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[2016] ZAWCHC 96
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Finlayson N.O and Others v Master Movers Cape CC and Others (10589/16) [2016] ZAWCHC 96 (2 August 2016)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE NO: 10589/16
In
the matter between:
MARK
FINLAYSON
N.O
................................................................................................
First
applicant
(In his capacity
as trustee of the Old Mill Trust IT3/2008)
HERMAN
JORIS WILLEMSE
N.O
..........................................................................
Second
applicant
(In his capacity
as trustee of the Old Mill Trust IT3/2008)
MAITLAND
FIDUCIARY LIMITED
N.O
..................................................................
Third
applicant
(In
its capacity as trustee for the time being
of the Old Mill
Trust IT3/2008)
And
MASTER
MOVERS CAPE CC
(in business
rescue)
.................................................
First
respondent
JOHN
FREDERICK KNEALE
CAINE
..................................................................
Second
respondent
DAVID
MALYON
........................................................................................................
Third
respondent
REASONS
DATED 10 AUGUST 2016
FOR
JUDGMENT DELIVERED ON 2 AUGUST 2016
VAN
ROOYEN AJ
[1]
The Applicants, in their capacities as
trustees of the Old Mill Trust (“the Trust”), as a matter
of urgency seek an
order evicting the First Respondent (“Master
Movers”) and all other persons or entities occupying the
Trust’s
premises (“the premises”) for commercial
purposes. The Second Respondent is the former business rescue
practitioner
of Master Movers and the Third Respondent is the sole
member of Master Movers. The Third Respondent is also a surety in
respect
of Master Movers’ obligations to the Trust.
[2]
Since 23 February 2016 Master Movers has
been under business rescue by virtue of a voluntary resolution to
that effect.
[3]
The Trust was granted leave to institute
these proceedings (“the eviction application”) in terms
of
s 133
of the
Companies Act, 71 of 2008
.
[4]
The eviction application was served on
29/30 June 2016 and in the notice of motion the Respondents, if they
intended opposing the
application, were required to notify the
Trust’s attorneys in writing by 1 July 2016 and to file
answering affidavits by
22 July 2016. The Respondents failed to keep
to those timelines.
[5]
This matter was set down for hearing on
Monday 1 August 2016 but it was only on Saturday 30 July 2016 that
the Third Respondent
launched an application for the postponement of
the application to the semi-urgent roll (“the postponement
application”).
A notice of intention to oppose the eviction
application was filed by Master Movers. It is dated 29 July 2016 but
it is not clear
when it was served.
[6]
In the founding affidavit in the
postponement application the Third Respondent asserts that a
postponement is required because “
as
a result of the actions of the Trust, Master Movers has been rendered
rudderless since 9 June 2016 and accordingly unable to
properly
oppose the eviction application
”.
The relevance of 9 June 2016 is that a Court order was granted in an
application launched by the Trust which had a bearing
on the business
rescue proceedings. It will be dealt with more fully later herein.
[7]
The Third Respondent does not contend that
the Trust is not entitled to an eviction order but asserts that
Master Movers has 15
employees and that it stores goods for
approximately 230 customers on the premises. According to the Third
Respondent it will take
at least 3 months to relocate the goods
stored at the premises. Moreover, it is contended that the Third
Respondent is involved
in negotiations with a potential business
rescue practitioner and a potential purchaser for Master Movers’
business. According
to the Third Respondent, those negotiations are
likely to be terminated if Master Movers is evicted from the premises
and the goods
stored thereon are removed.
[8]
The postponement application ought to be
considered in the context of the relevant factual matrix and
procedural history of this
matter.
The
Lease
[9]
On 2 December 2013 the Trust and Master
Movers concluded a written lease agreement in terms of which Master
Movers would lease the
premises for a period of 5 years, commencing
on 1 January 2014. The material terms of the lease included the
following:
9.1
The monthly rental payable by Master Movers
would escalate annually and for the period 1 January 2016 to 31
December 2016 it would
be R249 501 plus value-added tax. Interest
would accrue on all outstanding amounts.
9.2
Master Movers was obliged to pay all
charges in respect of rates, electricity consumed, water consumed or
any other municipal services
supplied to, and refuse removal and
sewerage services in respect of, the premises.
