THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable
Case No: 85/2017

In the matter between:

CITY CAPITAL SA PROPERTY
HOLDINGS LIMITED                                                                 APPELLANT
and

CHAVONNES BADENHORST
ST CLAIR COOPER NO                                                FIRST RESPONDENT
JOHANN DEMETRIUS APPIES NO                       SECOND RESPONDENT
SADECK AHMED NO                                                   THIRD RESPONDENT

Neutral citation: City Capital SA Property Holdings Ltd v Chavonnes
Badenhorst St Clair Cooper NO (85/2017) [2017] ZASCA 177 (1 December 2017)

Coram:
Leach and Saldulker JJA and Plasket, Tsoka and Schippers
AJA

Heard:

20 November 2017

Delivered:
1 December 2017

Summary:
Companies Act 71 of 2008 : when making an order under
s 20(9)(a), a court has no power to order a person to act as the liquidator of a
company : only the Master may do so : relief sought by appellant having no
practical effect : for this reason appeal dismissed.

_______________________________________________________________

ORDER
__________________________________________________________________

On appeal from: Western Cape Division , Cape Town (Van Rooyen AJ sitting as
court of first instance):
Paragraph 2 of the order of the court a quo is set aside and replaced with the
following:
„2(a)  The counter application of the intervening party for the relief in paragraph
3.1 and 3.2 of the notice of counter-application is dismissed, as such relief is
unnecessary.
(b) There is no order as to the costs of the counter-application.‟
2 Save as aforesaid, the appeal is dismissed with costs, including the costs of two
counsel.
_________________________________________________________________
JUDGMENT
__________________________________________________________________

Schippers AJA (Leach and Saldulker JJA and Plasket and Tsoka AJJA
concurring):

[1] On 8 July 2014 the Western Cape High Court made an order that five
separate companies, all of which had been wound up, were declared „a single entity
as envisaged by ss 20(9), 22, 141(2)(c) and 141(3) of the Companies Act 2008‟;
that the five companies would henceforth be known as the Dividend Investment
Scheme; and that the respondents, who had  already been appointed as liquidators
in the winding-up of two of the five companies, would be the liquidators of the
Dividend Investment Scheme.

[2] The central issue in this appeal is whether the order appointing the existing
liquidators of the two companies as liquidators of the Dividend Investment
Scheme, was competent. The appellants say that it was not:  they contend that only
the Master of the High Court (the Master) has the power to appoint a liquidator and
consequently, the order is a nullity.

Factual background
[3] The matter arises from a property syndication scheme conducted by the
Dividend Investment Group, which consisted of Div-Vest Holdings (Pty) Ltd (Div-
Vest Holdings)] and its two wholly-owned subsidiaries.

[4] The Dividend Investment Group promoted some 70 syndications. The
typical property syndication was structured as follows. Members of the public
acquired 100% of the shareholding in a holding company. The holding company
usually acquired about 85% of the shareholding in a property owning company
with the balance of 15% of the shareholding held by one of the promoter
companies. The property owning company would acquire a commercial property
with funds borrowed mainly from the holding company and in some instances, a
financial institution.  The scheme was promoted on the basis that the property
would be sold at a profit. This would allow the property owning company to repay
the holding company. The profit would then be distributed as a dividend to the
shareholders in the holding company and the remaining minority shareholder.

[5] City Capital contends that it acquired the minority shareholding of Div-Vest
Holdings in the property owning companies and that it is a creditor of those
companies because it made loans to them. This is in dispute, but need not be
decided for purposes of this judgment.

[6] The two property syndications in issue in this case relate to a single
commercial property development, a shopping centre called „Zambezi Retail Park‟
in Pretoria. This shopping centre was developed in two phases involving a single
sectional title scheme. Two property owning companies, Div-Prop 11 (Pty) Ltd
(Div-Prop 11) and Div-Prop 12 (Pty) Ltd (Div-Prop 12), each owns about half of
Zambezi Retail Park.

[7] The shares in Div-Prop 12 are held as follows: 45.5% of the shares are held
by Blue Beacon Investments 52 (Pty) Ltd (Blue Beacon Investments 52) as one of
the holding companies; 44.5% by Div-Hold Income 12 (Pty) Ltd (Div-Hold
Income 12) as the other holding company; and 10% allegedly by City Capital (this
is in dispute). The shares in Blue Beacon Investments 52 are held by 89 investors
and in Div-Hold Income 12, by 125 investors.

