Brits v Sweet Equity Investments 2 (Pty) Ltd and Another (23631/2022) [2023] ZAGPPHC 176 (24 March 2023)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

1. REPORTABLE: NO

2. OF INTEREST TO OTHER JUDGES: NO

…………..………….............

E.M. KUBUSHI DATE: … MARCH 2023

Case Number: 23631/2022

In the matter between:

In the matter between:

JAN HENDRIK BRITS APPLICANT

And

SWEET EQUITY INVESTMENTS 2 (PTY) LTD 1^ST RESPONDENT

THE SOUTH AFRICAN REVENUE SERVICE 2^ND RESPONDENT

JUDGMENT

KUBUSHI J

Delivered: This judgment was handed down electronically by circulation to the parties’ legal representatives by e-mail. The date and time for hand-down is deemed to be 10h00 on … March 2023.

[1] The Applicant, Jan Hendrik Brits, approached Court for the winding-up of the First Respondent, a limited liability company, known as Sweet Equity Investments 2 (Pty) Ltd. The relief the Applicant seeks in the application is, in essence, a final winding-up order, alternatively, that the First Respondent be provisionally wound up.

[2] The Second Respondent, the South African Revenue Service, is joined in this application, predicated on its likely interest in the outcome of the application from the point of view of the First Respondent's income tax and value added tax affairs. No relief is specifically sought against it.

[3] The facts of this matter are largely common cause between the Applicant and the First Respondent. The Applicant and the director of the First Respondent (“Mr Britz”) met and explored the possibility of together buying a farm that would go into the entity of the First Respondent. A farm in Mookgopong was identified. The Applicant contributed money into the entity, part of which was used for the purchase of the farm and some farm animals. There was an understanding between the parties that shares would be issued for the Applicant in the First Respondent, which was not done. The relationship between the Applicant and Mr Britz have now irretrievably broken down and the Applicant contents that he is entitled to repayment of the money he paid into the First Respondent, which the First Respondent and/or Mr Britz refuses to pay back. The applicant has now approached Court for relief.

[4] The First Respondent in opposing the application, raised in its papers, various defences and points in limine. In oral argument in Court, the First Respondent raised an in limine point, in regard to the Applicant’s failure to serve the application on the First Respondent’s employees and trade union(s) representing any of the First Respondent’s employees, which point the First Respondent’s counsel contended was a fatal defect which rendered the application dismissible.

[5] In his submission, the First Respondent’s counsel relied on the provisions of section 346(4A) of the Companies Act,¹ which provides that the application must be served on the company, the Master of the High Court, every registered trade union that represents any of the employees of the company and the employees themselves. The contention was that the Applicant did not comply with these requirements in that the Applicant failed to effect service upon the First Respondent’s employees and trade unions representing any of those employees, as well as failing to furnish the Court with a service affidavit as is required in terms of the afore stated subsection of the Companies Act. Counsel contended that these provisions are peremptory, and failure to comply with same rendered the application fatally defective.

[6] The Applicant’s counsel admitted that the service affidavit in respect of the service upon the First Respondent’s employees and the trade unions that represented any of those employees, was not filed. He requested a stand down, to be given an opportunity to make the said affidavit available. However, when the Court resumed after the said stand down, counsel was unable to provide the service affidavit, conceding that it was not available.

[7] Based on the fact that the affidavit was not available, the Applicant’s counsel suggested that the Applicant be given an opportunity to file the affidavit later, but that in the meanwhile an interim order be granted with a rule nisi and return date, including a proviso that service be made on the First Respondent’s employees and any trade unions involved. Alternatively, that the matter be stood down until Friday for the filing of the service affidavit. However, in the ultimate, counsel moved for the provisional order with the attached conditions as aforesaid.

[9] In opposition to the proposal by counsel for the Applicant, the First Respondent’s counsel referred this Court to the judgment in EB Steam Company,² where it is stated that the requirements of section 346 of the Companies Act, are peremptory, and they are peremptory for ordinary applications, both in an instance of a provisional order and a final order. It is only when an urgent application is brought that a Court may be convinced that as a result of problems of urgency, that it was not possible to serve on the employees, that the Court may then be of assistance and grant a provisional order. Counsel argued that since the current application was not urgent, the proposition of a provisional order with a return date was misplaced.

[10] The issue, as counsel submitted, is simple. Service upon the employees and trade unions are requirements that had to be complied with. The requirements were not complied with, and the Court will take that in consideration in its judgment and decide how to deal with it, however, the contention by counsel was that non-compliance under these circumstances was a substantive reason for the dismissal of the application.

[11] Section 346 of the Companies Act deals with an application for winding-up of a company. The salient provisions of the section, in particular, subsection 346(4A) provide 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 –

1. registered trade union that, as far as the applicant can reasonably ascertain, represents any of the employees of the company; and

2. to the employees themselves –

(aa) by affixing a copy of the application any noticeboard which the applicant and the employees access inside the premises of the company; or

(bb) 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 in a business at the time of the application;

3. the South African revenue service; and

(iv) to the company, unless the application is made by the company, or the court, at its discretion, dispenses with the furnishing of a copy if 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.”

