It makes sense to bring about an amendment similar to the one made to section 189(1)(b)(ii) of the Labour Relations Act to the corresponding provisions of proposed section 38(6)(b) in the Bill. However, I submit that "a meaningful joint consensus seeking process" envisaged in section 189(2) would be inappropriate to section 38(7) in view of time-constraints when deciding the fate of a business of an insolvent estate.
I did not consider other amendments to section 189 (and the insertion of section 189A) which do not deal with provisions similar to proposed section 38 in the Bill.
Whether the reference to Trade Unions in the NEDLAC agreements excludes workers.
I take it that this question refers to paragraph 1.14 of the Annexure to the COSATU submission which starts off with the following sentence:
The insolvency laws will be changed to require notice of insolvency to be given to trade unions, …
The document attached as Annexure A to the submission is not an extract from paragraph 3.3 of the NEDLAC Report on the Labour Law Amendments, September 2001, referred to in footnote one of the submission This report contains the following:
Paragraph 3.3 refers to a principle (against which statutory arrangements covering insolvency should be audited) that timeous notification of possible liquidation and notice of applications for liquidations should be given to trade unions.
Paragraph 3.3.1 a. refers to an amendment proposed to the Labour Relations Act requiring that employers notify trade unions or employees of circumstances and legal proceedings that may result in insolvency.
Paragraph 3.3.2 a. refers to amendments to the Insolvency Act obliging a petitioner to give notice of a provisional liquidation to a trade union or employee.
The NEDLAC agreement regarding Insolvency Act amendments provides for notice to trade unions or employees. I attended about three days of negotiations. During this time it was never proposed that the Insolvency Act amendments should limit notice to trade unions to the exclusion of workers or employees.
Whether the benefits excluded during suspension in terms of proposed section 38(2)(b) should be limited to benefits in terms of the Basic Conditions of Employment Act 75 of 1997
The proposed section 38(2)(b), as advertised for comment in July 2000, read as follows:
(2) Without limiting subsection (1), during the period of suspension of a contract of service referred to in subsection (1)–
…
(b) no benefit in terms of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997), accrues to an employee arising out of any contract of service that is suspended.
Business South Africa, in its comment on the advertised Bill, asked why paragraph (b) did not deal with the suspension of benefits in terms of collective agreements. It submitted that such benefits, in addition to benefits in terms of the Basic Conditions of Employment Act, should be suspended as well. This proposal made sense to me. During September 2001, I asked a labour lawyer, contracted as a drafter by the Department of Labour, why paragraph (b) should not merely refer to employment benefits. He was concerned about unintended consequences, for instance pension benefits in terms of a collective agreement, but did not regard such a change as serious. Because I was of opinion that pension benefits in terms of collective agreements, or similar benefits, could not be regarded as an employment benefit arising out of a contract of service, I changed the paragraph to refer to employment benefits.
In paragraph 3.1 of its submission, COSATU says employees are entitled to various benefits granted in terms of other legislation or the common law, for example, occupational and associated rights in terms of the Extension of Security of Tenure Act 62 of 1997. It says (with reference to authority quoted in footnote 2 on page 7 of its submission), that these rights fall within the definition of employment benefits since in some cases they accrue on the basis of the employment relationship.
Paragraph (b) of the Bill refers to employment benefits arising out of any contract of service and not to benefits that may accrue in terms of other legislation or the common law on the basis of the employment relationship. The benefits dealt with in the Basic Conditions of Employment Act are overtime payments (which is unlikely to arise during the suspension of contracts), leave benefits, and severance pay. Section 1 of the Labour Relations Act provides that 'remuneration' means any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working for any other person. Section 32 of the Act deals with the methods of payment of remuneration, and section 35 with the calculation of remuneration, but remuneration can hardly be described as a benefit in terms of the Basic Conditions of Employment Act. The entitlement to remuneration is suspended in terms of section 38(2)(a) proposed in the Bill. I am still not convinced that the exclusion of benefits should be limited to benefits in terms of the Basic Conditions of Employment Act. If certain benefits only are intended, they should in my view rather be spelled out, for instance leave benefits and severance pay.