[8] The shareholding in Div-Prop 11 is as follows: 90% of the shares are held by
Div-Hold 11, the holding company; and 10% allegedly by City Capital (this is also
in dispute). The shares in Div-Hold 11 are held by 201 investors.

[9] In February 2013 the three holding companies, Blue Beacon Investments 52,
Div-Hold Income 12 and Div-Hold 11, applied for the winding-up of Div Prop 11
and Div-Prop 12. Provisional winding-up orders were granted and in March 2013
the Master of the High Court appointed Mr C Cooper (the first respondent), Mr G
Gainsford and Mr J Appies (the second respondent) as the provisional liquidators
of Div-Prop 11. Subsequently, Mr Cooper and Mr Appies were appointed as final
liquidators of the company. Mr Cooper and Mr S Ahmed (the third respondent)
were appointed as the provisional liquidators and later final liquidators, of Div-
Prop 12.

[10] In March 2013, the board of directors of Blue Beacon Investments 52, Div-
Hold Income 12 and Div-Hold 11 each adopted resolutions in terms of s 129(1) of
the Companies Act 71 of 2008 (the 2008 Act), placing these companies in business
rescue. Mr J Van Rensburg was appointed the business rescue practitioner of all
three companies. In June 2014, he applied to court for an order discontinuing the
business rescue proceedings and placing all three companies in liquidation, in
terms of s 141(2)(a)(ii) of the 2008 Act.

[11] In an application heard on the same day as the liquidation applications, Mr
Van Rensburg successfully applied, inter alia, for an order declaring that Div-Hold
11, Div-Hold Income 12 and Blue Beacon Investments 52, together with Div-Prop
11 and Div-Prop 12 (both in liquidation), „be declared a single entity as envisaged
by ss 20(9), 22, 141(2)(c) and 141(3) of the 2008 Companies Act‟ (the s 20(9)
application).

[12] The grounds for the s 20(9) application were essentially the following. The
five companies were part of an unsustainable syndication scheme which had
engaged in reckless trading and defrauded members of the public. The use of the
companies, or the acts by or on behalf of them, constituted an unconscionable
abuse of their juristic personality, justifying an order that they should not be
regarded as juristic persons as contemplated in s 20(9) of the 2008 Act. Members
of the public had invested some R140 million into Zambezi Retail Park, whereas
the property was worth only about R45 million, leaving investors with a loss of
nearly R100 million. The syndication value of the property was about R125.5
million, its purchase price was some R107.3 million, and the promoter of the
scheme had made a profit of more than R19 million, which immediately reduced
the value of the investors‟ money. In addition, investors were liable for about R10

million raised through a mortgage bond. The only way they would recover
anything in the liquidation proceedings was if the promoter and other companies in
the scheme were held liable by holding the persons behind the promoter personally
responsible for the losses incurred.

[13] Zambezi Business Park was run as a single indivisible commercial
enterprise. The corporate identity of the five companies had not been maintained,
their financial affairs were not kept apart, and funds flowed to and from the various
companies as investors were paid dividends promised to them. It was therefore
contended that the five companies had to be treated as a single entity and the
liquidators of Div-Prop 11 and Div-Prop 12 should be appointed as the liquidators
of the Dividend Investment Scheme because they had extensive knowledge of the
scheme, had already incurred costs, and their appointment was to the advantage of
creditors.

[14] On 8 July 2014, Samela J made the following order in the s 20(9) application
(the July order).
„1.
Simultaneously with the liquidation orders pertaining to the first to third respondents
(under case number 10687/2014, 10688/2014 and 10689/2014), the first to third respondents,
Div-Prop 11 (Pty) Ltd and Div-Prop 12 (Pty) Ltd [are] declared a single entity as envisaged by
Sections 20(9), 22, 141(2)(c) and 141(3) of the Companies Act 2008;
2.
The five entities referred to in paragraph 1 above shall henceforth be known as the
“Dividend Investment Scheme” to be administered as a company in continuance of the
liquidation proceedings of the 4th to 7th Applicants;
3.
It is declared that the appointed liquidators in the estates of the 4th to 7th applicants to be
the appointed liquidators of the combined company (“the Dividend Investment Scheme”).‟

