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South Africa Judgment

South Gauteng High Court, Johannesburg

Hendricks Holding (Pty) Ltd v PHP Armed Response (Pty) Ltd (2022/043254) [2024] ZAGPJHC 972 (30 September 2024)

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Source document

01

Holding and result

The court held that, in terms of section 359 of the Companies Act, the action is considered abandoned because the plaintiff did not give notice to the liquidator of its intention to continue with the proceedings after its claim was proved. The absence of such notice means the matter is abandoned both in fact and in law. The second defendant's insistence on discovery is therefore without merit, as the underlying action no longer exists. Furthermore, the court found that the second defendant's pursuit of the application was an abuse of process, especially since the plaintiff had repeatedly drawn attention to the abandonment of the action. As a result, the court dismissed the application and awarded costs against the second defendant on a punitive scale to mark its displeasure at the unnecessary litigation.

Court disposition

Application dismissed with costs on a punitive scale against the second defendant.

Orders

  • The order signed on 30 April 2024 marked X is made an order of this Court.

02

Material facts

Parties

Hendricks Holding (Pty) Ltd

Applicant Counsel: Adv. J Kaplan

PHP Armed Response (Pty) Ltd

Respondent Counsel: Adv. C Gordon

PHP Armed Response (Pty) Ltd

Plaintiff Counsel: Adv. C Gordon

Mamba PHP (Pty) Ltd

Defendant

Hendricks Holding (Pty) Ltd

Defendant Counsel: Adv. J Kaplan

03

Procedural history

  1. Posture

    Interlocutory Application / Application for Discovery Under Rule 35(1)

04

Questions and positions

Legal issues

Party arguments

Applicant
The second defendant contends that it is entitled to discovery because the plaintiff has alleged a pending application to expunge its proved claim and that the action will proceed if the claim is expunged. The second defendant further argues that the plaintiff has not withdrawn the action nor tendered payment of costs, and therefore the action remains extant. As a matter of law, the second defendant asserts its right to proceed with its defence.
Respondent
The plaintiff argues that after its claim was proved at the creditors' meeting, it did not give notice to the liquidator of any intention to continue with the action, as its claim had already been proven. The plaintiff maintains that, in terms of section 359 of the Companies Act, the proceedings are considered abandoned due to the absence of such notice, rendering the second defendant's application for discovery unnecessary.

05

Court’s reasoning

  1. 01

    Section 359, Companies Act 71 of 1966

    When a company is wound up, all civil proceedings against it are suspended until a liquidator is appointed. Any party wishing to continue proceedings must give written notice to the liquidator within four weeks of appointment, failing which the proceedings are deemed abandoned unless the court directs otherwise.

  2. 02

    General South African costs jurisprudence

    Costs should generally follow the event, but a punitive costs order may be justified where a party abuses the court process and causes unnecessary legal expenses.

06

Ratio, limits and disposition

Ratio decidendi

The court held that, in terms of section 359 of the Companies Act, the action is considered abandoned because the plaintiff did not give notice to the liquidator of its intention to continue with the proceedings after its claim was proved. The absence of such notice means the matter is abandoned both in fact and in law. The second defendant's insistence on discovery is therefore without merit, as the underlying action no longer exists. Furthermore, the court found that the second defendant's pursuit of the application was an abuse of process, especially since the plaintiff had repeatedly drawn attention to the abandonment of the action. As a result, the court dismissed the application and awarded costs against the second defendant on a punitive scale to mark its displeasure at the unnecessary litigation.

Obiter and limits

  • The court emphasised that a businesslike and sensible interpretation of section 359 is required to avoid unnecessary litigation after a winding-up order.
  • The second defendant was only cited as a party with a potential interest and no substantive relief was sought against it, further undermining its entitlement to discovery.

Court disposition

Application dismissed with costs on a punitive scale against the second defendant.

  • The order signed on 30 April 2024 marked X is made an order of this Court.

Source and reliance status

South Gauteng High Court, Johannesburg

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Judgment reading view

Judgment text

The complete available source text.

Source document

South Gauteng High Court, Johannesburg

Judgment

[2024] ZAGPJHC 972

REPUBLIC OF SOUTH

AFRICA

IN THE HIGH COURT OF

SOUTH AFRICA

GAUTENG DIVISION,

JOHANNESBURG

(1) REPORTABLE: NO

(2) OF INTEREST TO OTHER JUDGES: NO

(3) REVISED:

NO

CASE NO: 2022/043254

In the interlocutory application between:

HENDRICKS HOLDING (PTY) LTD

APPLICANT And PHP ARMED RESPONSE (PTY) LTD

RESPONDENT In re: the main action between: PHP ARMED RESPONSE (PTY) LTD

PLAINTIFF And

MAMBA PHP (PTY) LTD

FIRST

DEFENDANT

HENDRICKS HOLDING (PTY) LTD

SECOND

DEFENDANT

Coram: Dlamini J

Request for Reason: 31 July 2024

Delivered: 30 September 2024 – This judgment was handed down electronically by circulation to the parties' representatives via email, uploaded to CaseLines, and released to SAFLII. The date and time for hand-down is deemed to be 10:30 on 30 September 2024.

