South Africa's Supreme Court of Appeal (“the SCA”) in Dr Waa Gouws (Johannesburg) v HR Computek (Pty) Ltd and Others considered whether:
(1) a company that is finally wound-up has locus standi to bring an application to rescind the provisional or final winding-up orders;
(2) such application should be brought in terms of section 354(1) of the Companies Act, 1973 (“the Companies Act”) or under common law; and
(3) the company must do so with assistance of the liquidators.
Background
On 6 January 2020, subsequent to being placed under a provisional winding-up order, the High Court granted an order finally winding-up HR Computek (Pty) Limited (“HR Computek”).Three liquidators were appointed as joint liquidators of the company. In July 2021, HR Computek instituted an application in which it sought the rescission of the winding-up order and the setting aside of the appointment of the liquidators (“the rescission application”).
The rescission application was premised on an alleged fraudulent misrepresentation by Dr Waa Gouws (Johannesburg)(Pty) Ltd (“Dr Waa Gouws company”) and HR Computek not receiving the application for its winding-up. Thus it was never given the opportunity to oppose the winding-up application.
Dr Waa Gouws, by way of a point in limine, challenged HR Computek's locus standi contending that the rescission application could only be brought by a member, creditor or liquidator as envisaged in section 354(1) of the Companies Act. Section 354(1) provides that “the Court may at any time after the commencement of the winding-up, on the application of any liquidator, creditor or member, and on proof to the satisfaction of the Court that all proceedings in relation to the winding-up ought to be stayed or set aside, make an order staying or setting aside the proceedings. . .'”Thus, Dr Waa Gouws contended that HR Computek, assisted by its sole director, did not have the locus standi to bring the application. Dr Waa Gouws further argued that HR Computek ought to have instituted the application with consent or co-operation of the joint liquidators.
On the other hand, HR Computek relied on the director's residual powers to oppose the granting of the provisional and final winding-up orders in terms of common law and contended that there is no reason why a company through its directors, without the consent and co-operation of liquidators, could not apply for the setting aside of an order that was granted in its absence. This argument was upheld by the court a quo. It is this decision that was being appealed by Dr Waa Gouws.
SCA findings
The SCA agreed with the High Court's findings. In particular:
- The SCA agreed with the reliance of the judgments in Storti v Nugent and Others (“Storti”) and Praetor and Another v Aqua Earth Consulting CC (“Praetor”) which were confirmed by O'Connell Manthe & Partners Inc v Vryheid Minerale (Edms) Bpk (“O'Connell”).
- The SCA highlighted that in Storti it was concluded that “where a winding- up order is assailable, a company may apply for rescission under the common law, provided it shows “sufficient cause””. In Praetor the court, invoking Storti's recognition of a right to rescind, further held that “since the directors may oppose or appeal a winding-up order in the company's name, there was no rational basis to distinguish that from seeking rescission of an order obtained without notice”.
- Rule 42(1)(a) of the Uniform Rules of Court provides that a rescission application may be brought by “any affected party”. The SCA found that this rule is not restricted to a liquidator, creditor or member (as per section 354(1) of the Companies Act). A company or its directors using their residual power to apply for the rescission of the winding-up orders fall under “any affected party”.
- Section 354(1) does not expressly, explicitly or implicitly exclude a company in liquidation or a board of directors from bringing an application to rescind winding up orders. This provision does not take away the inherent right that a company in liquidation acquired in terms of common law for obvious reasons. The common law right allows the company to contest its winding-up, particularly when it should not have been subjected to liquidation due to various factors, such as fraudulent behaviour.
- The SCA concluded that the findings of Impac Prop Cc v THF Construction CC and Venbor (Pty) Ltd v Vendaland Development Co (Pty) Ltd t/a Camp Store that section 354(1) is the sole legislative provision that confers locus standi to a company after the commencement of winding-up is incorrect.
Conclusion
The SCA held that HR Computek had the locus standi to bring the rescission application. The appeal was therefore dismissed with costs.
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