THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case No: 756/2017

In the matter between:

FRANCOIS JEAN DE VILLIERS                                                 FIRST APPELLANT
CAPE VETERINARY WHOLESALERS CC                           SECOND APPELLANT
THE TRUSTEES FOR THE TIME BEING OF
THE FRANCOIS DE VILLIERS SHARE TRUST                        THIRD APPELLANT

and

THE TRUSTEES FOR THE TIME BEING
OF THE GJN TRUST                                                                FIRST RESPONDENT
CAPE ANIMAL HEALTH BROKERS (PTY) LTD
(IN LIQUIDATION)                                                               SECOND RESPONDENT
CRAIG PHILANDER NO                                                          THIRD RESPONDENT
CONSTANT WILSNACH NO                                               FOURTH RESPONDENT
Neutral citation:  De Villiers v GJN Trust (756/2017) [2018] ZASCA 80
(31 May 2018)
Coram:
Shongwe ADP and Seriti and Van der Merwe JJA and Rogers and
Schippers AJJA
Heard:
16 May 2018
Delivered:
31 May 2018
Summary:   Practice – order avoiding the dissolution of a company in terms of
s 420 of the Companies Act 61 of 1973 – order granted in the absence of the
appellants – whether the appellants were affected parties within the meaning of
rule 42(1)(a) – ambit of s 420 and effect of order thereunder – appellants not affected
parties and had no locus standi to challenge section 420 order.

___________________________________________________________________

ORDER

On appeal from: Western Cape Division of the High Court, Cape Town. (Hack AJ
sitting as court of first instance):
The appeal is dismissed with costs.

JUDGMENT

Van der Merwe JA (Shongwe ADP and Seriti JA and Rogers and Schippers
AJJA concurring)

[1] The first appellant, Dr Francois Jean de Villiers, is the sole member of the
second appellant, Cape Veterinary Wholesalers CC (the CC) and the duly authorized
trustee of the third appellant, the trustees of the Francois de Villiers Share Trust
(the Share Trust). As explained below, the Share Trust is the holder of all the shares
in the second respondent, Cape Animal Health Brokers (Pty) Ltd (in liquidation)
(the company). At the instance of the first appellant, acting as a creditor of the
company, the Western Cape Division (the High Court) issued an order of liquidation
of the company. As a result the company was in due course dissolved in terms of s
419 of the Companies Act 61 of 1973 (the Act).

[2] However, the first respondent, the trustees of the GJN Trust (the GJN Trust),
launched an application for an order declaring the dissolution of the company to
have been void in terms of s 420 of the Act (the section 420 application). Such order
was granted by Blignault J in the High Court on 19 November 2015 (the section 420
order). Pursuant hereto, the Master of the High Court appointed the third and fourth
appellants (the liquidators) as joint liquidators of the company. The appellants
applied to the court a quo to have the section 420 order set aside on the ground that
it had erroneously been made without notice to any of them, but Hack AJ dismissed
the application (the rescission application). The appellants appeal against the

dismissal of the rescission application with the leave of this court. The central issue
in the appeal is whether any of the appellants should have been joined in the section
420 application. The determination of the issue calls for an analysis of the ambit of
s 420 of the Act and the effect of the section 420 order.

Background
[3] Prior to the liquidation of the company, the Share Trust gave notice of
cancellation of the agreement in terms of which it had acquired the shares in the
company and tendered retransfer thereof to the sellers. The right of the Share Trust
to cancel this agreement is disputed by the sellers and forms the subject of pending
litigation. Thus, the Share Trust remained the only shareholder in the company.
By the same token the first appellant continued to be its sole director.

[4] It is not disputed that, at the time of the company’s liquidation and
immediately prior to dissolution, the first appellant was a creditor of the company in
the amount of approximately R2 million for moneys lent and advanced to the
company and for payments made as surety of the company. Nor is it in issue that the
company owed the CC some R4,6 million. The bulk of this amount was for goods
sold and delivered to the company and the balance for loans (payments to creditors
of the company) and payments as surety of the company. The company was
indebted to the GJN Trust in the amount of approximately R23 000 in respect of
arrear rental.

