First National Bank Ltd v E U Civils (Pty) Ltd; First National Bank Ltd v E U Plant (Pty) Ltd; Bassett v E U Civils (Pty) Ltd; E U Holdings (Pty) Ltd v E U Plant (Pty) Ltd
Jurisdiction | South Africa |
Citation | 1996 (1) SA 924 (C) |
First National Bank Ltd v E U Civils (Pty) Ltd;
First National Bank Ltd v E U Plant (Pty) Ltd;
Bassett v E U Civils (Pty) Ltd;
E U Holdings (Pty) Ltd v E U Plant (Pty) Ltd
1996 (1) SA 924 (C)
1996 (1) SA p924
Citation |
1996 (1) SA 924 (C) |
Case No |
7091/95; 7092/95; 7117/95; 7118/95 |
Court |
Cape Provincial Division |
Judge |
Van Reenen J |
Heard |
June 5, 1995 |
Judgment |
July 6, 1995 |
Counsel |
K A B Engers SC for the applicant in cases Nos 7091/95 and 7092/95. |
Flynote : Sleutelwoorde G
Company — Winding-up — Competing applications — Determining priority — General principles discussed.
Headnote : Kopnota
H The practice in the Cape Provincial Division for determining the priority between rival applications for provisional sequestration is that if the rival applications are in proper form and before the Court simultaneously, precedence is given to the applicant who first lodges security with the Master, subject to the Court's discretion to order otherwise, depending upon the circumstances of the particular case. In view of the fact that the provisions of the Insolvency and Companies Acts and the Court and I Practice Notes of the Division in regard to procedures preliminary to the hearing of sequestration and winding-up applications are nearly identical, it would be apposite to apply similar principles to provisional winding-up applications. (At 929D/E-F/G & 929G/H-H/I
Whether rival applications are in proper form and before the Court simultaneously are questions of fact dependent upon the circumstances of each case. (At 929I.)
The question of which of rival sequestration or winding-up applications should be accorded precedence is procedural in nature and involves an J exercise of a judicial
1996 (1) SA p925
A discretion. (At 930F/G.) Such discretion should not be restricted by the practice of according priority to the applicant who first lodges security. (At 931B.)
The finding in Court v Standard Bank of SA Ltd; Court v Bester NO and Others 1995 (3) SA 123 (A), that all that is required by s 9(3)(b) of the Insolvency Act 24 of 1936 is that security be given before the sequestration application is heard and that the security certificate must accompany the application when it is heard, applies equally to security B lodged with the Master in terms of s 346(3) of the Companies Act 61 of 1973 in winding-up proceedings. (At 931D/E-F/G.)
Although the provisions of s 9(3)(b) of the Insolvency Act and of s 346(3) of the Companies Act are peremptory, the provision of security is merely one of a number of steps antecedent to sequestration or winding-up applications. (At 932A-B.)
Practice Note 5 enjoins that in all matters requiring a Master's report the application must first be lodged with the Registrar for the allocation of a case number and that copies, bearing the Registrar's number, only C thereafter be submitted to the Master for his report.
The only factor other than the lodging of security which the Courts have taken into account in determining priority in rival applications has been the filing or set-down of sequestration or winding-up applications. (At 933B.)
Section 348 of the Companies Act provides that '(t)he winding-up of a company by the Court shall be deemed to commence at the time of the D presentation to the Court of the application for the winding-up'. An application for winding-up is presented within the meaning of the section when it has been duly lodged with the Registrar. (At 933H.) Due lodgement of an application is the filing with the Registrar of the notice of motion and its accompanying affidavit(s), together with proof of compliance with the provisions of s 346(4) and, in the Cape Provincial Division, the application must, in addition, be lodged in accordance with the requirements of Practice Note 5. (At 933I/J-934A.)
E Sections 340(1) and 341(2), read with s 348, of the Companies Act provide the liquidator with summary remedies to obtain the restoration to the company of impeachable dispositions of its property both prior to and after its winding-up. It is axiomatic that the restoration to the company of its property may, depending upon the circumstances, be of major importance to creditors and that the earlier the actual or deemed winding up, the greater the number of potential transactions that may be set aside F for the benefit of creditors. Viewed from this perspective the filing of an application for the winding up of a company unable to pay its debts is a substantially more significant and relevant criterion for determining priority between rival applications for winding up than the lodging of security. (At 934C-E.)
In this instance, two competing sets of applications for the provisional winding up of the two respondent companies were before the Court simultaneously. The applicant in one set of applications had complied with the provisions of Practice Note 5 before submitting its papers to the G Master for a report, had obtained and filed the Master's report and had set the applications down for hearing before the applicants in the other set of applications had done so. The applicants in the latter set of applications had, however, lodged a bond of security with the Master earlier than had the applicant in the former set of applications, but had failed to comply with Practice Note 5. The Court accorded priority to the former set of applications. (At 934F/G-I.)
