REPORTABLE
Republic of South Africa 
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Before: The Hon. Mr Justice Binns-Ward

In the matter between:

and
WEDGEWOOD VILLAGE GOLF COUNTRY

JUDGMENT DELIVERED: 16 NOVEMBER 2011

BINNS-WARD, J:

[1] In this matter application was made as long ago as 28 December 2010 for an order winding up the respondent company. By agreement between the applicant, which is an admitted creditor of the respondent, and the respondent, the application was provisionally withdrawn against an undertaking by the respondent to settle the applicant's claim in monthly instalments.   The agreement allowed for the reinstitution of the winding up proceedings on the same papers in the event of the respondent defaulting on its payment undertaking. In the event the respondent did default and the proceedings were re-instituted. The respondent delivered papers opposing the applicant's winding up application. The opposition to the winding up application was advanced on the basis that there was a reasonable prospect of the company being able to obtain alternative finance to complete the golf course residential development in which it had been engaged in the Port Elizabeth area. (The residential development appears to have been the respondent company's only business enterprise.) It was contended on behalf of the respondent that the court should exercise its discretion against placing the company in liquidation even if a case for its winding up had been made out.

[2] Some time before the winding up application was due to be heard, the respondent's attorney of record withdrew as such. Thereafter, another of the respondent's creditors, Nedbank Ltd, applied for and was granted leave to intervene in the proceedings as an applicant. The bank's application for the winding up of the respondent was brought contingently on the failure for any reason of the applicant's application.
[3] When the hearing of the matters was called on 24 October 2011 there was no appearance for the respondent. The hearing could not proceed, however, until the effect on the current proceedings of an application instituted on 16 August 2011 by Mr and Mrs William Koen, who are the owners of a residential erf purchased from the respondent on the golf course estate, for an order placing the respondent under supervision for business rescue purposes had been determined. This because of the provisions of s 131 (6) of the Companies Act 71 of 2008.

[4]    Section 131 (6) of the 2008 Companies Act provides as follows:

If liquidation proceedings have already been commenced by or against the company at the time an application is made in terms of subsection (1), the application will suspend those liquidation proceedings until-
(a) the court has adjudicated upon the application; or
(b) the business rescue proceedings end, if the court makes the order applied for.
Business rescue proceedings end in the manner provided in terms of s 132(2) of the Act. One of the ways in which business rescue proceedings can end is the conversion by the court of the business rescue proceedings to liquidation proceedings.

[5] The application for an order in terms of s 131(1) of the 2008 Companies Act by Mr and Mrs Koen was brought in the Port Elizabeth High Court. It has been set down for hearing in that court on 9 February 2012; apparently the earliest date for a hearing that could be secured. The Koens' application is opposed by the applicant for the respondent's winding up in this court and also by Nedbank. A preliminary issue in that opposition is the contention by the applicant and Nedbank that the Port Elizabeth High Court does not have jurisdiction to determine the Koens' application.

'court', depending on the context, means either-

(aa) a designated judge of the High Court that has jurisdiction over the matter, if the Judge President has designated any judges in terms of subsection (3); or
(bb) a judge of the High Court that has jurisdiction over the matter, as assigned by the Judge President to hear the particular matter, if the Judge President has not designated any judges in terms of subsection (3).

[10] Under the 1973 Companies Act express provision was made in respect of which court had jurisdiction. As at the date of the repeal of the Act, s 12(1) of Act 61 of 1973 provided:

'First there is the search for the appropriate ratio jurisdictionis; and then the court asks whether it can give an effective judgment.... [and] neither of these is sufficient for jurisdiction, but both are necessary for jurisdiction.'.

Each company or external company must-
(a) continuously maintain at least one office in the Republic; and
(b) register the address of its office, or its principal office if it has more than one office-

(aa) a company, by providing the required information on its Notice of Incorporation; or
(bb) an external company, by providing the required information when filing its registration in terms of subsection (1); and

Section 23(4) provides:

A change contemplated in subsection (3)(b)(ii) takes effect as from the later of-
a)	the date, if any, stated in the notice; or
b)	five business days after the date on which the notice was filed.

[22] Questions of interpretation of the 2008 Companies Act must be undertaken with the provisions of ss 5 and 7 in mind. In particular, s 5(1) provides that the Act must be interpreted to give effect to the purposes set forth in s 7. In determining the effect of s 23 of the Act on the question of a court's jurisdiction it seems to me that the provisions of s 7(k) and (I) have a bearing. They provide:

The purposes of this Act are to-

(k) provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders; and
(I) provide a predictable and effective environment for the efficient regulation of companies.

