THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case no: 1025/2013
Reportable

In the matter between:

CHATER DEVELOPMENTS (PTY) LTD                                        Appellant
(IN LIQUIDATION)

and

WATERKLOOF MARINA ESTATES                                  First Respondent
(PTY) LTD

H A MARAIS

Second Respondent

Neutral citation: Chater Developments v Waterkloof Marina Estates & another

(1025/2013) [2014] ZASCA 198 (28 November 2014)

Coram:                Navsa ADP, Theron, Wallis, Mbha JJA and Dambuza AJA

Heard:                  13 November 2014

Delivered
28 November 2014

Summary: Company – Winding up by Court – Property purchased in good faith in
circumstances where the liquidator was not authorised to sell the property – Section
82(8) of the Insolvency Act 24 of 1936 rendered applicable by s 339 of the Companies
Act 61 of 1973 – Agreement valid.

__________________________________________________________________
ORDER
__________________________________________________________________
On appeal from: North Gauteng High Court, Pretoria (Pretorius J sitting as court
of first instance):
The appeal is dismissed with costs including the costs of two counsel.
__________________________________________________________________
JUDGMENT
__________________________________________________________________

Theron JA (Navsa ADP, Wallis, Mbha JJA and Dambuza AJA concurring):

[1] The issue for determination is whether the provisions of s 82(8) of the
Insolvency Act 24 of 1936 (the Insolvency Act) are applicable to a company
which is wound up on the basis of an inability to pay its debts, by virtue of the
provisions of s 339 of the repealed Companies Act 61 of 1973 (the 1973
Companies Act), which remains applicable in the winding up of companies.

[2] I set out the  common cause background to this litigation. Chater
Developments (Pty) Ltd (in liquidation) (Chater Developments), first defendant
in the court a quo, was placed in final liquidation on 30 July 2002. The second
respondent, Mr Hendrie Andries Marais (Marais), third party in the court a quo,
was appointed as sole liquidator of Chater Developments on 28 October 2002.
On 24 January 2003, the second meeting of creditors of Chater Developments
was held for, inter alia, the purposes of proof of claims and the passing of
resolutions empowering the liquidator to sell its assets. The second meeting of
creditors was adjourned to 30 January 2003, on which date a resolution was
adopted which authorised the liquidator,

‘to dispose of [Chater’s] movable assets by public auction, private treaty or public tender in
his sole discretion and that the mode of sale … shall be determined by the [liquidator] and
that all costs incurred in relation thereto be costs of administration and paid for by the estate.’
There were no contributories to Chater Developments.

[3] On 18 August 2004 the first respondent, Waterkloof Marina Estates (Pty)
Ltd (plaintiff in the court a quo) entered into a written agreement with Chater
Developments in terms of which it purchased from the latter, forty per cent of
the issued shares in City Lake Marina (Pty) Ltd (second defendant in the court a
quo) and Chater Developments’ claims, if any, against City Lake Marina for the
amount of R6 million. In concluding this agreement Chater Developments was
represented by Marais who acted under the authority granted to him at the
meeting of creditors held on 30 January 2003. On 14 September 2006,
Chavonnes Badenhorst St Clair Cooper was appointed as joint liquidator of
Chater Developments, together with Marais.

[4] Chater Developments refused to comply with the terms of the agreement
asserting that it was invalid and unenforceable because Marais had not obtained
a resolution from the members as required by s 386(3)(a) of the 1973
Companies Act.  In particular it refused to transfer the shares to Waterkloof
Marina, against a tender of payment of the purchase price.  During October
2009 Waterkloof Marina issued summons out of the North Gauteng High Court
(Pretoria) against Chater Developments for an order directing delivery and
transfer of Chater Developments’ forty per cent shareholding in City Lake
Marina, and its claims, if any against City Lake Marina, against payment of R6
million. Two other defendants were cited in the action in the high court, namely,
Yunnan Construction Engineering CC (third defendant) and the Master of the
High Court, Pretoria (fourth defendant). These defendants, including City Lake
Marina, were cited in the proceedings as interested parties and no relief was

sought against them. They did not participate in the trial in the high court, nor in
the appeal.

[5] On 16 January 2012 Marais resigned as liquidator of Chater
Developments. During February 2012 Chater Developments issued a third party
notice claiming that in the event the court finds that the agreement was valid,
Marais should be held liable to make good to the estate the amount of the loss
which the estate may have sustained as a result of him dealing with the property.

