Editorial note: Certain information has been redacted from this judgment in compliance with the law.
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
(1) REPORTABLE: NO
(2) OF INTEREST TO OTHER JUDGES: NO
(3) REVISED.
…………..…………....................
K.E. MATOJANE 06 DECEMBER 2021
CASE NUMBER: 2020/11582
In the matter between:
SOLOMON SEGALO Applicant
and
JOACHIM HENDRIK BOTHA N.O. First Respondent
DANIEL SANDILE NDLOVU N.O. Second Respondent
(In their capacities as the joint liquidators of
Blue Flame Advertising and Marketing (Pty)
Ltd (In liquidation) (Registration no: 2001/014553/07)
FIRSTRAND BANK LTD Third Respondent
THE MASTER OF THE HIGH COURT OF SOUTH
AFRICA, GAUTENG LOCAL DIVISION
JOHANNESBURG Fourth Respondent
THE MINISTER OF TRADE AND INDUSTRY Fifth Respondent
MINISTER OF JUSTICE AND CONSTITUTIONAL
DEVELOPMENT Sixth Respondent
1
CASE NUMBER: 2019/44572
In the matter between:
JOACHIM HENDRIK BOTHA N.O. First Applicant
DANIEL SANDILE NDLOVU N.O. Second Applicant
[In their capacities as the joint liquidators of
Blue Flame Advertising and Marketing Proprietary Limited
(In Liquidation), Registration Number: 2001/014553/07)
and
NOKHUPHIWA RITA SEGALO First Respondent
(Identity Number: […])
LINDA BALOYI Second Respondent
JOSE NHABANGA Third Respondent
THE CITY OF JOHANNESBURG
METROPOLITAN MUNICIPALITY Fourth Respondent
THE MASTER OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA Fifth Respondent
Delivered: This judgment was handed down electronically by circulation to the
parties and/or their legal representatives by email, and by uploading
same onto CaseLines. The date and time for hand-down is deemed to
be have been on 06 December 2021.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
MATOJANE J:
[1] The primary issue in this matter is whether s 386 of the Companies Act 61 of
1973 is unconstitutional and invalid as it fails to provide for judicial oversight
over sales of residential immovable properties of the liquidated companies
Apple.
[2] The applicants seeks the following relief:
2
2.1 An order declaring that the failure to provide judicial oversight over sales
of residential immovable properties of liquidated companies is
unconstitutional and invalid.
2.2 An order declaring it unconstitutional for a Master of the High Court to
authorise under s386 of the 1973 Companies Act the sale of immovable
property, or any portion thereof, to the extent that this permits the sale
of a home of a person.
2.3 An order declaring it unconstitutional for a liquidator of a company to
have the power under the 1973 Companies Act to sell any immovable
property of the company by public auction, public tender or private
contract and give delivery thereof, to the extent that this permits the sale
of a home of a person.
2.4 An order to remedy the defect by reading certain words into s386 of the
1973 Companies Act.
2.5 An order declaring that the application of rule 46 is not limited to the
immovable property of natural persons but also includes the immovable
property of all persons (including companies).
[3] The respondents oppose this application and contend that Section 386 of the
Companies Act 61 of 1973 is not unconstitutional and invalid in the respects
pleaded by the applicant for the following reasons, among other things:
3.1 The protection afforded by Rules 46 and 46A of the Uniform Rules of
Court regarding execution against homes does not apply where a juristic
person owns the property.
3.2 The rights conferred by sections 26(1) and 26(2) of the Constitution do
not vest in the juristic entity which owns the property;
3.3 The natural person's rights under sections 26(1) and (2) of the
Constitution are not threatened or breached by the sale of the property
concerned.
Background
[4] The applicant ("Mr Segalo") and his family reside in the property which is owned
by Blue Flame Advertising and Marketing (Pty) Ltd (in liquidation) ("Blue
Flame"). Mr Segalo was the sole director and shareholder of Blue Flame. Blue
Flame purchased the property for R16.5 million.