[15] After the July order was granted a dispute arose between the respondent and
the Master as to whether a first meeting of creditors had to be held in the estate of
the single entity, the Dividend Investment Scheme. The Master‟s position was that
the Scheme was a new entity, and the fact that it had been declared a single entity
did not prevent him from exercising his power to summon the first meeting of
creditors in terms of s 364 of the Companies Act 61 of 1973 (the 1973 Act); and
that all interested parties, including investors, creditors and shareholders could in
this way nominate and vote for liquidators of their choice.1

[16] The respondents‟ stance was that the process of liquidation in relation to
Div-Prop 11 and Div-Prop 12 included the single entity, which merely had to
continue. They said that if the liquidation had to start afresh, numerous practical
problems would arise. A first meeting of creditors had already been held in the
Div-Prop 11 and Div-Prop 12 estates at which members and creditors (including
the holding companies) had already proved claims, certain resolutions were
adopted, and the respondents had already been appointed as liquidators of those
two companies. They had already commenced with s 417 and s 418 enquiries

1  Section 364 of the 1973 Act provides:
„Master to summon first meetings of creditors and members and purpose thereof
(1) As soon as may be after a final winding-up order has been made by the Court or a special resolution for a
creditors' voluntary winding-up of a company has been registered in terms of section 200, the Master shall summon-

(a)   a meeting of the creditors of the company for the purpose of-
(i)   considering the statement as to the affairs of the company lodged with the Master under section 363;
(ii)   the proof of claims against the company; and
(iii)   nominating a person or persons for appointment as liquidator or liquidators; and
(b)   a meeting of the members of the company or, in the case where the winding-up concerns a company limited by
guarantee, a meeting of the contributories in respect of that company, for the purpose of-
(i)   considering the said statement as to the affairs of the company; and
(ii)   nominating a person or persons for appointment as liquidator or liquidators,
unless the company in general meeting, when passing a resolution provided for in section 349, has already disposed
of the matters referred to in subparagraphs (i) and (ii).
(2) Meetings of creditors under this section shall be summoned and held as nearly as may be in the manner provided
by the law relating to insolvency, and meetings of members or contributories in the manner prescribed by regulation:
Provided that, in the case of a meeting of creditors, the Master may direct the company concerned or the provisional
liquidator to send a notice of such meeting by post to every creditor of the company.‟

under the 1973 Act. The respondents contended that in these circumstances, there
would be uncertainty about the status of: the claims proved and the resolutions
adopted at the first meeting of creditors; the s 417 and 418 enquiries; and their
appointment as liquidators of the two companies.

[17] The dispute could not be resolved, and the respondents applied to the
Western Cape High Court for an order directing the Master to comply with the July
order. Mr Cooper made the founding affidavit in that application and it is
necessary to refer to paragraphs 14, 16 and 25 thereof because they were
incorporated in the order issued on 3 December 2014 (the December order),
pursuant to the application. Those paragraphs read as follows:

‟14.
It was always our intention and the intention of the business rescue practitioner that the
process of liquidation should merely continue.
16.
What was envisaged is that there would be a second meeting of the combined entity
“Dividend Investment Scheme”, but for some or other reason the Master differs from this
interpretation of the court order.
25.
Dealing with the problems to be encountered by the Applicants should they have to go
back to a first meeting can be summarised as follows:
25.1
The Dividend Investment Scheme consisted of approximately 166 different companies
representing approximately 70 syndications.
25.2
It is intended to join the companies to the Dividend Investment Group and the applicants
believe that at the end of the day all 166 companies will be liquidated and will be
declared to be part of the same scheme.
25.3  If the Master is correct in his attitude then that would mean that every time companies are
joined to the dividend investment scheme the position will revert to a time before the first
meeting and we would have various first meetings of creditors.
25.4
In the meantime, the liquidation process, as we proceed, is being held up for instance if a
second meeting of creditors was held tomorrow then the liquidators would be entitled to

