Ronbel 108 (Pty) Ltd v Sublime Investments (Pty) Ltd [2009] ZASCA 103; 2010 (2) SA 517 (SCA) ; [2010] 1 All SA 338 (SCA) (18 September 2009)

This matter involved a legal dispute between Ronbel 108 (Pty) Ltd (the appellant) and Sublime Investments (Pty) Ltd (the respondent), a company in liquidation. The respondent, Sublime Investments, had voluntarily resolved to wind up its operations, which led to the suspension of all civil proceedings against the company until the appointment of a liquidator.

Prior to the winding-up process, Absa Bank had instituted an action against Sublime Investments, but following the appointment of a provisional liquidator, Absa chose not to proceed with the action or submit a claim as they could become liable for a contribution towards administration costs. Instead, they ceded their claims to Ronbel 108 (the appellant) in October 2005.

The key issue in this case revolves around Section 359(2) of the Companies Act 61 of 1973, which states that any party intending to continue legal proceedings against a company in liquidation must provide notice to the liquidator within four weeks of their appointment. If notice is not given, the proceedings are considered abandoned unless the court directs otherwise.

In this case, Absa Bank, and subsequently the appellant, failed to provide the required notice to the liquidator. The appellant then launched an application to be substituted for Absa in the original action and sought a direction from the court that the proceedings should not be considered abandoned despite the lack of notice.

The court considered the purpose of Section 359(2), which is to provide the liquidator with an opportunity to assess the validity of claims and to prevent them from being embarrassed by unexpected actions shortly after their appointment. The court found that Absa's deliberate decision not to notify the liquidator of their intention to continue the action constituted evidence of abandonment. Furthermore, the appellant's delay in attempting to prove the claims and file the application was also considered.

The ratio decidendi, or core legal principle, underlying the decision in this matter is centered around the interpretation and application of Section 359(2) of the Companies Act. This section deals with the requirement for creditors to provide notice to the liquidator of their intention to continue legal proceedings against a company in liquidation.

The court's decision emphasises the purpose of this section, which is to provide the liquidator with an opportunity to assess claims and prevent them from facing unexpected legal actions shortly after their appointment. The ratio decidendi establishes that a deliberate decision by a creditor not to notify the liquidator of their intention to continue proceedings can be considered evidence of abandonment.

Furthermore, the court's discretion to direct otherwise under Section 359(2)(b) is not unfettered. While the absence of prejudice to the liquidator is a relevant consideration, the interests of all interested parties, including creditors, the liquidator, and members, should be taken into account. The court's decision highlights the importance of providing the liquidator with a timely opportunity to assess the validity of claims to protect the interests of the general body of creditors.

The case law referenced in the judgment is provided below, along with a summary:
1. Strydom NO v MGN Construction (Pty) Ltd & another: In re Haljen (Pty) Ltd (in liquidation) 1983 (1) SA 799 (D): This case interpreted the context of the term "liquidator" in Section 359 of the Companies Act. Booysen J held that the context indicates that "liquidator" refers to a final liquidator, not a provisional liquidator, in the case of Section 359. This decision was not challenged by either party in this matter.
2. Baskin v Levey & others NNO 1967 (3) SA 121 (W): Boshoff J interpreted the predecessor of Section 359, which was Section 118 of the Companies Act 46 of 1926. The judgment highlighted the purpose of the section as preventing a liquidator from being embarrassed by an action before they have a chance to consider it and to prevent unnecessary costs. The court also noted that a liquidator could oppose the purging of a default if they can show prejudice or if the applicant's excuse is not bona fide and reasonable.
3. Umbogintwini Land & Investment Co (Pty) Ltd (in liquidation) v Barclays National Bank Ltd & another 1987 (4) SA 894 (A): In this case, Viljoen JA provided insight into the design and intention of Section 359(2)(b). He stated that the provision was meant to give the liquidator an opportunity to consider and assess the nature and validity of claims in the interests of the general body of creditors.