[26] I also consider that the effect of the statutory provisions, construed in the manner in which I hold that the legislature intended, is directed at minimising the prospect of courts having to determine factual disputes on points of jurisdiction concerning companies. The place of a company's registered office is objectively ascertainable. Any dispute as to whether the registered office should be at a different address by reason of an argument that the actual location of the company's principal office is elsewhere is a matter that is not - primarily at least - intended to be one to concern the courts; being a matter, if it arises, falling instead to be determined and corrected administratively by the Companies and Intellectual Property Commission under the provisions of Part D of Chapter 7 of the 2008 Act. It is to be hoped that the prospect of administrative fines and criminal sanctions in respect of failures by companies or their directors to comply with the provisions of the Act and any compliance notices issued thereunder by the Commission will encourage companies to comply faithfully with the provisions of s 23(3) of the Act.
[27] I have thus concluded that the bank's contention that business rescue proceedings have not been competently instituted in the court having jurisdiction is sound and that the winding up application before this court consequently has not been suspended by virtue of s 131(6) of the 2008 Companies Act. I should add that, to the extent that it might otherwise have been relevant, it is clear in any event that the company cannot have had its principal place of business at the address in Port Elizabeth contended for by Mr and Mrs Koen at the time they instituted proceedings there. And that on any approach that had been the case since at least February 2011.

[28] The evidence adduced by Mr and Mrs Koen goes to the use of the office at the Port Elizabeth address only until February 2011. The property at the Port Elizabeth address was registered in the name of a different company, Grindstone Investments 127 (Pty) Ltd, which like the respondent company, is or was a member of the so-called 'Pinnacle Group', both companies being wholly, albeit indirectly, owned subsidiaries of Pinnacle Point Group Limited. The property was sold to a third party in April 2011 and transferred to that party in July 2011. The witness who deposed to an affidavit on behalf of the Koens to the effect that the Port Elizabeth address was the principal place of business of the company, one David Miller, stated that he was the respondent's general manager and national sales manager at all material times. The witness testified that his work had required him to relocate from Cape Town to Port Elizabeth. He, however, also averred that in February 2011 he returned to live in Cape town. He signally failed to explain how he was able to do that if, as he had stated, his duties required him to be at the company's principal place of business. Nor did he deal with the sale of the property by the respondent's associate company shortly after his return to Cape Town.   Moreover, the trial balance for the respondent company for the period 1 March 2011 to 31 July 2011 contains no indication of the payment of rental by the respondent to the third party purchaser of the property in July 2011. Significantly, the trial balance also contains no indication that any salaries or wages were paid by the respondent company during the relevant period; something which strongly suggests that Mr Miller's return to Cape Town in February coincided with a cessation of operations by the company. Would the company's directors, all of whom are based in Cape Town, have travelled to Port Elizabeth to hold their board meetings when the company no longer had a physical address there? The Koens have put up no evidence which might support the occurrence of such unlikely conduct. The suggestion that the directors ever used to meet in Port Elizabeth to conduct the business of the company is in dispute.
[29] Mr Stefan Braun, who was a director of the respondent company and of its immediate holding company, Pinnacle Point Investments (Pty) Ltd (now in liquidation), from September 2009 to December 2010, has confirmed that all the directors' decisions were taken in Cape Town and the that central administration of the respondent company occurred here, where the central administration of the rest of the Pinnacle Group was also undertaken. Mr Braun confirmed that the respondent company's accounting books and records and its minute books were kept at Cape Town. The company's current banking account was conducted at Nedbank in Cape Town and all the signatories on that account resided in Cape Town. Braun stated that during his period as a director there was no occasion on which all the directors were in Port Elizabeth together, and that there had been only one occasion on which he had been there with even one of the other directors. The purpose of his single joint visit with a co-director to Port Elizabeth had been 'a factfinding mission' at the commencement of their respective period of involvement in the respondent company's business, and not for the purpose of a board meeting

Order

(b) The winding up application is postponed until Monday, 28 November 2011 at 9.30 am or as soon thereafter as the matter may be heard by me, then to be disposed of as set out in paragraph [33] of this judgment.   

A.G. BINNS-WARD
Judge of the High Court