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[2015] ZASCA 69
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African Banking Corporation of Botswana v Kariba Furniture Manufacturers & Others (228/2014) [2015] ZASCA 69; 2015 (5) SA 192 (SCA); [2015] 3 All SA 10 (SCA) (20 May 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no
:
228/2014
In
the matter between:
AFRICAN
BANKING CORPORATION
OF
BOTSWANA
LTD
.......................................................................................................
APPELLANT
and
KARIBA
FURNITURE MANUFACTURERS
(PTY)
LTD
..........................................................................................................
FIRST
RESPONDENT
JEAN
PIERRE JORDAAN
NO
...................................................................
SECOND
RESPONDENT
NCHITE,
BALDWIN
.......................................................................................
THIRD
RESPONDENT
NCHITE,
BIRGITTA
SVENSSON
.............................................................
FOURTH
RESPONDENT
COMPANIES
AND INTELLECTUAL PROPERTY
....................................
FIFTH
RESPONDENT
COMMISSION,
REPUBLIC OF SOUTH AFRICA
MINISTER
OF TRADE AND
INDUSTRY
.....................................................
SIXTH
RESPONDENT
Neutral
Citation:
African Banking
Corporation of Botswana v Kariba Furniture Manufacturers & others
(228/2014)
[2015] ZASCA 69
(20 May
2015)
Coram:
Mpati P, Mhlantla, and Leach JJA, Schoeman and
Dambuza AJJA
Heard:
03 March 2015
Delivered:
20 May 2015
Summary:
Company – Business Rescue –
meaning of a ‘binding offer’ made in terms of
s
153(1)
(b)
(ii)
of the
Companies Act 71 of 2008
– a binding offer made to a
creditor who opposes a business rescue plan is not automatically
binding on the offeree - no
valid binding offer was made - –
business rescue having no reasonable prospects of success -
resolutions to commence
business rescue and to adopt business rescue
plan set aside.
ORDER
On
appeal from:
Gauteng
Division,
Pretoria (Kathree-Setiloane J sitting as court of first instance):
judgment reported
sub nom
African Banking Corporation of Botswana
Ltd v Kariba Furniture Manufacturers (Pty) Ltd
2013 (6) SA 471
(GNP).
(1)
The appeal succeeds with costs, including
costs of two counsel; such costs to be paid by the second, third and
fourth respondents
jointly and severally, the one paying, the others
to be absolved.
(2)
Paragraphs (2) and (3) of the order of the
court a quo are set aside and replaced with the following:
‘
2.1
The application succeeds.
2.2 It is declared
that the “binding offer” made on 26 March 2012 at the
second meeting of creditors, on behalf of the
Third and/or Fourth
respondents in terms of
s 153(1)
(b)
(ii) of the
Companies Act
71 of 2008
, to purchase the voting interest of the applicant, was not
binding on the applicant.
2.3 The approval of
the proposed business rescue plan which occurred at the meeting of
affected persons held on 26 March 2012, is
set aside.
2.4 The resolution
taken by the Board of the first respondent on 31 January 2012, to
voluntarily commence business rescue proceedings
and to place the
first respondent under supervision is set side.
2.5 The costs of
this application shall be paid by the second, third and fourth
respondents, jointly and severally, the one paying,
the others to be
absolved.’
JUDGMENT
Dambuza
AJA (Mpati P, Mhlantla JA and Schoeman AJA concurring):
Introduction
[1]
The provisions relating to the business rescue procedure which were
introduced into our company law with the enactment of the
Companies
Act 71 of 2008 (the Act) have been the subject of varying
interpretations in the various Divisions of the High Court.
This
appeal, with the leave of this Court, concerns, first, the
interpretation of the words ‘binding offer’ as they
appear in s 153(1)
(b)
(ii)
of the Act. More particularly, the issue is whether a binding offer,
as provided for in that section, is binding on the offeree
once it is
made. A further issue is the assessment of whether reasonable
prospects of a successful business rescue exist in this
case and
whether the resolutions to commence business rescue and to adopt a
business rescue plan fall to be set aside consequent
to that
assessment.
The
Background
[2]
The third and fourth respondents, Mr Baldwin and Mrs Brigitta Nchite
(Mr and Mrs Nchite) were shareholders and directors of
the first
respondent, Kariba Furniture Manufacturers (Pty) Ltd (Kariba). In
October 2006, the appellant, African Banking
Corporation of Botswana
(the bank), instituted action against Kariba in the Gauteng
Division, Pretoria, for payment of moneys
lent and advanced to Kariba
under a credit facility agreement. Mr and Mrs Nchite were Kariba’s
co-defendants by virtue of
deeds of suretyship executed by them in
favour of the bank. The bank was also a holder of a general notarial
bond executed in its
favour by Kariba as security for the loan. By
agreement between the parties to that litigation, the action was
removed from the
Gauteng Division and referred to arbitration. The
arbitrator found in favour of the bank and held Kariba and Mr and Mrs
Nchite
jointly and severally liable to the bank for payment of BWP
5 610 125.38
[1]
together with interest at 13 per cent per annum from 1 July 2004 to
date of payment. The arbitration award was confirmed on appeal,
but
the appeal tribunal found that Mrs Nchite’s liability, which
had been limited to R1.5 million, had been discharged. As
at 31
January 2012 the total liability of Kariba and Mr Nchite to the bank
was BWP 14 966 809.20.
[3]
On 31 January 2012, Mr and Mrs Nchite resolved that Kariba
voluntarily begin business rescue proceedings in terms of s 129 of
the Act. On the same day they nominated the second respondent, Mr
Jean Pierre Jordaan, for appointment as the business rescue
practitioner (the practitioner). He consented on the same day. On 6
February 2012, he was appointed as the practitioner for Kariba
by the
Companies and Intellectual Property Commission of South Africa
(CIPC).
[4]
On 17 February 2012, the first statutory meeting of creditors of
Kariba was held. At that meeting Mr Mapata, the bank’s
Credit
Manager, raised several concerns. Some of the concerns had been
expressed in correspondence exchanged between the parties
in the days
preceding the meeting. Chief amongst these was the lack of
recently audited financial statements relating to
Kariba. These
concerns were not resolved at the meeting, but the practitioner
undertook to email Kariba’s audited financial
statements for
the 2005 financial year to the bank’s attorneys. At this early
stage I may as well state that, as will become
clearer in the
paragraphs that follow, the absurdity of resolving to commence
business rescue proceedings seven years after Kariba
had last
conducted business was central to the bank’s opposition to
those proceedings.
[5]
Subsequent to the first meeting of creditors, further correspondence
was exchanged between the practitioner and the bank’s
attorneys
regarding the concerns raised by the bank. These related to the
provisional admission of the bank’s claims at the
first meeting
of creditors, the reluctance by the practitioner to admit the bank’s
claim for interest, the basis for evaluation
of Kariba’s
machinery and raw material, and the lack of post-2005 audited
financial statements and management accounts. These
remained
unresolved even when the practitioner distributed the proposed rescue
plan on 12 March 2012. Correspondence regarding
the concerns raised
by the bank’s attorneys continued until 26 March 2012 when the
second meeting of creditors was held.
