REPUBLIC OF SOUTH AFRICA

IN THE SOUTH GAUTENG HIGH COURT

(JOHANNESBURG)

(1)	REPORTABLE: YES/NO
(2)	OF INTEREST TO OTHER JUDGES:YES/NO
(3)	REVISED. 

1 November 2011           …………..……………………...

	 

In the matter between:

In the matter between:

CASE NO: 2008/12164

In the matter between:

HENDRIK JACOBUS RUST BARNARD N.O.

NORMAN KLEIN N.O.

FAROUK SHARIEF N.O.

THEMBA BENEDICT LANGA N.O.

ITUMELENG BRENDA MOHALE N.O.	
1stApplicant/Plaintiff

2nd Applicant/Plaintiff

3rd Applicant/Plaintiff

4th Applicant/Plaintiff

5th Applicant/Plaintiff	

(in their capacities as joint liquidators in the estate of Pro Med Construction CC (in liquidation) )

and
		
IMPERIAL BANK LIMITED

LAND FOR AFRICA (PTY) LTD 	1STRespondent/Defendant

2nd Respondent/Defendant	

JUDGMENT

WEINER J:
1.	The plaintiffs/applicants were cited in the particulars of claim in this matter nominee officio in their capacities as joint liquidators in the estate of Pro Med Construction CC (in liquidation) (“Pro Med”).

2.	Pro Med was finally wound-up by this court on 8 December 2004.

3.	For ease of reference, the parties will be referred to as in the main action. 

4.	The plaintiffs seek to amend the citation on the basis that it is not strictly in accordance with the provisions of section 386(4)(a) of the Companies Act 61 of 1973 (the “Act”).

5.	Section 386(4)(a) refers to the powers of liquidators and provides that the powers referred to in subsection (3) are – 

(a) ‘to bring or defend in the name and on behalf of the company any action or other legal proceedings of a civil nature…(own emphasis added).’ 

6.	The plaintiffs delivered a notice in terms of rule 28 of the Uniform Rules of Court on the 17th of February 2011 declaring an intention to amend paragraphs 1.1 to 1.5 of its particulars of claim.

7.	 In so doing, the plaintiffs seek to replace those paragraphs with the following:

1.	‘The plaintiff is Pro Med Construction CC (in liquidation) (“Pro 	Med”) ( Master’s Reference G27/50/04) duly represented herein by:-
1.1	Hendrik Jacobus Rust Barnard N.O.
1.2	Norman Klein N.O.
1.3	Farouk Sharief N.O.
1.4	Themba Benedict Langa N.O.
1.5	Itumeleng Brenda Mohale N.O. 

who bring this action in the name and on behalf of Pro Med in terms of the provision of section 386 of the Companies Act 61 of 1973.’

8.	The defendant objected to the amendment on the basis that:

a.	the liquidators were not entitled to institute the actions in their own names;
b.	the liquidators were not the creditor as envisaged in terms of section 15(1) of the Prescription Act 68 of 1969 ( the Prescription Act);
c.	the service of the summons did not interrupt the running of prescription;
d.	Pro Med’s claim has accordingly become prescribed; and 
e.	 the effect of the proposed amendment is to seek substitution of Pro Med as the plaintiff in the action.

9.	The plaintiffs contend that the defendants objection is ill-conceived in that, inter alia, the liquidators did not institute the action in their own names but in a representative capacity for and on behalf of Pro Med (in liquidation).

10.	Legal authority is divided as to the correct manner of citation of the plaintiff in proceedings brought by the company or its liquidator. 

11.	In this division, I was referred to two unreported judgments:

a.	In Fey N.O. v Lala Govan Exporters (Pty) Ltd; Allinpex CC and Gowan, Epstein AJ held that ‘any action brought by the liquidator pursuant to his powers under section 386(4)(a) must be brought in the name of the company and not by the liquidator in his representative capacity. On the other hand where proceedings are by the liquidator in his capacity as such e.g. for direction from the court or where he is exercising a statutory power to bring them, the manner of citation should be in the name of the liquidator and that he is acting in capacity as such.’ 

In the Fey matter, the plaintiffs were cited as ‘Eileen Margaret Fey N.O., an adult women who sues in her capacity as joint liquidator with the second plaintiff of Lala Govan Cape (Pty) Ltd (registration number 2002/029247/07), in liquidation (“Lala Govan”)… and Newel Cloete N.O., an adult women who sues in her capacity as the joint liquidator with the first plaintiff of Lala Govan …” 

b.	In Airborne Express CC and another v Theodore Willem van der Heever N.O. and others Msimeki AJ held that ‘it surely is pedantic and unnecessary to draw the distinction between the cases where the liquidator acts in the name of the company in liquidation or as liquidator nominee officio. It is indeed a question of form over substance where the liquidator is citied as plaintiff representing the company or where the company is cited as the plaintiff.’ 