[6] The matter came before the high court (Pretorius J) as a stated case where
the court was called upon to decide certain issues separately in terms of Rule
33(4) of the Uniform Rules of Court. The parties were agreed that for the
purposes of the stated case the court must assume that (i) Waterkloof Marina
acted bona fide as envisaged in s 82(8) of the Insolvency Act; (ii) the second
meeting of creditors was properly constituted; and (iii) the persons present at
that meeting were duly authorised and had acted in accordance with the terms of
their respective mandates. The parties further agreed that ‘no second meeting of
the members of the first defendant [Chater Developments] was held whether on
30 January 2003 or at all and that the aforesaid resolutions . . . were accordingly
not adopted by the members of the first defendant [Chater Developments]’.

[7] The high court was called upon to determine, on the basis of the agreed
facts, whether the agreement was valid and enforceable having regard to the
provisions of s 82(8) of the Insolvency Act, read with the provisions of s 339 of
the 1973 Companies Act. It answered this question in favour of the respondent
and found that there was no provision in the 1973 Companies Act, dealing
specifically with the situation where the liquidator sells property of the company
in liquidation without authorisation by members of the company. Based on this,
the judge concluded that s 82(8) of the Insolvency Act was applicable and the

agreement was valid and enforceable.  The appeal is against this judgment with
the leave of this court.

[8] In this court, Chater Developments contended that the agreement was not
valid and enforceable because Marais was not authorised by the members of
Chater Developments to sell its movable property by private contract as
envisaged in s 389(3)(a) read with s 386(4)(h) of the 1973 Companies Act.1
Waterkloof Marina on the other hand contended that the agreement was valid
and enforceable by virtue of the provisions of s 82(8) of the Insolvency Act,
read with s 339 of the 1973 Companies Act.

[9] Liquidators have certain powers that may be exercised on their own
initiative in any winding-up.2 Then there are defined powers which the
liquidator may only exercise on the authority of resolutions of the creditors and
members (or contributors) at a general meeting,3 and if no such authority is
given, or could be given, or even where there is a difference between the
directions of creditors on the one hand to those of members or contributors on
the other hand, then the liquidator may apply to the Master for directions under
section 387(2). If the Master refuses to give directions, the liquidator may apply
to court for directions.4 Section 386(3)(a) provides that:
‘The liquidator of a company in a winding-up by the Court, with the authority granted by a
meeting 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)’.

[10] Section 386(4)(h) authorises the liquidator ‘to sell any movable and
immovable property of the company by public auction, public tender or private

1 Griffin & others v The Master (Commins & another Intervening) 2006 (1) SA 187 (SCA) paras 6 and 7.
2 These powers are set out in s 386(1)(a)-(e) of the 1973 Companies Act and relate largely to core winding-up
functions of the liquidator.
3 These powers are dealt with in s 386(4)(a)-(i), are extensive and relate mainly to disposal of assets of the
company in liquidation.
4 Section 387(3).

contract and to give delivery thereof.’ The authors, Cilliers et al, characterise the
legal position of the liquidator in the following terms:
‘The liquidator does not have the inherent power to realise the assets of the company; he must
be authorised to do so by resolutions of creditors and members or contributories – or in the
absence of such resolutions, by the Master. The liquidator must, when selling assets of the
company, have regard to the directions of meetings of creditors or members or contributories.
Subject to such authorisation he may sell movable and immovable property either as a whole
or in parcels by public auction, public tender or private contract to any person.’ 5

[11] In this matter the liquidator acted without the necessary authorisation.
That would ordinarily invalidate the transaction unless Waterkloof Marina was
entitled to the protection of s 82(8) of the Insolvency Act. This court, as did the
high court, has to determine whether the laws of insolvency can, in the present
circumstances, be applied to render the agreement valid and enforceable. It was
common cause that the appellant was wound up on the basis that it was unable
to pay its debts. Section 339 of the 1973 Companies Act renders particular
provisions of the law relating to insolvency applicable to companies being
wound up and unable to pay their debts in respect of any matter not provided for
in the 1973 Companies Act. The provisions of Chapter XIV (which includes
s 339) of the 1973 Companies Act remain in force.6  This section reads:
‘In the winding-up of a company unable to pay its debts the provisions of the law relating to
insolvency shall, in so far as they are applicable, be applied mutatis mutandis in respect of
any matter not specially provided for by this Act.’

