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[2012] ZAGPJHC 35
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Ultrapolymers (Pty) Ltd v Maredi NO and Others (6171/2012) [2012] ZAGPJHC 35; 2012 (4) SA 232 (GSJ) (16 March 2012)
REPORTABLE
IN THE SOUTH GAUTENG HIGH COURT
(JOHANNESBURG)
CASE NO 6171/2012
DATE:16/03/2012
In the
matter between
ULTRAPOLYMERS (PTY)
LTD
.....................................................................
APPLICANT
and
CLIFFORD THABANG MAREDI
NO
.............................................
FIRST
RESPONDENT
KHAZHAZILE SIMON MAHLANGU
NO
..................................
SECOND
RESPONDENT
(In their
capacities as joint liquidators of
Alfa
Flexible Packaging (Pty) Ltd (in liquidation))
SASOL
POLYMERS, A DIVISION
OF
SASOL INDUSTRIES
LTD
.......................................................
NTERVENING
PARTY
Insolvency
–
section 32(1)(b)
of the
Insolvency Act 24 of 1936
–
application for declaratory relief pending main proceedings –
locus standi of proved creditor to institute interim
proceedings –
interpretation of “proceedings” in
s 32(1)
(b) of Act –
considerations applicable – held: creditor has locus standi in
circumstances requiring urgent interim
relief.
Interim
relief – requirement of
a
prima facie
right,
though open to some doubt – applicant relying on evidence given
at
s 417
enquiry – sufficiency of – held: requirement
satisfied.
Interim
relief – prejudice – administration costs of sale and
preservation of assets – ordered to be paid from
proceeds of
sale thereof.
J U D G M E N T
VAN OOSTEN J:
[1] This is an application in which the applicant seeks certain
interim relief, pending the outcome of an application or action
to be
brought by the applicant for declaratory relief in terms of s
32(1)(b) of the Insolvency Act 24 of 1936 (the Act). The respondents
are the appointed joint liquidators of Alfa Flexible Packaging (Pty)
Ltd (in liquidation) (Flexible) and they oppose the relief
sought by
the applicant.
[2] The applicant is a proved creditor in the insolvent estate of
Alfa Plastex (Pty) Ltd (in liquidation) (“Plastex”),
of
which Rueben Miller, Theodore Wilhelm van den Heever and Keith Elwyn
Lutchmia are the appointed joint liquidators. The assets
purportedly
belonging to Flexible form the subject matter of this application
(the assets). The applicant contends that the assets
in fact belong
to Plastex, and not Flexible, and that Plastex disposed of its assets
to Flexible in a purported transaction that
was not genuine and that
it therefore ought to be set aside in terms of s 26 and/or 29 and/or
30 and/or 31 and/or 34 of the Act
(the main proceedings). The
contention is based on certain evidence having emerged from an
enquiry held in terms of s 417 of the
Companies Act 61 of 1973, in
respect of Plastex, to which I will revert.
[3] On 10 and 13 February 2012 the applicant became aware that the
assets, in the liquidation of Flexible, were to be sold on an
auction
which was advertised to take place on 21 February 2012. This prompted
the applicant to launch the present application,
by way of urgency,
on 17 February 2012. The respondents opposed the application, but
conceded the urgency of the matter. An application
for intervention
was made by the intervening party (Sasol) to which the applicant
consented. Sasol, likewise, opposes the application.
The matter came
up for hearing before Carelse J on 20 February 2012. The learned
Judge postponed the application to 6 March 2012,
reserved costs and
further ordered that “Any or all sales at the auction to be
held by Park Village Auctions on 21 February
2012 at the instance of
the respondents shall be subject to confirmation by the respondents”
and that such confirmation was
not to be given on or before 19 March
2012. The auction went ahead and the assets were sold. As at the date
of the hearing of the
matter before me, the confirmation of the sale
was still pending. Counsel for the applicant informed me from the bar
that the applicant
is prepared to agree to the confirmation of the
sales by the respondents, subject to the rider that the proceeds of
the sales be
held in trust pending the finalisation of the main
proceedings. In view hereof, the applicant seeks relief in an amended
form as
set out in counsel for applicant’s heads of argument.