sell Zambezi Retail Park (the property owned by the Investment Scheme) and pay
investors their dues [and as] far as is possible, bearing in mind that the total syndicated
value of Zambezi Retail Park was some R110 000 000,00 (approximately 145 investors),
but the best offer received to date is approximately R54 000 000,00 provided that a
problem with the electricity account is sorted out with the City of Tshwane (litigation is
also underway in that matter).
25.5
This would militate against the effective administration of the various estates who will
come into the fold as soon as we get to those companies.
25.6
The question we pose to our attorneys of record and counsel is that what would happen if
the estate proceeds to a second meeting of creditors and the resolutions of creditors are
passed and thereafter more companies are joined to the scheme.
25.7
How can the status of the liquidation then revert to the position as it was before the first
meeting of creditors and what happens to the resolutions which [were] taken at the
second meeting of creditors.‟

[18] On 3 December 2014 the matter came before Meer J who issued the
December order. It reads:
„The respondent is ordered to immediately comply with the order of this court dated 8 July 2014
which is attached to the notice of motion as annexure “A” [the July order] and interpret the order
as set out in paragraph 14, 16 and 25 of the founding affidavit.‟

[19] In May 2015 City Capital launched a counter-application in the court a quo
in which it sought, inter alia, the reconsideration and setting aside of both the
orders granted on 8 July 2014 and 3 December 2014 in their entirety, in terms of
rule 6(12)(c) of the Uniform Rules of Court.2 Subsequently, in the court a quo and
in argument before us, City Capital confined the relief sought to paragraph 3 of the
July order, ie that the court was not empowered to appoint the respondents as

2 Rule 6(12)(c) reads:
„A person against whom an order was granted in such person's absence in an urgent application may by notice set
down the matter for reconsideration of the order.‟

liquidators of the Dividend Investment Scheme. It contended that paragraph 3 was
a nullity, and consequently that the December order should suffer the same fate as
it purported to give effect to the July order.

[20] The court a quo dismissed the counter application in October 2016. In
essence it held that paragraph 3 of the July order was a necessary consequence of
paragraphs 1 and 2 thereof; that read contextually, it did not constitute the
appointment of liquidators contemplated in Chapter 14 of the 1973 Act; and that as
a result, the December order was not impugnable. This appeal is with the leave of
the court a quo.

[21] Before dealing with the issues in this appeal, it is necessary to address a
preliminary point taken by the respondents for the first time at the hearing of the
matter, namely that City Capital had no standing to challenge paragraph 3 of the
July order, and consequently, the December order. The point may be dealt with
briefly. City Capital alleged that it had acquired the minority shareholding of Div-
Vest Holdings in the property owning companies and that it was a creditor of those
companies because it had advanced loans to them. This, the respondents submitted,
did not give City Capital standing to challenge the appointment of liquidators to
the holding companies, namely Div-Hold 11, Div-Hold Income 12 and Blue
Beacon Investments 52.

[22] The question whether a litigant‟s interest is sufficient to clothe it with
standing must be determined in the light of the factual and legal circumstances of
the case.3 The founding affidavit in the counter-application states that City Capital

3 JDJ Properties CC & another v Umngeni Local Municipality & another [2012] ZASCA 186; 2013 (2) SA 395
(SCA) para 27.

is a shareholder and creditor in all the respondent companies referred to in that
application and, accordingly, that it has a direct and substantial interest in the relief
sought. It appears that those allegations were not challenged.  But in any event,
City Capital was not given an opportunity to deal with the point in its papers, and it
is impermissible for the respondents to raise it now.

The issues
[23] Against the above background, the first issue is whether paragraph 3 of the
July order, in terms of which the court ostensibly appointed the liquidators of the
single entity, the Dividend Investment Scheme, was competent. Put differently, can
a court order a person to act as the liquidator of a company when making an order
under s 20(9) of the 2008 Act? If the answer to that question is „no‟, then the
second issue arises: whether, in the circumstances, that finding would have any
practical effect as contemplated in s 16(2)(a)(i) of the Superior Courts Act 10 of
2013, given that the Master had on 10 December 2014 appointed the liquidators of
the single entity.

