James v Magistrate Wynberg and Others

• Jurisdiction: South Africa
• Judge: Thring J
• Judgment Date: 13 July 1994
• Docket Number: 3664/94
• Court: Cape Provincial Division
• Hearing Date: 08 June 1994
• Citation: 1995 (1) SA 1 (C)

Thring J:

The applicant has at all times since its incorporation been the sole member of a close corporation, Waverley Agencies Exporters CC (to which I shall refer as 'the corporation'). On 17 December 1992 the corporation was placed in provisional liquidation at the instance of the Protea Assurance Co Ltd (to which I shall refer as 'Protea'). The D provisional order was made final on 13 January 1993. The second respondent was duly appointed as provisional liquidator of the corporation on 29 December 1992. His appointment was presumably subsequently confirmed by the Master, the third respondent. After several meetings had been convened and subsequently postponed, closed or abandoned by the second respondent, he convened a meeting for 24 January 1994 before the first respondent, the E magistrate of Wynberg. It was described as a 'special and general meeting' of the corporation. It is now accepted by the applicant that this meeting was convened in terms of s 386(1)(d) of the Companies Act 61 of 1973 which, mutatis mutandis, applies to the winding-up of a close corporation by virtue of the provisions of s 66(1) of the Close Corporations Act 69 of F 1984. Section 386(1)(d) of the Companies Act reads as follows:

'The liquidator in any winding-up shall have power -

(a)

. . .

(b)

. . .

(c)

. . .

(d)

to summon any general meeting of the company or the creditors or contributories of the company for the purpose of obtaining its G or their authority or sanction with respect to any matter or for such other purposes as he may consider necessary; . . .'

The purpose of the meeting was stated in the minutes of the proceedings to be threefold, viz 'proof of claims, adoption of liquidator's report and H interrogation of witnesses'. At this meeting a claim by Protea, which, it seems, had already been proved and admitted at a previous meeting on 26 August 1993, was resubmitted, proved and admitted in the sum of R12 230,02. This is the only claim which has, to date, been proved against the corporation. The second respondent did not submit any report at this meeting, nor were any witnesses interrogated. The meeting was then I adjourned, first to 26 January 1994 and, subsequently, to 28 March 1994.

Although, initially, the applicant sought to call the validity of this meeting into question on various grounds, he no longer contends that the meeting was not validly convened in terms of s 386(1)(d) of the Companies J Act, and he has not as yet objected to the proof of Protea's claim.

Thring J

A On 1 March 1994 the second respondent caused the magistrate to issue a subpoena on, inter alia, the applicant in terms of s 414(2) of the Companies Act. The subpoena required the applicant to appear before the magistrate on 28, 29, 30, and 31 March 1994 so that he could be questioned in terms of s 414(2) of the Act at the adjourned meeting. The applicant was also required by the subpoena to produce at the meeting: B

'All records evidencing the transaction regarding the purchase of a stock of books from Howard Lipman.'

It is now common cause that the provision in terms of which the second respondent sought to have the applicant examined is s 415(1) of the Companies Act, which is likewise mutatis mutandis applicable to the C winding-up of a close corporation, and which reads as follows:

'The Master or officer presiding at any meeting of creditors of a company which is being wound-up and is unable to pay its debts, may call and administer an oath to or accept an affirmation from any director of the company or any other person present at the meeting who was or might have been subpoenaed in terms of s 414(2)(a), and the Master or such officer D and any liquidator of the company and any creditor thereof who has proved a claim against the company, or the agent of such liquidator or creditor, may interrogate the director or person so called and sworn concerning all matters relating to the company or its business or affairs in respect of any time, either before or after the commencement of the winding-up, and concerning any property belonging to the company: Provided that the Master or such officer shall disallow any question which is irrelevant or would E in his opinion prolong the interrogation unnecessarily.'

