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[2016] ZAWCHC 193
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Van der Merwe and Others v Zonnekus Mansion (Pty) Ltd (in liquidation) and Another (17150/2016) [2016] ZAWCHC 193 (19 December 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
REPORTABLE
CASE
NO: 17150/2016
In
the matter between:
GARY
WALTER VAN DER
MERWE
First
Applicant
GARY
WALTER VAN DER MERWE N.O.
(on
behalf of the Eagles
Trust)
Second
Applicant
FERN
JEAN CAMERON N.O.
(on
behalf of the Eagles
Trust)
Third
Applicant
CANDICE
VAN DER MERWE N.O.
(on
behalf of the Eagles
Trust) Fourth
Applicant
and
ZONNEKUS
MANSION (PTY) LTD
(IN
LIQUIDATION)
First
Respondent
THE
EMPLOYEES OF ZONNEKUS MANSION
(PTY)
LTD
Second
Respondent
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE
First
Intervening Party
THE
STANDARD BANK OF SOUTH AFRICA
LIMITED
Second
Intervening Party
JUDGMENT
DELIVERED ON MONDAY 19 DECEMBER 2016
GAMBLE,
J:
INTRODUCTION
[1]
On Saturday 10 September 2016 the first applicant, Mr Gary Walter van
der Merwe (“van der Merwe”), as a matter of
urgency,
lodged an application in this court for the following orders –
“
1.
Placing Zonnekus Mansion Pty Ltd (in liquidation)
[hereinafter
‘ZKM’]
under supervision and
for it to commence business rescue proceedings in terms of the
provisions of Section 131 (1), read with section
131 (4) (a) of the
Companies Act No 71 of 2008 (“the Act”);
2. Confirming
the appointment of Gary Walter van der Merwe as a director of the
Respondent in Business Rescue and ratifying the
decisions taken by
him from 13 April 2015 to date regarding the implementation of the
business rescue plan of the Respondent as
contemplated in the first,
second and third business rescue applications and in terms of
section
137
of the
Companies Act 71 of 2008
;
3. That the
purported claim by by SARS against the Respondent be adjudicated on
in the pending Action ordered by Rogers J under
case number 8569/2014
and that the matter involving the alleged claim be joined to that
case which involves inter alia the same
parties and claims.
4. Appointing
NEILL MICHAEL HOBBS
as
the interim practitioner, as contemplated in section 131 (i) of the
Act.
5. Directing
that the costs of this application shall be borne by [ZKM]
(in
business rescue)
unless the
application is opposed, in which case a costs order shall be sought
against those parties who oppose the application,
and if the
liquidators should oppose, against them
de
bonis propriis.
6. Granting such
further and/or alternative relief as the Honourable Court may be
disposed to granting.”
[2]
The notice of motion cited the second to fourth applicants in their
respective capacities as trustees of the Eagles Trust (IT
3019/95) as
co-applicants in the matter. They are van der Merwe himself, his 75
year old mother (“Ms Cameron”) and
23 year old daughter
(“Candice”). Further, the notice of motion cited ZKM as
the first respondent and its employees
as the second respondent.
Notwithstanding the obvious interest of the first intervening party
(“
SARS”)
in the relief sought in prayer 3 of the
notice of motion, it was not cited as a respondent. Nor was the
second intervening party
(“
SBSA”
or “
the
bank”
), which to the knowledge of van der Merwe and the
attorney for the Trust and the employees, Mr. Dunn, had a material
interest in
the matter, cited as a respondent in the notice of
motion.
[3]
The notice of motion was drawn in the long form directing that the
matter be heard on 17 October 2016 in the event of non-opposition.
It
was signed by van der Merwe personally and on behalf of the Trust and
was marked for service on ZKM at 1A Chandos Close, Woodbridge
Island,
Milnerton, Cape Town and on the second respondent at C/O TJC Dunn
Attorneys, Suite 3, 1A Chandos Close, Woodbridge Island,
Milnerton,
Cape Town. Receipt of the papers on behalf of those respondents was
acknowledged by van der Merwe and TJC Dunn Attorneys.
The notice of
motion was also marked for service on the Trust at the same address
and further on the Companies and Intellectual
Property Commission,
SARS, SBSA, ABSA Bank Limited and the liquidators of ZKM all at their
respective email addresses. It bears
mention at this juncture that
the office of the Registrar of this court is not open for business on
a Saturday but, by special
arrangement, a standby registrar is
available to attend to the issuing of urgent applications, properly
so-called, i.e. applications
which are to be moved before the Duty
Judge as a matter of urgency. I shall revert to this issue later.
[4]
After receipt of the papers SARS and SBSA brought applications to
intervene in BR4, which applications were opposed by the applicants
and the second respondent. The intervening parties also sought
certain incidental relief to which I shall refer later and further
requested the court to fix a timetable for the hearing of the
application on an expedited basis on the semi-urgent roll. After
an
exchange of almost 600 pages, leave to intervene was granted to both
parties by Weinkove AJ on 30 September 2016, while the
incidental
relief was held over for determination by this court. The court
also directed that the matter be set down for
hearing on 7 and 8
December 2016. When the matter did not conclude before this court on
the second day it continued the following
day (Friday 9 December
2016) with the court sitting until 18h30, whereafter judgment was
reserved.
[5]
At the hearing van der Merwe appeared in person, the Trust was
represented by Adv P. Tredoux instructed by TJC Dunn Attorneys,
the
second respondent by Mr. Dunn himself, SARS by Advs H.G.A.Snyman SC,
C. Naude and Z. Cornelissen and SBSA by Adv.G.W.Woodland
SC. The
court is indebted to counsel and van der Merwe for the sterling
effort put into their respective heads of argument and
bundles of
authorities, to the attorneys for the meticulous preparation of the
papers and to the parties and their legal representatives
generally
for their co-operation and indulgence in sitting long hours to bring
the matter to finality.
[6]
During argument van der Merwe abandoned the relief sought in prayer 2
and I shall therefore only comment thereon briefly. However,
as that
prayer reflects, this was the fourth in a series of business rescue
applications brought in respect of ZKM and was referred
to by the
parties during argument as “
BR 4
”. The previous
three applications were referred to as BR1, 2 and 3 respectively. I
shall deal with those proceedings shortly
but for present purposes it
bears mention that BR1 and 3 were dismissed by this court while BR2
was purportedly withdrawn by the
applicants in that matter. However,
as the matter had already been set down for hearing and the consent
of the respondents therein
had not been obtained prior to the
withdrawal, the withdrawal was opposed and, after further argument,
the application was formally
dismissed by Weinkove AJ. But, before
dealing with those applications some corporate background is
necessary.
CORPORATE
HISTORY
[7]
ZKM was registered as a private company on 3 November 1999. Its first
directors were van der Merwe, and one Leno de Villiers,
who both
resigned on 14 December 2004. They were replaced by Ms Cameron, who
until recently remained the the sole director of the
company.
Initially van der Merwe was the sole shareholder in ZKM but since
2004 the entire shareholding has vested in the Trust.
Notwithstanding
the fact that van der Merwe is neither a shareholder nor a director
of ZKM, he has for many years, as he positively
asserts, been the
guiding mind and corporate controller of the company.
[8]
ZKM owns 5 immovable properties –
·
A partially developed residential property
on the Dennegeur Estate in Somerset West which is intended for
re-sale once completed;
·
3 adjacent residential properties in
Burmeister Circle , Milnerton which are utilized for rental income;
·
Zonnekus Mansion.
[9]
Zonnekus Mansion is the jewel in the crown. It is an estate of some
8000 sq.m located on the beach at Woodbridge Island close
to the
mouth of the Milnerton lagoon. The stately residence on the property,
which commands endless views of Table Bay, was designed
by Sir
Herbert Baker and built in 1926 by Sir David Graaff, an entrepreneur,
land owner and politician affectionately known as
“
The
Octopus
”
because he had interests in so many Cape businesses
[1]
.
The value of the property is estimated to be between R30 and 50
million. Van der Merwe told the court during argument that he
has
lived in the property for more than 20 years and it is clearly his
most treasured possession: a castle which he will defend
to the
bitter end with every sinew of war available to him.
[10]
Van der Merwe claims that ZKM also owns 2 Bell “Huey”
helicopters and a Mitsubishi fixed wing aircraft. Although
there is
reference to certain unidentified aircraft in the 2012 financial
statements of ZKM, SARS and the bank believe that ownership
thereof
vests in other entities. Judging from certain promotional brouchures
placed before the court, the Mansion is lavishly furnished
with every
modern appliance and appurtenance which the discerning occupant would
desire. In addition there is a large fleet of
motor vehicles under
attachment by SARS, ownership whereof may ultimately vest in van der
Merwe.
LEGAL
PROCEEDINGS INVOLVING ZKM
[11]
In 2011 the Homeowners’ Association of Dennegeur Estate
commenced liquidation proceedings against ZKM arising out of
the
non-payment of levies alleged to be due to it in respect of the
Somerset West property. After protracted litigation the application
was dismissed by Pillay AJ on 8 May 2014.
[12]
In June 2013 SARS commenced an investigation into the tax affairs of
inter alia
ZKM, Gary, Candice and other taxpayers directly or
indirectly linked to ZKM. As part of that investigation SARS
approached this
court on 30 August 2013 for a provisional order under
s 163(4)(a)
of the
Tax Administration Act, 28 of 2011
(“the
TAA”) preserving a variety of assets belonging to the various
entities under investigation. Rogers J granted such
an order
returnable on Monday, 7 October 2013.
[13]
Candice anticipated the return day of that order before Savage AJ, in
litigation which eventually found its way to the Supreme
Court of
Appeal.
[2]
On 11 December 2013 Davis J granted an order in terms of
section 50
of the TAA for an enquiry into the affairs of van der Merwe and,
inter alia. ZKM. That enquiry was subsequently held before retired
Judge M.M.Joffe and a number of witnesses, including Gary, were
questioned in the process.
[14]
On 19 March 2014 Rogers J made the preservation order final as
against, inter alia, Gary and ZKM in an order taken by agreement.
Thereafter, and within the 2 month period directed by Rogers J,
[3]
SARS instituted action against van der Merwe, Candice and ZKM in this
court under case number 8569/2014 claiming a globular sum
of R42m.
All of the above-mentioned immovable assets of ZKM are presently
subject to attachment under the Rogers order, as are
the helicopters,
the fixed wing aircraft and more than a dozen motor vehicles. It is
common cause that none of these assets may
be disposed of without the
sanction of this court.
