SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 901/2017
In the matter between:

GCC ENGINEERING (PTY) LTD
FIRST APPELLANT

GERT LOUWRENS STEYN DE
WET NO

SECOND APPELLANT

FRANS LANGFORD NO
THIRD APPELLANT

KGASHANE CHRISTOPHER
MONYELA NO                                                FOURTH APPELLANT

ECSPONENT INVESTMENT
HOLDINGS (PTY) LTD                                      FIFTH APPELLANT

MASTER OF THE HIGH COURT                    SIXTH APPELLANT

and

LAWRENCE MAROOS

FIRST RESPONDENT

ZETABOA TRADING

SECOND RESPONDENT

ALL OTHER                    THIRD TO SIXTY-FIRST RESPONDENT
APPLICANTS AS SET
OUT IN THE NOTICE
OF MOTION IN THE
MAIN APPLICATION

GCC ENGINEERING (PTY) LTD                             SIXTY SECOND
RESPONDENT

MAHOMED YASEEN CAMISA NO
SIXTY
THIRD
RESPONDENT

THE COMPANIES AND                  SIXTY FOURTH RESPONDENT
INTELLECTUAL
PROPERTY COMMISION

Neutral citation: GCC Engineering & others v Lawrence Maroos & others,
(901/2017) [2018] ZASCA 178 (3 December 2018)

Coram:     Cachalia, Seriti, Molemela, and Schippers JJA and Mothle AJA

Heard:      16 November 2018

Delivered: 3 December 2018

Summary:
Interpretation of s 131(6) of the Companies Act 71 of 2008 -
application for business rescue proceedings does not terminate the office of
provisional liquidators nor does it result in the assets and management of the
company in liquidation re-vesting in the directors of the company in
provisional liquidation.

________

ORDER

___
On appeal from: Gauteng Division of the High Court, Pretoria (Fabricius
J sitting as court of first instance):
The appeal is upheld.
The first and second respondents are ordered to pay the costs of this
appeal on an attorney and client scale including the costs of two counsel
where so employed, jointly and severally, the one paying the other to be
absolved.
Paragraphs 2 to 6 of the order of the court a quo are set aside and
substituted with the following:
‘(a) The application is dismissed.
(b) The first and second applicants are ordered to pay the costs of the
application, and the costs of the counter-application, jointly and severally,
the one paying the other to be absolved.’

___
JUDGMENT

___
Seriti JA (Cachalia, Molemela and Schippers JJA and Mothle AJA):

[1] This is an appeal against the judgment and some of the orders
granted by the Gauteng Division of the High Court, Pretoria (per Fabricius
J) on 15 June 2017 at the instance of the first, second and third to sixty first
respondents herein.

[2] The first to fourth appellants were granted leave to appeal to this
court by the court a quo. The fifth and sixth appellants were not parties to
the proceedings in the court a quo. After the judgment of the court a quo,

the fifth respondent launched an application to intervene as a respondent in
the court a quo and as a co-appellant. On 2 August 2017 the court a quo
granted the fifth appellant leave to intervene and leave to appeal. The sixth
appellant was granted leave to intervene in the appeal by this court.

[3] The relevant parts of the order made by the court a quo read as
follows:
‘2.
Mr E Naude is appointed as manager of the First Respondent with the powers
and capacity of a director of First Respondent, to manage its business affairs from date
hereof until date of finalization of the business rescue application for the business
rescue of First Respondent, currently pending.
3.
The said Mr E Naude is to provide security to the satisfaction of the Master of
the High court for the proper performance of his duties.
4.
He may not dispose of any assets of First Respondent without the written
consent of this Court.
5.
Mr E Naude is ordered to provide the Court hearing the business rescue
application with a full report of his management of the company, and with specific
detail as to the possibility of the First Respondent being rescued as a result of business
rescue proceedings.
6.
The costs of this application shall be costs in the business rescue proceedings.’

Factual background
[4] The first respondent was the director and the sole shareholder of the
first appellant. The first appellant was established in 1994, initially as a
close corporation and during 2012 it was converted into a company with
limited liability. In 2013 the company experienced serious financial
problems. In 2016 after realising that the business was ailing and would not
survive, due to its financial difficulties, a business rescue application was
launched and an order was granted. The first appellant herein was
subsequently placed in business rescue and Mr Gerhard Vosloo was
appointed as the provisional business rescue practitioner.

