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[2015] ZASCA 97
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Absa Bank Limited v Naude N.O and Others (20264/2014) [2015] ZASCA 97; 2016 (6) SA 540 (SCA) (1 June 2015)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 20264/2014
DATE:
01 JUNE 2015
Not
Reportable
In
the matter between:
ABSA
BANK
LTD
..............................................................................................................
APPELLANT
And
ETIENNE
JACQUES NAUDE
N.O
.................................................................
FIRST
RESPONDENT
LOUIS
PASTEUR INVESTMENTS
LIMITED
.......................................................................................................
SECOND
RESPONDENT
LOUIS
PASTEUR HOLDINGS
LIMITED
...................................................
THIRD
RESPONDENT
Neutral
citation:
Absa Bank Ltd v Naude NO
(20264/2014)
[2015] ZASCA 97
(1 June
2015)
Coram:
Ponnan, Pillay and Willis JJA and Schoeman
and Fourie AJJA
Heard:
20 May 2015
Delivered:
1 June 2015
Summary:
Business rescue – application for
setting aside of business rescue plan – non-joinder of
creditors having direct and
substantial interest – notice in
terms of
section 130
of the
Companies Act 71 of 2008
Act insufficient
– counter-application declaring certain suretyships void –
rendered moot on dismissal of main application
– costs of.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Ismail J sitting as court of first instance).
1
The appeal is dismissed with costs including the costs of two
counsel.
2
The cross-appeal succeeds to the extent that the order of the court
below on the counter application is set aside.
JUDGMENT
Schoeman
AJA (Ponnan, Pillay and Willis JJA and Fourie AJA concurring)
[1]
The appellant in this matter, ABSA Bank Ltd (the bank), was
dissatisfied when a business rescue plan was adopted which it had
voted against in respect of the second respondent, Louis Pasteur
Investments Ltd, (the company). The bank, as applicant, brought
an
application against Mr Etienne Jacques Naude NO, the business rescue
practitioner (the practitioner) as first respondent and
the company
as second respondent, for a declaratory order that the decision taken
at the meeting of creditors on 12 October 2012,
approving the
business rescue plan for the company, was unlawful and invalid. It
further asked for an order that the practitioner
be removed from
office. A counter-application was brought by the company and the
practitioner for a declaratory order that in terms
of the old
Companies Act, 61 of 1973, a cross-suretyship executed by the company
and other related companies, in favour of the
bank, is void.
[2]
The application was dismissed inter alia on the basis that the bank
had failed to join the creditors of the company and that
it was
precluded by s 133 of the Companies Act 71 of 2008 from bringing such
an application without the written consent of the
practitioner or the
leave of the court. The counter-application was dismissed as it was
found that the cross-suretyship was valid
and not contrary to the
provisions of s 226(1) of the old Companies Act.
[3]
On 19 June 2012 the board of directors of the company resolved that
the company begin business rescue proceedings in terms of
s 129 of
the Act. The notice of the commencement of business rescue
proceedings was filed with the Companies and Intellectual Property
Commission on 26 June 2012. At that stage the company was indebted to
the bank in an amount of approximately R8,5 million pursuant
to two
mortgage loans. The company and four other related companies had
executed a cross-suretyship in favour of the bank. The
cross-suretyship, according to the bank, increased the company’s
liability by an additional amount of approximately R150
million.
[4]
In terms of the proposed business rescue plan circulated to creditors
before the meeting in which the adoption of the business
rescue plan
was scheduled to take place, the bank was allocated a voting interest
in respect of its full secured claim. The bank’s
claim in
respect of the cross-suretyship was considered to be a ‘contingent
claim’ and the voting interest allocated
thereto was limited to
a value of approximately R2 million. The practitioner did not
consider the claim in respect of the cross-suretyship
to be a
concurrent claim and it was not included as such. The bank sought to
object to the voting interest allocated to it before
the meeting of
creditors, as its voting interest had been determined without
reference to the cross-suretyship, but without success.
Due to the
reduction of the concurrent claim of the bank, its opposition to the
acceptance of the business rescue plan did not
carry the day and the
business rescue plan was preliminarily approved in terms of s 152(2)
of the Act on 12 October 2012, on the
basis that it was supported by
the holders of more than 75% of the creditors’ voting interest
at the meeting.
[5]
The present application was launched on 15 November 2012. In the
founding affidavit deposed to on behalf of the bank, on 14
November
2012, the deponent inter alia stated that it seemed that the plan
could not be implemented as the bank had not received
any payments.
It was further stated that notice of the application would be given
to all affected parties ‘as required in
terms of section 130(3)
(a) and (b) of the Act’.
[6]
In the meanwhile the business rescue plan was implemented and the
first payments to creditors, in terms of the business rescue
plan,
were made between 12 and 16 November 2012. A further two and a half
years has passed since the implementation of the plan
and those
payments. It may be inferred that the creditors of the company have
probably been receiving payments in terms of the
business rescue plan
for the past 30 months, by reason of the fact that, during the
business rescue proceedings, if the practitioner
concludes that there
is no reasonable prospect that the company may be rescued, it is his
or her duty to inform the court, company
and affected persons of such
a conclusion and thereafter apply to the court for an order
discontinuing the business rescue proceedings
and placing the company
into liquidation (s141(2)9a)).