[15]
On 20 June 2014 SBSA applied to this court for a provisional order of
winding up in respect of ZKM. That application was enrolled
for
hearing in the motion court on 1 July 2014 (during the court recess).
A notice of opposition was filed on 25 June 2014 and
when the matter
came before the court on 1 July it was postponed by agreement for
hearing in the Fourth Division on 11 September
2014. An agreed
timetable was incorporated in the court order. The application served
before Traverso DJP on 11 September 2014,
when a further postponement
was sought by van der Merwe to enable an answering affidavit to be
filed. Her Ladyship was not prepared
to grant the relief sought,
suggesting that dilatory tactics were being employed and granted a
provisional order returnable on
28 October 2014. All opposition
disappeared and on that day a final order of liquidation was granted.
For the sake of completeness
I point out that the application was
based on a mortgaged loan by SBSA to ZKM totaling R5,3m and in
respect whereof ZKM had been
in default since October 2013.
[16]
On 1 October 2014 the Master appointed provisional liquidators for
ZKM and on 14 December 2014 a final appointment was made.
On 2
December 2014 the first meetings of creditors and members were
convened. At that meeting 4 claims totalling R13 443 174.08
were
submitted and accepted as proved, including three secured claims on
behalf of SBSA. On 15 December 2014 the liquidators successfully
applied to this court for an extension of their powers in terms of
section 386 (5) of the Companies Act, 61 of 1973 (“the
old
Companies Act”). On the same day the liquidators wrote to ZKM’s
erstwhile attorney, Mr. Perold, informing him of
their appointment
and requesting a meeting in January 2015 with van der Merwe. A
dispute thereafter arose in relation to ownership
of the helicopters
and on 2 March 2015 the liquidators informed Mr.Perold of their
intention to hold an enquiry in terms of section
417 of the old
Companies Act in relation thereto. An order to this effect was
granted by this court on application by the liquidators
on 25 March
2015.The enquiry was convened before retired Judge Joffee to commence
on 20 April 2015.
BUSINESS
RESCUE 1, CASE NO 4653/2015
[17]
However, before the enquiry could proceed van der Merwe, Candice, the
Trust and two other corporate entities launched BR1 on
13 April 2015.
In that application,
inter alia
, the liquidators, SBSA, SARS,
and ABSA Bank were cited as respondents. As a consequence of the
launching of BR1 the section 417
enquiry was postponed.
[18]
In response to BR1, SARS and SBSA applied to this court for a
declaratory order that business rescue was not competent in respect
of a company which was in final liquidation. The preliminary point
was argued on 28 May 2015 before Ferreira AJ and was ultimately
resolved in favour of van der Merwe on 10 June 2015 in light of the
judgment of the Supreme Court of Appeal in
Richter
[4]
delivered
on 1 June 2015. Ferreira AJ then postponed BR1 for hearing on the
semi-urgent roll on the earliest date upon which the
parties were
able to agree.
[19]
On the assumption that there had been agreement in that regard, the
matter was enrolled to be argued before Binns-Ward J on
1 December
2015. On that day van der Merwe successfully took the point that the
matter had been set down improperly in that there
had not been
agreement on the date and the application was accordingly postponed
for hearing on the semi-urgent roll on 4 February
2016.
[20]
When the matter came before Koen AJ on that day the court refused an
application by van der Merwe for condonation of the late
filing of a
replying affidavit. In so refusing, Koen AJ fortuitously relied upon
the decision by the Supreme Court of Appeal (“the
SCA”)
in Candice’s application where there had been a delay in filing
certain documents before that court. An application
for condonation
in that regard was refused with the relevant principles in relation
thereto being restated by the court. In the
result the matter
proceeded before Koen AJ in the absence of a replying affidavit from
van der Merwe.
[21]
On 18 February 2016 Koen AJ dismissed the application in BR1 and on
18 March 2016 refused an application for leave to appeal.
A petition
for special leave to appeal to the SCA was refused by that court on 4
July 2016.
BUSINESS
RESCUE 2, CASE NO 10504/2016
[22]
Even before the SCA had delivered its judgment on the petition before
it, BR 2 was launched. This time it was brought by the
alleged
employees of ZKM at the behest of van der Merwe on 22 June 2016 under
case number 10504/16. On 1 August 2016 Weinkove AJ
gave directions
and fixed a timetable for a hearing of the matter of semi-urgent roll
on Monday, 5 September 2016. However, on
Friday 2 September 2016 the
applicants in that matter filed a notice of withdrawal of BR2 which
was of no force and effect given
that they failed, in terms of Rule
41(1)(a) to secure the consent of their opponents or the leave of the
court to such withdrawal,
the matter already having been enrolled for
hearing.
[23]
In the circumstances, the matter proceeded on the Monday before
Weinkove AJ, who found that BR2 constituted an abuse of process
of
court and had been brought in bad faith. On 11 November 2016 Weinkove
AJ dismissed an application for leave to appeal his findings
in BR2.
The court was informed by van der Merwe from the Bar in this matter
that a further application for special leave to the
SCA was in the
process of being filed. He pointed out that such leave related, not
to the merits of BR2, but to certain of the
ancillary relief granted
by Weinkove AJ. Accordingly, the parties were in agreement that a
positive outcome of such petition would
not affect the merits of BR4.
BUSINESS
RESCUE 3, CASE NO 15861/2016
[24]
On Friday 2 September 2016 van der Merwe was at it again. BR3 was
launched on that day, apparently in the mistaken belief that
BR 2 had
been validly withdrawn. Weinkove AJ dealt with BR 3 on Friday 9
September 2016 and dismissed the application on the turn
as being a
nullity, reasoning that it had been launched while BR2 was still a
live application. On that day Weinkove AJ also dismissed
an
application for his recusal and made a costs order against Mr. Dunn
de bonis propriis.
This court was also informed by van der
Merwe that an application for leave to appeal had been lodged in BR3
against the ancillary
relief granted, which application is yet to be
heard by Weinkove AJ.
PROCEDURAL
ISSUES IN RELATION TO BR4
[25]
It is against this background that the current application, BR 4, was
hastily launched on Saturday, 10 September 2016, immediately
after
the dismissal of BR 3 the previous day. The application is
procedurally defective in a number of respects. In the first place,
the notice of motion is signed by van der Merwe personally and on
behalf of the Trust. Yet, there is no resolution from the Trust
authorizing either the institution of the application or van der
Merwe to represent it. Then there is the fact that the employees
cited collectively as the second respondent are not identified in any
manner whatsoever in either the notice of motion in the founding
affidavit. It goes without saying that no confirmatory affidavits by
the alleged employees were filed. Further, there is no entry
of
appearance by TJC Dunn Attorneys on behalf of either the Trust or the
employees. In the circumstances, the source of Mr Tredoux’s
instructions and the entitlement of Mr Dunn to represent the Trust
and the employees remains a mystery; this notwithstanding that
he is
the “in-house attorney” (in the fullest sense of the
word) for van der Merwe and the interests he effectively
controls
(hereinafter “
the van der Merwe interests”).
[26]
Finally there is the question of non-joinder of SBSA and SARS. The
latter point was remedied to an extent by the fact that
these parties
were given notice electronically, albeit not in terms of the Rules,
and were able to apply to intervene. But the
point is that they
should never have been put to the trouble, expense and resultant
delay of such an application in the first place.
All of this is a
matter of concern to the court since, as van der Merwe stated during
his address, Mr Dunn accompanied him to the
Registrar’s office
on the Saturday morning to facilitate the issuing of the papers.
Notwithstanding these procedural defects,
SBSA and SARS asked the
court to determine the application finally on its merits so as to
avoid the possibility of a further application
on papers duly
remedied. It seems to me that it is in the interests of justice to
adopt such a pragmatic approach.
[27]
Before dealing with the merits of BR4, I shall set out the principles
applicable to business rescue proceedings brought under
Chapter 6 of
the Companies Act, 71 of 2008 (“the Act”). I do so fairly
briefly given the relative urgency in delivering
this judgment and
because the parties were essentially
ad idem
in relation to
the mandated approach.
THE
GENERAL APPROACH TO BUSINESS RESCUE APPLICATIONS
[28]
In the first place it must be observed that Chapter 6 contains its
own internal definitions in s 128 of the Act. Accordingly,
a business
rescue application is to be brought by an “
affected person”
in circumstances where the intention is “
to facilitate
the rehabilitation of a company that
is financially distressed
“. There is no dispute that ZKM, as a company that has been
finally wound up, is “
financially distressed.”
Nor
is there any dispute that the Trust, as the shareholder of ZKM, is an
“
affected person”
as defined
.
All parties
are in agreement that the Trust has the necessary
locus standi
before this court. Similarly, it is not in dispute that SBSA has
locus standi
to oppose the current business rescue
application, given that it is a proven creditor in liquidation.
[29]
What is in issue is whether -
·
Van der Merwe has
locus
standi
to bring the application
personally;
·
ZKM conducts a business;
·
ZKM has any employees;
·
SARS is a creditor of ZKM, thus giving it
locus standi
to
oppose business rescue;
·
A suitable business plan has been put up in
compliance with the criteria set out in Chapter 6 and the applicable
case law.
[30]
In the founding affidavit in this application van der Merwe refers
only briefly to the judgment of Koen AJ in BR 1. It is as
if the
judgment is coincidental and of no consequence, since no copy thereof
is attached to the founding papers. Van der Merwe
puts it thus –
“
[18] ….
It is submitted that due to a change in circumstances relating to the
Respondent, the refusal of BR 1 has no effect
on this current
application and with respect ought not to be considered at all.”
[31]
The judgment of Koen AJ in BR 1 is fortunately attached to the
answering affidavit filed on behalf of SARS.
[5]
I am in agreement with the approach adopted by Loen AJ in his
judgment based as it is on the decision of the SCA in
Oakdene
Square
[6]
.
[32]
Brand JA observes in
Oakdene Square
that a court of first instance exercises a general and wide
discretion when deciding whether to grant business rescue under s131
(4) of the Act. That section reads as follows -
“
(4) After
considering an application in terms of subsection (1), the court may-
(a)
make an order placing the company
under supervision and commencing business rescue proceedings if the
court is satisfied that-
(i)
the company is financially
distressed;
(ii)
the company has failed to pay over
any amount in terms of an obligation under or in terms of a public
regulation, or contract, with
respect to employment-related matters;
or
(iii)
it is otherwise just and equitable
to do so for financial reasons, and there is a reasonable prospect
for rescuing the company;
or
(b) dismissing the application,
together with any further necessary and appropriate order, including
an order placing the company
under liquidation.