[5] On 6 April 2017 Mr Vosloo launched an application wherein he
sought an order that the business rescue proceedings with regard to the first
appellant be terminated and that the first appellant be placed under
liquidation in terms of s 141(2)(a)(ii) of the Companies Act 71 of 2008 (the
Act). In his founding affidavit in support of his application, Mr Vosloo
stated that the proceedings should be terminated as there was no longer a
reasonable prospect that the first respondent would be rescued. On 3 May
2017 an order placing the first appellant under a provisional winding-up
order in the hands of the Master of the High Court was granted. On 15 May
2017 the Master appointed the provisional joint liquidators, who after their
powers were extended, as contemplated in s 386(4)(f) of the Companies
Act 61 of 1973 (the 1973 Act), suspended the company’s business for
operational reasons on 18 May 2017.

[6] On 30 May 2017 the first respondent served and filed an urgent
application. In the said proceedings he sought an order and the relevant
parts thereof read as follows:
‘2 That Mr Etienne Naude be appointed as manager of the first respondent, with full
powers and capacity of a board of directors of a company, to manage the first
respondent from date hereof until date of finalization of a business rescue application
for the business rescue of the first respondent currently pending.
3. That Mr Etienne Naude be ordered to provide the court hearing the business rescue
application with a full report of his management of the company over the interim
period, with specific reference to the possibility of the first respondent being rescued as
a result of business rescue proceeding.’

[7] On 6 June 2017 the first to fourth appellants served and filed a
counter-application. In the counter-application they sought an order that
their powers as provisional joint liquidators be extended to the extent that
they be authorised in terms of s 386(4)(a) of the 1973 Act to oppose the

application instituted by the applicants in the court a quo. Furthermore they
sought an order authorising them as provisional joint liquidators, on behalf
of the company in liquidation, to oppose the application launched by the
applicants.

[8] On 15 June 2017 the court a quo granted the appellants an order
authorising them to oppose the application and to sign and file all necessary
affidavits. The court a quo further granted the orders mentioned in
paragraph 3 above. It reasoned that since liquidation proceedings that have
already commenced are suspended by an application for business rescue in
terms of s 131(6) of the Act, the powers of the liquidators are suspended
and control of the assets of the company ‘falls under the Master in
accordance with the provisions of s 131(2)’. If the particular company
trades, and the powers of the liquidators are suspended, so the court held,
the Master cannot assume the powers of the previous directors, which then
‘are re-vested with the particular directors to control and manage the
company pending determination of the pending business rescue
application’.

[9] The main issues to be considered in this appeal are the following:
(a)
Whether the appointment and the powers of the duly appointed
provisional joint liquidators are suspended in terms of s 131(6) of the Act
71 of 2008.
(b)
Whether the control and management of the property of a company
already placed in liquidation by a court order, can validly and legally be re-
vested in the director of that company.
(c)
Whether the Master has any role to play in business rescue
proceedings.

[10] Section 131(6) of the Act reads as follows:
‘If liquidation proceedings have already been commenced by or against the company at
the time an application is made in terms of subsection (1), the application will suspend
those liquidation proceedings until-

(a)   the court has adjudicated upon the application; or

(b)   the business rescue proceedings end, if the court makes the order applied for.’

[11] The functions of a provisional liquidator are essentially to take
physical control and to manage the administration of the property and
affairs of the company pending the appointment of a liquidator. In Jansen
van Rensburg NO & another v Cardio-Fitness Properties (Pty) Ltd &
others [2014] JOL 31979 (GSJ) para 43 Kgomo J, correctly, remarked that
the responsibilities of the provisional liquidators are essentially to take
physical control of and to superintend the administration of the insolvent
company’s property and affairs pending the appointment of a permanent
liquidator. At paragraph 58 the learned Judge stated that s 131(6) of the Act
does not affect the appointment of provisional liquidators.

