IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

REPORTABLE

CASE  NO:  534/2002

In the matter between :

THE MINISTER OF JUSTICE
Appellant

and

FIRSTRAND BANK LIMITED                                                                 First Respondent
BOE BANK LIMITED

Second Respondent
ABSA BANK LIMITED

Third Respondent
CREDIT GUARANTEE INSURANCE
CORPORATION LIMITED

Fourth Respondent
RETAIL APPAREL GROUP LIMITED

Fifth Respondent
LESLIE MATUSON

Sixth Respondent
MARK WILLIAM LYNN

Seventh Respondent
YVONNE THOKOZILE MBATHA

Eighth Respondent
THAMSANQA EUGENE MSHENGU

Ninth Respondent
___________________________________________________________________________
Coram:
HOWIE P, SCOTT, ZULMAN, BRAND et CLOETE JJA
Heard:
1 September 2003
Delivered:
25 September 2003
Summary:   Section 371 of the Companies Act does not apply to provisional liquidators.
___________________________________________________________________________

J U D G M E N T
___________________________________________________________________________

HOWIE P/

HOWIE P:
[1] First respondent, a creditor of Retail Apparel Group Limited, obtained an
order in the High Court at Durban for the provisional liquidation of that
company.  In due course the Master of the High Court for Kwazulu-Natal
appointed four provisional liquidators. Subsequently, appellant, the Minister of
Justice and Constitutional Development, directed the Master to appoint a fifth
provisional liquidator, Mr E M Motala. In issuing the directive the Minister
relied on the provisions of s 371 (3) of the Companies Act 61 of 1973, and on
professional advice that the sub-section empowered such a directive in the case
of a provisional liquidator. The Master complied with the directive and
appointed Mr Motala.
[2] First respondent and others, including the four originally appointed
provisional liquidators, then applied to the High Court in Durban for an order
reviewing and setting aside the appointment of Mr Motala and the underlying
directive. Cited as respondents were the Minister, the Master and Mr Motala.
Booysen J granted the application and later gave leave to appeal. Only the
Minister appeals.
[3] We were informed prior to the hearing of the appeal that Mr Motala had
been appointed a provisional liquidator by way of a second appointment entirely
separate from that presently in issue. This does not render the appeal moot,

however,  for  we  were  informed  at  the  hearing  that  the  Minister  has
relied on s 371 in other provisional liquidations as well. The Court’s decision is
therefore of application not just to possible future cases but actual pending
matters.
[4] Formally, the question for decision is whether the provisions of s 371(3)
pertain only to liquidators or also apply to provisional liquidators. However, the
definition section in the Act defines ‘liquidator’ as including ‘provisional
liquidator’ unless the context indicates otherwise and so the real issue is whether
the relevant context does indicate otherwise.
[5] The context which requires analysis is provided by a number of sections
of the Act. It is convenient to recount them not in numerical sequence but in the
sequence in which events pertaining to liquidation orders would ordinarily
occur.
[6] This case concerns a liquidation ordered by the court at the instance of a
creditor by reason of the debtor company’s inability to pay its debts but it is
necessary to consider, as part of the relevant context, provisions of the Act
which concern other types of winding-up as well.
[7] Apart from winding-up by the court, the Act provides for two forms of
voluntary winding-up, one by creditors and the other by members (s 343).
Either form of voluntary winding-up requires a special resolution of the

company (s 349).   In terms of s 356 (2) a certified copy of that resolution must
be lodged with the Master together with any further resolution (in the case of a
members’ voluntary winding-up) containing nominations for appointment as
liquidator of the company.  I pause to observe that nomination is provided for
also in other situations dealt with in the Act, as will be seen, and is a concept of
crucial importance in resolving the question in issue.
[8] In a winding-up by the court (and unless indicated otherwise I mean to
focus on such form of winding-up) all the property of the company is deemed to
be in the custody and control of the Master until a provisional liquidator has
been appointed and has assumed office (s 361).
[9] The appointment by the Master of liquidators generally is empowered by
s 367. The appointment of a provisional liquidator in particular is dealt with in s
368 which, omitting irrelevant wording, reads:
‘As soon as a winding-up order has been made in relation to a company … the Master may
appoint any suitable person as provisional liquidator of the company concerned, who shall
give security to the satisfaction of the Master for the proper performance of his duties as
provisional liquidator and who shall hold office until the appointment of a liquidator’.
[10] In terms of s 364(1), as soon as possible after a final winding-up order, the
Master must summon separate meetings of creditors and members.  Both kinds
of meeting are held for the purpose, inter alia, of

