Pellow NO and Others v the Master of the High Court and Others

• Jurisdiction: South Africa
• Citation: 2012 (2) SA 491 (GSJ)

Pellow NO and Others v the Master of the High Court and Others
2012 (2) SA 491 (GSJ)

2012 (2) SA p491

Citation	2012 (2) SA 491 (GSJ)
Case No	2010/22522
Court	South Gauteng High Court, Johannesburg
Judge	Spilg J
Heard	August 16, 2011
Judgment	September 13, 2011
Counsel	MM Antonie (with AJ Lapan) for the first and second applicants.; No appearance for the third applicant.; No appearance for the first respondent.; S Mawere for the second respondent.; No appearances for the third to fifth respondents.

Flynote : Sleutelwoorde B

Company — Winding-up — Liquidator — Group of companies — Practice of appointing same liquidator for group of companies being liquidated generally salutary.

Company — Winding-up — Liquidator — Removal — By Master — When appropriate C — Apprehension of bias — Liquidator's employer subsidiary of major creditor of company being liquidated — Test being whether relationship between liquidator's employer, liquidator, and major creditor resulting in exertion of undue influence on liquidator or potential prejudice to particular creditor — Companies Act 61 of 1973, s 379(1). D

Company — Winding-up — Liquidator — Removal — By Master — When appropriate — Apprehension of bias — Adverse finding should not be made against liquidator unless (1) attempt was made to resolve issues at meeting between liquidator and complainant; or (2) there was clear and unanswered transgression of statutory requirement — Companies Act 61 of 1973, s 379(1). E

Headnote : Kopnota

The common practice of appointing a single liquidator to oversee the winding-up of companies in the same group is a salutary one that has distinct advantages, including a broad understanding of the interrelationship between associate companies and the justification of intergroup transactions. (Paragraph [33] at 500B – D.) F

It turned out in an application for the annulment of the Master's decision to remove the joint liquidators of AHI (Pty) Ltd that the employer (Westrust) of one of the liquidators (Pellow) was a wholly owned subsidiary of AHI's major creditor (Investec), and the issue was whether this was sufficient to justify an apprehension of bias on the part of Pellow. The court held that the test was whether the relationship between Westrust, Pellow and Investec G resulted in the exertion of undue influence on Pellow to the prejudice or potential prejudice of a particular creditor (on the assumption that any such creditor desires the highest dividend possible and has no ulterior motive). The court further held that the removal of a liquidator should not happen (1) in the absence of an attempt to resolve the perceived issues at a meeting between the liquidator and the complainant; or (2) unless there was a clear H transgression of a statutory requirement that remained unanswered. (Paragraphs [37] and [40] at 501B – C and 501F – G.)

Cases Considered

Annotations:

Reported cases

Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Others I 2004 (4) SA 490 (CC) (2004 (7) BCLR 687): referred to

Hudson and Others NNO v Wilkins NO and Others 2003 (6) SA 234 (T): dictum in para [14] applied

Krumm and Another v The Master and Another 1989 (3) SA 944 (D): referred to

Lipschitz v Wattrus NO 1980 (1) SA 662 (T): referred to J

2012 (2) SA p492

Ma-Afrika Groepbelange (Pty) Ltd and Another v Millman and Powell NNO and Another 1997 (1) SA 547 (C) (1996 CLR 751): dictum at 566E applied A

Standard Bank of South Africa v The Master of the High Court and Others 2010 (4) SA 405 (SCA): applied.

Unreported cases B

Allendale Planters CC and Another v The Master (TPD case No 20663/98): applied.

Statutes Considered

Statutes

The Companies Act 61 of 1973, s 379(1): see Juta's Statutes of South Africa C 2010/11 vol 2 at 1-286.

Case Information

Application for the review and setting-aside of the Master's decision to remove the first and second applicants as joint liquidators.

MM Antonie (with AJ Lapan) for the first and second applicants.

No appearance for the third applicant.

D No appearance for the first respondent.

S Mawere for the second respondent.

No appearances for the third to fifth respondents.

Cur adv vult.