Tienie Cronje
Researcher: South African Law Commission
16 May 2002

Appendix 3:
Follow-up information and proposals with reference to the briefing on the Insolvency Amendment Bill 14 of 2002 held on 22 April 2002

Heading of proposed section 38 (here after section 38 and it subsections)
The heading of the clause reads "Contract of service suspended on insolvency of employer".
This is what is provided in subsection 38(1), but several other matters are dealt with in the rest of the section, for instance claims by the employer and termination of contracts after consultation.
The heading of section 37 reads "Effect of sequestration upon a lease". It is proposed that the heading of section 38 be replaced by the following:
Effect of sequestration upon contract of service of employee
This is wide enough, gives a fair description of the contents and is in accordance with the heading of the previous section.

Section 38(3): Employee deemed to be unemployed for purposes of Unemployment Insurance Act, subject to provisions of that Act.
My explanation of the provision at the briefing was that the employee was deemed to be unemployed, but this was subject to the Unemployment Insurance Act 30 of 1966 and an employee could not claim unemployment pay if he or she was not in fact unemployed. Section 35(4) of the Unemployment Insurance Act provides that an applicant for unemployment benefits must submit to the claims officer such proof as the claims officer may require of his continuous unemployment during any period in respect of which he claims unemployment benefits.
The Chairperson expressed concern that the deeming provision may override any other requirement that a person must be unemployed. This is a valid concern. I propose the following amendment (omissions are in bold between square brackets and insertions underlined):
An employee whose contract of service is suspended is [deemed to be unemployed for the purposes of] entitled to unemployment benefits in terms of section 35 of the Unemployment Insurance Act, 1966 (Act No. 30 of 1966), from the date of such suspension [and,] subject to the provisions of that Act. [is entitled to receive unemployment benefits in terms of section 35 of that Act]

Subsection 38(4)
Three issues were raised – questions regarding the wording, whether an employee will be able to claim amounts immediately, and whether the subsection should be moved to subsection (11).
The wording of subsection 38(4)
The chairperson requested that I should enquire from the Masters and insolvency practitioners about the practice followed in this regard and trace where the wording comes from.
As indicated below, the wording of section 38(4) agrees substantially with existing section 38 of the Insolvency Act.
I could not trace court decisions on the part of section 38 dealing with the claim for compensation. However, the ancient decision (6 November 1884) in the case of Clark v Denny 4 EDC 300 contains a useful discussion of the common law position. The non-fulfillment of the contract of service was the necessary consequence of the insolvency, but this did not take away the right to claim damages against the estate. In respect of a lease agreement section 104 of the Insolvent Ordinance enacted that such lease or agreement would upon the sequestration cease and determine, but this enactment was immediately followed by the proviso that "nothing herein contained shall prevent the lessor … from suing the trustee … for any damage which he shall prove to have been by him sustained in consequence of the non-performance of the conditions of such lease or agreement for a lease during the full period of the stipulated endurance thereof." According to Chief Justice De Villiers this proviso was merely declaratory of the law, and was inserted for the purpose of preventing the inference that the compulsory determination of the lease put an end to an action for damages – a person who had let his services for a definite period was as much entitled to damages for a premature dismissal as a lessor of a house for premature determination of the lease.
This historical background tends to support the exposition I gave at the briefing. I sent the following e-mail to experienced insolvency practitioners and the Masters for whom I have e-mail addresses:
I will very much appreciate an urgent reply to the following:
 
Section 38 of the Insolvency Act 24 of 1936 provides as follows:
 
38 Contract of service terminated by insolvency of employer
The sequestration of the estate of an employer shall terminate the contract of service between him and his employees, but any employee whose contract of service has been so terminated shall be entitled to claim compensation from the insolvent estate of his former employer for any loss which he may have suffered by reason of the termination of his contract of service prior to its expiration.

The essence of the proviso (after "but", dealing with a claim for compensation) has been repeated unchanged in section 38(4) proposed in the Insolvency Amendment Bill 14 of 2002.
 
I told the portfolio committee that the provision means that the employee has an unliquidated, concurrent claim for damages as a result of the termination of the contract of service by operation of law. I added that the ordinary rules regarding delictual claims for damages apply.
 
Do you agree with what I told the committee?
What is the practice regarding such claims?
Are such claims common?
Have you encountered difficulty with the interpretation of the provision?
 