[6]
During that meeting, the practitioner inquired if any party wished to
vote for amendment of the rescue plan as provided for
in terms of s
152(1)
(d)
of
the Act.
[2]
When none of the
affected parties showed interest in doing so, the practitioner called
for a vote by the creditors for preliminary
approval of the plan in
terms of s 152(1)
(e)
.
In terms of the plan, the bank held a voting interest of 63 per cent,
while ABSA Bank Limited held 2 per cent, the North West
Development
Corporation (NWDC), another creditor, held 1 per cent, the
Municipality of Hammanskraal held 1 per cent, and the shareholders
held the balance. The bank and NWDC rejected the plan.
[3]
After the practitioner had indicated that he would not invoke the
provisions of s 153(1)
(a)
of the Act, the shareholders’ attorney indicated that his
clients wished to make a binding offer on behalf of the shareholders,
to purchase the bank’s voting interest in terms of s
153(1)
(b)
(ii)
of the Act. The practitioner immediately ruled that it was not open
to the bank to respond to the offer; that the offer was
binding on
the bank and that the bank’s voting interests had to be
transferred to the shareholders immediately. He proceeded
to amend
the plan to reflect the bank as holding zero per cent interest and
the shareholders 95 per cent. The representatives of
the bank left
the meeting. Mr van der Merwe, who represented NWDC, registered his
principal’s opposition to the rescue plan
and then also left
the meeting. Thereafter a vote on the proposed business rescue plan
was undertaken by the reconstituted creditors
(excluding the bank)
and they voted in favour of preliminary approval of the plan.
[4]
The
high court proceedings
[7]
It is against this background that the bank launched an application
in the Gauteng Division, Pretoria, seeking resolution of
the issues
already set out in the opening paragraph of this judgment. In the
court below, the bank contended that it could not
be bound by an
offer which it had not been allowed to respond to. It complained that
the offer was improper in that it lacked clarity
as to the identity
of the offeror, ie whether it was both Mr and Mrs Nchite or only one
of them, what the amount and terms of payment
thereof were and
whether there were any conditions attached thereto. All that was
stated was that the binding offer to purchase
the bank’s voting
interests would be ‘at a value independently and expertly
determined to be a fair and reasonable
estimate of the return to the
bank, if Kariba were to be liquidated’. There was also the
outstanding issue of whether Mr
Nchite would remain liable to the
bank under the deed of suretyship.
[8]
The court a quo (Kathree-Setiloane J) dismissed the application by
the bank. It approved the procedure adopted by the practitioner
in
dealing with the binding offer as made, holding that he had applied s
153(1)
(b)
(ii)
properly. It found that ‘the binding offer’ envisaged in
s 153(1)
(b)
(ii)
did not anticipate an ‘option’ or an ‘agreement’
in the contractual sense, but was rather ‘a
set of statutory
rights and obligations, from which neither party could resile’,
and that the offer was automatically binding
on both the offeror and
the offeree once made. According to the court a quo, this
interpretation was consistent with the intention
of the legislature
to ensure ‘co-operation’ by opposing creditors in
business rescue proceedings. The court also found
that the opposing
creditor, whose voting interest was transferred in terms of the
binding offer, stood to suffer no prejudice as
the value of the
transferred voting interest, which would be determined by an
independent expert, would be paid prior to implementation
of the
revised business plan. It refused to set aside the approval of the
business rescue plan prepared by the practitioner and
the resolution
taken by Kariba’s board to voluntarily commence business rescue
proceedings. It is against this decision that
the bank appeals to
this court.
The
appeal
[9]
On appeal the bank contended that a binding offer made in terms of s
153(1)
(b)
(ii)
of the Act did not automatically bind the offeree. Instead, the use
of the term ‘binding offer’ in the section
is intended to
convey that the offer, once made, could not be withdrawn by the
offeror. The bank also insisted that the resolution
to commence
business rescue falls to be set aside as there were no reasonable
prospects, on the basis of the rescue plan, that
Kariba could be
rescued. It was submitted on behalf of the bank that the rescue
proceedings were a sham and were instituted for
an ulterior and
improper purpose. It was further submitted that, even if this court
were to find that the offer was binding on
the bank, the practitioner
should be removed from office as he had failed to exercise the
required degree of care in the performance
of his functions. In this
regard the bank also sought leave to lead further evidence pertaining
to the practitioner’s conduct
subsequent to the adoption of the
rescue plan. In essence the evidence relates to an alleged undue
delay by the practitioner in
obtaining the valuation of the bank’s
voting interest subsequent to the adoption of the business rescue
plan. Because of
the view I take on the main issues on appeal, I do
not deem it necessary to deal with that application and nothing more
needs be
said about the further evidence sought to be introduced.
[10]
On the other hand Kariba, the practitioner and Mr and Mrs Nchite
tendered a concerted argument that the business rescue process
could
not be delayed or derailed by a single ‘hostile’ creditor
to the detriment of other creditors. They argued that
to allow a
situation where a creditor must accept a binding offer would detract
from the objectives of business rescue. Counsel
for Kariba submitted
that the court a quo was correct in finding that the intention of the
legislature was to impose the shareholder’s
offer upon
recalcitrant creditors to facilitate business rescue.
[11]
Submissions were also made on behalf of the CIPC regarding the
constitutionality of s 153(1)
(b)
(ii).
The issue was whether s 153(1)
(b)
(ii)
amounted to unjustified deprivation of property, contrary to the
provisions of s 25 of the Constitution. However, again, it
is not
necessary to decide that issue.
Binding
offer
[12]
The approach adopted by the high court in considering the issues
before it was largely motivated by its understanding of the
term
‘binding offer’ as provided in terms of s153(1)(
b
)(ii)
of the Act. For this reason an intimate examination of the term is
required. A broad summary of the business rescue scheme
as provided
for in the Act would be beneficial to a proper interpretation of the
term. Business rescue has been defined as
proceedings to
facilitate the rehabilitation of a company that is financially
distressed by providing for: first, temporary supervision
of the
company and of management of its affairs, business and property;
second, a temporary moratorium on the rights of claimants
against the
company or in respect of property in its possession; third, the
development and implementation of a plan to rescue
the company by
restructuring its affairs, business, property, debt, and equity in a
manner that maximises the likelihood of the
company continuing in
existence on a solvent basis or, if that is not possible, fourth, a
plan that would achieve a better return
for the company’s
creditors than the payment they would have received if the company
had simply been liquidated.
[5]
[13]
The process begins with a resolution taken by the board of a company,
in terms of s 129 of the Act, that the company voluntarily
begins
business rescue proceedings. Within five days after adoption of the
resolution to commence business rescue the company must
appoint a
practitioner in terms of s 129(3)
(b)
.
Alternatively, an affected person may apply to court in terms of s
131 of the Act for an order placing the company under supervision
and
commencing business rescue proceedings. The court may also appoint a
practitioner, subject to ratification by holders of a
majority of
independent creditor’s voting interest.
[6]
[14]
During business rescue proceedings no legal proceedings, including
enforcement of action against the company, may be commenced
or
continued in any forum.