[12] In Knipe & another v Noordman NO & others 2015 (4) SA 338
(NCK) the court also dealt with the effect of s 131(6). At paragraph 24
Mamosebo AJ said that the legislature did not intend to create a situation
where the provisional liquidators would be disempowered to carry out their
function. The learned Judge further said that the provisional liquidators
cannot be hamstrung by the business rescue application.

[13] It is not the responsibility of the provisional liquidators to wind up
the company, although under certain circumstances a provisional liquidator
can, in terms of s 386(4)(f) request the Master or the court to extend their
powers.

[14] In Richter v ABSA Bank Ltd [2015] ZASCA 100; 2015 (5) SA 57
(SCA) para 18, Dambuza AJA said:
‘[F]or these reasons a proper interpretation of “liquidation proceedings” in relation to s
131(6) of the Act must include proceedings that occur after a winding-up order to
liquidate the assets and account to creditors up to deregistration of a company.’

[15] Section 131(6) of the Act does not change the status of the company
in liquidation nor does it suspend the court order that placed the company
under liquidation in the hands of the Master in terms of s 141(2)(a)(ii) of
the Act. The appointed provisional joint liquidators must proceed with their
duties and functions to protect the assets of the company for the benefit of
all the creditors of the company.

[16] Successful liquidation proceedings constitute a complete process by
which a company is brought to an end and the liquidation process
culminates in the dissolution of the company up to its deregistration (See
Richter v ABSA Bank at 60D).

[17] In terms s 131(6) of the Act, it is liquidation proceedings, not the
winding-up order, that is suspended. What is suspended is the process of
continuing with the realisation of the assets of the company in liquidation
with the aim of ultimately distributing them to the various creditors. The
winding-up order is still in place; and prior to the granting or refusal of the
business rescue application, the provisional liquidators secure the assets of
the company in liquidation for the benefit of the body of creditors.

[18] In Rentekor (Pty) Ltd & others v Rheeder and Berman NNO &
others 1988 (4) SA 469 (T), the court granted a winding-up order. Some of
the respondents were granted leave to appeal to the full court and when

granting leave to appeal, the court, directed that rule 49(11) of the Uniform
Rules was applicable. The effect thereof was that the operation of the
winding up order was suspended. In his judgment Kriegler J at 504G said
that ‘[t]he liquidator’s appointment and their powers and duties were
suspended, as were all the other consequences of winding-up. Suspended
means lifted, removed but subject to future reimposition’. The facts of that
case are distinguishable. In the present matter, the winding-up order still
stands. There is no appeal pending against the winding-up order.

[19] I find that the appointment, office and powers of the provisional
liquidators are not suspended. In s 131(6) the legislature used the word
‘suspend’ and which not mean termination of the office of the liquidator. In
my view the term ‘liquidation proceeding’ refers only to those actions
performed by a liquidator in dealing with the affairs of a company in
liquidation in order to bring about its dissolution. What is suspended is the
process of winding-up and not the legal consequences of a winding-up
order.

[20] The next question is whether the control and management of the
company already placed in winding-up by the court order, can validly be
re-vested in the director of that company. Section 361(1) and (2) of the
1973 Act read as follows:
‘1. In any winding-up by the Court all the property of the company concerned shall be
deemed to be in the custody and under the control of the Master until a provisional
liquidator has been appointed and has assumed office.
2. In any winding-up of any company, at all times while the office of the liquidator is
vacant or he is unable to perform his duties, the property of the company shall be
deemed to be in the custody and under the control of the Master.’

[21] In Secretary for Customs and Excise v Millman NO 1975 (3) SA 544

(A) at 552H, Botha JA said ‘[u]pon the compulsory winding-up of a
company its directors cease to function as such . . . and they are, therefore,
deprived of their control on behalf of the company of the property of the
company which is then deemed to be in the custody or control of the
Master or liquidator’. As stated earlier the order placing the company under
winding up is still in place and has not been set aside. On the granting of
the winding-up order, the directors of the company cease to function as
directors and the property of the company falls under the control of the
Master or the appointed liquidators. The directors of the company in
liquidation have been stripped of their control and management of the
company placed in winding-up by the court. There is no legal provision
either statutory or at common law that sanctions the re-vesting of control
and management of the company in liquidation to the director of the said
company.

