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[2018] ZAGPJHC 25
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Le-Sel Research (Rf) Properties and Another v Johannesburg Water (Soc) Limited (49352/2017) [2018] ZAGPJHC 25 (22 February 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
DATE:
22/02/18
CASE:
49352/2017
REPORTABLE:
YES
/ NO
OF
INTEREST TO OTHER JUDGES:
YES
/ NO
In
the matter between:
LE-SEL
RESEARCH (RF) PROPERTIES
LIMTED
(
in
business rescue)
FIRST
APPLICANT
MKHOMBO
PHAHLANI N.O SECOND
APPLICANT
AND
JOHANNESBURG
WATER (SOC) LIMITED
RESPONDENT
JUDGMENT
TWALA J
[1]
In this application the applicants seek an order interdicting the
respondent from disconnecting the water supply or service
to the
first applicant’s property until such time as the first
applicant may be able to effect payment of the services/water
to the
respondent. The respondent has filed its opposing papers in this case
and a counter application seeking permission to terminate
the
agreement between itself and the first applicant.
[2]
At the commencement of the hearing of this case, counsel for the
applicants alluded to the fact that this matter was postponed
from
the urgent Court and placed on the roll of the opposed motion Court.
The parties agreed and obtained a postponement order
which also
provided that the respondent shall not terminate the supply of water
to the first applicant’s property pending
the adjudication of
this case on the 13
th
February 2018. Counsel agreed that the matter could proceed for
hearing in the opposed interlocutory court instead of postponing
it
to the opposed motion court roll.
[3]
It is common cause that as at the 24
th
of July 2017, the first applicant owed the respondent a sum of
R3 660 154 for the water supply. The first applicant had
entered into an arrangement with the respondent to settle the debt
over a period of six months in monthly instalments of R610 000
commencing on the 10
th
of August 2017. It is further not in dispute that the first applicant
breached the terms of the arrangement. On the 15
th
of December 2017 the first applicant applied for business rescue and
the second applicant was appointed the business rescue manager.
[4]
Due to the failure of the applicants to meet the terms of the
arrangement, the respondent indicated its intention to terminate
the
agreement to supply water to the premises of the first applicant.
This is what galvanised the applicants in bringing this action
to
interdict the respondent from terminating the water supply into its
premises since it is under business rescue.
[5]
It is contended by counsel for the applicants that since the first
applicant is under business rescue, the respondent is precluded
from
terminating the agreement for its water supply because that amounts
to be an enforcement action on the applicants. Put differently,
the
respondent is withholding its performance in terms of the agreement
to force the first applicant to perform its part of the
agreement.
This, it is argued by counsel for the applicants, is contrary to the
provisions of the section 133 of the Companies
Act, Act 71 of 2008
(“The Act”).
[6]
Water is an essential commodity in the business of the first
applicant which employs more than 600 people. If the respondent
were
to be allowed to terminate the water supply, so the argument goes,
the more than 600 employees of the first applicant will
suffer
irreparable harm as they will lose their jobs since the first
applicant will be forced to shut down. The termination of
the
agreement to supply water would not give the business rescue process
the opportunity to resuscitate the business of the first
applicant.
[7]
The termination of the water supply, so contended counsel for the
respondent, is not an enforcement action as envisaged in section
133
but a juristic act to cancel or terminate an agreement between the
first applicant and the respondent. The respondent has not
started
legal proceedings to recover the outstanding debt but wishes to
terminate the agreement to supply the first applicant with
water.
[8]
It is submitted by counsel for the respondent that, should the Court
find that the termination of the agreement is in contravention
of
section 133 of the Act, there is no reasonable justification that the
supply of water to the first applicant’s property
be extended
beyond the period of three months as provided for in section 132 of
the Companies Act. Business rescue proceedings
started on the 15
th
of December 2017 and are to run for three months which is until the
15
th
of March 2018 unless the business rescue manager applies to Court for
an extension of time. The respondent is owed a substantial
amount of
money by the first applicant and it will be prejudiced if it were to
continue to supply water without any payment. The
respondent is a
State owned enterprise and therefore acts in a fiduciary capacity and
should exercise some care in handling public
funds.
[9]
It is well established that the purpose for business rescue
proceedings is to provide the company with essential breathing space
in order to allow its financial affairs to be reconstructed such that
it can afford to continue to operate as a successful concern.
The
question to be determined in this case is whether the cancellation of
a contract between the parties is an enforcement action
as envisaged
in section 133 (1) of the Act.
