Ma-Afrika Groepbelange (Pty) Ltd and Another v Millman and Powell NNO and Another

• Jurisdiction: South Africa
• Judge: Van Zyl J
• Judgment Date: 05 September 1996
• Citation: 1997 (1) SA 547 (C)
• Docket Number: 12471/95
• Counsel: R S Van Riet SC (with him L M Olivier) for the applicants J J Gauntlett SC (with him G W Woodland) for the respondents
• Court: Cape Provincial Division

Van Zyl J:

This is an application to remove the first respondent, one J

Van Zyl J

Ralph Millman, as joint liquidator of Fancourt Properties (Pty) Ltd (in A liquidation), hereinafter referred to as 'Fancourt Properties', in terms of the provisions of s 379(2) of the Companies Act 61 of 1973. The second respondent, Oliver Michael Powell, is the joint liquidator, with Millman, of Fancourt Properties, while the Master, as the third respondent, is cited in his official capacity. No relief is sought against Powell or the B Master. Powell does not oppose the application and the Master abides the decision of this Court.

The first and second applicants have brought this application as proven concurrent creditors of Fancourt Properties, of which the second applicant is also a member and the beneficial owner of all the issued C shares therein. The major proven creditors of Fancourt Properties are various companies in the Masterbond group (I shall refer to them jointly and severally as 'Masterbond'), which have proved eight secured claims against Fancourt Properties.

The grounds for the removal of Millman in terms of s 379(2) of the Companies Act are that he has allegedly: D

(a)

failed to perform satisfactorily duties imposed upon him by the said Act;

(b)

acted to the detriment of creditors of Fancourt;

(c)

sided with the secured creditors and failed to display the objectivity required of a liquidator; E

(d)

refused to investigate and/or challenge the claims of the secured creditors.

In his founding affidavit on behalf of the applicants Mr André Pieterse, their chairman, has furnished certain background information relating to events prior to the liquidation of Fancourt Properties. I shall deal with it briefly. F

Since 1981 Pieterse has been engaged in developing his family estate, owned by Fancourt Properties, into a 'country club resort'. The manor house and its gardens were converted into a luxury hotel which was partly financed by means of a R3,9 million loan granted by Masterbond. The loan was secured by a first mortgage bond registered over the G property of Fancourt Properties. Thereafter Fancourt Holdings (Pty) Ltd ('Fancourt Holdings') was registered with a view to developing a golf course. This was a joint venture of the first applicant and Masterbond and was financed by means of 'development bonds' granted by Masterbond. The Manor House Hotel, as it was called, was operated by a subsidiary of Fancourt Holdings, namely Fancourt Hotels (Pty) Ltd H ('Fancourt Hotels'), on the basis of a lease agreement with Fancourt Properties.

During the latter part of 1991 Masterbond experienced financial difficulties and was placed under provisional curatorship. The golf course was, at that stage, incomplete and the builder, Group Five I Construction (Pty) Ltd ('Group Five'), threatened to withdraw.

In an attempt to resolve these difficulties the provisional curators, Fancourt Holdings, Fancourt Properties, Group Five and Pieterse concluded a 'moratorium agreement' in January 1992. The aim of the agreement was to complete the Fancourt development. It provided for, inter alia, a moratorium of five years to Fancourt Holdings and Fancourt J

Van Zyl J

Properties in respect of capital repayments on their bonds, waiver of A interest and suretyships by Fancourt Holdings and Fancourt Properties in favour of Masterbond for the payment of all amounts owing to it (at that stage some R83 million).

Thereafter, various disputes arose between the creditors of Fancourt Holdings and Fancourt Properties and the provisional curators, whose B appointment was finalised on 12 August 1992. Nevertheless, surety bonds were registered over the property of Fancourt Properties in favour of Masterbond on 18 August 1992. Shortly thereafter, however, on 25 September 1992, the curators applied for the liquidation of Fancourt Properties and Fancourt Holdings. A provisional liquidation order C granted on 2 December 1992 was made final on 5 March 1993. Millman was nominated as provisional liquidator by the curator and was appointed as such by the Master on 4 December 1993.

