In a recent judgment, the Supreme Court of Appeal ("SCA") considered whether an appellate court can grant a final winding-up order in a proceeding against a company, where another court has already granted a provisional order against the same company. The appeal was brought by by Resilient Rock (Pty) Ltd ("Resilient") against Voltex (Pty) Ltd t/a Atlas Group ("Voltex").
The dispute arose from an application for liquidation instituted by Voltex against Resilient on the grounds that Resilient was unable to pay its debts. The Johannesburg high court found that Voltex failed to prove that Resilient was commercially insolvent, that the debt was due and payable, and that Resilient had no defence to the claim of Voltex. Consequently, Voltex's application was dismissed.
Following an unsuccessful application for leave to appeal to the Johannesburg high court, Voltex applied for special leave to appeal to the SCA. The SCA granted Voltex leave to appeal to a bench of judges in the Johannesburg High Court ("the full court"). The full court took a different view and granted a final winding-up order against Resilient. Resilient, as a consequence of the full court's order, applied for special leave to appeal to the SCA, which was granted.
The SCA noted that on 17 January 2023, another Resilient creditor, Trencon Construction (Pty) Ltd ("Trencon"), applied to the Johannesburg high court for an order to wind-up Resilient. On 9 May 2023, the Johannesburg high court handed down its judgment, provisionally winding up Resilient and issuing a rule nisi for a return date of 13 June 2023. On 31 May 2023, Voltex's appeal was heard by the full court. At the full court hearing, Resilient applied for the postponement of the matter as the Johannesburg high court had already issued a provisional winding-up order in respect of Trencon's application. The application for postponement was supported by Voltex. However, on 8 June 2023 the full court made an order finally winding-up Resilient. The issuing of the final order led to the removal of the Trencon application before the Johannesburg high court from the roll.
Before the full court, Resilient argued that the full court lacked the jurisdiction to issue a final winding-up order against it, in circumstances where another high court had granted a provisional order for the winding-up of Resilient. This argument was based on the provisions of s 347(5) of the Companies Act, 1973 which provides as follows:
"The Court shall not grant a final winding-up order in the case of a company or other body corporate which is already being wound up by order of Court within the Republic."
The full court rejected Resilient's argument, contending that an appellate court was entitled to issue such an order, which would have a retrospective effect.
The SCA noted that the full court dealt with the matter on the basis that the order in the Trencon application did not exist. This was because at the time the Full Court dealt with the matter, the order in the Trencon application had not been made.
According to the SCA, the full court's approach to the matter was misplaced, inter alia, because; on a plain reading of section 347(5), the court was obligated by the legislature to take the new fact of the existence of the order in the Trencon application into account; the Trencon order was relevant to the issue before it; the Trencon order had a practical effect on the appeal, in that it affected the date when the concursus creditorum was established; and the full court ought to have inquired whether the order sought was moot or not.
The SCA further remarked that section 347(5) of the Companies Act expressly prohibited a court from granting a final winding-up order in relation to a company that is already the subject of another provisional winding-up order. The SCA went on to say that the wording of the provision was clear, and courts are required to consider the text, context and purpose of the statute in interpreting legislation. The SCA held that the natural meaning of the words used in section 347(5) of the Companies Act revealed that the limitation imposed on a court was absolute and was not restricted only to courts of first instance.
Consequently, the SCA found that the full court failed to give effect to the legislative intent by either postponing the appeal as sought by both Resilient and Voltex, or by striking it off from the roll on the ground that it was moot.
The SCA upheld Resilient's appeal with costs on the basis that section 347(5) disbarred the full court from issuing a second winding-up order. The full court's order was set aside and replaced with an order dismissing the appeal with costs.
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