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[2020] ZAGPJHC 196
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African Global Holdings (Pty) Ltd and Others v Lutchman NO and Others (Commissioner for the South African Revenue Services and Another Intervening); Fidelity Security Services (Pty) Ltd v African Global Holdings (Pty) Ltd and Others (42741/19; 44827/19; 32083/19) [2020] ZAGPJHC 196 (24 August 2020)
IN THE
HIGH COURT OF SOUTH AFRICA
(GAUTENG LOCAL
DIVISION, JOHANNESBURG)
CASE
NUMBERS: 42741/19, 44827/19 and 32083/19
In
case numbers 42741/19 and 44827/19:
In
re:
AFRICAN
GLOBAL HOLDINGS (PTY) LTD
First Applicant
SUN
WORX (PTY) LTD
Second
Applicant
KGWERANO
FINANCIAL SERVICES (PTY) LTD
Third Applicant
and
RALPH
FARREL LUTCHMAN N.O.
First
Respondent
CLOETE
MURRAY N.O.
Second
Respondent
TANIA
OOSTHUIZEN N.O.
Third
Respondent
MARIANNE
OELOFSEN N.O
.
Fourth
Respondent
In their capacities as
the joint provisional liquidators of
AFRICAN GLOBAL
OPERATIONS (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O
.
Fifth Respondent
CLOETE
MURRAY N.O.
Sixth
Respondent
SELBY
MUSAWENKOSI NTSIBANDE N.O.
Seventh Respondent
ANDRE
BOTHA OCTOBER N.O
Eighth
Respondent
In their capacities as
the joint provisional liquidators of
BOSASA PROPERTIES
(PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Ninth
Respondent
CLOETE
MURRAY N.O
.
Tenth Respondent
NURJEHAN
ABDOOL GAFAAR OMAR N.O.
Eleventh Respondent
In their capacities as
the joint provisional liquidators of
GLOBAL TECHNOLOGY
SYSTEMS (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twelfth
Respondent
CLOETE
MURRAY N.O.
Thirteenth Respondent
ROYNATH
PARBHOO N.O.
Fourteenth Respondent
LIZETTE
OPPERMAN N.O.
Fifteenth Respondent
In their capacities as
the joint provisional liquidators of
LEADING PROSPECT
TRADING 111 (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Sixteenth Respondent
CLOETE
MURRAY N.O.
Seventeenth
Respondent
OFENTSE
ANDREW NONG N.O.
Eighteenth Respondent
TSHEPO
HARRY NONYANE N.O.
Nineteenth Respondent
In their capacities as
the joint provisional liquidators of
BOSASA YOUTH
DEVELOPMENT CENTRES (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twentieth Respondent
CLOETE
MURRAY N.O.
Twenty-First
Respondent
TARYN
VALERIE ODELL N.O.
Twenty-Second Respondent
GORDON
NOKHANDA N.O.
Twenty-Third
Respondent
In their capacities as
the joint provisional liquidators of
BLACK ROX SECURITY
INTELLIGENCE SERVICES (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twenty-Fourth
Respondent
CLOETE
MURRAY N.O.
Twenty-Fifth
Respondent
MILANI
BECKER N.O.
Twenty-Sixth
Respondent
In their capacities as
the joint provisional liquidators of
BOSASA SUPPLY CHAIN
MANAGEMENT (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twenty-Seventh Respondent
CLOETE
MURRAY N.O.
Twenty-Eighth
Respondent
MARC
BRADLEY BEGINSEL N.O.
Twenty-Ninth
Respondent
In their capacities as
the joint provisional liquidators of
BOSASA IT (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirtieth Respondent
CLOETE
MURRAY N.O.
Thirty-First Respondent
MARIETTE
BENADE N.O
.
Thirty-Second Respondent
In their capacities as
the joint provisional liquidators of
RODCOR (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirty-Third
Respondent
CLOETE
MURRAY N.O.
Thirty-Fourth
Respondent
JACOLIEN
FRIEDA BARNARD N.O.
