REPORTABLE
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case Number  : 297 / 99
In the matter between
SUNNY SOUTH CANNERS (PTY) LIMITED
Appellant
and
XOLANI MBANGXA
First Respondent
MZIMTSHA VIZIA NKONKI
Second Respondent
JOHN EDWARDS STUART
WAYMARK NNO
Third Respondent
Composition of the Court :
HEFER ADCJ; OLIVIER, and STREICHER
JJA;  MELUNSKY and BRAND  AJJA
Date of hearing :
16 NOVEMBER 2000
Date of delivery :
28 NOVEMBER 2000
SUMMARY
Locus standi of the liquidators of a corporation to launch
liquidation proceedings against a debtor company; discretion
of the court to grant a liquidation order.
J U D G M E N T

PJJ OLIVIER
OLIVIER  JA
[1] The appellant is a company incorporated in 1993 and which
conducted business in the Eastern Cape as a pineapple canner until 15
December 1995 when it closed its doors never to operate again.
[2] The respondents are the joint liquidators of the Ciskei Agricultural
Corporation (“the CAC”) (in liquidation).   The CAC was a juristic person
created by statute, and was liquidated by Proclamation 248 of 1997 issued by
the Premier of the Province of the Eastern Cape with effect from 10 July 1997
(“the Proclamation”).
[3] In March 1999 the respondents launched an application against the
appellant in the Eastern Cape Division of the High Court for an order liquidating
it.   The application was opposed by the appellant.
[4] On 24 June 1999 Van Rensburg J, at the conclusion of a thorough
judgment, placed the appellant under provisional winding-up in the hands of the

Master.   On the extended return day, 12 August 1999, the rule nisi was made
absolute by Brauns AJ.
[5] On the same date, Brauns AJ also granted leave to the appellant to
appeal to this Court against the final liquidation order, but specifically also
issued the following orders:
“1
The appeal does not interrupt the liquidation.
The liquidators are authorised by the respondent to
realise its assets in the course of the liquidation.”
[6] The background to the relationship between the appellant and CAC
is relevant to virtually all the issues in this matter.   It is as follows:
(a)
The CAC was established by the former Ciskei
Government in 1983 with the object inter alia, of the
promotion and development of the agricultural
industry, in particular the production and sale of
pineapples in the area.
(b)
Prior to and during 1993 the CAC, in pursuance of
its objects, developed large scale commercial
pineapple farming operations know as Pineapple
Development Schemes in terms of which a number

of farms in the Peddie region of the Eastern Cape
Province
were
administered,
controlled
and
commercially developed by the CAC as a unit in the
cyclical planting and reaping of pineapples.
(c)
During 1993 CAC lost the main purchasers of its
pineapples.  If the CAC had to cease its commercial
pineapple growing and marketing activities, it would
have resulted in large scale job losses in the area,
and the pineapple industry in the area would have
suffered irreparable harm.   It would also mean that
the Ciskei Government would have had to fund the
deficit of the CAC, at that time R 14 050 000,00, if it
wished to ensure the survival of the CAC.
(d)
In 1993 the appellant company was launched and
negotiations were concluded between various parties
involved to ensure the continued existence on a long
term basis of the CAC’s pineapple development
scheme by securing a market for the CAC’s
pineapple crop.
(e)
In the light of the negotiations, the following
agreements, relevant to this matter, were entered
into:
(1)
A Fruit Supply Agreement between the

CAC and the appellant, in terms of
which the former would sell and supply
the appellant with at least
30 000 tons of pineapples per year, for
a period of five years, at an agreed
price.
(2)
An Agreement of Loan between the
CAC and the appellant in terms of
which the CAC lent and advanced an
amount of R 3 100 000,00 to the
appellant, for the purpose of providing
operating capital to finance the
production
of
canned
fruit
and
extracted juices by the appellant.
(3)
A guarantee by the CAC in favour of
Appletiser South Africa (Pty) Ltd
(“Appletiser”) for the due performance
by the appellant of its obligations in
terms of a contract of sale whereby it
purchased a cannery from Appletiser.
(4)
A guarantee by the Ciskei Government
in favour of the  Development Bank of
South Africa for the repayment of a