3
[5] FirstRand Bank Limited is the bondholder in respect of the property and the
only secured creditor in the winding up of Blue Flame. Blue Flame was
provisionally liquidated on 13 August 2018 and finally liquidated on 5 December
2018.
[6] On 26 August 2019, the second meeting of the creditors of Blue Flame was
held, and resolutions were adopted in terms of which the liquidators, the first
and second respondents, were authorised by the company's creditors to
dispose of Blue's assets Flame, including its property.
[7] The liquidators brought an application for order amongst others, extending their
powers in terms of section 386 of the Act authorising them to take steps to sell
the assets of Blue Flame and marketing and selling the immovable property by
public auction, public tender or private contract.
[8] The liquidators issued an application for the eviction of Mr Segalo and any
persons claiming occupation through or under him from the property on the date
to be determined by the Court in terms of Section 4(8) of the Prevention of
Illegal Eviction from unlawful Occupation of Land Act 19 of 1998 ("PIE Act").
[9] An order for the eviction of Mr Segalo was duly granted on 22 October 2019
(under Case Number: 2019/9147). Mr Segalo agreed to and was ordered to
vacate the property by 14 February 2020. Mrs Segalo failed to vacate the
property, and on 5 March 2020, the liquidators obtained an order in terms of
s4(2) of the PIE Act authorising service of the notice on Mrs Segalo and her
employees. Mrs Segalo delivered a notice in terms of rule 16A and a counter
application in which she seeks the same order that Mr Segalo seeks in this
application.
[10] The applicant seeks an order to intervene in his wife's eviction application
(under Case Number: 2019/44572) and seek the aforementioned orders. As
the two matters share a factual background and the same issues of law and
fact arise, it is convenient to all the parties and the Court to grant an application
by Mr Segalo for the consolidation of the two matters.
[11] It bears mentioning that no payments have been made by Mr and Mrs Segalo
(“the applicants”) to the third respondent (“FirstRand Bank Limited”) or to the
Johannesburg City Council since the provisional liquidation of Blue Flame on
13 August 2018. The judgment debt has escalated to an amount exceeding
R17 500,000.00. The outstanding rates, taxes, and utilities owed to the
municipality exceed R600 000.00. In his replying affidavit, Mr Segalo states
that he can afford to pay between R80 000.00 to R100 000.00 per month as a
rental to the liquidators.
4
Legal Framework
[12] Section 386(3) read with subsection 4 provides that in a winding-up of a
company by the Court, with authority granted by meetings of creditors and
members or contributories or on the directions of the Master given under
section 387, the liquidators shall have the powers to sell any movable and
immovable property of the company by public auction, public tender or private
contract and to give delivery thereof and to perform any act or exercise any
power for which he is not expressly required by this Act to obtain the leave of
the Court.
[13] Section 387 deals with the exercise of liquidator's powers in winding-up by
Court and provides:
(1) …
(2) In regard to any matter which has been submitted by the liquidator for
the directions of creditors and members or contributories in general
meeting, but as to which no directions have been given or as to which
there is a difference between the directions of creditors and members
or contributors, the liquidator may apply to the Master for directions and
the Master may give or refuse to give directions as he may deem fit.
(3) Where the Master has refused to give directions as aforesaid or in
regard to any other particular matter arising under the winding-up, the
liquidator may apply to the Court for directions.
(4) Any person aggrieved by any act or decision of the liquidator may apply
to the Court after notice to the liquidator, and thereupon, the Court may
make such order as it thinks just.
Right of Access to Courts
[14] The applicants rely on section 34 of the Constitution, which provides that:
"Everyone has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before a court or, where
appropriate, another independent and impartial tribunal or forum."
[15] The applicants cite as authority for this proposition three judgments: Lesapo,1
Zondi,2 and First National Bank.3 These cases deal with a completely different
factual matrix where legislation authorised self-help.
1 Chief Lesapo v North West Agricultural Bank 2001 (1) SA 409 (CC).
2 Zondi v MEC for Traditional and Local Government Affairs and Others 2005 (3) SA 589 CC.
3 First National Bank of SA v Land and Agricultural Bank of SA 2000 (3) SA 626.
5
[16] In Lesapo, the Court found that section 38(2) of the North-West Agricultural
Bank Act 14 of 1981 infringed s 34 of the Constitution and breached the rule of
law by sanctioning self-help, the bank being permitted thereby to be the judge
in its cause.
