Liquidation or Exploitation? The controversy unfolding in Mahikeng High Court

Published Dec 21, 2023


In the solemn chambers of the Mahikeng High Court, nestled deep in the Northwest of South Africa, an unprecedented case is under way.

This case has the potential to radically alter the future course of liquidation laws within the nation. At the centre of this legal storm is Tariomix, a firm owned by Louis Liebenberg, and the legal practitioners and provisional liquidators tasked with its provisional dissolution, Strydom Rabie and Associates, and provisional liquidator Vaughan Victor.

These protagonists are well-acquainted with high-stakes liquidation cases, having collectively raked in an astonishing R30 million from the liquidation of Mirror Trading International over a span of two years. The hefty profits from such proceedings cast a long, ominous shadow on the profession, leading some to perceive it as a business capitalising on the misfortunes of others.

In an intriguing twist, the original applicants who initiated the liquidation of Tariomix have formally retracted their support. This action leaves the provisional liquidators bereft of a mandate to persist with their work. Unfazed by this development, they have attempted to navigate this setback with a legal stratagem to replace the original applicants with new ones. These new entrants are purportedly pursuing lost profit, a claim traditionally not entertained in liquidation cases where only capital can be recovered.

This case presents profound legal conundrums. The original applicants sought the court's intervention based on their specific circumstances, which cannot be universally extended to all those associated with the provisionally liquidated company. Therefore, the argument persists that the case should have been dismissed and the provisional liquidation rescinded when the original applicants withdrew.

Given the present circumstances, if new applicants desire to initiate the liquidation process anew, they would need to bring forth a fresh application. If granted, this would then set off the process of appointing liquidators. It appears that the current provisional liquidators and their legal teams are putting up a vigorous fight to maintain their control. This is despite the clear setback brought about by their original applicants distancing themselves from the ongoing proceedings before a final liquidation order could be issued. This fierce resistance seems rooted in a desire to protect their current status quo, as there is no guarantee they would be reappointed should a new liquidation process commence.

Despite these arguments, the provisional liquidators are forging ahead, seemingly trying to persuade the court to sidestep principles of justice and equity. This audacious move has sparked widespread controversy, with over 5,000 individuals lodging documents urging the court to halt the liquidation. If they prevail, it could set an alarming precedent, enabling the courts to become instruments for altering the already contentious rules governing liquidations in South Africa.

Liquidation typically involves selling a company's assets, such as intellectual property, customer databases, and business plans, to generate funds to settle debts. However, critics contend that liquidators often act more like scavengers, plundering the remains of a company rather than fulfilling their duty to represent the creditors' best interests.

The unfolding saga has already resulted in the provisional liquidators allegedly accumulating costs soaring into the tens of millions, considering they were only appointed in February of this year this again highlights how liquidations are clearly a profitable business in South Africa. This raises questions about whether they are truly serving the creditors' best interests or merely exploiting the process for personal gain.

As this crucial case progresses, Justice Morgan has reserved judgment, leaving Tariomix's joint venture partners and others in a state of heightened suspense. This case could signify a turning point in South Africa's liquidation laws, testing whether the courts will uphold the rule of law or yield to the pressure of the liquidators. If the latter occurs, it could set a concerning precedent, potentially paving the way for similar practices in future liquidations.

This case underscores the pressing need for transparency, fairness, and accountability in the liquidation process, the master’s office, and the courts that grant these matters often based solely on an affidavit from an unverified creditor. It sheds light on the opaque practices that frequently cloak the process, emphasising the immediate need for reform.

Despite the original applicants no longer being on record, Justice Morgan has made the pivotal decision to hear the case. This choice further complicates the matter, adding another layer of intrigue and anticipation.

The judge's decision to proceed despite the absence of the original applicants highlights the significance of this case and its potential impact on the future of liquidation laws in South Africa. This decision could pave the way for other judges to do the same in similar circumstances, potentially reshaping the legal landscape. The outcome of this case is eagerly awaited as it could set a new precedent for liquidation laws in South Africa.

* Author’s name withheld to protect their identity.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.