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[2016] ZASCA 30
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Eravin Construction CC v Bekker NO and Others (20736/2014) [2016] ZASCA 30; 2016 (6) SA 589 (SCA) (23 March 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20736/2014
In the
matter between:
ERAVIN
CONSTRUCTION
CC
APPELLANT
and
JACOBUS
NICOLAAS BEKKER NO
FIRST RESPONDENT
CLIFFORD
THABANG MAREDI NO
SECOND
RESPONDENT
CHAVONNES
BADENHORST ST’CLAIR
COOPER
THIRD RESPONDENT
Neutral
citation:
Eravin Construction CC v Bekker
NO
(20736/2014)
[2016] ZASCA 30
(23 March
2016).
Coram:
Lewis,
Tshiqi, Swain and Dambuza JJA and Plasket AJA
Heard:
15 March
2016
Delivered:
23
March 2016
Summary:
Company law – whether void disposition
in terms of s 341(2) of the Companies Act 61 of 1973 recoverable
by creditor or
whether enforcement precluded by
s 154(2)
of the
Companies Act 71 of 2008
– whether pre-business rescue debt –
meaning of ‘debt owed’.
ORDER
On
appeal from:
North West Division of the High
Court, Mahikeng (Landman J sitting as court of first instance)
1 The
appeal is upheld with costs.
2 The
order of the court below is set aside and replaced with the following
order:
‘
The
application is dismissed with costs.’
JUDGMENT
Plasket
AJA (Lewis, Tshiqi, Swain and Dambuza JJA concurring):
[1] The
issue to be determined in this appeal is whether the payment of
R389 593.49 by Ditona Construction (Pty) Ltd (Ditona)
– a
company being wound-up – to the appellant, Eravin Construction
CC (Eravin), is recoverable at the instance of Ditona’s
liquidators as a void disposition in terms of s 341(2) of the
Companies Act 61 of 1973 (the old Act), or may not be recovered
by
them because, in terms of s 154(2) of the Companies Act 71 of
2008 (the new Act), it is a pre-business rescue debt which
may not be
enforced. In the court below, the North West Division of the High
Court, Mahikeng, Landman J declared the payment to
be void and
ordered the repayment of the money. He subsequently granted Eravin
leave to appeal to this court.
Background
[2] In
order to place the matter in its proper context, it is necessary to
chronicle the travails of Ditona in its winding-up and
Eravin in it
being placed under business rescue. The events that I shall outline
and their chronology are common cause.
[3]
On 20 October 2010, an application was brought by KLK Landbou Ltd for
the winding-up of Ditona. A provisional winding-up order
was made on
9 December 2010. A final order was made on 3 March 2011. The
effective date of the winding-up, in terms of s 348 of
the old Act,
was 20 October 2010, the date of ‘the presentation to the court
of the application for the winding-up’.
[1]
On 4 October 2011, Messrs. J N Bekker, C T Maredi and C B St Clair
Cooper, the respondents in this appeal and who were the applicants
in
the court below, were appointed as Ditona’s liquidators.
[4] On 21
October 2010, a day after the winding-up application was launched,
the disputed payment of R389 593.49 was made by
Ditona to
Eravin.
[5]
On 24 September 2012, Eravin’s board resolved to place it under
business rescue in terms of s 132 of the new Act. Notice
to commence
business rescue proceedings was filed in the offices of the Companies
and Intellectual Property Commission (CIPC) on
26 September 2012,
thus beginning the business rescue process.
[2]
A business rescue practitioner, Mr Jean-Pierre Jordaan, was appointed
on 5 October 2012 and a business rescue plan was adopted
on 25
January 2013. The business rescue was terminated on 31 May 2013 and a
notice was filed to the effect that substantial compliance
with the
business rescue plan had been achieved.
[3]
[6]
Ditona’s liquidators, having established that the disputed
amount had been paid to a firm of attorneys, Grobler, Levin
and
Soonius Inc, instructed their attorneys to ascertain the basis of the
payment. By letter dated 15 February 2013, their attorneys
gave
notice to Grobler, Levin and Soonius Inc that the payment, having
been made after the effective date of the winding-up, was
void and
that they were obliged to pay the money received back to Ditona.
[7]
Having stated in the letter that Ditona’s liquidators intended
establishing
a s 417 enquiry to investigate the circumstances of the
payment, the attorneys proceeded to say that this would not be
necessary
if Grobler, Levin and Soonius Inc either repaid the money
or furnished a comprehensive written explanation of the circumstances
under which the payment to them had been made. In other words, the
letter continued, ‘we want to know on what basis you received
the payment, what you have given in exchange for receipt of the
payment to the company in liquidation and also when the governing
agreement was concluded as well as what the terms of the agreement
were’.