[5] The company was finally liquidated on 8 March 2013. Neither the first
appellant nor the CC proved claims in the liquidation. The GJN Trust also did not
prove its claim, because the erstwhile liquidators of the company alerted creditors of
the danger that a contribution might be payable by concurrent creditors. In the event,
only Standard Bank proved its secured claims of approximately R340 000 and
concurrent claims of approximately R370 000. Further unproved concurrent creditors
of the company amounted to some R308 000.

[6] The first and final liquidation and distribution account was confirmed by the
Master on 11 February 2014, whereafter a dividend equal to its secured claims and a

very small concurrent dividend were distributed to Standard Bank. In the result,
concurrent debts of the company of some R7,4 million remained unpaid.

[7] In terms of s 419 of the Act the Master reported that the affairs of the
company had been completely wound up. Although the precise date thereof does not
appear from the record, the parties are in agreement that the company was
thereafter dissolved in terms of s 419(2) of the Act. Therefore, the existence of the
company came to an end and the erstwhile liquidators were discharged.
All remaining assets of the company became bona vacantia (ownerless property)
and automatically passed to the state without any form of delivery. See Rainbow
Diamonds (Edms) Bpk en andere v Suid-Afrikaanse Nasionale Lewensassuransie
Maatskappy [1984] ZASCA 41; 1984 (3) SA 1 (A) at 10-12.

[8] The section 420 application was launched during November 2015.
The erstwhile liquidators of the company and the Master were cited as respondents.
In essence, the GJN Trust averred that, according to the financial records of the
company, the CC owed the company a debt in the amount of R1 232 847. 04, but
that during December 2012 that debt had been written off on the instruction of the
first appellant. The GJN Trust also alleged that trading stock of the company to the
value of R650 000 had, on the instruction of the first appellant at more or less the
same time, been transferred first to the CC and then to another business of the first
appellant. In this regard the GJN Trust presented the evidence of a person who had
at the time been the manager of both the company and the CC. The GJN Trust
accordingly contended that it had presented sufficient evidence to justify an order in
terms of s 420 of the Act for purposes of appointment of new liquidators to
investigate these matters with a view of retrieving assets for distribution to creditors.

[9] In the rescission application, the first appellant admitted that the books of the
company had been altered to remove the record of a debt owed to the company by
the CC, but said that that simply entailed the correction of an error in the books.
He explained that the CC supplied the company with products but had retained
ownership thereof until payment took place. Because the company defaulted in
paying for the products, the CC repossessed the products. This, according to the first
appellant, should have been accompanied by the issuing by the CC of a credit note

but instead the CC was erroneously invoiced for the products that it had
repossessed.

Section 420
[10] The Act was repealed by the Companies Act 71 of 2008 (the new Act),
subject to the transitional arrangements set out in Schedule 5 thereto. Item 9(1) of
Schedule 5 provides that, despite the repeal of the Act, Chapter 14 thereof continues
to apply to the winding-up and liquidation of companies, as if not repealed, until a
date to be determined. Chapter 14 of the Act comprises ss 337-426. Section 339 of
the Act provides for the application of the laws relating to insolvency in the winding-
up of a company that is unable to pay its debts. Section 420 of the Act provides:
‘When a company has been dissolved, the Court may at any time on an application by the
liquidator of the company, or by any other person who appears to the Court to have an
interest, make an order, upon such terms as the Court thinks fit, declaring the dissolution to
have been void, and thereupon any proceedings may be taken against the company as
might have been taken if the company had not been dissolved.’
It bears mentioning that the provisions of s 83(4) of the new Act are substantially
similar to those of s 420.

[11] In Goodman v Suburban Estates, Ltd (in liquidation) and others 1915 WLD 15
at 26, Mason J stated the following with reference to s 193 of the Transvaal
Companies Act 31 of 1909 (a forerunner of s 420 of the Act):
‘Having regard to all these matters it seems to me that the Court ought not to avoid a
dissolution unless some unforeseen event such as the discovery of new assets has occurred
or unless there has been some fraud or concealment practiced or unless the dissolution has
become either by reason of surrounding circumstances or through some contrivance of
parties the instrument of injustice.’
In Henochsberg on the Companies Act 5 ed (2008) vol 1 at 902, it is contended that
the application of s 420 should not be limited to the grounds set out in Goodman.
The authors submit, with reference to inter alia Ex parte Liquidator Natal Milling Co
(Pty) Ltd 1934 NPD 312, that the court may avoid the dissolution of a company in
any circumstances where the interests of justice warrant such a cause.