‘nominating a person or persons for appointment as liquidator or liquidators’.
In the case of a members’ voluntary winding-up, so the subsection provides, the
nomination process will be unnecessary if nomination has already been effected
in a s 349 resolution.
[11] That the nomination procedure in a winding-up by the Court does not
apply also to provisional liquidators, is indicated by the terms of s 364(2)
according to which, for the purposes of summoning a creditors’ meeting (at
which nominations will be made) the Master may direct the company or the
provisional liquidator to send notice of the meeting to creditors.  In other words,
a provisional liquidator enters upon the scene before nominations for the office
of liquidator can be made.
[12] Section 369 is headed ‘Determination of person to be appointed
liquidator’ and lays down that, subject to s 370, the Master must appoint as
liquidator or liquidators the person or persons ‘nominated’ under the sections (to
which I already have referred) dealing respectively with a members’ winding-up
and a winding-up by the court.
[13] Section 370(1) details circumstances in which the Master may decline to
accept a nomination or to appoint the nominee.  Where that occurs a remedy is
provided in s 371.  It is appropriate to quote s 371 in full.   It reads:

‘371. Remedy of aggrieved persons. – (1) Any person aggrieved by the  appointment of a
liquidator or the refusal of the Master to accept the nomination of a liquidator or to appoint a
person nominated as a liquidator, may within a period of seven days from the date of such
appointment or refusal request the Master in writing to submit his reasons for such
appointment or refusal to the Minister.
(2)  The Master shall within seven days of the receipt by him of the request referred to in
subsection (1) submit to the Minister, in writing, his reasons for such appointment or refusal
together with any relevant documents, information or objections received by him.
(3)  The Minister may, after consideration of the reasons referred to in subsection (2) and any
representations made in writing by the person who made the request referred to in subsection
(1) and of all relevant documents, information or objections submitted to him or the Master by
any interested person, confirm, uphold or set aside the appointment or the refusal by the
Master and, in the event of the refusal by the Master being set aside, direct the Master to
accept the nomination of the liquidator concerned and to appoint him as liquidator of the
company concerned.’
(Emphasis supplied.)
[14] Reverting to s 370, subsection (2) provides that when the Master has
declined to accept a nomination or to appoint the nominee, or the Minister has,
under s 371(3), set aside the appointment of a liquidator, the Master must once
again convene meetings of creditors and members for the purpose of a fresh
nomination and appointment process.

[15] Similarly, s 377 provides that when a vacancy in the office of liquidator
occurs, and the Master does not leave completion of the winding-up to any
remaining liquidators, he must convene members’ and creditors’ meetings to
obtain the nomination and appointment of a new liquidator (subsec (1)).
Subsections (2) and (3) are also of significance.  The former emphasizes that the
provisions of the Act applicable to the convening and conduct of meetings and
the nomination and appointment of liquidators must apply to the filling of a
vacancy.  Subsection (3) states that where a vacancy is for any reason not filled
by implementation of such procedure or the Master does not leave it to any
remaining liquidators to complete the winding-up, he may appoint a person as
provisional liquidator or as liquidator to fill the vacancy.  The latter subsection,
therefore, contrasts an appointment pursuant to the statutorily provided
nomination and appointment process, and an appointment by the Master where
that process fails, acting in his own discretion and on his own initiative in
making an appointment of either a provisional liquidator (or a liquidator).  The
important point is that even where he acts in his own discretion that must
necessarily be only after the prescribed nomination process has failed to effect
the filling of the vacancy.
[16] Section 375 then states the essentials for appointment as liquidator.   The
first is that the person to be appointed has been ‘determined’ and the second is

that such person has given security to the Master’s satisfaction.  As the earlier
sections show, the person determined cannot be anyone other than somebody
nominated at a convened meeting of members or creditors.  And the requirement
of nomination remains even if the Minister uses his s 371 powers of
intervention.  I shall revert to this last point.
[17] Finally as to the legislative context, there is a blanket provision in s 374
which empowers the Master, whenever he considers it desirable, to appoint any
person not disqualified from holding the office of liquidator, and who gives the
necessary security, as a co-liquidator with the liquidators.   Of note here is that
any appointment under this section, unlike the position in s 371(3), is not made
subject to any possible directive by the Minister.
[18] Turning to the argument in support of the appeal, counsel for the Minister
said that the cornerstone of his submissions consisted in the provisions of
s 39(2) and 33(1) of the Constitution.  (The former requires promotion of the
values of the Constitution in statutory interpretation and the latter bestows the
right on everyone to fair and reasonable administrative action.)  The need for
that quality of administrative action, said counsel, was especially required at the
time in a winding-up before a final liquidator was appointed because it was at
those early stages when a company’s assets were peculiarly vulnerable to illicit
concealment or disposal.  It was at this juncture and with the risk of this