Thanks

The following is a summary of the responses received from 14 persons:
All but one of those who responded agree with my exposition to the Portfolio Committee and some point out that this view is supported by the standard insolvency text books.
The practice is that damages claims must be tendered at a meeting of creditors where it must be rejected by the Master or Magistrate, as being unliquidated (section 44(1) of the Insolvency Act). The claim can subsequently be admitted by the trustee once he or she has been properly authorised by a resolution of creditors in terms of section 78(3) of the Act (usually at the second meeting). One commentator points out that a portion of the claim may be liquidated, namely for the time after insolvency when the employee has in fact been unemployed at the time when the claim is lodged.
The claims are similar to the damages claim of lessors in terms of section 37(1) of the Insolvency Act where the lease has been terminated in terms of the Insolvency Act.
The problem practically speaking is to determine the quantum of the claim. The trustee is obliged to take into account compensation paid to the employee by the Unemployment Insurance Fund.
It is not feasible to liquidate the claim by legislation – for example one week’s salary for every completed year of service, less payments by the Unemployment Insurance Fund.
One commentator distinguishes between two types of claims. (a)The first type is the "notice pay" claims (before section 98A of the Insolvency Act made provision for a preferent claim for severance or retrenchment pay). (b) The second type is where fixed term contracts are terminated early, subject to mitigation, for instance if alternative employment is found. This claim is for damages not covered by section 98A. (Another commentator says the compensation provision in section 38 is superfluous as a result of the provisions of section 98A(1)(a)(iv).) The commentator says type (a) used to be common (before section 98A came into force), but he has never seen type (b). Several other commentators say they have never seen any of these claims and other say they are uncommon. One commentator says the claims arise whenever larger labour forces exist and another says they are common.. The reasons given for the scarcity of the claims are the following:
Fixed term contracts of service are unusual;
Workers and their unions are unaware of the claims;
There is seldom enough free residue to pay the claims.
The employee has to prove the existence of a contract either written or verbal; written contracts are extremely rare and employees are reluctant to try and prove a verbal contract or do not know the terms of a verbal contract.
It is difficult to prove the amount of the damages.
Commentators who responded to my fourth question say they have never experienced problems with the interpretation of the provision. One commentator says there has been some difficulties with section 98A(1)(a)(iv) in the sense that there has been a duplication when notice pay as well as severance or retrenchment pay have been claimed.
It is submitted that a case can be made out for the use of words indicated in bold in the phrase "compensation … for loss suffered by reason of the suspension or termination of contracts of the contract of service prior to its expiration". The phrase is identical to the wording since at least 1936 which has apparently not given rise to problems. "Compensation" is used in a similar context in the previous section dealing with termination of leases. Although the words "prior to its expiration" are not essential, they clarify that the claim is in respect of damages caused by early termination of the contract of service as a result of insolvency. Although there is an overlap with section 98A(1)(a)(iv), the possibility of compensation claims remain. I propose that the word "compensation" and the phrase "prior to its expiration" should be retained.

Can an employee claim payment of amounts immediately?
Advocate Masutha raised the question whether subsection 38(4) allowed an employee to claim amounts immediately and place the trustee in an impossible position.
Proposed section 38, read on its own, creates the impression that an employee can claim immediately. The exposition above of the practice surrounding these claims, based on provisions of the Insolvency Act, shows that the concern about immediate claims cannot materialise in practice. The unliquidated claim must be submitted at a meeting. Once the trustee has obtained directions from creditors (usually at the second meeting) or from the Master (if no directions are given at the second meeting) he or she decides whether to accept the claim or not. If the trustee does not settle the claim, the creditor is entitled to prove the claim by court proceedings, especially the quantum of the claim. Even if the claim is liquidated the creditor must lodge a claim at a meeting and wait for confirmation of an account before he or she is entitled to payment.
It is submitted that, reading the provision with the rest of the Insolvency Act, it will be impossible for an employee to claim payment of amounts immediately.