[8] On 1
May 2013, Grobler, Levin and Soonius Inc, which had by now changed
its name to Grobler Vorster Inc, responded by letter.
It said:
‘
We
confirm that the amount of R389 593.49 (THREE HUNDRED AND
EIGHTY NINE THOUSAND FIVE HUNDRED AND NINETY THREE RAND
AND FORTY
NINE CENTS) was paid to our company in terms of an Acknowledgement of
Debt signed by Mr G P Pretorius in his personal
capacity and on
behalf of the company.
Mr
Pretorius failed to perform in terms of the Acknowledgement of Debt
and we therefore proceeded to obtain judgment whereafter
a warrant of
execution was issued against the property of Mr Pretorius, as a
result of the said judgment. Mr Pretorius’s
mother proceeded to
pay this judgment debt.
Accordingly
it is our submission that the monies you refer to was not paid by the
company in liquidation, but was paid by a third
and independent
party,’
[9] The
person mentioned in the letter, Mr G P Pretorius, was Ditona’s
managing director prior to its winding-up. In an affidavit
attached
to the liquidators’ replying affidavit Pretorius denied that
the money paid to Eravin emanated from his mother and
that Ditona’s
account was used as a mere conduit for that payment by his mother.
Instead, he said, the ‘money was Ditona’s
money and came
from a Ditona bank account’. This was confirmed by the
liquidators in the replying affidavit. It was stated
that an
examination of the bank accounts of Ditona established that the funds
were Ditona’s funds and that ‘there was
no prior
injection of funds from Mr Pretorius’ mother as alleged’.
The
issues
[10] The
case of the liquidators, that they are entitled to recover the
payment made by Ditona to Eravin, rests on s 341(2) of the
old Act.
It provides:
‘
Every
disposition of its property (including rights of action) by any
company being wound-up and unable to pay its debts made after
the
commencement of the winding-up, shall be void unless the Court
otherwise orders.’
It is not
in dispute that Ditona was unable to pay its debts.
[11]
Eravin’s case, on the other hand, is that s 154(2) of the new
Act precludes the liquidators from recovering the debt.
This section
provides:
‘
If
a business rescue plan has been approved and implemented in
accordance with this Chapter, a creditor is not entitled to enforce
any debt owed by the company immediately before the beginning of the
business rescue process, except to the extent provided for
in the
business rescue plan.’
[12] The
first argument raised in the court below by the liquidators was that
the entire business rescue proceedings were void and
that therefore s
154(2) of the new Act did not bar the recovery of debt. This was so
because Eravin had not complied with s 129
of the new Act in one
respect: the business rescue practitioner was not appointed within
five business days of the filing of the
resolution, as required by s
129(3)(
b
). This argument was rejected by Landman J.
[13] At
the time, the issue was open, with different High Court judgments in
conflict as to whether a failure to comply with a requirement
of ss
129(3) or (4) had the effect, by operation of law, of rendering the
business rescue proceedings void.
[14]
The divergence of views has now been resolved by this court in
Panamo
Properties (Pty) Ltd & another v Nel & others NNO
.
[4]
Wallis JA held that non-compliance with s 129 did not visit nullity
on the business rescue proceedings automatically. What was
required
in order to achieve this result was an application to court. As a
result of
Panamo
Properties
,
this point was abandoned before us.
[15] The
second argument was that the debt was not a pre-business rescue debt
owed by Eravin to Ditona as it only arose –
or became due –
after the commencement of the business rescue proceedings. That being
so, the argument proceeded, its recovery
is not barred by s 154(2) of
the new Act. Landman J found that this was indeed so and granted the
liquidators’ application
on this basis.
[16]
He identified the issue to be addressed as being the meaning of the
word ‘debt’ in s 154(2). Counsel for the liquidators
had
argued that the word bore the same meaning in this context as in the
context of the
Prescription Act 68 of 1969
. While Landman J held that
this Act could provide guidance as to the word’s meaning, ‘one
must be cautious in relying
on this’.
[5]
Instead, with reference to ‘the general context’ of the
new Act, he held that there was ‘much to be said’
for the
idea that ‘debt in a wide and general sense denotes “whatever
was due . . . from an obligation”’;
[6]
that a ‘debt which is claimable is one which is due [and]
payable’; and that a ‘claim arises when the cause of
action is complete’.
[7]
[17]
He concluded in respect of the disputed payment:
[8]
‘
The
payment although void (but capable of being validated in a sense) is
not due and does not arise until, at least, a liquidator
has been
appointed and ascertains that the payment has been made and the close
corporation in liquidation is unable to pay its
debts. In addition
the identity of the recipient of the disposition must be known. Until
it becomes known the cause of action is
incomplete. On this basis the
debt only became claimable after 1 May 2013 when the applicants
discovered the identity of the recipient.’
On this
basis, he held that the debt was not a pre-business rescue debt and
its recovery was enforceable.