The applicant does not wish to submit himself to any such examination at the instance of the second respondent. On 23 March 1994 he launched the present application as a matter of urgency. At that stage he sought, inter alia, an order in the following terms: F

'2.1

that the meeting of creditors and member of Waverley Agency Exporters CC to be held before first respondent on Monday, 28 March 1994, at 09:00 at Wynberg be set aside;

2.2

that, pending the determination of the present proceedings, the meeting of Waverley Agency Exporters CC to be held before first G respondent on Monday, 28 March 1994, at 09:00 at Wynberg be stayed;

in the alternative to para 2 above

3.1

that the notice in terms of s 414 of the Companies Act requiring applicant to appear before first respondent on Monday, 28 March H 1994, at 09:00 at Wynberg be set aside;

3.2

that, pending the determination of the present proceedings, the notice in terms of s 414 of the Companies Act requiring applicant to appear before first respondent on Monday, 28 March 1994, at 09:00 at Wynberg be set aside; . . .'

I On 24 March 1994 this Court, by agreement between the parties, made the following order:

'1.

The meeting of creditors scheduled to take place on Monday, 28 March 1994, at the magistrate's court for the district of Wynberg in respect of Waverley Agencies Close Corporation will be J postponed to Monday, 20 June 1994.

Thring J

2.

A The application is postponed for hearing on the semi-urgent roll on 8 June 1994.'

Further provision was made in the order for the filing of opposing and replying affidavits and the costs were ordered to stand over for later determination.

B Further voluminous documentation was then delivered by the applicant and the second respondent. The papers currently run to some 960 pages. The magistrate of Wynberg (the first respondent) and the Master (the third respondent) do not oppose the application.

The second respondent delivered a counter-application. In it he claims, inter alia, an order in the following terms: C

'2.

Declaring that the general meeting of Waverley Agencies Close Corporation (in liquidation) postponed to Monday, 20 June 1994, by order of this honourable Court dated 24 March 1994 to be validly summoned by second respondent in terms of s 386(1)(d) of the Companies Act 61 of 1973 as applied by virtue of the provisions of s 66(1) of the Close Corporations Act 69 of 1984. D

3.

Directing that applicant submit to interrogation at the meeting on 20 June 1994 and any adjournment/postponement thereof.'

Subsequently it was apparently agreed between the parties that, even in the event of the counter-application being successful, no interrogation E would in fact take place on 20 June 1994, but that the meeting would, on that date, be further adjourned to a date to be arranged to suit the convenience of those concerned.

It is quite clear that the primary purpose for which the second respondent wishes to proceed with the adjourned meeting is to examine the applicant and others, or to cause them to be examined, on various topics. He says F that such an examination is necessary in order to enable him to report in terms of s 79 of the Close Corporations Act, which he has not yet done. This section reads as follows:

'Except in the case of a members' voluntary winding-up, a liquidator shall, as soon as practicable and, except with the consent of the Master, G not later than three months after the date of his appointment, submit to a general meeting of creditors and members of the corporation concerned a report as to the following matters:

(a)

the estimated amounts of the corporations' assets and liabilities;

(b)

if the corporation has failed, the causes of the failure;

(c)

whether or not he has submitted or intends to submit to the Master a report under s 400(2) of the Companies Act, as applied by s 66 of this Act; H

(d)

whether or not any member or former member appears to be liable -

(i)

to the corporation on the ground of breach of trust or negligence;

(ii)

to make repayments to the corporation in terms of s 70(2) or (3) or s 71(1) or (2);

(iii)

to either a creditor of the corporation or the corporation itself, as the case may be, by virtue of any provision of Part VIII of this Act; I

(e)

any legal proceedings by or against the corporation which may have been pending at the date of the commencement of the winding-up, or which may have been or may be instituted;

(f)

whether or not any further enquiry is in his opinion desirable in regard to any matter relating to the formation or failure of the J corporation or the conduct of its business;

Thring J

(g)

A whether or not the corporation has kept the accounting records required by s 56 and, if not, in what respects the requirements of that section have not been complied with;

(h)

the progress and prospects in respect of the winding-up; and

(i)

any other matter which he may consider fit, or in connection with which he may require the directions of the creditors.'

B Part VIII of the Act includes s 64, which deals with the personal liability of certain individuals for the debts of a corporation in certain circumstances.

The topics on which the second respondent wishes to examine the applicant can be separated into the following categories:

(a)

the possible commission or attempted commission by the applicant C of a fraud on Protea, inasmuch as the applicant may, on behalf of the corporation, have submitted a fraudulent claim to Protea...