9.3
In the event that Master Movers was in
default, and remained in default not less than 7 days after being
notified in writing to
remedy such default, the Trust was entitled to
cancel the lease.
Breach
of the lease
[10]
In breach of its obligations under the
lease, Master Movers failed to make payment of rental and other
charges due for the period
of January 2016. On 11 January 2016, the
Trust sent Master Movers a letter notifying it of its breach and
demanding that it remedy
the breach by making payment of the arrear
rental and other charges due, within 7 days thereof. Master Movers
remained in default
and on 28 January 2016 the Trust’s
attorneys sent a letter to Master Movers (with the Third Respondent
in copy) affording
it a further two days within which to remedy its
breaches.
[11]
On 28 January 2016 Master Movers addressed
correspondence to the Trust’s attorneys wherein it raised a
dispute regarding certain
charges levied under the lease. The Trust
took steps contemplated in the lease to address the dispute.
[12]
Master Movers again breached the lease by
failing to make payment of the rental and other charges for February
2016. On 10 February
2016 the Trust’s attorneys addressed
correspondence to Master Movers wherein the steps taken in terms of
the lease to address
the dispute were set out and demand was again
made for payment of the amounts owing under the lease within 7 days,
failing which
the Trust would exercise its rights under the lease.
Master Movers failed to make payment.
[13]
As at 22 February 2016 Master Movers was
indebted to the Trust in the amount of R737 720. It continued with
its failure to pay rental
after that date and by 1 August 2016 Master
Movers owed the Trust a total of R2 962 546. R2 205 833 of that sum
represents rental
(excluding interest) which should have been paid.
In addition, the Trust has paid the amount of R319 544 in respect of
municipal
services and rates which should have been paid by Master
Movers.
[14]
Master Movers has continued to occupy the
premises and to make use of the municipal services and the Trust has
had to cover those
charges without having been able to recover those
amounts from Master Movers.
Business
Rescue
[15]
On 23 February 2016, Master Movers was
placed under business rescue by virtue of a voluntary resolution to
that effect. The Second
Respondent was appointed as the business
rescue practitioner of Master Movers.
[16]
On 19 April 2016 the Trust’s
attorneys addressed a letter of demand to Master Movers and the
Second Respondent and payment
of all outstanding amounts was again
demanded within 7 days, failing which the Trust would exercise its
right to cancel the agreement.
[17]
On 6 May 2016, a letter was addressed to
Master Movers’ attorneys, the Second Respondent and the Third
Respondent, setting
out the breaches of the lease and stating that
the Trust elected to cancel the lease. It was demanded that Master
Movers vacate
the premises by 16 May 2016. However, Master Movers has
failed to make any further payment and has continued to occupy the
premises.
[18]
On 18 May 2016 the Second Respondent filed
a “Notice of Substantial Implementation of Business Rescue
Plan”.
[19]
The Trust launched a court application in
which an order was granted on 9 June 2016 interdicting the Second
Respondent from implementing
the business rescue plan. In addition,
the Trust was granted leave in terms of
s 133
of the
Companies Act to
seek the setting aside of the resolution in terms of which business
rescue proceedings were commenced. Counsel informed me that
such an
application is pending and that it will be heard towards the end of
August 2016.
[20]
On 9 June 2016 an application was brought
by Firstrand Bank Ltd for the provisional liquidation of Master
Movers. By agreement between
the parties, the application was
postponed for hearing to 11 August 2016.
[21]
On 17 June 2016 the Trust brought a further
application seeking an order for the removal of the Second Respondent
and that Master
Movers appoint a replacement practitioner. On 12 July
2016 an order was granted by agreement between the Trust and the
Second Respondent
in terms of which the Second Respondent was
permitted to resign as the business rescue practitioner of Master
Movers and the Third
Respondent was permitted to appoint a
replacement business rescue practitioner within 21 days of the date
of that order, failing
which the Trust would be entitled to apply for
the appointment of a replacement business rescue practitioner or for
other relief.
[22]
The Third Respondent, instead of applying
for a replacement business rescue practitioner, brought an
application for the setting
aside of the resolution pursuant to which
Master Movers was placed in business rescue and for an order winding
up Master Movers.