[12] The predecessor to s 339 of the 1973 Companies Act, was s 182 of the
Companies Act 46 of 1926, the relevant portion of which was substantially
similar to s 339, and was interpreted by Colman J in Woodley v Guardian
Assurance Company of SA Ltd7 to mean that the provisions of the law relating to

5 H S Cilliers et al, Corporate Law 3 ed (2000) at 28.73 on ‘The Realisation of Assets’ (footnotes are omitted).
See also J A Kunst, P Delport and Q Voster, Henochsberg on the Companies Act 5 ed (2011) at 826.
6 Appendix I of the Companies Act 71 of 2008.
7 Woodley v Guardian Assurance Company of SA Ltd 1976 (1) SA 758 (W).

insolvent estates shall be applied ‘in so far as they are capable of being
applied’.8 The learned judge reasoned that it was just and reasonable that
persons in the position of the plaintiff in that matter should be no worse off,
because the wrongdoer was a company in liquidation, than they would have
been if the wrongdoer had been an individual under sequestration and added
that:
‘… it is socially desirable that, as far as is practicable, all the consequences of the liquidation
of an insolvent company should be similar to those to the insolvency of an individual.
Certainly there is no reason for assuming that the Legislature, when enacting a provision
which brings about or tends to bring about that result, could not have meant what it said.
The winding-up of a company unable to pay its debts is something closely akin to the
winding-up of the estate of an insolvent individual. There are some different requirements
which flow from the fundamental difference between a company and an individual: those are
specifically provided for in the Companies Act. In respects other than those so provided for I
cannot see why the Legislature should not have desired, not merely the procedural rules, but
also the substantive rules and consequences, to be the same in both cases. And I can see no
justification for an approach which distorts or strains the language of sec. 182 in order to
avoid that result’.9
A provision of the law relating to insolvency will not apply if the matter is
‘specifically provided’ for in the Companies Act.10 The Constitutional Court has
approved this approach.11

[13] The relevant provision of the Insolvency Act is s 82(8), which provides:
‘If any person other than a person mentioned in subsection (7) has purchased in good faith
from an insolvent estate any property which was sold to him in contravention of this section,
[without authority] or if any person in good faith and for value acquired from a person
mentioned in subsection (7) any property which the last mentioned person acquired from an
insolvent estate in contravention of that subsection, the purchase or other acquisition shall
nevertheless be valid, but the person who sold or otherwise disposed of the property shall be

8 At 760B-C and 763.
9 At 763E-F.
10 Woodley v Guardian Assurance Company of SA Ltd 1976 (1) SA 758 (W) at 763. J A Kunst, P Delport and Q
Voster, Henochsberg on the Companies Act 5 ed (2011) at 668.
11 Bernstein & others v Bester & others NNO 1996 (2) SA 751 (CC) para 96.

liable to make good to the estate twice the amount of the loss which the estate may have
sustained as a result of the dealing with the property in contravention of this section.’12

[14] It was contended by the appellant that s 82 was not applicable as the 1973
Companies Act contains provisions, namely ss 386(5) and 387(4), which deal
with the situation where a liquidator sells property of the company in liquidation
without authorisation by its members. Section 386(5) of the 1973 Companies
Act provides that the court may grant leave to a liquidator to conclude an
agreement to raise money on the security of the assets of the company or to do
any other thing necessary for winding up the affairs of the company.13 In
support of its argument the appellant relied on Griffin & others v The Master &
another14 where it was held that s 386(5) can be invoked to resolve a deadlock
between creditors and members of a company or close corporation in
liquidation. It was suggested that it can thus be inferred that the court is
empowered to do whatever is necessary for winding up the affairs of the
company and distributing its assets, even if it is against the wishes of the
creditors and members. It was further contended that even where the liquidator
does not approach court to ratify an unauthorised agreement of sale, the
purchaser may, in terms of s 387(4) of the 1973 Companies Act, approach the
court for appropriate relief. Section 387(4) provides that any person aggrieved
by any act or decision of the liquidator may apply to court for an order that is
‘just’.

