THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 325/08

PIETER ARNOLDUS CRONJE NO
First Appellant
ENVER MOHAMED MOTALA NO
Second Appellant
NEDBANK LIMITED
Third Appellant

and

HILLCREST VILLAGE (PTY) LTD
First Respondent
CRYSTAL COOPER DE LA PIERRE NO
Second Respondent

Neutral citation:
Cronje v Hillcrest Village (325/08) [2009] ZASCA 81 (17 July
2009)

Coram:
STREICHER ADP, LEWIS, VAN HEERDEN JJA, GRIESEL &
BOSIELO AJJA

Heard:
14 MAY 2009

Delivered:
17 JULY 2009

Summary:
Section 420 of Companies Act 61 of 1973 – application to avoid
dissolution of liquidated company - unlikelihood of avoidance
yielding a financial benefit to applicant, inaction and delay on the
part of applicant factors to be taken into account in exercise of
court’s discretion.

ORDER

On appeal from: High Court, Pretoria (Mavundla J sitting as court of
first instance)

The appeal is upheld with costs. In the case of the second and third
appellants such costs are to include the costs of two counsel.
The order by the court below is set aside and replaced with the
following order:
‘The application is dismissed with costs.’

JUDGMENT

STREICHER ADP (LEWIS, VAN HEERDEN JJA, GRIESEL & BOSIELO
AJJA concurring)

[1] This is an appeal against a judgment in the High Court, Pretoria in
terms of which Mavundla J, in an application by the first respondent,
Hillcrest Village (Pty) Ltd (‘Hillcrest’), and the second respondent, the
trustees of the CMT Trust (‘CMT’), declared the dissolution of a
company, Waterkloofspruit Projects (Pty) Ltd (in liquidation) (‘WKP’),
to have been void and ordered certain ancillary relief. The appeal is with
the leave of the court below.

[2] The respondents’ founding affidavit is only 11 pages long but after
receipt of the appellants’ answering affidavits they filed a replying

affidavit consisting of 131 pages containing new matter. The appellants
thereupon filed a supplementary answering affidavit dealing with the new
matter. The court below dismissed an argument by the appellants that it
should not have regard to new matter in the replying affidavit and
proceeded to deal with the matter on the basis also of such new matter.
However, it was either unaware of the existence of the supplementary
answering affidavit or chose to ignore it. Mavundla J stated in his
judgment: ‘Besides, the respondents, it would seem, never sought to file
further affidavits to deal with what they contend is now a new ground, ie
the fraud’ and later ‘I have taken note of the fact that the fifth, sixth and
seventh respondents did not seek leave of the Court to deal with what is
alleged to be new matters being raised in the replying affidavit.’
However, according to the respondents the appellants had been given
leave to deal with the new matter. Before us the matter was, therefore,
argued as if the replying affidavit formed part of the founding affidavit
and as if the answering affidavit and supplementary answering affidavit
constituted the answer to these founding affidavits. That is the sensible
way to deal with the matter. One can certainly not have regard to the new
matter in the replying affidavit and ignore the supplementary answering
affidavit.

[3] The Plascon Evans rule applies and the facts will be stated in
accordance with that rule. On 19 October 1994 WKP purchased Erf 1856
Waterkloof Ridge from the City Council of Pretoria (‘the City Council’).
The property was to be developed as part of an upmarket security village,
Waterkloof Boulevard, consisting of 113 residential stands and 107
cluster stands. In terms of the agreement of sale WKP was obliged to
create a nature park at a cost of not more than R2 158 000 on the
remainder of Erf 1856. At that stage the remainder of Erf 1856 comprised

‘29,5902 hectare of disturbed land’ within a natural valley formed by the
Waterkloofspruit which bisects the site. BOE Private Bank and Trust
Company Ltd (‘BOE’) guaranteed WKP’s obligation to create a nature
park. BOE also made available to WKP an amount of R14 200 000
secured by a mortgage bond over the property for purposes of funding a
turnkey development on the property.

[4] On 3 February 2000 a lease agreement was entered into between
the City Council and WKP which committed WKP, in addition to the
development of the park, to the long term maintenance of the park at an
initial rental amount of R5 000 per year. In terms of the lease agreement
the lessee was obliged to commence with the development of the park
within 60 days of signing of the lease agreement and to complete the park
within a 12-month period. WKP failed to do so. As a result the City
Council, on 13 October 2000, in terms of the guarantee referred to above,
claimed payment by BOE of an amount of R2 158 000.

[5] It became apparent that the work that had already been done in
respect of the project had deviated from the approved site and landscape
development plans resulting in substantial damage being effected to an
already seriously disturbed site. BOE thereupon undertook to complete
the project on behalf of WKP.