That application is to be heard on 11 August 2016.
Postponement
Considered
[23]
After hearing oral argument presented by
counsel for the Trust and the Third Respondent respectively on 2
August 2016, I dismissed
the postponement application with costs
against the Third Respondent. The reasons that I undertook to furnish
later, follow below.
[24]
Since the letter of cancellation and the
demand that the premises be vacated in the Trust’s letter of
May 2016 nobody, including
the Second Respondent before his
resignation, has disputed the Trust’s right to cancel the lease
and it has not been shown
that Master Movers has any right to
continue its occupation of the premises.
[25]
Master Movers has known since May 2016 that
the lease was cancelled and that it had to vacate the premises.
[26]
Moreover, when the eviction application was
served in June 2016, all the Respondents knew that they were required
to notify the
Trust’s attorneys before 1 July 2016 if they
intended opposing the application and they had to file answering
affidavits
by 22 July 2016. However, nothing was done until Saturday
30 July 2016 when the postponement application was launched whilst
this
matter was set down for hearing on Monday 1 August 2016.
[27]
The postponement application was launched
by the Third Respondent, the sole member of Master Movers. He does
not attack the cancellation
of the lease and does not make out a case
for any right entitling Master Movers to continue its occupation of
the premises. The
only basis on which a postponement is sought, is
that, according to the Third Respondent, Master Movers is deprived of
the opportunity
to be heard in the eviction application until such
time as a new business rescue practitioner has been appointed or
Master Movers
has been placed in liquidation.
[28]
It
was submitted by the Third Respondent’s counsel that the effect
of
s137(2)(a)
-(b) and s
140
(1)(a) of the
Companies Act is
that, upon a
close corporation
[1]
being
placed in business rescue, the business rescue practitioner takes
over full responsibility for the management of the close
corporation
and the members merely follow his orders. In the absence of a
business rescue practitioner, the management of Master
Movers may not
represent Master Movers in this matter and, consequently, Master
Movers is deprived of the opportunity to be heard.
[29]
However, the Third Respondent wanted to
have his cake and eat it. He asserted
locus
standi
to bring the postponement
application by virtue of
s146(b)
of the
Companies Act and
, as stated
in his heads of argument, “
a
residual duty as caretaker of Master Movers in his capacity as
member
”.
[30]
The grounds for
locus
standi
in the postponement application
also gave the Third Respondent the right to participate in the
eviction application and/or to have
a replacement business rescue
practitioner appointed.
[31]
In any event, the Third Respondent went to
great lengths to explain in the postponement application how
negotiations with a prospective
purchaser of Master Movers’
business was in progress and how it would be in the interest of
Master Movers that it be given
more time to pursue those
negotiations. However, he failed to put up any defence to the Trust’s
right to have Master Movers
evicted. If such a defence existed, the
Third Respondent, no doubt, would have raised it in the postponement
application.
[32]
In these circumstances, Master Movers has
had every opportunity since February 2016 to object to the threats of
eviction and, when
the Second Respondent received notice of eviction
in May 2016, he had a further opportunity to inform the Trust if
Master Movers
had any defence.
[33]
In the absence of a business rescue
practitioner, the Third Respondent could have placed a defence, if
any, on record in the eviction
application. His right to participate
in terms of
s 146(b)
of the
Companies Act, enabled
him to record
facts and circumstances in favour of Master Movers. A business rescue
practitioner would have been in no better position
to do so because
the Third Respondent is the sole member of Master Movers with
intimate knowledge of the affairs of Master Movers.
[34]
Moreover, the attempt to hide behind the
absence of a business rescue practitioner is futile in circumstances
where nobody wants
the business rescue process to continue. That
includes the Third Respondent who has applied for the setting aside
of the business
rescue process and for a winding-up of Master Movers
instead.
[35]
In the meantime, the Trust suffers severe
prejudice. The property is its sole potential source of income, it is
liable for payment
of municipal accounts and it has to make monthly
mortgage bond payments.
[36]
In the process Master Movers’
liabilities increase every month which is not in the interest of
Master Movers and its creditors.