12.	In Kwa-Zulu Natal, in Shepstone and Wylie and others v Geyser N.O (N) Hugo J stated that although section 386(4)(a) of the Act empowers the liquidator to bring in the name and on behalf of the company’ any action, in practice, such actions are frequently brought in the name of the liquidator with the letters N.O. appended. Hugo J held that he had been unable to find any rule that distinguishes the two forms of citation.

13.	The Kwa-Zulu Natal court went on to find that whilst the company in liquidation may have been incorrectly cited, it was not non-suited.   The case was overruled in the SCA, but on another point. The question of citation was not dealt with in the SCA. However, Hefer JA held in relation to section 13 regarding an application for security for costs in legal proceedings, ‘express reference in section 13  to an company which is being wound up and to its liquidator indicates the legislature envisaged cases where the plaintiff or applicant is a company in liquidation. It could not have been unaware that in such cases the company is always represented by the liquidator whether the latter sues nominee officio or not (emphasis added).

14.	In Janse Van Rensburg N.O. & Others v Ladislav, Southwood J dealt with an exception on the basis that the liquidators of a company lacked locus standi to bring an claim to impeach a transaction because of the provisions of section 386(4)(a) of the Act. Southwood J stated the following in his judgment:
“The excipient relies on the unreported judgment of Epstein AJ in the Witwatersrand Local Division in the matter between Eileen Margaret Fey N.O. and Mawaal (sic) Cloete N.O. v Mahandrabai Naran Gowan WLD case number 19644/05 in which the court upheld the point raised in the present exception”; 
“The plaintiff’s counsel contends that section 386(4)(a) does not apply to the present claim because section 26(1) is a statutory claim based on the provisions of that section read with section 32 which expressly empowers the liquidators of the close corporation to bring the action.  He points out that the provisions of section 32 of the Insolvency Act were not referred to by Epstein AJ and were not clearly not raised before him”;
“Section 386(4)(a) confers on the liquidator of a company the power to institute and defend proceedings by or against the company in liquidation.  It provides in terms that the liquidator has the power – ‘to bring or defend in the name and on behalf of the company any action or other legal proceedings of a civil nature”;
“The excipient’s counsel concedes that there is no difference between the plaintiffs suing in their capacity as the liquidators of the close corporation and suing in the name of and on behalf of the close corporation in liquidation”; (emphasis added)

15.	Epstein AJ in the Fey case distinguished the facts in Shepstone and Wylie. According to Epstein AJ, Hefer JA’s ruling in Shepstone and Wylie did not support the liquidators in Fey. Epstein AJ also acknowledged Hugo J’s reference, in the court a quo, to the practice of bringing actions at the whim of a liquidator, but held that this did not justify the practice. Epstein AJ therefore held that the correct citation was the company in liquidation and not the liquidators in their capacity as such as section 386(4)(a) was peremptory and provided that the liquidator was given the power to bring or defend actions ‘in the name and on behalf of the company’.

16.	Blackman, Jooste and Everingham state that ‘when a liquidator institutes civil proceedings he ought to bring the proceedings in the name of the company in the exercise of his powers under section 386(4)(a).’ The authors refer to Fundstrust (in liquidation) v Marais, which presented the corollary of the present case. In that case, an action in terms of section 424 of the Act against the directors of the company (in liquidation) was launched in the name of the company (in liquidation). It was argued that because section 424 empowers the court to make an order on the application of “…the liquidator”, the action ought to have been brought by the liquidator nominee officio and not in the name of the company as represented by its liquidators. Brand J held that the company could not sue in terms of Section 424 and that only the liquidators had locus standi. He held that it was clear from section 386(4) that in some cases the liquidator could sue in the name of the company and that was exactly what the liquidators had attempted to do. He held further that the rules did not relate to the plaintiffs locus standi but rather to whether the provisions of section 386 applied in an action in terms of section 424, and whether the liquidator in such an action had to be cited (own emphasis added). There was nothing in section 424 that prohibited a liquidator from suing in the name of the company and that the wording of section 386(4)(a) is wide enough to include an action in terms of section 424. A liquidator makes it clear by the use of the indication nominee officio that he is not acting in his personal capacity but in a representative capacity or on behalf of somebody else namely the company in liquidation. Hence Brand J held that there was no reason why a liquidator who acts in terms section 424 of the Act cannot sue in the name of the company. 

