Kalil v Decotex (Pty) Ltd and Another

• Jurisdiction: South Africa
• Judge: Corbett JA, Viljoen JA, Smalberger JA, Nestadt JA and Steyn AJA
• Judgment Date: 03 December 1987
• Citation: 1988 (1) SA 943 (A)
• Hearing Date: 05 November 1987
• Court: Appellate Division

Corbett JA:

The appellant applied to the Witwatersrand Local Division for the winding-up of a company known as Decotex (Pty) Ltd ('Decotex'). C He applied in two different capacities and upon two separate grounds: (i) in his capacity as a shareholder of Decotex on the ground that it was just and equitable that the company be wound up; and (ii) in his capacity as a loan creditor of Decotex on the ground that the company was unable to pay its debts. He cited Decotex as first respondent and D one Charles Becker as second respondent. Second respondent is the registered holder of two of the four issued shares in Decotex, the other two being registered in the name of the appellant. The directors of Decotex are appellant and second respondent. The application which was filed on 2 January 1986 was opposed by second respondent in his personal E capacity and on behalf of Decotex.

When the matter came before Grosskopf J the appellant asked for a provisional order of winding-up. Having heard argument, the learned Judge dismissed the application with costs. With leave of the Court a quo appellant now appeals to this Court against the whole of the F judgment and order of Grosskopf J. At the hearing before us, however, respondents' counsel argued in limine that no appeal lay against the order of the Court a quo. This was disputed by appellant's counsel. It is the first matter which I must consider.

I might mention that this point in regard to appealability was not raised at the stage of the application for leave to appeal, which was G opposed by the respondents. Counsel admitted that the point had only occurred to him later.

Respondents' argument on appealability turns on whether the provisions of s 150 of the Insolvency Act 24 of 1936 as amended ('the Insolvency H Act') are made applicable to orders granting or refusing the winding-up of a company which is unable to pay its debts by reason of the provisions of s 339 of the Companies Act 61 of 1973 as amended ('the 1973 Companies Act'). The relevant portions of s 150 read:

'(1) Any person aggrieved by a final order of sequestration or by an order setting aside an order of provisional sequestration may appeal against such order.

...

I (5) There shall be no appeal against any order made by the Court in terms of this Act, except as provided in this section.'

And s 339 provides:

'In the winding-up of a company unable to pay its debts the provisions of the law relating to insolvency shall, in so far as they are applicable, be applied mutatis mutandis in respect of any matter not J specially provided for by this Act.'

Corbett JA

A It is cardinal to the respondents' argument that the opening words of s 339, viz: 'In the winding-up of a company...', be read as referring not only to (a) the process of liquidation which commences once an order of winding-up has been granted, but also to (b) the legal proceedings which lead to the grant or refusal of such an order. In my view, the words in question refer to (a), but not to (b). It seems to me that the B ordinary meaning of the words 'winding-up of a company' impel one to this conclusion. They refer to the liquidation of the company, not to the legal proceedings giving rise to the liquidation order; and, a fortiori, not to proceedings giving rise to the refusal of a liquidation order. In the case of Lawclaims (Pty) Ltd v Rea Shipping Co SA: Schiffscommerz Aussenhandelsbetrieb Der VVB Schiffbau Intervening 1979 (4) SA 745 (N) C James JP, delivering the judgment of the Full Bench of the Natal Provincial Division (Van Heerden and Milne JJ concurring) stated (at 750B - C):

'Section 339 lays down that the provisions of the Insolvency Act only apply in the winding-up and that stage is only reached when the order to wind up has been granted in terms of the Companies Act.' D

He went on further to hold that the 1973 Companies Act itself did not prohibit an appeal against an order refusing an application to wind up; that consequently the right to appeal was governed by the Supreme Court Act 59 of 1959; that an application for winding-up was a civil proceeding and, in the absence of any specific limitation, a judgment or order made in such a proceeding was appealable; and that, in the case E before the Court, there being no such specific limitation, the order refusing an application to wind up was appealable. (The reference to a 'specific limitation' arose from the provisions of s 20(2)(c) of Act 59 of 1959, in the original form, to which I shall make further reference later.) I am in full agreement with what was stated and held in the F Lawclaims case in regard to the interpretation of s 339 and the appealability of a decision refusing a winding-up order. Naturally this must now be read subject to the requirements relating to leave to appeal as laid down by s 20 of the Supreme Court Act in its present form, ie as amended by s 7 of the Appeals Amendment Act 105 of 1982. (See also the remarks (obiter) of Smuts J, with whom Klopper JP and Erasmus J G concurred, in Du Plooy and Another v Onus (Edms) Bpk and Two Others 1981 (1) PH E2.)