Cases Considered
Annotations
Reported cases
The following decided cases were cited in the judgment of the Court:
H Bernold and Company v Zlotnick; O'Reilly v Zlotnick 1930 WLD 204
Cambanis v Bornman; Mosenthals Ltd v Bornman 1950 (1) SA 252 (O)
Courier Townhouse (Pty) Ltd v Myers 1986 (4) SA 1038 (C)
Court v Standard Bank of SA Ltd; Court v Bester NO and Others 1995 (3) SA 123 (A)
Glade Investments (Pty) Ltd v Chanes 1957 (4) SA 720 (W)
I Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A)
Ex parte Maritz; Ex parte De Klerk 1968 (4) SA 130 (C)
Melcost Investments (Pty) Ltd v Kruger 1968 (2) SA 69 (O)
Meter v Naidoo; Scalabrino v Naidoo 1960 (1) SA 242 (C)
Pat Cornick & Co (Pty) Ltd v Mimosa Meubels (Edms) Bpk; Bakker & Steyger (1960) (Pty) Ltd v Mimosa Meubels (Edms) Bpk 1961 (4) SA 119 (T)
Peach and Hatton (Pty) Ltd v Fenix Investments (Edms) Bpk; Hoover (SA) J (Pty) Ltd v Fenix Investments (Edms) Bpk 1965 (4) SA 559 (D)
1996 (1) SA p926
A SA Incorporated Merchants Protection Agency Ltd v Cajee; Cajee v Cajee 1939 TPD 184
Saffer Clothing Industries (Pty) Ltd v Chiat and Mair; Sheftz and Sheftz v Chiat and Mair 1956 (1) SA 756 (C)
Setsokosane Busdiens (Edms) Bpk v Voorsitter, Nasionale Vervoerkommissie, en 'n Ander 1986 (2) SA 57 (A)
Ex parte W J Upton Transport (Pty) Ltd; Man Trucks & Bus (SA) (Pty) Ltd B v W J Upton Transport (Pty) Ltd 1985 (1) SA 312 (W)
Venter NO v Farley 1991 (1) SA 316 (W)
Vermeulen and Another v C C Bauermeister (Edms) Bpk and Others 1982 (4) SA 159 (T)
Wellington Board of Executors Ltd and Another v Perlman 1954 (1) SA 546 (C)
Wolhuter Steel (Welkom) (Pty) Ltd v Jatu Construction (Pty) Ltd (in Provisional Liquidation) 1983 (3) SA 815 (O) C
Case Information
Competing applications for the provisional winding up of companies. The nature of the issues appears from the reasons for judgment.
K A B Engers SC for the applicant in cases Nos 7091/95 and 7092/95.
G W Woodland for the applicants in cases Nos 7117/95 and 7118/95.
D [The Court granted the order on 5 June and handed down the following reasons for judgment on 6 July.]
Judgment
Van Reenen J:
E U Civils (Pty) Ltd (hereinafter referred to as 'Civils'), E a company with a share capital, carries on business at 1 Hydro Street, Bellville, as a civil engineering contractor and has its registered office at c/o A C Venter & Company, 46 Middle Street, Bellville.
E U Plant (Pty) Ltd (hereinafter referred to as 'Plant'), a company with a share capital, carriers on business as a supplier, by way of hire, of plant, machinery and vehicles to the civil engineering contracting F industry at the same address as Civils.
Civils hires most of the plant, machinery and vehicles used by it in the conduct of its business from Plant.
The principal shareholders of Civils and Plant are Messrs V T Bassett, N Marsh and J O'Regan, all of whom are directors of Civils. Mr N Marsh is the sole director of Plant.
G As at the close of business on 31 May 1995:
Civils was indebted to First National Bank Ltd (hereinafter referred to as 'FNB') (i) in an amount of not less than R7,6 million in respect of overdraft facilities; (ii) a contingent liability of H R1,525 million in respect of guarantees issued on its behalf; and (iii) an amount of R92 495,93 in respect of a suretyship obligation for an indebtedness of Plant to FNB.
Plant was indebted to FNB in an amount of R92 495,93 in respect of overdraft facilities.
As security for the aforementioned obligations Civils and Plant passed I general notarial bonds over their existing and future movables in favour of FNB.
In an urgent application brought by FNB against Civils and Plant on 2 June 1995, this Court granted an order which entitled FNB to take possession of and hold in pledge the assets of (a) Civils hypothecated under general notarial bond No BN 59515/90; and (b) Plant hypothecated under general J notarial bonds BN 59516/90 and BN 16181/93.
1996 (1) SA p927
Van Reenen J
A The deputy sheriffs of Cape Town, Bellville and Stellenbosch respectively, on 2, 3 and 5 June 1995, and pursuant to the said order, placed FNB in possession of the movable assets of Civils and Plant. Such assets consisted largely of earthmoving and engineering plant, machinery, B vehicles and materials, without which Civils and Plant were unable to continue their...
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