17.	This case was not followed in Ex parte Liquidator: Vautid Parts (Pty) Ltd (in 	liquidation). Vorster AJ held that the only applicants envisaged in section 	424(1) could bring such procedure. That section gave the liquidator the legal 	standing for those proceedings. The company lacked legal standing because it 	could not apply for relief under section 424. 

18.	As is evident from the authorities quoted in this judgment, they range from one extreme to the other. Fey is authority for the strict interpretation of Section 386(4)(a) ie the proceedings must be brought in the name of the company.

19.	Fundstrust, Airborne Express CC and Shepstone and Wylie (in the court a quo) are authority for a much wider interpretation of the Section i.e. either the liquidator nomine officio or the company in liquidation can bring the proceedings.

20.	 Section 386(4) deals with the general powers of the liquidator. Most of the authorities referred to deal with the statutory powers of the liquidator. There seems to me to be a stronger case, in that instance, for the liquidator to be cited as the applicant/plaintiff, as it is clear from the particular sections referred to that the liquidator (as opposed to the company in liquidation) is specifically given such power. In Shepstone and Wylie (N), Hugo J, in referring to the question of whether a liquidator or the company in liquidation should be the plaintiff, stated that ‘the liquidator can sue on behalf of the company for debts owed to the company (qua company). In such cases the company would, but for the liquidation, be the plaintiff itself. In other cases such as the setting aside of impeachable dispositions or actions under section 423 or 424, the company itself could never be the plaintiff and it is the liquidator who exercises power specifically given to him under the Insolvency Act 24 of 1936 and the Companies Act 61 of 1973. 

21.	As Hefer JA said in Shepstone, ‘it (the legislature) could not have been unaware of the fact that in such cases the company is always represented by the liquidator, whether the latter sues nominee officio or not.’

22.	The fact that the company’s corporate identity remains intact despite its liquidation and the fact that its property remains vested in the corporation does not affect the locus standi of the liquidator. 

23.	The authorities, other than Fey’s case support the notion that the liquidator always has locus standi. Section 386(4)(a) deals with the citation that the liquidator should use. Blackman, Jooste and Everingham suggest that in the winding up no distinction can be drawn between cases where the company has locus standi and cases where the liquidator has locus standi. ‘A company being wound up never has standing; standing is always conferred on the liquidator. A company in liquidation cannot itself litigate; the liquidator litigates on its behalf.’‘…Whenever a liquidator brings legal proceedings he asserts his own locus standi and exercises his own – not the company’s – powers, which powers are conferred upon him by section 386 of the Companies Act. Section 386(4)(a) empowers the liquidator ‘to bring or defend in the name or on behalf of the company any action or other legal proceedings of a civil nature’. He must bring ‘the proceedings in the name and on behalf of the company’ because he seeks an order in favour of the company and the costs he incurs are to be borne by the company…In this regard the liquidators position is similar to that of a creditor under section 32(a)(b) of the Insolvency Act 24 of 1936 who, if the trustee fails to take any proceedings to have dispositions set aside, may himself take such proceeding ‘in the name of the trustee’. It is the creditor who has locus standi, albeit that he brings the proceedings in the name of the trustee. He is required to bring the proceedings in the name of trustee because, if successful, recovery will be in favour of the trustee (own emphasis added).

24.	Insofar as Epstein AJ in Fey’s case held that the liquidators had no locus standi to issue the proceedings, I respectfully disagree on that point.

25.	In the present case (as in Fey’s case), the court is dealing with the locus standi of the liquidator in terms of Section 386(4)(a). If the liquidator nomine officio had locus standi at the inception of the proceedings, prescription would not apply.

26.	In the present case the plaintiff seeks an amendment which, in the ordinary course, would be granted. However, the issue in this case is, whether or not, when the summons was initially instituted, the plaintiffs were ‘a creditor’ in terms of the Prescription Act. If not, as the defendants contend, then the issuing of the original summons would not have interrupted prescription.

27.	In the present case (as in Fey’s case), the court is dealing with the locus standi of the liquidator in terms of Section  386(4)(a). If the liquidator nomine officio had locus standi at the inception of the proceedings, prescription would not apply.

28.	In my view the Section empowers the liquidator to bring proceedings. That empowerment vests the liquidator with locus standi. The requirement encompassed in Section 386(4)(a) relates to the citation to be used.  If this is done incorrectly, this does not detract from the locus standi of the liquidator.

