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[2016] ZAWCHC 192
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Booysen v Jonkheer Boerewynmakery (Pty) Ltd and Another (10999/16) [2016] ZAWCHC 192; [2017] 1 All SA 862 (WCC); 2017 (4) SA 51 (WCC) (15 December 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
REPORTABLE
CASE
NO: 10999/16
In
the matter between:
JOHN
FREDERICK
BOOYSEN
Applicant
and
JONKHEER
BOEREWYNMAKERY (PTY) LTD
(In
Business
Rescue)
First
Respondent
DANIEL
TERBLANCHE
(In his
capacity as the
Business
Rescue Practitioner
appointed
to the First Respondent)
Second
Respondent
Heard:
13 October 2016
Delivered: 15
December 2016
JUDGMENT
SHER,
AJ:
[1] This matter
deals with certain provisions of Chapter 6 of the Companies
Act,
[1]
(the “
Act
”) which introduced the concept of
business rescue into our company law in 2011. It concerns, in
particular, an interpretation
of the statutory moratorium
provision
[2]
which forms an integral part of the business rescue process, and the
issue of whether or not a business rescue practitioner may
reserve
for himself the right to amend a business rescue plan (and a
creditor’s claim reflected therein) unilaterally, even
after it
has been adopted.
[3]
The background
circumstances
[2] First respondent
is a company which formerly conducted business as a liquor wholesaler
in the Southern Cape and the Karoo.
It was established in
Bonnievale in 1963. The following year the applicant’s father
opened a branch in De Aar and some 20
years later the applicant
joined him there as an employee. It is common cause that during 2013
first respondent found itself in
financial difficulties and on
26 August 2013 its directors accordingly resolved to place it
under business rescue, and to
appoint the second respondent as the
business rescue practitioner tasked with giving effect thereto. The
resolution was filed with
the Companies and Intellectual Property
Commission (the “
Commission
”) and on 29 August
2013 second respondent was duly authorised by the Commission to serve
as business rescue practitioner.
[3] Subsequent to
his appointment second respondent duly assumed control of the company
and convened a first meeting of creditors
and employees on 12
September 2013, at which time he informed those present that he
believed there was a reasonable prospect that
the business rescue
process would result in a better outcome than would be achieved on a
winding-up, and he called on creditors
to submit any claims they
might have. On 16 October 2013 the applicant, who was the
manager of the De Aar branch of the business
at the time, duly lodged
a claim in the amount of R698 830.12 for outstanding
remuneration which was allegedly owing to him
in respect of
‘commission’ on gross profit for the 2011 – 2012
and 2012 – 2013 financial years.
[4] On 8 November
2013 second respondent published a draft business rescue plan he had
prepared, for consideration by the creditors
and employees. In
accordance with the statutory requirements in this regard he duly set
out the company’s financial position
therein as well as details
of its indebtedness to each of its secured, preferent and concurrent
creditors, and his proposals as
to how their claims would be settled.
[5] As far as the
preferent creditors were concerned, second respondent made provision
for the retrenchment of the De Aar staff
complement, and also listed
the full value of the applicant’s claim as an admitted
preferent claim.
[6] According to his
rescue plan the bulk of the claims of the secured creditors were to
be settled by way of a first distribution,
at which time the claims
of all the preferent creditors (including the applicant’s
claim), were also to be settled, in full.
[7] The plan was
duly put forward and adopted at a second meeting of creditors which
was held on 22 November 2013. But,
despite this, it is
common cause that some 3 years later the applicant has still not been
paid the major portion of his claim,
and this after second respondent
indicated in a progress report dated 20 November 2015 that an
amount of R2.7 million
had already been paid to preferent
creditors and a total of some R39 million overall had been
“
distributed”
to the general body of creditors.
[8] On 28 November
2015 applicant sent an e-mail to second respondent in which he
pointed out that more than 2 years had elapsed
since the start of
business rescue proceedings and he enquired when he could expect
payment.
[9] Second
respondent replied on 2 December 2015 by enclosing a copy of his
latest monthly report in which he indicated that there
were 2
immovable properties that were in the process of being transferred,
and he said the directors had indicated that they might
consider
making an
ex gratia
payment to the applicant in an attempt to
“
expedite the process”
. It will be noted
from the terms of this response that not only was it initially not
disputed that the applicant’s
claim was due, owing and
outstanding but second respondent also indicated that an attempt
would be made to effect payment thereof.
Of importance also is
the fact that although as a matter of law second respondent was
seized with the management and control of
the first respondent, its
erstwhile directors nonetheless clearly had decision-making powers in
regard to the settling of claims
against it whilst it was under
business rescue. This issue is a matter of some concern as it
is apparent that the answering
affidavit was also deposed to by one
of such directors and not by the second respondent, and it seems
already from this response
by the second respondent that, in effect,
the rescue process has largely been managed by the erstwhile
directors.
[10] However,
notwithstanding the promise implicit in second respondent’s
e-mail of 2 December 2015 no payment was forthcoming
and
consequently, on 29 March 2016 applicant’s attorneys
addressed a further correspondence to the second respondent
in which
they called upon second respondent to advise by close of business on
4 April 2016 when the applicant could expect
such payment,
failing which, legal action would be taken. A few days later
applicant’s attorneys received a letter
from a firm of
attorneys acting on behalf of the second respondent, in which they
requested an indulgence until 8 April 2016
in order to respond.
On 7 April 2016 they duly replied to the applicant’s
attorneys in a letter in which, for
the first time, the applicant’s
claim was contested. They stated that the first respondent’s
directors had informed
the second respondent that the “
formula”
which had been
used to calculate the value of
the applicant’s claim had been applied “
incorrectly”
as it did not “
take into
consideration the bank interest”
(sic) and the auditors were accordingly engaged in a process of
“
re-calculating”
the value of the claim. In addition, it was alleged that
independent legal advice had been obtained to the effect that the
applicant’s claim was in fact not preferent, but concurrent,
and would be ‘treated’ accordingly.
[11] On 1 May 2016
an amount of R33 859.61 was paid to the applicant, without any
explanation for how it was made up and arrived
at. On 11 May
2016 applicant’s attorneys sent yet another letter of demand to
second respondent’s attorneys calling
upon them to settle the
balance of R664 970.51 by no later than 17 May 2016.
This letter prompted a response from
second respondent’s
attorneys on 24 May 2016 in which they indicated that they were
now acting on the instructions of
the directors of the first
respondent, and that no legal action could be taken for enforcement
of the applicant’s claim whilst
the business rescue plan was
“
still in the process of being implemented”
.
The letter also went on to state that the applicant’s claim was
disputed and that he was only entitled to “
additional
payments”
over and above his ordinary remuneration when the
company had made a net profit, and in this regard the financial
statements of
2011 – 2013 “
seem(ed) to indicate”
that no amount was due and payable to the applicant and that he
had in fact received payments to which he was not entitled, and which
would have to be refunded. In addition, the letter also stated
that the second respondent had reserved to himself the right
to amend
the business rescue plan should it come to his attention that
material information had been withheld, or in the event
that
“
additional”
(sic) information was brought to his
attention, and second respondent had advised the directors that he
would be amending the plan
in respect of the applicant’s claim
“
accordingly”
. However, on 30 May 2016
second respondent circulated a further monthly progress report in
which he stated that he was
in the process of implementing the
“
sanctioned”
business rescue plan and that he
expected that the business rescue process would be finalised
shortly.
[12] Failing
compliance with the letter of demand, on 24 June 2016 applicant
launched the instant application in which he sought
an order
directing the respondents to pay the outstanding balance of
R664 970.51 to him, together with interest thereon at
the
prescribed rate, from 1 May 2016 to date of payment. On 26
August 2016 applicant was paid a further sum of R18 449.12.
Once
again, how this subsequent payment was made up and arrived at was not
disclosed. The balance outstanding in respect of the
applicant’s
claim thus, as at date hereof, amounts to R646 521.39 and he
seeks judgment in this sum, together with interest
thereon. In terms
of paragraph 2 of the Notice of Motion he also seeks an Order
granting him leave to ‘bring’ the application,
in terms
of s 133(1) of the Act.