Move subsection 38(4) to subsection (11)
The Chairperson submitted that subsection (4) belongs with subsection (11) and should be moved there.
Subsection (4) was probably placed where it is because it refers to suspension of service contracts which is dealt with in the previous subsections. It is also placed after subsection (3) which deals with another claim which can be instituted by the employee upon suspension of the contract. However, subsection (4), in addition to suspension, also deals with termination of contracts which is explained in subsections (5) and (10). Subsection (11), like subsection (4), deals with a claim which can be instituted by an employee whose services have been terminated.
A case can be made out that subsection (4) should be moved to subsection (11). This will entail the renumbering of subsections (5) to (10) and changing cross-references to these subsections. Because subsection (4) deals with suspension and termination while subsection (11) deals with termination only, it is submitted that it is not advisable to join subsection (4) and subsection (11) and divide the new section into paragraphs. It is proposed that subsection (4) rather be moved to immediately before subsection (11).

Section 38(10)
Ms Camerer was unsure whether subsection (10) prescribed a final date for the termination of contracts or whether the matter could drag on for more than 45 days after the appointment of the final trustee.
Subsection (10) provides that all suspended contracts of service shall, subject to measures contemplated in subsection (7), terminate 45 days after the date of the appointment of a (final) trustee in terms of section 56. Subsection (7) refers to consultation to reach consensus on measures to save the whole or part of the business of the insolvent employer.
The effect of the phrase "subject to measures contemplated in subsection (7)" is not clear. I accepted that the meaning of the phrase was that all service contracts not renewed before 45 days after the final appointment in view of measures to save the business or a part thereof, would terminate on the 45^th day after the appointment. (Paragraph 2.7 of the Memorandum on the Objects of the Bill reads as follows: "Unless otherwise agreed between a trustee and an employee, all contracts of service not already terminated terminate 45 days after the appointment of the final trustee.") However, there are problems with this interpretation. Even if there is consensus on measures to save the business, there is no certainty that the renewal of service contracts would have been finalised. There is not even certainty that a sale of the business, transfer contemplated in section 197A, scheme or compromise or other measure would be in place by the cut-off date.
I propose that subsection 38(10) should be amended as follows (omissions are in bold between square brackets and insertions underlined):
All suspended contracts of service shall [, subject to measures contemplated in subsection (7),] terminate 45 days after the date of the appointment of a trustee in terms of section 56, unless the trustee and an employee has agreed on continued employment of the employee in view of measures contemplated in subsection (7).
If an employee has terminated a contract before the cut-off date, section 38(10) will not apply because there is no longer a suspended contract.

Clause 3: Short title and commencement
The Chairperson is not in favour of the provision that legislation will come into operation on a date determined by proclamation, because Departments never get around to doing the proclamation. He also expressed the view that there was no need to warn trustees about the coming into operation of the provisions as they would be aware of it.
I still submit that there should be some warning of the coming into operation of the provisions.
In order to avoid unnecessary delay, a clause similar to section 159 of the Insolvency Act can be considered: "This Act shall be called the Insolvency Act, 1936, and shall come into operation on the first day of July, 1936." Another possibility is wording similar to section 70 of Proclamation 147 of 1979 which reads as follows: "This Proclamation shall be called the Land and Agricultural Bank of South West Africa Proclamation, 1979, and shall come into operation on 1 September 1979 or on such earlier date as the State President may determine by proclamation in the Gazette."
Proposed section 38(7)(b) refers to section 197A of the Labour Relations Act, 1995. To the best of my knowledge (I am waiting for someone from the Department of Labour to get back to me) this section is not yet in force. There are precedents to link the coming into operation of legislation to the date of commencement of other legislation. For instance section 9 of the South African Reserve Bank Amendment Act 10 of 1991: "This Act shall be called the South African Reserve Bank Amendment Act, 1993, and shall come into operation on the date of commencement of the Deposit-taking Institutions Amendment Act, 1993."
It is assumed that the amendments will apply to estates sequestrated after the coming into operation of the legislation. In order to remove any doubt a provision similar to section 2(2) of Act 122 of 1998 can be considered: "The provisions of subsection (1) shall apply in respect of estates which are sequestrated or provisionally sequestrated on or after the date of commencement of this section."
I propose that clause 3 should be amended as follows (omissions are in bold between square brackets and insertions underlined):
3. (1) This Act is called the Insolvency Amendment Act, 2002, and comes into operation on [a date determined by the President] 1 January 2003 or on such earlier date as the State President may determine by proclamation in the Gazette.
(2) This Act applies in respect of estates which are sequestrated or provisionally sequestrated on or after the date of commencement of this Act.

