Gavin Cecil Gainsford NO & Others v Tanzer Transport (Pty) Limited & Others

Costa Logistics SA (Pty) Ltd (the company) operated a distribution centre for Pick n Pay in Johannesburg from June 2007. Tanzer Transport (Pty) Ltd (Tanzer) provided transportation services to the company as a sub-contractor. By July 2008, the company's auditors expressed concerns about its ability to continue as a going concern. On 13 February 2009, Pick n Pay cancelled its agreement with the company. On the same day, the company's directors resolved to place it in voluntary winding-up. The special resolution was registered by the Registrar of Companies on 3 March 2009, which marked the commencement of the winding-up. Shortly before the winding-up, the company paid R4 500 000 to State Logistics (its Australian parent company). After the commencement of the winding-up, during March and April 2009, the company made payments totalling R14 231 161.86 to Tanzer. The company was factually insolvent, with concurrent creditors owed approximately R70 million. The liquidators sought to have the payments to Tanzer declared void as voidable dispositions under section 341(2) of the Companies Act 61 of 1973.

• Whether liquidators can sue in their capacity as liquidators or must sue in the name of the company in liquidation
• Whether liquidators had authority to institute proceedings to recover voidable dispositions
• Whether the matter was suitable for motion proceedings or required trial action
• Whether payments made by the company to Tanzer after commencement of winding-up were voidable dispositions under section 341(2) of the Companies Act 61 of 1973
• Whether the winding-up should be set aside

The appeal was upheld with costs including costs of two counsel. The high court's order was set aside. The payments totalling R14 231 161.86 made by Costa Logistics to Tanzer during March and April 2009 were declared void under section 341(2) of the Companies Act 61 of 1973. Tanzer was ordered to repay these amounts to the liquidators with costs. The application to set aside the winding-up was dismissed with costs. A special costs order was made limiting Tanzer's legal representatives to recovering only 50% of their costs from Tanzer in respect of heads of argument, due to flagrant breach of the Rules of Court (heads exceeded 40 pages and contained unnecessary lengthy analysis).

Liquidators have standing to institute proceedings either in the name of the company in liquidation or in their own names as liquidators (nomine officio). The reference in section 386(4)(a) of the Companies Act 61 of 1973 to bringing proceedings 'in the name and on behalf of the company' is satisfied when liquidators sue in their representative capacity as liquidators. A resolution authorizing liquidators to collect 'outstanding debts' is sufficiently broad to encompass proceedings to recover voidable dispositions. Section 341(2) of the Companies Act 61 of 1973 renders void all dispositions of property by a company being wound up and unable to pay its debts made after commencement of winding-up, unless the court orders otherwise. The fact that dispositions were made in the ordinary course of business or in ignorance of the winding-up is no defence. A court will only validate such dispositions in limited circumstances where fairness and justice require departure from the rule, which is not established merely because payments were made in ordinary course or without knowledge of winding-up. The fundamental principle that free assets at commencement of liquidation must be distributed rateably amongst creditors prevents validation of dispositions that prefer individual creditors over the general body.

The court noted with disapproval that State Logistics appeared to have been involved in a fraudulent scheme, having received R4 500 000 from the company shortly before winding-up and having reneged on undertakings to guarantee the company's debts. However, the court noted that the liquidators had already instituted separate proceedings against State Logistics to recover the R4 500 000. The court commented that Tanzer's interest in setting aside the winding-up appeared motivated solely by the desire to preserve its undue preference, as the company was an empty shell with no operations. The judgment contains an extensive discussion criticizing Tanzer's heads of argument for breaching Rule 10(3)(g) (exceeding 40 pages) and for containing unnecessary lengthy analysis of numerous cases rather than focused argument. The court referenced Caterham Car Sales & Coachworks Ltd v Birkin Cars to warn that practitioners who fail to comply with practice directions on heads of argument may face disallowance of part of their fees.

This case provides important clarification on liquidators' standing to institute proceedings. It confirms that liquidators may sue either in the name of the company in liquidation or in their own names as liquidators (nomine officio) - the distinction is one without substance. The case reaffirms the strict application of section 341(2) of the Companies Act 61 of 1973, which renders void dispositions made after commencement of winding-up by an insolvent company. It confirms that payment in the ordinary course of business or ignorance of the winding-up provides no defence. The judgment emphasizes the fundamental insolvency principle of concursus creditorum and equal treatment of creditors, holding that dispositions after winding-up unfairly prefer individual creditors over the general body. The case also illustrates the court's willingness to impose costs sanctions on legal practitioners who breach the Rules of Court regarding heads of argument.