The respondents’
defences: an introduction
[13] An answering
affidavit which was deposed to by one Dirk Jonker, an erstwhile
director of the first respondent, was filed on
behalf of the
respondents on 13 September 2016. In it Jonker said that
he had been actively involved in managing the
first respondent’s
business before it went into business rescue, and he had assisted the
second respondent in assessing claims
submitted by creditors.
[14] The affidavit
itself is perfunctory, to say the least. It declares that the
application is opposed on 2 grounds. In the
first place, it
avers that the claim is “
grossly overstated”
and
notwithstanding that it was listed as preferent it was “
properly
treated”
as concurrent, and the applicant has (already)
been paid the “
appropriate”
dividend. It
further contends that the business rescue plan was subject to a
proviso in terms of which second respondent
had reserved the right
to
amend it
unilaterally, without reference to
creditors, and after “
additional”
information in respect of the applicant’s claim had come to his
attention (the nature of which information was not disclosed),
it had
been so “
amended”
.
When such amendment was effected and in what manner and in what
amount, was not disclosed and the affidavit is entirely
silent in
this regard. Second respondent also chose not to enlighten the court
and simply filed an affidavit in which he confirmed
the answering
affidavit.
[15] In heads of
argument which the respondents filed shortly before the matter was
due to be heard they sought to rely on a further
defence which had
not been pleaded or raised before viz that contrary to the provisions
of s 133(1) of the Act the applicant
had not obtained the
written consent of the second respondent or the leave of the court
before launching the instant proceedings,
and it was submitted that
on this ground alone the application fell to be dismissed.
Notwithstanding that this point had
not been taken in the answering
affidavit I allowed argument to be presented in regard thereto on the
assumption that it was a
matter of law which the respondents were
entitled to raise without the need for this to be dealt with in their
affidavits,
[4]
and on the understanding that the applicant had not been prejudiced
as he filed supplementary submissions dealing with this aspect.
Business rescue
proceedings
[16] In
Cape
Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Ano
,
[5]
Rogers AJ pointed out that the business rescue provisions in the Act
“
reflect a legislative preference for proceedings aimed at
the restoration of viable companies rather than their
destruction”
.
[6]
[17] In
Oakdene
Square Properties (Pty) Ltd and Ors v Farm Bothasfontein (Kyalami)
(Pty) Ltd and Ors
,
[7]
the court expressed the view that the new provisions in the Act were
in line with modern trends in corporate rescue regimes in
that they
attempted to secure and balance the competing interests of creditors,
shareholders and employees, and envisaged a shift
away from only
having regard for creditors’ interests, and are predicated on
the belief that to preserve a business and the
experience and skill
of its employees, might, in the end prove to be a better option for
creditors and enable them to secure a
better recovery of their debts
from their debtor.
[8]
In their work entitled
Companies and Other Business Structures in
SA
,
[9]
the authors have explained that whereas it is fundamental to healthy
market-based economies that companies which cannot be competitive
will fail, owing to the negative social impact such failures can have
on employees and their dependents and considering the effect
on
sovereign economies as a result of the loss of revenue previously
generated by such failed companies, since the 1990s there
has been a
shift in approach in most industrialised nations towards ‘rescuing’
financially distressed corporate entities
rather than liquidating
them, and indeed, the “
straightforward”
liquidation of companies has become rather “
unfashionable”
.
[10]
[18] “
Business
rescue”
is defined in the Act as
proceedings taken to facilitate the rehabilitation of a financially
distressed company by providing for
its temporary supervision and the
management of its affairs, business and property,
[11]
a temporary moratorium on the rights of claimants against the company
(or in respect of property in its possession),
[12]
and the development and implementation, if approved, of a plan to
rescue the company by restructuring its business affairs, liabilities
and equity in a manner that will
maximise
the
likelihood of it continuing in existence on a solvent basis, or if
this is not possible, which will result in a better return
for
creditors or shareholders than would otherwise result from its
immediate liquidation.
[13]
[19]
In terms of the Act there are two ways a company may be placed under
business rescue: the board of a company may resolve voluntarily
to
begin rescue proceedings if it has reasonable grounds to believe that
the company is financially distressed and there appears
to be a
reasonable prospect of being able to save it,
[14]
or any affected person (ie a shareholder, creditor, representative
trade union or an employee not represented by a trade union)
may
apply to the court for an order placing the company under temporary
supervision.
[15]
[20] The business
rescue practitioner who is appointed to attend to a company in
business rescue is responsible for preparing a
so-called ‘business
rescue plan’ after consulting creditors and other affected
persons (including shareholders, employees
and management
[16]
(which is intended to constitute his plan in terms of which the
company will be saved and rehabilitated), and is responsible for
implementing it once it has been adopted.
[17]
The plan is required to deal pertinently with a number of issues and
must contain all information reasonably required in
order to
facilitate its proper consideration by affected persons in order to
enable them to decide whether to accept or reject
it. Amongst other
things, it must set out all the secured, preferent and concurrent
creditors and which of them have proved their
claims,
[18]
as well as the probable dividend which they would receive were the
company to be placed in liquidation instead.
[19]
The plan is also required to propose how the company is going to
discharge its debts,
[20]
and in this regard must include details as to how any assets which
are available may be realised in order to settle creditors’
claims,
[21]
and the order of preference in terms of which the proceeds thereof
will be applied to pay creditors.
[22]
In addition, it must set out a statement of any conditions which must
be satisfied in order for it to come into operation
and to be fully
implemented,
[23]
and the effect, if any, that it will have on the number of employees
and their terms and conditions of employment,
[24]
as well as the circumstances in terms of which the rescue process
will come to an end.
[25]
[21] The plan must
be published by the company within 25 business days
[26]
after the appointment of the business rescue practitioner, and within
10 business days thereafter the practitioner must convene
and preside
over a meeting of creditors and the holders of voting interests in
the company, which must consider its adoption.
[27]
At the meeting which is so convened the practitioner must introduce
the proposed plan to the creditors and shareholders
[28]
and must provide employees’ representatives with an opportunity
to address the meeting,
[29]
and must thereafter invite discussion and conduct a vote on a
proposal to adopt or to amend the proposed plan.
[30]
If the proposed plan is rejected by the meeting the practitioner may
seek approval from the holders of voting interests to
prepare and
publish a revised plan,
[31]
which must be tabled and sanctioned within 10 business days
thereafter.
[32]
[22] The Act
provides that once a rescue plan has been adopted in meeting, it is
binding on the company and on each of its creditors
as well as the
holders of its securities, whether or not such persons were present
at the meeting and voted in favour of the plan
or not, and
irrespective of whether or not such persons, if they were creditors,
had proven their claims against the company.
[33]
And once the plan has been adopted, the company is required, under
the direction of the practitioner, to take all necessary
steps to
attempt to satisfy any conditions on which the plan may be
contingent
[34]
and to implement the plan “
as adopted
”.
[35]
After the practitioner has “
substantially”
implemented the rescue plan, he may terminate the rescue proceedings
by giving notice of substantial implementation to the Commission.
[36]
The respondents’
defences: an evaluation
[23] (i)
Non-compliance with s 133(1)
:
S 133 of the Act
contains a general moratorium on legal proceedings against a company
in business rescue. Sub-section (1)
is the provision in issue.
It provides that during business rescue proceedings no legal
proceedings (including enforcement
action) against a company
[37]
may be “
commenced or proceeded with”
in any forum,
except with the written consent of the business rescue
practitioner
[38]
or with the leave of the court, in accordance with such terms as the
court may deem “
suitable”
.
[39]
There are certain proceedings which are expressly exempt from such
consent or leave.
[40]
But as none of these are of relevance or
application to this matter this aspect requires no further
discussion.