Tienie Cronje
Researcher: SA Law Commission
9 May 2002

Appendix 4:
Labour and Employment Law
Germany, Netherlands and Finland

The information below was taken from expositions by Dr Andreas Remmert (Germany) and the Insolvency Ombudsman (Finland) at the Third International Colloquium on Insolvency Law (Recklinghausen 21-23 May 2002) and from articles by Egbert Loesberg, lecturer in Burgerlijk Recht aan de Katholieke Universiteit Nijmegen (Netherlands).

Germany
Employment contracts remain valid in the case of insolvency. The administrator has to continue to employ the employees and pay their wages as preferential claims.
Claims before opening of the proceedings remain regular claims without priority. However, employees can receive money form the a fund known as the "Insolvenzausfallgeld" for the last three months before the opening of the proceedings. The employees whose contracts are terminated receive unemployment benefits from the unemployment insurance.
Both parties can terminate the employment contract within three months to the end of a month or a shorter contractual period. The termination has to be socially justified. This means that the administrator has to take care of a correct social selection (for instance, age, duration of employment, social responsibilities) and the termination has to be justified by the needs of the business (usually satisfied in the case of insolvency). If the preconditions of a lawful termination are not met, the employee can file a termination protection law suit at the labour court within three weeks after receiving the notice of termination.
If the administrator cannot employ employees because of lack of work or has no funds to pay estate claims, he can release employees from the duty to work until the next termination date. The employees have wage claims for the period until termination, but it is disputed amongst jurists whether the claims are preferential claims or concurrent claims.
Changes which lead to disadvantage of the employees, in particular a partial or complete shut down of the company, have to be negotiated with the employees’ council if the company has more than 20 employees. A so-called "social plan" has to be agreed upon by the employer and the employees’ council. In the case of insolvency, if no plan is agreed upon, the administrator may without preceding settlement proceedings directly ask the labour court to rarify changes not agreed to within three weeks after the start of the negotiations. The administrator may ask the court, under certain preconditions, to declare discharges lawful. The administrator and employees’ council may agree on a list of names of employees ("name list") whose contracts should be terminated. In the case of a name list it is presumed that the termination is based on urgent company needs and the social selection is subject to limited scrutiny. Agreements on name lists are common. Compensation claims for employees with terminated contracts can be agreed on in a "social plan" between the administrator and employees’ council and the claims are paid as cost of administration (highest preference). Claims are limited to 2.5 months’ earnings and the total cost of the social plan to a third of the estate.
If the business or a part of it is sold the purchaser acquires the rights and obligations of the existing employment contracts, also in the case of insolvency. In the case of insolvency it is presumed that a termination of employment contracts of listed employees (see above) is not void.

Finland
In the case of insolvency, the contracts of employment may be terminated by either party regardless of its duration with a notice period of 14 days. No termination reasons are required in the case of insolvency. In practice all contract are terminated by the administrator who enter into fixed term contracts with selected employees, as is required necessary. The pay for the notice period is cost of administration (the highest preference).
"Pay security" secures the payment of claims arising form an employee’s employment relationship in the event of the employer’s insolvency. It covers regular wages, annual holiday pay, holiday bonus, compensation for reduced working time, wages for term of notice, compensation for tools and travel expenses, daily allowances and damages based on contract of employment. An employer is considered insolvent if he is declared insolvent, is undergoing a debt recovery procedure and cannot pay the debts, has neglected to remit statutory withholding taxes or social security and pension contributions, or his insolvency can otherwise be clearly established by the pay security authorities. Pay security covers all payment that the employer is liable to pay the employee (Pay Security Act 866 of 1998 and Pay Security Decree 868 of 1998.) Pay security must be applied for within three months of the falling due of the claim. There is a set maximum amount of pay security for one employee (15,200 Euro). The State collects the pay security payment with interest from the employer or the insolvent estate. The Central Fund of Unemployment Funds each year retroactively reimburse the State the difference between the amounts paid to employees as pay security and the capital amounts collected from employers. The funds are collected as unemployment insurance payments from the employers.
According to Chapter 1, § 10 of the Employment Contracts Act when an enterprise is sold by the bankrupt estate, the assignee is not liable for the employee’s pay or other claims that have fallen due before the assignment, except if controlling power in the insolvent enterprise and in the assignee enterprise is exercised by the same persons.