[37]
The
prejudice that would have been suffered by the Trust if the eviction
application was postponed would therefore by far have outweighed
prejudice, if any, that may be suffered by Master Movers as a result
of the dismissal of the postponement application.
[2]
[38]
In the circumstances set out above, I am of
the view that the postponement application was not
bona
fide
and that it was an abuse of
process which should not be permitted.
[39]
For these reasons I dismissed the
application for postponement with costs against the Third Respondent.
Eviction
Application
[40]
After I had dismissed the postponement
application, I was informed by counsel for the Third Respondent that
he did not appear for
Master Movers in the eviction application. His
instructing attorney in the postponement application was also the
attorney who purported
to represent Master Movers in a notice of
intention to oppose the eviction application. I informed counsel that
one of three options
had to be exercised. If his instructing attorney
in the postponement application did not have a mandate to represent
Master Movers
in the eviction application the notice of intention to
oppose had to be withdrawn. If he had a mandate, counsel had to be
instructed
to represent Master Movers in the eviction application or
the attorney had to appear on behalf of Master Movers. I afforded
counsel
an opportunity to consult with his instructing attorney,
after which I was informed that the notice of intention to oppose the
eviction application was withdrawn. The application therefore
continued on an unopposed basis.
[41]
The
fact that Master Movers is under business rescue does not have any
effect on the Trust’s right to cancel the agreement
[3]
.
Section 133(1)
of the
Companies Act does
not apply to the
cancellation of the lease and, consequently, the Trust did not
require the consent of the Second Respondent or
the leave of the
court when it cancelled the lease in May 2016.
[4]
[42]
After the cancellation of the lease, Master
Movers had no right to occupy the premises. Business rescue did not
bestow Master Movers,
the Second Respondent (or any other business
rescue practitioner, if appointed) with rights in respect of the
property outside
the four corners of the lease except, of course,
that in terms of
s133(1)
the Trust needed the consent of the Second
Respondent or the leave of the court to launch the eviction
application. The court granted
such leave.
[43]
The
pending applications for liquidation too will have no bearing on the
existence or not of a right to occupy the property because
a
liquidator, if Master Movers is wound up, will not have rights in
respect of the property beyond the lease.
[5]
[44]
In these circumstances, the Trust was
entitled to an eviction order and on 2 August 2016 I ordered that:
44.1
Master Movers and all other persons or
entities occupying the premises comprising the ground floor and
basement of the Old Mill
Trust building situate at Mocke & Leo
Roads, Diep River together with parking bays (“the Premises”)
are ordered
to vacate the premises within 20 working days of the
granting of this order;
44.2
The Sheriff (or his/her deputy) is
authorised to evict Master Movers and all other persons or entities
occupying the premises should
the Respondents fail to comply with
sub-paragraph 1 of this order;
44.3
The South African Police Services are
directed to assist the Sheriff in carrying out sub-paragraph 2 of
this order should this be
necessary and if requested by the Sheriff
or his/her deputy;
44.4
The Sheriff is directed:
44.4.1
to remove from the premises, the goods
stored at the premises and to store the said goods;
44.4.2
to place a written notice on the principal
door of the premises specifying that the goods are being stored by
him and that they
may be reclaimed from him;
44.4.3
to release the goods of all persons so
stored by him to them respectively upon and against payment by them
to him of the costs of
storage.
44.5
Master Movers shall pay the costs of the
eviction application on attorney and client scale.
VAN
ROOYEN, AJ
[1]
In terms of
s66(1A)
of the
Close Corporations Act, 69 of 1984
,
Chapter 6 of the
Companies Act applies
to close corporations.
[2]
Myburgh
Transport v Botha t/a SA Truck Bodies
1991 (3) SA 310 (NmS)
[3]
178
Stamfordhill CC v Velvet Star Entertainment CC
(1506/15) [2015] ZAKZDHC 34 (1 April 2015) para [27]
[4]
Cloete
Murray & Another NNO v Firstrand Bank Ltd t/a Wesbank
2015 (3) SA 438
(SCA) para [33]
[5]
Ellerine
Brothers (Pty) Ltd v McCarthy Ltd
2014 (4) SA 22
(SCA) para [10]