THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable
CASE NO. 446/2004
In the matter between
JOHN MALCOLM GRIFFIN
FIRST APPELLANT
NEWBERRY INTERNATIONAL INC
SECOND APPELLANT
PIETER JOHANNES HANEKOM
THIRD APPELLANT

(Applicants a quo)
and
THE MASTER OF THE HIGH COURT
FIRST RESPONDENT
MICHAEL JOHN LANE N O
SECOND RESPONDENT
JOHN COMMINS
THIRD RESPONDENT
HUGO LEGGATT
FOURTH RESPONDENT

____________________________________________________________
CORAM:
ZULMAN, STREICHER, NAVSA, PONNAN JJA

et COMBRINCK AJA

DATE HEARD: 30 AUGUST 2005
DELIVERED:
19 SEPTEMBER 2005

In terms of s 386(3)(a) read with s 386(4)(c) of the Companies Act 61 of
1973 made applicable to a close corporation by s 66(1) of the Close
Corporations Act 69 of 1984, a liquidator of a close corporation is required
to be authorized by meetings of creditors and members or contributors or
on the directions of the Master in order to admit any claim against the close
corporation. A members resolution will not suffice.

______________________________________________________________________

______________________________________________________________________

JUDGMENT
____________________________________________________________

ZULMAN  JA

[1] This is an appeal with leave, against an order granted by Erasmus J
in the Cape High Court dismissing an application by the appellants in terms
of section 407(4)(a) of the Companies Act 61 of 1973 (the Companies Act)
against the first respondent’s (the Master) refusal to sustain an objection to
an amended liquidation and distribution account which did not include the
appellants’ claims.
[2] The Master and the second respondent (the liquidator) who is the
liquidator of Cape Trails CC (In Liquidation) (the Close Corporation) abide
the decision of the court. The third and fourth respondents who intervened
in the application seek the dismissal of the appeal. For the sake of

convenience these respondents will be referred to simply as the
respondents.
[3] Counsels’ heads of argument canvas two essential issues as arising in
this appeal:

3.1
Whether the liquidator was authorized  in terms of s 386(3)(a)
of the Companies Act to admit the appellants’ claims in terms of  s
386(4)(c); and

3.2
whether the application of the appellant is time-barred in terms
of s 407 of the Companies Act.

However, counsel for the appellant fairly conceded that if the
appellants were unable to show that the liquidator was authorized to
admit the appellants’ claim then the appeal would fail and it would
be unnecessary to determine the second issue.
[4] The following are the relevant common cause facts:

4.1
The Close Corporation was placed under provisional winding-
up at the instance of the first appellant on 26 March 1998 and finally
wound up on 2 December 1998.

4.2
At the time of its liquidation the first appellant and the
respondents were members of the Close Corporation. The first
appellant held a 1/6 share in the members’ interest and the
respondents held the remaining 5/6 in equal shares.

4.3
The liquidator convened a first meeting of members and
creditors of the Close Corporation in terms of s 78 of the Close
Corporations Act before the Master on 29 December 1998. Only the
first appellant attended the meeting. A resolution was adopted at the
meeting. I will refer to this resolution in detail later in this judgment.
No claims were lodged for proof.

4.4
After subsequent meetings of creditors the appellants tendered
three claims for proof against the Close Corporation. The claims
were rejected by the presiding officer.

4.5
The claims were subsequently admitted to proof by the
liquidator. The claims were originally reflected in the liquidation and
distribution account.

4.6
Following an objection by the Respondents, the liquidator
framed an amended liquidation and distribution account which lay
open for inspection for a fourteen day period from 1 August 2003.
The appellants’ claims were not reflected in the amended liquidation
and distribution account.

4.7
On 13 August 2003 the appellants lodged an objection with
the Master. The basis of the objection was that in spite of the prior
admission by the liquidator of the claims, these had not been
reflected in the amended liquidation and distribution account.

4.8
On 5 August 2003 the Master refused to sustain the appellants’
objection.

4.9
In upholding the Master’s refusal, Erasmus J, held that it had
not been shown that the liquidator had been granted any authority to
compromise or admit any claim.
[5] In order to determine whether the liquidator was authorized to act in
the manner that he did it is necessary to interpret the relevant provisions of
s 386 of the Companies Act read with s 66 of the Close Corporations Act
69 of 1984 (the Close Corporations Act). Section 66(1) in part IX of the
Close Corporations Act deals specifically with the winding-up of close
corporations. The section applies the provisions of the Companies Act
which relate to the winding-up of a company including the regulations
made thereunder, with the exception of certain specifically mentioned
sections, including s 387, but not s 386, of the Companies Act, mutatis
mutandis in so far as they can be applied to the liquidation of a close

corporation, in respect of any matter not specifically provided for in part IX
of the Close Corporations Act or in any other provision of the Act. Sections
386(3)(a) and 386(4)(c) of the Companies Act which deal specifically with
the powers of liquidators provide as follows:
‘386(3) The liquidator of a company –
(a)
in a winding-up by the Court, with the authority granted by meetings of creditors
and members or contributories or on the directions of the Master given under
section 387;
…
shall have the powers mentioned in subsection (4).
…
(4)
The powers referred to in subsection (3) are –
(a)
…
(b)
…
(c)
to compromise or admit any claim or demand against the company, including an
unliquidated claim;’