Thirty-Fifth Respondent
In their capacities as
the joint provisional liquidators of
WATSON CORPORATE
ACADEMY (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirty-Sixth
Respondent
CLOETE
MURRAY N.O.
Thirty-Seventh
Respondent
DEIDRE
BASSON N.O.
Thirty-Eighth
Respondent
In their capacities as
the joint provisional liquidators of
ON-IT-1 (PTY) LTD (in
liquidation)
PARK VILLAGE
AUCTIONEERS AND
PROPERTY
SALES (PTY) LTD
Thirty-Ninth
Respondent
(
A
further 177 respondents set out in an order dated 11 March 2020 have
been joined as the Fortieth Respondent to the
Two-Hundred-and-Sixteenth
Respondent, but none opposed the two
applications)
COMMISSIONER FOR THE
SOUTH
AFRICAN
REVENUE SERVICES
First Intervening Party
FIDELITY SECURITY
SERVICES
(PTY)
LTD
Second
Intervening Party
In
case number 32083/19:
FIDELITY
SECURITY SERVICES
(PTY)
LTD
Applicant
and
AFRICAN
GLOBAL HOLDINGS (PTY) LTD
First Respondent
SUN
WORX (PTY) LTD
Second Respondent
KGWERANO
FINANCIAL SERVICES (PTY) LTD
Third
Respondent
and
RALPH
FARREL LUTCHMAN N.O.
Fourth
Respondent
CLOETE
MURRAY N.O.
Fifth Respondent
TANIA
OOSTHUIZEN N.O.
Sixth
Respondent
MARIANNE
OELOFSEN N.O.
Seventh Respondent
In their capacities as
the joint provisional liquidators of
AFRICAN GLOBAL
OPERATIONS (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Eighth
Respondent
CLOETE
MURRAY N.O.
Ninth
Respondent
SELBY
MUSAWENKOSI NTSIBANDE N.O.
Tenth
Respondent
ANDRE
BOTHA OCTOBER N.O
Eleventh Respondent
In their capacities as
the joint provisional liquidators of
BOSASA PROPERTIES
(PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twelfth
Respondent
CLOETE
MURRAY N.O.
Thirteenth
Respondent
NURJEHAN
ABDOOL GAFAAR OMAR N.O.
Fourteenth Respondent
In their capacities as
the joint provisional liquidators of
GLOBAL TECHNOLOGY
SYSTEMS (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Fifteenth Respondent
CLOETE
MURRAY N.O.
Sixteenth Respondent
ROYNATH
PARBHOO N.O.
Seventeenth
Respondent
LIZETTE
OPPERMAN N.O.
Eighteenth Respondent
In their capacities as
the joint provisional liquidators of
LEADING PROSPECT
TRADING 111 (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Nineteenth Respondent
CLOETE
MURRAY N.O.
Twentieth Respondent
OFENTSE
ANDREW NONG N.O.
Twenty-First
Respondent
TSHEPO
HARRY NONYANE N.O.
Twenty-Second Respondent
In their capacities as
the joint provisional liquidators of
BOSASA YOUTH
DEVELOPMENT CENTRES (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twenty-Third
Respondent
CLOETE
MURRAY N.O.
Twenty-Fourth
Respondent
TARYN
VALERIE ODELL N.O.
Twenty-Fifth
Respondent
GORDON
NOKHANDA N.O.
Twenty-Sixth
Respondent
In their capacities as
the joint provisional liquidators of
BLACK ROX SECURITY
INTELLIGENCE SERVICES (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Twenty-Seventh Respondent
CLOETE
MURRAY N.O.
Twenty-Eighth
Respondent
MILANI
BECKER N.O.
Twenty-Ninth Respondent
In their capacities as
the joint provisional liquidators of
BOSASA SUPPLY CHAIN
MANAGEMENT (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirtieth Respondent
CLOETE
MURRAY N.O
.
Thirty-First Respondent
MARC
BRADLEY BEGINSEL N.O.
Thirty-Second
Respondent
In their capacities as
the joint provisional liquidators of
BOSASA IT (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirty-Third
Respondent
CLOETE
MURRAY N.O.
