Wilcass Group CC v The Premier of Limpopo Provincial Government and Another (29074/12) [2015] ZAGPPHC 795 (19 November 2015)

HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

GAUTENG DIVISION, PRETORIA)

CASE NO: 29074/12

19/11/2015

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

IN THE MATTER BETWEEN

THE WILCASS GROUP CC Plaintiff

THE PREMIER OF LIMPOPO PROVINCIAL GOVERNMENT 1stDefendant

THE MEC OF THE DEPARTMENT OF LOCAL GOVERNMENT 2ndDefendant

PROVINCIAL GOVERNMENT

REASONS FOR THE ORDER

LEGODI J,

HEARD ON: 10 NOVEMBER 2015

[1] Before me was a special plea filed against the plaintiff’s claim by the defendants namely, the Premier of Limpopo Provincial

Government (First defendant) and the MEC Department of Local Government and Housing Limpopo Provincial Government (second defendant). In terms of the special plea it is pleaded that the plaintiff (The Wilcass Group CC) has no power to institute the proceedings as the CC was liquidated in 2009. On 10 October 2015 I upheld the special plea with costs without giving reasons. I now do so.

[2] Wilcass Group CC (hereinafter referred to as the “CC”), was appointed by the second defendant as a developer for the upgrading of housing project against payment of subsidies as approved. The CC was to develop 400 RDP houses units within Polokwane

municipality. The amount due to the CC for such development amounted to R11 200 000.00.

[3] The CC proceeded to develop 118 housing units and 96 floating. The balance of 186 units could not be developed since there was a quarry on the site and no municipal services had been installed.

[4] On 10 July 2009 the CC was informed that their contract with Department was terminated. The CC accepted this as a repudiation of the agreement and thus a claim for damages in the sum of R7 000 000-00.

[5] During the pre-trial conference of 14 September 2015 it transpired that the CC was liquidated in 2009. However when the

proceedings were instituted on 30 May 2012 the CC did so in its names without making reference to liquidation. In paragraph 1 of the particulars of claim is pleaded:

The plaintiff is The WIlcass Group CC, a Close Corporation incorporated with the laws of South Africa with registration number CK97/29426/23

with registered office situated at 6, 6thAvenue, Industrial, Polokwane Limpopo Province”.

[6] The special plea was delivered after the pre-trial conference aforesaid and it is pleaded as follows:

“AD SPECIAL PLEA

AD SPECIAL PLEA

1.1.Whereas the parties held a pre-trial conference on 14 September 2015,

Whereas the parties held a pre-trial conference on 14 September 2015,

1.2.Whereas the plaintiff confirmed that it was liquidated in 2009 and whereas the plaintiff has instituted these proceeding in its own name on 30 May 2012,

Whereas the plaintiff confirmed that it was liquidated in 2009 and whereas the plaintiff has instituted these proceeding in its own name on 30 May 2012,

1.3.Whereas the plaintiff has produced a certificate indicating that Johannes Zacharias Human Muller and Jayant Dayi Pema of Tshwane Trust were appointed as liquidators of the plaintiff’s insolvent estate,

Whereas the plaintiff has produced a certificate indicating that Johannes Zacharias Human Muller and Jayant Dayi Pema of Tshwane Trust were appointed as liquidators of the plaintiff’s insolvent estate,

1.5.Section 386 (4)(a) of the Companies Act 61 of 1973 confers on the liquidator of a company the power to institute and to defend proceedings by or against the company in liquidation in the name and on behalf of the company”.

Section 386 (4)(a) of the Companies Act 61 of 1973 confers on the liquidator of a company the power to institute and to defend proceedings by or against the company in liquidation in the name and on behalf of the company”.

[7] The issue at hand is whether the CC had established itslocus standito institute the present proceedings regard been had to the fact that it is liquidated and was so liquidated at the time of the institution of these proceedings. On behalf of the CC it was contended that the CC did not have to institute the proceedings

in any capacity than in its own name as pleaded. What is pleaded in paragraph 1 of the particulars of claim should be seen as a citation. Furthermore, the attorney for the CC contended that whilst the liquidators have the power to institute proceedings in their capacity as such, or in the names of the CC represented by them, the fact that it is not specifically so pleaded, would not mean the CC as cited, has nolocus standito institute the present proceedings.

locus standi

locus standi

[8] Initially the attorney for the CC wanted to lead evidence of the liquidator to prove locus standi. He wanted to do so without having pleaded such authority or locus standi. He did not pursue the contention after he was discouraged that such evidence will not be allowed if it was not specifically pleaded. The CC could have pleaded locus standi by citing the CC as represented by its liquidators or the liquidators acting in their capacities on behalf of the CC in liquidation. That did not happen. Instead, the attorney for the CC was steadfast that there was nothing wrong in the manner in which the CC is cited. Put differently that there was no need to plead that the CC was in liquidation.

[9] Subsections (3) and (4) of section 386 of the Companies Act no 61 of 1973 provide as follows:

“(3)The liquidator of a Company-

(3)The liquidator of a Company-

The liquidator of a Company-

(a)in a winding-up by the court, with the authority granted by meetings of creditors and members or contributories or on the directions of the Master, given under section 387.

in a winding-up by the court, with the authority granted by meetings of creditors and members or contributories or on the directions of the Master, given under section 387.