[6] WKP was entirely dependent on the funding provided by BOE to
complete the development and it had become clear prior to 2000 that it
was unable to meet its obligations vis-à-vis BOE, the City Council in
respect of rates and taxes, and other creditors. In consequence of WKP’s
financial constraints BOE, during 2000, advanced a further loan of
R10,8m to WKP secured by a mortgage bond, for purposes of

restructuring the development. In that year and at the request of Mr
Edward de la Pierre (‘De la Pierre’) who acted on behalf of WKP, BOE
mandated Pam Golding Properties to launch a marketing campaign in
respect of the stands in the development. BOE incurred all the costs of
this campaign. But although the campaign was driven with the assistance
of De la Pierre it failed, mainly because potential purchasers were
interested only in stands in respect of which transfer could not yet be
given because of problems with the sub-division and installation of
services. As a result BOE considered itself as not having any alternative
but to foreclose its mortgage bond. At about this time another creditor
applied for the liquidation of WKP. In an attempt to avoid the liquidation
De la Pierre was willing to conclude a sale agreement with one Da Silva,
on whom BOE pinned its hopes to undertake the completion of a
substantial portion of the development. Da Silva purchased the cluster
stands and undertook to pay to BOE the purchase price in respect of each
cluster stand purchased upon completion of building operations on the
relevant stand and the sale thereof to a third party. In terms of the Da
Silva agreement BOE undertook to provide services to the cluster stands
at its cost.

[7] The Da Silva agreement was signed by De la Pierre on 18 July
2000. Three days later, on 21 July 2000, WKP also gave a general power
of attorney to BOE in respect of the disposition of the remaining unsold
subdivisions of Erf 1856 and undertook not to interfere or in any way
participate in the marketing and selling of the properties. In terms of the
general power of attorney BOE undertook to effect payment of an amount
not exceeding R5,1m in reduction of any lawful and current debt due by
WKP to its sundry debtors. Pursuant to the general power of attorney
serious attempts were made to market the properties and BOE settled the

claims of various creditors of WKP involving an amount of
approximately R5m.

[8] BOE believed that with Da Silva’s involvement at least a
substantial portion of the project could be successfully completed.
However, subsequent to the conclusion of the agreement of sale, WKP
contended that De la Pierre had no authority to conclude the agreement
and refused to ratify it. By that time Da Silva had commenced with
construction. De la Pierre then claimed that the stands had a value which
BOE considered to be unrealistic and adopted an attitude which BOE
considered to be unreasonable, unreliable and uncooperative. In the
circumstances BOE considered itself not to have any option other than to
apply for the liquidation of WKP.

[9] On 14 February 2001 WKP was placed in liquidation and Mr
Cronje, the first appellant, and Mr Motala, the second appellant
(hereinafter jointly referred to as the liquidators), were appointed as
provisional liquidators. The liquidators applied to the Master for authority
in terms of s 386(2A) and (2B) of the Companies Act 61 of 1973 to sell
the immovable property of WKP by way of public auction ‘met
bekragtiging onmiddelik na afloop van die veiling’. In its request for
authority it stated that the amount owing by WKP to BOE as mortgagee
was R29 442 461.59, that it would not be possible to recover the amount
from the proceeds of the auction, that in addition to a capital loss BOE
would also have to write off approximately R400 000 interest per month
and that BOE would have to pay rates and levies of approximately
R180 000 per month to the Local Transitional Council. The liquidators
stated:

‘Die voorwaardes van die voorgenome verkoop van die onroerende eiendomme is
kortliks soos volg:
(‘n afskrif van die voorgenome Verkoopsvoorwaardes hierby aangeheg vir u meer
volledige verwysing)
Die eiendomme word elkeen apart opgeveil, en word voetstoots verkoop, elk
onder `n aparte koopkontrak.
10% van die verkoopprys in kontant op ondertekening van die
verkoopsvoorwaardes.
Die balans koopprys tesame met 16% rente per jaar, bereken vanaf datum van
veiling tot datum van oordrag in die naam van die koper, beide dae ingesluit, binne 30
dae vanaf veilingsdatum per bank of bouvereniging waarborg.
Die verkoping vind plaas met onmidelike bekragtiging na afloop van die
veiling, en is geen bekragtigingsperiode van krag nie.
. . .
Voor dat die individuele standplase opgeveil word, word dit in die vooruitsig
gestel dat die ontwikkeling as `n geheel opgeveil sal word, om sodoende te verseker
dat die maksimum voordeel vir die verbandhouer verkry sal word.’
The conditions of sale provided that the auctioneer could reject any bid
without giving a reason.

[10] The auction took place on 20 March 2001. Although it was well
attended no bidding interest was shown and there was no realistic
expectation of a selling price in respect of the stands which would be
remotely close to the outstanding balance owed to BOE at the time. As a
result BOE considered itself not to have any choice ‘but to buy in the
project as it was the only creditor’. It did so by offering a nominal amount
of R100 000 and that bid was accepted by the auctioneer obviously on
instruction of the provisional liquidators.