[33]
Each case will be determined on its merits, at all times having
regard to the definition of business rescue in s128 (1)(b)
of the Act
which sets out the goals for consideration under s131(4):
“‘
business
rescue’
means proceedings
to facilitate the rehabilitation of a company that is financially
distressed by providing for-
(i)
the temporary supervision of the
company, and the management of its affairs, business and property;
(ii)
a temporary moratorium on the rights
of claimants against the company or in respect of property in its
possession; and
(iii)
the development and implementation,
if approved, of a plan to rescue the company by restructuring its
affairs, business, property,
debt and other liabilities, and equity
in a manner that maximises the likelihood of the company continuing
in existence on a solvent
basis or, if it is not possible for the
company to so continue in existence, results in a better return for
the company’s
creditors or shareholders than would result from
the immediate patient of the company.”
[34]
Brand JA observes that that definition must be read in conjunction
with the definition contained in s 128(1)(h) that-
“’
rescuing
the company’
means
achieving the goals set out in the definition of “business
rescue” in paragraph (b);”
Accordingly,
said Brand JA, an applicant for business rescue must establish
grounds for the reasonable prospect of achieving one
of the two goals
set in s128(1) (b) -
“
[31]
….
(E)ither to restore the company
to a solvent going concern, or at least to facilitate a better deal
for creditors and shareholders
than they would secure from a
liquidation process.”
[35]
In circumstances where a business rescue practitioner, as opposed to
the liquidator, is likely to have to sell property belonging
to the
embattled company, Brand JA points out that the purpose of business
rescue is not intended to serve as a less expensive
form of winding
up.
“
[33] My
problem with the proposal that the business rescue practitioner,
rather than the liquidator should sell the property as
a whole, is
that it offers no more than an alternative, informal kind of
winding-up of the company, outside the liquidation provisions
of the
1973
Companies Act which
had, incidentally, been preserved, for the
time being, by item 9 of schedule 5 of the 2008 Act. I do not
believe, however, that
this could have been the intention of creating
business rescue as an institution. For instance, the mere savings on
the cost of
the winding-up process in accordance with the existing
liquidation provisions could hardly justify the separate institution
of
business rescue.
A fortiori
,
I do not believe that business rescue was intended to achieve a
winding up of the company to avoid the consequences of liquidation
proceedings, which is what the appellant’s apparently seek to
achieve.”
[36]
Further, Brand JA refers to the important investigative powers of a
liquidator acting under the old
Companies Act in
circumstances where
there have been, for example, questionable transactions on the part
of the company or its directors or employees,
and which warrant
further investigation by way of interrogation.
“
[35] …On
the respondents’ version the company has been stripped of all
its income and virtually all its assets while
under the management
[of one of the company’s directors]. These allegations are, of
course, denied by the appellants. But,
as I see it, that is not the
point. The point is that these are the very circumstances at which
the investigative powers of the
liquidator - under s417 and 418 of
the 1973
Companies Act
- and the machinery for the setting aside of
the improper dispositions of the company’s assets - provided
for in the
Insolvency Act 24
of
1936
- are aimed. In this light I believe there is a very real
possibility that liquidation will in fact be more advantageous to
creditors
and shareholders - excluding, perhaps, the appellants -
than the proposed informal winding up of the company through business
rescue
proceedings.”
[37]
Finally, Brand JA points out that where the majority of creditors are
against the proposed business rescue scheme, that is
an important
consideration for the court to have regard to –
“
[38] …As
I see it, the applicant for business rescue is bound to establish
reasonable grounds for the prospect of rescuing
the company. If the
majority creditors declare that they will oppose any business rescue
scheme based on those grounds, I see no
reason why that proclaimed
opposition should be ignored. Unless, of course, that attitude can be
said to be unreasonable or mala
fide. By virtue of
s132
(2) (c) (i)
read with s152 of the Act, rejection of the proposed plan by the
majority of creditors will normally sound the death
knell of the
proceedings. It is true that such rejection can be revisited by the
court in terms of s153. That, of course, will
take time and attract
further costs. Moreover, the court is unlikely to interfere with the
creditors’ decision unless their
attitude was unreasonable. In
the circumstances I do not believe that the court can be criticised
for having regard the declared
intent of the major creditors to
oppose any business rescue plan along the lines suggested by the
appellants.”
[38]
An applicant for business rescue is not required to set out a
detailed business rescue plan. However, the applicant must establish
grounds for the reasonable prospect of achieving one of the two goals
mentioned in section 128 (1)(b) of the Act (ie a return to
solvency
or a better deal for creditors and shareholders than through
liquidation). A reasonable prospect means a possibility that
rests on
objectively reasonable grounds.
[7]
[39]
In
Propspec
[8]
van
der Merwe J observed that –
“
There can
be no doubt that, in order to succeed in an application for business
rescue, the applicant must place before the court
a factual
foundation for the existence of a reasonable prospect that the
desired object can be achieved.”
Expanding
thereon, the court noted
[9]
that
-
“
..(A)
reasonable prospect in this context means an expectation. An
expectation may come true or it may not. It therefore signifies
a
possibility. A possibility is reasonable if it rests on the ground
that it is objectively reasonable.… [a] reasonable
prospect
means no more than a possibility that rests on an objectively
reasonable ground or grounds.”
[40]
In
Wedgewood
Village
[10]
Binns-Ward J held the view that an applicant for business rescue must
be able to place before the court a cogent evidential foundation
to
support the existence of a reasonable prospect that the desired
object could be achieved.
[41]
Lastly, by way of background, it is generally accepted that business
rescue is intended to be a short-term measure. In
Gormley
[11]
Traverso DJP made the following observation:
“…
.
The
Act envisages a short-term approach to the financial position of the
company. This is so for self-evident reasons. There must
be a measure
of certainty in the commercial world. Creditors cannot be left in a
state of flux for an indefinite period. The provisions
of the Act
make it clear that the concept of business rescue only applies to
companies which are financially distressed as defined
in the Act. If
a company is not so financially distressed, the provisions of Chapter
6 of the Act will not apply. It must either
be likely that the debts
can be repaid within 6 months or that there is the likelihood that
the company will go insolvent in the
ensuing 6 months.”
Traverso
DJP went on to find that because the company in question was at the
time insolvent and that it required a moratorium to
pay its debts,
the company was not financially distressed within the meaning of
section 128(1)(f) of the Act.
[42]
In light of these authorities I turn to consider whether the
applicants have made out a case for the primary relief sought
in
these proceedings. I do so in the context of the issues referred to
in paragraph 29 above.
DOES
VAN DER MERWE HAVE
LOCUS STANDI
?
[43]
Given that it is not in dispute that the Trust as shareholder is an
“
affected
person”,
and given that van der Merwe is a trustee who holds a general power
of attorney from Ms Cameron, and assuming that the Trust is
van der
Merwe’s
alter
ego
[12]
,
it does not affect the continuation of the application whether he has
the necessary standing in law. The application can proceed
in the
name of the Trust alone and without his participation. However to the
extent that this point was argued, and for reasons
which will become
apparent later, I think it is appropriate to make a finding in this
regard.
[44]
Van der Merwe relied on three alleged facts which he claimed rendered
him an “
affected person”-
·
He holds a single share in the company
along with the Trust;
·
He is a creditor of ZKM; and
·
He is an employee of ZKM.
[45]
As to the first alleged fact, van der Merwe maintained that before
the institution of BR1 the Trust transferred a single share
to him.
When asked to do so van der Merwe was, however, unable to refer the
court to any documentation in the papers which reflected
a decision
taken by the Trust pursuant to a duly adopted resolution to support
this allegation. He first referred the court to
a resolution at p 66
of the papers signed by the 3 trustees on 20 February 2015 in which
he was authorized to take various steps
on behalf of the Trust
including launching and defending legal proceedings and submitting
claims on behalf of the Trust. When the
court pointed out to van der
Merwe that this document did not sustain a transfer of shares he then
took the court to a similar
resolution passed by the Trust just over
a month ago on 12 November 2016 (at p1338 of the papers). This
resolution too makes no
mention of a decision to transfer any shares
to van der Merwe. It is simply untrue to suggest that he is a
shareholder in ZKM.
[46]
But, in any event, the transfer of shareholding post liquidation is
proscribed thus by s 341(1) of the old
Companies Act –
“
(1
) Every
transfer of shares of a company being wound up or alteration in the
status of its members effected after the commencement
of the
winding-up without the sanction of the liquidator, shall be void.”
There
is no suggestion of any such sanction by the liquidators in this
matter. The first inconvenient truth therefore is that van
der Merwe
is not a shareholder in ZKM.
[47]
As proof of his alleged status as a creditor of the company, van der
Merwe firstly referred the court to the cession to him
of debts owed
by ZKM to a company he controls (“Bank on Assets Global (Pty)
Ltd – BOAG”). The cession itself
is signed by van der
Merwe both as cessionary and cedent. The circumstances of such a
cession would perhaps be suspect. But since
it occurred on 30 August
2016, it is of no force and effect given that the cession now relied
upon took place after the liquidation
of the company and in the midst
of a succession of business rescue applications. The second
inconvenient truth is that van der
Merwe is not a creditor of ZKM.
[48]
Then, van der Merwe attempted to persuade the court that he had a
claim against ZKM for services rendered to the company after
it was
placed in liquidation and later in business rescue. This allegation
goes hand-in-hand with his claim that he is an employee
of ZKM. Once
again the answer to this assertion is to be found in the legislation.
In terms of subsections 38(1) and (9) of the
Insolvency Act, 24 of
1936 (which are applicable to the winding-up provisions under the old
Companies Act), the
contracts of service of employees whose employer
has been liquidated are suspended with effect from the date of the
granting of
the order of winding-up. Unless the liquidator thereafter
agrees to the continued employment of such an employee within 45 days
of the suspension of the contract of service under
s38(1)
, such an
employee’s employment terminates at the end of the 45 day
period. The third inconvenient truth is that van der Merwe
is not an
employee of ZKM.
[49]
In consequence of the aforegoing, van der Merwe is not an “
affected
person
” as contemplated in s128(1)(a) of the Act and he has
no
locus standi
to move an application for business rescue.
DOES
ZONNEKUS MANSION (PTY) LTD (IN LIQUIDATION) CONDUCT BUSINESS?