(b)in a creditors’ voluntary winding-up, with the authority granted by a meeting of creditors, and

in a creditors’ voluntary winding-up, with the authority granted by a meeting of creditors, and

(c)in a members’ voluntary winding-up with the authority granted by a meeting of members,

in a members’ voluntary winding-up with the authority granted by a meeting of members,

shall have the powers mentioned in subsection (4)”.

(4)Powers referred to in subsection (3)-

Powers referred to in subsection (3)-

(a)to bring or defend in thename and on behalf of the companyany action or other legal proceedings of a civil and subject to the provisions of any law relating to criminal procedure, any criminal

proceedings:

to bring or defend in the

name and on behalf of the company

any action or other legal proceedings of a civil 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 any authority referred to on subsection (3), the Minister any authorize, upon which terms as he thinks for any urgent legal proceedings for the recovery of outstanding accounts,

(g)to exercise mutatis mutandis the same powers as are bysections 35and37of theInsolvency Act 24 of 1936, confirmed upon a trustees over the Act, on the like terms and conditions as are therein mentioned: provided that the powers conferred by section 35 aforesaid, shall not be exercised ….the Company is unable to pay its debts;

to exercise mutatis mutandis the same powers as are bysections 35and37of theInsolvency Act 24 of 1936, confirmed upon a trustees over the Act, on the like terms and conditions as are therein mentioned: provided that the powers conferred by section 35 aforesaid, shall not be exercised …

sections 35

Insolvency Act 24 of 1936

the Company is unable to pay its debts;

[10] The underlining in the quotation is my emphasis. Insofar as the attorney for the CC argued that section 386 does not exclude an entity under liquidation to litigate in its names without reference to its liquidation as represented by the liquidators, I find it necessary to refer to some case law authorities.

[11] In making the contention, the attorney for the CC placed much reliance on what was decided in the case ofGainsford No v Tanzer Transport[1]. In that case it was contended on behalf of the respondent that the liquidators could only bring the application in name of the company in liquidation and not in their names as liquidators of the company in liquidation. The contention found favour with the court a quo as per Salduker J, as she then was. On appeal by the liquidators the respondent persisted with the point which was found by the courta quoin their favour. That is, it was a fatal flaw for the liquidators to bring the main application in their capacity as liquidators rather than in the name of the company in liquidation. For the contention, the respondent relied on the provisions of section 386(4)(a) of the Companies Act quoted in paragraph 9 of this judgment.

[11] In making the contention, the attorney for the CC placed much reliance on what was decided in the case of

Gainsford No v Tanzer Transport

. In that case it was contended on behalf of the respondent that the liquidators could only bring the application in name of the company in liquidation and not in their names as liquidators of the company in liquidation. The contention found favour with the court a quo as per Salduker J, as she then was. On appeal by the liquidators the respondent persisted with the point which was found by the court

a quo

in their favour. That is, it was a fatal flaw for the liquidators to bring the main application in their capacity as liquidators rather than in the name of the company in liquidation. For the contention, the respondent relied on the provisions of section 386(4)(a) of the Companies Act quoted in paragraph 9 of this judgment.

[12] The question in the present case is slightly different. The issue is whether the company can institute or defend legal

proceedings in its names as if it is not in liquidation. Put differently, whether it can institute or defend legal proceedings

without pleading that it is in liquidation. The object of liquidation is essentially to protect creditors and any other party,

entity or a person wishing to have a business dealing with an entity in liquidation. For example, no transaction can after

liquidation be entered into with regard to the estate matters by a single creditor to exclusion and prejudice of the general body of creditors. The claim of each creditor must be dealt with as it existed at the issue of the order for liquidation. Once liquidation order is in place and the ‘hand of the law is laid upon the estate’ nothing can thereafter be done by one creditor to alter the rights of other creditors[2].

[13] The issue in the present case, calls into question the proper citation of a party, particularly a company placed in liquidation and engaged in legal proceedings for the recovery of a debt owed to it.

[14] The attorney for the CC in the present case relied on what was decided by Epstein AJ in the matter ofFery NO.& Another v Lala Govan Exporters (PTY) Ltd[3]wherein it was held that referencing in section 386 of the Companies Act to the liquidator being empowered in the name and on behalf of the Company, underpinned the requirement that any legal proceedings instituted or engaged in the exercise of that power must thus necessarily be brought in the name of the Company, rather than of the liquidatornomine officio.

[14] The attorney for the CC in the present case relied on what was decided by Epstein AJ in the matter of

Fery NO.& Another v Lala Govan Exporters (PTY) Ltd

wherein it was held that referencing in section 386 of the Companies Act to the liquidator being empowered in the name and on behalf of the Company, underpinned the requirement that any legal proceedings instituted or engaged in the exercise of that power must thus necessarily be brought in the name of the Company, rather than of the liquidator

nomine officio.