[7]
The practitioner deposed to an answering affidavit and raised the
issue of the non-joinder of the creditors of the company.
The reasons
for insisting on joinder of the creditors were that the setting aside
of the business rescue plan would undo their
vote in favour of such
plan and it would require each creditor to return all monies that
were paid to it pursuant to such plan.
[8]
In the court below the bank averred that the notice given to
creditors in terms of s 130 of the Act was sufficient. However,
notice in accordance with the provisions of s 130(3) is confined to
matters where an application is brought prior to the adoption
of a
business rescue plan.
[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. It was stated in
Amalgamated
Engineering Union v Minister of Labour
[1]
that
an interested party’s non-intervention without more, ‘after
receipt of a notice of legal proceedings short of a
citation, cannot
therefore…be treated as if it were a representation, express
or tacit, that the party concerned will submit
to and be bound by,
any judgment that may be given.’ Further, it is the duty of the
sheriff, when serving process, to explain
the nature and exigency
thereof to the person on whom service is effected.
[2]
The
creditors could thus have made an informed decision as to whether to
oppose the application.
[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
[3]
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.
[11]
I therefore conclude that the court below was correct in upholding
the non-joinder point. It was submitted in argument that
if we were
to reach that conclusion, the proceedings should be stayed and the
bank should be afforded an opportunity to join the
creditors. Here
though a simple declaratory order was sought with no consequential
relief such as the repayment by the creditors
of the amounts received
in terms of the plan. The undesirability of a declaratory order
in a vacuum has recently been stressed
by this court in
City
of Johannesburg v South African Local Authorities Pension Fund.
[4]
It
was conceded that in any event the relief would have to be amended to
provide inter alia for the repayment by creditors. There
thus seems
to be little point in keeping this application alive and remitting
the matter to the high court. This disposes of the
appeal and in the
result it must fail.
[12]
The bank submitted that it would be appropriate, even if the issue of
non-joinder is dispositive of the appeal, that this court
should
nonetheless consider whether the consent of the practitioner or leave
of the court should be sought before an application
of this kind is
brought after a business rescue plan has been adopted. This
argument was premised on the basis that there
are conflicting
judgments of the high court dealing with this issue. However, any
decision on s 133 in the context of this judgment,
would be
obiter
dictum
.
[5]
Furthermore,
the matter was not fully ventilated in this court and the decision
would not have any practical effect or result as
envisaged by
s
16(2)
(a)
(i)
of the
Superior Courts Act 10 of 2013
. Therefore I do not consider it
advisable to deal with this issue.
[13]
In the counter-application the bank and practitioner sought an order
that the cross-suretyship is void by virtue of the prohibition
in
s
226(1)
of the old Companies Act. Section 226(1) provides that no
company shall provide security to any person in connection with an
obligation
of another company controlled by one or more directors of
the first company, or another company which is a subsidiary of its
(the
first company’s) holding company. The bank’s
defence to this was that the cross-suretyship was valid due to the
exception created in s 226(1B).
[14]
It is clear that this issue was only relevant, in the instant matter,
to determine whether the practitioner was correct in
refusing to
allow the bank’s claim in respect of the cross-suretyship. If
this were decided in favour of the practitioner
and the company it
would have disposed of the merits of the bank’s application.
Therefore, both parties in this court
accepted that although it
was raised as a counter-application, in truth, it was a defence to
the main application. And, to the
extent that it was raised as a
counter application it was really conditional upon the bank
succeeding in its application before
the high court. As the bank
failed in its application this decision had become academic and the
high court should not have dealt
therewith.
[6]
[15]
I should add that an appeal was also noted against the refusal of the
application to have the business rescue practitioner
removed.
On appeal the bank advanced no argument in respect of this issue.
Furthermore, no case was made out for this relief
in the application
and the bank correctly did not persist with the appeal.
[16]
Therefore there is no reason why the costs of the main appeal should
not follow the event. However the cross-appeal poses more
of a
problem. In view of the finding above that the court a quo should not
have determined the issue raised in the counter-application,
it would
be just and equitable that no order as to costs be made in respect of
the counter-application and cross-appeal.
[17]
Therefore the following order is made.
1
The appeal is dismissed with costs including the costs of two
counsel.
2
The cross-appeal succeeds to the extent that the order of the court
below on the counter application is set aside.
I
Schoeman
Acting
Judge of Appeal
APPEARANCES
For Appellant: G
W Amm
Instructed
by: Lowndes Dlamini, Sandton
Matsepes,
Bloemfontein
For
Respondent: J Suttner SC (with him P Cirone)
Instructed
by: Etienne Naude Attorneys, Pretoria
McIntyre
& Van der Post, Bloemfontein
[1]
Amalgamated
Engineering Union v Minister of Labour
1949 (3) SA 637
(A) at 662-663.
[2]
Uniform Rule 4(1)(d).
[3]
Gordon
v Department of Health, Kwazulu-Natal
2008
(6) SA 522
;
[2008] ZASCA 99
(SCA) para 9.
[4]
City
of Johannesburg v South African Local Authorities Pension Fund
others
[2015] ZASCA 4
para 8.
[5]
See
Pretoria
City Council v Levinson
1949
(3) SA 305
(A) at 317.
[6]
Section
154(2).