[7]
As
soon as practicable after appointment, the practitioner must
investigate the affairs of the company and consider whether there
is
any reasonable prospect of the company being rescued.
[8]
Within ten business days of being appointed the practitioner must
convene and preside over the first meeting of creditors.
[9]
A meeting of employees’ representatives must also be convened
by the practitioner within ten business days of appointment.
[10]
After consulting the creditors, other affected persons, and
management of the company, the practitioner must prepare a business
rescue plan for consideration and possible adoption at a meeting to
be held in terms of s 151.
[11]
In that meeting, the practitioner must introduce the proposed
business plan for consideration by creditors and shareholders, inform
the meeting whether he or she continues to believe that there is a
reasonable prospect of the company being rescued, provide opportunity
for employees’ representatives to address the meeting, invite
discussion and conduct a vote on motions to amend the proposed
plan
or adjourn the meeting in order to revise the proposed plan for
further consideration, and call for a vote for preliminary
approval
of the proposed plan. If the proposed plan is accepted it will be
implemented; if it is not approved on a preliminary
basis, the plan
is rejected and may be considered further only in terms of s 153 of
the Act.
[12]
[15]
Section 153(1) provides that-
‘
153.
Failure to adopt business rescue plan.- (1)
(a)
If a business rescue plan has been
rejected as contemplated in section 152(3)
(a)
or
(c)
(ii)
(bb)
the
practitioner may-
(i)
seek a vote of approval from the holders of
voting interests to prepare and publish a revised plan; or
(ii)
advise the meeting that the company will
apply to a court to set aside the result of the vote by holders of
voting interests of
shareholders, as the case may be, on the grounds
that it was inappropriate.
(b)
If the practitioner does not take any
action contemplated in paragraph
(a)-
(i)
any affected person present at the meeting may-
(aa)
call for a vote of approval from the
holders of voting interests requiring the practitioner to prepare and
publish a revised plan;
or
(bb)
apply to the court to set aside the
result of the vote by the holders of voting interests or
shareholders, as the case may be
on the grounds that it was
inappropriate; or
(ii)
Any affected person or a combination of affected persons,
may
make a binding offer to purchase the voting interests of one or more
persons who opposed adoption of the business rescue plan,
at a value
independently and expertly determined, on the request of the
practitioner, to be a fair and reasonable estimate of the
return to
that person, or those persons, if the company were to be liquidated
.
’
(My emphasis.)
As
already stated, in this case it is in the context of the majority
voting interest holder having rejected the rescue plan proposed
by
the practitioner that the intention to make a binding offer for the
bank’s voting interest was expressed.
[16]
In finding that the legislature intended to exclude an opposing
creditor’s consent to a binding offer, the court a quo
relied
on United States of America (U.S.) Bankruptcy legislation. Indeed
Chapter 11 of the U.S. Bankruptcy Code provides for rearrangement
of
the debt structure of a business and protection of the company from
enforcement of claims by creditors whilst its business continues.
However it seems to me that certain factors distinguish the process
as provided for in our Act from the procedure provided for
in the
U.S. Bankruptcy Code. First, under the U.S. Bankruptcy Code it
is the court that makes the decision as to whether
rejection of a
business plan by a creditor should be ignored. Obviously that
decision would be taken after due consideration of
all relevant
factors. In
s
1129(a)
of
the U.S. Bankruptcy Code the requirements that must be satisfied
before a court can confirm a rescue plan are listed. And the
provisions of this section are peremptory.
[13]
The requirements include that the plan must have been proposed in
good faith, each ‘impaired’ class of creditors must
have
either accepted the plan or each creditor must stand to receive no
less than it would receive under liquidation, each class
of creditors
must accept the plan or be ‘unimpaired’, and there must
be no likelihood of confirmation of the plan being
followed by a
liquidation or further business ‘reorganisation’.
[17]
A further and more pertinent distinguishing factor is that the making
of the binding offer in our business rescue procedure
is a step
separate and antecedent to the second round of voting on the adoption
of the rescue plan. Therefore the meaning of ‘binding
offer’
falls to be considered on its own merits and separately from the
merits of a rescue plan.
[18]
The term ‘binding offer’ must be appreciated against the
meaning of ‘offer’ as hitherto understood
in this
country. In everyday use, the word ‘offer’ signifies a
presentation or a proposal to someone for acceptance
or rejection; it
is ‘an expression of readiness to do or give something; [or] an
amount of money that someone is willing
to pay for something’.
[14]
In South African legal parlance, an offer is an invitation to consent
to the creation of obligations between two or more parties.
[15]
‘What distinguishes a true offer from any other proposal or
statement is the express or implied intention to be bound by
the
offeree’s acceptance.’
[16]
Therefore, the settled meaning, both in the general use and in the
more technical legal use of the word “offer” is
that it
is only on acceptance that an offer creates rights and
obligations.
[17]
[19]
It is a well-established principle of our law that an ambiguous
proposal cannot be classified as an offer.
[18]
And the terms of an offer must cover the minimum requirements of the
proposed contract. A mere regurgitation of the provisions
of s
153(1)
(b)
(ii)
(that the offer was or would be to purchase the voting interest at a
value to be independently determined) could not constitute
a proper
binding offer. The bank was entitled to know who exactly was
making the offer and what the details thereof were,
including the
price or determined value, and where, when and how payment would be
effected. It
was
therefore correct in insisting that it could not be held bound to an
offer, the terms of which were never divulged.
The
attorney’s indication that his clients wanted to make an offer
under s 153(1)(
b
)(ii)
could in itself not be an offer under that section.
[20]
Provision, in s 153(1
)(b)
(ii),
for the making of a binding offer presupposes that the rescue plan
will contain sufficient detail from which a determination
of the
value of the bank’s (and other creditor’s) voting
interest can be readily and reliably ascertained, such that
a binding
offer will embody the price or value at which the offer is made.
Section 150(2) provides that the business rescue plan
must contain
all the information reasonably required to enable affected persons to
decide whether or not to accept or reject it.
Details of the required
information are set out in the section. It is the same details which
will form the basis for calculation
of fair and reasonable value of
the voting interests. In this case, where available information
about Kariba’s business
only related to 2004, there was no
proper basis for determination of a fair and reasonable value of
creditors’ voting interests
in 2012. Therefore, even if the
bank wished to respond to the ‘binding offer’ made by the
shareholders, as it was entitled
to, there was no valid binding offer
to which it could respond.
[21]
In addition, not only must there be an offer but it must be binding.
The significance of this description can only be once
that the offer
is made it cannot be withdrawn by the offeror, in contrast to the
ordinary meaning ascribed to an offer (that it
becomes binding on
acceptance and may be withdrawn before then). It is highly unlikely
that the legislature intended such an extraordinary
procedure as
postulated by Kariba, the practitioner and Mr and Mrs Nchite; the
effect of which would be to deprive an offeree of
an established
right to accept or reject an offer. Had that been the intention, the
legislature would not have used a word which
connotes an expectation
of a response. As Gorven J held in
DH
Brothers Industries (Pty) v Ltd Gribnitz NO
:
[19]
‘
[The
legislature] would have introduced a deeming provision of acceptance
on the part of the offeree and (would) have stated that
the offer,
once made, gave rise to binding obligations between the parties.