[22]  The other question that needs attention is whether the Master has
any role to play in business rescue proceedings. As stated earlier the sixth
appellant was not a party to the proceedings in the court a quo. In their
notice of motion in the court a quo the applicant never sought any order
which had any impact or effect on the sixth appellant. In their founding and
replying affidavits the applicants did not set out any facts which justified
the granting of an order requiring the sixth appellant to perform any
functions or duties. The sixth appellant, (the Master) has a direct and
substantial interest in the order granted by the court a quo. In Molusi &
others v Voges NO & others [2016] ZACC 6; 2016 (3) SA 370 (CC) para
28, Nkabinde J said ‘[t]he purpose of pleadings is to define the issues for
the other party and the Court. And it is for the Court to adjudicate upon the
disputes and those disputes alone’. The court a quo granted an order which
was not sought by any of the parties and consequently denied the sixth

appellant an opportunity to be head prior to the granting of an order under
consideration.

[23] The order of the court a quo required the sixth appellant to hold
security for the performance of the duties by a manager having the same
powers as a board of directors in a company. It also required the sixth
appellant to monitor the utilisation or disposal of the assets of the company
by the manager appointed by the court. The sixth appellant is a creature of
statute and may perform only those duties and functions empowered by the
enabling legislation. The sixth appellant exercises control and supervision
over the winding-up, liquidation and sequestration processes, including
rehabilitation of the insolvent and the deregistration of the company. The
Master has no powers to deal with a ‘manager’ appointed by the court or
the business rescue practitioner. The appointment of the ‘manager’ by the
court a quo falls outside the scope of the winding-up, liquidation and
sequestration processes. There is also no statutory provisions that permits
the appointment of a ‘manager’ in these circumstances. Consequently
paragraph 3 of the court a quo’s order was incorrect.

[24] The respondents were not represented in this appeal nor did they
serve a notice to abide. On 11 October 2018, on instruction of the presiding
judge, the Chief Registrar of this court sent a letter to the respondents
attorneys asking them to indicate promptly whether they were opposing the
appeal and if so to file the heads of argument immediately. By way of
correspondence dated 25 October 2018, addressed to the parties, the Chief
Registrar advised the parties that the respondent must indicate to the court
what they intend to do, failing which an adverse cost order might be made
against them. The respondents failed to advise the court about their attitude
to the appeal despite the correspondence dispatched to them by the Chief

Registrar. In my view this court must express its disapproval with the
respondents’ conduct. The respondents failed to indicate to this court their
attitude to the appeal. The conduct of the respondents in this respect is
unacceptable.

[25] As a result of the failure of the respondents to participate in this
appeal, at the request of the presiding Judge, Mr L M Spiller prepared
heads of argument and appeared as amicus curiae. His assistance is
appreciated.

[26] For the reasons mentioned here above I make the following order.
The appeal is upheld.
The first and second respondents are ordered to pay the costs of this
appeal on an attorney and client scale including the costs of two counsel
where so employed, jointly and severally, the one paying the other to be
absolved.
Paragraphs 2 to 6 of the order of the court a quo are set aside and
substituted with the following:
‘(a) The application is dismissed.
(b) The first and second applicants are ordered to pay the costs of the
application, and the costs of the counter-application, jointly and severally,
the one paying the other to be absolved.’

__________________
LW SERITI
JUDGE OF APPEAL

APPEARANCES

For the 1st to 4th Appellants:                   P A Swanepoel

C A Boonzaaier
Serfontein Viljoen & Swart,
Pretoria
Van Der Beg Van vuuren
Attorneys, Bloemfontein

For the 5th Appellant:
J Hershensohn
Lewies Attorneys, Pretoria
Z Bezuidenhouts Inc,
Bloemfontein

For the 6th Appellant:

ZZ Matebese SC

A Gxogxa

State Attorney, Pretoria

State Attorney, Bloemfontein
Amicus Curiae

L M Spiller

For the Respondent:

Instructed by 1st and 2nd Respondents:   Prinsloo Bekker Attorneys,
Pretoria
Symington & De Kok,
Bloemfontein

Instructed by the 3rd to 61st Respondent: Lucienne Murray Attorneys,
Pretoria