[12] I agree with this submission. In Natal Milling Co Hathorn J pointed out that in
Goodman the court had construed s 193 of the Transvaal Act, which corresponded
with s 191 of the Companies Act 46 of 1926, with reference to s 196 of the Transvaal
Act. He said that s 196 of the Transvaal Act corresponded with s 199 of the 1926
Act. Both these sections dealt with companies presumed to be defunct and
empowered the Registrar of Companies to strike such a company from the register,
resulting in its dissolution. These sections also specified the circumstances under
which a court could reverse such a striking off and dissolution. Section 193 of the
Transvaal Act and s 191 of the 1926 Act, in turn, dealt with the subject matter of
s 420, namely the power of a court to avoid the dissolution of a company that took
place after its affairs had been wound up. These sections did not enumerate any
circumstances under which the power of the court could be exercised. Hathorn J
indicated persuasively that these two sets of provisions dealt with matters which had
little bearing on each other and that the meaning of s 191 of the 1926 Act was clear.
He declined to follow Goodman and concluded:
‘According to my view the power of the Court to make an order declaring the dissolution to
have been void is unlimited in any respect, and as the circumstances under which the
section may be brought into operation are likely to vary in every case, it seems to me
inadvisable to lay down any principle upon which the Court will act.’

[13] There is no reason to differentiate in this regard between s 191 of the 1926
Act and its successor, s 420. In my judgment this dictum in Natal Milling Co is
equally applicable to s 420. I hold that s 420 provides the court with a wide discretion
that defies precise definition. Paragraph 12 of the judgment in Motala and others v
Master of the High Court (North Gauteng) and others [2013] ZASCA 185; [2014] 2
All SA 154 (SCA) should be read in this light.

[14] The effect of an order under s 420 is to revive the company and to restore the
position that existed immediately prior to its dissolution. Thus the company is
recreated as a company in liquidation, with the rights and obligations that existed
upon its dissolution. Property of the company that passed to the state as bona
vacantia is automatically re-vested in the company by operation of law. An order
under s 420 is only retrospective in this sense and does not validate any corporate
activity of the company which may have taken place during the period of its

dissolution. The effect of an order in terms of s 420 must therefore be contrasted
with the effect of the reinstatement of a company in terms of s 82(4) of the new Act
after its deregistration by the Companies and Intellectual Property Commission in
terms of s 82(3) thereof. See Newlands Surgical Clinic (Pty) Ltd v Peninsula Eye
Clinic (Pty) Ltd [2015] ZASCA 25; 2015 (4) SA 34 (SCA). The abovementioned
principles appear from Henochsberg, above p 900(1)-902 and Blackman et al,
Commentary on the Companies Act, Vol 3, pp 14-506 – 14-507. See also Pieterse v
Kramer  1977 (1) SA 589 (A) at 600-601. The findings of the court a quo that the aim
of s 420 is to set aside the entire liquidation process of a corporation for purposes of
commencing the liquidation anew, were therefore clearly wrong. The steps taken
during the prior liquidation, up to the time of dissolution, stand.

[15] Paragraph 1 of the section 420 order, as rectified by agreement in respect of
the name and number of the company by the court a quo, declared the dissolution of
the company to have been void. Paragraph 2 of the order provided:
‘The Master is authorized and directed to appoint new liquidator(s), which liquidator(s) shall
be clothed with all powers and competencies as if the company is liquidated de novo.’
(My translation)1

[16] The appellants interpreted this part of the order as providing that the company
was to be liquidated de novo and that this would entail reopening the confirmed
liquidation and distribution account in terms of which distribution has already taken
place. This is incorrect. First, that is not what the words of para 2 of the order
convey. The paragraph does not deal with the commencement of liquidation. It deals
only with the appointment and powers of a new liquidator(s). These powers shall be
as if the company is liquidated de novo. The words ‘as if’ indicate that in fact there
will be no de novo liquidation. De novo liquidation is only postulated to define the
powers of the new liquidator(s). Second, as I have shown, the legal consequence of
an order under s 420 is no more than the restoration of a dissolved company to the
position existing immediately prior to its dissolution.

