional order merely because it had not been feasible, possible as a result of the conduct of the employees, to furnish a copy of the application papers to the employees or a representative trade union or even SARS, although the latter is unlikely to be a practical problem”. [My Emphasis]

[26]   In casu, although the employees were not served with the initial amended notice of motion itself, some letters were apparently sent to them notifying them of the intended application.  Although there is no proof attached that the said letters did reach these employees, there is a return of service for each employee as a proof that the provisional order had been served on them.  In my view, the statutory purpose of bringing the application to their notice has been achieved.

[27]   The conclusion that I reach is that the applicants have proved on a balance of probabilities that it is just and equitable that the order be made final.

[28]   Consequently the following order is made:-

28.1  The provisional winding-up order of the first respondent granted by Gura J on the 1^st August 2016 is hereby confirmed / made final;.

28.2  The costs will be costs in the liquidation of the first respondent’s company.

 

________________

A M KGOELE

JUDGE OF THE HIGH COURT

ATTORNEYS:

 

For the Applicant                   :         Smit Stanton Inc

                                                29 Warren Street

                                                MAHIKENG

 

For the Respondent    :         Van Rooyen Tlhapi Wessels

                                                9 Proctor Ave

                                                MAHIKENG

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