[10]
Section 133 of the Companies Act provides as follows:
“
General
moratorium on legal proceedings against company:
(1)
During
business rescue proceedings, no legal proceeding, including
enforcement action, against the company, or in relation to any
property belonging to the company, or lawfully in its possession, may
be commenced or proceeded with in any form, except-
a)
With
the written consent of the practitioner;
b)
With
the leave of the court and in accordance with any terms the court
considers suitable;
c)
………………………………………………
..
[11]
Henochsberg on the
Companies Act 71 of 2008
Vol. 1 at 482(33) states
the following:
“
If it is
accepted that a juristic act, such as a notice in terms of the
contract to cancel the contract due to eg. malperformance
by the
company under business rescue, is not a ‘legal proceeding’,
and therefore a valid termination of the contract,
there will not, it
is submitted, be any bar to a provision in a contract that stipulates
that the contract will be terminated if
the company goes into
business rescue.”
[12]
In the case of
Cloete Murray and Another NNO v FirstRand Bank Ltd
t/a Wesbank
2015 (3) SA 438
(SCA)
the Supreme Court of Appeal
stated the following:
“……
.the
concepts ‘enforcement’ and ‘cancellation are
traditionally regarded as mutually exclusive. The term ‘cancellation’
connotes the termination of obligations between parties to an
agreement. However, the liquidators contended for a wider meaning
to
be attributed to the expression ’enforcement action’ to
include the cancellation of an agreement. In so doing, I
believe that
they are doing violence to the wording of s 133(1) of the Act.
Cancellation is a unilateral act of a party to an agreement
and save,
for giving the other party notice of such cancellation, it does not
occur in or by means of any process associated with
any form of
forum. In any event, as pointed out on behalf of Wesbank, it also
does not make linguistic sense to speak of cancellation
as having
‘commenced or proceeded with’ in any forum, as envisaged
by s 133(1). It therefore seems to me that, linguistically,
the
phrase ‘enforcement action’ in s 133(1) is unable to bear
the meaning of the cancellation of an agreement, as contended
for by
the liquidators. Contextually it must be understood to refer to
enforcement by way of legal proceedings.”
[13]
I am unable to agree with counsel for the applicants that
cancellation of the agreement between the first applicant and the
respondent amounts to an enforcement action. I am not persuaded
by counsel’s submission that by cancelling the agreement
to
supply water to the first applicant, the respondent is withholding
its performance in terms of the agreement solely to force
the
applicants to pay its debt or water account. Cancellation of the
agreement is, in my view, a unilateral act by a party to an
agreement
which is not performed in a forum as envisaged in section 133 (1) of
the Act. It is therefore my respectful view that
the applicants’
application falls to be dismissed on this point.
[14]
I have considered the issue that water is an essential service and is
needed for a company of the magnitude of the first applicant.
However, I cannot agree that there is a duty on government
institutions such as the respondent to fund or supply private
business
without any payment. As contended by counsel for the
respondent, the respondent has a fiduciary duty to handle public
funds with
the utmost care.
[15]
I now turn to deal with the respondent’s counter application
seeking an order to be permitted to terminate the supply
of water to
the first applicant’s property. There is no merit in this
application. The respondent has failed to show why
the legal
proceedings against the first applicant are necessary and
appropriate.
[16]
In the case of
Arendse and Others v Van der Merwe NO and Another
2016 (6) SA 490
(GJ)
the Court stated the following:
“
what
needs to be fully set out in any application for leave are the
reasons why legal proceedings against the company in business
rescue
are necessary and appropriate. “
[17]
It is my considered view that it was absolutely unnecessary for the
respondent to bring this counter application because it
did not add
anything more than it stated in its answering affidavit to the
applicants’ application. Therefore the counter
application
falls to be dismissed.
[18]
There is an issue about costs which were reserved when the
matter served before the urgent Court on the 22
nd
of December 2017. It is trite that the costs follow the result. I am
therefore of the view that the respondent was successful in
its
opposition of this application and therefore is entitled to a costs
order.
[19]
In the circumstance, I make the following order:
A.
The
application for an interdict is dismissed with costs;
B.
The
counter application is dismissed with costs.
_________________
TWALA J
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION
Date
of hearing:
13 February 2018
Date
of Judgment:
22 February 2018
For
the Applicant:
Advocate: S
Alcock
Instructed
by:
Norton Rose Fulbirght SA Inc
TEL:
011 685 8509
For
the Respondent:
Advocate: AG Amiradakis
Instructed
by:
Moodie & Robertson
TEL:
011 628 8600