[50]
In BR1 Koen AJ found that ZKM was a property owning company which
owned 5 immovable properties and allegedly also owned unidentified
movables, including certain aircraft. In [27] of the judgment Koen AJ
formed the following view regarding ZKM –
“
It has no
employees and conducts no business in the accepted sense of the word,
at least not a business which can be said to be
on-going. I am
mindful of the fact that it was submitted on behalf of the applicants
that Zonnekus held the immovable properties
it owned with a view to
later developing them, and that this was its business. However, it is
only in respect of the Somerset West
property that there is any
evidence of the business of property development being conducted by
Zonnekus, and that this development
ground to a halt sometime ago as
a result of inadequate funding.”
I
have not read the papers in BR1, nor have I read the arguments
advanced in that application. While the assessment of Koen AJ makes
eminent sense, I prefer to conduct my own enquiry, based on the facts
deposed to in this application, into the alleged business
status of
ZKM.
[51]
Van der Merwe argued that “
business rescue
” as
contemplated in chapter 6 actually meant “
company rescue
”.
In such circumstances, he said, a more flexible interpretation should
be given to the rescue of ZKM in light of the fact
that the express
purposes of the Act as set out in s7 thereof are, inter alia, to –
“
(d)
reaffirm the concept of the company as a means of achieving economic
and social benefits;
(e) continue to provide for the
creation and use of companies, in a manner that enhances the economic
welfare of South Africa as
a partner within the global economy;
(f) promote the development of
companies within all sectors of the economy, and encourage active
participation in economic organisation,
management and productivity….
(k) provide for the efficient
rescue and recovery of financially distressed companies, in a manner
that balances the rights and
interests of all relevant stakeholders…”
[52]
In addition, there is s5 which deals with the general interpretation
to be applied to the Act, and in particular s5(1) which
provides that
the Act “
must be interpreted and applied in a manner that
gives effect to the purposes set out in section 7.”
[53]
Van der Merwe argued that the aircraft allegedly owned by ZKM are
chartered out for use by other entities and pointed to the
financial
statements of the company for the tax year ending 29 February 2012 in
which charter fees totaling R1 262 000 constitute
the bulk of the
company’s revenue for that year. Such revenue totals R1,4m,
with rent received in the amount of R138 000
making up the balance.
When one looks at the “
Statement of Financial Performance
”
for that period in which the company’s alleged operating
expenses of R1,95m are set out, one sees that the principal
component
thereof (R1,36m) relates to “
depreciation, amortisation and
impairments
”. The remainder of the operating expenses seem,
on the face of it, to be very much like the sort of expenses
associated with
the running of a large domestic household (rates and
taxes, cleaning, levies, repairs and maintenance, telephone and fax,
electricity
and water). Significantly “
Employee costs”
for that tax year are reflected as nil.
[54]
Van der Merwe informed the court during argument that ZKM invoices a
company called FFA Aviation (Pty) Ltd (which evidently
operates
support services in the fire-fighting industry) for the so-called
“
hire and fly”
of its aircraft. In the same breath
he conceded that at least one of those aircraft was registered to an
American company and he
was unable to refer to any documentation
reflecting ownership of the aircraft in ZKM.
[55]
As far as the immovable properties are concerned, van der Merwe
argued that the Somerset West property is half built and will
ultimately be sold in the hope that it will return a profit. The
three properties in Burmeister Circle were apparently purchased
for
development in 2008 and have been let out for residential rental in
the meanwhile. Then, it was said that Zonnekus Mansion
itself is
available for occasional rental for social occasions such as weddings
and lavish parties. Its website
[13]
advertises that it is a “
Premier
Conference and Events Venue
”
capable of accommodating up to 150 guests. The Mansion is also
available for rental for 16 guests on the Airbnb international
website
[14]
at a staggering R96 604/day.
[56]
I have some serious reservations regarding the claim that ZKM was
running a business as a going-concern, but I am nevertheless
prepared
to accept for present purposes that in the past the company may have
been used for commercial purposes and, given the
mandated
interpretation in the Act, that it might have been an appropriate
entity to be considered for business rescue under Chapter
6 had it
presently been in business. However, the papers demonstrate that such
commercial activities as might have been conducted
behind that
corporate veil in the past ended in mid 2014 when the liquidation
application commenced. Significantly, van der Merwe
did not consider
business rescue as an option for saving ZKM either before or after
issue of the liquidation papers, notwithstanding
his knowledge that
SBSA was contemplating foreclosure. Nor did he take any such steps
while the company was in provisional liquidation
or immediately after
it was put into final winding-up. Rather, he allowed the liquidators
to take control of the company and waited
several months before
launching BR1 for an ulterior purpose, as I shall demonstrate later.
[57]
Simply put, the company has been in liquidation for more than 2
years: final liquidators have been appointed, at least two
meetings
of creditors have been convened, a s 417 enquiry has been authorized
by this court and any employees who may once have
been in the service
of ZKM have long since ceased to render services to the company.
Moreover, not only have such employees not
been identified in these
papers other than in their collective nomination as the second
respondent, but the provisions of
s38
of the
Insolvency Act referred
to above are applicable and they are in any event unable to discharge
any duties towards the company.
[58]
In the circumstances I am of the view that the company in liquidation
does not conduct any business. ZKM is presently
no more than a
property holding entity in final liquidation. Whatever business it
might have conducted for profit is moribund and
incapable of
resuscitation through the provisions of Chapter 6. Such a finding
renders consideration of the proposed business rescue
plan redundant.
However, in the event that I am wrong in regard to the absence of
ZKM’s business activities, I shall deal
with the proposed plan
more fully hereunder. Before doing so it is necessary to give
consideration to the status of SARS as a creditor
of the company in
liquidation since it plays a major role in consideration of the
proposed business rescue plan.
THE
SARS CLAIMS - VAN DER MERWE’S ‘BLIND SPOT’
[59]
As already pointed out, secured claims in excess of R5,3m have been
proved by SBSA in liquidation, the company having been
unable to
settle its indebtedness to the bank since at least March 2014. Van
der Merwe does not dispute the company’s liability
to the bank
but suggests that it is lower than the amount proved. He has it in
his mind that the account is still alive, that mortgage
bond payments
can be made to SBSA and that when the time comes he will be in a
position to sit down and debate the extent of the
company’s
liability with the bank. He says the following by way of example in
the founding affidavit –
“
[35]……(SBSA)
is a fully secured creditor who (sic) can and will be paid in full.
In this regard I can state that the
three… mortgage bonds are
paid way in advance, active and have never been cancelled, the
respondent continues to keep them
up to date and…(the bank)
keep(s) accepting such payments…..
[49]….[The attached
spreadsheet].. reflects payments of R2 965 000 over the past 12
months, of which R2 005 000
went to [SBSA], who accepted the
payments without hesitation. I pause to mention that the balances on
the bond accounts needs (sic)
to be audited as [the bank] continues
to charge unauthorised amounts such as legal costs of R1 458 837
on one bond account
alone and then levy additional interest on this.
That said, if one has regard to the proven [SBSA] claim of R5 366
502, less
the payments made… over the past 12 months of R2 005
000, there should be a balance of no more than R3 361 502,
plus
some interest and less any unauthorised payments allocated to the
bond accounts, this (sic) is a minor claim compared to the
huge asset
base of the respondent.”
[60]
Van der Merwe points out that ABSA Bank is also a secured creditor
with a claim which he says totals the “
relatively
minor amount of some R1 703 000.”
He
makes similar allegations suggesting that this bank’s mortgages
have also been regularly serviced since liquidation. The
rationale
behind this curious reasoning on the part of van der Merwe lies in
the fact that he believes that the general moratorium
on legal
proceedings against the company introduced in s133 of the Act has the
effect of depriving the company of its status as
having been finally
wound up, suspending the liquidators’ statutory powers and
permitting him to carry on running ZKM as
his personal fiefdom on the
basis that it is no longer in final liquidation. In conjunction with
this contention is his assumption
that the company is already in
business by virtue of the provisions of s132(1)(b) of the Act.
[15]
This approach completely ignores the express wording of s131(1)(c)
which is applicable
in
casu.
[16]
[61]
In the founding affidavit van der Merwe asserts that SARS is not a
creditor in liquidation in that its claim of R46 026.36
against
ZKM has been settled by BOAG. It bears mention that this entity is
the current corporate vehicle being utilised by van
der Merwe to
conduct his business interests. He flatly refuses to recognise SARS’
assertion that it is a creditor of ZKM
for an amount in excess of
R82m.
[62]
The basis of the SARS claims is two-fold. Firstly, it says that it
raised an assessment on 27 November 2015 against ZKM for
unpaid taxes
going back to 2005 in the aggregate amount of R41 618 767.24.
Secondly, it says, on the assumption of success
in the action
instituted in case no 8569/2014 it has a further contingent claim
against ZKM of R 42m. Van der Merwe argues that
both of these claims
arose post liquidation and that they are not enforceable in the
current
concursus creditorum.
[63]
It is not necessary for the purposes of this enquiry to go into any
great detail regarding the enforceability or prospects
of success of
the SARS claims. In the event that SARS persists with these claims,
and if they are contested by the liquidators,
litigation will
assuredly follow in different
fora:
the claim in case number
8569/2014 will proceed in the High Court, while any challenge to the
assessed taxes must be taken on appeal
to the Income Tax Court.
Suffice it to say that SARS contends in these proceedings that there
is substance in both legs which make
up the claims.
[64]
The claim in respect of assessed taxes is based on two documents
issued during 2015. On 11 May 2015 SARS issued a “
Letter of
Audit
Findings”
in which it advised ZKM –
“
(T)hat it
intended to raise assessments which would result in additional normal
tax liability in an amount of R12 342 725.70,
excluding
interest on underpayment of provisional tax, understatement penalties
and other administrative non-compliance penalties.”
It
invited the ZKM (through its erstwhile attorney Mr Perold) to engage
with it in relation to its findings. Various extensions
of time were
sought by the company which ultimately requested that SARS await the
appointment of a business rescue practitioner,
given that BR1 was
still before the court at that stage. Ultimately SARS refused any
further extensions and on 27 November 2015
proceeded to raise the
relevant assessments, substantiated in a document entitled
“
Finalisation of Audit
Letter
”. Individual
assessments were drawn up by SARS in respect of each of the tax year
is in question over the period 2005-2012,
the aggregate whereof is
said to exceed R41m.
[65]
ZKM sought to attack these assessments by first requesting reasons as
it is entitled to do under the TAA. Various items of
correspondence
ensued between SARS and Mr Perold all of which served to confuse
rather than elucidate the situation. The position
taken by van der
Merwe is that no taxes are payable to SARS under the assessments
until ZKM has been furnished with reasons in
relation thereto. Such
reasons are said to be a pre-condition to any objection by ZKM being
raised to the assessments.