[24]
Inasmuch as the proceedings in this matter concern a claim by the
applicant for payment of a sum of money (which formed part
of a claim
which was admitted and included in the rescue plan), it is common
cause that they constitute an “
enforcement action”
within the meaning of the provision under discussion. As such,
on the face of it these proceedings required either the written
consent of the practitioner or the leave of this court before they
could be “
commenced”
or “
proceeded”
with.
[25]
The respondents contend that inasmuch as the applicant’s claim
is one which arose prior to the commencement of business
rescue
proceedings, in the absence of any written consent from the
practitioner the applicant was required to make an initial,
separate
application for leave to institute these proceedings before
commencing therewith, and he is not at liberty to seek the
court’s
leave in this regard afterwards, in one and the same application, as
the applicant has sought to do. On the
other hand, the
applicant contends that inasmuch as his claim arises out of its
acceptance and adoption by the creditors and affected
persons in
meeting, as part of the first respondent’s rescue plan, it is
not a claim which arose prior to the commencement
of rescue
proceedings and, on a proper interpretation of s 133 it should
be held that the legislature intended that only pre-existing
claims
ie pre-business rescue proceedings claims are to be subject to the
requirement of consent or the leave of the court, and
it was not
intended that the provisions of the section would apply to claims
arising out of a rescue plan which has been adopted
after rescue
proccedings had commenced, and in respect of which the applicant
simply seeks an order directing the respondents to
give effect
thereto.
[26] The provisions
of s 133 have been subject to conflicting interpretations in a
number of decisions. Before dealing
with these, it must be
pointed out that notwithstanding the injunction that no legal
proceedings may be commenced or proceeded
with during business rescue
proceedings unless consent from the practitioner or leave from the
court has been obtained, in a number
of matters which were brought in
terms of the provisions of s 130(1) of the Act courts have
consistently held that such proceedings
are not subject to the
provisions of s 133.
[27] In this regard
s 130(1) provides that any time after an adoption of a
resolution to commence business rescue
[41]
and prior to the adoption of a business rescue plan
[42]
an affected person may apply to a court for an order either setting
aside the resolution by the company to commence business
rescue
proceedings (on the grounds that at the time there was no reasonable
basis for believing that the company was financially
distressed or
there was no reasonable prospect of rescuing the company, or it
failed to comply with the prior procedural requirements
of
s 192),
[43]
or for an order setting aside the appointment of the business rescue
practitioner.
[44]
In such matters the courts have held that the provisions of ss 130(1)
and (5) constitute separate enabling provisions authorising
applicants to approach the courts for relief, and the resultant
proceedings are therefore not subject to the moratorium provisions
in
s 133.
[45]
[28] Similarly, in
National Union of Metalworkers of SA obo Members v Motheo Steel
Engineering CC
,
[46]
the Labour Court held that unfair dismissal claims brought in that
court were not subject to the moratorium in s 133.
The
court based its finding on s 210 (1) of the Labour Relations Act,
[47]
which provides that the provisions of such Act shall prevail in the
event of conflict with any other law, save for the Constitution.
[29] In the various
conflicting judgments on the issue divergent views have been
expressed 1) in regard to whether the provisions
of s 133
require a separate prior application to be made for leave to commence
or proceed with legal proceedings, or whether
such leave may be
sought in one and the same matter (ie together with the principal
matter in terms of which the relevant proceeding
is instituted) and
2) as to whether or not proceedings pertaining to the implementation
of a rescue plan are covered by the terms
of s 133 and also
require either the prior consent of the practitioner or the leave of
the court, or not. The divergent judgments
are broadly split between
the South Gauteng and Kwazulu-Natal divisions on the one hand, and
the North Gauteng division on the
other.
[30] In what appears
to be the first reported decision on the point in the South Gauteng
division in May 2013 viz
Merchant West Working Capital Solutions
(Pty) Ltd v Advanced Technologies (Pty) Ltd and Ano
,
[48]
Kgomo J held that it was not permissible for an applicant to seek to
amend its notice of motion
ex post facto
by the inclusion of a
prayer therein for leave to institute proceedings against a company
in business rescue. In that matter
the proposed amendment was
first motivated in the replying affidavit and no basis for it had
been laid in the founding papers,
and the respondents had not been
afforded an opportunity to respond thereto.
[49]
Kgomo J held that the leave of the court which was required in terms
of s 133(1) was not “
a simple one”
which
could be “
advanced from the Bar”
and needed to be
motivated substantially, in the same form and manner as would
ordinarily be the case when an applicant sought
a departure from the
rules of court in order to justify a matter being heard as one of
urgency.
[50]
In the result, a court which was asked to grant leave to proceed
against a company under business rescue should receive “
a
well-motivated application”
so that it could properly apply
its mind to the facts and the law and thereafter be in a position to
make a ruling in accordance
with any terms which it might consider to
be suitable in the particular circumstances.
[51]
[31] A month later,
in
Redpath Mining
[52]
the same court went further and held that litigation ‘against
or related to’ a rescue plan was only to be permitted
in
“
exceptional circumstances”
.
[53]
As a result, it refused to grant the applicant leave to institute
proceedings interdicting the implementation of a rescue
plan which
had been adopted.
[32] However, later
that year in
African Banking Corporation
,
[54]
an application before the North Gauteng division for leave to sue was
sought and granted in one and the same application for the
setting
aside of an approved rescue plan.
[33] In contrast to
these decisions, in July 2014, in
Moodley v On Digital Media (Pty)
Ltd and Ors
,
[55]
a minority shareholder of a company in business rescue sought leave
from the South Gauteng division to proceed with an application
interdicting the company from implementing certain transactions which
it was claimed were contrary to the business rescue plan
which had
been adopted. The court held that proceedings pertaining to the
development, adoption and implementation of a business
rescue plan,
and its interpretation, did not fall within the ambit of s 133
and the consent of the business rescue practitioner
or the leave of
the court was thus not required for such proceedings.
[34] Applicant’s
counsel urged me to accept the reasoning and decision in
Moodley
but, after due consideration I am, with respect, not persuaded that
its ratio can withstand scrutiny and for the reasons that follow
hereinafter I do not believe that it was correctly decided. But
it has subsequently been endorsed
[56]
or followed
[57]
in a number of decisions.
[35] In December
2015, the Gauteng North division held in the matter of
Safari
Thatching
,
[58]
that it was open to an applicant in winding-up proceedings which had
commenced prior to a company being placed under business rescue,
to
thereafter seek leave to proceed with such application without the
need for a substantive and separate application to be made
in this
regard.
[36] In contrast to
the conflicting stances adopted by the Gauteng courts, in June 2014
an
ex post facto
application before the Kwazulu-Natal division
for leave to sue, which was made during argument from the bar, in an
application
[59]
by a municipality for an order against a company in business rescue
directing it to cease all business operations, was refused.
The
court held that in such matters a substantive, prior application for
leave to sue was required, on affidavit, so that the company
could
have a proper opportunity to consider and oppose the application if
necessary and so that the court could have regard for
all the
relevant circumstances.
[60]
[37] Similarly,
during December 2014 the same division
[61]
held in
Elias Mechanicos
[62]
that leave to institute proceedings against a company in business
rescue must be obtained prior to the commencement of the principal
proceedings and cannot be sought as part of the relief claimed
therein. As a result, an application for an order directing
the
respondent company (which was in business rescue) to provide certain
documentation pertaining to an alleged joint venture which
the
parties had previously engaged in for the purposes of a housing
development, was dismissed, summarily.
[38] In my view, in
arriving at a determination of which of these conflicting judgments
is to be preferred and followed, there are
a number of cardinal
principles which I must have regard for. In the first place, I
believe the proper starting point is the current
approach to
statutory interpretation as set out in
Endumeni
[63]
where Wallis JA said the following:
[64]
“
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed …. Where more than one meaning
is possible each possibility must be weighed
in the light of all
these factors
.
The
process is objective, not subjective.
A
sensible meaning is to be preferred to one that leads to insensible
or unbusiness-like results or undermines the apparent purpose
of the
document.
”
[39] At the same
time, I am required to guard against any temptation to substitute
what I may regard as reasonable, sensible or
business-like for the
words actually used, in order not to “
cross the divide”
between interpretation and legislation.
