THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 555/08

In the matter between :

RONBEL 108 (PTY) LTD
Appellant
(Reg No 2003/026780/07)

and

SUBLIME INVESTMENTS (PTY) LTD
Respondent
(In liquidation)
(Represented by its Liquidator S L Anticevich NO)

Neutral citation:
Ronbel v Sublime (555/08) [2009] ZASCA 103 (18 September
2009)

Coram:
STREICHER, NUGENT, VAN HEERDEN JJA, HURT and
GRIESEL AJJA

Heard:
3 SEPTEMBER 2009

Delivered:
18 SEPTEMBER 2009

Summary:
Section 359(2) of Companies Act 61 of 1973 – no notice to
liquidator of intention to continue legal proceedings –
proceedings considered to be abandoned – court’s discretion to
otherwise direct – long delay in bringing application.

ORDER

On appeal from: High Court, Johannesburg (Bruinders AJ sitting as court
of first instance).

The appeal is dismissed with costs.

JUDGMENT

STREICHER JA (NUGENT, VAN HEERDEN JJA, HURT and GRIESEL
AJJA concurring)

[1] Upon registration of a special resolution by a company that it be
wound up voluntarily all civil proceedings against the company are
suspended until the appointment of a liquidator.1 A person who intends to
continue with such proceedings must, within four weeks after such
appointment, give three weeks’ notice of his intention to continue the
proceedings, to the liquidator, before doing so.2 If notice is not so given the
proceedings are considered to have been abandoned unless the court
otherwise directs.3 The appellant’s application for such a directive in
respect of an action instituted by Absa Bank Limited, which thereafter

1 Section 359(1) of the Companies Act 61 of 1973 provides:
‘(1) When the Court has made an order for the winding-up of a company or a special resolution for the
voluntary winding-up of a company has been registered in terms of section 200 –
(a)
all civil proceedings by or against the company concerned shall be suspended until the appointment
of a liquidator; and
(b)
. . ..’
2 Section 359(2)(a) provides:
‘(2)(a) Every person who, having instituted legal proceedings against a company which were suspended
by a winding-up, intends to continue the same . . . shall within four weeks after the appointment of the
liquidator give the liquidator not less that three weeks’ notice in writing before continuing or commencing
the proceedings.’
3 Section 359(2)(b) provides:
‘(b) If notice is not so given the proceedings shall be considered to be abandoned unless the Court
otherwise directs.’

ceded its claim to the appellant, was dismissed by the High Court,
Johannesburg, per TJ Bruinders AJ, and this is an appeal against his
judgment. The appeal is with the leave of the court below.

[2] Absa instituted action against Sublime Investments (Pty) Ltd,
formerly known as Capitol Hill Investments (Pty) Ltd. The matter was set
down for trial on 30 April 2003 but shortly before the trial was due to
commence, Sublime, by special resolution, resolved that it be voluntarily
wound up and such winding-up commenced upon the registration of the
resolution.4 As a result, in terms of s 359(1)(a) of the Companies Act 61 of
1973, the action was suspended pending the appointment of a liquidator.
Section 1 provides that unless the context otherwise indicates ‘liquidator’
includes a duly appointed provisional liquidator. But in Strydom NO v
MGN Construction (Pty) Ltd & another: In re Haljen (Pty) Ltd (in
liquidation) 1983 (1) SA 799 (D) at 806B-807H Booysen J held, correctly
in my view, that in the case of s 359 the context indeed indicates otherwise
and that, in terms of the section, proceedings are suspended pending the
appointment of a final liquidator. The correctness of this decision was not
challenged by either of the parties.

[3] A Mr Anticevich was appointed as provisional liquidator and
subsequently, on 1 July 2004, as final liquidator. During the period
approximately July to August 2003 Mr Loubser, in his capacity as an
employee of Absa, made enquiries about the assets of Sublime and was
informed by Anticevich:
(a)
The company was the owner of an immovable property with
improvements on it, namely a fuel filling station;

4 Section 352(1) provides:
‘A voluntary winding-up of a company shall commence at the time of the registration in terms of section
200 of the special resolution authorising the winding-up.’

(b)
The property was subject to a long term lease in favour of Zenex Oil
(Pty) Ltd;
(c)
All the future rent had been paid in advance, prior to the liquidation,
so that the company would at least for a substantial period of time not
receive any income in the form of rent;
(d)
The lease was registered and was for a period of 20 years of which
11 years remained;
(e)
The only future income of the company would be a contribution by
the lessee to the rates and taxes payable on the property;
(f)
A notarial bond was registered in favour of Zenex to secure its rights
and upon a sale of the property Zenex had a right of first refusal; and
(g)
Apart from the property, small outstanding debts appeared to be the
only other assets.