[66]
Mr Snyman SC pointed out in argument that van der Merwe’s
argument on this aspect is fundamentally flawed. Applying the
maxim
“
Pay
Now, Argue Later”
,
SARS relies on ss100 and 164 of the TAA and points out that now, more
than a year after the assessments were made, no valid objections
have
been lodged. In “
Metcash
”
[17]
, which was decided before the TAA was passed, the Constitutional
Court approved of the “Pay Now, Argue Later” principle.
And, s164 of the TAA now expressly directs that payment of a tax
obligation must proceed pending any objection thereto “
unless
a senior SARS official otherwise directs.”
It
is common cause that there has been no such direction in relation to
ZKM’s tax obligation arising from the November 2015
assessments. As a matter of fact, therefore, ZKM is presently
indebted to SARS in the amounts contained in the assessments and
if
it wishes to challenge them it must pay before it is entitled to
invoke the dispute resolution mechanism contained in chapter
9 of the
TAA.
[67]
A second issue which arose in relation to the claim for assessed tax
turned on van der Merwe’s argument that the assessments
were
out of time and beyond the three year prescription period
contemplated under s 99 of the TAA. During argument it appeared
that
all of the parties were in possession of the “
Letter of
Audit Findings
” of 11 May 2015 but that no copy thereof had
been included in the papers before the court. SARS contended that
such a letter
contained allegations which served to remedy the
prescription argument relied upon by van der Merwe. At the conclusion
of argument
the court requested SARS to place the letter before it in
an affidavit.
[68]
On 12 December 2016 the attorney acting on behalf of SARS, Mr Kotze,
filed an affidavit to which the letter was attached. The
issue of
prescription is dealt with pertinently in Section G of the letter as
follows:
“
111. SARS
is of the view that the amounts mentioned in this letter have not
been previously assessed to tax or the expenses and/or
input tax
claims were allowed, due to the non-disclosure and/or
misrepresentations of material facts by the taxpayer in the various
returns submitted.
112. Therefore, SARS is of the view
that in terms of
section 99
(2) of the
Tax Administration Act, SARS
may re-open any one or more of the assessments raised in respect of
any assessment period within the period of investigation.”
Thereafter
details are furnished of the alleged non-disclosures and/or
misrepresentations of material facts. In the circumstances,
I am of
the view that there is no substance in the argument advanced by van
der Merwe that the tax claims have prescribed.
[69]
The last argument advanced in respect of the revenue claims relates
to the action instituted under case no. 8569/2014. It was
suggested
by Mr. Tredoux on behalf of the Trust that the claims had lapsed in
that SARS had not given the statutory notice required
under
s359(2)(a)
of the old
Companies Act of its
intention to continue with
the proceedings. However, the court was referred by Mr Snyman SC to a
report of the liquidators for
submission to the second meeting of
creditors held on 24 February 2015 where, under the heading “
LEGAL
PROCEEDINGS”
,
the following is recorded –
“
We
received notice from the attorneys acting for the South African
Revenue Services (“SARS”) in terms of section 359(2)
of
the 1973
Companies Act for
the continuation of proceedings commenced
prior to the liquidation of the Company.
The proceedings relate to an action
instituted against 10 defendants, including the Company as the 7
th
defendant under case number 8569/2014……
The liquidators are taking advice
as to the merits of the claim which forms the basis of the SARS
action and will be guided accordingly.”
There
is accordingly no merit in this argument and the claim brought on the
half of SARS is currently properly before this court.
CANDICE’S
APPLICATION
[70]
As appears from the judgment of Ponnan JA in Candice’s
application, she is an attractive and vivacious woman who, prior
to
2013, earned a modest living from a modelling career. Her career as
such required her, so she said, to visit a private resort
on the
Indian Ocean island of the Seychelles known as “
The
Plantation
Club
” where she was employed “
to
lend a sense of glamour and exclusivity to the… [lavish
parties and events held at that club]… and by definition
the
resort .
[71]
A fantastical tale of serendipitous wealth is described in detail by
Ponnan JA and I shall not prolong this judgment unnecessarily
with
the finer detail described in that judgment. Suffice to say that
Candice describes meeting a wealthy businessman from the
Middle East
at the club during one of her visits and the subsequent unsolicited
deposit of US$15,3m (then worth almost R143m) into
her bank account
held in South Africa. This deposit attracted the attention of the
revenue authorities who were alerted thereto
by the Financial
Intelligence Centre.
[72]
Candice lost little time in satisfying her heart’s desire by
acquiring 2 expensive motor vehicles (an Audi R8 Spyder
and a Range
Rover Evoque collectively valued at more than R2,5m) as also a luxury
home in the Cape Town suburb of Fresnaye allegedly
worth R110m). The
authorities suspected that the hand of van der Merwe may have been
involved in the deposit into Candice’s
bank account and asked
that these assets of Candice also be preserved in the provisional
order granted by Rogers J in August 2013.
[73]
Candice anticipated the return day of the Rogers J order before
Savage AJ in February 2014. She was unsuccessful in securing
the
release of the assets, an order which was confirmed by the SCA. It
appears that Candice thereafter came to an agreement with
SARS in
terms whereof the action instituted against her (as the 2
nd
defendant) in case number 8569/2014 was withdrawn.
[74]
Van der Merwe’s affidavit in these proceedings informs us that
Candice paid an amount in excess of R12m to SARS in settlement
of the
claim against her. His affidavit before the the SCA in relation to
the condonation application in Candice’s application
demonstrates manifestly that he was the driving force behind that
litigation. In paragraph [25] of his judgment Ponnan JA further
found
that van der Merwe –
·
“
has a strong presence in
[Candice’s] affairs”;
·
“
asserts a mandate to conduct the
litigation on her behalf, but has chosen not to disclose the full
details of the mandate”;
·
“
appears to…
control…Zonnekus Mansions… as he sees fit”;
·
“
also appears to control the
affairs of his daughter”;
·
“
has signing powers in respect of
the account into which the R140 million was deposited”;
·
“
[has the] facility to control or
influence the transfer of funds between accounts for which he holds
signing powers”
[75]
Ponnan’s JA’s concluding remarks in Candice’s
application are intended to have far-reaching consequences
–
[26] Mr van der
Merwe’s evident involvement of family members and his obviously
close relationship with the applicant, coupled
with the extraordinary
wealth which she suddenly acquired (allegedly as a gift), require
investigation. It thus seems imperative
that a curator investigate
how and on what basis those funds were effectively placed at the
disposal of Mr van der Merwe and whether
and how he has disposed of
the funds. It follows that Sars’ application for the
appointment of a curator bonis should have
succeeded before Savage AJ
and that its appeal in that regard must succeed.”
[76]
The remarks of the learned Judge of Appeal, the facts revealed in
Candice’s application and the allegations made in the
affidavits filed in that application must be considered when the
business plan put up by van der Merwe in this application are
considered.
THE
PROPOSED BUSINESS PLAN
[77]
I agree with counsel for SBSA and SARS that the business plan
suggested by van der Merwe in these proceedings is significantly
short on detail. What he proposes is that funding will be injected
into ZKM from BOAG, which he controls. And, it appears as if
Candice’s immense wealth was relatively short lived as BOAG is
now said to be flush with money, or at the very least will
have
access to loans from Candice. Van der Merwe goes on to point out that
the money to be injected into ZKM will not be by way
of a loan but
rather an investment of capital and a participation in the
shareholding of the company in liquidation. As I say,
the business
rescue plan is short on detail and no indication is given as to what
sort of shareholding will be given to BOAG in
return for its
investment. The court is not told what class of shares will be
allocated to BOAG, what rights will attach to such
shares nor is
consideration given to the mechanism for disturbing the share capital
of a company which is in final liquidation
[78]
Mr Woodland SC euphemistically described van der Merwe’s
attitude towards the revenue claims as “
the elephant in the
room
”, while Mr Snyman described the SARS claims as van der
Merwe’s “
blind spot
”. As I see it, it is all
very well to come along claiming that a business plan which
contemplates an investment of some R5
– 7m in ZKM is a fair
investment for the return at hand. But when that business plan
consistently ignores the existence of
the SARS claims it runs into
interminable trouble. The SARS claims presently exist and cannot
simply be thought away. And so, one
only has to ask oneself what
prudent investor would contribute a significant sum of money
(probably running into tens of millions
of Rands) in exchange for
equity in a company that has potential liabilities close to R90m, to
realise that the business plan has
little prospect of success at all.
[79]
But there are other issues of equal importance which militate against
the granting of business rescue in this matter. As in
Oakdene
Square,
the backers of this company are liable to be
interrogated in terms of s is 417 of the old
Companies Act. In
such
circumstances, said Brand JA, business rescue is not an appropriate
vehicle. In addition one has the cautionary remarks of
Ponnan JA
referred to earlier. There are yet many questions to be asked and
many answers to be furnished under the windingup provisions
of the
old
Companies Act before
the sun finally sets on Zonnekus Mansion.
[80]
Furthermore, it is beyond any doubt that SBSA and SARS will oppose
any business rescue model being put up by van der Merwe.
This,too, is
an important consideration in deciding whether or not to grant
business rescue.
[81]
Considering the
dictum
in
Gormley
, that business
rescue is a relatively speedy and sharp intervention intended to
return a company to solvency, it must be said that
the litigation
which must follow in relation to both the SARS and SBSA claims will
indubitably protract proceedings in relation
to the winding-up of
this company: a company which is hopelessly insolvent and whose
affairs need urgently to be taken under control
and investigated.
Such steps are preferably conducted in the winding-up process by the
liquidators rather than via the limited
avenues which are open to a
business rescue practitioner.
[82]
In
Normandie
Restaurants
[18]
the SCA delivered its most recent
pronouncement
on business rescue. The principles remain the same and
Oakdene
Square
is still the touchstone. As Tshiqi JA reminds us that
in regard to business rescue, as in any other application brought on
notice
of motion,
“
[16] An
applicant must establish reasonable grounds in accordance with the
ordinary rules of the pleadings in motion proceedings,
i.e. in the
founding affidavit.… Motion proceedings such as these are
aimed at the resolution of the legal issues based
on common cause
facts. They are not geared towards deciding factual disputes. To the
extent that disputes of fact exist in the
affidavits filed by the
parties, the matter must be decided on the [respondent] Bank’s
version unless it is so far-fetched,
or clearly untenable that it can
justifiably be rejected merely on the papers.… What is more,
it makes no difference to
this approach that, as in this case, motion
proceedings have been dictated by the legislature. Neither does it
make any difference
where the legal or evidential onus lies.”