1 ‘Die Meester word gemagtig en beveel om nuwe likwidateur(s) aan te stel, welke likwidateur(s) met
alle magte en bevoegdhede beklee sal wees asof die maatskappy de novo gelikwideer word.’

[17] Section 104 of the Insolvency Act 24 of 1936 provides that a creditor who has
proved a claim against the estate after the confirmation of an account by the Master
is excluded from the distribution under that account, but may share in the distribution
under a subsequent account. In terms of s 408 of the Act the confirmation of a
liquidation and distribution account by the Master ‘. . . shall have the effect of a final
judgment, save as against such persons as may be permitted by the Court to re-
open the account after such confirmation but before the liquidator commences with
the distribution.’ Therefore, save possibly in the case of fraud, a confirmed account
may only be reopened before distribution in terms thereof commences. Even then,
reopening will only be ordered on grounds for restitutio in integrum such as justus
error or dolus. See Kilroe-Daley v Barclays National Bank Ltd 1984 (4) SA 609 (AD)
at 626F-G. See also Gilbey Distillers & Vintners (Pty) Ltd & others v Morris NO 1991
(1) SA 648 (AD) at 65G in respect of the similarly worded s 112 of the Insolvency
Act. As distribution in terms of the confirmed first and final liquidation and distribution
account of the company was completed during 2014, the section 420 order could not
in law have the effect of reopening that account.

[18] In the light of these considerations and of the explicit purpose of the section
420 application, namely investigation aimed at distribution of assets not dealt with in
that account, para 2 of the section 420 order must in my view be interpreted to mean
that the liquidators shall have the powers in terms of the Act to deal with further
assets of the company. It follows that further assets of the company recovered by the
liquidators must be dealt with in a further liquidation and distribution account in terms
of s 403 of the Act. Section 403(1)(b) of the Act also provides that the Master may at
any time and in any case where a liquidator has funds in hand, which ought, in the
opinion of the Master, to be distributed or applied towards the payment of debts,
direct a liquidator in writing to frame and lodge a liquidation and distribution account
within a specified period.

[19] Section 44(1) of the Insolvency Act provides for late proof of claims by
creditors. In terms thereof a creditor may prove a claim after the expiry of the
prescribed period, with the leave of the Master or a court and on payment of such
amount as either directs to cover the costs occasioned by the late proof. Where the
dissolution of a company has been avoided under s 420 for the very purpose of

distribution of further assets of the company, the Master or a court may well be
persuaded to allow late proof of claims, especially when the erstwhile liquidators had
discouraged proof of the claims.

[20] The phrase ‘any person who appears to the Court to have an interest’ in
s 420, is very wide. This broad language may encompass parties who do not have a
direct and substantial interest of the kind which would necessitate joinder. It certainly
encompasses an unpaid creditor, including, in my view, a creditor who intends to
prove a late claim under s 44(1) of the Insolvency Act. It follows that the GJN Trust
had locus standi to bring the section 420 application.

Rule 42(1)(a)
[21] Whether the section 420 order fell to be set aside on the ground that it had
been granted without notice to any of the appellants, must be determined against
this background. In the rescission application the appellants relied on Uniform
Rule 42(1)(a). In terms of rule 42(1)(a) a court may, upon the application of any party
affected, rescind or vary an order or judgment erroneously sought or erroneously
granted in the absence of any party affected thereby.

[22] In United Watch and Diamond Co (Pty) Ltd and others v Disa Hotels Ltd and
another 1972 (4) SA 409 (CPD), Corbett J held that in order to establish locus standi
under rule 42(1)(a), an applicant must show a direct and substantial interest in the
judgment or order that the applicant wishes to have varied or rescinded. This means
a legal interest in the subject matter of the action or application which could be
prejudicially affected by the order in that action or application. This judgment has
been cited with approval on numerous occasions, including by this court in, inter alia,
Aquatur (Pty) Ltd v Sacks and others 1989 (1) SA 56 (A) at 62.