[15] However inShepstone & Wylie and Others v Geyeser NO[4]Hugo J stated:

[15] However in

Shepstone & Wylie and Others v Geyeser NO

Hugo J stated:

“Although s 386 (4)(a) of Act 61 of 1973 empowers liquidators to bring … in the name and on behalf of the company any action… in practice such actions are frequently brought in the name of the liquidator with letters NO (nomine officio) appended. I have been unable to find any rule that distinguishes the two forms of citation and it seems until now to have been up to the when of the liquidator concerned”.

Although s 386 (4)(a) of Act 61 of 1973 empowers liquidators to bring … in the name and on behalf of the company any action… in practice such actions are frequently brought in the name of the liquidator with letters NO (nomine officio) appended. I have been unable to find any rule that distinguishes the two forms of citation and it seems until now to have been up to the when of the liquidator concerned”.

[16] I cannot agree more with the statement. In paragraph 14 ofGainsford supra, Theron JA stated:

Gainsford supra

“In my view the different views reflect a distinction without difference. The structure of the Act such that liquidators are

empowered to perform specified acts including applying to court in a voluntary winding up in terms of s 388(1) to determine any ‘question arising in the winding-up or to exercise any of the powers which the Company were being wound up by the court’. Likewise, s 386(5) provides that:

In my view the different views reflect a distinction without difference. The structure of the Act such that liquidators are

empowered to perform specified acts including applying to court in a voluntary winding up in terms of s 388(1) to determine any ‘question arising in the winding-up or to exercise any of the powers which the Company were being wound up by the court’. Likewise, s 386(5) provides that:

‘In a winding-up by the court, the court may, if it deems fit, grant leave to a liquidator to raise money on the security of the assets of the company concerned or to do any other thing which the court may consider necessary for winding-up the affairs of the Company and distributing its assets’.

In a winding-up by the court, the court may, if it deems fit, grant leave to a liquidator to raise money on the security of the assets of the company concerned or to do any other thing which the court may consider necessary for winding-up the affairs of the Company and distributing its assets’.

As stated above, Mailula J was correct in reaching the conclusion referred to in Gainsford, to have regard to the provisions of s 386 (5) which demonstrate that liquidators act in the stead of the Company in liquidation. A distinction between the locus standi accorded to the Company in liquidation and that of its liquidators acting in their representative capacity in pedantic or illusory.To disqualify liquidators properly appointed from acting on behalf of a company in liquidation would only truly be devating form

above substance”.

[17] The citation of the plaintiff as quoted in paragraph 5 of this judgment fails to bring the CC within the four corners of section 386 of the Act and the case law cited above. When a company in liquidation institutes or defends legal proceedings it ought to do as represented by its liquidator/ liquidators or in their capacity as liquidators representing the company in liquidation. The citation in paragraph 5 of this judgment falls short of this and as a result no locus standi is established.

[18] I find it very difficult to understand why the CC did not just amend its particulars of claim to reflect the authority or locus standi under which it instituted the proceedings. Inasmuch as the intention was to lead oral evidence in this regard, it was flawed as that would have been evidence on a question of law and on an issue that is not specifically pleaded in the particulars of claim.

[19] Legal proceedings instituted or defended in the name of the Company in liquidation NO. that isnomine officiileaves no speculation about the status of the company. This is important not only to the general body of creditors but also to the general public. Had it not have been what was disclosed during pre-trial conference on 14 September 2015, the defendants in the present case would have been in the dark regarding the status of the CC. This could have had a significant consideration when an order for costs is made. The CC could turn around and say it can neither sue nor be sued. The potential prejudice that would be caused or occasioned by improper litigation of an entity in liquidation is in view, immeasurable and can be huge.

nomine officii

[20] These are the reasons for the order made on 10 November 2015 in terms of which I upheld the special plea with costs including the costs of a senior counsel.

…………………………………………

M F LEGODI

JUDGE OF THE HIGH COURT

FOR THE PLAINTIFF:

Mr W NIEDINGER

INSTRUCTED BY:

WALTER NIEDINGER & ASSOCIATES

477 Falda Street

Cnr Windsor & Falda Streets

Garsfotein, PRETORIA

TEL: 0861 008 254

W Niedinger/ea/W022

FOR THE DEFENDANTS: ADV. B R TOKOTA SC

THE STATE ATTORNEY: THE STATE ATTORNEY

Ground Floor Salu Building

255 Thabo Sehume Street

Cnr Thabo Sehume & Francis Baard Str.

PRETORIA

TEL: 012 309 1519

REF: Mr DP Burger

[1]2014 (3) SA 468 (SCA).

2014 (3) SA 468 (SCA).

[2]SeeWalker v Syfret NO.1911 AD 141at 166 andWard v Barret NO. and Another1963 (2) SA 546(A) at 552 E-G.

Walker v Syfret NO.

1911 AD 141at 166 and

1911 AD 141

Ward v Barret NO. and Another

1963 (2) SA 546(A) at 552 E-G.

1963 (2) SA 546

[3]2011(6) SA 181 (W).

2011(6) SA 181 (W).

[4]1998 (1) SA (N) at 359 F-G

1998 (1) SA (N) at 359 F-G