[4] The respondents’ and Sasol’s (jointly hereinafter
referred to as “the respondents”) opposition to the
relief sought by the applicant, is based on the grounds, firstly,
that applicant has
no locus standi
to bring the application in
its own name; secondly, that the applicant has failed to put up
security as required in terms of s
32(1)(a) of the Act; thirdly, that
the applicant has failed to make out a case that the assets belong to
Plastex and not to Flexible;
and, fourthly, and finally, that none of
the other requirements of interim relief have been established and in
particular that
the interim relief, if granted, would unduly
prejudice the respondents. I turn now to a consideration of each of
the grounds of
opposition under a separate heading.
THE
LOCUS STANDI
OF THE APPLICANT
[5] The provisions of s 32 of the Act are pertinent to this issue. It
reads:
‘
(1)
(a) Proceedings to recover the value of property or a right in terms
of section 25 (4), to set aside any disposition of property
under
section 26, 29, 30 or 31, or for the recovery of compensation or a
penalty under section 31, may be taken by the trustee.
(b)
If the trustee fails to take any such proceedings they may be taken
by any creditor in the name of the trustee upon his indemnifying
the
trustee against all costs thereof.
(2)
In any such proceedings the insolvent may be compelled to give
evidence on a subpoena issued on the application of any party
to the
proceedings or he may be called by the court to give evidence. When
giving such evidence he may not refuse to answer any
question on the
ground that the answer may tend to incriminate him or on the ground
that he is to be tried on a criminal charge
and may be prejudiced at
such a trial by his answer.
(3)
When the Court sets aside any disposition of property under any of
the said sections, it shall declare the trustee entitled
to recover
any property alienated under the said disposition or in default of
such property the value thereof at the date of the
disposition or at
the date on which the disposition is set aside, whichever is the
higher.’
[6] The
locus standi
of the applicant, as creditor of Plastex,
is challenged on the ground that the application should have been
brought by the liquidators
of Plastex and not the applicant. In
support of the contention, reliance is placed on the wording of s
32(1) as well as the judgments
in
Volkskas Beperk NO v Barclays
Bank (DC&O)
1955 (3) SA 104
(T), and
Reynolds and
Others NNO v Standard Bank of South Africa Ltd
2011 (3) SA 660
(W). The reference in s 32(1)(a) is to “proceedings”
without specific reference to interim proceedings. The meaning
of the
noun “proceedings” has been pronounced on in a large
number of cases, particularly in regard to the use of
the word in
diverse statutory provisions (see Claassen
Dictionary of Legal
Words and Phrases
Vol 3 201). The mere use of the word
“proceedings” in s 32(1)(a) absent, for example,
qualifications such as “all
proceedings”, or “any
and all proceedings”, which would have made it clear that a
wide meaning is intended, in
my view, precludes simply reading
“interim proceedings” into “proceedings” (cf
Ramjan v Khassimgadu
1940 NPD 275).
There are significant
differences between the two. In the present matter the interim
proceedings are completely separate from the
main proceedings to be
instituted, should the relief herein be granted. I am accordingly
driven to the conclusion that, had it
been the intention of the
legislature to include interim proceedings in s 32(1)(a), words to
that effect would have been used.
In my view, the lack of
qualification means that the “proceedings” referred to in
s 32(1)(a) do not include interim
proceedings.
[7] The cases relied upon by the respondents are clearly different.
In
Volkskas
,
Neser J upheld an exception against a
declaration in an action where the plaintiff purported to act on
behalf of the trustee in
instituting that action. In
Reynolds
,
Blieden J held that the trustees, as plaintiffs in the action,
and not the creditor, were entitled to make discovery in terms of
rule 35(1), for the reason, so the learned Judge held, “They
are the plaintiffs because they are the only parties entitled
to
embark on the litigation concerned”. Both cases dealt with
proceedings by way of action and the issue concerning the
locus
standi
of a creditor to institute interim proceedings that we are
now concerned with, neither featured nor was it dealt with.