.
. . The only actor mentioned is the offeror. The only action
described is to ‘make a binding offer’ not to create
a
set of statutory rights and obligations. More importantly, [‘offer’]
has a specific, settled legal meaning –
as the Legislature must
be presumed to have known. In order to give rise to obligations on
the part of both parties, an offer requires
acceptance. The plain
meaning falls well short of the binding offer creating any
obligations on the part of the opposing creditor.
It is also
important that the offer is to “purchase”. This,
likewise, relates to an established legal concept. It is
aimed at
concluding a contract of purchase and sale. It is not aimed at
creating statutory rights and obligations. The words “offer”
and “purchase” when used together must mean that a
contract is envisaged and, for such a contract to be concluded,
there
must be an acceptance or agreement. It is nowhere provided that no
such acceptance is necessary and that, without it, a contract
of
purchase and sale has come into existence.’
[20]
Consequently,
a binding offer remains predominantly similar in nature to the common
law offer, save that it may not be withdrawn
by the offeror until the
offeree responds thereto.
[22]
Difficulties that arise from the court a quo’s finding that
once a binding offer is made to purchase a voting interest,
the
holder thereof is summarily divested of its voting interest
include the following: the holder of the voting interest
in
question is divested of its interest without any determination of
affordability on the part of the offeror. Regarding prejudice
that a
creditor might suffer as a result of the inability of the offeree to
comply with his or her obligations under the binding
offer, the court
a quo found that:
‘
Although
the offeree is divested of his or her voting interest on approval or
adoption of the rescue plan in terms of s 152 of the
Act, the offeree
will not lose his or her right to enforce any debt owed by the
company immediately before the beginning of the
business rescue
process, until payment of the purchase price of the voting interest
is made by the offeror
.’
[23] Counsel for
Kariba submitted that as found by the court a quo, this concern is
adequately covered in the Act as the rescue
plan will only be
implemented after payment in terms of the valuation. But he could not
refer us to any supporting provision in
the Act. Moreover, this
argument, and the finding by the court below ignore the prejudice
that the offeree will have suffered as
a result of the loss of its
voting interest.
[24]
As already concluded, there is no indication, in the language used in
the provision, that the word ‘offer’ had
assumed a
different meaning from the accepted one. Section 153(6) provides
that:
‘
A
holder of a voting interest
,
or
a person acquiring that interest
in terms of a binding offer, may apply to a court to review,
re-appraise and re-value a determination by an independent expert
in
terms of subsection (1)
(b)(ii).’
(My emphasis.)
The
legislature has made express provision for two categories of persons:
those who are holders of voting interests and those
in
the process of acquiring
a voting
interest. This suggests that although a binding offer may have been
made (during consideration of the rescue plan), finalisation
of the
aspects relating thereto, including transfer of the voting interest,
is not necessarily immediate. This is consistent
with the
established meaning of an offer. The interpretation
accorded by the court a quo immediately divests interested
holders of
their interest once the binding offer is made; this is untenable.
[25]
In my view, the interpretation of a binding offer in the terms
advocated by the respondents cannot be said to lead to sensible,
business-like results and cannot be supported.
[21]
It follows that there was never a binding offer made. Consequently
the resolutions taken subsequent to the transfer of the bank’s
voting interest, including the adoption of the rescue plan, are null
and void.
Reasonable
prospects of success.
[26]
In this regard counsel for the appellant submitted that if we decided
that the adoption of the rescue plan fell to be set aside,
it would
be open for us to consider the merits related to its application for
the setting aside of the resolution to commence business
rescue. I
agree.
[27]
Section 130(1
)(a)
(ii) of the Act provides:
‘
(1)
Subject to subsection (2) at any time after the adoption of a
resolution in terms of section 129, until the adoption of a business
rescue plan in terms of section 152, an affected person may apply to
a court for an order-
(a)
Setting aside the resolution, on the grounds that-
(i) . . . .;
(ii) There is no
reasonable prospect of rescuing the company; or
(iii)
. . . .
’
[28]
In
Oakdene
Square Properties v Farm Bothasfontein (Kyalami)
,
[22]
this court stated that it was generally accepted that ‘a
reasonable prospect’ is a lesser requirement than ‘reasonable
probability’ which was the measure for placing a company under
judicial management in terms of s 427(1) of the Companies
Act 61 of
1973. But the court pointed out that a reasonable prospect
‘require[d] more than a mere prima facie case or arguable
possibility.’ Brand JA said:
‘
Of
even greater significance, I think, is that it must be a reasonable
prospect – with the emphasis on “reasonable”
–
which means that it must be a prospect based on reasonable grounds. A
mere speculative suggestion is not enough.’
[23]
[29]
The requirement of reasonable prospects of rescue originates in s129
(1) of the Act which provides:
‘
(1)
Subject to subsection (2)
(a),
the
board of a company may resolve that the company voluntarily begin
business rescue proceedings and place the company under supervision,
if the board has reasonable grounds to believe that-
(a) the company is
financially distressed; and
(b)
there appears to be a reasonable prospect of rescuing the company.’
[30]
I am mindful of the warning by this court in
Oakdene
[24]
against being prescriptive about the assessment of reasonable
prospects of rescue. But there can be no dispute that the directors
voting in favour of a business rescue must truly believe that
prospects of rescue exist and such belief must be based on a concrete
foundation.
[25]
Given the
apparent state in which Kariba’s affairs were when the
resolution to commence business rescue was taken, there
could have
been no true basis, on 31 January 2012, for Mr and Mrs Nchite
to believe that there were reasonable prospects
of Kariba’s
rescue.
[31]
The bank had complained repeatedly to the practitioner about the
contents of the business rescue plan. In the business rescue
plan,
the purpose of the process was stated to be to ‘revive’
the business of the company. Kariba had not been operating
for, at
least, the five years preceding the resolution to commence business
rescue. It was said that its operations had stopped
because of
litigation between it and African Bank (Pty) Ltd, a different company
from the appellant. Kariba had received R5 million
on settlement of
the litigation. It is apparent from the affidavit filed by Mr Nchite
in terms of s 129 of the Act that when the
resolution was taken to
commence business rescue, it was anticipated that this settlement
amount would form part of the rescue
plan capital. According to the
business rescue plan the company assets consisted of machinery for
furniture manufacture and motor
vehicles, some of which were subject
to instalment sale agreements with ABSA Bank and others subject to
the notarial bond with
the bank (for R453 083.03). Secured
creditors were the bank for the BWP 14 966 809.20 and ABSA
Bank for the R453 083.03.
There were also various unsecured
concurrent claims and claims of shareholders for their loan accounts.
It was said that Kariba
would complete the manufacture of the
furniture which had been interrupted by the litigation in 2004. The
proceeds from the sale,
and a cash injection of R450 000.00 from
the shareholders, together with the machinery, would provide capital
for production
of new furniture. Provision was made for a probable
dividend of 21 cents in the Rand and 51 cents in the Rand for the two
secured
creditors to be paid over a maximum period of 100 months
respectively but a nil dividend for unsecured creditors.