At the first meeting of creditors of Fancourt Properties held on 11 June 1993 eight secured claims totalling R28 900 000 were proved by Masterbond and three unsecured claims totalling R5 499 925 by the D applicants and Group Five respectively. Millman and Powell were nominated as joint liquidators, the former being nominated by the curators and the latter by the applicants and Group Five. The nominations were accepted by the Master and they were appointed as joint liquidators on 3 September 1993. In conformance with the practice in E liquidation matters where joint liquidators are appointed, namely that the administration of the company in liquidation is usually entrusted to the liquidator nominated by creditors whose claims are greater in value, Millman became responsible for the day-to-day administration of Fancourt Properties in liquidation. F

On 23 August 1993 the curators applied in terms of s 417 of the Companies Act for an enquiry to be held into the affairs of, inter alia, Fancourt Holdings and Fancourt Properties. Ex-Judge J H Steyn was appointed as commissioner.

It would appear that both liquidators were of the opinion that the suretyship executed by Fancourt Properties in favour of Masterbond G might be impeachable. Powell also expressed the view that the moratorium agreement might be a nullity and suggested that the second meeting of creditors should be adjourned for purposes of conducting an enquiry in terms of s 415 of the Companies Act. In regard to the moratorium agreement, he informed Millman that Group Five had asked him to obtain senior counsel's opinion on its validity. H

Millman responded that he would have no difficulty with a s 415 enquiry should he be apprised of its purpose and be of the view that it is necessary. He agreed that senior counsel's opinion should be obtained in regard to the validity of the moratorium agreement.

When he was advised of the purpose of the envisaged enquiry, I Millman's response was that the liquidators should await the outcome of the s 417 enquiry before incurring the costs of another enquiry. This view prevailed, despite Powell's objection that a s 415 enquiry would canvass matters which would not be dealt with in a s 417 enquiry.

At the second meeting of creditors held on 3 December 1993 a firm of chartered accountants, Fisher Hoffmann Stride, proved a claim of J

Van Zyl J

R21 153 and joined the ranks of the concurrent creditors. Millman and A Powell tabled a joint report in which they stated that efforts had been made by them to sell the Fancourt Hotel and Country Club resort as a going concern but they had hitherto not received an acceptable offer. In regard to the suretyship of some R25 million in favour of Masterbond, they advised that they would obtain an opinion from senior counsel 'to B ascertain whether there is any basis upon which this indebtedness can be set aside'.

At the said meeting Powell, supported by the applicants and Group Five, applied for an enquiry in terms of s 415 of the Companies Act, read with s 44(7) of the Insolvency Act 24 of 1936. This was opposed by the C curators on the basis that it was not necessary pending the s 417 enquiry. Millman referred also to the s 417 enquiry but did not oppose the application. The meeting was then postponed by the presiding officer to afford the applicants the opportunity to make written submissions.

In a letter dated 15 December 1993 from Powell to Millman it was suggested that some 'manoeuvring' had been taking place behind his D back and he stated that he had 'no or little knowledge' regarding the administration of the Fancourt Properties estate. He once again expressed doubts in regard to the validity of the suretyship claim of Masterbond against Fancourt Properties and reiterated that creditors or a trustee should have the right to interrogate in terms of s 44(7) of the Insolvency Act. E

Thereafter the attorneys of the applicants addressed a letter, dated 24 December 1993, to Powell and Millman requesting them to state whether they regarded the moratorium agreement to be valid or not. Powell responded by saying that his prima facie view was that it might be unenforceable, alternatively incapable of performance. He stressed, F however, that he had not had the opportunity to discuss the content of their letter with Millman.

Powell subsequently called upon Millman in a telefax dated 7 January 1994 to consider obtaining senior counsel's opinion on the validity of the moratorium agreement. Millman did not respond to this request. G

On 28 January 1994 the applications for an enquiry in terms of s 415 of the Companies Act and s 44(7) of the Insolvency Act were refused by the presiding officer on the basis that a s 417 enquiry was pending. The applicants then applied to Commissioner Steyn to hear evidence of the curators regarding the validity of the moratorium agreement and the suretyships granted by Fancourt Properties in favour of Masterbond. H This application was likewise refused on grounds which are criticised by the applicants as being clearly wrong, namely that the Commissioner was bound by Berman J's judgment on the validity of the moratorium agreement (unreported judgment dated 14 May 1993 in Wilken NO and Others v Fancourt Holdings (Pty) Ltd and Another, cases No 12863/92 and 12864/92) I and that the applicants were estopped from reopening the issue for purposes of establishing whether or not the suretyships constitute voidable or impeachable dispositions in terms of the Insolvency Act. This brought to an end the s 417 enquiry.

The second meeting was postponed to 4 March 1994, when Fisher Hoffmann Stride applied for an interrogation in terms of s 44(7) of the J

Van Zyl J

Insolvency...