29.	Further in cases where plaintiffs have been mis-described in their citation and have sought an amendment same has on several occasions been granted. In Four Tower Investments (Pty) Ltd v Andre’s Motors, Galgut DJP referred to several cases in which an amendment was granted where the mis-description of the true plaintiff had occurred.  The court held in such cases that the original summons had not been a nullity. Galgut DJP also referred to other cases in which the contrary had been held and with which he disagreed. Reference was also made by Galgut DJP to Rosner v Lydia Swanepoel Trust where Goldstone J held that it was not the real plaintiff that had changed, only its description.

30.	Galgut DJP held further:- ‘One of the grounds upon which it has been held that an amendment will cause prejudice that cannot be compensated for, is when the late grant of the amendment will deprive an opposing party of a defence which would otherwise have been available to it. An example which arises commonly is where the amendment, usually one whereby it is sought to change the name of the plaintiff or the defendant as cited, is applied for by the plaintiff at a stage when the claim would otherwise already have prescribed. In such situation, the prejudice is sometimes said to be that, if the amendment is granted, the summons commencing action would serve to interrupt the prescription ex post facto and thereby to revive the otherwise prescribed claim’.  

31.	In the Four Tower Investments case, the plaintiff was cited as Four Tower Investments (Pty) Ltd, which did not exist. The true plaintiff was Four Tower Investments CC. Galgut DJP held: ‘[28] in the instant case counsel for the respondent contends, in the first place, that because the plaintiff as cited was a non-existent entity, the summons was a nullity, which as such, cannot be amended and secondly and, in any event, that the issue and service of the summons, even if it was not a nullity, did not interrupt prescription for the reason, so he submits, that it was by or on behalf of Four Tower Properties CC that it had been issued and served. [29] As I have already said, however, if the citation of a party is nothing more than a mis-description, it should not matter whether the incorrect citation happens, on the face of it, to refer to a non-existing entity or indeed to an existing but uninvolved entity. [30] In the instant case the facts, which are not in dispute, show that the citation of the appellant as the plaintiff had indeed been nothing but a mis-description. It was the close corporation, the true creditor, that had instructed the attorney to issue summons on it behalf and it was the same close corporation that had prosecuted the action at all times’. 

32.	Galgut DJP referred to the judgement of Trollip JA in Neo and Cold Cathode Illuminations (Pty) Ltd v Ephron. It was emphasised by Trollip JA that what must be considered when determining whether prescription has been interrupted is the substance of the process and not merely its form. Galgut DJP went on further to state ‘Since then as I perceive it, decisions in the reported cases tend to show that there has been a gradual move away from an overly formal approach. It is a development which is to be welcomed if proper ventilation of the issues in a case is to be achieved, and if justice is to be done. In line with this approach, courts should therefore be careful not to find prejudice when none really exists.’

33.	I respectfully agree with the approach of Galgut DJP in this regard.

34.	In dealing with the plaintiff’s amendment and the question of prescription, and in granting the amendment, the court takes cognisance of the following:
a.	The authorities are divided on the point as to how the plaintiff should be cited; Hugo J’s remarks that there is a long-held practice that either citation can be used and Msimeki J’s similar finding, would find that the plaintiff as presently cited is permissible;
b.	Until this point is decided decisively, it would not be equitable for this court to refuse the amendment on the basis that the liquidators did not have locus standi when they brought the action and thus that such action did not interrupt prescription;
c.	It is clear that a company being wound up never has standing; the locus standi is always conferred on the liquidator who litigates on the company’s behalf. Therefore, at the time that proceedings were instituted the plaintiffs did have locus standi, although, according to the defendants (and some authorities) such citation was defective;
d.	This matter relates to claims of a company in liquidation brought by the liquidator; it would be to the prejudice of the general body of creditors and to the public interest if the strict interpretation of Section 386(4)(a), resulted in the claim having prescribed;
e.	The citation of the plaintiffs, even based upon a strict interpretation of section 386(4)(a), was a mere mis-description.

35.	The opposition to the application has not been frivolous or obstructive and defendants are therefore entitled to the costs occasioned by the amendment.

There will be an order in the following terms:

1.	The plaintiff is given leave to amend its particulars of claim as set out in the Notice in terms of Rule 28 dated 17 February 2011.
2.	The plaintiffs are to pay the costs occasioned by the 	amendment.

DATED AT JOHANNESBURG THIS 1st DAY OF NOVEMBER 2011

___________________
Weiner J

Date of hearing: 19 September 2011
Date of judgment: 1 November 2011
Counsel for the plaintiff: WJ Vermeulen SC and LW de Beer
Attorneys for the plaintiff: Vezi & de Beer Attorneys
Counsel for the defendant: PG Robinson SC and AC Botha
Attorneys for the defendant: Lowndes Dlamini