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[2016] ZASCA 78
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Golden Dividend 339 (Pty) Ltd and Another v Absa Bank Limited (569/2015) [2016] ZASCA 78 (30 May 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No:569/2015
DATE:
30 MAY 2016
Not
Reportable
In the matter
between:
GOLDEN
DIVIDEND 339 (PTY)
LTD
..............................................................
FIRST
APPELLANT
ETIENNE NAUDE
NO
...................................................................................
SECOND
APPELLANT
And
ABSA BANK
LIMITED
................................................................................................
RESPONDENT
Neutral
Citation: Golden Dividend v Absa Bank (569/2015)
[2016] ZASCA 78
(30
May 2016)
Coram: Tshiqi
and Swain JJA and Tsoka AJA
Heard:25 May
2016
Delivered:30
May 2016
Summary:
Application to set aside business rescue proceedings –
creditors have a direct and substantial interest – non-joinder
of creditors is fatal to the relief sought in the application.
ORDER
On appeal from:
Gauteng Division of the High Court, Pretoria (P Lazarus AJ sitting as
court of first instance):
1.The appeal is
upheld including the costs of two counsel where employed.
2. The order of
the court a quo is set aside and in its stead is substituted:
‘
The
application is dismissed with costs including the costs consequent
upon employment of two counsel.’
JUDGMENT
Tshiqi JA
(Swain JA and Tsoka AJA concurring)
[1]
The issue in this appeal is whether the
non-joinder of creditors in an application to set aside a business
rescue plan is fatal
to the granting of that application.
[2]
The appellant, Golden Dividend 339 (Pty) Ltd (the
company) concluded a written loan agreement on 05 April 2016 with the
respondent,
Absa Bank Ltd (the bank) in terms of which the bank
advanced an amount of approximately eight million to finance the
acquisition
of immovable property by the company. A first mortgage
bond was registered over the immovable property as security for the
loan.
During January 2012 the company stopped making regular payments
in terms of the loan agreement and as at 07 July 2013, an amount
of
approximately six million together with interest was outstanding. On
25 July 2013 the bank, through its attorneys served a letter
of
demand on the company in terms of s 345 of the Companies Act 61 of
1973 (read with clause 9 of schedule 5 of the
Companies Act 71 of
2008
as amended), (the 2008 Act) but the company, for a period of
three weeks after service of the letter, neglected to pay the amount
due.
[3]
On 27 August 2013 the company’s board of
directors passed a resolution placing it in business rescue
proceedings in terms
of s 129(1)
(b)
of the 2008 Act on the basis that it was
financially distressed. Pursuant thereto the second appellant, Mr
Etienne Naude (Naude)
was appointed as a business rescue practitioner
for the company. On 4 October 2013 Naude published a business rescue
plan and a
business rescue meeting was held on 8 October 2013 in
terms of s 151 of the 2008 Act. The meeting however did not proceed
due to
inadequate notice and the plan was withdrawn and a new plan
was published. At that meeting the majority of the creditors voted to
extend the 25 day period provided for in terms of s 150(5) of the
2008 Act for the publication of the plan and the meeting was
rescheduled for 22 November 2013. At that next meeting the plan was
adopted by a majority vote of 89 per cent of creditors with
voting
rights.
[4]
On 21 November 2013 the bank launched an
application, served on Naude on 5 December 2013 (later amended on 15
December 2013) seeking
an order declaring the business rescue plan
published by the second appellant on 11 November 2013 unlawful and
invalid.
[5]
In its answering
affidavit the company raised non- joinder as a point in limine and
stated:
‘
2.
In its amended notice of motion the applicant seeks to avoid a
business plan that was accepted and adopted in terms of the
provisions
of s 152 of the Companies Act, 71 of 2008 (the Act).
3.
In terms of the provisions of s 152(4) of the Act, an adopted
business rescue plan is binding on the company concerned, each
of its
creditors, as well as every holder of the company’s securities.
4.
The applicant is a creditor of the first respondent. Other creditors,
as reflected in the business rescue plan, have a direct
and
substantial interest in the subject matter of this litigation, and
should therefore have been joined as parties thereto.
5.
In the premises the application should be struck from the roll due to
non-joinder.’
[6]
In its replying
affidavit the bank purported to meet the point by asserting that in
its founding affidavit it had stated that notice
of the proceedings
would be given to all the company’s creditors in terms of s
145(1)
(a)
of the 2008 Act and
to the holders of securities in terms of s 146
(a)
of the
said Act. Such notice was given to all the affected persons in the
prescribed manner and none of them elected to participate
therein.
Consequently, so the bank stated, the point of non-joinder had no
merit as a formal joinder of the creditors would not
have achieved a
result different from compliance with the provisions of s 145(1)
(a)
and
(b)
of the 2008 Act. In
essence the bank did not deny that the creditors were not joined, but
stated that formal joinder was not
necessary as it would not achieve
a result different from that achievable through service of the notice
in terms of s 145(1)
(a)
and
(b)
of the 2008 Act.
[7]
The
application came before Lazarus AJ. At the commencement of the
hearing counsel for the company requested that the point in limine
be
argued separately from the merits but the court declined the request
and decided to hear it together with the merits. In support
of its
point in limine the company argued that as the right of interested
parties to be joined is derived from common law
[1]
,
the introduction of the notice procedures did not purport to afford
interested parties lesser rights than they had at common law.