JUDGMENT

DLAMINI J

Introduction

[1] This is an interlocutory application in which the second defendant applicant sought discovery in terms of Rule 35 (1) of the Uniform Rules of Court against the plaintiff. 30 April 2024, I made an order dismissing the second defendant’s application. Below are my reasons for dismissing the application.

Background facts

[2] The facts surrounding this application are largely common cause and can be summarised as follows; -

[3] The plaintiff had instituted action against the first defendant. The second defendant was cited as an interested party and no relief was sought against the second defendant save only for an order for costs in the event the second defendant entering an appearance to defendant the action. On 7 November 20223, both defendants entered appearance to defendant.

[4] Amid this action, the second defendant’s director applied for an order winding up the first defendant. On 15 February 2023, an order was granted finally winding the first defendant in terms of section 359 of the Companies Act[1] (the Act).

[5] Subsequent to this order, on 6 March 2023, the second defendant served a notice in terms of Rule 35(1) on the plaintiff calling discovery.

[6] What is common cause is that on 5 May 2023, the plaintiff’s claim in the action was proved at a first meeting of the first defendant creditors. On 9 June 2023, final liquidators were appointed in respect of the first defendant.

[7] The plaintiff avers that once its claim was proved, the plaintiff did not give notice to the liquidator of any intention of the plaintiff to continue with the action, because its claim has already been proven.

[8] Considering this development, the plaintiff avers that it was therefore not necessary for the second defendant to proceed with this application.

[9] The second defendant is adamant and insists that it is entitled to discovery as it has claimed.

Issue for determination

[10] The question that arises for determination is whether the second defendant is entitled to discovery in light of the Section 359 order granted against the first defendant.

[11] The second defendant insists that it is entitled to the order on the basis that the plaintiff in their answering affidavit alleges that there is a pending application to expunge the plaintiff’s proved claim and that the action will proceed in the event that the claim is expunged. Secondly, the second defendant avers that the plaintiff has not withdrawn the action and tendered payment of the second defendant’s costs and as a result the action remains extant. Finally, the second defendant argues that as a matter of law, it is entitled to proceed with its defence.

Analysis

[12] It is apposite at this stage to look at the provisions of section 359 of the Act, which provides as follows; -

“When a court has made an order for the winding-up of a company, all civil proceeding against the company shall be suspended until the appointment of a liquidator”.

“Every person who, having instituted legal proceedings against a company which were suspended by the winding-up, intends to continue the same, shall within 4 weeks after the appointment of the liquidator give the liquidator not less than 3 weeks’ notice in writing before continuing the proceedings”.

“If the notice is not given in accordance with the proceeding paragraphs, the proceedings shall be considered to be abandoned, unless the court otherwise directs”.

[13] In my view, a businesslike and sensible interpretation of this section is that this action is now abandoned. This is because as at the hearing of this matter, the plaintiff has not given any notice to the liquidator that it intends to continue with this matter. In other words, absent the plaintiff’s notice to the liquidator, the matter is in fact and in law considered abandoned. Period.

[14] Additionally, relief is being sought by the plaintiff against the second defendant who is cited only as a party who may have interest in the matter. Therefore, the second defendant’s arguments in this regard are simply meritless and are accordingly dismissed.

Costs

[15] The trite principle of our law is that costs should follow the event. I have however decided to award costs against the second defendant on a punitive scale.This is because the plaintiff had on occasion drawn the provision of section 359 of the Act to the attention of the second defendant clearly indicating that the action has been abandoned and that to date of that letter, the plaintiff had not exercised its rights to pursue this matter. Despite the plaintiff’s reasonable attempts of engaging the second defendant not to proceed with this unnecessary application, the second defendant went ahead with this application.

[16] The application is nothing more than an abuse of the court process which has resulted in the plaintiff incurring unnecessary legal costs to defend this action. To show the court’s displeasure, I have awarded the plaintiff’s costs on a punitive scale.

[17] The above are my reasons for the order.

ORDER

1. The order that I signed on 30 April 2024 marked X is made an order of this Court.

J DLAMINI

Judge of the High Court

Gauteng Division, Johannesburg

For the Plaintiff/Respondent: Adv C Gordon cgordon@law.co.za Instructed by: Andersen Attorneys Keshia.Manolios@za.andersen.com For the Defendant/Applicant: Instructed by: Adv. J Kaplan M J Hood & Associates martin@mjhood.co.za / jordanl@mjhood.co.za

[1] Act 71 of 1966

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Authorities

Authorities used by the court

Cases, legislation, regulations, and constitutional provisions identified in the available record.

Companies Act 71 of 1966

Legislation

Legislation referenced in the available case record.

Uniform Rules of Court, Rule 35(1)

Legislation

Legislation referenced in the available case record.

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