[12] It is not in dispute that the Applicant has failed to comply with the requirements of section 346(4A) of the Companies Act. Counsel for the Applicant conceded, as well, that the Applicant failed to comply with these statutory obligations. For instance, the requirement in subsection 346(A4)(a)(i) is that the Applicant must furnish a copy of the application to the registered trade union that, as far as the Applicant can reasonably ascertain, represents any of the employees of the company. There is no evidence that this subsection was ever complied with. Nor is there any evidence that there were any enquiries made to determine whether the employees were represented by any trade union.

[13] As regards service on the employees of the First Respondent, the return of service of the Sheriff uploaded on Caselines, indicates that the application was served on two employees of the First Respondent on behalf of the other employees. The Companies Act, however, provides in section 346(4A)(a)(ii) that service upon the employees of the company shall be served by (aa) affixing a copy of the application on any noticeboard which the Applicant and the employees have access to inside the premises of the company; or (bb) where 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 business at the time of the application.

[14] From the aforesaid, it is obvious that the Companies Act makes no provision for service of the application upon other employees on behalf of other employees. The service having been effected as such, is as a result defective.

[15] Furthermore, in terms of subsection 346(A4)(b) of the Companies Act 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. It is common cause that such an affidavit was never furnished to the Court either before or during the hearing of the application. Counsel for the Applicant went as far as requesting a stand down in an attempt to get hold of the affidavit, to no success.

[16] In EB Steam Company,³ a judgment of the Supreme Court of Appeal, on which the First Respondent’s counsel relied to fortify his arguments, that Court remarked as follows:

“…The requirement that the application papers be furnished to the person specified in s346(4A) is peremptory, when furnishing them to the respondent’s employees, that this be done in any of the ways specified in s346(4A)(a)(ii). If those modes of service are impossible or ineffectual another mode of service will satisfy the requirements of the section. If the applicant is unable to furnish the application papers to employees in one of the methods specified in the section, or those methods are ineffective to achieve that purpose and it has not devised some other effective manner, the court should be approached to give directions as to the manner in which this is to be done. Throughout the emphasis must be on achieving the statutory purpose of so far as reasonably possible bringing the application to the attention of the employees.”

[17] Although EB Steam Company was decided in the context of service on the company’s employees, it is quite clear that service required in terms of subsection 346(4A) of the Companies Act is peremptory even when it relates to trade unions. It is also clear that if service is not possible in one of the methods specified in the subsection or those methods are ineffective to achieve that purpose, another mode of service has to be devised or the Court should be approached to give directions as to the manner in which this is to be done.

[18] In this instance, the mode of service provided for in subsection 346(4A)(a)(ii)(aa) and(bb) was not followed when service was effected on the First Respondent’s employees. It is not clear from the papers uploaded on Caselines why this mode of service was not followed. Instead, another mode of service was devised and the application was served upon two of the employees of the First Respondent on behalf of all other employees.

[19] This Court is of the view that the devised mode of service is ineffective, and will not achieve the purpose, which is to make all the First Respondent’s employees aware of the application. That the two employees served with the application will bring the application to the attention of other employees, is not ascertainable on the facts before this Court. The return of service in respect of this service does not indicate why it was not possible to serve on the other employees as required in the subsection, as a result, this Court cannot make any inference as to whether there was any need to approach the Court for directions or not.

[20] This Court has, therefore, to rule that such service is defective as it does not comply with the requirements of the subsection.

[21] The afore stated will similarly, apply where trade unions are concerned. In this instance, as earlier indicated, nor enquiries were made as to whether or not any of the First Respondent’s employees was represented by a trade union. This Court can thus not ascertain if there were trade unions representing the employees or not. Fundamentally, there is no evidence on record on which it could be deduced whether another mode of service should have been devised or whether the Court should have been approached for direction or not, as it is not known why the trade unions were not served in the first place. As such, this is a blatant non-compliance.

[22] The Court in Pilot Freight, ⁴ examined the effect of non-compliance with the requirements of section 346(4A)(b) of the Companies Act, and came to the conclusion that the requirements ‘are peremptory and can therefore in appropriate circumstances be fatal to an application for the winding-up of a company’. It is not in dispute that the service affidavit was not furnished in this instance, this might render the application fatally defective.

[23] In this Court’s view, the submission by the Applicant’s counsel that a provisional order be granted with a return date and a proviso that the outstanding requirements be complied with, is not sustainable. It is only under circumstances where because of urgency or logistical problems that provisional order may be granted by this Court.⁵

[24] In the circumstances of this application, where the Applicant approached Court without any proper service on the employees of the First Respondent, and having made no attempt to serve the application on the trade union(s), and more importantly, having failed to file the service affidavit, it is this Court’s view that such defect is fatal to the application. There is no compliance, whatsoever, and the application ought to be dismissed.

[25] Consequently, the application is dismissed with costs.

________________________

E.M KUBUSHI

JUDGE OF THE HIGH COURT

GAUTENG DIVISION, PRETORIA

APPEARANCES:

APPLICANT’S COUNSEL: ADV C ZIETSMAN

APPLICANT’S ATTORNEYS: WARFFEMIUS VAN DER MERWE INC

FIRST RESPONDENT’S COUNSEL: ADV MP VAN DER MERWE SC

FIRST RESPONDENT’S ATTORNEYS: PIETER FERREIRA ATTORNEYS