[17] In Zondi, the applicant sought confirmation of an order of the High Court
declaring invalid certain provisions of the Pound Ordinance 32 of 1947,
KwaZulu-Natal. The challenged provisions gave landowners and pound
keepers power to seize and impound livestock found trespassing on the land.
They also gave power to the poundkeepers to sell the impounded animals to
recover the pound fees. All of this occurred without a court order. The Court
held that the combined effect of certain provisions among those challenged
created an impounding scheme that, from seizure of the animals to execution
of their sale, did not involve the judicial process and did not provide for notice
to livestock owners where they could, with reasonable diligence, be identified.
The Court also held that one of the provisions discriminated against black
people, landless black people in particular, on the basis of colour and
landownership and therefore violated the constitutional right to equality.
[18] First National Bank concerned a statute that authorised a bank to attach and
sell a debtor's property in execution without recourse to a court of law. The
constitutional Court confirmed an order that the provisions of the Land and
Agricultural Bank of South Africa to attach and sell a debtor's property in
execution without recourse to a court of law were unconstitutional.
[19] On the applicants' interpretation of section 34 of the Constitution, items of value
such as property and equipment which a liquidated company owns could not
be sold without prior judicial oversight of their sales.
[20] The applicants have failed to show that any of their section 34 rights have been
limited by the Companies Act. The PIE Act affords them protection in that a
court "may grant an order for eviction if it is of the opinion that it is just and
equitable to do so, after considering all the relevant circumstances, including
the rights and needs of the elderly, children, disabled persons and households
headed by women.4
Right to Housing
4 Section 4(6) of the PIE Act.
6
[21] The applicants, relying on Jaftha,5 contends that lack of judicial oversight over
the sale of a primary residence owned by a company violates their right to
housing enshrined in section 26 of the Constitution.
[22] In Jaftha, execution was levied against a judgment debtor's home without
judicial oversight, unlike the present case where the property is owned by a
juristic person. The Court found that section 66 of the Magistrates' Courts Act
32 of 1944 permits a person to be deprived of existing access to adequate
housing, thereby limiting the rights protected in section 26 of the Constitution.
[23] Again in Gundwana, 6 the Constitutional Court held that where execution
against the primary residence of debtors, who owns the property and run the
risk of losing their security of tenure is sought after judgment on a money debt,
judicial oversight of the execution process is a must.
[24] The Supreme Court of appeal in Saunderson7 said the following about the
execution of residential property:
"But Jaftha did not decide that the ownership of all residential property is
protected by s 26(1); nor could it have done so bearing in mind that what
constitutes 'adequate housing' is necessarily a fact-bound enquiry. One need
only postulate executing against a luxury home or a holiday home to see that
this must be so, for there it cannot be claimed that the process of execution will
implicate the right of access to adequate housing at all."
[25] The Constitutional Court explained in Jaftha that judicial oversight has the effect
of preventing the potentially unjustifiable sale in execution of the homes of
people who, because of their lack of knowledge of the legal process, are ill-
equipped to avail themselves of the remedies currently provided in the Act.
[26] The high court rule 46(1)(a)(ii) was amended from 24 December 2011 (see GN
R981 (19 November 2010) to require judicial oversight over the sales of
debtor's homes.
[27] The new rule 46A now provides:
"46A Execution against residential immovable property
(1) This rule applies whenever an execution creditor seeks to execute
against the residential immovable property of a judgment debtor.
5 Jaftha v Schoeman and Others; Van Rooyen v Stottz and Others 2005 (2) SA 140 (CC) (2005 (1)
BCLR 78).