[4] According to the statement of affairs in terms of s 363 required of the
directors of Sublime, dated 9 April 2003, the liabilities of the company
were reflected as R2 720 651. The assets were reflected as R120 030
comprising the immovable property at a value of R90 000 and outstanding
book debts of R30 030. Save for an additional liability of R5 940 in respect
of arrear salaries these were also the assets and liabilities according to the
final liquidator’s report dated 12 July 2004.

[5] No claims were proved at the first meeting of creditors arranged for
19 May 2004. Absa decided to refrain from submitting and proving a
claim, principally because, if it did submit a claim, it, in the light of the
information at its disposal, could become liable for a contribution towards
the administration costs. However, towards the middle of 2004 the
appellant expressed an interest in acquiring Absa’s claims and entered into
negotiations with Absa regarding the acquisition of its claims. Towards the
end of October 2005 they reached agreement that –

(a)
Absa would cede to the appellant all of its rights, title and interest in
and to the claims held by Absa against the company.
(b)
In consideration for the cession the appellant would pay Absa an
amount of R250 000.
(c)
A claim would be prepared in the name of Absa and submitted for
proof.

[6] Pursuant to the agreement Absa’s claims were ceded to the appellant
on 31 October 2005 and at a meeting of creditors held on 24 May 2006 the
appellant submitted Absa’s claims supported by affidavits deposed to by
Loubser on behalf of Absa for proof. The claims were opposed by Mr van
Zyl, the company’s director, and member on the grounds that they had been
ceded to the appellant before they were submitted for proof, that the claims
were in terms of s 359(2)(b) considered to be abandoned; that the claims
had become prescribed and that the quantum of the claims could not be
established by a certificate of indebtedness.

[7] As set out above, s 359(2) provides as follows:
‘(a)
Every person who, having instituted legal proceedings against a company which
were suspended by a winding-up, intends to continue the same . . . shall within four
weeks after the appointment of the liquidator give the liquidator not less than three
weeks’ notice in writing before continuing or commencing the proceedings.
(b)
If notice is not so given the proceedings shall be considered to be abandoned
unless the Court otherwise directs.’
It is common cause that Absa had not given the liquidators notice in terms
of s 359(2)(a) of an intention to continue the proceedings. Consequently the
proceedings (not the claims) must be considered to have been abandoned
unless a court otherwise directs.

[8] As a result of the opposition to the Absa claims the appellant
launched the application which is the subject matter of this appeal, in terms

of which it applied to be substituted for Absa in the action instituted by
Absa and for a direction in terms of s 359(2)(b) that the proceedings should
not be considered to have been abandoned.

[9] The court below found that the deliberate decision by Absa not to
notify the liquidator that it intended to proceed with the action constituted
evidence that the action had been abandoned and held that the appellant, in
the circumstances, had failed to provide a satisfactory explanation for not
having notified the liquidator of its intention to continue with the
proceedings within the time period prescribed in terms of s 359(2)(b).

[10] The appellant referred to the fact that the allegation in its founding
affidavit that the liquidator had not been prejudiced by Absa’s failure to
give the required notice is not disputed by the respondent and submitted
that, in the circumstances, the court below should have exercised its
discretion in its favour. In this regard the appellant referred to Baskin v
Levey & others NNO 1967 (3) SA 121 (W) at 123F-124A where Boshoff J,
referring to s 118 of the Companies Act 46 of 1926, the predecessor of s
359 said:
‘The purpose of this section is to prevent a newly-appointed liquidator from being
embarrassed by an action before he has had an opportunity of considering the matter,
and to prevent costs being incurred by the institution of proceedings between the time
when the winding-up order has been made and the liquidator has been appointed;
Randfontein Extension Ltd v South Randfontein Mines Ltd and Others 1936 WLD 1 at
p 3. If  no such notice has been given to a liquidator, proceedings are to be considered
abandoned to bring about finality so that the liquidator may be in a position to report to
the creditors of his company as accurately as possible on the state of and the claims
against the company. It would, therefore, seem that a liquidator would, generally
speaking, be entitled to oppose an application for the purging of a default if he can show
that he had been prejudiced by the default or that the excuse advanced by the applicant
is not bona fide and reasonable or, if it is necessary, to insist on terms on which an
applicant should be allowed either to continue or to commence proceedings.’