Netherlands
Insolvency ("faillissement") has no effect on employment contracts. The contracts can be terminated upon notice of six weeks.
The curator may terminate if maintaining the employment contracts would not be in the interest of the insolvent estate. Where the interests of employees do not conflict with the interests of creditors, the curator should protect the interests of employees. Judicial interference would arise only in the case of abuse of authority by the trustee. In a case where the continuation of the business is not in the interest of the estate, the termination would in principle not be unreasonable. An example given by De Hoge Raad of unreasonable action by the curator is where the business is continued and the selection of employees to be dismissed is clearly unreasonable.
The claims after insolvency are payable as administration costs within the limits in section 40, while claims before insolvency are concurrent. No claims can be made after dismissal in insolvency in respect of a contractual provision that the employee would have a prescribed claim upon dismissal. If dismissal by the curator is clearly unreasonable it must be determined whether compensation would be appropriate and the amount of compensation must be determined.
Insolvency proceedings may be set aside if it is an abuse of the proceedings, for instance the sole aim of proceedings was to get rid of employment contracts, while objectively speaking insolvency was not necessary. It is also possible that the "ondernemingsraad" was not consulted where this was required.
Where the curator does not continue the business the employees are usually dismissed with a right to compensation during the dismissal period. In the case of the sale of a business the curator should strive to maintain as many employment opportunities as possible. Where the curator continues the business he or she must give security for the payment of employees who have not been dismissed.
In terms of a salary guarantee arrangement, the employer has a claim against the Landelijk Instituut Sociale Verzekeringen (LISV) in the case of inability by the employer to pay salary benefits. This applies in the case of insolvency, in the case of extension of payments ("surseance van betaling") or other enduring inability to pay debts. The claim is for salary for 13 weeks before termination of employment contracts, holiday pay, holiday bonus or where the employee has suffered prejudice because of failure by the employer to pay over monies in connection with the employment contract for a maximum of one year before the end of the termination period. The employee must report non-payment within a week after payment was due. In so far as the LISV has paid a claim of a creditor of an employer, the LISV obtains all the rights which the creditor had in connection with the claim.

Tienie Cronje
Researcher: South African Law Commission
31 May 2002

Appendix 5:
CHRONOLOGICAL LISTING OF CASES Jan 1957 - Apr 2001/1988 I Volume 1: 691 - 1005 (March) I KALIL V DECOTEX (PTY) LTD AND ANOTHER 1988 (1) SA 943 (A) I Judgment

Respondents' argument on appealability turns on whether the provisions of s 150 of the insolvency Act 24 of 1936 as amended ('the Insolvency Act') are made applicable to orders granting or refusing the winding-up of a company which is unable to pay its debts by reason of the provisions of s 339 of the Companies Act 61 of 1973 as amended ('the 1973 Companies Act'). The relevant portions of s 150 read:

'(1) Any person aggrieved by a final order of sequestration or by an order setting aside an order of provisional sequestration may appeal against such order.

(5) There shall be no appeal against any order made by the Court in terms of this Act, except as provided in this section.'

And s 339 provides:

'In the winding-up of a company unable to pay its debts the provisions of the law relating to insolvency shall, in so far as they are applicable, be applied mutatis mutandis in respect of any matter not specially provided for by this Act.'

CORBETT JA

It is cardinal to the respondents' argument that the opening words of s 339, viz: 'In the winding-up of a company..', be read as referring not only to (a) the process of liquidation which commences once an order of winding-up has been granted, but also to (b) the legal proceedings which lead to the grant or refusal of such an order. In my view, the words in question refer to (a), but not to (b). It seems to me that the ordinary meaning of the words 'winding-up of a company impel one to this conclusion. They refer to the liquidation of the company, not to the legal proceedings giving rise to the liquidation order; and, a fortiori, not to proceedings giving rise to the refusal of a liquidation order. In the case of Lawclaims (Pty) Ltd v Rea Shipping Co SA: Schiffscommerz Aussenhandeisbetrieb Der VVB Schiffbau Intervening 1979(4) SA 745(N) James JP, delivering the judgment of the Full Bench of the Natal Provincial Division (Van Heerden and Mime JJ concurring) stated (at 750B - C):

'Section 339 lays down that the provisions of the Insolvency Act only apply in the winding-up and that stage is only reached when the order to wind up has been granted in terms of the Companies Act.'