[15] There is little authority on this point. Section 82 of the Insolvency Act has
been said to be applicable to liquidations by virtue of s 339 of the 1973

12 The persons referred to in s 82(7) of the Insolvency Act include ‘the trustee or an auctioneer employed to sell
property of the estate in question, or the trustee's or the auctioneer's spouse, partner, employer, employee or
agent’.
13 Section 386(5) of the Companies Act reads: ‘In a winding-up by the Court, the Court may, if it deems fit,
grant leave to a liquidator to raise money on the security of the assets of the company concerned or to do any
other thing which the Court may consider necessary for winding up the affairs of the company and distributing
its assets.’
14 2006 (1) SA 187 (SCA) para 10.

Companies Act.15 Conradie J, in Mookrey v Smith NO & another,16 explained
the rationale for s 82(8) of the Insolvency Act:
‘To the extent that a trustee is bound to comply with instructions from creditors [and
members (or contributors) of the company] as to the manner which the estate is to be wound
up and the assets to be disposed of, he may be regarded as a kind of statutory agent for
creditors [and members (or contributors) of the company].
If an agent acts outside his powers his act, leaving aside ratification, is a nullity. It therefore
seems to me that the Legislature could not have intended that an act performed by a trustee
beyond the scope of authority given to him at the second meeting of creditors [and members
(or contributors) of the company] should be anything but invalid.
…
But where an act is clearly ultra vires the authority given by the creditors [and members (or
contributors) of the company] to the trustee it seems to me that invalidity must have been
intended to result. …
Once there is a rule as uncompromising as this, it goes almost without saying that some
method has to be devised to protect an innocent third party from the consequences of having
entered into an unenforceable transaction. Section 82(8) does this by providing that if a
purchaser is bona fide the sale shall nevertheless be valid.’17
And in Sherry v Henning NO & others18  it was found that:
‘There is no similar provision in the Companies Act dealing with sale of property and it
follows that section 82 is therefore applicable’.

[16] Section 339 renders both procedural and substantive provisions of the
Insolvency Act applicable in the winding up of a company.19 The remedies
provided in ss 386(5) and 387(4) of the 1973 Companies Act are discretionary
and subject to a particular set of facts being present. This section empowers a
liquidator, and only a liquidator to approach court in appropriate circumstances.
A purchaser such as the respondent who seeks to preserve a sale concluded in

15 Oertel v Director of Local Government 1981 (4) SA 491 (T) at 508. See generally J A Kunst, P Delport and Q
Voster, Henochsberg on the Companies Act 5 ed (2011) at 669; 4 Lawsa Part 3 (First reissue) para 104.
16 1989 (2) SA 707 (C).
17 At 711B-F.
18 [2005] JOL 15358 (T) para 6.
19 Woodley v Guardian Assurance Co of SA Ltd 1976 1 SA (W) 758 at 763F-G.

good faith cannot invoke this section. It was contended by Chater Developments
that in the event that the liquidator refuses to act in terms of s 386(5), an
aggrieved person such as Waterkloof Marina is entitled to invoke the provisions
of s 387(4) of the Act and seek an order from the court compelling the liquidator
to abide the sale.

[17] The provisions of s 387(4) do not detract from the applicability of s 82 (8)
of the Insolvency Act. The right in s 82(8) is a substantive right that offers
protection to an innocent third party such as the respondent, from the
consequences of an unenforceable transaction. It validates a purchase in good
faith. By contrast, the provisions of s 387(4) provide for a situation where the
relief sought is dependent upon the exercise of a discretion by the court.
Waterkloof Marina should not be obliged to rely on a discretionary remedy in
circumstances where it is able to assert a valid purchase by virtue of the
provisions of s 82(8) of the Insolvency Act. It was common cause that Chater
Developments was a company unable to pay its debts as envisaged in s 339.
There is no provision in the 1973 Companies Act that validates a purchase in
good faith from a liquidator who is not authorised to sell. Such a situation is not
‘specifically provided for in this Act’ and it follows that s 82(8) is applicable.

[18] For these reasons the appeal is dismissed with costs including the costs of
two counsel.

______________
L V Theron
Judge of Appeal

APPEARANCES
For Appellant:

AB Rossouw SC with JH Moller
Instructed by:
Brooks and Brand Inc, Pretoria
Van Der Merwe & Sorour Attorneys,
Bloemfontein

For First Respondent:

GI Hoffman SC with S Kuny

Instructed by:
David Kahn & Associates, Johannesburg
Symington & De Kok,
Bloemfontein