Ward and Another v Smit and Others: In re Gurr v Zambia Airways Corporation Ltd

• Jurisdiction: South Africa
• Judge: Mahomed CJ, Eksteen JA, Zulman JA, Streicher JA
• Judgment Date: 23 March 1998
• Citation: 1998 (3) SA 175 (SCA)
• Docket Number: 51/96
• Hearing Date: 16 March 1998
• Counsel: JM Suttner (with him AE Bham) for the appellants AP Joubert (with him HH Steyn) for the respondents
• Court: Supreme Court of Appeal

Scott JA:

Zambia Airways Corporation Ltd ('the company') was incorporated in Zambia in February 1980 and A thereafter carried on business as the country's national airline. The company's aircraft flew to and from some 31 countries including South Africa where it established offices in Johannesburg. As an 'external company' within the meaning of s 1 of the Companies Act 61 of 1973 ('the Act') it was obliged in terms of s 322 of the Act to B register as such and on 11 March 1991 was issued with a certificate of registration by the Registrar of Companies. The company's financial position deteriorated and on 4 December 1994 at Lusaka, Zambia, its shareholder, acting in terms of the Companies Act of Zambia, resolved that the company be voluntarily C wound-up with immediate effect. On 9 December 1994 and by virtue of a further resolution the two appellants were appointed as joint liquidators. On 31 January 1995 the second respondent, who was employed by the company as a sales manager in Johannesburg and who had a claim against it for 'severance pay', launched an D application in the Witwatersrand Local Division for the compulsory winding-up of the company. The application was founded on s 344(g) of the Act (which I shall consider in more detail later in this judgment) and contained a full disclosure of the voluntary winding-up of the company in Zambia and the appointment of the appellants as joint liquidators. A provisional winding-up order was granted on 1 February 1995 which in the absence of E opposition was made final on 28 February 1995. The first respondent was appointed provisional liquidator on 9 February 1995 and liquidator on 5 June 1995. The company has substantial assets in this country, including immovable property, and upon his appointment as provisional liquidator the first respondent immediately set F about winding up the company's South African estate. The first meeting of creditors was held on 16 May 1995 and the second on 19 July 1995. According to the first liquidation and distribution account prepared by the first respondent claims of local creditors proved at the second meeting amounted to R2 009 858,74 (of which R2 G 188,68 was the subject of secured or preferent claims) while the amount available for distribution was stated to be R706 046,29.

Six months after the granting of the provisional winding-up order in South Africa and on 2 August 1995 the appellants instituted motion proceedings in which they sought (stated briefly) an order: H

(i)

recognising their appointment as liquidators of the company on terms set out in the notice of motion, including the provision of security;

(ii)

declaring that the appellants be empowered to administer the South African estate of the company in accordance with the terms of the Insolvency Act 24 of 1936, read with the Companies Act, subject to certain specified qualifications; I

(iii)

authorising the appellants to transfer any surplus assets or funds from the Republic of South Africa with the consent of the Master;

(iv)

setting aside the provisional and final orders of liquidation of the company granted by the Court in South Africa as well as the first respondent's appointment as liquidator, and J

Scott JA

(v)

directing the first respondent to hand over all the assets of the company to the appellants and to A account to the appellants for his administration of the South African estate of the company.

The Object of Seeking the Order Was Stated in the Supporting Affidavit to be 'To Enable (The Appellants) to Collect the South African Assets, Reduce Them to Cash and Administer the Estate in South Africa So as to Enable an B Expeditious and Fair Distribution of Assets to the World-Wide Creditors of the Company' as Opposed to Using the Local Assets 'Exclusively to Settle the Claims of South African Based Creditors'.

The granting of the relief claimed was opposed by the first respondent and the matter was heard in the Witwatersrand Local Division by Levy AJ, who, apart from ordering that the appellants be 'recognised as foreign C liquidators', dismissed the appellants' claims. The appellants were ordered to pay three-quarters of the first respondent's costs and the latter was ordered to pay one-quarter of the former's costs. With the leave of the Court a quo the appellants appeal to this Court. There is no cross-appeal. D

The appointment of a liquidator to an external company in the country of its incorporation and the authority conferred by foreign legislation on the liquidator to deal with the assets of that company have no extra-territorial application. Such a liquidator, until he or she is recognised by a South African Court, will accordingly have no E power to deal with assets of the company situated in this country, regardless of whether those assets are movable or immovable; nor will creditors be precluded from attaching such assets and proceeding to execution. When an external company is being wound up in the country of its incorporation a competent South African Court will, however, on application and in the exercise of its discretion, grant an order...