[65]
[40] In
Panamo
Properties
,
[66]
a recent decision of the Supreme Court of Appeal which also deals
with business rescue proceedings, Wallis JA pointed out that
in
attempting to arrive at a “
sensible”
interpretation the court should aim towards giving a meaning to every
word used and will not lightly construe a provision under
scrutiny
such that it will have no practical effect. And where there are
provisions which may appear to conflict with one
another the court
must attempt to arrive at an interpretation which reconciles
them.
[67]
[41] In the second
place, and although this is not an aspect which has been in the
forefront in recent decisions involving an interpretation
of the
provisions of s 133(1), in my view, when interpreting them I must do
so through the prism of the Constitution,
[68]
and insofar as they may implicate or negatively affect the
constitutional right of access to court which a litigant would
ordinarily
enjoy,
[69]
I am bound to promote the spirit, purport and objects of the Bill of
Rights in my interpretation of such provisions.
[70]
[42] In this regard
in
Lesapo
[71]
the Constitutional Court pointed out that the right of access to
court is “
foundational to the stability of an orderly
society. It ensures… peaceful, regulated and
institutionalised mechanisms
to resolve disputes, without resorting
to self-help… As a result, very powerful considerations would
be required for its
limitation to be reasonable and justifiable”.
[43] In
Zondi
[72]
the Constitutional Court further pointed out that the right of access
to court is a fundamental aspect of the rule of law, which
in turn is
one of the foundational values on which our constitutional democracy
has been established.
[44] In the
circumstances, inasmuch as the provisions of s 133(1) may limit
or intrude upon the constitutional right of access
to court which a
litigant may ordinarily enjoy, they must, in my view, be interpreted
in a manner which is least restrictive of
such rights
[73]
and, if at all possible, I am enjoined to adopt a ‘generous’
construction over a merely textural or legalistic one
in order to
afford affected parties the fullest possible protection of such right
of access.
[74]
[45] In the third
place, one must also bear in mind that the provisions in question
must be read in the context of the statutory
presumption that unless
a contrary intention clearly appears from the language, the
legislature did not intend “
unfair, unjust or unreasonable”
results to flow from its enactments
[75]
and it is to be presumed that the legislation was not meant to be
absurd or anomalous.
[76]
[46] In addition,
there are legislative provisions in the Act itself which serve as a
guide to interpreting its contents. In this
regard s 5 provides that
the Act must be interpreted and applied in a manner which will give
effect to the legislative purposes
enunciated in s 7,
[77]
and if appropriate, in doing so a court may consider foreign company
law.
[78]
S 7 in turn provides that the purposes of the Act are
inter alia
to promote compliance with the Bill of Rights in the application
of company law,
[79]
and to provide for the “
efficient”
rescue and
recovery of financially distressed companies, in a manner that
balances the rights and interests of all stakeholders.
[80]
In
Nedbank Ltd v Bestvest 153
[81]
Gamble J expressed the view that the effect of these provisions was
that courts were now required to adopt a “
fresh approach”
when assessing the affairs of corporate entities and should interpret
the Act in such a way as to promote the values inherent in
the
Constitution.
[82]
[47] In addition,
when seeking to interpret the provisions in a manner which promotes
the “
efficient”
rescue of corporate entities the
court must, in my view, also bear in mind that “
it is
axiomatic that business rescue proceedings, by their very nature,
must be conducted with the maximum possible expedition”.
[83]
Legislative recognition of this is
reflected in the relatively short time-periods which are provided for
in the Act for the implementation
of such proceedings. In this
regard it is evident from the provisions of s 132(3) that the
legislature envisaged that
business rescue proceedings should occur
within a framework period of 3 months (or such further period as the
court might allow
by extension), as the business rescue practitioner
is required after such period to file a monthly progress report with
all affected
parties and the Commission until the conclusion of the
rescue process.
[48]
So, in my view, when giving effect to the provisions of s133(1) it is
important to strive towards an interpretation which will
allow for
the speedy, cost-effective and efficient implementation of an adopted
rescue plan and the timeous completion of the business
rescue process
as opposed to an interpretation which will prolong it or drag it out
unnecessarily.
[49] As was pointed
out in
Chetty
,
[84]
the obvious purpose of placing a corporate entity under business
rescue is to provide it with “
breathing space”
so
that its financial affairs may be assessed and re-structured in a way
which will allow it to return to financial viability.
The moratorium
on legal proceedings against an entity under business rescue
constitutes a vital part of that “
breathing space”
and allows for a “
period of respite”
[85]
for the necessary re-structuring and rehabilitation to take place in
terms of a rescue plan which the business rescue practitioner
must
formulate in conjunction with creditors and other affected parties,
such as shareholders and employees.
[86]
[50] The moratorium,
in effect, amounts to a stay of legal proceedings against the
company, except in certain circumstances envisaged
in the
sub-sections
[87]
or with the consent of the business rescue practitioner or the leave
of the court.
[51] To extend the
nautical metaphor adopted in
African Banking
,
[88]
if the purpose of the rescue plan is to throw a life-line to a
company in financial distress to help keep it afloat, then the
moratorium serves to prevent it from being overwhelmed by stormy
financial waters, and from being sunk by an opportunistic creditor’s
torpedo. It is plain however that the moratorium is not
intended to be an absolute bar to legal proceedings against a company
and it is intended to serve merely as a procedural limitation on a
litigant’s rights of action.
[89]
Because it is only a procedural limitation and not a bar in itself to
proceedings against a company in business rescue, the
Supreme Court
of Appeal held in
Chetty
[90]
that the requirement of consent from the practitioner or leave from
the court, is not a jurisdictional fact or condition precedent
for
such legal proceedings and the legislature did not intend to
invalidate or nullify such proceedings if they were brought without
the requisite prior consent or leave having been obtained.
[91]
On this basis matters such as
Elias Mechanicos
were, in my
view, wrongly decided and even were I to find in the respondents’
favour on this point, the relief sought by them
(ie the dismissal of
the principal application) cannot be granted and at best they are
merely entitled to a stay of the proceedings.
[52] It must be
pointed out that in
Chetty
the SCA held that the purpose of
obtaining the consent of the business rescue practitioner or the
leave of the court, was in order
to afford the practitioner an
opportunity to consider the nature and validity of the proposed claim
which was to be made in the
envisaged proceedings, and its potential
impact on the “
wellbeing”
of the company and its
ability to regain its financial health, and how best it was to be
dealt with eg by settling it or by continuing
with the
litigation.
[92]
[53] Finally, it
must be stated that one of the principal objectives which the court
should have in mind is to protect and give
effect to the business
rescue process and to advance it, rather than to stifle or retard
it. To this end, the provisions
of s 133 are not to be
understood to be a “
shield behind which a company not
needing the protection may take refuge to fend off legitimate
claims”
.
[93]
So, where, in a matter such as the one on hand, the purpose of the
proceedings against the company for which leave of the
court is
sought is to implement and give effect to a rescue plan which was
properly adopted, the court should, in my view, be slow
to refuse
such leave and should be alive to the danger of putting unnecessary
formalistic obstacles in the path of the achievement
of such
purpose.
[54] Thus, in my
view, the consequence of all these interpretative strands as laid out
in the various judgments I have referred
to is that it would be wrong
to hold that in each and every matter in which leave of the court is
required, such leave needs to
be sought and obtained by way of a
formal application, nor, in my view, would it be correct to hold that
such leave must, of necessity,
always be sought by way of a separate,
prior application. In my view, there is no one-size-fits-all
approach to be followed
and what will be required and what will be
sufficient, will depend on the circumstances of each particular
matter. It will in each
case be a matter for the court’s
discretion, which as was held recently in
Arendse
,
[94]
is to be exercised judicially on the basis of considerations of
convenience and fairness, and what will be in the interests of
justice.