If that
was the purpose, so it contended, it would have been clearly
stated.
[2]
The company urged the
court not to entertain the matter until all persons who had an
interest in its outcome had been joined.
[8]
The court dismissed
the point in limine and was not persuaded by the company’s
reliance on an earlier judgment by Ismail J
in
Absa
Bank Ltd v EJ Naude NO and others
,
unreported, North Gauteng High Court, Johannesburg, case number
66088/2012) in which that court held that the company’s
creditors ought to have been joined in an application seeking to set
aside a business rescue plan. It distinguished the present
case from
Ismail J’s judgment on the basis that in that case no notice
appeared to have been given to creditors. The court
said:
[19]
‘To the extent that Ismail J intended to find that,
notwithstanding compliance with the notification provisions of the
Act, it is nevertheless necessary to join creditors in an application
such as the present, such a finding seems incongruous with
Chapter 6
of the Act when read as a whole.’
In
the result the court made an order setting aside the resolution
placing the company under supervision and in business rescue
and also
ordered that the company be consequently placed in final liquidation.
This appeal is with the leave of the court a quo.
[9]
In the meantime
Ismail J’s judgment was taken on appeal and this court (
Absa
Bank Ltd v Naude NO & others
(20264/2014)
[2015]
ZASCA 97
(1 June 2015) (the SCA decision) endorsed Ismail J’s
reasoning and said:
‘
[9]
The argument by the bank that the issue of non-joinder did not arise
because the creditors had knowledge of the proceedings,
due to the
notices dispatched to them, and did not intervene, is without
substance . . . .
[10]
The test whether there has been non-joinder is whether a party has a
direct and substantial interest in the subject matter
of the
litigation which may prejudice the party that has not been joined. In
Gordon v
Department of Health, Kwazulu-Natal
[2008]
ZASCA 99
;
2008 (6) SA 522
(SCA) it was held that if an order or
judgment cannot be sustained without necessarily prejudicing the
interest of third parties
that had not been joined, then those third
parties have a legal interest in the matter and must be joined. That
is the position
here. If the creditors are not joined their position
would be prejudicially affected: A business rescue plan that they had
voted
for would be set aside; money that they had anticipated they
would receive for the following ten years to extinguish debts owing
to them, would not be paid; the money that they had received, for a
period of thirty months, would have to be repaid; and according
to
the adopted business rescue plan the benefit that concurrent
creditors would have received namely a proposed dividend of 100
per
cent of the debts owing to them, might be slashed to a 5,5 per cent
dividend if the company is liquidated.’
[10]
The court concluded
that Ismail J
was correct in
upholding the non-joinder point.
Not
unexpectedly, the bank has since filed a notice of withdrawal of its
opposition of the appeal. It is thus not necessary to traverse
all
the issues initially raised by the parties in this matter save to
state that the court a quo’s finding that it is not
necessary
to join the creditors for as long as the notices were served is
flawed. It thus follows that that the non-joinder of
the creditors
was fatal to the relief sought by the bank and the appeal must
therefore succeed.
[11]
Although the bank
withdrew its opposition to the appeal, it has not abandoned the order
of the court a quo. Consequently that order
still stands and the
company had to approach this court in order to set it aside.
Notwithstanding the fact that the bank elected
not to participate in
the appeal, it should be held liable for the costs. (See Financial
Services
Board v Barthram & another
(20207/2014)
[2015] ZASCA 96
; [2015] 3 ALL 665 (SCA) (1 June 2015).
[12]
I make the following
order:
1.
The appeal is upheld
with costs including the costs of two counsel where employed.
2.
The order of the
court a quo is set aside and in its stead is substituted:
‘
The
application is dismissed with costs including the costs consequent
upon employment of two counsel.’
ZLL
Tshiqi
Judge
of Appeal
APPEARANCES
For
Appellant:
J Suttner SC
Instructed
by: Prinsloo Bekker Attorneys, Pretoria
Van
der Berg Van Vuuren Attorneys.
Bloemfontein
For
Respondent: No appearance
[1]
Rose’s
Car Hire (Pty) Ltd v Grant
1948
(2) SA 466
(A) at 471-2;
President
Insurance Co Ltd v Yu Kwam
1963
(3) SA 766
(A) at 781B-C;
Estate
Agents Board v Lek
1979
(3) SA 1048
(A) at 1062D-H;
S
v H
1986
(4) SA 1095
(T) at 1097J (confirmed on appeal in
S
v H
1988
(3) SA 545
(A);
Protective
Mining & Industrial Equipment Systems (Pty) Ltd (formerly Hampo
Systems (Pty) Ltd) v AudioLens (Cape) (Pty) Ltd
[1987] ZASCA 33
;
1987
(2) SA 961
(A) at 991-992A;
SA
Breweries Ltd v Food and Allied Workers Union & others
1990
(1) SA 92
(A) at 99F;
Land-
en Landboubank van Suid-Afrika v Die Meester en andere
1991
(2) SA 761
(A) at 771A-C;
Palvie
v Motale Bus Service (Pty) Ltd
[1993]
ZASCA 105
;
1993 (4) SA 742
(A) at 748A;
Fedlife
Assurance Ltd v Wolfaardt
[2001]
ZASCA 91
;
2002 (1) SA 49
(SCA) at 58A-F.
[2]
Law
Society of South Africa & others v Minister for Transport &
another
[2010] ZACC 25
;
2011 (1) SA 400
(CC) para 69-70.