THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case No: 20278/14

In the matter between:

THE ISIBAYA FUND

APPELLANT

and

ERNUSTUS JACOBUS VISSER
FIRST RESPONDENT

VAUGHN COETZEE

SECOND RESPONDENT

Neutral citation: The Isibaya Fund v Visser & another (20278/14) [2015]
ZASCA 183 (27 November 2015)

Coram:
Shongwe, Tshiqi, Majiedt, Willis and Swain JJA

Heard:
20 November 2015

Delivered: 27 November 2015

Summary: Civil Procedure – s 424 of the Companies Act 61 of 1973 – special
plea in terms of s 11(d) of Prescription Act 68 of 1969 – whether the appellant
is the ‘State’ as contemplated in s 11(b) of Prescription Act – court concluding
that the three-year period of prescription applies and not a fifteen-year period.

ORDER
________________________________________________________________

On appeal from:  Gauteng Division of the High Court, Pretoria (Preller J
sitting as court of first instance):

The appeal is dismissed with costs.

JUDGMENT
________________________________________________________________

Shongwe JA (Tshiqi, Majiedt, Willis and Swain JJA concurring)
[1] This appeal arises from an action instituted by the appellant, The Isibaya
Private Equity Fund (the Fund), a fund governed by the provisions and in
accordance with the Public Investment Corporation Act 23 of 2004 (PIC Act) as
amended, against the respondents. The Fund sought an order holding the
respondents liable for dereliction of their fiduciary duties to the Fund under the
provisions of s 424 of the Companies Act 61 of 1973 (the Companies Act),
which reads as follows:
‘(1) When it appears, whether it be in a winding-up, judicial management or otherwise, that
any business of the company was or is being carried on recklessly or with intent to defraud
creditors of the company or creditors of any other person or for any fraudulent purpose, the
Court may, on the application of the Master, the liquidator, the judicial manager, any creditor
or member or contributory of the company, declare that any person who was knowingly a
party to the carrying on of the business in the manner aforesaid, shall be personally
responsible, without any limitation of liability, for all or any of the debts or other liabilities of
the company as the Court may direct.’
The Fund also demanded, in its particulars of claim, payment of a sum of
R80 million, jointly and severally, by the respondents for losses which had been
suffered by the Fund, under their watch.

[2] The respondents were representatives of various companies which
entered into a joint venture with the Fund. The Fund invested in the holding
company, Lesiba Healthcare Holdings (Pty) Ltd, the name of which was
subsequently changed to the Carewell Group of South Africa (Pty) Ltd (the
holding company). The respondents were directors of the holding company and
were sought to be held personally responsible for recklessly carrying on of the
business of the holding company in terms of the above provision.

[3] The respondents filed a special plea alleging that the Fund’s cause of
action arose more than three years before the service of the summons and had
therefore prescribed in terms of s 11(d) of the Prescription Act 68 of 1969 (the
Act). At the hearing of the matter, the court a quo made an order in terms of
Uniform rule 33(4), separating the determination of the special plea from the
other relief claimed and postponing the other relief sine die. The special plea
was upheld by the court a quo. This appeal, with the leave of this court, is
against that determination.

[4] It is opportune, at this stage, to briefly deal with the factual background
of this matter. On 22 February 1998, the Fund concluded what was called a
‘shareholders agreement’, with the first and second respondents and the third
defendant a quo (who did not defend the action and who is not a party to the
present appeal), and other legal entities and individuals. The conclusion of the
agreement was for the purpose of forming a healthcare group to provide primary
healthcare and to establish a network of primary healthcare clinics providing
quality healthcare services at an affordable price under the control of the
holding company.

[5] The Fund invested a sum of R35 million to purchase a 25 per cent
shareholding in the holding company and a further sum of R35 million as a loan

to the holding company. To protect its interests the Fund was entitled to
nominate and have two directors appointed to the board. The first directors were
a representative of the Fund, together with the respondents and the third
defendant.