[32]
But the reality was that the rescue plan fell woefully short of
providing the information required in terms of s 150(2) and
(3) of
the Act and of providing information on which an assessment of
reasonable prospects could be made. The R5 million
settlement
amount that was to be part of the capitalisation of the rescue
process did not appear anywhere on the business rescue
plan. In fact,
the practitioner indicated that the amount had hardly been sufficient
to even cover the costs of litigation with
African Bank. But, despite
repeated inquiries by the bank, the practitioner could not produce
any document relating to the said
legal costs. On the other hand
there was no indication of what had happened to the money. Inquiries
by the bank as to ability and
willingness of shareholders to provide
the R450 000.00 loan went unanswered. The estimated value
of the assets last
used in 2004 was based on the practitioner’s
assessment (a forced sale value of R3 177 631) rather than an
expert evaluation.
No details of the ‘on-going role of the
company’ or existing agreements could be furnished because
Kariba had not been
operating for a number of years preceding the
commencement of business rescue. Apart from mentioning that in 2004
Kariba used to
supply furniture to Ellerine Holdings (as one of two
major customers) there were no supply contracts in place. The plan
only stated
that: ‘The Company will carry on trading’.
There was no provision in the plan for increase in the ‘skeleton
staff’
which Kariba was said to have maintained whilst not in
operation. Provision for rental was made at a reduced amount of
R10 000.00
instead of the correct rental of R30 000.00.
When the practitioner’s attention was drawn to this
discrepancy, his only
remark was that rental would be renegotiated
and that Mr van der Merwe should relay to his client that everybody
was ‘taking
a knock’. As stated, the contents of
the projected balance sheet and statement of income and expenses for
the ensuing
three years could not be said to be reliable given the
absence of proper evaluation of the assets of the company.
[33]
The fact that both the resolution to commence business rescue and the
business rescue plan were based on financial statements
which were
more than five years old, presented a fundamental difficulty for a
proper assessment of prospects of business rescue.
Generally, the
factual basis for assessment of the true financial position of a
company is its (latest) financial statements (and,
where necessary,
its management accounts). And the business rescue plan must conclude
with a certificate by the practitioner that
the actual information
provided appears to be accurate, complete and up to date.
[26]
Although the business plan had the required certificate, it was
clearly not correct. For obvious reasons, the 2005 financial
statements
could not, on their own, in January 2012, form a proper
basis for an assessment of reasonable prospects of rescuing Kariba.
[34]
The true state of Kariba’s affairs as at January 2012 and its
anticipated operations could not be established without
an update of
the books of account, conducted on sound accounting principles,
proper valuation of the company assets, and substantiated
prospective
income and expenditure. All these were lacking and no cogent
case was made to support an opinion of reasonable
prospects of
rescue.
[27]
Consequently, the
resolution to commence business rescue was taken without a proper
basis and falls to be set aside.
[35]
In view of this conclusion, it is not necessary to consider the
application by the bank for the setting aside of the practitioner’s
appointment in terms of s130(1
)(b)
(ii)
of the Act.
[28]
However, the
conduct of the practitioner in this case raises serious concerns.
This is because of the responsibility he had, as
a business
practitioner under the Act, which he does not seem to have
appreciated. A business rescue practitioner must be held
to a high
professional and ethical standard. In addition to the powers and
duties specifically conferred on business rescue practitioners
by
Chapter 6, they are also officers of the court (s 140(3)
(a)
)
and have the responsibilities, duties and liabilities of a director
as set out in ss 75 to 77 (s 140 (3)
(b)
).
[29]
It was the duty of the practitioner in this case to conduct a careful
assessment of Kariba’s affairs and to prepare a plan
that
adequately reflected the prospects of Kariba’s rescue.
Against this standard, and the standard expected
of the
practitioner as an attorney, the attitude displayed by the
practitioner in regard to serious concerns expressed by the bank
regarding what it considered to be the shortcomings in Kariba’s
affairs and the rescue plan, is disturbing.
[36]
When representatives of the bank expressed concern about the 2005
financial statements, coupled with the unavailability of
management
accounts, the practitioner explained that the lengthy litigation that
Kariba had been involved in had ‘tapped
the resources of the
company such that preparation of financial statements became unviable
and superfluous’. He nevertheless
certified that the
information contained in the business rescue plan was ‘accurate,
complete and up to date’. It appears
that he never considered
that updated books of account and properly substantiated information
had to form the basis of the rescue
plan. Nor was he concerned about
the fact that the plan included information that turned out to be
unfounded. For example, Kariba’s
expenses included reduced
rental of R10 000.00 per month for the premises from which it
would have conducted its business.
But the evidence was that Mr van
der Merwe, who represented the landlord, NWDC, at the meeting of
creditors
,
pointed out that rental payable was in fact R30 000,00 and that
an agreement previously reached for reduced rental had only
been
limited to the period of the protracted litigation. Equally
concerning is the practitioner’s apparent contentment with
the
non-inclusion in the rescue plan of the R5 million that Mr Nchite had
declared, under oath, only six weeks before, as being
available for
business rescue.
[37]
In response to an enquiry as to why he thought reasonable prospects
of business rescue existed, the practitioner stated that
all that was
required ‘for the business to be rescued was a viable business
rescue plan and successful implementation thereof.’
He never
attempted to obtain an objective assessment of facts upon which he
could make a proper assessment of prospects of success.
He relied on
information supplied by Mr and Mrs Nchite and his own unsubstantiated
assessment. He ignored, and was even hostile
to, inquiries by the
bank’s representatives when such inquiries related to aspects
which were the core of his function as
a business rescue
practitioner. The impression gained by the bank’s
representatives that he acted as a representative of
Kariba, rather
than as an independent practitioner, was justified. The apparent lack
of appreciation, by the practitioner, of the
seriousness of the
office he held is unacceptable.
[38]
In addition, the practitioner was expected to act objectively and
impartially in the conduct of the business rescue proceedings.
So too
when it came to the institution of legal proceedings, was an
objective and impartial attitude to be expected. This was lacking
in
the extreme. Not only did the practitioner file the principal
answering affidavit to the appellant’s application
in the court
a quo, but he actively engaged both in the proceedings in the court
below and in this court. He sought to act in his
capacity as an
attorney to represent not only himself in his capacity as the
business practitioner but as Kariba’s representative
on whose
behalf he prepared and signed the heads of argument filed in this
court. It was only when the propriety of his doing so
was questioned
by the registrar upon the request of the President of this court, and
his attention was drawn to the decision in
Carolus
v Saambou Bank
,
[30]
that he was replaced by counsel who argued the appeal in his stead.
As appears from this, the practitioner personally entered the
lists
of litigation, and, whilst ordinarily a practitioner is not liable
for any act or omission performed in good faith in the
course of
exercise of powers and performance of functions of practitioner,
[31]
there is no reason for the practitioner in this case not to be
obliged to pay the appellant’s costs as would any other
ordinary
unsuccessful litigant. Section 140(3)
(c)
(ii)
of the Act does make provision holding a practitioner to be held
liable ‘in accordance with any relevant law for the
consequences of any act or omission amounting to gross negligence in
the exercise of the powers and performance of the functions
of a
practitioner’. In this case, the practitioner’s grossly
improper conduct was deliberate; he should therefore pay
the
appellant’s costs jointly and severally with Mr and Mrs Nchite.