[24] As stated above, City Capital abandoned its attack on paragraphs 1 and 2 of
the July order, in terms of which the five companies in liquidation were declared a
single entity (the Dividend Investment Scheme) to be administered as a company
in continuance of the liquidation proceedings of Div-Prop 11 and Div-Prop 12. It is
thus unnecessary to consider the proper construction and application of s 20(9) of
the 2008 Act in any detail, which in any event was not argued before us.
Consequently, s 20(9), which appears to supplement the common law in relation to

piercing the corporate veil,4 is construed only in the context of whether it
authorises the appointment of a liquidator.

[25] Section 20(9) of the 2008 Act provides:
„If, on application by an interested person or in any proceedings in which a company is involved,
a court finds that the incorporation of the company, any use of the company, or any act by on
behalf of the company, constitutes an unconscionable abuse of the juristic personality of the
company as a separate entity, the court may-
(a)
declare that the company is to be deemed not to be a juristic person in respect of any
right, obligation or liability of the company or of a shareholder of the company or, in the case of
a non-profit company, a member of the company, or of another person specified in the
declaration; and
(b)
make any further order that the court considers appropriate to give effect to a declaration
contemplated in paragraph (a).‟

[26] It is settled that words in a statute must be given their ordinary meaning
unless to do so would result in an absurdity. Statutory provisions should always be
interpreted purposively, in context and consistently with the Constitution.5 Stated
differently, when interpreting legislation, what must be considered is the language
used; the context in which the relevant provision appears; the apparent purpose to
which it is directed; and the material known to those responsible for its
production.6

[27] It is trite that a company is a legal entity distinct from its shareholders. It has
rights and liabilities of its own, separate from those of its shareholders. Its property

4 P Delport and Q Vorster Henochsberg on the Companies Act 71 of 2008 (Service Issue 13, 2017) Vol 1 at 100(3).
5 Cool Ideas 1186 CC v Hubbard & another [2014] ZACC 16; 2014 (4) SA 474 (CC) para 28.
6 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) para
18.

is its own and not that of its shareholders.7 This follows from the separate legal
existence with which a company is by statute endowed.8 Thus, in The Shipping
Corporation of India Ltd 9 Corbett CJ said:
„It seems to me that, generally, it is of cardinal importance to keep distinct the property rights of
a company and those of its shareholders, even where the latter is a single entity, and that the only
permissible deviation from this rule known to our law occurs in those (in practice) rare cases
where the circumstances justify “piercing” or “lifting” the corporate veil. And in this regard it
should not make any difference whether the shares be held by a holding company or by a
Government. I do not find it necessary to consider, or attempt to define, the circumstances under
which the Court will pierce the corporate veil. Suffice it to say that they would generally have to
include an element of fraud or other improper conduct in the establishment or use of the
company or the conduct of its affairs. In this connection the words “device”, “stratagem”,
“cloak” and “sham” have been used …‟

[28] Section 20(9) of the 2008 Act provides a statutory basis for piercing the
corporate veil. On its plain wording, s 20(9) permits a court to disregard the
separate juristic personality of the company where its incorporation, use or an act
performed by or on its behalf „constitutes an unconscionable abuse of the juristic
personality of the company as a separate entity‟. The term „unconscionable abuse‟
is not defined in the 2008 Act and must therefore be given its ordinary meaning.

[29] The meaning of „unconscionable‟ in the Oxford English Dictionary includes,
„Showing no regard for conscience . . . . Unreasonably excessive . . . . egregious,
blatant . . . . unscrupulous.‟ It is in my view undesirable to attempt to lay down any

7 Salomon v A Salomon & Co [1897] AC 22 at 51, affirmed in Dadoo Ltd & others v Krugersdorp Municipal
Council 1920 AD 530 at 550.
8 Dadoo fn 5 ibid.
9 The Shipping Corporation of India Ltd v Evdomon Corporation & another 1994 (1) SA 550 (A) at 566C-F.

definition of „unconscionable abuse‟.10 It suffices to say that the unconscionable
abuse of the juristic personality of a company within the meaning of s 20(9) of the
2008 Act, includes the use of, or an act by, a company to commit fraud; or for a
dishonest or improper purpose; or where the company is used as a device or facade
to conceal the true facts.11