Thirty-Fourth
Respondent
MARIETTE
BENADE N.O.
Thirty-Fifth Respondent
In their capacities as
the joint provisional liquidators of
RODCOR (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirty-Sixth
Respondent
CLOETE
MURRAY N.O.
Thirty-Seventh
Respondent
JACOLIEN
FRIEDA BARNARD N.O.
Thirty-Eighth
Respondent
In their capacities as
the joint provisional liquidators of
WATSON CORPORATE
ACADEMY (PTY) LTD
(in liquidation)
RALPH
FARREL LUTCHMAN N.O.
Thirty-Ninth
Respondent
CLOETE
MURRAY N.O.
Fortieth Respondent
DEIDRE
BASSON N.O.
Forty-First Respondent
In their capacities as
the joint provisional liquidators of
ON-IT-1 (PTY) LTD
(in
liquidation)
PARK VILLAGE
AUCTIONEERS AND
PROPERTY
SALES (PTY) LTD
Forty-Second
Respondent
COMMISSIONER FOR THE
SOUTH
AFRICAN
REVENUE SERVICES
Forty-Third Respondent
JUDGMENT
De Villiers AJ:
Introduction
[1]
The three applications before me are
interrelated and were argued over two days as one hearing. This was
done by video-conferencing
during the Covid-19 lockdown. The
papers were more than 7 000 pages and the heads of argument more than
700 pages.
[2]
In issue are three applications:
[2.1]
A
business rescue application of six companies that are in
liquidation
[1]
(“
the
business rescue application
”);
[2.2]
An
application to set aside the sale of the assets of those companies
[2]
(“
the
auction application
”).
One of the sales in issue is of the sale of an immovable property
that took place after the public auction by private
treaty. The
description “
auction
application
”
is accordingly a misnomer, as the application pertains to all sales
by the provisional liquidators; and
[2.3]
An
application to vary a court order pertaining to the sale of an
immovable property of one of the companies at the auction
[3]
(“
the
Rule 42 application
”).
[3]
The matter first came before me on 11 March
2020 for a two-day hearing. It was not ready to proceed, amongst
others due to late
additions to the papers and unresolved
in
limine
issues. Some progress was made:
[3.1]
Two intervening parties that had brought
three applications for leave to intervene, were allowed to intervene,
and those costs were
reserved. The first intervening party was the
COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICES (“
SARS
”),
and the second intervening party was FIDELITY SECURITY SERVICES (PTY)
LTD (“
Fidelity
”).
SARS sought leave to intervene in both the auction and business
rescue applications, and Fidelity, in the auction application.
SARS
is the, or a major, creditor of the six companies seeking to be
placed in business rescue. Fidelity would later bring the
Rule 42
application as the purchaser of an immovable property, and it also
purchased movable assets at the auction;
[3.2]
The
applicants in the auction and business rescue applications had not
given notice of applications to purchasers at the auction,
nor to
creditors companies that are in liquidation. Initially they asked for
relief in the form of a rule
nisi
in the auction application. In dispute was the assistance by the
provisional liquidators
[4]
to
identify purchasers at the auction and creditors. By the time that
the matter came before me, the provisional liquidators had
provided
the applicants with such information as they had. When requested, I
made an order that potentially interested parties
be joined as
respondents and made orders as to the manner of service. Service on
purchasers of immovable properties had to be done
in the normal
manner. Service on purchasers of movable assets could be done by
e-mail and/or SMS (where such information was known)
and by
publication in newspapers. None of those respondents would later
deliver answering affidavits; and
[3.3]
I also directed that dates be agreed upon
and determined the dates for the exchange of further affidavits and
heads of argument.
[4]
Two costs orders must be made still, the
first is the costs of the postponement. In my view, the postponement
was one of those inevitable
developments in litigation, and the costs
should be costs in the cause. The matter was huge and complex,
difficult to manage to
trial readiness.