[6] The Fund alleges that by the year 2001 the holding company was
dormant, did not trade actively, had lost its share capital, had no employees and
was unable to repay its loan. The holding company was finally wound up on 14
January 2005 at the instance of the Fund. An inquiry in terms of s 417 read with
s 418 of the Companies Act was thereafter held into the affairs of the holding
company. As a result, the Fund instituted the present action in terms of s 424 of
the Companies Act.

[7] Initially, the Fund challenged the order of the court a quo, which upheld
the plea of prescription, on three grounds, namely that: (a) the 15-year
prescriptive period contemplated in s 11(b) of the Act applied because the debt
was one owed to the State; (b) the Fund only acquired sufficient knowledge to
formulate a claim under s 424 of the Companies Act during or upon the
completion of the s 417 enquiry at the earliest around May 2006, and finally (c)
the Fund relied upon a written acknowledgement of debt by the first respondent
which interrupted the running of prescription.

[8] The respondents, on the other hand, contend that the Fund is not the State,
and therefore the relevant period for prescription is three years and not 15 years
as provided for in s 11(d) of the Act. They contend further that the Fund was
fully aware of the alleged debtors and of the facts from which the debt arose
more than three years prior to the institution of the action. In respect of the
acknowledgement of debt, the respondents aver that it was not an
acknowledgement of liability and did not have the result of interrupting the

running of prescription. In any event the offer was also dated after the claim had
already been extinguished by the running of prescription.

[9] At the hearing of this appeal, counsel for the Fund indicated that he
would not pursue the second ground of appeal and later conceded the third
ground of appeal likewise would not be pursued. That left the first ground of
appeal as the only point this court has to decide.

[10] Counsel for the Fund contended that when interpreting a statute, context
is the key in determining the meaning of the words ‘debt owed to the State’ in s
11(b) of the Act. He nevertheless conceded that the term ‘State’ does not have a
universal meaning. This concession, in my view, is consistent with the finding
of this court in Holeni v Land and Agricultural Development Bank of South
Africa 2009 (4) SA 437 (SCA) para 11. Counsel attempted to find a
distinguishing factor between Holeni and the present case, but, in my view, was
unable to do so.

[11] In Holeni this court had to decide whether the debts owed by Mr Holeni
to the Land and Agricultural Development Bank of South Africa (the Bank)
were extinguished after the lapse of a period of 15 years or three years had
passed. In essence this court had to determine whether, for purposes of s 11(b)
of the Act, the Bank could be classified as the ‘the State’ to enable it to rely on
the advantage provided in s 11(b). Navsa JA concluded (in para 38) that:
‘… [the Land and Agricultural Development Bank Act 15 of 2002] makes it clear that the
bank is a separate juristic person acting in its own name and right, … distinct from, although
not entirely independent of, Government.’
Of importance is that the main object of the PIC Act which governs the Fund, is
to be a financial service provider in terms of the Financial Advisory and
Intermediary Services Act 37 of 2000 (s 4). It is a juristic person, and is an

institution falling outside the public service. In this context the Fund is
controlled by the board appointed by the Minister responsible for finance. The
board may establish such committees, consisting of directors, as it considers
necessary (s 7 PIC Act). The board controls the business of the corporation (s 8
PIC Act), it may obtain authorisation as a financial services provider (s 9 PIC
Act), it may (as it did in this case) invest a deposit in the Fund (s 10 PIC Act).
As in Holeni therefore, the Fund cannot qualify as the State for the purposes of s
11(b) of the Act.

[12] The appeal accordingly fails. I make the following order:
The appeal is dismissed with costs.

_______________________

J B Z SHONGWE

JUDGE OF APPEAL

Appearances

For the Appellant:

N Cassim SC with him A Farber

Instructed by:

Nkosi Sabelo Incorporated,

Bryanston;

Matsepe Inc, Bloemfontein.

For the First and Second Respondents:
W F Pienaar (S D Wagner SC
having drafted the Heads

Instructed by:
Coetzer & Partners, Pretoria;
Honey Attorneys, Bloemfontein.