[11] Before the auction, on 6 March 2001, an agreement of settlement
was concluded between Gilboa Properties Ltd (‘Gilboa’), Hillcrest and

other debtors of WKP on the one hand and WKP and BOE on the other
hand. In terms of this agreement –
(i)
it was recorded that R5,2m was owed by these debtors to WKP and
that some of these debtors had bound themselves as sureties and co-
principal debtors to BOE in respect of the obligations of WKP to BOE in
terms of a loan by BOE to WKP;
(ii)
the debtors undertook, jointly and severally, to pay to WKP an
amount of R10m together with interest at the rate of 16,5 per cent per
annum;
(iii)
the debtors had to deliver share certificates in respect of 20 million
Gilboa shares together with share transfer forms as security in respect of
the obligations undertaken by them.
(iv)
the debtors waived any claims that they might have against WKP
and BOE.

[12] On 24 August 2001 the parties to the first settlement agreement and
the trustees of CMT, being De la Pierre, De la Pierre’s wife and one Jan
Boshoff entered into a second settlement agreement in terms of which it
was agreed that CMT would deliver share transfer forms in respect of the
Gilboa share certificates that had already been delivered, that the
liquidators could sell the shares on the Johannesburg Stock Exchange and
that the proceeds would be applied in reduction of the debt of R10m.
Because of ‘the fact that there was a minimal market for the shares’
Hillcrest borrowed R3m against security of a mortgage bond over its
property and paid the amount to WKP in reduction of the debt of R10m.
In terms of yet a further agreement of settlement (‘the third settlement
agreement’) concluded on 23 August 2002 the parties to the second
settlement agreement agreed that Hillcrest would transfer the immovable
property known as Gilboa House to BOE at a price equal to the amount

owing to BOE in terms of the mortgage bond over the property (being
R6,9m), that the Gilboa shares which had not been sold (20 775 000 less
600 000) would be redelivered to CMT and that, against transfer of the
property, CMT and the other parties would be absolved from their
obligation to pay the amount of R10m to WKP and from their obligations
to BOE in terms of any suretyships. Effect was given to this agreement.

[13] A first and final liquidation and distribution account was confirmed
by the Master on 13 December 2002 and WKP was dissolved on 25 June
2004. According to the liquidation and distribution account BOE, having
paid the other creditors, was the only creditor that proved a claim against
WKP. It proved a claim of R29 297 229,13 secured by a mortgage bond.
Its security realised only R100 000 (plus VAT) and an additional R720
000 (plus VAT) in respect of two stands separately auctioned which, after
deduction of deductible costs, entitled it as a secured creditor to a
dividend of R784 527,23 leaving it with a concurrent claim in an amount
of R28 512 701,90 in respect of which it received a dividend of
R3 619 804,73. The only other assets reflected are a cash balance of
R688 008,92, an amount of R82 210,34 refundable by SARS and an
amount of R4 209 812,22 payable by BOE. The latter amount is made up
as follows:
Proceeds of Gilboa shares
R   109 812,22
Proceeds of loan to Hillcrest
R3 000 000,00
Net value of the Gilboa House property
R1 100 000,00

[14] BOE suffered a loss of approximately R7m in respect of the
project. It recovered approximately R28,5m from the disposal of the
stands it purchased at the auction. In addition it credited its WKP account
with an amount of R4,1m in respect of the Gilboa House property which

was transferred to it as part payment of the debt of R10m and received a
dividend of approximately R4,4m from the liquidators. R4.1m is the
difference between R11m which De la Pierre claimed the value of the
property to have been and the R6.9m owed in terms of the mortgage bond
held by BOE over the property. The balance owing by WKP to BOE at
the time of the liquidation was approximately R29,3m to which should be
added R14,5m in respect of post liquidation interest and expenses.

[15] De la Pierre did not attend the auction and did not object to the
sale. But he became aware of articles in the Pretoria News to the effect
that banks which were repossessing properties bought these properties at
reduced prices, resold them later at a profit and did not pass the profits on
to the original owners. According to the newspaper the ‘country’s
banking adjudicator’ said that this kind of profiteering ‘flies in the face of
common law and the Code of Banking Practice’. He then started
investigating the matter and those investigations gave rise to the present
application by Hillcrest, of which De la Pierre is the sole director, as first
applicant and CMT as second applicant. In terms of the application the
applicants prayed for an order:
That the dissolution of WKP be declared void in terms of s 420 of
the Companies Act 61 of 1973.
That the liquidation and distribution account be re-opened.
That the Master of the High Court be ordered to appoint new
liquidators to wind up WKP.

[16] In their founding affidavit Hillcrest and CMT alleged that the sale
to BOE was void because, contrary to the provisions of s 82(1) of the
Insolvency Act 24 of 1936, the auction had not been advertised in the
Government Gazette as a result of which the protection afforded by

s 82(8) to a purchaser in good faith was not available to BOE because
BOE had acted mala fide. They alleged furthermore that in the event of
the auction sale being declared void Hillcrest would have a claim against
WKP, Cronje and BOE because of the transfer of Gilboa House to BOE.
CMT is alleged also to have an interest in the matter as cessionary of all
Gilboa’s rights ‘in and to all claims which Gilboa . . . may have against
BOE Bank Ltd . . . or any other third party, in respect of Gilboa’s rights
as shareholder in Waterkloofspruit Projects (Pty) Ltd’ in terms of a
cession dated 7 May 2001. The cession provides that the claims referred
to are in terms of the cession ‘not limited to any specific cause of action
and includes any claim or claims which emanate or might emanate from
or in respect of the liquidation of Waterkloofspruit Projects (Pty) Ltd
and/or any claims in respect of the Waterkloof Boulevard Project.’