[5]
The
second costs order pertains to the applications to intervene. It is
linked to the non-joinder point taken by the provisional
liquidators
(and SARS). The standard formulation for the test to be applied, set
out in
Erasmus
,
is:
[5]
“
The
rule is that any person is a necessary party and should be joined if
such person has a direct and substantial interest in any
order the
court might make, or if such an order cannot be sustained or carried
into effect without prejudicing that party, unless
the court is
satisfied that he has waived his right to be joined
.”
[6]
When
does someone have a “
direct
and substantial interest
”
as opposed to a (mere) financial interest? Although every creditor
does not have to be joined in every application for winding-up,
a
creditor is now accepted by the Supreme Court of Appeal (“the
SCA
”)
as a person with a “
direct
and substantial interest
”
in applications to declare an adopted business rescue plan invalid,
and must be joined in those applications. In
Golden
Dividend 339 (Pty) Ltd and Another v Absa Bank Limited
[6]
and
in
Absa
Bank Limited v Naude N.O and Others,
[7]
(both applications to declare adopted business rescue plans invalid)
creditors were found to have had direct and substantial interests
and
not mere financial interests.
[7]
The
law to apply in the case of a business rescue application, is
distinguishable on more than a conceptual basis (that it is only
the
beginning of a process that will involve creditors in its
determination). The distinction is brought about in terms of section
131 of the Companies Act, 71 of 2008 (“
the
2008 Act
”).
This section includes, without formal joinder, an automatic right to
an “
affected
person
”
(a defined term that includes creditors) to participate in a hearing.
Creditors therefore need not be joined formally in
an application for
business rescue under section 131 of the 2008 Act. See
Cape
Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Another
(Advantage Projects Managers (Pty) Ltd Intervening)
para 21,
[8]
a judgment by Rogers
AJ. It was quoted with approval by Weiner J in
Mhlonipheni
v Mezepoli Melrose Arch (Pty) Ltd and Others ; Lwazi v Mezepoli
Nicolway (Pty) Ltd and Another; Moto v Plaka Eastgate
Restaurant CC
and Another; Mohsen and Another v Brand Kitchen Hospitality (Pty) Ltd
and Another
para 49.
[9]
(Having defined the
2008 Act, I should add that I refer herein to the Companies Act 61 of
1973 as “
the
1973 Act
”.)
Joinder of SARS in the business rescue application was thus
unnecessary.
[8]
A debate was had in the papers whether the
auction applicants ought to have joined more interested parties in
the auction application,
and whether their version of having had
difficulties initially to ascertain identities and particulars of
such parties, held water.
Any point of non-joinder became moot as a
result of the orders made on 11 March 2020. The initial rule
nisi
sought in the auction application, became unnecessary as a result.
Notice of both the business rescue and auction applications
has since
been given to interested parties, who were joined as respondents. (I
point out that none of the further 177 respondents
delivered an
answering affidavit.)
[9]
In my view, this matter does not warrant
more time to be spent on the need to intervene, or not, in the
business rescue application
as a result of the wording of the 2008
Act, what the Common Law is with regard to the joinder of purchasers
(where the seller is
already before the court) in the auction
application, or on the dividing line between a mere financial
interest as opposed to a
real and substantial interest to creditors
in the auction application.
[10]
The non-joinder points do not warrant
further costs orders. They took up little time and effort. The
applications to intervene did
not take up material time either.
Fidelity and SARS would have been joined in the order that I made to
join parties. On a pragmatic
basis, and the costs of intervention
being limited costs, the costs of the applications to intervene also
should be costs in the
cause. In my view, the applicants in the
auction and business rescue applications could have taken the
pragmatic route and allowed
SARS and Fidelity to intervene. They
wanted to be heard, and this judgment always would have had some
impact on them. Accordingly,
if their opposition to the applications
to intervene caused wasted costs, they have to pay those costs.
