Leech and Others v Farber NO and Others

• Jurisdiction: South Africa
• Citation: 2000 (2) SA 444 (W)

Leech and Others v Farber NO and Others
2000 (2) SA 444 (W)

2000 (2) SA p444

Citation	2000 (2) SA 444 (W)
Case No	97/30472
Court	Witwatersrand Local Division
Judge	Nugent J
Heard	February 9, 1998
Judgment	February 26, 1998
Counsel	D Unterhalter for the applicants.; No appearance for the first, third and fourth respondents.; Andre Gautschi SC (with him M J Sawyer) for the second respondent (ABSA Bank Ltd).

Flynote : Sleutelwoorde G

Company — Winding-up — Enquiry in terms of ss 417 and 418 of Companies Act 61 of 1973 — Master's authority to authorise holding of enquiry — Present Companies Act having extended to Master discretion to authorise such enquiry — Grounds upon which such discretion to be exercised no different from those applying under former legislation — Not for Court to decide whether enquiry should have been H authorised, but only whether it has been shown that Master improperly exercised his/her discretion to do so.

Company — Winding-up — Enquiry in terms of ss 417 and 418 of Companies Act 61 of 1973 — Court will not countenance such enquiry being conducted I unfairly, even without calling in aid provisions of s 33 of Constitution of the Republic of South Africa Act 108 of 1996 — Accordingly unnecessary to decide whether enquiry constitutes 'administrative action' as intended in s 33 of Constitution.

Company — Winding-up — Enquiry in terms of ss 417 and 418 of Companies Act 61 of 1973 — Whether witness entitled to all information, including J

2000 (2) SA p445

documents, in questioner's possession as precondition to interrogation A of witness — Such entirely inconsistent with nature and purpose of enquiry — Furnishing of such information undermining purpose of enquiry — Not unduly prejudicial to witness unless witness first given access to all such information in possession of questioner - Where witness requires opportunity to consider question more fully to put him/herself in position to provide meaningful reply to questions, B commissioner can deal therewith when it arises.

Company — Winding-up — Enquiry in terms of ss 417 and 418 of Companies Act 61 of 1973 — Whether witness entitled prior to enquiry to access to documents in possession of creditor of company in terms of s 32 of C Constitution of the Republic of South Africa Act 108 of 1996 — Documents not held by creditor as agent of commissioner conducting enquiry — Section 32 of Constitution not applicable.

Headnote : Kopnota

The Master of the High Court has a discretion to authorise the holding of an enquiry under ss 417 and 418 of the Companies Act 61 of 1973. The cases relating to the equivalent sections of the 1926 D Companies Act held that for an enquiry to be authorised it was sufficient if there was a 'fair ground for suspicion and that the person proposed to be examined can probably give information about what is suspected'. Under the Companies Act of 1973, as amended by the Companies Amendment Act 29 of 1985, the discretion to authorise an enquiry has been extended to the Master, but the grounds upon which that discretion is to be exercised are no different from those which E applied under the former legislation. It is not for the High Court to decide whether an enquiry should have been authorised, but only whether it has been shown that the Master improperly exercised his/her discretion to do so. The extent of the information which was before him is relevant only insofar as it may justify the inference that he could F not properly have exercised his discretion. (At 448C/D - G.)

Whether an enquiry under ss 417 and 418 of the Companies Act constitutes 'administrative action' as intended in s 33 of the Constitution of the Republic of South Africa Act 108 of 1996 did not need to be decided in the present case. A Court will not countenance an enquiry of this nature being conducted 'unfairly', even without G calling in aid the provisions of s 33 of the Constitution. (At 450B - C.)

The enquiry which is contemplated by ss 417 and 418 of the Companies Act is essentially an interrogation in which information is sought to be pieced together to enable the affairs of the company to be properly wound up. Although the commissioner is in overall control of the enquiry, the liquidator and any creditor, member or contributory of the H company is entitled to interrogate witnesses (s 418(1)(c)). To require that the questioner should disclose to witnesses all information, and documents, which is/are already in his possession, or indeed any suspicions he may have in relation to the particular witness, as a precondition to questioning him seems to be entirely inconsistent with the nature and purpose of such an enquiry. This is I quite apart from the fact that it is difficult to see how this could be effected in practice without entirely undermining the purpose which is served by such an enquiry. For so long as enquiries of this nature have been permitted by legislation in this country the Courts have had the power to intervene in order to supervise the manner in which they have been conducted. It has never been suggested that such enquiries are unduly J

2000 (2) SA p446

prejudicial unless the witness concerned is first given access to all information, and documents, which are in the possession of the A questioner. (At 450I/J - 451D and 452H - I.)