[17] Section 420 of the Companies Act reads:
‘When a company has been dissolved, the Court may at any time on an application by
the liquidator of the company, or by any other person who appears to the Court to
have an interest, make an order, upon such terms as the Court thinks fit, declaring the
dissolution to have been void, and thereupon any proceedings may be taken against
the company as might have been taken if the company had not been dissolved.’
The court below held that Hillcrest and CMT as sureties in respect of the
indebtedness of WKP to BOE had an interest in the setting aside of the
dissolution of WKP. It held that CMT also had such an interest as a
cessionary of the rights of Gilboa, the sole shareholder of WKP.

[18] As sureties Hillcrest and CMT, in the ordinary course, would have
had an interest in the winding-up of WKP in that, upon payment of
WKP’s debt, they would have had a right of recourse against WKP.
However, they entered into agreements of settlement with BOE and WKP
in terms of which (i) they settled all claims which WKP and BOE had or

might have had against them and (ii) they waived any claims that they
might have had against WKP. As a result they no longer, as sureties, had
any interest in the winding up of WKP. As cessionary of the rights of
Gilboa, the sole shareholder of WKP, the only interest that CMT can have
in avoiding the dissolution of WKP can be its entitlement to a surplus
upon completion of the winding up.

[19] As indicated above the respondents contended in their founding
affidavit that the sale of the properties at the auction was invalid because
it had not been advertised in the Government Gazette as required by
s 82(1) of the Insolvency Act 24 of 1936. The section reads as follows:
‘82 Sale of property after second meeting and manner of sale
(1)
Subject to the provisions of sections eighty-three and ninety the trustee of an
insolvent estate shall, as soon as he is authorized to do so at the second meeting of the
creditors of that estate, sell all the property in that estate in such manner and upon
such conditions as the creditors may direct: . . . Provided that if the creditors have not
prior to the final closing of the second meeting of creditors of that estate given any
directions the trustee shall sell the property by public auction or public tender. A sale
by public auction or public tender shall be after notice in the Gazette and after such
other notices as the Master may direct and in the absence of directions from creditors
as to the conditions of sale, upon such conditions as the Master may direct.’

[20] In their replying affidavit the respondents alleged that BOE had
committed a series of frauds and that the conduct of Cronje and Motala is
inexplicable in the absence of them having colluded with BOE. The
properties had previously been sold to Da Silva for R30m and Cronje and
Motala colluded with BOE to ensure that they were sold to BOE for
R100 000. They allege furthermore that in terms of s 31 of the Insolvency
Act, in the event of the dissolution of WKP being set aside, Cronje,

Motala and Nedbank, the third respondent, as successor to BOE1 would
be liable to WKP for substantial amounts having regard to their collusive
dealings immediately prior to the liquidation.

[21] The court below referred to the fact that the properties had been
sold for R100 000 while they were clearly much more valuable and stated
that the allegations of fraud and collusion required to be investigated. The
court expressed the view that had these facts, as also the non-compliance
with the provisions of s 82(1) of the Insolvency Act, been brought to the
attention of the Master, he would probably not have confirmed the
liquidation and distribution account. For these reasons the court below
declared the dissolution of WKP void, ordered the re-opening of the
liquidation and distribution account, ordered the Master to appoint new
liquidators and ordered the appellants to pay the costs occasioned by their
opposition to the application.

[22] Section 82(1) of the Insolvency Act deals with the sale of property
after the second meeting of creditors and is not applicable to the auction
of WKP’s property. The auction sale was a sale authorised by the Master
in terms of s 386(2B) of the Companies Act before a general meeting of
WKP’s creditors had been convened. The court below therefore erred in
considering the section to be of application in respect of the auction sale.

[23] In terms of s 31(1) of the Insolvency Act which, in terms of s 340
of the Companies Act, applies mutatis mutandis to companies being
wound up and unable to pay their debts, a court may after the liquidation
of a company set aside any transaction entered into by the company

1 The rights and obligations of BOE were transferred to Nedbank Ltd in accordance with the provisions
of s 54 of the Banks Act 94 of 1990 with effect from 1 January 2003.

before the liquidation, whereby the company in collusion with another
person disposed of property belonging to the company in a manner which
had the effect of prejudicing the company’s creditors or of preferring one
of his creditors above another. Section 31(2) provides for the recovery of
the loss suffered by the company as a result of the collusive disposition
from the other person, for the imposition of a penalty payable by such
person and for forfeiture of the other person’s claim against the estate of
the company if such person is a creditor of the company. The section
deals with transactions by the liquidated company before its liquidation,
ie at the time when De la Pierre was in control and before Cronje and
Motala had been appointed as liquidators. There is therefore no merit in
the allegation that, in terms of the section, Cronje, Motala and Nedbank
would be liable to WKP for substantial amounts should the dissolution of
WKP be avoided.