[18]
Despite his own warning of the dangers of importing the concepts in
the
Prescription Act into
the different context of the old and new
Companies Acts, Landman J did precisely that. In so doing, he ignored
a fundamental difference
between the two.
[19]
The
Prescription Act is
concerned with fixing a time when a debt
falls due – when it may be claimed – because it has
determined that to be
the point at which prescription starts to
run.
[9]
That point is only reached when the creditor knows ‘the
identity of the debtor and of the facts from which the debt
arises’.
[10]
[20]
Section 341(2)
of the old Act and s 154(2) of the new Act are
different. They are not concerned with when debts are due and can be
claimed, but
when they are owed. On this account, the prescription
analogy is not apposite and, as was demonstrated in this case, is apt
to
mislead.
[21] The
question to be answered in this case is thus when the debt was owed.
That must be answered in the first instance with reference
to s
341(2) of the old Act. It states expressly that a disposition in the
terms contemplated by it ‘shall be void’.
The recipient
has no right, on this account, to retain it. Consequently, it owes a
debt to the body which made the prohibited disposition,
and that debt
is owed as soon as the disposition was received.
[22]
Section 154(2) of the new Act is as clear: if a debt was owed by a
company ‘before the beginning of the business rescue
process’
– before, in other words – the filing of the resolution
when a company places itself under business
rescue – then the
creditor ‘is not entitled to enforce’ that debt.
[23] In
this case, the payment was made on 21 October 2010 and, being void,
its repayment was immediately owed by Eravin. Its business
rescue
proceedings began on 26 September 2012, being the date on which the
resolution was filed with the CIPC. As the debt was
owed prior to 26
September 2012, the debt may not be recovered.
[24] A
further point was argued in this court, but was not raised in the
court below. It was that s 154(2), properly interpreted,
only applies
to creditors who have been given notice of the business rescue
proceedings.
[25] The
argument arises in this case presumably because Eravin did not know
that the payment of a judgment debt by Ditona was a
void disposition
and so did not know that the liquidators, who had then taken no steps
to recover the debt, were creditors. As
a result, it did not give the
liquidators notice of the business rescue proceedings, and they
obviously played no part in them.
[26] In
these circumstances, it was argued that s 154(2), being draconian in
the sense that it provided for certain debts to be
rendered
unenforceable against the company under business rescue, should be
restrictively interpreted in order to minimise the
prejudice to
creditors.
[27] In
my view, the argument has no merit. The meaning of the section is
clear and unambiguous: all creditors – as opposed
to creditors
who had been given notice of the business rescue proceedings –
are precluded from enforcing pre-business rescue
debts. I can see no
justification for reading into the section a limitation that the
legislature would have provided for expressly,
had it wished to.
[28] A
creditor who has not been given notice, but who knows of the business
rescue proceedings, has a remedy. He or she may apply
to set aside
the business rescue proceedings for want of compliance with the
requirements of s 129 of the new Act. If he or she
succeeds in doing
so, s 154(2) would no longer be a bar to the recovery of the
debt.
[29] To
the extent that some creditors may not know about the business rescue
proceedings until after they have been concluded,
that may indicate a
defect in the provisions of the new Act concerning the giving of
notice. If that is so, that is a matter for
the legislature to attend
to. It is not the proper function of the court to attempt to remedy
such difficulties by means of interpretative
sleight of hand.
[30] For
the reasons that I have given, the appeal must succeed and the order
of the court below must be set aside and replaced.
It was argued on
behalf of the appellant that as the case involved a novel point, the
costs of two counsel was justified. I disagree.
Novel as the point
may have been, it was straightforward.
The
order
[31] I
make the following order.
1 The
appeal is upheld with costs.
2 The
order of the court below is set aside and replaced with the following
order:
‘
The
application is dismissed with costs.’
___________________
C
Plasket
Acting
Judge of Appeal
APPEARANCES:
For
Appellant:
AB Rossouw SC (with him J H A Saunders)
Instructed by:
George Loock Attorneys, Mahikeng
McIntyre & Van der Post,
Bloemfontein
For
Respondents:
M P
van der Merwe SC
Instructed by:
Couzyn Hertzog & Horak, Mahikeng
Spangenberg Zietsman & Bloem
Attorneys,
Bloemfontein
[1]
Section 348 of the old Act provides:
‘
A
winding-up of a 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.’
[2]
New Act, s 132(1)(
a
)(i).
[3]
New Act, s 132(2)(
c
)(ii).
[4]
Panamo
Properties (Pty) Ltd & another v Nel & others NNO
2015 (5) SA 63 (SCA).
[5]
Para 14.
[6]
Para 15.
[7]
Para 16.
[8]
Para 19.
[9]
Prescription Act, s
12(1).
[10]
Prescription Act, s
12(3).