[23] The application of these principles is illustrated in the judgment in Standard
General Insurance Co Ltd v Gutman NO and others 1981 (2) SA 426 (C). There the
owner of a business entered into an agreement with the applicant insurance
company in terms of which the property of the business was inter alia insured
against destruction by fire. After the owner had sold the business, a fire destroyed
certain property covered by the insurance policy. The owner submitted a claim in

terms of the policy, but the claim was repudiated on the ground that, because of the
sale of the business, the owner no longer had an insurable interest in the property
destroyed. Thereafter the estate of the owner was sequestrated. The trustee of the
owner sued the purchaser of the business for an order declaring the sale of the
business void and for the return of all the assets of the business and obtained such
an order by default. The trustee then sued the applicant for indemnification under the
policy. The applicant applied to have the default judgment rescinded in terms of the
rule 42(1). The applicant contended that the sale was erroneously found to have
been void and that the default judgment had deprived the applicant of its defence of
absence of an insurable interest.

[24]   The court accepted for purposes of argument that the effect of the sale of the
business had been to eliminate the owner’s insurable interest. However, the court
held that the applicant had no locus standi in terms of rule 42(1). It accepted that the
applicant’s rights might have been affected by the order in the sense that it had
deprived the applicant of a defence against the action of the trustee. It held,
however, that this constituted a mere indirect financial interest in the subject matter
of the litigation between the trustee and the purchaser.

[25] In the rescission application the appellants averred that the section 420 order
adversely affected their interests in that they were not afforded the opportunity to
respond to the serious allegations of impropriety that had been made in the section
420 application. This misses the point. Although the purpose of the section 420
application was to enable the liquidators to claim from the appellants, the subject
matter of that application was the restoration of the dissolved company to a company
in liquidation and not the enforceability of the alleged claims against the appellants.
The prosecution of these claims will no doubt take place by due process, during
which the appellants will be afforded the full opportunity to protect their rights. In his
replying affidavit in the rescission application, the first appellant in fact declared that
he had no reason to seek protection from investigation by the liquidators. Thus, no
legal interests of the appellants were adversely affected by the section 420 order.

[26] For the sake of completeness it should be mentioned that, as unproved
creditors, the first appellant and the CC also had no legal interest in the section 420

order. The rights of unproved creditors could clearly not be adversely affected by the
revival of the company to a company in liquidation. The same must apply to the mere
fact that the section 420 order restored the first appellant and the CC as the director
and shareholder respectively of the company in liquidation. In this regard it will be
recalled that the stance of the Share Trust is that it cancelled the sale agreement in
respect of the shares. The first appellant’s directorship is inextricably linked to the
shareholding of the Share Trust.

[27] The appellants obliquely also relied in the rescission application on the
common law. However, as explained in Herbstein and Van Winsen, The Civil
Practice of the High Courts of South Africa 5 ed (2009) at 929, rule 42 is for the most
part a reinstatement of the common law and must be interpreted in the context of the
common law principles of finality of judgments in the interests of certainty. This
leaves no room for rescission of a judgment at the instance of a person who was not
a necessary party to the litigation concerned. In the result I hold that the appellants
had no locus standi to challenge the section 420 order.

[28] As a last resort, the appellants contended that the state, represented by the
Minister of Finance, should have been joined in the section 420 application on the
basis that the section 420 order deprived the state of the assets of the company
(including the alleged claims against the appellants) that had passed to it on the
dissolution of the company. I accept that in principle this is correct. But as the
appellants have no locus standi to challenge the section 420 order, the section 420
application is not before this court. This is not a case such as Amalgamated
Engineering Union v Minister of Labour 1949 (3) SA 637 (A), where both parties
before the court desired it to deal with the merits of the matter in the absence of a
necessary party thereto.

[29] For these reasons the appeal must fail. The following order is issued:
The appeal is dismissed with costs.

_________________________
C H G van der Merwe
Judge of Appeal

APPEARANCES
For Appellants:
L M Olivier SC (Heads of Argument prepared by
P S Bothma)

Instructed by:

Terblance Slabber Pieters Inc, Malmesbury

Hill McHardy & Herbst, Bloemfontein

For Respondents:
A J R van Rhyn SC

Instructed by:

Lamprecht Attorneys, Stellenbosch

Symington & De Kok, Bloemfontein