loan made by the bank to the CAC in
order to facilitate the loan mentioned in
paragraph 2 above.
[7] In its application for the liquidation of the appellant, the liquidators of
the CAC relied on three claims, all originating from the aforesaid agreements,
and breaches thereof by the appellant.
[8] The first claim is based on the loan agreement.   The liquidators
allege that the amount of R 3 100 000,00 was advanced by the CAC to the
appellant as follows:
On 24 January 1994
R 1 000 000,00
On 8 March 1994
R 2 100 000,00
They alleged that, due to a failure by the appellant to honour the terms of the
agreement, the full amount of the loan together with interest thereon, became
due and payable.   This amount stood at R 6 100 074,00 on 31 March 1996.
[9] The second claim is based on the Fruit Supply Agreement.   The
liquidators alleged that during the period March to October 1994 CAC supplied
pineapples to the appellant in accordance with the provisions of the said

agreement and at a price, calculated in accordance therewith, of R 1 600
000,00.   As the appellant was unable to pay this amount, a further agreement
was entered into between the CAC and the appellant in October / November
1994, in terms whereof the said debt was converted into a loan repayable by the
appellant to the CAC on demand.   Despite due demand on 5 August 1998, the
appellant failed to pay the said amount together with the agreed interest thereon
at the rate of 14% per year from 31 March 1996.
[10] The third claim is likewise based on the Fruit Supply Agreement.
The allegation is that the CAC continued to supply pineapples to the appellant
during the period September to November 1995 in accordance with the
provisions of the said contract.   The purchase price, calculated in terms of the
agreement, so it is alleged, amounts to R 789 178,93, which amount is due and
payable.
[11] The liquidators thus averred that the appellant was indebted to the
CAC as at 31 August 1998 in the sum of R 11 448 575,55, i e the amounts set

out above together with interest thereon.
[12] In their application for the winding-up of the appellant, the liquidators
relied on the following grounds, viz
12.1
that the appellant had suspended its business as
contemplated in section 344 (c) of the Companies Act 61
of 73 for a period exceeding one year;
12.2
more than 75% of the appellant’s issued share capital had
been lost and become useless for its business within the
meaning of section 344 (e) of the Companies Act;
12.3
the appellant is unable to pay its debts as envisaged in
section 345 read with section 344 (f) of the Companies Act;
12.4
it is just and equitable within the meaning of section 344 (h)
of the Companies Act that the appellant be wound up.
[13] The appellant, in its opposing affidavit
13.1
admitted that it had suspended its business operations for
a period exceeding one year, but alleged that such
suspension was caused by a breach of contract by the
CAC;
13.2
disputed that more than 75% of its issued share capital had
been lost and become useless for its business, alternatively

such loss had been  caused by the CAC’s breach of
contract;
13.3
denied that it was unable to pay its debts.   It alleged that
because the CAC breached its contract with the appellant,
the appellant is not obliged to make any payment
whatsoever to the liquidators.   Furthermore, it averred, it
had a counterclaim for damages against the CAC (in
liquidation) and the Government of the Republic of South
Africa as a consequence of the said breach of contract,
vastly exceeding in value the claims by the liquidators.   It
also put forward that at the very least it was entitled to a
stay of the liquidation proceedings until such time as its
claims had been adjudicated upon.
13.4
disputed that it will be just and equitable that the appellant
be wound up.
[14] The allegations as to the breach of contract by the CAC, relied upon
by the appellant, can be summarised as follows : The CAC was not able to
sustain a supply of pineapples in accordance with the Fruit Supply Agreement.
This was due mainly to its failure to apply such crop husbandry practices on its
pineapple farms as are generally accepted, resulting in an unacceptable fruit

mix with regard to quality, sizes and juice content.    No fertiliser was applied to
the crop and weeds and grass were encroaching on the pineapples.   It also
failed to plant new and additional pineapples to provide for future supply to the
appellant in accordance with the terms of the agreement.   As a result, it
delivered pineapples of unacceptable quality and grades, and failed or refused
to deliver during the years ended 1994 /1995 the minimum quantity of 30 000
tons of pineapples.   Consequently, the appellant cancelled the Fruit Supply
Agreement on 30 November 1995, and had to close its factory on 15 December
1995.
[15] In July 1996 the appellant instituted action in the Ciskei Provincial
Division against the CAC as first defendant, the Government of the Eastern
Cape Province as second defendant (against whom the action was not
proceeded with), and the Government of the Republic of South Africa as the
third defendant (“the Ciskei case”).   As against the CAC, the appellant alleged
the breach of the Fruit Supply Agreement mentioned above, averred that it had