[39]
In regard to the appellant’s aborted application to lead
further evidence there should be no order as to costs. This
is
because, although the application proved to be unnecessary, the
appellant was justified in doing all in its power to bring the
impropriety of the practitioner’s conduct to the attention of
the court.
[40]
Consequently, I make the following order:
(1) The appeal
succeeds with costs, including costs of two counsel; such costs to be
paid by the second, third and fourth respondents
jointly and
severally, the one paying the others to be absolved.
(2) Paragraphs (2)
and (3) of the order of the court a quo are set aside and replaced
with the following:
‘
2.1
The application succeeds.
2.2 It is declared
that the “binding offer”, made on 26 March 2012 at the
second meeting of creditors, on behalf of
the Third and/or Fourth
respondents in terms of
s 153(1)
(b)
(ii) of the
Companies Act 7
of 2008
, to purchase the voting interest of the applicant was not
binding on the applicant.
2.3 The approval of
the proposed business rescue plan which occurred at the meeting of
affected persons held on 26 March 2012, is
set aside.
2.4
The resolution taken by the Board of the first respondent on 31
January 2012 to voluntarily begin business rescue proceedings
and to
place the first respondent under supervision is set side.
2.5 The costs of
this application shall be paid by the third and fourth respondents,
jointly and
severally, the
one paying,
the others to be absolved.’
___________________
N Dambuza
Acting
Judge of Appeal
LEACH
JA (Mpati P, Mhlantla JA and Schoeman AJA concurring)
[41]
I have had the privilege of reading the judgment of Dambuza AJA.
Although I agree with her and the order she proposes, I wish
to add
certain additional reasons for reaching my conclusion.
[42]
As its very name suggests, the purpose of a business rescue plan is
to throw a lifeline to a company in financial distress
to help keep
it afloat in a manner that balances the rights and interests of all
relevant stakeholders.
[32]
The process involves the preparation of a rescue plan designed either
to assist the company’s return to solvency or, should
that goal
be impossible, to provide a better return for creditors and
shareholders than would be the case than were the company
to be
immediately wound up. This plan is considered at a meeting of
creditors and other holders of ‘a voting interest’
as
defined in
s 128(1)(
j
)
of the Act at which, inter alia, representatives of the
employees of the company are entitled to express their views.
[33]
Should the plan be approved by those having a voting interest, the
formal process comes to an end and the plan becomes binding.
But if
it is not approved, various options become available under s 153 of
the Act, including an affected person acquiring the
voting interest
of a person opposed to the plan.
[34]
[43]
I do not believe it is unfair to comment that many of the provisions
of the Act relating to business rescue, and s 153 in particular,
were
shoddily drafted and have given rise to considerable uncertainty.
Questions which immediately spring to mind in regard to
the procedure
envisaged by s 153(1)(
b
)(ii),
and to which no answers are clearly expressed in the Act, include
(this list is not intended to be all-embracing) whether
an offeree
has a period of time, a
spatium
deliberandi
,
in which to consider whether to accept or reject an offer; the effect
of an offer being rejected; whether an offer may be conditional
and,
if so, what conditions are permissible; whether an offer excludes the
making of a counter-offer or any other offers being
made by other
affected persons and, if not, how offers are to be ranked. It is
therefore not surprising that Dr A Loubser
has expressed the
view that it was ‘regrettable that the drafters of the
provisions regulating the new rescue proceedings
did not exercise
more care’ and that the ‘unclear, confusing and sometimes
alarming provisions regulating the business
rescue proceedings . . .
will certainly not assist in making the procedure more acceptable or
successful’.
[35]
[44]
One of the obvious uncertainties created by the section is what is
meant by a ‘binding offer’. It can of course
be accepted
that the offer is to be regarded as irrevocable in the sense that it
may not be withdrawn or varied by the offeror.
However, opinions have
diverged on whether the offeree will also be bound thereby, whether
it likes it or not. Thus the court below
concluded that a ‘binding
offer’ had to be seen not in its normal contractual sense but
rather as ‘a set of statutory
rights and obligations from which
neither party may resile’.
[36]
On the other hand in
DH
Brothers Industries (Pty) Ltd v Gribnitz NO
2014 (1) SA 103
(KZP), Gorven J held that an ‘offer’ in
our law does not assume the creation of rights and obligations and
that an
offer, albeit one that could not be withdrawn by the offeror,
had to be accepted before both parties were bound. This latter
interpretation
was followed by Daffue J in
Absa
Bank Limited v Caine NO
.
[37]
It also enjoys the weight of academic opinion.
[38]
Inter alia, the decision of the court a quo in the present case was
criticised, and that in
DH
Brothers
supported, in the 2013 Annual Survey as follows:
[39]
‘
The
court held that the business rescue practitioner would not be able to
proceed with the implementation of the business rescue
plan before
finalisation of the payment of the binding offer . . . .
It is unclear on what grounds the court came to
this conclusion. No
provision of the Act was cited as authority, nor could we find any
provision that bars the implementation of
the business rescue plan
before such an offer is finalised . . . . Section 154(2) provides
that after the approval and implementation
of a business rescue plan,
any creditor is prohibited from enforcing any debt owing to it
immediately before commencement of the
business rescue proceedings,
unless provided for in the business rescue plan. Implementation of
the business rescue plan before
finalisation of the binding offer
would mean that section 154(2) becomes operative against the offeree,
while he or she is excluded
from the voting process and his or her
interests are not reflected in the revised business rescue plan. This
is a clear indication
that the interpretation given to the effect of
section 153(1)(b)(ii) in
Kariba
cannot be correct. Instead, the interpretation in
DH
Brothers
is preferable, namely that the
business rescue plan may only be voted on once payment for the voting
interests has been received.
After adoption of the business rescue
plan, the plan must be implemented by the business rescue
practitioner (s 140(1)(
d
)(ii)
. . . .
There are certain
other matters that the decision in
Kariba
did not take into
account. On the interpretation given by the court, it is unclear
whether the inability of the offeror to pay
the offeree
after
determination of the value of the voting interests, would mean that
the business rescue plan had not been validly adopted and would
have
to be reviewed and reconsidered by the creditors. Nothing in chapter
6 of the Act suggests that the inability of the offeror
to honour its
binding offer would have this effect. This would mean that the
business rescue practitioner would have to wait for
legal processes
against the offeror to be finalised before it could implement the
business rescue plan. If the appropriate legal
process is the
liquidation of the offeror, this could postpone the implementation of
the business rescue plan for a very long time.
Keeping in mind that
the business rescue proceedings are supposed to be finalised within
three months (see s 132(3)), it seems
doubtful whether such a
potential obstacle to the finalisation of the business rescue was
intended.
Furthermore,
if the offeror is unable to pay the offeree, and its estate cannot
realise enough to settle the amount owing to the
offeree in full, the
rights of the offeree are certainly prejudiced by the binding offer
provisions in section 153(1)(
b
)(ii).