Postea (September 13). E

Judgment

Spilg J:

The nature of the application F

[1] This is an application brought under s 151 of the Insolvency Act 24 of 1936 and s 6(2) of the Promotion of Administrative Justice Act 3 of 2000 (PAJA) to review and set aside the first respondent's decision to remove the first and second applicants as joint liquidators of African Heritage Investments (Pty) Ltd (AHI), together with an order for their G reinstatement. Costs are sought only against General Beltings (Pty) Ltd (General Beltings), the second respondent, unless any of the other respondents opposed the application.

[2] In view of an objection raised by the second respondent, the three liquidators who had replaced the first and second respondents were also H joined. The applicants do not seek their removal. Consequently, if the erstwhile liquidators are reinstated there will be five liquidators administering the estate. None of the current liquidators object to this course, the effect of which will not result in any prejudice to the creditors since no additional costs are thereby incurred: the fees and other charges to which the tariff entitles liquidators would simply be divided amongst five I liquidators instead of three.

[3] Moreover the third applicant (Investec) subsequently withdrew as a party to the application.

[4] Not only do the present liquidators refrain from opposing the J application, but the Master does not oppose the relief either. This is

2012 (2) SA p493

Spilg J

hardly surprising, for reasons that will become evident later. It is only A General Beltings that opposes the application. This, too, is hardly surprising, since the directors of General Beltings were also directors of AHI, and were among the individuals being investigated in relation to alleged wrongful dispositions of assets by AHI, including the creation of fictitious invoices to various entities they controlled. B

Background

[5] On 3 June 2009 AHI was wound up at the instance of Investec on the grounds of an inability to pay its debts. AHI was an investment holding company and Investec was one of its major creditors, with a proved claim C exceeding R208 million, representing some 97% of all proved claims. Investec's claim arose from guarantees provided by AHI as security for loans provided to subsidiary companies of AHI.

[6] General Beltings also proved a claim against AHI for R5,7 million in respect of arrear rentals. Messrs Mutumwa Mawere and Parmanathan Mariemuthu were the controlling directors of General Beltings. They D had also been the controlling directors of AHI.

[7] The applicants' appointment as joint liquidators was nominated and voted for by Investec at the first meeting of creditors on 7 July 2009. At the second meeting of creditors, held on 22 October 2009, a resolution E was passed authorising the applicants to enquire into the reasons for the substantial deficit in AHI's net asset worth and to engage legal assistance to collect amounts that might be due to AHI. The resolution was passed at the instance of Investec which also undertook to fund the costs of an enquiry under ss 417 and 418 of the old Companies Act 61 of 1973. F

[8] After the Master authorised the applicants, an enquiry commenced in October 2009 and was still ongoing when General Beltings applied on 10 February 2010 to the Master for the removal of the applicants as liquidators, relying on s 379(1)(b) and (e) of the Companies Act. General Beltings also requested the Master to stay the enquiry. G

[9] Between the commencement of the ss 417/418 enquiry and General Beltings' application for removal of the applicants as liquidators the following events occurred:

(a)

Mawere and Mariemuthu were amongst those subpoenaed to testify at the enquiry. H

(b)

On 3 December 2009 and relying on evidence they believed was revealed during the enquiry of alleged improper and fraudulent activities that had occurred at AHI, and of the transfer of AHI assets at the instance of Mawere and Mariemuthu to companies which they either owned or controlled, the applicants as liquidators I ('applicants' unless the context indicates otherwise) brought an urgent ex parte application and obtained interim interdictory relief against African Heritage Advisory Services (Pty) Ltd, African Heritage Financial Solutions (Pty) Ltd, and African Heritage Properties (Pty) Ltd, from disposing of shares transferred to them by AHI under what was identified as the September Agreements, J

2012 (2) SA p494

Spilg J

A that had never been previously disclosed to the auditors nor reflected in AHI's audited annual financial statements. Although a notice of intention to oppose was served, no answering affidavits were filed. The rule was subsequently confirmed without opposition on 23 February 2009, which was shortly after General Beltings' application to the Master.

(c)

B On 25 January 2010 at the reconvened enquiry Mawere and Mariemuthu, in their capacity as directors of General Beltings, sought a stay of the enquiry pending an application it intended to launch for the removal of the applicants...