[83]
In BR4 van der Merwe’s “
blind spot”
serves
to create factual disputes between the parties. And, the persistent
failure of the applicants to realistically address the
SARS claims
means that they are unable to discharge the onus which they bear in
BR4. As the court further highlighted in
Normandie Restaurants
–
[19]
Section 128
(1) (b) envisages that measures to be taken in order to facilitate
the rehabilitation of the company should provide for
temporary
supervision, and for a
temporary
moratorium on the rights of claimants against the company. They are
not meant to provide companies with a mechanism with which
to delay
payments to creditors with no feasible plan of ever paying its debts,
or a means of restructuring its debts over lengthy
periods of time.
[20] The
temporary measures envisaged by the Act are aimed at maximising the
likelihood of the company continuing in existence on
a solvent basis
and at creating a better return for the creditors and shareholders…
The measures proposed in the business
rescue plan will, in my view,
not provide for a temporary solution as envisaged in s128 (1) (b).
They do no more than plan a long-term
debt management process.”
To
those remarks I imagine that the creditors would probably add, “
and
so say all of us”.
PRAYER
2 – CONFIRMATION OF DIRECTORSHIP
[84]
During argument van der Merwe was asked by the court to identify any
documentation confirming his appointment as a director
of ZKM. He was
unable to do so. In the founding affidavit van der Merwe deals with
his purported appointment as director as follows:
“…
.
I was also appointed the (sic) director of the Respondent post
liquidation and since business rescue preceding (sic) began.”
In
argument van der Merwe expanded on this allegation by stating that Ms
Cameron had “
appointed”
him to such office.
[85]
The election of directors of profit companies (of which ZKM is one)
is governed by s68 of the Act. When it was pointed out
to van der
Merwe that this required a decision and resolution by the Trust as
the sole shareholder in the company, he accepted
that they had been
no such appointment and indicated to the court that he no longer
persisted in the relief sought in prayer 2.
PRAYER
3 – CONSOLIDATION OF ACTIONS
[86]
The relief sought in prayer 3 is aimed at a consolidated hearing in
relation to SARS’ on-going litigation with the van
der Merwe
interests. As demonstrated above the litigation in case number
8569/2014 has been commenced by SARS in the High Court
and will serve
before a single judge of this Division. There is currently no
litigation pending before this court in relation to
the tax
assessments arising from the “
Finalisation of Audit Letter”
of 27 November 2015.
[87]
Should the liquidators of ZKM elect to exercise the taxpayer’s
rights under the TAA and object against that assessment
they may
ultimately appeal against such finding to the Tax Court. That Court
is a creature of statute established under the
TAA and, in
terms of s118, consists of a judge of the High Court, an accountant
selected from a panel of members appointed by the
President in terms
of s120, and a representative of the commercial community also
selected from that panel. In the circumstances,
consolidation of the
tax proceedings contemplated in this matter is a legal impossibility.
Accordingly the relief sought in prayer
3 cannot succeed.
THE
INCIDENTAL RELIEF SOUGHT BY SARS
[88]
As already indicated, by virtue of the failure of the applicants to
join, inter alia, SARS as a party in these proceedings,
it was
obliged to bring a substantive application for intervention. In so
doing it asked the court to grant the following additional
relief:
3. That pending
the finalisation of Zonnekus BR4, including but not limited to the
finalisation of any interlocutory or ancillary
applications and any
applications for leave to appeal or subsequent appeals:
3.1
the liquidation proceedings of Zonnekus not be suspended as envisaged
in
section 153(1)(b)
of the
Companies Act; and
3.2
the liquidators in the winding up of Zonnekus be authorised to take
control of Zonnekus’ assets in accordance with the
provisions
of the
Companies Act, read
with the provisions of the
Insolvency Act,
Act
24 of 1936 (“ the
Insolvency Act&rdquo
;);
4. That the
applicants, both in their personal and representative capacities as
trustees of the the Eagles Trust, are hereby interdicted
from
launching any further applications to place Zonnekus under
supervision and business rescue proceedings to be commenced as
envisaged in terms of
section 131
of the
Companies Act, without
the
prior written leave from this Honourable Court.”
The
basis for the relief was motivated in the affidavit filed on behalf
of SARS in support of the application to intervene.
[89]
In granting SARS leave to intervene Weinkove AJ ordered that the
relief sought in prayers 3 and 4 should be determined by the
court
hearing the business rescue application. At the conclusion of
argument before this court counsel for the intervening creditors
handed up a draft order which contained relief jointly sought.
Besides asking the court to dismiss the application and to make
appropriate costs orders, the creditors sought the following further
relief in slightly more refined terms:
“
2.
Pending the finalisation of any application for leave to appeal or
subsequent appeals against the dismissal of the application:-
2.1
The liquidation proceedings of Zonnekus Mansion (Pty) Ltd(in
liquidation)(“Zonnekus”) are not suspended; and
2.2
the liquidators in the winding-up of Zonnekus are directed to take
control of Zonnekus’ assets, in accordance with the
provisions
of the
Companies Act, Act
61 of 1973 (“the Companies Act
1973”), read with the provisions of the
Insolvency Act, Act
24
of 1936.
3. Gary Walter
van der Merwe (“Mr van der Merwe”), Candice-Jean van der
Merwe (“Ms C van der Merwe”) and
Fern Jean Cameron (“Mrs
Cameron”) in their personal and representative capacities as
trustees of the Eagles Trust,
or any other affected party, as defined
in
section 128
(1) (a) of the
Companies Act 2008
, are interdicted
from launching further applications to place Zonnekus under
supervision and business rescue proceedings to commence,
as envisaged
in
section 131
of the
Companies Act 2008
, without the prior written
authorisation of the Senior Duty Judge.”
[90]
The relief so sought by the intervening parties is undoubtedly
far-reaching and unusual. It seeks to interfere with the ordinary
operation of the suspension of orders pending appeal and further
seeks to place a limitation on a party’s constitutional
right
to approach a court under section 34 of the Constitution of the
Republic of South Africa, 1996. The creditors argue for such
relief
because they say that the van der Merwe interests have persistently
abused the processes of this court. So, it is argued,
the time has
come for this court to take back control of its processes and to make
appropriate orders to ensure that these are
not abused to advance
sectional interests.
ABUSE
OF PROCESS?
[91]
SBSA and SARS relied upon, inter alia, my judgment in
Harris
[19]
for the principles applicable to an assessment as to whether
litigation constitutes an abuse of process of the court or not. I
believe that the judgment indeed captures those principles succinctly
and it is therefore not necessary to traverse them in any
great
detail now. Suffice it to say that the judgment of Southwood AJA in
National
Potato
Co-Operative
[20]
,
provides a useful summary of the approach in the constitutional
setting:
“
[54] In
general, legal process is used properly when it is invoked for the
vindication of rights or the enforcement of just claims
and it is
abused when it is diverted from its true course so as to serve
extortion or oppression; or to exert pressure so as to
achieve an
improper end. The mere application of a particular court procedure
for a purpose other than that for which it was primarily
intended is
typical, but not complete proof, of
mala
fides
. In order to prove
mala
fides
a further inference that
an improper result was intended is required. Such an application of a
court procedure (for a purpose other
than that for which it was
primarily intended) is therefore a characteristic rather than a
definition, of
mala fides
.
Purpose or motive, even a mischievous or malicious motive, is not in
general a criterion for unlawfulness or invalidity. An improper
motive may, however, be a factor where the abuse of the court process
is in issue. (
Brummer v Gorfil
Brothers Investments (Pty) Ltd en Andere
1999 (3) SA 389
(SCA) at
412I-J; 414I-J and 416B)
.
Accordingly, a plaintiff who has no
bona
fide
claim but intends to use
litigation to cause the defendant financial (or
other) prejudice will be abusing
the process
(see Beinash and
Another v Ernst & Young and Others
1999 (2) SA 116
(CC).. para
[13]).
Nevertheless it is
important to bear in mind that courts of law are open to all and it
is only in exceptional cases that a court
would close its doors to
anyone who wishes to prosecute an action… The importance of
the right of access to courts enshrined
by s 34 of the Constitution
has already been referred to. However, where a litigant abuses the
process this right will be restricted
to protect and secure the right
of access for those with
bona
fide
disputes…”
[92]
To fully appreciate the conduct of the applicants in this matter a
little more background is necessary. At the commencement
of
proceedings on Wednesday 7 December 2016, van der Merwe moved an
interlocutory application permitting a film crew to record
the
entirety of the proceedings. His reason for this was said to be an
autobiographical documentary which he is in the process
of compiling
to highlight his alleged persecution by SARS over the years. Van der
Merwe informed the court of his expertise in
the production of
documentary films and hoped that his life story might one day make
commercial success in the film world. The
application was refused
with short reasons given at the time but the seeds of the present
litigation are to be found in certain
of the facts mentioned by van
der Merwe in his address to this court.
[93]
Van der Merwe informed the court from the Bar of two criminal matters
in which he claimed he had been wrongly pursued by SARS
- one in the
regional court and another before this court. He later said that he
had recently been convicted by le Grange J in
this Division on a
single count of fraud to which he was sentenced to 7 years
imprisonment conditionally suspended for five years.
Apparently an
application for leave to appeal in that matter is currently pending.
[94]
Be that as it may, van der Merwe said that SARS was the complainant
in that case. He referred to other litigation in which
he had been
involved over the years and after the adjournment of the proceedings
this court requested a list of all reported cases
in which the name
Gary Walter van der Merwe appears to be compiled by one of the High
Court researchers. The list, which excludes
reference to either of
the criminal trials referred to by van der Merwe, is annexure A to
this judgment. It must immediately be
said that van der Merwe’s
experience in the courts over the past 10 years or so has made him
into a very competent litigator.
In this matter, he prepared detailed
heads of argument and thereafter addressed the court with the utmost
decorum, candour and
respect. Indeed many an aspirant to junior
advocate could take a leaf out of van der Merwe’s book. The
point here is that
this court is not dealing with any ordinary lay
litigant: van der Merwe is an experienced litigator on a mission to
discredit SARS
and he aspires to be “Mission Control”.
[95]
In dealing with the post-liquidation developments, van der Merwe
complained bitterly about the conduct of the liquidators,
in
particular of the fact that they immediately approached this court
for increased powers under section 386 of the old
Companies Act and
thereafter applied for a
s417
enquiry to be conducted into the
affairs of ZKM. He described the exercise of these powers as
“
Draconian
” and attributed an improper motive to
the liquidators. Such complaints are, of course, unfounded given that
both applications
were brought in terms of the old
Companies Act and
would have been considered on their merits by judges of this
Division.