6 Gundwana v Sleko Development CC and Others C 2011 (3) SA 608 (CC).
7 Standard Bank of South Africa Ltd v Saunderson and Others 2006 (2) SA 264 at 274B.
7
(2) (a) A court considering an application under this rule must-
(i) establish whether the immovable property which the
execution creditor intends to execute against is the
primary residence of the judgment debtor; and
(ii) consider alternative means by the judgment debtor of
satisfying the judgment debt, other than execution
against the judgment debtor's primary residence.
(b) A court shall not authorise execution against immovable
property, which is the primary residence of a judgment debtor
unless the Court, having considered all relevant factors,
considers that execution against such property is warranted.
(c) The registrar shall not issue a writ of execution against the
residential immovable property of any judgment debtor unless a
court has ordered execution against such property..."
[28] The protection is aimed at poor people who own and occupy the property
sought to be executed without proper consideration of their circumstances. The
Constitution does not require judicial oversight when the property belonging to
a company is sold.
[29] In Mokebe,8 the full Court of this division held that a preliminary enquiry is
necessary to establish whether the judgment debtor is indigent and whether the
property is their home. The Court held that the constitutional considerations do
not challenge the judgment creditor's right to execute but instead cautions
courts to have due regard to the impact that this may have on 'judgment debtors
who are poor and at risk of losing their homes.
[30] In Fraser,9 the Court held that Rule 46A applies to individuals and natural
persons only. That immovable property owned by a company, a close
corporation or a trust, of which the member, shareholder or beneficiary is the
beneficial owner, is not protected by the rule even if the immovable property is
the shareholder's, member's or beneficiary's only residence.
[31] In Mkhize v Umvoti Municipality & others,10 the Supreme Court of Appeal said
that the object of judicial oversight is to determine whether rights in terms of s
26 of the Constitution (the right to adequate housing) are implicated. Being a
juristic person, Blue Flame has no right of access to adequate housing under
section 26 of the Constitution and is not a bearer of the right to human dignity.
8 Absa Bank Ltd v Mokebe and Related Cases 2018 (6) SA 492 (GJ).
9 Investec Bank Ltd v Fraser No and Others 2020 (6) SA 211(GJ).
10 2012 (1) SA 1 at para 26.
8
Order
[32] In the premise, I make the following order:
1. The First Respondent’s counterclaim (under Case Number:
2019/44572) is dismissed with costs;
2. Ejecting and evicting The First to Third Respondents (under Case
Number: 2019/44572) and any person/s claiming occupation through
or under the First to Third Respondents from the property more fully
described as Portion 1 of Erf […] Bryanston, Johannesburg which
corresponds to […], Bryanston, Johannesburg,
Gauteng ("the property") before the 5 January 2022 in terms of
Section 4(8) of the Prevention of Illegal Eviction From and Unlawful
Occupation of Land Act 19 of 1998 ("the Act");
3. The sheriff is authorised and directed to eject and evict the First to
Third Respondents ( Case Number: 2019/44572) and any person/s
claiming occupation through or under the First to Third Respondents
from the property before the 5 January 2022 in terms of Section
4(8) of the Act, in the event that the First to Third Respondents
(and any person/s claiming occupation through or under them) have
not vacated the property on the date referred to in paragraph 2
above; and
4. The Respondents including Mr Segalo to pay the costs, jointly and
severally.
_______________________________
K.E. MATOJANE
Judge of the High Court
Gauteng Local Division, Johannesburg
Heard: 30 August 2021
Judgment: 06 December 2021
9
CASE NUMBER: 2020/11582
For Applicant: S.S. Cohen (with A.F. Ashton)
Instructed by: Larry Marx Attorneys
For First to Third Respondents: J.E. Smit
Instructed by: Werksmans Attorneys
CASE NUMBER: 2019/44572
For Applicants: J.E. Smit
Instructed by: Werksmans Attorneys
For First to Third Respondents: S.S. Cohen (with A.F. Ashton)
Instructed by: Larry Marx Attorneys
For Fourth Respondent: S Jackson
Instructed by: Moodie & Robertson Attorneys
10
Cited documents 3
Judgment 2
- Gundwana v Steko Development CC and Others [2011] ZACC 14 (11 April 2011)
- Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others [2004] ZACC 25 (8 October 2004)