suffered damage in the amount of R 105 011 000,00 as a consequence thereof,
and claimed the payment of the said sum as damages.
[16] As against the Government of the Republic of South Africa, the appellant
averred that a tacit agreement came into existence between itself and the
Government of the Republic of Ciskei during or about October 1993 in terms of
which the latter undertook that during the subsistence of the Fruit Supply
Agreement it would provide the CAC annually with sufficient funds to enable it
to meet its contractual obligations towards the appellant in terms of the said
agreement.   According to the provisions of section 239 (3) of the Constitution
of the Republic of South Africa, Act 200 of 1993 (“the interim Constitution”) the
Government of the RSA assumed the debts and liabilities of the Government of
the Ciskei, including those arising out of the alleged tacit agreement.
Thereafter the said agreement was breached, in that the Government of the RSA
failed to provide the CAC with sufficient funds to enable it to fulfil its contractual
obligations towards the appellant.  The CAC’s breach of contract against the

appellant, so it was averred, was a direct and foreseeable result of the
Government’s breach of the tacit contract.   As a consequence, the appellant
suffered damage in the amount of R 105 011 000,00.   In the result, payment
of said sum was claimed, in solidum, from the CAC and the RSA Government.
[17] After the liquidation of the CAC the liquidators in their official
capacities as such, were substituted as plaintiffs in the action.   The liquidators
opposed the action, delivering a plea in which, in essence, the breach of
contract on the part of the CAC was denied.   This plea was served and filed of
record on 16 September 1998.   It will be remembered that the application by
the liquidators to have the appellant liquidated was launched early in March
1999, i e approximately 5½ months after they had delivered their plea in the
appellant’s action against them.   The juxtaposition of the action and the
application gave rise to some of the major disputes in this appeal, as will appear
from what follows hereafter.
[18] Before I deal with the grounds advanced by the liquidators for the

winding-up of the appellant, a preliminary point taken by the latter must be
considered.   The substance of the objection is that the application was fatally
defective in that the liquidators failed to allege that they had the necessary
authority, granted by the creditors of the CAC, or that they were acting on
directions of the Master, in bringing the application.
[19] The liquidators, in response, submitted firstly, that on a proper
interpretation, the provisions of the Proclamation authorised the liquidators to
bring the application and, alternatively, that they were as far as the appellant
is concerned entitled to launch the winding-up proceedings without the authority
given by the creditors or by the Master.
[20] I will consider the relevant provisions of the Proclamation first.   The
point of departure must be that the CAC was not a company incorporated under
the Companies Act.   It was a unique entity, created by statute and “dissolved”
by the Proclamation.   The correct approach is that the provisions of the
Companies Act are not applicable, unless incorporated by the Proclamation.

[21] In the law relating to companies, the requirement that liquidators in
order to litigate, must have a resolution of creditors to that effect, or directions
by the Master, arises from section 386 (3) (a) which provides that
“(3)
The liquidator of a company -
(a)
in a winding-up by the Court, with the
authority granted by meetings of
creditors and members or contributories
or on the directions of the Master given
under section 387; ... shall have the
powers mentioned in subsection (4).”
Section 386 (4) (a) reads as follows:
“(4)
The powers referred to in subsection (3) are -
(a)
to bring or defend in the name and on
behalf of the company any action or
other legal proceedings of a civil nature,
...”
[22] Were these provisions made applicable to the liquidators of the CAC
(in liquidation) by the Proclamation?   The Proclamation provides in paragraph
(c) (v) that

“ ... the liquidators shall exercise, mutatis mutandis, the same
powers as those mentioned in section 386 of the Companies
Act, including those conferred under the Insolvency Act, 1936 ...
on like terms to those mentioned in section 386 (4) (g) of the said
Act  :  Provided that the liquidators may dispose of the assets of
the Corporation in a manner contemplated in section 386 (4) (h)
of that Act without the consent of the Master or body of creditors
if they deem it necessary in the interests of the Corporation.”
[23] It follows, so the appellant’s argument proceeded, that the
requirement of authorisation by the creditors or the Master spelled out in the
Companies Act was incorporated by paragraph (c) (v) of the Proclamation.
The matter is, however, not as simple as it appears to be.
[24] Had paragraph (c) (v) of the Proclamation stood alone, there might
have been some substance in the appellant’s argument.   But the Proclamation
does not end at paragraph (c) (v).   Paragraph (f) provides that
“ ... the powers, terms, conditions and procedures set out in the
Annexure hereto shall apply to the dissolution of CAC.”  (My
emphasis)
[25] Paragraph 2 of the Annexure reads as follows:

“The following general provisions shall apply in relation to the
dissolution of the Corporation:
2.1
The liquidators are authorised to engage the services
of attorneys and / or counsel and / or shorthand writers
for the purpose of -
(i)
taking any legal actions that may be considered
necessary in the interest of the estate;
(ii)
instituting or defending any action in respect of any
matter affecting the estate in any court of law;
(iii)
instituting an enquiry into the affairs of the estate, and
/ or any matter relating thereto.”
[26] Although paragraph 2 of the Annexure prima facie relates only to
the employment of attorneys and counsel etc, it also, by necessary implication,
authorises the taking of legal action and the institution of  such action, as
provided for in the paragraph.   It follows, as was correctly conceded by
counsel for the appellant, that paragraph 2.1 of the Annexure authorises the
liquidators to take legal action and to institute
proceedings without any further authorisation by creditors or the Master.
[27] But there seems to be a conflict, therefore, between paragraphs

(c) (v) of the Proclamation itself and 2.1 of the Annexure.   The conflict cannot
be resolved so as to give full force and effect to both provisions.   Counsel for
the appellant submitted that paragraph 2.1 of the Annexure is subject to
paragraph (c) (v) of the Proclamation.   I do not agree  :  on a proper
interpretation of both provisions and the Proclamation in its entirety the opposite
is true.   Paragraph (c) (v) is the general provision;  paragraph 2.1 of the
Annexure the special.   By applying the maxim generalia specialibus non
derogant to this case (see S v Hattingh 1978 (2) SA 826 (A) at 829 A - D) one
must conclude that no authority from creditors or the Master was required for
the institution of the liquidation application, because such authority was given
in paragraph 2.1 of the Annexure.
[28] The appellant’s point in limine pertaining to the alleged lack of
authority on the part of the liquidators cannot be upheld.
The exercise of the discretion by the court a quo to grant a
liquidation order.

[29] The court a quo found, on the facts as they crystallised in the various
affidavits and annexures, that
(a)
the appellant had suspended its business as
envisaged by section 344 (c) of the Companies Act,
and that such suspension was indicative of an
inability and a lack of intention on the part of the
appellant to resume its business;
(b)
it is probable that 75% of the issued share capital of
the appellant had been lost, and if the appellant’s
claim for damages against the CAC (in liquidation)
and the Government is not taken into consideration,
it is both factually and commercially insolvent;
(c)
as at 31 August 1998 the appellant owed the CAC R
11 448 575,55.   There is a further claim against the
appellant for R 801 651,76.   The appellant also
failed to comply with the demand to pay its debts
served by the liquidators on it on 5 August 1998 in
terms of section 345 (1) (a) of the Companies Act.
The appellant, if its claim for damages aforesaid is
not taken into account, is factually hopelessly
insolvent;  it is by virtue of section 345 (1) (a) of the

Companies Act also deemed to be insolvent;
(d)
it is just and equitable that the appellant be wound-up
in the hands of the Master of the Supreme Court
because it has not traded for more than three years;
there is little or no prospect of the appellant resuming
its business in the future;   it is in parlous financial
circumstances and its plant and equipment are
deteriorating all the time.
[30] The court found that there were, therefore, ample grounds for the
liquidation of the appellant.   This finding was not challenged in this Court.
[31] The appellant’s case is simply that, notwithstanding the factual
findings made by the court a quo, the court still had an overriding discretion
under section 344 of the Companies Act, not to grant a winding-up order.  This
argument was raised and debated in the court a quo, but as far as the appellant
is concerned, with no success.   It remains the main attack on the court a quo
before us.
[32] On behalf of the appellant it is argued that the court a quo erred in

the following respects:
[32.1]
It failed to accord proper weight to the breach by the
CAC of the Fruit Supply Agreement, and in
particular its failure to supply the agreed quantities
of pineapples to the appellant, which caused the
appellant’s financial difficulties;
[32.2]
it failed to accord proper weight to the CAC’s
conduct of the litigation instituted by the appellant
against the CAC and also, in that context, the
launching of the liquidation proceedings, which is
described by the appellant as an abuse of the
process of the court;
[32.3]
it failed to properly take into account the claim of the
appellant against the liquidators and the RSA
Government.   Had that been done, so it was argued,
the court would not have been able to find that the
liquidation of the appellant was just and equitable.
I will deal with these points of criticism seriatim.
[33] The failure by the CAC to supply pineapples followed the appellant’s
failure to pay for previous supplies.   This in turn was the result of the