[96]
When asked by the court during argument to explain why there had been
a delay of at least 9 months in bringing BR1, van der
Merwe frankly
informed the court that he was obliged to do so because the
liquidators were “
up to their
shenanigans again”.
That explanation established beyond doubt that BR1 was launched,
not for the purposes of rescuing a financially distressed company,
but to frustrate the liquidators from discharging their obligations
under the winding-up provisions of the old
Companies Act. And
,
thereafter the conduct of van der Merwe and the people he controls,
be they alleged employees, the Trust or attorneys, has effectively
precluded the liquidators from taking any steps in relation to the
company for more than two years.
[97]
Immediately upon the launching of BR1 the creditors challenged the
validity of the proceedings in light of the final order
of
liquidation. Once that issue had been determined by the SCA one would
have expected that the application for business rescue
would have
preceded with the necessary alacrity. However, quite the contrary is
occurred. It appears as if no serious effort was
made at agreeing a
date for hearing and when the matter came before Binns-Ward J it was
van der Merwe who called in the assistance
of senior counsel and
obtained a last-minute postponement in December 2015 for a hearing in
February 2016.
[98]
Next, one sees the dismissal of BR1 by Koen AJ, an application for
leave to appeal, the prompt dismissal thereof and an immediate
petition to the SCA. But even before that court had delivered its
ruling, BR2 was issued. That suggests that van der Merwe realised
that the pending application was not likely to succeed and that fresh
steps had to be taken to kibosh the liquidators.
[99]
After BR2 was issued it was necessary for a timetable to be fixed to
advance the matter on the roll only for that application
to flounder
on the court day preceding the hearing when an invalid notice of
withdrawal was filed. Then, when BR3 served before
this court it was
established that it had been issued prematurely while BR 2 was still
pending. And, when BR3 was dismissed on
Friday 9 September, this
application was launched over a weekend in unusual circumstances. Van
der Merwe explained to this court
during argument that his current
attorney was actually in attendance when the papers were issued; yet
there is no palpable explanation
for the fact that the application
was brought by van der Merwe in his personal capacity and not through
duly appointed attorneys.
[100]
A further anomaly is that the papers issued in BR 4 did not envisage
an expedited hearing: rather van der Merwe elected to
follow the long
form contemplated in Form 2(a) to the First Schedule to the Uniform
Rules when issuing the notice of motion. And,
as I have already
pointed out, there was a non-joinder of two parties who shared a
material interest in BR4. All of these tactical
decisions only served
to protract the matter further as parties sought leave to intervene,
such applications were opposed and timetables
were required to be
fixed to ensure a speedy hearing. Manifestly, procrastination and
foot dragging was the preferred approach
of the van der Merwe
interests.
[101]
There can be little doubt, therefore, that as the one obstacle set up
to hinder the liquidators in the exercise of their statutory
came
down, the next was shrewdly put in place. All the while, claiming
that he was entitled to do so by virtue of the provisions
of the
general moratorium provided for in s133 of the Act, and a
misinterpretation of s132(1)(b), van der Merwe has side-lined
the
liquidators and asserted control of the company for almost 2 years
now
.
Claiming that the powers of the liquidators had been
suspended under s131(6) of the Act, ignoring the provisions of
s132(1)(c)
and exploiting the absence of a duly appointed business
rescue practitioner, van der Merwe has done with ZKM just what he
pleases,
notwithstanding the absence of any legal relationship with
the company whether as shareholder, director or employee.
[102]
In the result, the collective conduct of the van der Merwe interests
has precluded the liquidators from discharging their
court-appointed
functions and served only to entrench his position at Zonnekus
Mansion. But it goes further than that. Not only
have the liquidators
been unable to gain physical access to that property, van der Merwe
has taken active steps to interfere with
the integrity and use of the
Burmeister Circle properties. When he suspected that a tenant in one
of the houses (a woman living
on her own) may have been so bold as to
offer assistance to the liquidators he immediately stepped in. He
allowed a group of Angolan
to occupy a property adjacent to hers and
boundary walls were taken down. All the while van der Merwe
personally collected
the rental from these properties.
[103]
Ultimately, however, the proof of the pudding has been in the eating.
A worthless, revamped business plan has been put up
in BR4 in respect
of a company which does not conduct business. In the process,
valuable court time and resources have had to be
taken up to deal
with the allegations made, not only by van der Merwe personally but
by his in-house attorney on behalf of unidentified
employees and by
counsel on behalf of the shareholders of the company in liquidation.
Choosing to attack on three fronts meant
that a matter which was set
down for 2 court days lasted long into a third day which, but for the
endurance of the legal representatives,
might well have run into a
fourth day. One shudders to consider what further tricks the van der
Merwe interests might have up their
collective sleeves.
[104]
In the result I am satisfied that since their inception these
business rescue proceedings have not been intended to restore
the
liquidated company to solvency but rather to preclude the liquidators
from discharging their statutory functions as directed
to do by this
court. Simply put, business rescue has been utilised by being
“
diverted from its true course so as to serve extortion or
oppression; or to exert pressure so as to achieve an improper end.”
A clearer example of an abuse of process, as contemplated by
Southwood AJA, could not be found to exist.
APPROPRIATE
RELIEF
[105]
What then should be done to address these tactics? Mr Tredoux
suggested somewhat optimistically that van der Merwe’s
conduct
had always been
bona fide
and that the doors of the court
should not be shut in his face, nor of those who shared his
interests. While I am satisfied that
van der Merwe has failed to
establish that any of the applications for business rescue were
bona
fide,
I am of considered view that the order proposed by SBSA and
SARS does not completely shut the door to a
bona fide
litigant. Rather, it seeks to put in place a suitable gate-keeping
measure to ensure that this court’s resources and time
are not
taken up needlessly, and that other parties affected by this
litigation are not put to the unnecessary trouble of filing
yet
another set of opposing papers.
[106]
In the passage referred to above in
National Potato
Co-Operative
the SCA sanctioned a restriction of the section
34 right in appropriate exceptional circumstances. I am satisfied
that such circumstances
exist in the instant case, and that the
procedure proposed is a fair limitation of the right to approach the
court on behalf of
the liquidated company. Given that there can be no
pressing need in the prevailing circumstances for an urgent order for
the commencement
of business rescue, any delay which might be
occasioned by requiring a genuinely affected party to approach this
court on proper
notice to all other interested parties will not
operate unduly harshly in the circumstances.
[107]
As far as the relief sought in paragraph 2 of the creditors’
draft order is concerned, it is a matter of great concern
that for
almost 2 years the liquidators have been stopped dead in their tracks
notwithstanding the provisions of s132(1)(c). There
is much work yet
to be done in bringing the winding-up of ZKM to finality and the
sooner that is done the better for all concerned.
At the conclusion
of argument the court anticipated a delay in the delivery of this
judgment and asked the parties come to an agreement
to permit the
liquidators limited access to the property for the purposes of
compiling an inventory. Mr Tredoux indicated that
he supported such
an approach and undertook to liase further with Mr Woodland SC to
that end.
[108]
During the afternoon of Wednesday, 14 December 2016 this court’s
registrar was copied into a string of emails between
the parties
relating to a discussion of the court’s proposal. All of that
was brought to a halt on the morning of Thursday,
15 December 2016
when van der Merwe flatly refused to co-operate:
“
Dear All
Please note that I am not in
agreement that the Hon Court expressed the view or need for an
interim order to be made, it merely
asked the parties if they could
reach an agreement as an interim measure pending judgment, (sic) your
order clearly goes way beyond
this and in facts (sic) provides for
the liquidation to continue notwithstanding the fact that liquidation
proceedings have been
suspended until the Hon Court rules on the
business rescue application, (sic) as stated in my earlier email
the
status quo should remain as it has been for more than two years and
18 years before that
, (sic) I can see no reason why the
liquidators should be permitted the inconvenience (sic) the numerous
families that reside in
the houses (and during the festive season)
and how they would have the
locus standi
to proceed with the
liquidation as you would have it,(sic) the liquidators have stated
under oath that they have no Locus Standi
during business rescue
proceedings and have accepted this.
Furthermore the liquidators stated
under oath in the replying papers that they have absolutely no funds
available and that they
would not even be in a position to pay the
insurance premiums on one of the properties let alone all 5, (sic)
please provide an
explanation as to how they would be in a position
to undertake any function and pay for the substantial monthly running
costs,
(sic) who is currently covering the legal expenses and other
costs? and (sic) kindly provide an interim liquidation and
distribution
account of the liquidators (sic) position to date in
order that same may be evaluated.
Regards
Gary van der
Merwe.”
[109]
As I understand SARS’ position, paragraph 2 of the draft
contemplates the prospect of an application for leave to appeal
being
brought by one or more of the applicants, and, in the context of the
history of this matter, and generally having regard
to van der
Merwe’s propensity to litigate, as demonstrated in
inter
alia
Annexure A, I consider that assumption to be reasonably
held. SARS’ obvious concern then is how to reign in van der
Merwe
and permit the liquidators to procede with their designated
funtions.
[110]
The erstwhile provisions of Rule 49 (11), which dealt with the
suspension of the operation of orders pending the decision
of an
application for leave to appeal, have been replaced by
s18
of the
Superior Courts Act, 10 of 2013
which prescribes a fairly complex and
regulated procedure to be considered by a court requested to
implement the operation of its
order immediately. The relief sought
in paragraph 2 of the draft order, however, has nothing to do with
s18
of the
Superior Courts Act but
is based on s131(4)(b) of the Act
which is the following effect-
“
(4) After
considering an application [for the commencement of business rescue]
in terms of subsection (1), the court may-
(a)……..
(b)
dismiss the application, together with any further necessary and
appropriate order, including an order placing the company under
liquidation.”
[111]
In
Richter
the SCA based its finding that
business rescue was possible even after a final order of liquidation
on the notion that winding-up
is an ongoing procedure which only
terminates when the company is finally dissolved –
“
[9] …
Generally, in law and in business, liquidation is the exhaustive
process by which a company is brought to an end, and
the assets
thereof, if any, are redistributed. The authors of
Cilliers
and Benade; Corporate Law (3
rd
ed, 2000,at 494)
describe
liquidation as follows:
‘
(27.01)….
The process of dealing with or administering a company’s
affairs prior to its dissolution by ascertaining
and realising its
assets and applying them firstly in the payment of creditors of the
company according to the order of preference
and then by distributing
the residue, if any, among the shareholders of the company in
accordance with their rights, is known as
the winding-up or
liquidation of the company’.