[30] Thus, where the controllers of various companies within a group use those
companies for a dishonest or improper purpose, and in that process treat the group
in a way that draws no distinction between the separate juristic personality of the
members of the group, as happened in this case, this would constitute an
unconscionable abuse of the juristic personalities of the constituent members,
justifying an order in terms of s 20(9) of the 2008 Act.12 This is not new. In Ritz
Hotel13 this Court referred to English authority in which Lord Denning MR
observed that, as regards piercing the corporate veil, there was a general tendency
to ignore the separate legal entities of various companies within a group and to
look instead at the economic entity of the whole group, especially where a parent
company owns and controls the subsidiaries.14

[31] What is however clear from the provisions of s 20(9) of the 2008 Act, is that
they have nothing to do with the appointment of a liquidator to a company in
liquidation, let alone authorise a court to appoint a liquidator. The respondents
accept, as they must, that the power to appoint liquidators vests solely in the

10 Leslie Brown The New Shorter Oxford English Dictionary on Historical Principles (third edition 1993) Vol 2 p
1466.
11 Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & others 1995 (4) SA 790 (A) at 804C-D.
12 Ex Parte Gore & others NNO [2013] ZAWCHC 9; 2013 (3) SA 382 (WCC) para 33.
13 Ritz Hotel Ltd v Charles of the Ritz Ltd & another 1988 (3) SA 290 (A) at 315F.
14 DHN Food Distributors Ltd v Tower Hamlets London Burough Council [1976] 1 WLR 852 (CA) at 860B; [1976]
3 All ER 462 at 467b-c.

Master.15 However, on the authority of Natal Pension Fund,16 they contended that
the court a quo‟s interpretation of the July order is sensible and businesslike: Div-
Prop 11 and Div-Prop 12 and the three holding companies were to be regarded as a
single entity, the Dividend Investment Scheme, and administered „as a company‟,
ie as if the five companies were one entity; and that the Div-Prop liquidators had to
continue with the liquidation of the single entity (paragraphs 1 and 2 of the July
order). The order appointing the liquidators (paragraph 3), so it was contended,
was „a necessary consequence‟ of paragraphs 1 and 2 of the July order.

[32]  The respondents are mistaken. First, there is nothing in either s 20(9) or any
of the other provisions of the 2008 Act referred to in paragraph 1 of the July order,
which authorised a court to appoint the liquidators. Second, s 367 of the 1973 Act
makes it clear that the Master appoints liquidators for the purpose of conducting
the winding-up of a company.17 The Master‟s office, which controls every stage of
the administration of companies under winding-up, from the launching of
liquidation applications to the deregistration of companies, has the institutional
knowledge and expertise to apply policy and assess the ability and integrity of
liquidators who may wish to be appointed. Although the South African insolvency
system is creditor-driven and the majority of creditors have the right to elect
liquidators, their choice of liquidator is subject to the Master‟s approval and the
exercise of the functions of liquidators is subject to the Master‟s control.18

15 The Master of the High Court (North Gauteng High Court, Pretoria) v Motala NO & others 2011 ZASCA 238;
2012 (3) SA 325 (SCA) paras 7 and 14, affirming Ex Parte the Master of the High Court of South Africa (North
Gauteng) [2011] ZAGPPHC 105; 2011 (5) SA 311 (GNP).
16 Natal Joint Municipal Pension Fund fn 6 para 18.
17 Section 367 reads:
„Appointment of liquidator
for the purpose of conducting the proceedings in a winding-up of a company the Master shall appoint a liquidator or
liquidators as hereinafter provided‟
18 Ex Parte the Master of the High Court of South Africa (North Gauteng) fn 15 paras 25-28.

[33] By issuing paragraph 3 of the July order, the court usurped a power
expressly conferred on the Master by the 1973 Act.  Consequently, I am driven to
conclude that paragraph 3 is a nullity and of no force and effect.19

[34] This brings me to the December order. It was founded on the relief sought in
prayer 2 of the notice of motion in that application, which read:
„Ordering the Respondent [the Master] to immediately comply with an order of this Honourable
Court, dated 8 July 2014 and which is attached hereto as annexure “A” and interpret the order as
set out in paragraphs 14, 16 and 25 of the Founding Affidavit.‟

[35] Section 165(5) of the Constitution provides that an order or decision of a
court binds all those to whom and organs of state to which it applies. This Court
has held that parties who are required to comply with court orders must know with
clarity what is required of them; otherwise they risk being held in contempt of
court.20 The doctrine of vagueness, which is founded on the rule of law, is a
foundational value of our constitutional democracy. It requires laws to be written
in a clear manner, with reasonable certainty and not perfect lucidity.21 Orders of
court must comply with this standard: vague provisions in a court order violate the
rule of law.22