mischief, therefore, that effective action was necessary to ensure that adequate
and appropriate provisional liquidators were in charge.  It there was a
shortcoming in their numbers, competence or approach to any aspect of the
winding-up, there was a need for a quick remedial process whereby informal
nominations could be made and, if not accepted by the Master, then enforced by
a Ministerial directive under s 371(3).
[19] From the papers it emerges that the provisional liquidators originally
appointed were considered by the Minister, or rather, perhaps, by those advising
him, to be unduly sceptical or dismissive in regard to an alleged claim against
the company by the South African Revenue Services and it was consequently
the Minister’s wish to obtain the appointment of Mr Motala so that the
Revenue’s claim could be accorded the attention to which it was, in the
Minister’s view, entitled in the proper execution of the winding-up.
[20] Counsel for the Minister accepted that the Master’s actions could be
subject to review if a creditor’s interests were irregularly disregarded but he
contended that by the time review proceedings were finalised a successful
outcome would be cold comfort if the consequences of wrong or ineffective
action in the preservation of the assets or in the treatment of a valid claim had
long since been felt.

[21] Counsel went on to outline existing practice consequent upon the grant
of a provisional winding-up order as being one whereby creditors put forward
names of suggested provisional liquidators, the latter lodged requisitions with
the Master and he usually accepted those suggestions and made appointments of
provisional liquidators accordingly.   It was submitted that this practice really
involved an informal nomination procedure and that when the Act referred to
nomination the interpretation accorded that word should embrace this informal
intimation as well as the formal process provided for in the statute.
[22] In evaluating the argument advanced in support of the appeal it is realistic
to bear in mind that some company insolvencies do, unfortunately, involve
irregular dealing with assets by former directors, members or employees.
However, I find nothing in the sections of the Act to which I have referred, or in
the practice described by counsel whereby provisional liquidators are usually
appointed (assuming that description to be correct) which tends to jeopardize a
creditor’s, or any other interested party’s, constitutional right to fair
administrative action.  If irregularities are perceived on the part of the Master, a
provisional liquidator or anyone else involved in the provisional winding-up of a
company, review or interdictory remedies are available.  Should the
circumstances warrant speedy relief, they can be brought as matters of urgency

and disposed of with expedition.  Essentially, therefore, the case turns on the
proper construction of s 371 viewed in the context set out above.
[23] What the contention for the Minister really seeks to achieve is the
interpretation of the opening words of s 371(1) (‘Any person aggrieved by the
appointment of a liquidator’) as including any person aggrieved by the non-
appointment of a provisional liquidator;  and the interpretation of ‘nomination’
or nominated’ as also referring to nomination made otherwise than in the
manner provided for in the Act.
[24] In my view ‘appointment’ in the opening quoted phrase of s 371(1) cannot
include ‘non-appointment’.  Non-appointment is specifically dealt with in the
immediately following words which cover refusal of the Master to accept a
nomination and refusal of the Master to appoint a nominee.  Moreover the
section deals not with appointment per se but only appointment pursuant to
nomination.  As for ‘nomination’ or ‘nominated’, these words can, in the
relevant context, refer to nothing other than the s 364 nomination process, the
result of which is that the Master is required, by s 369, to appoint as liquidator
(meaning final liquidator) the person or persons nominated.  Nothing in the Act
leaves room for understanding those words in any other sense.  Therefore the
grievances for which s 371 provides a remedy are grievances consequent upon

the appointment of a person duly nominated (or the non-appointment of a
person duly nominated) within the meaning of the Act, and particularly s 364.
[25] The fundamental flaw in the statutory construction on the strength of
which the Minister issued the directive in question is that it was thought
sufficient to direct the Master to appoint Mr Motala.  The vital point, however,
is that where the Minister acts under s 371(3) and sets aside a Master’s s 370
refusal, he must not just direct the person concerned’s appointment.   He must,
in addition, by reason of the closing words of s 371(3)
‘direct the Master to accept the nomination of the liquidator concerned and to appoint him as
liquidator …’
In the present case there was no such nomination of Mr Motala within the
meaning of the Act. It remains to add that s 371, properly construed, cannot
apply to the Master’s appointment, or non-appointment, of a provisional
liquidator.  In the result the Minister’s directive, and the appointment based on
it, were not in conformity with the provisions of the Act.  They were therefore
invalid.
[26] The appeal is dismissed with costs, including the costs of two counsel.

_________________
CT HOWIE
PRESIDENT
SUPREME COURT OF APPEAL

CONCURRED:
SCOTT  JA
ZULMAN  JA
BRAND  JA
CLOETE  JA