[6] It is clear that s 386(3) specifies in terms that a liquidator may only
exercise the powers given (with certain exceptions which are not here
relevant) if granted authority to do so. Furthermore s 386(3)(a) specifies
from whom this authority must be obtained; namely in the case of a
winding-up by the court, meetings of creditors and members or
contributories or on the directions of the Master. It is not suggested that in
this case there was any authority given by contributories or that there were
directions from the Master.
[7] The learned authors Blackman et al  in their Commentary on the
Companies Act (2002) Vol 3 page 14 – 330 correctly state the position in
these terms:-
‘Section 386(3) provides that with the required authority the liquidator ‘shall have the
powers mentioned in subsection (4)’. Thus it would seem that the grant of authority is
not merely a condition for the exercise of those powers, but, is rather, a necessary
condition for their existence. Where the liquidator requires such authority to exercise a

particular power, other than the power to litigate, [a situation not of application here] it
is open to a third party to raise the question of  liquidator’s lack of authority’.
(See also Ex parte Du Plessis 1965 (2) SA 438 (T) 440D, Du Plessis v
Protea Inryteater (Edms) Bpk 1965 (3) SA 319 (T) 320A-B and
Henochsberg on The Companies Act – Vol 1 (5th Edition) p 821.
[8] The way I understood the argument of counsel for the appellants it
was to the effect that although he accepted that in regard to a company, a
liquidator seeking to exercise powers under s 386(4) was in terms of s
386(3) required to be authorized both by creditors and members, the
position was different when considering the powers of a liquidator of a
close corporation. In my view this argument is plainly untenable,
particularly, if one has proper regard to s 386(3) of the Companies Act
made applicable to close corporations by s 66(1) of the Close Corporations
Act. One cannot have one interpretation of a section of an Act for the one
purpose and another interpretation of the same section for another purpose.

[9] The appellants submitted that it could be implied in the case of the
winding up of a close corporation that the words ‘with the authority granted
by meetings of creditors and members’ in s 386(3)(a) of the Companies Act
had no application to a close corporation and that the words in question
must be read disjunctively and not conjunctively. There is no substance in
the argument in the light of the unambiguous words in s 66(1) of the Close
Corporations Act or s 386(3)(a) of the Companies Act.
[10] It was also suggested that a possible deadlock in the winding-up of a
close corporation would arise if one were to require its liquidator to be
authorized not only by members but also by creditors and it was not
possible for the liquidator of the close corporation to obtain authority from
creditors. However, on a proper construction of s 386 there is no substance
in the argument. Section 386(5) of the Companies Act gives the Court the
power to grant leave to a liquidator to do ‘any other thing which the Court
may consider necessary for winding up the affairs of the company and

distributing its assets’. There is therefore no possibility of a deadlock
occurring.
[11] Section 78(3) of the Insolvency Act 24 of 1936 similarly requires a
trustee to be authorized to admit claims by creditors who have proved
claims against the estate, or if no claim has been proved,  by the Master.
[12] Turning again to the facts of the matter it is contended by the
appellants that the liquidator was in any event authorized by the resolution
passed at the first meeting of members and creditors of the close
corporation on 29 December 1998 to which I have previously referred.
More particularly it is argued that paragraph 1(c) of the resolution
authorized the liquidator to compromise or admit any claim or demand.
However an examination of the stereotyped form containing the resolution
reveals that although it is headed ‘First Meeting of Members and Creditors’
at the foot, below the signature of the first appellant, the words ‘qq
creditors’  have a line drawn through them and in handwriting the word

‘member’ is written underneath. This resolution could therefore only have
been one taken by a member and not also by creditors. This much is clear
from para 7.2 of an affidavit deposed to by the liquidator to the effect that
no claims were lodged for proof at this meeting. Since only creditors who
have proved claims can take resolutions (the voting going according to
number and value) it follows that at the first meeting there were no
creditors who could give the liquidator the authority required by s 386(3)(a)
read with s 386(4)(c) of the Companies Act.
[13] The appeal is accordingly dismissed with costs.

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R H ZULMAN

JUDGE OF APPEAL

STREICHER JA
)
NAVSA JA

)
CONCUR
PONNAN JA

)
COMBRINCK AJA
)