[95]
There may be matters where by virtue of the nature of the envisaged
proceedings very little is necessary in the way of applying
for, or
seeking the court’s leave. For example, if one has regard
for the facts in the
Safari Thatching
matter which concerned a
prior application for the liquidation of a company which had been
brought before it went into business
rescue, and which was
automatically stayed when business rescue proceedings commenced, it
would surely have been otiose and inefficient
to require that the
leave of the court to proceed therewith should be sought by way of a
separate prior application, if the
business rescue process had ground
to a halt or was otherwise defective.
[55] On the other
hand, there will be instances where it will be proper and necessary
that a formal, substantive and separate application
for the court’s
leave must be brought and where it will not be appropriate for such
an application to be conflated with the
main application or action
concerned. One must, in my view, also have regard for the fact
that there may be instances where
it is necessary to proceed for
relief as a matter of urgency, and it will thus be necessary to
launch proceedings immediately,
and in such circumstances unless the
provisions of s 133(1) are incapable of such a construction the
applicant should be allowed
to ask for leave to proceed as part of
such urgent proceedings, albeit
in limine
thereto.
[56] In the
circumstances, I respectfully differ from the approach adopted by the
courts in both
Elias Mechanicos
as well as in
Moodley,
and I find the reasoning in both matters not to be persuasive.
As far as
Elias Mechanicos
is concerned,
the principal rationale for the decision seems to be that because a
court might impose terms on an applicant in granting
leave for legal
proceedings to be commenced or proceeded with, such leave must, of
necessity, be obtained before such proceedings
were commenced “
as
that will be the time to impose the terms contemplated in the
section”
.
[96]
I cannot discern any reason why this would, of necessity, be so in
each and every case. Where the facts of a particular
matter
dictate that prior to commencing with certain legal proceedings a
court would be required to impose certain terms and conditions,
it
would obviously be sensible and proper to approach the court for the
necessary leave and guidance in this regard, before such
proceedings
were commenced. But, as I have already indicated, there may
well be instances where proceedings have to be launched
as a matter
of urgency or where the panoply of facts and circumstances relevant
to the principal application are inevitably going
to have to be dealt
with in any interlocutory application for leave to launch such
application, and I can see no reason why in
such matters it may not
be appropriate, fair and convenient to obtain the court’s leave
on such terms as it may deem fit
in one and the same matter, by way
of an interim order, before the main application or action itself is
heard and the relief sought
therein is granted. In my view this
application is such a matter. In seeking the court’s leave to
proceed with his application
for an order directing the respondents
to give effect to the business rescue plan which was adopted, the
applicant has to set out
the entire history of his claim and how it
came about, and must in the course of this of necessity deal with the
inclusion of his
claim in the rescue plan and how the plan was
adopted but subsequently not complied with. In my view a sensible,
business-like
approach does not require the applicant to have to deal
with all of this in a separate, prior application, only to have to
repeat
it all again, in the principal application, at a later stage.
[57] As far as the
decision in
Moodley
is concerned, the
ratio
appears at
para [10] of the judgment. It is stated therein that inasmuch as it
is the business rescue practitioner who must develop
and implement
the business plan (once it is adopted), and it is the company which
must take all necessary attempts to satisfy any
conditions on which
the plan is contingent and which must thereafter implement the plan
under the direction of the business rescue
practitioner, any legal
proceedings which seek to give effect to such plan (ie to implement
it) will be legal proceedings which
must be instituted against
both
the business rescue practitioner and the company, and are thus not
legal proceedings against the
company
within the meaning of s
133(1).
[97]
To my mind and with all due deference, the distinction which is
sought to be made is an artificial one. Any plan which
is
adopted and which needs to be implemented by a company in business
rescue, is a plan which belongs to that company and the business
rescue practitioner merely seeks to give effect thereto as the
manager in charge of the company. To this end, the business
rescue practitioner steps into the shoes of the board of the company
and its management during the period when it is temporarily
under
supervision for the purposes of business rescue. But, any
proceedings taken in relation to such plan ie to set it aside
or to
enforce its implementation, are proceedings taken against the
company, which is represented by the business rescue practitioner
and, to my mind, there is no justification in seeking to distinguish
such proceedings or to hold that they are not the kind of
proceedings
covered by the provisions in question.
[58] Furthermore,
there may well be instances where a creditor may seek to obtain some
preference or undue advantage in respect
of the implementation of
part of a rescue plan eg by seeking payment when it is not yet due or
where even though it may be due
in terms of the plan, as a result of
unexpected financial difficulties (such as an asset not being
realised as and when it was
supposed to have been), the company is
unable to pay out such claim strictly according to the time-lines
envisaged in the rescue
plan. In such instances I can see no
reason why the leave of the court should not be obtained sanctioning
any proceedings
brought in order to give effect to, or to implement,
the rescue plan, and the court would have every reason to consider
whether
or not to grant leave to proceed with such proceedings, in
the interests of the company and the business rescue to which it was
subject, as the precipitous launch thereof may well endanger the
chances of the successful rehabilitation of such a company, if
the
proceedings were to be allowed. I am of the view that it could
never have been intended by the legislature to exclude
any and all
legal proceedings that deal with the adoption or implementation of a
business plan, from the requirement of the consent
of the business
rescue practitioner or the leave of the court.
[59] It is important
to note that S 133(1) provides that no legal proceedings against
a company in business rescue may be “
commenced”
or
“
proceeded”
with (my emphasis), without the
consent of the practitioner or the court’s leave. The
wording in this provision follows
similar wording adopted in the
Australian equivalent legislation which is contained in s 440D
of Part 5.3A of the Corporations
Act 50 of 2001 and which provides
that during the administration of a company a proceeding “
in
a court against a company or in relation to any of its property
cannot be begun or proceeded with”
except with the
administrator’s written consent
[98]
or with the leave of the court in accordance with such terms, if any,
as the Court may impose.
[99]
In like vein s 440F provides that any enforcement process against a
company in administration is suspended and cannot be
“
begun
or proceeded with”
except with the leave of the
court.
[100]
According to a limited survey I was able to perform it does appear as
if Australian courts seized with giving effect to these
provisions
commonly grant leave to ‘commence and proceed’, as part
of the relief sought in the principal application
itself.
[101]
[60] In contrast to
the provisions in Australian and South African law, the relevant
provisions of Chapter 11 of the US Bankruptcy
Code provide that
any petition for ‘reorganization’ which is filed in terms
thereof, shall operate as a stay of the
“
commencement or
continuation, including the issuance or employment of process of a
judicial, administrative or other action or proceeding
against the
debtor that was or could have been commenced before the commencement
of the case … or to recover a claim against
the debtor that
arose before the commencement of the case”
.
[102]
The relevant provision in Canadian legislation
[103]
similarly provides that “
no action, suit or proceeding in
any court or tribunal against or in respect of a company or the
Monitor, or affecting the dominium
of (its) property shall be
commenced or continued with except with the written consent of the
company or the Monitor or with the
leave of the Court
.”
[61] S 133 does
not provide for a stay on the commencement or
continuation
of
any legal proceedings against a company under business rescue, but a
stay on the commencement or
proceeding
with such litigation.
Had the section referred to the ‘commencement or
continuation’
of proceedings, it would, in my view, have been very clear that it
was not open to an applicant to seek leave to sue after such
proceedings had already been commenced ie after such proceedings had
already been launched, and the requisite leave in respect
of matters
arising after the advent of business rescue proceedings, could thus
only be obtained by way of an application for leave
which was brought
separately and prior to the commencement of the substantive
proceedings themselves. In my view, the use
of the words
“
proceeded with”
in s 133(1) allows for leave to
be obtained from a court in respect of proceedings which have a cause
of action arising both before
as well as after business rescue
proceedings have commenced, and also allows for the necessary leave
of the court to be obtained,
in appropriate instances, subsequent to
the principal application or action already having been launched, or
even as part thereof,
in the form of an
in limine
order ie by
way of interim relief. In this regard “
proceed”
is defined
[104]
as meaning both to “
go (on) to a further or (the) next
stage”
or to “
go on to do something”
or
“
continue
” with something (ie to “
continue
”
with a course of action which began previously) or to “
start
a lawsuit
” or “
take legal action
”. On
the other hand “
continue”
implies a prior
commencement only, and is not susceptible of an interpretation of a
course of action or a legal proceeding
commencing
at the same
time. In this regard “
continue”
is defined as
meaning “
to remain in existence, operation or a particular
state”
or to “
carry on with”
.