[36] The December order is both erroneous and vague. It is, firstly, erroneous as
it purportedly directs the respondent, the Master, „to immediately comply with the
order of this court dated 8 July 2014‟. But the Master was not ordered to do
anything at all in the order of 8 July 2014: it did not apply to him. In terms of that

19 Motala fn 15 para 14.
20 Minister of Home Affairs & others v Scalabrini Centre & others [2013] ZASCA 134; 2013 (6) SA 421 (SCA)
para 77.
21 Affordable Medicines Trust & others v Minister of Health & others 2006 (3) SA 247 (CC) para 108.
22 Minister of Water and Environmental Affairs v Kloof Conservancy [2015] ZASCA 177; [2016] 1 All SA 676
(SCA) para 14.

order, two property owning companies and three holding companies were declared
to be a single entity known as the Dividend Investment Scheme; and the liquidators
of the property owning companies were appointed as the liquidators of the single
entity.

[37] Secondly, the December order is „so open-ended and vague as to render the
relief incompetent‟.23 It states that the Master is ordered to „interpret the order as
set out in paragraph 14, 16 and 25 of the founding affidavit‟, whatever that may
mean. In paragraph 14 of the founding affidavit, Mr Cooper stated that it was
always the intention of the liquidators and the business rescue practitioner that „the
process of liquidation should merely continue‟. As already quoted, in paragraph 16
he said that a „second meeting of the combined entity‟ was envisaged but that the
Master „differs from this interpretation of the court order‟. And in paragraph 25 of
the affidavit Mr Cooper outlined the difficulties which the liquidators would
encounter if they had to convene a first meeting of the single entity.

[38] In the light of this, the December order is vague. It does not tell the Master
with any measure of certainty, let alone reasonable certainty, what he or she is
required to do to comply with the order of 8 July 201324 - which was never granted
against him in the first place. It follows that the December order is both void for
vagueness, and because it is inextricably linked to paragraph 3 of the July order,
which is a nullity.

23 Mazibuko NO v Sisulu NO & others NNO [2013] ZACC 28; 2013 (6) SA 249 (CC) para 24.
24 Kloof Conservancy fn 20 para 13.

[39] It is trite that, as a general rule, what is done contrary to the prohibition of
the law is of no effect and must be regarded as never having been done.25 Whether
non-compliance with a statutory prohibition nullifies an act must be determined
according to the language of the relevant statute.26  Section 367 of the 1973 Act
confers on the Master, exclusively, the power to appoint a liquidator in the
winding-up of a company. Inasmuch as paragraph 3 of the July order and the
December order in its entirety, are nullities, a pronouncement to that effect is
unnecessary.27

[40] The remaining issue is whether the finding that the July and December
orders are invalid, would have any practical effect. The position is governed by
s 16(2)(a)(i) of the Superior Courts Act. It reads:
„When at the hearing of an appeal the issues are of such a nature that the decision sought will
have no practical effect or result, the appeal may be dismissed on this ground alone.‟

[41] On 10 December 2014, and presumably to regularise the liquidation
proceedings, the Master appointed  the respondents as the liquidators of the
Dividend Investment Scheme, in terms of s 367 read with s 375(1) of the 1973 Act.
According to the certificate of appointment, the five companies in liquidation were
registered as „one file‟ with the Master.

[42] The consequences of the certificate of appointment are that it is valid
throughout the Republic;28 the respondents are entitled to act as liquidators of the
Dividend Investment Scheme from the date of the certificate of appointment;29 and

25 Schierhout v Minister of Justice 1926 AD 99 at 109; Cool Ideas fn 5 para 90
26 Cool Ideas fn 5 para 91.
27 Motala fn 15 para 14.
28 Section 375(2) of the 1973 Act.
29 Section 375(3) of the 1973 Act.

all acts of the respondents as liquidators of the Scheme are valid, notwithstanding
any defects that may be discovered in their appointment afterwards.30

[43] The Master‟s decision to appoint the respondents as liquidators of the
Dividend Investment Scheme constitutes administrative action as defined in the
Promotion of Administrative Justice Act 3 of 2000.31 As such, the decision by the
Master is valid and stands until it is reviewed and set aside.32 City Capital has not
sought to review the Master‟s decision appointing the respondents as liquidators;
nor has it applied to set aside that certificate of appointment.