[24] That several irregularities were committed in the liquidation of
WKP is clear. The Master authorised the sale of the individual stands
subject to the whole development being auctioned first to ensure that the
maximum benefit for the bondholder be obtained. I interpret that
authority to mean that the project as a whole could be auctioned and
thereafter the individual stands, whereupon the most advantageous offer
or offers could be accepted. None of the parties contended that the
Master’s authority should be interpreted differently. However, individual
stands were never offered for sale at the auction. According to Cronje it
became clear at the auction that ‘due inter alia to the failure by [WKP]
(controlled by De la Pierre) to comply with the provisions regarding
subdivision, the provisions regarding the development of the park . . . and
the generally incomplete and stagnant condition of the development as a
whole no parties were prepared to purchase individual erven.’ But

according to Adams, at the time Regional General Manager: Property
Finance of BOE, BOE’s purpose in holding the auction was to attract a
willing and able contractor/developer to take over the project. He said
that, based on BOE’s experience at the time, BOE realised that it would
not be legally possible nor financially viable to dispose of the stands
individually, and that there was no realistic prospect of a high enough bid
to settle the total outstanding debt of WKP. There may well, therefore,
never have been an intention to offer the individual stands for sale at the
auction. However that may be, the auction was not conducted in the
manner authorised by the Master.

[25] In terms of s 342 and s 391 of the Companies Act the assets of a
company being wound up must be applied in payment of the costs
incurred in the winding-up and of the claims of creditors and, unless the
company’s memorandum otherwise provides, any surplus assets available
must be distributed by the liquidators among the members according to
their rights and interests in the company. It follows that not only the
creditors but also the members of a company have an interest in the
proper winding-up of a company. See in this regard Van Zyl NO v
Commissioner for Inland Revenue 1997 (1) SA 883 (C) at 891C-E where
Hodes AJ said: ‘It should be remembered that a company in liquidation is
administered not only for the benefit of creditors, but that the liquidator is
obliged to take the interests of members into account. In terms of
s 342 (1) of the Companies Act, if there is a surplus after payment to
creditors, this goes to members. The interest of members in the proper
winding-up of the company is recognised in ss 360(1), 386(3)(a) and
387(1) of the Companies Act.’ See also Concorde Leasing Corporation
(Rhodesia) Ltd v Pringle-Wood NO & another 1975 (4) SA 231 (R) at
234 in fine to 235A where Beadle ACJ said that it is clear from the

authorities and a matter of common-sense that the liquidator in the
winding-up of a company owes a duty both to that company and to the
creditors. ‘He owes a duty to the company to see that its assets are
realised and its liabilities minimised to the best possible advantage of the
company and he owes a duty to the creditors to see that they suffer the
least loss and receive the most advantageous dividend.’

[26] In the liquidation application it was stated that the properties had a
value of R26,702m. People were interested in the stands as is evidenced
by the Da Silva agreement, enquiries made by one Rojahn before the sale,
and the sale of stands by BOE to Dotcom Trading 635 (Pty) Ltd shortly
after the auction. No bidding interest may have been shown at the auction
when the project as a whole was offered for sale but that did not prove
that there were no buyers who were interested in buying the properties.
The mere fact that the auction was well attended indicated that there were
people who were interested in the properties. The properties constituted
BOE’s security in respect of its claim of more than R29m against WKP.
It would therefore not have agreed to a sale of the properties to a third
party at a price substantially lower than the value (R26,702m) it had
placed on the properties. Fourie, the deponent to Nedbank’s answering
affidavit, himself stated that he did not dispute ‘that it would have been
obvious to potential bidders that [BOE] would not confirm any bid unless
a substantial amount could be derived from the proceeds of the auction
for purposes of settling at least part of [BOE’s] exposure.’ The fact that
no bidding interest was shown, therefore, did not indicate that the project
had virtually no value; all it indicated was that nobody was prepared to
pay an amount which was considered acceptable to BOE. In these
circumstances the offer of R100 000 by BOE should not have been
accepted. BOE was not entitled to preferential treatment as a buyer and an

offer which would not have been acceptable if made by another buyer
should not have been acceptable if made by BOE. The offer was
nevertheless accepted by the liquidators. In doing so they did not act in
the best interests of WKP. It should have been obvious to them that the
property as a unit was much more valuable than R100 000 and that a
much higher price could be obtained for it. However, it would seem that
they did not realise that they owed a duty to the company. Confirmation
that that was the case is to be found in the supplementary answering
affidavit deposed to by Cronje where he said: ‘BOE would remain the
preferent creditor and the largest creditor by far would determine what the
liquidators would or would not do.’