In the course of his argument respondents' counsel referred to s 348 of the 1973 Companies Act which provides as follows:

'A winding-up of the company by the Court shall be deemed to commence at the time of the presentation to the Court of the application for the H winding-up'.

He conceded, however, in view of the authority of Vermeulen and Another v C C Bauermeister (Edms) Bpk and Others 1982 (4) SA 159 (T), that since no winding-up order was in fact made in this case, s 348 did not come into operation. Nevertheless, in my view, the provisions of s 348 tend to controvert, rather than advance, the argument of respondents' I counsel. The purpose and effect of s 348 was considered by the Full Bench of the Transvaal Provincial Division in Vermeulen's case supra at 161F - 162B. Clearly the effect of the section is to antedate, by means of a deeming provision, the commencement of a winding-up by the Court to the time of the presentation of the application for winding-up. And, in my opinion, the time from which the commencement of winding-up was J intended to be

Corbett JA

A antedated by this deeming provision was the date of the grant of the winding-up order. It seems implicit in this that the Legislature regarded a winding-up as ordinarily commencing with the order for winding-up.

Respondents' counsel placed considerable reliance on the English case of In re A I Levy (Holdings) Ltd 1964 Ch 19 as authority for the proposition that the words 'In the winding-up...' in s 339 included B the legal proceedings leading to the grant, or refusal, of the winding-up order. I have read the case carefully. It deals with s 227 of the English Companies Act of 1948 and the question as to when the Court may exercise the jurisdiction granted to it by that section. Section 227 and s 339 of the 1973 Companies Act are not in pari materia and I do not find the decision to be of any assistance in resolving the question now C under consideration.

In R v City Silk Emporium (Pty) Ltd and Meer 1950 (1) SA 825 (GW) the question arose as to whether a company which was under provisional liquidation and was unable to pay its debts was indictable for certain offences under the Insolvency Act. The State relied upon s 182 of the Companies Act 46 of 1926 ('the 1926 Companies Act'), which was the D predecessor of s 339. The Court held that the State was not entitled to rely on s 182 since (at 834)

'the section is merely administrative. It provides that the law relating to insolvent estates is to apply to the process of winding up a company....'

(My italics.) This decision was followed in R v Schreuder 1957 (4) SA 27 (O) E and Cooper and Cooper v Ebrahim 1959 (4) SA 27 (T). It may be that the use of the words 'merely administrative' in this dictum placed too confined a construction on the effect of s 182 (see the discussion of these cases and of another in which the dictum was applied in a civil matter, viz Ex parte Mallac: In re L D De Marigny (Pty) Ltd (In Liq): De F Charmoy Estates (Pty) Ltd Intervening 1960 (2) SA 187 (D), by Colman J in Woodley v Guardian Assurance Co of SA Ltd 1976 (1) SA 758 (W)), but it seems to me that the interpretation that the relevant words in s 182 ('In the case of every winding-up of a company...') referred to 'the process of winding up' is consistent with the meaning which I have placed upon the corresponding words in s 339. I should add that there G are differences in the wording of ss 182 and 339, but none of these appears to me to have any bearing upon the question presently being discussed.

Respondent's counsel also referred to s 159 of the 1926 Companies Act, which reads:

'An appeal from any order or decision made or given for or in the H winding-up of a company by the Court under this Act shall lie in the same manner and subject to the same conditions as an appeal from any order or decision of the Court in cases within its ordinary jurisdiction.'

He drew attention to the fact that there was no equivalent provision in the 1973 Companies Act and he argued that this was because the right of appeal in winding-up applications had been placed on the same footing as I that in sequestration applications by virtue of s 339.

This argument is, in my view, not well founded. A provision in terms virtually identical to s 159 of the 1926 Companies Act was to be found in s 155 of the Companies Act of 1909 (Tvl); and a provision in substantially similar terms was to be found in s 195 of the Companies Act of 1892 (Cape). It appears from Collier v Redler and Another 1923 AD J 640 that this

Corbett JA

A latter section was taken over almost verbatim from s 124 of the English Companies Act 1862 'without... proper consideration' (see at 645, 652). In Collier's case this Court held...