[8] In the absence of any direct authority on the interpretation of
the word “proceedings” in s 32(1)(a) with regard
to
interim relief, I proceed to do so, on the basic and, in my view,
decisive point of departure which is to have regard to the
nature of
the interim proceedings. The application was brought on the basis of
urgency shortly after it had come to the notice
of the applicant that
the assets were to be sold. The potential prejudice the applicant
would have suffered had the auction proceeded,
is apparent. The
application was clearly urgent. The applicant proceeded to launch the
application without having obtained the
consent of the liquidators,
in its own name, and moreover without having put up security. The
applicant has indicated that it will
provide security in the main
proceedings, should that become necessary. In these circumstances it
would be both unreasonable and
impracticable to have required the
applicant to first follow the time consuming procedure of obtaining
the consent of the three
liquidators of Plastex. I am fortified in
this view by subsequent events. It now appears that obtaining their
consent would not
have been without difficulty: one of the joint
liquidators of Plastex seems reluctant to proceed with the main
proceedings and
further, some form of disagreement on this aspect
seems to be lingering between the liquidators. Be that as it may, a
creditor,
in my view, where circumstances require swift action, will
be entitled to institute interim proceedings in its own name for the
protection of a right, in particular where vindicatory or quasi
vindicatory rights, as is the case here, are in jeopardy. For these
reasons, I conclude that the respondents’ objection to the
applicant’s
locus standi
must fail.
APPLICANT’S RELIANCE ON EVIDENCE HAVING EMERGED FROM THE S
417 ENQUIRY
[9] It is trite that an applicant seeking interim relief is required
to establish and satisfy as one of the requirements, a
prima facie
right, though open to some doubt (see for example
SA Taxi
Securitisation (Pty) Ltd v Chesane
2010 (6) SA 557
(GSJ) 559 para
[11]). In this regard the applicant relies on the s 417 enquiry
evidence I have already referred to. The enquiry
was held during 2009
and 2010. Mr Miller, who, as I have mentioned, is one of the joint
trustees of Plastex, apparently was present
at the enquiry and
advised the applicant of the evidence that had emerged from the
enquiry. A brief summary of the evidence is
the following. Flexible
and Plastex shared common directors and shareholders. Flexible took
possession and control of the business
of Plastex, including the
assets, books and records of Plastex prior to it’s liquidation
thereof. The self-same business
continued as before from the same
premises and in the same manner as before. Plastex dissipated its
assets, including the assets
which are the subject matter of this
application, to Flexible, without any value and consequent upon
collusion between Flexible
and Plastex. Based on this information the
applicant contends that the purported transaction between Plastex and
Flexible whereby
Flexible purportedly acquired ownership of the
assets of Plastex, is liable to be set aside in terms of the
applicable provisions
of the Act I have already referred to.
[10] The respondents attack the admissibility of the evidence
referred to by the applicant as constituting inadmissible hearsay
evidence which, it was further submitted, would in any event, be
inadmissible against Flexible. In my view the objection is without
foundation. The information was disclosed by Miller who was present
at the enquiry. It extends well beyond Miller merely having
expressed
his own conclusions and opinions concerning the evidence, as counsel
for the respondents would have it: the facts disclosed
by Miller to
the applicant, if accepted, clearly reveal the collusion referred to.
Furthermore, the applicant states in its founding
affidavit that its
attorneys are in possession of the transcripts of the evidence
adduced at the s 417 enquiry, which, it is further
stated, confirm
the information relayed to the applicant. The transcripts, although
not annexed to the papers, have been made available
for perusal which
the respondents evidently did not avail themselves of. The applicant
accordingly, intends seeking the permission
of the Master to use
those transcripts as evidence in the main proceedings. The Master has
already given such permission albeit
to different parties. There is
no reason to believe that the applicant will not succeed in obtaining
the necessary permission of
the Master. The court, in any event, has
the final say in this regard.