[27] Counsel for BOE submitted that it was ludicrous to suggest that
BOE paid R100 000 for the properties. According to him the purchase
consideration was R100 000 plus the waiver of BOE’s claim of R29m
against WKP. However, there is no evidence that BOE waived its claim.
On the contrary, it is clear that it did not do so. But although BOE paid
only R100 000 (plus VAT) for the properties, it in effect placed a value of
R100 000 on its security with the result that, in terms of the liquidation
and distribution account, it, in the event, received a dividend of
R784 527,23 in respect of its secured claim and R3 619 804,73 in respect
of the balance of its claim as a concurrent claim. Had it not purchased the
property it would have received (up to a maximum of R29m plus interest,
being its secured claim) the selling price of the properties plus the
dividend of R3 619 804,73 less the additional costs relating to the selling
of the properties. The additional costs would have included the costs
relating to the installation of services. The amount that it would have
received in these circumstances less the dividends BOE received plus the

R100 000 (plus VAT) purchase price paid thus, in effect, constitutes the
amount it cost BOE to acquire the properties.

[28] In terms of the first settlement agreement an amount of R10m was
payable by Hillcrest and other debtors to WKP. R3m was paid by
Hillcrest to WKP in reduction of the debt. In respect of the balance of
R7m payable by the debtors to WKP it was agreed that Hillcrest would
transfer the property known as Gilboa House to BOE at a price equal to
the amount owing to BOE in terms of BOE’s mortgage bond over the
property and that the remaining debt of R7m would thereby be
extinguished. The liquidators were parties to the agreement and by
agreeing as aforesaid they simply relinquished an asset, namely WKP’s
entitlement to R7m, in favour of BOE. Once again the liquidators did not
act in the best interests of the company. However, in calculating its loss
as a result of the project, Nedbank did credit its WKP account with
R4.1m being the difference between the R11m De la Pierre claimed the
value of the property to have been and the R6.9m owed in terms of the
mortgage bond held by BOE over the property.

[29] In the light of these irregularities I am satisfied that in the event of
the dissolution of WKP being avoided WKP may well have a claim
against the liquidators in respect of the dereliction of their duty to act in
the best interests of the company. The question then arises whether in
these circumstances the dissolution of WKP should have been declared
void by the court below.

[30] Section 420 confers a discretion on a court, on application by a
person who appears to the court to have an interest, to make an order,
upon such terms as the Court thinks fit, declaring the dissolution of a

company to have been void.  As stated above, the court below did not
have regard to the supplementary answering affidavits filed by the
appellants. It therefore, failed properly to apply its mind to the matter. It
follows that we may substitute our view as to how the court below should
have exercised its discretion, whether or not the discretion to be exercised
in terms of s 420 is a discretion in the wide or the narrow sense.2 In the
circumstances and as no argument was addressed to us as to the nature of
the discretion, I do not intend expressing any view as to whether it is a
discretion in the wide or narrow sense.

[31] The appellants submitted that the avoidance of WKP’s dissolution
would not benefit CMT as, considering BOE’s concurrent claim, there is
no prospect of a surplus being available for distribution to the members of
WKP. I agree that it would seem highly unlikely that CMT would be able
to prove that had these irregularities not been committed there would
have been a surplus available for distribution to the members of WKP. De
la Pierre used to be in control of WKP and knew what the market
conditions were like. On his version he was not even aware of the auction
but was under the impression, as a result of Deeds Office print-outs that
he had seen, that the properties had been sold for R100 000 each. He says
that it was only in about May 2004 that he ascertained from his attorneys
that there had been an auction. The appellants deny this version but if it
were true his disinterest in the winding-up proceedings is a clear
indication that he did not consider that there was any possibility of the
winding-up yielding a surplus for distribution to members. Moreover, De
la Pierre said that R100 000 per stand would have been well below
market value but would possibly have been acceptable in the

2 See the discussion in Bookworks (Pty) Ltd v Greater Johannesburg Tansitional Metropolitan Council
and Another 1999 (4) SA 799 (W) at 804H-808C.

circumstances. At that price the auction would have yielded a mere
R13,7m, some R15,5m less than the amount owing to BOE, and services
still had to be installed. BOE took over the project in order to minimise
its losses and was able to restrict such losses to approximately R7m.
There is no reason to believe that the liquidators would have been able to
do any better.

[32] De la Pierre contends that the Da Silva agreement proves that the
reasonable market value of the unsold stands, some six months prior to
the auction, was R30m, to which R8,4m should be added in respect of the
improvements erected by Da Silva on 14 of them; that BOE, Cronje and
Motala had fraudulently ensured that interested buyers would be under
the mistaken belief that, sold as a lot, BOE would not accept any bid
unless it was way above a reasonable market value; and that the intention
was to ‘torpedo’ the auction so as to ensure that ‘BOE would acquire the
lot at a ridiculously low price so as to continue with the Da Silva
agreement’.