It may well be that particular questions will be asked of, or propositions put to, a witness which he requires an opportunity to consider more fully, or be given an opportunity to study a particular document, in order to place himself in a position to provide a B meaningful reply, but that is a matter which can and should be dealt with by the commissioner if and when it arises. (At 452F/G - G and 454B/C - D.)

Dealing with a contention that a witness was entitled, in terms of s 32 of the Constitution, read with item 23(2) of Schedule 6 to the Constitution (which provides that every person has the right of access to 'all information held by the State or any of its organs in any C sphere of government insofar as that information is required for the exercise of protection of any of their rights') to access to documents in the possession of a creditor (a bank) of the company in liquidation because those documents were ipso facto held by the creditor as agent on behalf of the commissioner (an organ of State) conducting and controlling the enquiry, the Court held that there was no authority D in support of that proposition and there was no rule or principle of law which could support it. The bank was a creditor of the company and appeared at the enquiry in its own right to examine witnesses, as it was entitled to do in terms of s 418(1)(b) of the Companies Act. There was no basis for the contention that the bank's documentation somehow became that of the commissioner merely because the bank chose to ask for or attend an enquiry. Reliance on s 32 of E the Constitution in such circumstances was misconceived. (At 453H/I - 454A/B.)

Cases Considered

Annotations

Reported cases F

Bernstein and Others v Bester and Others NNO 1996 (2) SA 751 (CC) (1996 (4) BCLR 449): dictum in para [36] applied

Ex parte Brivik 1950 (3) SA 790 (W): applied

Du Preez and Another v Truth and Reconciliation Commission 1997 (3) SA 204 (A): discussed and distinguished

Ferreira v Levin NO and Others; Vryenhoek and G Others v Powell NO and Others 1996 (1) SA 984 (CC) (1996 (1) BCLR 1): considered

James v Magistrate, Wynberg, and Others 1995 (1) SA 1 (C): dictum at 16E applied

Jeeva and Others v Receiver of Revenue, Port Elizabeth, and Others 1995 (2) SA 433 (SE): not approved and not followed

Katz v Colonial Realty Trust (Pty) Ltd 1954 (4) SA 302 (W): applied H

Re Pergamon Press Ltd [1971] Ch 388 (CA) ([1970] 3 All ER 535): distinguished

Schulte v Van der Berg and Others NNO 1991 (3) SA 717 (C): dictum at 720I applied.

Statutes Considered

Statutes I

The Companies Act 61 of 1973, ss 417, 418: see Juta's Statutes of South Africa 1998 vol 2 at 1-208, 1-209

The Constitution of the Republic of South Africa Act 108 of 1996, ss 32, 33, Schedule 6 item 23(2): see Juta's Statutes of South Africa 1998 vol 5 at 1-147, 1-189. J

2000 (2) SA p447

Case Information

Application for the review and setting aside of decisions of the Master and a commissioner conducting an enquiry in terms of ss 417 A and 418 of the Companies Act 61 of 1973. The facts appear from the reasons for judgment.

D Unterhalter for the applicants.

No appearance for the first, third and fourth respondents. B

Andre Gautschi SC (with him M J Sawyer) for the second respondent (ABSA Bank Ltd).

Cur adv vult.

Postea (26 February 1998). C

Judgment

Nugent J:

During the course of last year a company known as Needwood (Pty) Ltd was placed in liquidation. Its sole shareholder and director was a certain Mr Konrad Leech, who has been sequestrated. The petitioning creditor in each case was ABSA Bank Ltd, which had lent the company approximately R54 million. D

ABSA Bank, supported by the liquidator, applied to the Master of the High Court for an enquiry to be held into the affairs of the company in terms of ss 417 and 418 of the Companies Act 61 of 1973. In its application ABSA Bank said that the money had been lent to the company for the purpose of financing a residential development, but that some E of it had been diverted to other entities or persons associated with Mr Leech. It...