Bowman NO v Sacks and Others

• Jurisdiction: South Africa
• Judge: Flemming J
• Judgment Date: 04 June 1985
• Citation: 1986 (4) SA 459 (W)
• Hearing Date: 28 May 1985
• Court: Witwatersrand Local Division

Flemming J:

Because of an order in terms of Rule of Court 33 (4), one issue only falls to be determined now. Apart from relief in respect of costs, the particulars of claim seek an order, clearly in terms of s 424 of the Companies Act 61 of H 1973, declaring defendants"personally responsible, without any limitation of liability, for all the debts and liabilities of the company as at the date of its liquidation".

The requisite allegation is made that defendants carried on business recklessly within the meaning of the said section. The issue is whether plaintiff has any entitlement to seek or obtain such a declaration; more pertinently whether plaintiff I is a "liquidator" as intended by s 424.

From the statement of agreed facts handed in by the parties (from which the parties departed by agreement by not handing in the final liquidation account) certain facts appear. This stands in conjunction with the plea which admits that plaintiff was appointed liquidator of the relevant company on 15 February 1978. The company was dissolved on 3 February 1981 in terms of J s 419 (2) of the Companies Act 1973. It is that

Flemming J

A dissolution which gives rise to the issue to be decided. It is therefore unnecessary to elaborate thereon that s 419 refers to a dissolution pursuant to a situation when "the affairs of a company have been competely wound up"; that plaintiff in a letter dated 9 January 1981 intimated to the Master that the B stage for such dissolution had been reached and in fact asked for his formal release as soon as possible; or the dates upon which the Master acted upon the letter or the dissolution was published in the Government Gazette.

Prior to the dissolution the duties in regard to distribution accounts and the distribution of assets in accordance therewith were complied with. Vide ss 408,409 and 410 of the Companies C Act 1973. The Master also consented to cancellation of the security furnished by the plaintiff for the proper execution of his duties as liquidator. See s 385 (2) of the Act.

The crux of plaintiff's argument is that s 424 creates a self-contained remedy, one which the liquidator despite dissolution is obliged (or entitled) to pursue in order to D "bring the reckless to book" and as such is not an action brought on behalf of the company. The defendants argue that, upon dissolution of the company, there was a cessation of the existence of the legal person; that plaintiff's action being in a representative capacity, it accordingly ceased when he had no one to represent, no one to account to and no one to whom the E proceeds of the litigation was to be paid. As I will point out, the answer is to be sought in the extent to which the action brought by the liquidator in terms of s 424 is an act of administration of company affairs.

It would make no difference to the contentions of the defendants that the summons in the present matter was issued before the dissolution of the company, the Registrar having F signed the summons on 15 January 1981. It would accordingly be equally unnecessary to rely upon the view that, irrespective of what transpired after dissolution on 3 February 1981, the action was in January 1981 not yet an action brought by the liquidator. Such an assertion would rest upon the fact that the power of attorney filed when summons was issued indicated that. G The grantor of the original power of attorney was described simply as one "Neil Bowman". After defendants raised that point, a new power of attorney was filed on 16 February 1981. Therein the plaintiff-to-be was described as Neil Bowman in his capacity as the duly appointed liquidator of the company concerned. The document proclaims that he was authorised to H institute action by a resolution of which a copy was attached. The annexure purports to be a minute of the second meeting of creditors where the common practice was followed of, as a first step in administering the estate, getting creditors effectively to delegate to the liquidator the steps which the Legislature intended that they should supervise and control. It is thus in I wide terms. Apart from ratifying whatever the provisional liquidator and liquidator might have done in the past and leaving the "further administration of the company" entirely in the hands of the liquidator, it deals specifically with legal services. The liquidator does seem thereby to have obtained a free discretion also to decide what legal action should be taken. I should point out, though, that, if the plaintiff is really at the moment busy with some sort of punitive exercise J irrespective of the advantages which creditors may derive therefrom, he may well fall

Flemming J

beyond the terms of the resolution in one respect. Legal A assistance and litigation is authorised therein insofar as it may be "in the interest of creditors" only.

Whether or not the resolution of creditors authorised plaintiff as the power of attorney purports to claim, the new power of attorney purported to indicate that plaintiff's action was that B of a duly appointed liquidator and nothing else. At this juncture one must call to mind the important distinction between proof of authority which in its function proves that authority did previously exist for what was (being) done, and a document which for the first time gives authority for a previous act. Only in the latter case is there any question of C ratification. In the former case it is at most a question of amplifying proof that was lacking or deficient, conceivably in some cases with an additional difficulty of overcoming a time limit, if any was set, for the proper supplying of proof. Cf, by way of example, Baeck & Co SA (Pty) Ltd v Van Zummeren and Another 1982 (2) SA 112 (W). That the present was a case of supplying better...