[33] Da Silva had a builder’s lien over the improvements erected by him
and, therefore, for purposes of determining whether any surplus for
distribution to members could be achieved, the amount of R8,4m should
be left out of the reckoning. Furthermore, the Da Silva agreement does
not afford evidence that the stands could have been sold for R30m. First,
if the unsold stands in fact had a market value of R30m, De la Pierre
would never have allowed the liquidators to proceed with the sale of the
stands for R100 000 each as he allegedly thought they were doing.
Second, Da Silva had to take transfer of the stands within a period of 12
months, did not have to pay interest on the purchase price of the first 20
stands he took transfer of for a period of nine months, and, on the

subsequent stands he took transfer of, for a period of six months from
date of transfer. Third, payment of the purchase price in respect of the
stands had to be effected upon completion of building operations on the
stand and the sale thereof to a third party only. Fourth, BOE undertook
responsibility for the provision of services to the stands at its cost. As
regards the alleged fraud the appellants deny that they ensured that
interested buyers would be under the mistaken belief that sold as a lot,
BOE would not accept a bid unless it was way above a reasonable market
value. It is improbable that they would have done so but in any event it is
on the appellants’ version that the matter has to be decided.

[34] Counsel for CMT submitted that an interest relied upon in an
application for the avoidance of a dissolution in terms of s 420 need not
be one which is firmly established or highly likely to prevail. In this
regard he relied on Re Wood and Martin (Bricklaying Contractors) Ltd
[1971] 1 All ER 732 (Ch) at 736 in which Megarry J said in respect of the
similarly worded s 352 of the UK Companies Act 1948:
‘It does not, I think, have to be shown that the interest is one which is firmly
established or highly likely to prevail: provided it is not merely shadowy, I think it
suffices for the purpose of s 352.’
In the present case the chances of an avoidance of the dissolution of WKP
yielding any financial benefit to CMT seems to me to be remote. But,
even if they are such that it can be said that CMT has a financial interest
in the avoidance of the dissolution, the remoteness thereof is in my view a
factor to be taken into account in the exercise of the discretion vested in a
court to avoid or not avoid the dissolution.

[35] Other factors to be taken into account are the following. WKP was
placed in liquidation on 14 February 2001 and the auction took place on

20 March 2001. In terms of s 363 of the Companies Act the directors of
WKP were required to make out a statement as to the affairs of the
company and lodge copies thereof with the Master within 14 days of the
winding-up order, and in terms of s 364(1)(b) the Master should have
convened a meeting of members for the purpose of considering that
statement and nominating a person or persons for appointment as
liquidator or liquidators. The members could therefore have nominated a
person as liquidator and the person so nominated would have been
appointed by the Master unless he was disqualified from being nominated
or appointed as liquidator, or failed to give the security mentioned in
s 375(1), or was a person who in the opinion of the Master should not be
appointed as a liquidator of the company (s 370(1)). Cronje and Motala
were appointed as liquidators. They prepared a first and final liquidation
and distribution account which was confirmed by the Master on 13
December 2002. Confirmation by the Master could have taken place only
after the account had lain open for inspection as prescribed in s 408 and if
no objection had been lodged or an objection had been lodged but had
been withdrawn or had not been sustained by the Master or a court.
Thereafter the company was dissolved on 27 May 2004.

[36] Gilboa and not CMT was a member of WKP. It ceded all claims
that it could have against BOE or any other third party ‘in respect of [its]
rights as shareholders in Waterkloofspruit Projects (Pty) Ltd’ and not its
rights as a shareholder. It should have been aware of how the liquidators
had dealt with WKP’s property, it is not alleged that it was not so aware
and it could have done something about the matter if it did not approve.
De la Pierre alleges that he became aware that there had been an auction
only in 2004. Coming from the person who was in control of WKP up to
the time of its liquidation I find that hard to believe, especially in the light

of the fact that, in terms of the deed of cession he took cession of
Gilboa’s claims as a shareholder against WKP on 7 May 2001, less than
two months after the auction. However, if true, CMT, notwithstanding its
cession, must have been completely disinterested in the liquidation
process. In either event and having regard to Gilboa’s inaction and the
remote possibility of an avoidance of the dissolution yielding a surplus,
the dissolution should in my view not be avoided pursuant to an
application by CMT launched some five years after the auction, more
than three years after the confirmation of the liquidation and distribution
account and almost two years after the dissolution of WKP. See in this
regard Goodman v Suburban Estates Ltd (in liquidation) & others 1915
WLD 15 at 26 where Mason J said in respect of an application for the
avoidance of the dissolution of a company:
‘I [do not] think this extraordinary relief should be afforded to an applicant, who has
acquiesced in the action which he complains of, or has been guilty of laches in
invoking the assistance of the Court.’

[37] Section 408 of the Companies Act provides that the Master’s
confirmation of a liquidation and distribution account ‘shall have the
effect of a final judgment, save as against such person as may be
permitted by the Court to re-open the account after such confirmation but
before the liquidator commences with the distribution’. Because  the
confirmation has the effect of a final judgment an applicant for a
reopening of the account must show grounds for restitutio in integrum
such as justus error or dolus before a court will order the re-opening of
the account (see Kilroe-Daley v Barclays National Bank Ltd 1984 (4) SA
609 (A) at 626G-H). No case of justus error or dolus in respect of the
account has been made out by the respondents.