[10] ...The
correct position is that upon the final order of liquidation being
granted the company continues to exist, but control
of its affairs is
transferred from the directors to the liquidator who exercises his or
her authority on behalf of the company.
As to when liquidation
commences, in terms of s348 of [the old
Companies Act] liquidation
of
a company by the court is deemed to commence on presentation to the
court of the application for the winding up and continues
until the
affairs of the company have been finally wound up and the Master’s
certificate to that effect is published in the
Government Gazette,
thus dissolving the company….”
[112]
The decision in
Richter
is consonant with the position
contemplated by the Legislature in
s132(1)(c):
if a company is
already in liquidation, business rescue only commences when a court
places the company under supervision of the
business rescue
practitioner. However, in terms of
s131(6)(a)
, the mere launching of
the application for business rescue has the effect of suspending the
liquidation proceedings. This does
not mean that the liqudators are
depived of their staturoy powers, just that they are precluded from
exercising them. As the facts
of this case demonstrate, this can
result in an undesirable state of affairs should an unscrupulous
individual seek to exploit
the legal
lacuna
which the Act
occasions in relation to day-to-day control of the liquidated
company.
[113]
The refusal of BR4 will have the effect that the general moratorium
provided for in s133 of the Act is lifted and the suspension
of the
liquidators powers under s131(6)(a) is terminated. Control of
the company will therefore be exercised by the liquidators
again.
Should an application for leave to appeal be lodged, the likely
effect is that it will be contended the moratorium has once
again
been reinstated. But, in such circumstances there is nobody available
to manage the company. A business rescue practitioner
has not been
appointed, nor does the company have any directors given that Ms
Cameron has apparently resigned as a director. Added
to that is the
fact that van der Merwe has shamelessly assumed control of the
company as if he were a director, shareholder, employee
and creditor
where he is manifestly none of those and has no claim to control of
the company. And, as his email of 15 December
2016 illustrates, he is
assuredly not going hand over control of ZKM to the liquidators.
[114]
In such circumstances the company will be what Kgomo J termed “
a
rudderless ship or a ship without captain”
[21]
,
or as Mr Snyman SC so colourfully and aptly suggested, “
a
ship captained by a pirate”.
In
my view it is imperative that ZKM be returned immediately to the
control of the “
nightwatchman
looking after the assets and affairs of the insolvent company”.
[22]
Accordingly I consider that an order in terms of prayer 2 of the
draft is correctly grounded in the legislative provisions of
s131(4)(b) of the Act and in accordance with precisely the staus
which the legislature had in mind in the event of a business rescue
application not succeeding – the company to continue to be
subject to the process of winding-up and the resumption of control
of
court-appointed liquidators.
COSTS
[115]
In the draft order, the creditors ask that the costs of this business
rescue application as well as the interlocutory proceedings
brought
to sanction their intervention in the matter be borne by van der
Merwe in his personal as well as is representative capacity
and
Candice and Ms Cameron in their representative capacities on behalf
of the Trust. SARS asks that those costs include the costs
of two
counsel and that they be awarded on the punitive scale. SBSA adopts a
more benign approach, asking for costs on the ordinary
scale,
notwithstanding its entitlement to attorney and client costs in terms
of its loan agreements with ZKM.
[116]
There is no reason why costs should not follow the result as is
customary in litigation of this nature. Having found that
van der
Merwe and his fellow applicants perpetrated serial abuse of this
court’s processes, it is appropriate that the court
should
express its displeasure at such conduct by ordering costs on the
scale as between attorney and client.
ORDER
OF COURT:
IN
THE CIRCUMSTANCES THE FOLLOWING ORDER IS MADE:
1.
The application is dismissed.
2.
Pending the finalisation of any application
for leave to appeal or subsequent appeals against the dismissal of
the application:
2.1
the liquidation proceedings of
Zonnekus Mansion (Pty) Ltd (in liquidation) (“
Zonnekus”)
are not suspended; and
2.2
the liquidators in the winding-up of
Zonnekus are directed to take control of Zonnekus’ assets, in
accordance with the provisions
of the Companies Act, 61 of 1973 (“
the
Companies Act 1973
”), read with
the provisions of the
Insolvency Act, Act
24 of 1936.
3.
Gary Walter van der Merwe(“
Mr
van der Merwe”),
in his personal
`capacity and representative capacity as a trustee of the Eagles
Trust and Candice-Jean van der Merwe
(“Ms
C van der Merwe”)
and Fern Jean
Cameron (“
Mrs Cameron”)
in their representative capacities as trustees of the Eagles Trust,
or any other affected party as defined in
section 128
(1) (a) of the
Companies 2008, are interdicted from launching further applications
to place Zonnekus under supervision and business
rescue proceedings
to commence, as envisaged in
section 131
of the
Companies Act 2008
,
without the prior written authorisation of the Senior Duty Judge of
this Division.
4.
Mr van der Merwe, in his personal capacity
and representative capacity, and Ms C van der Merwe NO and Mrs
Cameron NO in their representative
capacities as aforesaid are
ordered to pay the Commissioner for the South African Revenue
Service’s (“SARS”)
costs of this application on the
attorney and client scale, including the costs occasioned by the
appointment of two counsel, as
well as the costs occasioned by the
interlocutory application brought by SARS, on 30 September 2016, such
costs also to be taxed
on the attorney and client scale.
5.
Mr van der Merwe, in his personal capacity
and representative capacity and Ms C van der Merwe NO and Mrs Cameron
NO, in their representative
capacities, are ordered to pay the
Standard Bank of South Africa Limited’s (“
Standard
Bank”)
costs of this application,
as well as the costs occasioned by the interlocutory application
brought by Standard Bank on 30 September
2016, all such costs to be
on the party and party scale.
6.
All such costs payable are to be paid
jointly and severally by the respective parties, the one party
paying, the others to be absolved.
_______________________
GAMBLE
J
Annexure
A
Reported
cases involving Gary Walter van der Merwe
1.
Wellness International Network Ltd V MV
Navigator
And Another
2004 (5) SA 10
(C)
2.
MV
Navigator
And Another v Wellness International Network Ltd
2004 (5) SA 29
(C)
3.
V & A Waterfront (Pty) Ltd and another
v Helicopter & Marine Services (Pty) Ltd and others 2004 JDR 0073
(C)
4. V & A
Waterfront (Pty) Ltd and another v Helicopter & Marine Services
(Pty) Ltd and others 2005 JDR 1061 (SCA)
5. Helicopter &
Marine Services (Pty) Ltd And Another v V & A Waterfront
Properties (Pty) Ltd And Others 2005 JDR 1400 (CC)
6.
Huey Extreme Club v McDonald t/a Sport
Helicopters
2005 (1) SA 485
(C)
7. V & A
Waterfront (Pty) Ltd and another v Helicopter & Marine Services
(Pty) Ltd and others
2006 (1) SA 252
(SCA)
8.
Van der Merwe & another v Nel &
others
2006 (2) SACR 487
(C).
9. Van der Merwe &
another v Taylor N O & others
2008 (1) SA 1
(CC).
10. McDonald t/a
Sport Helicopters v Huey Extreme Club
2008 (4) SA 20
(C)
11. Gary Walter Van
Der Merwe v The National Director Of Public Prosecutions And Others,
CASE NO 8845/08, UNREPORTED, Judgment delivered
8 April 2009
12. Van der Merwe
And Others v Additional Magistrate, Cape Town And Others
2010 (1)
SACR 470
(C)
13. Legal Aid South
Africa v Van der Merwe and Others (A409/2010)
[2010] ZAWCHC 525
(4
November 2010)
14.
Van der Merwe v NDPP (373/09)
[2010] ZASCA
129
(30 September 2010)
15. Van der Merwe v
National Director Of Public Prosecutions And Others
2011 (1) SACR 94
(SCA)
16. Minister Of
Safety And Security And Another v Van der Merwe And Others
2011 (1)
SACR 211
(SCA)
17. Minister Of
Safety And Security v Van der Merwe And Others
2011 (2) SACR 301
(CC)
18. Minister Of
Safety And Security v Van der Merwe And Others
2011 (5) SA 61
(CC)
19.
Van Der Merwe and Others v Zonnekus Mansion
(Pty) Ltd and Others (4653/2015B)
[2016] ZAWCHC 11
(18 February 2016)
20.
Commissioner, South African Revenue Service
v Van Der Merwe 2016 (1) SA 599 (SCA)
[1]
Wikipaedia Online
Encyclopaedia
sv
“Sir
David Graaff, 1st Baronet”
[2]
CSARS v Van der Merwe
2016(1) SA 599 (SCA)
hereafter referred to as “
Candice’s
application”
[3]
The precise date does not appear from the papers but it was said to
be not later than 15 May 2014.
[4]
Richter v ABSA Bank Limited
2015 (5) SA 57 (SCA)
[5]
See also
Van der Merwe and
Others v Zonnekus Mansions (Pty) Ltd and Others
[2016]
ZAWCHC 11
(18 February 2016)
[6]
Oakdene Square Properties
(Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd
2013 (4) SA 539 (SCA)
[7]
Propspec Investments (Pty)
Ltd v Pacific Coast Investments 97 Ltd
2013(1) SA 542 (FB) at [12]
[8]
[31]
[9]
[12]
[10]
Koen and Another v
Wedgewood Village Golf and Country Estate (Pty) Ltd and Others
2012(2) SA 378 (WCC) at
[17]
[11]
Gormley v West City
Precinct Properties (Pty) and Another
[2012]
ZAWCHC 33
(18 April 2012) at [11]
[12]
Jordaan v Jordaan
2001(3)
SA 288 (C) at [33]
[13]
www.zonnekus.co.za
[14]
www.airbnb.com/rooms/10409278
[15]
“
S132(1)
Business
rescue proceedings begin when-
(a)…..
(b)
an affected person applies to court for an order placing the company
under supervision in terms of
section 131(1)
…..”
“
(c)
a court makes an order placing a company under supervision during
the course of liquidation proceedings
[17]
Metcash Trading Ltd v
Commissioner, South African Revenue Service and Another
2001
(1) SA 1109
(CC) at [61]
[18]
Firstrand Bank Limited v
Normandie Retaurants Investments and Another
{2016] ZASCA 178 (25 November 2016)
[19]
Ex Parte Harris
[2016]
1 All SA 764 (WCC)
[20]
PriceWaterHouseCoopers Inc
and Others v National Potato Co-Operative Ltd
2004(6)
SA 66 (SCA) at [50]
[21]
Jansen van Rensburg NO v
Cardio-Fitness Properties (Pty) Ltd
2014 JDR 0406 (GSJ) [56];[58]
[22]
Ibid [49]