[44] Consequently, because the Master‟s appointment of the respondents as
liquidators of the Dividend Investment Scheme remains unaffected, the finding that
paragraph 3 of the July order and the December order in its entirety are nullities,
would have no practical result as envisaged in s 16(2)(a)(i) of the Superior Courts
Act. For this reason the appeal falls to be dismissed.

[45] Although the appeal falls to be dismissed because the decision sought will
have no practical effect, paragraph 2 of the order of the court a quo insofar as it
sought to affirm the July order and the December order, must be set aside. In my
view, it cannot be said that City Capital should have succeeded in the court a quo
and accordingly, that it should have been awarded the costs of the counter-
application. It was in exactly the same position in the court a quo, as it is in this
Court: paragraph 2 of the court a quo‟s order had no practical effect because the

30 Section 375(4) of the 1973 Act.
31 Nel & another NNO v The Master (Absa bank Ltd & others intervening) 2005 (1) SA 276 (SCA) para 28.
32 Oudekraal Estates (Pty) Ltd v The City of Cape Town & others 2004 (6) SA 222 (SCA) para 26.

Master‟s decision to appoint the liquidators of the Dividend Investment Scheme
had not been set aside.

[46] On the other hand, it appears from the record that the respondents did not
take the point that the relief sought in the court a quo would be academic because
the Master‟s decision appointing them had not been set aside. Instead, they
supported the July and December orders. In the circumstances, fairness dictates
that there should be no order of costs in relation to the proceedings in the court a
quo.

[47]  In the result, the following order is made:
1 Paragraph 2 of the order of the court a quo is set aside and replaced with the
following:
„2(a)  The counter-application of the intervening party for the relief in paragraph
3.1 and 3.2 of the notice of counter-application is dismissed, as such relief is
unnecessary.
(b) There is no order as to the costs of the counter-application.‟
2 Save as aforesaid, the appeal is dismissed with costs, including the costs of two
counsel.

___________________
A Schippers
Acting Judge of Appeal

Appearances
For Appellant:
A Oosthuizen SC (with R J Howie)
Instructed by:
Werksmans Attorneys, Cape Town
Rozendorff Reits Barry Attorneys, Bloemfontein

For Respondent:

S du Toit SC (with T D Prinsloo)
Instructed by:
Lombard & Kriek Attorneys, Cape Town
Webber Attorneys, 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: 1 December 2017

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

City Capital SA Property Holding Ltd v Chavonnes Badenhorst St Clair Cooper NO
(85/2017) [2017] ZASCA 177 (1 December 2017)

Section 20(9)(a) of the Companies Act 71 of 2008 (the Act) allows a court to disregard the
separate juristic personality of a company where the use of, or an act by or on behalf of, the
company, constitutes an unconscionable abuse of the juristic personality of the company as a
separate entity.
In 2014 a business rescue practitioner successfully applied to the Western Cape High Court,
Cape Town, for an order declaring five companies as a single entity, known as the ‘Dividend
Investment Scheme’, in terms of s 20(9)(a) of the Act. The five companies were part of an
unsustainable syndication scheme which had engaged in reckless trading and defrauded
members of the public who had invested some R140 million in a shopping centre in Pretoria,
worth only R45 million, leaving investors with a loss of about R100 million. The High Court
also appointed the liquidators of the Dividend Investment Scheme.
Today the Supreme Court of Appeal delivered a judgment in which it was held that a court
which makes an order under s 20(9)(a) of the Act, is not permitted to appoint a liquidator:
that power is vested solely in the Master of the High Court by s 367 of the Companies Act 61
of 1973. Consequently the High Court’s order appointing the liquidators of the Dividend

Investment Scheme was a nullity. That finding, however, had no practical effect because the
Master, presumably to regularise the liquidation of the Dividend Investment Scheme, had in
fact appointed liquidators of the single entity, which appointment is valid unless and until it
is reviewed and set aside. The appeal was therefore dismissed with costs.
--ends--