[11]
The matters were postponed to 4 and 5 May
2020. A further postponement became necessary due to the
unavailability of counsel for
the provisional liquidators. He became
unavailable due to an unexpected commitment in the SCA. A
postponement took some time to
be agreed to, as there were seven
counsel involved in the matter, and many attorneys too. During this
process, the dates 21 and
22 May 2020 appeared to be the most
suitable next available dates, but the junior counsel for the
applicants in the business rescue
and auction applications, had
constraints. These constraints were resolved, and the matter was
postponed on 22 April 2020 by agreement
to 21 and 22 May 2020, and
costs reserved. I was managing the hearing. From the start, I
reflected the view that the legal representatives
should seek to
resolve procedural matters, but that I would, if required to do so,
make rulings. No one could not have had the
impression that I would
not facilitate a fair date for the hearing.
[12]
Again,
in my view, the postponement was one of those inevitable unforeseen
developments in litigation, and the costs of the postponement
should
be costs in the cause. The provisional liquidators still had launched
an application for a postponement on 18 April 2020.
It was an
unnecessary step that was taken in accordance with the unduly
aggressive manner in which the provisional liquidators
conducted the
litigation. The 38 applicants
[10]
to the application for a postponement dated 18 April 2020 must to pay
their own costs in respect of the application.
[13]
Next, I address the role players other than
SARS and Fidelity, to whom I have referred already.
Broad overview of the
role players
[14]
The three applications relate to the
affairs of a group of companies, commonly referred to as the BOSASA
group of companies, now
largely in liquidation. I refer to this group
herein as “
the group of
companies
”, “
the
group
”, or “
the
BOSASA/African Global group of companies
”
(as the group was in a transition from BOSASA to a new identity,
“
African Global
”).
[15]
The holding company of the group is AFRICAN
GLOBAL HOLDINGS (PTY) LTD (“
Holdings
”).
It is not in liquidation and is the first applicant in the business
rescue and auction applications, and the first respondent
in the Rule
42 application. It held all the shares in AFRICAN GLOBAL OPERATIONS
(PTY) LTD (in liquidation) (“
Operations
”).
Operations in turn held shares in ten further companies that are in
liquidation. I first deal with five of them:
[15.1]
BOSASA PROPERTIES (PTY) LTD (in
liquidation) (“
Properties
”);
[15.2]
GLOBAL TECHNOLOGY SYSTEMS (PTY) LTD (in
liquidation) (“
Technology
Systems
”);
[15.3]
LEADING PROSPECT TRADING 111 (PTY) LTD (in
liquidation) (“
Leading Prospect
”);
[15.4]
BOSASA YOUTH DEVELOPMENT CENTRES (PTY) LTD
(in liquidation) (“
Youth
Development Centres
”);
[15.5]
BLACK ROX SECURITY INTELLIGENCE SERVICES
(PTY) LTD (in liquidation) (“
Security
Intelligence
”).
[16]
The
six companies that are in liquidation, are the six companies in
respect of which the business rescue application is brought
(“
the
six business rescue companies
”).
[11]
No
relief is sought in respect of five companies in the group that are
in liquidation:
[16.1]
BOSASA SUPPLY CHAIN MANAGEMENT (PTY) LTD
(in liquidation) (“
Supply Change
Management
”);
[16.2]
BOSASA IT (PTY) LTD (in liquidation)
(“
BOSASA IT
”);
[16.3]
RODCOR (PTY) LTD (in liquidation)
(“
RODCOR
”);
[16.4]
WATSON CORPORATE ACADEMY (PTY) LTD (in
liquidation); and
[16.5]
ON-IT-1 (PTY) LTD (in liquidation)
(“
ON-IT-1
”).
[17]
The
companies in liquidation are represented herein by their provisional
liquidators; three or four provisional liquidators in each
case. I
refer to all of them as “
the
provisional liquidators
”.
However, two of the provisional liquidators were not represented
before me, each held a single appointment only.
[12]
I make no order against them as they did not oppose the relief
sought. Two provisional liquidators led the provisional winding-up,
Mr RF Lutchman and Mr C Murray. The other 11 provisional liquidators
of the six business rescue companies played no active role
in the
proceedings before me.