He went on further to hold that the 1973 Companies Act itself did not prohibit an appeal against an order refusing an application to wind up; that consequently the right to appeal was governed by the Supreme Court Act 59 of 1959; that an application for winding-up was a civil proceeding and, in the absence of any specific limitation, a judgment or order made n such a proceeding was appealable; and that, in the case before the Court, there being no such specific limitation, the order refusing an application to wind up was appealable (The reference to a 'specific limitation' arose from the provisions of s 20(2)(c) of Act 59 of 1959, in the original form, to which I shall make further reference later.) I am in full agreement with what was stated and held in the Lawclaims case in regard to the interpretation of 339 and the appealability of a decision refusing a winding-up order. Naturally this must now be read subject to the requirements relating to leave to appeal as laid down by s 20 of the Supreme Court Act in its present form, i.e. as amended by s 7 of the Appeals Amendment Act 105 of 1982. (See also the remarks (obiter) of Smuts J, with whom Klopper JP and Erasmus J concurred, in Du Plooy and Another V Onus (Edms) Bpk and Two Others 1981(1) PH E2.)

In the course of his argument respondents' counsel referred to s 348 of the 1973 Companies Act which provides as follows:

'A winding-up of the company by the Court shall be deemed to commence at the time of the presentation to the Court of the application for the winding-up'.

He conceded, however, in view of the authority of Vermeulen and Another V C C Bauermeister (Edms) Bpk and Others 1982 (4) SA 159 (T), that since no winding-up order was in fact made in this case, s 348 did not come into operation. Nevertheless, in my view, the provisions of s 348 tend to controvert, rather than advance, the argument of respondents' counsel. The purpose and effect of s 348 was considered by the Full Bench of the Transvaal Provincial Division in Vermeulen's case supra at 161F - 162B. Clearly the effect of the section is to antedate, by means of a deeming provision, the commencement of a winding-up by the Court to the time of the presentation of the application for winding-up. And, in my opinion, the time from which the commencement of winding-up was intended to be

CORBETT JA

antedated by this deeming provision was the date of the grant of the winding-up order. It seems implicit in this that the Legislature regarded a winding-up as ordinarily commencing with the order for winding-up.

Respondents' counsel placed considerable reliance on the English case of In re A I Levy (Holdings) Ltd 1964 Ch 19 as authority for the proposition that the words 'In the winding-up in s 339 included the legal proceedings leading to the grant, or refusal, of the winding-up order. I have read the case carefully. It deals with s 227 of the English Companies Act of 1948 and the question as to when the Court may exercise the jurisdiction granted to it by that section. Section 227 and s 339 of the 1973 Companies Act are not in pan materia and I do not find the decision to be of any assistance in resolving the question now under consideration.

In P v City Silk Emporium (Pty) Ltd and Meer 1950 (1) SA 825 (GW) the question arose as to whether a company which was under provisional liquidation and was unable to pay its debts was indictable for certain offences under the Insolvency Act. The State relied upon s 182 of the Companies Act 46 of 1926 ('the 1926 Companies Act'), which was the predecessor of s 339. The Court held that the State was not entitled to rely on s 182 since (at 834)

'the section is merely administrative. It provides that the law relating to insolvent
estates is to apply to the process of winding up a company....

(My italics.) This decision was followed in P V Schreuder 1957 (4) SA 27 (O) and Cooper and Cooper v Ebrahim 1959 (4) SA 27 (T) . It may be that the use of the words 'merely administrative' in this dictum placed too confined a construction on the effect of s 182 (see the discussion of these cases and of another in which the dictum was applied in a civil matter viz Ex parte Mallac: In re L D De Marigny (Pty) Ltd (In Liq): De Charmoy Estates (Pty) Ltd Intervening 1960 (2) SA 187 (D) by Colman J in Woodley v Guardian Assurance Co of SA Ltd 1976 (1) SA 758 (W) ), but it seems to me that the interpretation that the relevant words in s 182 ('In the case of every winding-up of a company...') referred to 'the process of winding up' is consistent with the meaning which I have placed upon the corresponding words in s 339. I should add that there are differences in the wording of ss 182 and 339 but none of these appears to me to have any bearing upon the question presently being discussed.