[11] Section 118 of the Companies Act 46 of 1926 provided that in
default of a notice of intention to continue proceedings suspended by a
winding-up, ‘the proceedings shall be considered to be abandoned unless
the Court finds that there was a reasonable excuse for the default’. Having
omitted the requirement of a reasonable excuse in s 359(2)(b) it is clear, in
my view, that the legislature intended to give a court an unfettered
discretion to decide whether or not to direct that proceedings should not be
considered to be abandoned. In exercising this discretion a court should
naturally have regard to the interests of all interested parties being the
creditors, liquidator and members.5

[12] In Umbogintwini Land & Investment Co (Pty) Ltd (in liquidation) v
Barclays National Bank Ltd & another 1987 (4) SA 894 (A) Viljoen JA
said in respect of s 359(2)(b):6
‘The provision was designed, in my view, to afford the liquidator an opportunity,
immediately after his appointment, to consider and assess, in the interests of the general
body of creditors, the nature and validity of the claim or contemplated claim and how to
deal with it – whether, for instance, to dispute or settle or acknowledge it.’

[13] Although no prejudice is alleged by the appellant the liquidator had,
contrary to the interests of the general body of creditors of the appellant,
not been given an opportunity immediately after his appointment to
consider and assess the nature and validity of Absa’s claim against the
appellant. The reason why the liquidator had not been afforded that
opportunity is that Absa decided not to proceed with the proceedings and
not to prove a claim against Sublime for fear of being held liable for a
contribution. When Absa took that decision information as to the assets and
liabilities of Sublime was available and known to Absa. Only about two

5 See P M Meskin Henochsberg on the Companies Act Vol 1 5 ed (2008) p 761.
6 At 910H-I.

years after the time for giving notice of intention to continue with the
proceedings had expired, was an attempt made by the appellant, not Absa,
to prove the claims. The application for a directive followed more than six
months later.

[14] Absa took a deliberate decision not to proceed with the action and
there is no allegation that it changed that decision for as long as it had an
interest in the claim against Sublime, ie up to the date of the cession of that
claim 16 months after the appointment of a final liquidator. Absa does not
deny having had knowledge of the provisions of s 359(2)(b) and must be
assumed to have had such knowledge. These facts justify the inference that
Absa in fact abandoned the action. The appellant submitted that the fact
that Absa entered into negotiations with the appellant indicated that it had
not abandoned the action. In my view the negotiations may be an indication
that Absa had not abandoned its claims, not that Absa had not abandoned
the action. If Absa had not abandoned the action it would have considered
it prudent to give notice in terms of s 359(2)(a). But even if Absa had not in
fact abandoned the action there is no reason why the court below should
have exercised its discretion in favour of an applicant (the appellant) who
wishes to proceed with an action which the plaintiff in that action (Absa)
had decided not to proceed with some two and a half years previously.

[15] The appeal should therefore be dismissed. But it should be added
that the court below said in its judgment that there was further evidence
that ‘the claim’ had been abandoned. Whether or not the claim had been
abandoned was not an issue in the case and the court below probably meant
to say that there was further evidence that the action had been abandoned.

[16] For these reasons the appeal is dismissed with costs.

__________________
P E STREICHER
JUDGE OF APPEAL

Appearances:

For Appellant:
M P van der Merwe

Instructed by

Bieldermans Inc, Johannesburg

Schoeman Maree Inc, Bloemfontein

For Respondent:
M Smit

Instructed by

Melamed & Hurwitz Inc, Johannesburg

Rosendorff Reitz Barry, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
18 September 2009
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal.

* * *
RONBEL 108 (PTY) LTD v SUBLIME INVESTMENTS (PTY) LTD

The SCA today dismissed an appeal against a judgment of the High Court,
Johannesburg.

After Absa had instituted action against the respondent for payment of an
amount alleged to be due to it, the respondent was placed under liquidation.
Absa, for fear of becoming liable for a contribution towards the costs of
administration of the respondent, decided not to proceed with the legal
proceedings. Consequently Absa did not give notice to the liquidator of an
intention to continue the proceedings. As a result Absa is deemed to have
abandoned the proceedings unless a court otherwise directs. Subsequent to
having decided not to proceed with the proceedings Absa ceded its claim
against the respondent to the appellant. The appellant thereafter applied to the
High Court for a directive that the proceedings are not to be considered to

have been abandoned.

The SCA held that the High Court correctly dismissed the application. It held
that the facts justified the inference that Absa in fact abandoned the
proceedings and that there was in any event no reason why the High Court
should have exercised its discretion to declare that proceedings are not
considered to have been abandoned in favour of an applicant (the appellant)
who wishes to proceed with an action which the plaintiff in that action (Absa)
had decided not to proceed with, some two and a half years previously.