[105]
[62] In the
circumstances, in my view, applying a purposive and contextual
interpretation to the language used in the provisions
in question,
there is nothing in s 133(1) which excludes the leave of the court
being sought and obtained, in appropriate circumstances,
either
together with or subsequent to the launch of the principal
proceedings or action in question. Similarly, in my view,
applying a purposive interpretation with the aim of promoting the
efficient, timeous and expeditious rehabilitation of a company
according to its business rescue plan, where legal proceedings
concern the implementation of such plan the leave of the court can
and should ordinarily be obtained by way of a substantive
application, but, in order to avoid unnecessary expense and formalism
such application can properly be made as a part of the principal
matter and can be heard
in limine
prior to the commencement
thereof, without doing violence to the provisions of the section.
To my mind, it makes little sense
to compel an applicant seeking to
obtain an order from a court simply directing the business rescue
practitioner and company in
rescue to implement the terms of a rescue
plan which has been adopted, to obtain leave to do so by way of a
separate and prior
application and to do so would result in an
unnecessary duplication of costs and would unnecessarily delay the
rescue process.
[63] When pressed,
respondents’ counsel was unable to provide any substantive
reason why leave to proceed could and should
not be granted in this
matter, particularly inasmuch as all that the applicant seeks is an
order directing the respondents to implement
(ie to give effect to)
the business plan as adopted, and to discharge his claim in terms
thereof. In the circumstances the
comments by Tuchten J in
LA
Sport 4x4
[106]
that the attitude adopted amounts to nothing more than “
an
exercise in empty formalism, designed cynically to perpetuate the
advantages of immunity from the normal processes of the law
which a
company can secure for itself under the business rescue regime”
are apposite. And, given that the respondents’ defences to
the merits were fully dealt with in the answering affidavit and
were
fully traversed when argument was heard on the merits of the
principal application, it would, in my view, be an injustice
to the
affected parties were the matter to be brought to a halt, simply in
order to compel the applicant to make a separate application
for
leave to proceed with the relief he seeks in the main application.
(ii)
The nature
of the applicant’s claim: preferent or concurrent
[64] As I previously
pointed out the applicant’s claim was treated as a preferent
claim in terms of the rescue plan which
was proposed and adopted,
whilst respondents now contend that it was in fact a concurrent
claim, and as a result they aver that
the applicant has been paid in
full in accordance with the dividend which was applicable. In this
regard the respondents contend
that the applicant’s claim,
properly construed, amounts in essence to a ‘bonus’ claim
and not a claim for remuneration,
and they say they have been advised
that such claims are ordinarily treated in insolvency law as
concurrent claims and not as preferent
claims.
[65] In terms of s
98A(1)(a)(i) of the Insolvency Act
[107]
an employee ordinarily only has a preferent claim in respect of
unpaid “
salary or wages
” for a period not
exceeding 3 months and up to a maximum of R 12 000
[108]
and any claim for monies pertaining to remuneration, outside of that,
would be concurrent and not preferent. This is however not
an
insolvency matter and s 144(2) of the Act is much broader as it
provides that to the extent that “
any remuneration …
or other amount of money relating to employment”
became due
and payable by a company to an employee before business rescue
proceedings commenced, such employee becomes a “
preferred”
unsecured creditor in respect thereof. It is common cause that
the applicant’s claim is based on a so-called incentive
remuneration agreement in terms of which applicant was contractually
entitled to a percentage share, or ‘commission’
of the
first respondent’s annual nett profit. It is also common
cause that as at the date when the company went into
business rescue,
that percentage was in the order of 12%, if one has regard for
paragraph 20 of the answering affidavit of Jonker.
In the
circumstances, it is common cause that the applicant’s claim is
in respect of outstanding
remuneration
and is not one in
respect of outstanding bonuses. “
Bonuses”
are traditionally defined as discretionary payments which may be made
by an employer to an employee without any legal obligation,
as and
when the employer may deem fit. In the applicant’s case,
it is common cause that he was paid an annual 12% share
of the first
respondent’s nett profits from 2007 onwards, after his father
died and his percentage share of the incentive
remuneration was
simply added to that due to the applicant. It is not disputed
that the applicant received such payments
for each year between 2007
and 2009. In respect of his payment for the financial year 2010
– 2011 it is also not disputed
that the applicant entered into
an agreement with Dirk Jonker in terms of which a portion thereof was
to be paid to him together
with his ‘normal’ salary on
25 December 2011 and the balance thereof was to be paid in two
equal instalments on
25 January and 25 February 2012.
At the same time it was also agreed that his share of incentive
remuneration for
the 2011 – 2012 financial year, would be paid
at the end of 2012. In the circumstances, in my view the monies
claimed
by the applicant constitute monies pertaining to his
remuneration or ‘relating to his employment’, in terms of
s 144(2)
and as such the applicant became a preferent (albeit
unsecured) creditor vis-à-vis the first respondent, and his
claim was
not a concurrent one.
(iii)
The
purported amendment of the applicant’s claim
[66] The Act
provides that when a company goes into business rescue, the business
rescue practitioner is required to investigate
its financial
circumstances and within 10 days from the date of his appointment
must convene and preside over a meeting of creditors
at which,
inter
alia,
he may receive proof of their claims.
[109]
Thereafter, as I have previously pointed out, the practitioner is
required to prepare a rescue plan for consideration and
possible
adoption at a meeting of creditors and affected parties
[110]
which plan must set out the secured, preferent and concurrent
creditors and the
quantum
of their proven claims,
[111]
and how the company proposes discharging its indebtedness to them.
The Act provides that each creditor has the right to vote to
approve,
amend or reject the proposed rescue plan
[112]
at a meeting to be called for this purpose,
[113]
and if the plan is rejected the creditors may propose the preparation
of an alternative plan
[114]
or one or more of them may present an offer to acquire the interests
of any of the others.
[115]
If the plan is adopted it becomes binding on the company and on each
of its creditors and every holder of its securities,
whether or not
such persons were present at the meeting and voted in favour of the
adoption of the plan or not, and in the case
of creditors, whether
they proved their claims against the company or not.
[116]
Thereafter, the Act requires the company under the direction of the
business rescue practitioner to take all necessary steps
to implement
the plan as adopted.
[117]
[67] In the
circumstances, the whole scheme of these provisions is such that,
there is, to my mind, no room for a business rescue
practitioner to
reserve to himself the right to amend a business rescue plan. By
doing so, he would effectively circumvent the
procedure set out in
the Act in terms of which the claims, which are to be discharged as
per the rescue plan, derive their binding
force. Insofar as second
respondent thus sought in terms of the provisions of clause 2.4 of
the plan to reserve to himself the
right to amend the plan, such a
right could, at best, only have been a right to amend the
proposed
ie draft plan prior to its adoption by the creditors in meeting,
and not thereafter. Any other interpretation would make nonsense
of
the process provided for in the Act whereby control over the rescue
proceedings is to be exercised by democratic majority vote
of the
creditors and affected parties, and would allow the business rescue
practitioner to unilaterally reduce or compromise creditors’
claims to their prejudice (or even perhaps to increase certain claims
at the expense of others), thereby exposing the whole process
to
uncertainty and possible corruption. I point out that in any event,
although on the papers before me there is a bare allegation
that an
amendment of sorts was effected to the applicant’s claim there
is no proof that this was in fact done. There is not
even an attempt
to state when, in what manner, and in what amount this was done.
Concluding
remarks
[68] Prior to
setting out the terms of the Order which I propose granting in this
matter it remains for me to deal with one issue,
which concerns the
conduct of the second respondent in this matter and the two erstwhile
directors of the first respondent who,
despite the company being in
business rescue, appear nonetheless to be running it and controlling
the rescue process. S 140(1)(a)
provides that during business rescue
proceedings the business rescue practitioner shall have “
full
management control”
of the company in
substitution for its board and pre-existing management.
