By Sean Buskin and checked by Lauren Squier
This case concerns an application by the business rescue practitioner (“the Practitioner”) of Ramagale Holdings (Pty) Ltd (“Ramagale”) in order to provisionally wind-up Ramagale. The application was opposed Peter Naledzani Ramaite (“Ramaite”) and Lorenso Manenti (“Manenti”), being shareholders and directors of Ramagale.
The Practitioner brought the application, following a lapse of more than three months after his appointment in terms of sections 141 (2)(a)(ii) and 81(1)(b) of the Companies Act 71 of 2008 (“the new Act”), read with the provisions of chapter XIV of the Companies Act 61 of 1973 (“the Old Act”). In pursuing the application to provisionally wind-up Ramagale, the Practitioner averred that Ramagale was unable to pay its debts and was thus commercially and factually insolvent.
The issue in dispute in the above matter concerned compliance with the provisions of section 346(4A) of the Old Act, relating to the manner of service of the application to wind-up. The Practitioner attached an affidavit deposed to by Ms. Cassim (“Cassim”), an attorney, stating that she had been advised by means of a Sheriff that the application had been served on Ramagale. It was sufficiently clear that service had been effected on Ramagale by means of the notice of intention to oppose filed on behalf of Ramagale, together with the application for leave to intervene which was filed by Ramaite and Manenti respectively in their capacities as shareholders and directors of Ramagale.
The court however took issue with certain averments, regarding the service of the application, as declared in Cassim’s affidavit. Cassim’s affidavit, made, inter alia, the following averments:
- The application had been served on the employees of Ramagale, at the Company’s registered address in Rivonia and at its principal place of business in Nigel. Furthermore, a bulk SMS had been transmitted informing all respective parties about the relevant application being served at the aforementioned addresses. Cassim, being the deponent to the affidavit, relied on the returns of service issued by the relevant Sheriff. The returns of service further stated that the employees of Ramagale were not represented by a trade union; and
- Cassim, in her affidavit, further referred the Court to the acknowledgement by the South African Revenue Service (“SARS”), as appeared on the notice of motion, in order to demonstrate that service had been affected on SARS.
Further to the above, a second affidavit, deposed to by Ms. Van der Merwe (“Van der Merwe”), being the attorney of record of Ramagale, confirmed that a bulk SMS had been transmitted to SARS and to the employees of Ramagale, stating that the application would be available from Ramagale’s attorneys.
The court, in the above matter, was tasked with determining whether the affidavits of Cassim and Van der Merwe, in confirming the manner of service of the application, were compliant with the provisions of section 346(4A) of the Old Act, which reads, inter alia, as follows:
“ (a) When an application is presented to the court in terms of this section, the applicant must furnish a copy of the application–
- to every registered trade union that, as far as the applicant can reasonably ascertain, represents any of the employees of the company; and
- to the employees themselves-
(aa) by affixing a copy of the application to any notice board to which the application and the employees have access inside the premises of the company; or
(bb) if there is no access to the premises by the applicant and the employees, by affixing a copy of the application to the front gate of the premises, where applicable, failing which to the front door of the premises from which the company conducted any business at the time of the application;
- to the South African Revenue Service; and
- to the company, unless the application is made by the company, or the court, at its discretion, dispenses with the furnishing of a copy where the court is satisfied that it would be in the interests of the company or of the creditors to dispense with it.
(b) The applicant must, before or during the hearing, file an affidavit by the person who furnished a copy of the application which sets out the manner in which paragraph (a) was complied with.” [emphasis added].
The court acknowledged its discretion to grant condonation in respect of a failure to furnish a copy of the application on the Company itself, if same was in the best interests of the Company or its creditors. However, the court found that there exists a distinction between the Company, its employees and SARS in that the same condonation could not be granted in respect of a failure to serve the application on the employees or SARS.
At the outset, the court had regard to the service and compliance affidavits filed on behalf of Ramagale, which entirely relied on the returns of service issued by the Sheriff and the acknowledgement by SARS. In the normal course, one would rely on a return of service issued by a Sheriff, however, section 346 (4A) of the Old Act contains specific provisions, as introduced in 2002, which must be complied with.
The Court, in justifying the peremptory elements of the aforementioned provision, made reference to the case of EB Steam Co (Pty) Ltd v Eskom Holdings Society Ltd , which, inter alia, provides that provisions in relation to service, as enshrined in section 43 of the Superior Courts Act, are viewed as general provisions and will not be applicable where the manner of service, in respect of specific proceedings, is governed by distinct legislative provisions regulating such service, as is the case in relation to section 346 (4A) of the Old Act.
The court further highlighted the issue with regard to the transmission of a bulk SMS to the employees and SARS, informing them of the application. The court rejected the averment that same constituted effective service of the application, remitting the Practitioner to the wording of the provision, requiring a “copy of the application” to be furnished on the respective parties. The applicants failed to attach a copy of the whole application, as required by section 346(4A)(a) of the Old Act.
The court further highlighted the applicants failure to comply with the provisions of section 346(4A)(b) of the Old Act, in that Cassim and Van der Merwe, as deponents to the service and compliance affidavits, were, in fact, not the parties who affected service of the application. The application was served by the Sheriff, however there was a failure to place an affidavit, deposed to by the relevant Sheriff, confirming compliance with the relevant provisions. The court fund that the relevant provisions of section 346 are peremptory in nature and, as a result thereof, the affidavit must be deposed to by the person who served the application.
The court made reference to the judgment of EB Steam Co (Pty) Ltd v Eskom Holdings Soc Ltd in relation to the argument that the court has the discretion, in instances of urgency or where logistical problems exist, to grant a provisional order, despite the fact the application had not yet been served on the employees of the relevant Company. In distinguishing the aforementioned judgment from the circumstances of this case, the court highlighted that the case does not provide support for an argument that it may condone non-compliance with the provisions of section 346(4A)(b) of the Old Act, even in cases of extreme urgency.
The court stated that the aforementioned judgment is “…authority for the proposition that in urgent matters the Court may consider an affidavit by the person who furnished the application and who did not affix a copy of the application at the premises but who used some other, perhaps more efficient means under the circumstances” [emphasis added]. The court further indicated that, in instances of extreme urgency, it may even condone a failure to strictly comply with all provisions of section 346(4A) of the Old Act, but only when presented with a service affidavit, stating the reasons resulting in the failure to fully comply with the relevant provisions. However, in this instance, where the matter was recognised as urgent by the Court, more than 2 (Two) weeks had passed since the application had been instituted and it was noted that there had been sufficient time within which to comply with the relevant provisions of section 346 (4A)(b).
The court concluded in finding that the affidavit of Cassim, who was not the person who served the application, failed to comply with the section 346(4A)(b) of the Old Act. Furthermore, the bulk SMS failed to remedy any defect in the manner of service of the application, in that the SMS did not contain a copy of the application and no further affidavit was filed justifying any non-compliance with the provisions of section 346(4A)(a)(ii)(aa) and (bb) of the Old Act. As a result thereof, the manner of service of the application could not, in the circumstances, be condoned.
The case provides significant value on the requirements for service of an application to wind-up, highlighting the peremptory nature of section 346(4A) of the Old Act. The case further indicates the instances under which a court may condone non-compliance with certain provisions of the Act.
The court did not condone non-compliance with the manner of service of the application to wind-up in that the applicants had failed to comply with the relevant provisions of the Old Act and thereafter had failed to provide any justification for such failure.
The manner of service of an application to wind-up.