[38] For these reasons the court below should in the exercise of its
discretion have dismissed the application.

[39] The respondents in their affidavits and in the heads of argument
filed in this court made numerous allegations of fraud and collusion on
the part of the appellants. The allegations were made without spelling out
the factual basis thereof so as to enable a court properly to deal therewith
and before us counsel for the respondents was unable to give a coherent
and comprehensible exposition as to precisely what constituted the fraud.
Counsel for the appellants submitted that the respondents should in the
circumstances be ordered to pay the appellants’ costs on the attorney and
client scale. However, because it is the irregularities referred to above that
gave rise to the application I do not think that the appellants should be
awarded their costs on the attorney and client scale.

[40] The following order is made:
The appeal is upheld with costs. In the case of the second and third
appellants such costs are to include the costs of two counsel.
The order by the court below is set aside and replaced with the
following order:
‘The application is dismissed with costs.

_________________________
P E STREICHER
ACTING DEPUTY PRESIDENT

APPEARANCES:

For appellant:
M P van der Merwe (1st)

S du Toit SC (2nd)

T A L L Potgieter (2nd)

J G Wasserman SC; G D Wickins (3rd)

Instructed by:

Tintingers Inc, Pretoria (1st)

Symington & De Kok, Bloemfontein

Savage Jooste & Adams, Pretoria (2nd)

Naudes, Bloemfontein

Cliffe Dekker Hofmeyr (3rd)

c/o Weavind & Weavind, Pretoria

Webbers, Bloemfontein

For respondent:
D A Bregman SC

Instructed by:

Kobus Boshoff & Associates

c/o Van Rensburg Inc, Pretoria

E G Cooper Majiedt Inc, Bloemfontein

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
17 July 2009
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal.

* * *
P A CRONJE NO & OTHERS v HILLCREST VILLAGE (PTY) LTD &
ANOTHER

The appellants appealed against an order made in the High Court, Pretoria in terms
of which the High Court, after the liquidation of a company Waterkloofspruit
Projects (Pty) Ltd, declared the dissolution of the company void, ordered the re-
opening of the liquidation and distribution account and ordered the Master to
appoint new liquidators.

The company purchased Erf 1856 Waterkloof Ridge from the City Council of
Pretoria and proceeded with the development of a security village, Waterkloof
Boulevard, consisting of 113 residential stands and 107 cluster stands. However,
because of financial difficulties the company was liquidated before the completion
of the development but after some of the stands had been sold. The remainder of the
stands was offered for sale on an auction. When no other bids were received the
liquidators accepted a bid by BOE, the bondholder, and sold the property to BOE for
the nominal amount of R100 000.

At the time of the liquidation the balance owing by the company to BOE in terms of
the bond was approximately R29,3m and in its application for the liquidation of the
company BOE had stated that the value of the property was R26,702m. It would

have been obvious to potential purchasers that a sale at a price substantially lower
that the value of R26,7m would not be confirmed and that explains why no bids
exceeding R100 000 were received at the auction. The liquidation of the company
was thereafter finalised, a liquidation and distribution account was confirmed and
the company was dissolved. BOE had before the auction settled the company’s debts
and was the only creditor who proved a claim against the company.

Some five years after the auction, more than three years after the confirmation of the
liquidation and distribution account and almost two years after the dissolution of the
company the respondents applied for the dissolution to be avoided. The court had a
discretion to do so on an application by a person who appeared to have an interest.
The SCA held that the only interest that the respondents could have was the
entitlement of the second respondent, as cessionary of the rights of the sole
shareholder of the company, to a surplus upon completion of the winding-up of the
company.

The High Court referring to the respondents’ allegations that BOE had acted
fraudulently and that the conduct of the liquidators was inexplicable in the absence
of them having colluded with BOE stated that the allegations of fraud and collusion
required to be investigated and declared the dissolution to have been void.

The Supreme Court of Appeal held that the liquidators owed a duty to the company
to see to it that its assets were realised to the best possible advantage of the
company. It should have been obvious to them that the property was much more
valuable than R100 000 and that a much higher price could be obtained for it. In
these circumstances the offer of R100 000 by BOE should not have been accepted.
BOE was not entitled to preferential treatment as a buyer and an offer which would
not have been acceptable if made by another buyer should not have been acceptable
if made by BOE.

In the light of this irregularity and others the SCA was satisfied that in the event of
the dissolution of the company being avoided the company may well have a claim
against the liquidators in respect of the dereliction of their duty to act in the best
interests of the company.  However, the SCA considered the chances of an
avoidance of the dissolution of the company yielding any financial benefit to the
shareholder of the company to be remote and for this reason, as also the inaction of
the shareholder for several years held that the dissolution should not have been
avoided by the High Court.

For these reasons the SCA upheld the appeal and set aside the order by the High
Court.