The judgment assumed that the offeree would receive the full value
independently and expertly determined, in which case the
binding
offer is not prejudicial . . . . However, if the
interpretation in
Kariba
is correct, the offeree’s original debtor, the company, is
substituted with the offeror without any need for the offeror
to show
that he or she is financially able to satisfy the offer . . .
The court seemed to assume that the company will again
become the
debtor of the offeree if the offeror is unable to satisfy the value
determined by the independent expert . . . but there
is nothing in
section 153, or in chapter 6 generally, to support this conclusion.’
[45]
The reasoning in this passage seems to me to be correct and, on the
strength thereof and the reasons set out by Dambuza AJA,
I am of the
view that the interpretation of Gorven J in
DH
Brothers
was correct and that the court
a quo erred in concluding that an offer under the section bound both
parties. In addition there
is a further fundamental reason why the
appeal must succeed.
[46]
Attention has thus far been focused on the issue of who is to be
regarded as bound by an offer made under s 153(1)(
b
)(ii),
but sight should not be lost of the initial requirement that the
offer must be one to purchase. This immediately raises a
further
issue not dealt with by the legislature, namely, whether the mere
offer in itself is sufficient or whether, in order to
create any
obligations inter partes, it should be accompanied either by a tender
of payment of cash or the provision of adequate
security for payment.
In this regard it is necessary to recall that at common law a tender
needs to be made ‘met opene beurse
en klinkende gelde’
(with open purses and clinking money)
[40]
and that an offer of settlement must be ‘made by a person
capable of making a payment, since a person who has no capacity
to
pay has no capacity to make a tender’.
[41]
It is hardly conceivable that the legislature intended that a party
lacking the wherewithal to pay could interfere with the
flow of
business rescue proceedings merely by making an offer it could not
implement. Indeed the failure to make specific provision
in the Act
in regard to this issue provides support for an interpretation that
an offer only binds both parties once it has been
accepted.
[47]
Reverting to the content of what the respondents contend was a
binding offer to purchase under the section, the high water
mark of
the respondents’ case was that the attorney representing Mr and
Mrs Nchite informed the practitioner that his clients
‘wished
to purchase’ the appellant’s voting interest.
Conceptually there is a substantial difference between
expressing a
wish to make an offer to purchase and actually doing so, especially
where the price to be paid is unknown. Be that
as it may, although it
may be somewhat doubtful whether an offer to purchase was ever in
fact made, the parties appear to accept
that whatever was said
constituted an offer and I intend to proceed on that basis.
[48]
However, it is common cause that no price was mentioned, the offer
merely having been one to purchase ‘at a value independently
and expertly determined, on the request of the practitioner, to be a
fair and reasonable estimate of the return’ to the appellant
should the company be liquidated (the practitioner stressed that the
offer had been in the precise terms of the section).
[49]
At the time this offer was made, the fair and reasonable return to
the appellant had not been independently and expertly determined.
The
respondents contended that the amount which the appellant would
become entitled to receive was only to be determined at a later
date
once the necessary independent valuation had been obtained and that,
if the parties did not agree thereto on the valuation
when it became
available in due course, the court could determine the amount under s
157(6). Thus they argued that an offer to
pay whatever amount might
be determined in due course was sufficient to constitute an offer to
purchase as envisaged by the section,
and that the appellant’s
argument that the valuation has to be determined before an offer is
made conflicts with the clear
scheme of the Act.
[50]
In my view the respondents’ argument in this regard is, in
truth, contrary to the scheme of the Act. As the learned authors
of
Henochsberg
point out, the value independently and expertly
determined will already be known by the practitioner in a case of
concurrent creditors
as the practitioner, in terms of ss 145(4)
and (5), would before the meeting have been obliged to obtain the
necessary valuation
in order to determine their voting interests.
Moreover as Jonathan Rushworth, a member of the International
Reference Team for
Company Law Reform in South Africa, has commented:
‘
The
possibility of an offer to purchase the debts due to creditors or the
shares of those who voted against the plan is a novel
concept. Such
an offer would provide employees, creditors or shareholders who
continue to support a business rescue plan with the
opportunity to
seek funding to buy the other interests and then approve the plan and
procure its implementation. Registered trade
unions representing
employees and employees not represented would be able to make an
offer to acquire the interests of creditors
and shareholders.
’
[42]
[51]
It is almost inconceivable that a bank or other financial institution
would be prepared to agree to provide funding to trade
unions or any
other interested persons for the purchase of the voting interests of
creditors in companies in financial difficulties
where the value had
not been fairly and expertly determined, let alone in respect of an
amount which would still have to be determined
in the future.
[52]
Importantly, at common law it is essential for a valid contract of
sale for the parties to be agreed on the price or that the
price be
readily ascertainable. Agreement that the price is to be determined
at a later date is insufficient.
[43]
As a contract of sale pursuant to an offer is envisaged by the
section, there is no reason to depart from the common law position
that the price is to be determined from the terms of the offer.
Indeed there is every reason to conclude that the common law position
was envisaged. It would for example hardly be fair to hold an offeror
to a purchase at a price far beyond what it imagined or an
offeree to
a price far less than what the true value of its interests proves to
be.
[53]
The inevitable conclusion from all of this is that the offer in the
present case cannot be construed as being a valid offer
to purchase
as no mention was made of a price nor was a price readily
ascertainable therefrom, despite the prospect of the value
of the
voting interest purportedly purchased subsequently being determined,
possibly by a court. As there was no valid offer to
purchase there
could thus be no ‘binding’ offer to do so as envisaged by
the section.
[54]
As there was no valid offer to purchase the voting interest of the
appellant, it was never acquired by Mr and Mrs Nchite. Accordingly,
the business rescue plan was approved on the strength of Mr and Mrs
Nchite exercising a voting interest they did not have, and
its
adoption has to be set aside. Moreover, as the business rescue plan
was never validly adopted, the appellant is entitled under
s
130(1)(
a
)(ii)
to apply to set aside the resolution to commence business rescue on
the basis that there is no reasonable prospect of rescuing
the
company.
[55]
Dambuza AJA has dealt with the relevant facts relating to the
prospect of rescuing the company and it would be superfluous
for me
to attempt to add thereto. Suffice it to say that the company was
clearly hopelessly insolvent and effectively dormant in
that it had
not traded for years and had no business contracts in place. This is
not a case in which an on-going business was likely
to be rescued. It
is a matter in which there was at best a forlorn hope, unsupported by
any objective facts, that the company might
arise from the dead.
Consequently I agree that there was no reasonable prospect of
achieving the ends of a business rescue and
that the resolution to go
to business rescue should be set aside.
[56]
I also support my learned colleague’s criticism of the manner
in which the second respondent conducted himself as practitioner.
He
showed a distinct lack of objectivity and supported a business rescue
plan without making a proper assessment of its prospects
of success.
Nor for that matter when the prospects were challenged in the court a
quo, does it appear to have dawned on him that
in this case the vast
majority of the creditors were justified in opposing a business
rescue plan. I am not surprised that the
appellant applied to have
him removed as practitioner, and I therefore agree with the costs
orders my learned colleague proposes
in her judgment.