Although the practitioner may delegate
[118]
any power or function he has to any person who was part of the board
or management, it is nonetheless clear that the legislature
intended
that the business rescue practitioner should be more than a nominal
figurehead responsible for the rehabilitation of the
company.
Indeed, the Act requires that only an accredited person in good
standing as a member of the legal, accounting or
business management
professions may serve as a business rescue practitioner.
[119]
The Act also requires the practitioner to be a person of integrity
and impartiality who must not have any relationship with
the company
he is to supervise, such as would lead a reasonable and informed
third party to conclude that he was compromised in
any way,
[120]
and during the course of rescue proceedings the practitioner
functions as an officer of the court
[121]
and must account to the court in accordance with its rules and any
orders or directions it may make.
[122]
The practitioner also has the responsibilities, duties and
liabilities of a director during the business rescue process.
[123]
Where the business rescue practitioner has delegated certain
powers to former directors or has authorised them to continue in some
or other capacity on the board any actions taken by such persons
which would require the approval of the practitioner will be void
unless such approval has been obtained.
[124]
Similarly, such directors can only continue to
exercise their powers and functions subject to the authority of the
practitioner
[125]
and may only exercise any management function they have within the
company in accordance with the express instructions or direction
of
the practitioner, and to the extent that it is reasonable to do
so.
[126]
[69]
There is no indication on the papers before me that second respondent
ever formally delegated any of his powers or functions
to the
erstwhile directors, and no attempt was made to explain how they came
to be directing or controlling the company whilst
it was in business
rescue, or on what basis they apparently are controlling the rescue
process and effectively deciding against
paying the applicant’s
claim, even though it was admitted by the second respondent and
adopted as part of his business plan.
According to para 3.8 of the
business rescue plan, the company’s day-to day affairs were to
be attended to by the second
respondent.
[70] In the
circumstances I have serious concerns in regard to whether or not
second respondent and the directors of the first respondent
have
discharged their duties and functions in accordance with what is
required of them, in terms of the provisions I have referred
to.
It is apparent from the initial letter from the respondents’
attorneys which I referred to above, that although
they were
originally engaged to represent the second respondent in his capacity
as rescue practitioner, they indicated in subsequent
correspondence
that they were now acting on the instructions of the directors of the
company. No attempt was made to explain
any of this by the
second respondent who appears to have adopted an entirely supine
attitude in regard to the litigation, confining
himself to filing a
confirmatory affidavit in which he confirmed the allegations made by
Jonker in the answering affidavit.
Such allegations,
inter
alia,
pertained to an alleged amendment of the business rescue
plan by the second respondent without providing any indication of the
date
or manner in which such amendment was effected, and no written
proof of any such amendment ever having been effected, and second
respondent made no attempt to take the court into his confidence in
this regard and appears merely to have gone along with what
was said
in the answering affidavit, and with the opposition to the
application adopted by the directors of the board. This
is,
with respect, not what is required of an officer of the court
occupying the position of the second respondent and one is left
with
an uneasy feeling that the necessary impartiality, objectivity and
independence which is required of the office he occupies
may not be
present in this matter. In
African Banking
[127]
the Supreme Court of Appeal pointed out that a business rescue
practitioner is expected to act objectively and impartially in the
conduct of business rescue proceedings, including when it comes to
the institution of legal proceedings (ie either on behalf, or
in
defence of, the company in rescue). The indelible impression one is
left with after perusing the answering affidavit, is that
it is in
fact the former directors of the first respondent who are pulling the
strings, as it were, in regard to the process.
This is a matter
for great concern, not least because it is apparent in terms of the
rescue plan which was adopted that second
respondent is to be paid a
not inconsiderable fee of R500 000.00 for his services in regard
to this assignment, as a basic
fee, following upon the second
distribution which was made to creditors, and an initial fee
calculated at R1500 for every hour
spent on the matter, before that.
In the circumstances, a copy of this judgment is to be sent to the
Companies and Intellectual
Property Commission for its consideration.
[71] In the result,
I make the following Order:
(i) The applicant is granted leave to proceed with this application
in terms of s 133(1)(b) of the Companies Act, no. 71 of
2008;
(ii) First respondent is directed to pay to the applicant the sum of
R646 521.39, together with interest thereon at the prescribed
rate from 1 May 2016 to date of payment;
(iii) Respondents shall be liable jointly and severally (the one
paying the other to be absolved) for the costs of the application;
(iv) A copy of this judgment is to be sent to the Registrar of the
Companies and Intellectual Property Commission, for its
consideration.
________
SHER,
AJ
Appearances
:
For applicant:
Mr
R Patrick
Instructed by:
Cluver Markotter Inc, Stellenbosch (M Koen)
For respondents
:
Mr P Bothma
Instructed by: CK
Attorneys, Cape Town (AJ Van Greunen)
[1]
Act 71 of 2008.
[2]
In s 133(1).
[3]
In terms of s152.
[4]
Compare
Bato Star
Fishing (Pty) Ltd v Minister of Environmental Affairs and Ors
[2004] ZACC 15
;
2004
(4) SA 490
(CC) para [27].
[5]
2011 (5) SA 600 (WCC).
[6]
Id
para [6],
603E.
[7]
2012 (3) SA 273
(GSJ) para [12], 278F.
[8]
Id
.
[9]
D Davis
,
W
Geach
et al
(3
rd
ed) 2013.
[10]
Id,
p 235.
[11]
S 128(1)(b)(i).
[12]
S 128(1)(b)(ii).
[13]
S 128(1)(b)(iii).
[14]
S 129(1)(a) and (b).
[15]
S 132(1)(b) rtw s 131(1).
[16]
S 150(1).
[17]
S 140(1)(d)(ii).
[18]
S 150(2)(ii).
[19]
S 150(2)(iii).
[20]
S 150(2)(b)(ii).
[21]
S 150(2)(b)(iv).
[22]
S 150(2)(b)(v).
[23]
S 150(2)(c)(i)(aa) and (bb).
[24]
S 150(2)(c)(ii).
[25]
S 150(2)(c)(iii).
[26]
Or on such extended date as may be allowed either
by the court on application to it, or by the holders of the majority
of the
creditors’ voting interests (Ss 150(5)(a)-(b)).
[27]
S 151(1).
[28]
S 152(1)(a).
[29]
S 152(1)(c).
[30]
Ss 152(1)(d)(i)-(ii) and (e).
[31]
S 153(1)(a)(i).
[32]
S 153(3)(a)(i) and (ii).
[33]
S 152(4)(a) – (c).
[34]
S 152(5)(a).
[35]
S 152(5)(b).
[36]
S 152(8).
[37]
Or in relation to any property belonging to the
company or lawfully in its possession-see
Kythera Court v
Le Rendez-Vous Café CC
2016 (6) SA 63
(GJ) where it was
held that the moratorium did not apply to proceedings for the
ejectment of a company in business rescue, as
the lease regulating
rights of occupation had been validly cancelled and the company had
failed to vacate and was thus not in
lawful possession of the
property.
[38]
S 133(1)(a).
[39]
S 133(1)(b).
[40]
These
include criminal proceedings against the company or any of its
directors or officers (s 133(1)(d)), proceedings concerning
any
property or right over which the company exercises the powers of a
trustee (s 133(1)(e)), proceedings by a regulatory authority
against
the company (s 133(1)(f)), or proceedings in which a party
seeks to set off any rights or claims it may have against
a company
(s 133(1)(c)).
[41]
In terms of s 129.
[42]
In terms of s 152.
[43]
S 130(1)(a)(i)-(iii).
[44]
On the grounds that he / she does not possess the
requisite
formal qualifications
(s
138),
or is not independent of the company or its management or lacks the
necessary skills to perform his duties (s130(b)(i) –
(iii)).