appellant (even on its own version) being under-capitalised from the very start
of its existence.   The under-capitalisation which led to endemic cash flow
problems resulted in the Loan Agreement in the amount of
R3 100 00,00;  the conversion of the appellant’s debt of R 1 600 00,00 for
pineapples supplied by the CAC during March to October 1994 to a loan, and
the outstanding debt of R 789 178,93 for pineapples supplied during September
to November 1995.   The court a quo took all of these factors into account in
deciding the issue in favour of the liquidator.   I cannot fault its conclusion.
[34] As far as the conduct of the litigation and the abuse of the court’s
proceedings are concerned, it was argued by the appellant, with reference to
the affidavits before the court a quo, that the CAC and the liquidators had
unduly and deliberately delayed the finalisation of the appellant’s action against
the CAC and the RSA Government.   The action was instituted in July 1996.
After many delays, according to the appellant, caused by the CAC and the
liquidators, a plea on behalf of the CAC was delivered on 15 September 1998.

A trial date was then arranged.   Only then was the application for liquidation
launched.   This shows, so the appellant argues, that the purpose of the
liquidation proceedings was only to prevent the appellant’s action against the
liquidators and the RSA Government from proceeding to trial in the ordinary
course.   The bringing of the application for liquidation, so it was submitted, was
mala fide and an abuse of the process of the court.
[35] On behalf of the liquidators it was pointed out that the reasons for
delays in the finalisation were fully explained in the replying affidavit.    It deals
inter alia with changes of attorneys and advocates.
[36] For the purposes of this judgment it is not necessary to set out the
reasons for the delays in detail.   Suffice it to say that the appellant has not
asked leave to reply and gainsay the liquidator’s explanations.   Nor did it, in the
heads of argument, argue that the explanations were untrue or that the changes
of the legal team employed by the CAC and the liquidators were  unreasonable,
unjustified or frivolous.   It must also be taken into account that the CAC itself

was in a parlous financial position.   What is more, the appellant was the
dominus litis and could have prevented any undue delay by any of the
defendants in the action.   In the result, one cannot reasonably find that the
delays amounted to an abuse of the process of the court or that they evince an
improper motive.
[37] The institution of the liquidation proceedings after a trial date in the
action had been obtained, is more worrisome.   Reference was made by
counsel to a number of decisions dealing with similar or comparable cases.  But
in the end the question is a factual one : was the creditor who brought the
liquidation application motivated by an improper motive?
[38] The court a quo held on the facts that the liquidators were not
motivated by an improper motive.   I agree.   The liquidators had a claim
exceeding R 11 million against the appellant which could not bona fide be
disputed.   The appellant had closed its business three years earlier.   It had
disposed of its moveable assets.   Its only asset was a disputed claim against the

liquidators and the RSA Government.   There was no reason why it would
proceed with the action for damages against the CAC, which had already been
placed in liquidation.   If the appellant were placed in liquidation, its liquidators
could proceed with the action, if so advised.   Liquidating the appellant cannot
deprive the creditors of the appellant of any rights which they enjoyed prior to
its liquidation.   In the result, I fail to see how one can say that the liquidators
intended to stifle the appellant’s claim or that they acted mala fide or abused the
process of the court.
[39] I finally turn to the complaint that the court a quo had not given
proper weight to the claim for damages instituted by the appellant against the
CAC and the RSA Government.   The argument is that if the claim is successful,
the appellant will be solvent and able to pay its debts, including the claims of the
liquidators.   Consequently, so it was argued, the liquidation order should not
have been granted; alternatively, the application should have been postponed
until the action for damages had been finalised.

[40] If the claim against the liquidators is successful, it will have little
effect on the solvency of the appellant.   The dividend it will receive from the
liquidators will fall far short of the liquidators’ claims against the appellant.  Had
this been the only action, it was, realistically speaking, not a factor to be taken
into account  - especially if regard is had to the fact that the appellant’s
liquidators could, if so advised, still proceed with the action against the
respondents.
[41] The only claim which can have a material effect on the appellant’s
solvency, is that against the RSA Government.   The existence of that claim does
not, in my view, stand in the way of winding up the appellant.   As stated before,
the liquidation of the appellant does not affect the claim.   If successful, the
appellant’s members and creditors will enjoy every benefit and advantage to
which they would have been entitled had the appellant not been liquidated.   The
alleged existence of the claim is, therefore, at best for the appellant, a neutral
factor.

[42] I am therefore not satisfied that the court a quo exercised its
discretion improperly.
[43] In the result the appeal fails with costs, including the costs of two
counsel.
P J J OLIVIER  JA
CONCURRING  :
HEFER  ADCJ
STREICHER  JA
MELUNSKY  AJA
BRAND  AJA