[18]
The other applicants in the business rescue
and auction applications, other than Holdings, are SUN WORX (PTY) LTD
(“
Sun Worx
”)
and KGWERANO FINANCIAL SERVICES (PTY) LTD (“
Kgwerano
”).
These two companies are also the first and second respondents in the
Rule 42 application. I refer to these three, Holdings,
Sun Worx and
Kgwerano, as “
the business rescue
applicants
”, or “
the
auction applicants
”, or “
the
business rescue and auction applicants
”,
as the case may require. Operations held shares in Sun Worx, and in
Kgwerano, and the two entities were also in some instances,
creditors
of companies in liquidation, the details of which are not relevant to
determine these matters.
[19]
Apart from the 177 other respondents joined
before me, the remaining party in the three matters, is PARK VILLAGE
AUCTIONEERS AND
PROPERTY SALES (PTY) LTD (“
Park
Village
Auctions
”)
that conducted the auction sales in issue, and played no active role
before me.
[20]
I next summarise the relief sought in the
three applications.
Relief sought
[21]
The auction applicants sought the following
relief in the auction application:
[21.1]
Prohibiting any auction of and any other
sale, whether by private treaty or otherwise, of assets of the six
business rescue companies-
[21.1.1]
Before the second meeting of creditors;
and/or
[21.1.2]
Without the written consent by resolution
of the board of directors of Holdings; and
[21.1.3]
Before the final adjudication of the
business rescue application;
[21.2]
Declaring any auction of and any other
sale, whether by private treaty or otherwise, of assets of the six
business rescue companies-
[21.2.1]
Before the second meeting of creditors;
and/or
[21.2.2]
Without the written consent by resolution
of the board of directors of Holdings; and
[21.2.3]
Before the final adjudication of the
business rescue application,
to be null and void;
[21.3]
Prohibiting delivery and registration,
where applicable, of movable and the transfer and registration of
immovable assets to any
prospective purchaser of the assets of the
six business rescue companies whilst in liquidation and-
[21.3.1]
Before the second meeting of creditors;
and/or
[21.3.2]
Without the written consent by resolution
of the board of directors of Holdings; and
[21.3.3]
Before the final adjudication of the
business rescue application;
[21.4]
Ordering the respondents to pay the costs
of this application, on the attorney-and-client scale, the one to pay
the others to be
absolved from liability.
[22]
The business rescue applicants in the
business rescue application sought the following relief:
[22.1]
Placing the six business rescue companies
under supervision and that business rescue proceedings be commenced
in terms of section
131(1) of 2008 Act;
[22.2]
Appointing Daniel Terblanche as business
rescue practitioner to conduct the business of the six business
rescue companies with all
powers and duties entrusted to him in terms
of the 2008 Act;
[22.3]
[Some relief regarding service of the
papers not relevant at this stage];
[22.4]
Ordering that the applicants’ costs,
taxed on the scale between attorney-and-client, to be paid by the six
business rescue
companies.
[23]
Fidelity sought the following relief in the
Rule 42 application:
[23.1]
“
That paragraph 2 of the order
granted by the Honourable Mr Justice Boohla dated 28 October 2019 be
varied by the insertion of the
words "and African Global
Operations (Pty) Ltd (in liquidation)" after the words "Bosasa
Properties (Pty) Ltd (in
liquidation)";
and
[23.2]
“
That there be no order as to
costs in this application, unless opposed, in which event the party
opposing the application be ordered
to pay such costs, alternatively
the costs occasioned by their opposition
”
.
Introduction (continued)
[24]
If the auction application fails, the
business rescue application probably also has to fail as the six
business rescue companies
would be divested of all assets. The
auction application therefore needs to be determined before the
business rescue application,
despite the latter being the earlier
application. The Rule 42 application pertains to the wording of a
court order, an order that
is one of the two main matters to be
decided in the auction application. The Rule 42 application therefore
has to be determined
first.
[25]
I have made findings under the heading
“
introduction
”
about reserved costs in certain instances. There were more
in
limine
issues raised in the papers:
[25.1]
Non-joinder (which was resolved on the
first day of the hearing as set out above);
[25.2]
An
alleged failure by the applicants in the auction and business rescue
applications to make out a case in the founding papers.