[11] I accept that the answers given by the
witnesses at the s 417 enquiry will be admissible in the main
proceedings against those
witnesses only and not against Flexible
(
Simmons NO v Gilbert Hamer and Co Ltd
1962
(2) SA 487
(N)). But that, of course, would not disentitle the
applicant in the main proceedings to call those witnesses to testify
and answer
questions
inter alia
concerning their evidence given at the enquiry. It is impossible and
in any event undesirable, at this stage, to embark upon a
prognosis
of the effect this would or might have on the applicant’s
prospects of success in the main proceedings. Suffice
to say, the
prima facie
indications of a collusion of the nature referred to by the
applicant, although open to some doubt, are sufficiently clear to
satisfy the
prima facie
right requirement for obtaining the relief sought in this
application.
PREJUDICE
[12] Concerning prejudice, it is only
necessary to consider and decide the liability and payment of the
costs of the administration,
thus far incurred by the respondents in
regard to the sale and preservation of the assets. That those costs
have in fact been incurred
is not in dispute between the parties. In
this regard the first respondent has filed a supplementary affidavit
(which was not objected
to) setting out all the necessary details
concerning the assets, including what assets were sold at the
auction, the proceeds derived
from the sale, the assets encumbered
where Standard Bank is a secured creditor, the assets subject to a
rental agreement in favour
of Compass Finance, the assets encumbered
by security held by Sasol, the unencumbered assets, the costs
relating to an agreement
of lease and, finally, the costs in respect
of security. I pause to mention that both Standard Bank and Compass
Finance, although
having been invited to join this application, have
chosen not to do so.
[13] The administration costs as I have
alluded to, have been incurred in respect of the assets. Those costs,
accordingly, were
necessary and incurred for the benefit of all
parties. The same applies to the further costs that will be incurred
pending the
finalisation of the main proceedings. Counsel for the
respondents submitted that the administration costs ought to be paid
from
the proceeds of the sale of the assets. I agree. The prejudice
that the respondents would otherwise suffer outweighs any possible
prejudice the applicant might suffer. The liability for payment of
the administration costs, it must be emphasized, will remain,
even if
the applicant is successful in the main proceedings.
[14] In the result the following order is made:
The proceeds of
the sale by the respondents of the assets at the auction held on 21
February 2012 are to be held in trust by the
respondents’
attorneys, subject to paragraph 2 below.
All administration
costs, as referred to in the supplementary affidavit of the first
respondent, dated 2 March 2012, are to be
paid from the monies held
in trust referred to in paragraph 1 above.
The order in
paragraph 1 above is to operate as an interim order pending the
outcome of an application
alternatively
action by the applicant in the name of the liquidators of Alfa
Plastex (Pty) Ltd (in liquidation) in terms of
section 32(1)(b)
of
the
Insolvency Act 24 of 1936
, against the first and second
respondents as the liquidators of Alfa Flexible Packaging (Pty) Ltd
(in liquidation), for relief
declaring that the assets referred to
in paragraph 1 above belonged to Alfa Plastex (Pty) Ltd (in
liquidation) and for payment
by the first and second respondents, as
the liquidators of Alfa Flexible Packaging (Pty) Ltd (in
liquidation), of the balance
of the amount held in trust referred to
in paragraph 1 above.
The application
alternatively
action
referred to in paragraph 3 above must be instituted within 30 days
of the date of this order.
The costs of this
application are to be costs in the cause in the application
alternatively
action
referred to in paragraph 3 above.
_
________________________
FHD VAN OOSTEN
JUDGE OF THE HIGH COURT
COUNSEL
FOR APPLICANT: ADV L HOLLANDER
APPLICANT’S
ATTORNEYS: PHILIP SILVER & ASS INC
COUNSEL
FOR RESPONDENT:
&
THIRD PARTY ADV E L THERON
RESPONDENT’S
ATTORNEYS: SHAUN NEL & ASS
THIRD
PARTY’S ATTORNEYS: MESSINA INC
DATE OF HEARING: 9 MARCH 2012
DATE
OF JUDGMENT : 16 MARCH 2012