[45]
DH Bros Industries v Gribnitz NO
2014 (1) SA 103
(KZP);
LA
Sport 4X4 Outdoors CC and Ano v Broadsword t/a 20 (Pty) Ltd and Ors
[2015] ZAGPPHC 78;
Resource Washing (Pty) Ltd v Zululand Coal
Reclaimers (Pty) Ltd and Ors
[2015] ZAKZPHC 21;
ABSA Bank Ltd
v Golden Dividend 339 (Pty) Ltd
2015 (5) SA 272
(GP);
Griessel
and Ano v Lizemore and Ors
2016 (6) SCA 236 (GJ);
Cordeiro
Holdings CC and Ors v Market Demand Trading 254 (Pty) Ltd and Ors
[2016] ZAGPJHC 284.
[46]
[2014] JOL 32257 (LC).
[47]
Act 66 of 1995.
[48]
[2013] ZAGPJHC 109, decided on 10 May 2013.
[49]
Id
para [66].
[50]
Id
para [67].
[51]
Id.
S
133(1)(b) provides that in
granting leave the court may do so on such terms as it considers
“
suitable
”.
[52]
Redpath Mining SA (Pty) Ltd v Marsden NO and Ors
[2013]
ZAGPJHC 148 decided on 14 June 2013.
[53]
Id
p
ara
[71].
[54]
African Banking Corporation of Botswana Ltd v Kariba Furniture
Manufacturers (Pty) Ltd and Ors
2013 (6) SA 471 (GNP).
[55]
2014 (6) SA 279 (GJ).
[56]
See
Resource Washing
n 45, at para [11].
[57]
See
Hlumisa Investment Holdings (RF) Ltd and Ano v Van der Merwe
NO and Ors
[2015] ZAGPHC 1055
at para
[17]
.
[58]
Safari Thatching Lowveld CC v Misty Mountain Trading 2 (Pty) Ltd
2016 (3) SA 209 (GP).
[59]
Msunduzi Municipality v Uphill Trading 14
(Pty) Ltd & Ors
[2014] ZAKZPHC 64
decided on 27 June 2014.
[60]
At para [8].
[61]
Sitting
in Durban-
Msunduzi
(n 59)
was heard in Pietermaritzburg.
[62]
Elias Mechanicos Building and Civil Engineering Contractors (Pty)
Ltd v Stedone Developments (Pty) Ltd and Ors
2015 (4) SA 485
(KZD).
[63]
Natal Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593 (SCA).
[64]
At para [18].
[65]
Id.
[66]
Panamo Properties (Pty) Ltd and Ano v Nel and Ors NNO
2015
(5) SA 63 (SCA).
[67]
Id
p
ara
[27].
[68]
Investigating Directorate; Serious Economic Offences and Ors v
Hyundai Motor Distributors (Pty) Ltd and Ors In re: Hyundai Motor
Distributors (Pty) Ltd and Ors v Smit NO and Ors
[2000] ZACC 12
;
2001 (1) SA 545
(CC) at para
[21]
, 558E.
[69]
W
hich is guaranteed in s 34 of the
Constitution.
[70]
S
39(2) of the Constitution;
Makate v
Vodacom (Pty) Ltd
[2016] ZACC 13
at para
[88]
.
[71]
Lesapo v North West Agricultural Bank and Ano
1999 (12) BCLR
1420
(CC) at para [22].
[72]
Zondi v MEC for Traditional and Local Government Affairs and Ors
2005 (3) SA 589
(CC) at para [82].
[73]
SATAWU and Ors v Moloto and Ano NNO
2012 (6) SA 249
(CC) at
para [44].
[74]
Department of Land Affairs and Ors v Goedgelegen Tropical Fruits
(Pty) Ltd
[2007] ZACC 12
;
2007 (6) SA 199
(CC) at para
[53]
.
[75]
Road Accident Fund v Smith
1999(1) SA 92 (SCA) at 102C-D;
Principal Immigration Officer v Bhula
1931 (AD) 323, at 337.
[76]
Du Plessis
The Re-Interpretation of Statutes
at 162
;
Barnard v Regspersoon van Aminie
2001 (3) SA 973
(SCA) at para
[27].
[77]
S 5(1).
[78]
S 5(2).
[79]
S 7(a).
[80]
S 7(k).
[81]
Nedbank Ltd v Bestvest 153 (Pty) Ltd; Essa and Ano v Bestvest 153
(Pty) Ltd and Ors
2012 (5) SA 497 (WCC).
[82]
Para [20].
[83]
Koen and Ano v Wedgewood Village Golf Club and Community Estate
(Pty) Ltd and Ors
2012 (2) SA 378
(WCC) at para [10].
[84]
Chetty t/a Nationwide Electrical v Hart and
Ano NNO
2015 (6) SA 424
(SCA) at para
[29].
[85]
Cloete Murray and Ano NNO v FirstRand Bank Ltd t/a Wesbank
2015
(3) SA 438
(SCA) at para [14].
[86]
Id
.
[87]
S 133(1)(a) – (e).
[88]
African Banking Corporation of Botswana v Kariba Furniture
Manufacturers (Pty) Ltd
2015 (5) SA 192
(SCA) at para [42].
[89]
Chetty
n 84 paras [40] and [42];
Arendse v Van Der Merwe
2016 (6) SA 490
(GJ) para [15];
Kythera
n 37 para [8].
[90]
Chetty
n 84
para [38].
[91]
Id
paras [40] and [42].
[92]
Id
para [28].
[93]
Id
para [40].
[94]
Arendse v Van Der Merwe
2016 (6) SA 490
(GJ)
para [11].
[95]
A similar approach was adopted in
Mabote & Ors v Van Der
Merwe
[2016] ZAGPHC 185
at para
[11]
.
[96]
Note 62
para [12].
[97]
Id
rtw para [11].
[98]
S 440D(1)(a).
[99]
S 440D(1)(b).
[100]
S 440F(a).
[101]
See
Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd
[2011]
NSWC 1305 (leave granted to commence and proceed with an application
for the enforcement of an interim arbitral award);
Hallmark
Consolidated Ltd & Anor v Centaur Mining & Exploration Ltd
(Administrators Appointed)(Receivers & Managers
Appointed)
[2001] WASC 190
(leave granted to commence and proceed with a
mandatory injunction).
[102]
S 362(a)(i) 11 USC.
[103]
The Companies’ Creditors Arrangement Act RSC 1985 C 36.
[104]
A
ccording to the Oxford Advanced Learners’
Dictionary (4
th
ed).
[105]
Id
. The Chambers 20
th
Century Dictionary defines “
continue”
to mean “
to
extend, go on with, to resume, to be a prolongation of”
whereas to “
proceed”
means both “
to
continue”
or to “
go on”
or “
to
begin and go on”,
or to “
prosecute”
or
“
take legal action”
.
[106]
LA 4x4 Outdoor CC and Ano v Broadswood Trading 20 (Pty) Ltd and
Ors
[2015] ZAGPPHC 78 at para [29].
[107]
Act 24 of 1936.
[108]
S 98A(1)(a)(ii)-(iv) also provides for claims for leave, holiday or
other ‘absence’ pay (to a maximum of R 4000),
and claims
for severance or retrenchment pay (to a maximum of R 12 000).
[109]
S 147(1)(ii).
[110]
S 150(1).
[111]
S 150(2)(a)(ii).
[112]
S 145(2)(a).
[113]
At which every creditor, secured or unsecured,
has a voting interest equal to the value of his or her claim.
[114]
S 145(2)(b)(i).
[115]
S 145(2)(b)(ii).
[116]
S 152(4)(a)-(c).
[117]
S 152(5)(b).
[118]
S
140(1)(b).
[119]
S
138(a).
[120]
S 138(e).
[121]
S 140(3)(a).
[122]
S 140(3)(a).
[123]
S 140(3)(b).
[124]
S 137(4).
[125]
S 137(2)(a).
[126]
S 137(2)(b).
[127]
African Banking Corporation of Botswana Ltd v Kariba Furniture
Manufacturers (Pty) Ltd and Ors
2015 (5) SA 192
(SCA) at para
[38].