In this
matter, little benefit could be gained by taking a two-step approach.
The parties agreed that regard should be had to all
papers in the
three applications. Any alleged defects in the founding affidavits
have been sufficiently addressed to eliminate
a peering at them on
their own. It seems to me that
Valentino
Globe BV v Phillips and Another
[13]
permits a common sense handling of the matter on all the papers filed
of record. None of the parties sought a referral to evidence,
and I
can address all factual disputes by applying
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd.
[14]
I
therefore make no order in respect of this
in
limine
defence. It added no material time to the argument and no separate
costs order is required; and
[25.3]
Two
striking out applications aimed at affidavits by the provisional
liquidators. In issue, in those applications, are primarily
defamatory averments and inuendo. I deal later with penalising costs
in this regard, but in the end, I did not order the striking
out of
paragraphs in the affidavits by the provisional liquidators. The
reason is that it would add nothing to resolve the matter.
[15]
In my view, some of my reasoning is addressed later herein in a bit
more detail, I would have struck some averments in the papers
delivered by the provisional liquidators. Still, limited time was
spent on this aspect, and I order that those costs be costs in
the
cause.
[26]
Taxation
in this matter will be difficult. It is caused by three interrelated
matters being argued. Taxation will further be complicated
by the
additional affidavits delivered, of which almost all added little
value.
[16]
I request the
taxing master to carefully consider, in light of this judgment, any
claim on taxation for preparing additional affidavits.
A part of the
disciplined approach to motion proceedings is that there are three
sets of affidavits (founding, answering and replying).
Where
necessary, any new matter in reply should be dealt with by clearly
objecting thereto, striking out, or by responding thereto.
In this
case additional affidavits were delivered. Any such affidavit should
not re-argue the case, and only address the new matter.
[27]
I next address the chronology of events.
Chronology
[28]
To avoid later duplication, I make some
remarks about factual matters in the chronology of events. The
chronology of events in this
matter is of particular importance in
the following respects: (a) the interpretation of the court order
that provided for consent
to sales of assets of companies that are in
winding-up, (b) if such consent was given, and (c) the probability of
success in the
business rescue application. In many ways, the answers
to these questions would be self-evident at the end of the chronology
of
events.
[29]
The BOSASA/African Global group of
companies rendered services to government departments and state-owned
enterprises. They typically
submitted tenders pursuant to which fixed
term contracts would be concluded with them, if their tenders were
accepted. This is
an important consideration in the business rescue
application, as that business is no more, as will appear below.
[30]
The
companies had inter-company loans, and do not appear to have
maintained strict separate corporate personalities. The business
rescue application, at some stage, even contained an alternative
prayer that the corporate personalities be disregarded. Evidence
before the Zondo Commission of Enquiry into State Capture (“
the
Zondo Commission
”)
caused the group to receive extensive negative publicity about the
way in which business was conducted within the group.
Mr Gavin
Watson
[17]
was a central figure in the unfavourable evidence led at the Zondo
Commission and had passed away before the present proceedings
commenced. This is an important consideration in the business rescue
application, as new business undertaking will face this legacy.
[31]
A consequence of the evidence before the
Zondo Commission was that first First National Bank (“
FNB
”)
in November 2018 and then later, ABSA Bank (“
ABSA
”)
in February 2019, advised that they would withdraw
banking facilities from Operations (and thus from the whole group).
This was
so as payments in respect of these tenders were not made to
the company concerned, but to Operations. The other companies did not
have their own bank accounts.
[32]
On 28 January 2019, an auditor, Ms Colleen
Passano CA (SA) issued a letter contemplated by section 360.17 of the
South African Institute
of Chartered Accountants Code of Conduct
recording numerous reportable irregularities in
the affairs of the group.
[33]
The writing was on the wall. During the
first week of February 2019, the boards of Holdings and Operations
met with attorney Danie
Potgieter. He assisted and on 12 February
2019, special resolutions by their shareholders were adopted, placing
Operations and
the ten subsidiaries identified earlier herein, in
voluntary winding-up in terms of sections 349 and 350 of 1973 Act.