___________________
L E Leach
Judge
of Appeal
APPEARANCES
For
Appellant: AE Bham SC (with him S Budlender and P Romano)
Instructed by:
Norton Rose
Fulbright South Africa, Sandton
Webbers,
Bloemfontein
For
1
st
& 2
nd
Respondents: JA Klopper
Instructed
by:
Jordaan
Attorneys, Potchefstroom
Ben
Van Der Merwe Attorneys, Bloemfontein
For
3
rd
& 4
th
Respondents: LK Van Der Merwe
Instructed
by:
Cawood
Attorneys, Pretoria
Botha
De Jager Inc, Bloemfontein
For
5
th
Respondents:
JL Van Der Merwe SC (with him J Janse van Rensburg)
Instructed
by:
The
State Attorney, Pretoria
The
State Attorney, Bloemfontein
[1]
Botswana Pula, the currency abbreviation of which is BWP.
[2]
Section 152 of the Act, which regulates the proceedings during
consideration of the business rescue plan, provides:
‘
Consideration
of business rescue plan-(1) At a meeting convened in terms of s151
the practitioner must-
(a)
Introduce the proposed business plan for consideration by the
creditors and, if applicable, by the shareholders;
(b)
Inform the meeting whether the practitioner continues to believe
that there is a reasonable prospect of the company being rescued;
(c)
Provide a opportunity for the employees’ representatives
to address the meeting;
(d)
Invite discussion, and conduct vote, on any motions to-
(i)
amend the proposed plan, in any manner moved and seconded by holders
of creditors’ voting interests, and satisfactory
to the
practitioner; or
(ii)
direct the practitioner to adjourn the meeting in order to revise
the plan for further consideration; and
(e)
call for a vote for preliminary approval of the proposed plan,
as amended if applicable, unless the meeting has first been
adjourned
in accordance with paragraph
(d)
(ii).
(2)
In a vote called in terms of (1)
(e)
, the proposed business
rescue plan will be approved on a preliminary basis if-
(a)
it was supported by the holders of more than 75% of the
creditors’ voting interest that were voted; and
(b)
the votes in support of the business plan included, at least 50%
of the independent creditors’ voting interests, if any, that
were voted.
(3)If
a proposed business rescue plan-
(a)
is not approved on a preliminary basis, as contemplated in
subsection (2), the plan is rejected, and may be considered only in
terms of section 153….’
[3]
‘Failure to adopt business rescue plan. –(1)
(a)
If
the business rescue plan has been rejected as contemplated in
subsection 152(3)
(a)
or
(c)
(ii)
(bb)
the
practitioner may –
seek
a vote of approval from the holders of voting interests to prepare
and publish a revised plan; or
(i)
advise the meeting that the company will apply to a court to set
aside the result of the vote by the holders of voting interests
or
shareholders, as the case may be, on the grounds that it was
inappropriate.
(b)
If the practitioner does not take any action contemplated in
paragraph (a)-
(i)
any affected person may –
(aa)
call
for a vote of approval from the holders of voting interests
requiring the practitioner to prepare and
publish
a revised plan; or
(bb)
apply to the court to set aside the result of the vote by the
holders of voting interests or shareholders, as the case may be,
on
the grounds that it was inappropriate; or
(iii)
any affected person or a combination of affected persons, may make a
binding offer to purchase the voting interests of one
or more
persons who opposed adoption of the business rescue plan, at a value
independently and expertly determined, on the request
of the
practitioner, to be a fair and reasonable estimate of the return to
that person, or those persons, if the company were
to be
liquidated.
’ (My emphasis.)
[4]
In terms of s 152(2) of the Act.
[5]
Professor P Delport et al
Henochsberg
on
the
Companies Act
71
of 2008
1 ed (2011)
at
446.
[6]
Section 131(5)
and
s 147.
[7]
Section 133
.
[8]
Section 141
.
[9]
Section 147
.
[10]
Section 148.
[11]
Section 150
.
[12]
Section 152
subsecs (1), (2) and (3)
.
[13]
Section 1129 of the Act provides that: “The court shall
confirm a plan only if the following requirements are met …”
[14]
Concise
Oxford English Dictionary
12 ed (2011).
[15]
S W Van der Merwe et al
Contract:
General Principles
4 ed (2012) at 46.
[16]
Ibid.
[17]
R H Christie and G B Bradfield
Christie’s
The law of contract in South Africa
6 ed (2011) at 82.
[18]
Christie’s
fn
18
supra
at 32.
[19]
D
H Brothers Industries (Pty) Ltd v Gribnitz NO
2014
(1) SA 103
(KZP) para 40-41.
[20]
See also
Christie
fn
17
supra
at
31.
[21]
Natal
Joint Municipal Pension Board v Endumeni Municipality
2012(4)
SA 593 (SCA) at para 18.
[22]
Oakdene
Square Properties
(Pty)
Ltd
v
Farm Bothasfontein (Kyalami)
(Pty)
Ltd
2013(4)
SA 539
(SCA)
para
29
.
[23]
Para
29,
[24]
Para 29.
[25]
Henochsberg
at
456
.
It has been suggested that the directors must have subjectively
believed and there must have been reasonable grounds for the
belief.
[26]
Section
150(4)(a) of the Act
[27]
See
Oakdene
para
30 including the authorities cited therein.
[28]
Based
on the premise that the practitioner was not independent of the
company or its management.
[29]
Henochsberg
at
488. In terms of s 138 of the Act
a
business
rescue
practitioner
can only be a member in good standing of the legal, accounting or
business management profession accredited by the
Commission (CIPC).
[30]
Carolus
v Saambou Bank
2002
(6) SA 346 (SE
[31]
Section
140
(c)
(i)
of the Act
[32]
Section 7(
k
).
[33]
Section 152(1).
[34]
Section 153.
[35]
Dr A Loubser ‘The Business Rescue Proceedings in the
Companies
Act of 2008
: Concerns and Questions
(Part 2)
’
(2010)
TSAR
689
at 700-701.
[36]
Para 29.
[37]
Absa
Bank Limited v Caine NO
[2014]
ZAFSHC 46
(2 April 2014) para 27.
[38]
Professor P Delport et al
Henochsberg
on
the
Companies Act
71
of 2008
1 ed (2011), and N Locke and I Esser ‘Company Law and
Stock Exchanges’ (2013)
Annual
Survey of South African Law
231 at 279-286.
[39]
Above at 282.
[40]
Compare
Odendaal
v Du Plessis
1918 AD 470
at 475 and
Boland
Bank Bpk v Steele
1994 (1) SA 259
(T) at 266 A-C.
[41]
Wessels
The
Law of Contract in South Africa
2 ed (1951) vol 2 para 2341.
[42]
Jonathan
Rushworth, ‘A critical analysis of the business rescue
regime in the Companies Act 71 of 2008’
(2010)
Acta
Juridica
375
at 407.
[43]
See eg
H
Merks & Co (Pty) Ltd v The B-M Group (Pty) Ltd
[1995] ZASCA 45
;
1996 (2) SA 225
(A) at 233G-234A.