Maritz and Another v Maritz & Pieterse Inc (In Liquidation)

• Jurisdiction: South Africa
• Citation: 2006 (3) SA 481 (SCA)

Maritz and Another v Maritz & Pieterse Inc (In Liquidation)
2006 (3) SA 481 (SCA)

2006 (3) SA p481

Citation	2006 (3) SA 481 (SCA)
Case No	175/2004
Court	Supreme Court of Appeal
Judge	Scott JA, Zulman JA, Navsa JA, Nugent JA and Heher JA
Heard	May 23, 2005
Judgment	May 30, 2005
Counsel	F H Terblanche SC for the appellants.; J A Dreyer SC for the respondent.

Flynote : Sleutelwoorde B

Attorneys — Attorneys' practice conducted by private company — Attorneys' Act 53 of 1979, s 23(1)(a) — Section permitting private company to conduct attorneys' practice only if memorandum of association providing that all directors, past and present, jointly and severally with company liable for debts of company contracted during C their periods of office — Whether section read with memorandum of company in liquidation creating company asset in form of claim against directors — Such interpretation would bring about consequences opposed to legislative intention — Liquidators deriving no rights from section. D

Company — Directors and officers — Director — Liability of — Director of company conducting attorneys' practice — Attorneys Act 53 of 1979, s 23(1)(a) — Section permitting private company to conduct attorneys' practice only if memorandum of association providing that all directors, past and present, jointly and severally with company, liable for debts of company contracted during their periods of office — Whether section read with E memorandum of company in liquidation creating company asset in form of claim against directors — Such interpretation would bring about consequences opposed to legislative intention — Liquidators deriving no rights from section.

Insolvency — The insolvent — Whether appellants (former directors of company) personally liable to its F liquidators for claims of creditors in estate — In casu, liability of directors for contractual liabilities of liquidated attorneys' practice — Whether order authorising Registrar to issue warrant of execution in respect of claims correctly granted — Whether claims validly and regularly proved — Whether respondent liquidators having locus standi to sue directors — Whether appellants granted opportunity to defend claims of creditors. G

Headnote : Kopnota

The instant appeal concerned the right of liquidators of a professional company to rely on the statutory liability of its former directors as joint and several co-debtors with the company to its creditors as a ground for claiming from those directors claims proved H by the creditors in the liquidation of the company. The respondent (the company) had conducted an attorneys' practice. It was a juristic person, incorporated and registered under the Companies Act 61 of 1973 and empowered to carry on its professional practice by reason of s 23(1) of the Attorneys' Act 53 of 1979 (the Attorneys' Act). Section 23 of the Attorneys' Act permitted a company to conduct an I attorneys' practice only if its memorandum of association provided that all present and past directors of the company were jointly and severally liable with the company for the debts and liabilities of the company contracted during their period of office.

The company was placed under final liquidation when a High Court found that the directors had permitted the company to become a vehicle for the J

2006 (3) SA p482

operation of a pyramid scheme, in terms of which investors' funds had been channelled through its trust account to the operator of the A scheme, who had disappeared with the proceeds. By releasing the funds in the trust account without ensuring that adequate securities were provided, the company was found to have acted in breach of its mandate from the investors and incurred contractual claims for the losses suffered by the investors. The liquidators sought to recover from the former directors the amount of claims proved by the creditors of the B pyramid scheme.

Held, that a liquidator was appointed for the purpose of conducting the proceedings in the winding-up of the company with the duty to recover and realise the assets and property of the company for the benefit of its creditors. The personal assets of the former directors did not belong to the company in liquidation. The liquidators' case could only be that s 23(1) of the Attorneys' Act C read with the memorandum created an asset of the company in the form of a claim against those directors. If such claim did not arise, the liquidators had acted beyond their powers in attempting to recover from the directors on this basis and they had no locus standi. (Paragraph [11] at 486G - J.)

Held, further, that to interpret s 23(1)(a) of the Attorneys' Act as the liquidators would have it would bring about D consequences directly opposed to the legislative intention. If a company in liquidation were permitted to recover its indebtedness to the creditors from its former directors and were to be paid in full, the proceeds would necessarily accrue to the general body of creditors, entitling the individual creditors to a dividend at best. The creditors of a professional company would be deprived of the very assurance which E the section sets out to provide, which was the right to claim in full from the directors. (Paragraph [14] at 487G - I.)

Held, accordingly, that the liquidators derived no rights from s 23(1)(a) of the Attorneys' Act or the memorandum of the company. (Paragraph [15] at 487I - J.) Appeal upheld.

The decision in the Transvaal Provincial Division in Maritz & Pieterse Inc (in Liquidation) v Maritz and Another reversed. F

Cases Considered

Annotations

Reported cases

Bernstein and Others v Bester and Others NNO 1996 (2) SA 751 (CC) (1996 (4) BCLR 449): referred to G

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

Fundstrust (Pty) Ltd (in Liquidation) v Van Deventer 1997 (1) SA 710 (A) ([1997] 1 All SA 644): considered

Koornklip Beleggings (Edms) Bpk v Allied Minerals Ltd 1970 (1) SA 674 (C): compared H

Sonnenberg McLoughlin Inc v Spiro 2004 (1) SA 90 (C): approved.

Statutes Considered

Statutes

The Attorneys' Act 53 of 1979, s 23(1)(a): see Juta's Statutes of South Africa 2004/5 vol 5 at 3-112.

Case Information

Appeal from a decision in the Transvaal Provincial Division (Hartzenberg J). The facts appear from the judgment of Heher JA. I

F H Terblanche SC for the appellants.

J A Dreyer SC for the respondent.

In addition to the authorities cited in the judgment of the Court, counsel for the parties referred to the following: J

2006 (3) SA p483

Aircondi Refrigeration (Pty) Ltd v Ruskin NO and Others 1981 (1) SA 799 (W) at 804 A

Aspeling and Another v Hoffman's Trustee 1917 TPD 305 at 306 - 7

Bellingan v Clive Ferreira and Associates CC and Others 1988 (4) SA 382 (W) at 403 - 5

Boland Bank Bpk v Steele 1994 (1) SA 259 (T) at 270D - F B

Cachalia v De Klerk NO and Benjamin NO 1952 (4) SA 672 (T)

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