The simple
truth is that the boards formed the view that the business
conducted by the group was no longer viable. On 14 February 2019, the
resolutions were filed with the CIPC and the companies were thus
wound up.
[34]
On 21 February 2019, the Master appointed
Mr Lutchman and Mr Murray as the first two provisional liquidators
for Operations, and
on 27 February 2019 in respect of the ten
subsidiaries identified earlier herein. From time-to-time the Master
appointed further
provisional liquidators for the eleven companies so
placed in liquidation.
[35]
On 22 February 2019, auditors D’Arcy
& Co Inc placed on record that its services were engaged to
perform an audit of the
financial statements of the group, but that
it could not do so because the annual financial statements for the
year ending February
2018 (due by August 2018) in respect of Holdings
and certain subsidiaries, had not been prepared. The unreliability of
past annual
financial statements was not resolved thereafter. No
purpose would be served to re-do financial statements of companies in
final
winding-up. On 25 February 2019, D’Arcy & Co Inc
issued Holdings and its subsidiaries with a notice
in
terms of
section 45
of the
Auditing Profession Act 26 of 2005
, that
the affairs of the companies have been conducted in a manner that
does not impart confidence or trust, but anxiety and concern.
This is
an important consideration in the business rescue application, as the
applicants relied on the financial statements.
[36]
On 26 February 2019, Holdings took issue
with the special resolutions and contended that the winding-ups were
invalid. This dispute
would continue until November 2019 when the SCA
ruled on the matter. On 5 March 2019, Holdings launched an
application to set aside
ab initio
the winding-up of all eleven companies placed in winding-up due to an
alleged defective procedure followed in their winding-up.
[37]
On 14 March 2019, Ameer AJ granted the
relief (“
the Ameer order
”)
and set aside the winding-up of all eleven companies. On 14 March
2019, notice was given that leave to appeal the decision
would be
sought. On 20 March 2019 leave to appeal the Ameer order to the SCA
was granted. At this stage, there was no doubt as
to the position in
law, all eleven companies remained in liquidation pending the appeal
and the provisional liquidators had to
fulfil their functions as
such. This is an important consideration in the auction application.
I do not discount that a pragmatic
person in the position of the
provisional liquidators would have considered the impact of a
potential dismissal of the appeal on
steps taken in the interim,
apart from the restrictions placed in law on the powers of
provisional liquidators.
[38]
On 20 March 2019, the Cabinet instructed
all the government departments to terminate all contractual
relationships and any association
with the BOSASA/African Global
group. This is an important consideration in the business rescue
application. There is no indication
that this position is likely to
change, and such an eventuality is not relied upon in the business
rescue application.
[39]
On 29 March 2019, Fourie J ordered a tax
inquiry as envisaged in
section 50
of the
Tax Administration Act 28
of 2011
into the affairs of the group.
[40]
Before the chronology is further set out, a
contextual point needs to be made:
[40.1]
During the period February/March 2019 to
about October/November 2019, the provisional liquidators did not only
preserve the assets
of the group, but traded it down, closed its
operations. The contracts were terminated, employees left, and assets
were sold. This
was done based on powers given to them in two court
orders referred to below, and in consultation with the boards of
Holdings and
Operations. An informal arrangement was reached between
the provisional liquidators and the boards met monthly for a while.
If
one has regard to the minutes of these monthly meetings, they
reflect a process where largely by consent, businesses were wound
down. This resulted in redundant assets, which brought, in turn,
holding costs. No one disputed that redundant assets had to be
sold,
but I found no proof of any agreement that every asset would be sold
at an auction on terms and on a date determined by the
provisional
liquidators. Monthly meetings were held on the following dates (and
some meetings are again referred to below)-
[40.1.1]
1 April 2019 (“
the
first meeting
”);
[40.1.2]
8 April 2019 (“
the
April meeting
”);
[40.1.3]
3 May 2019 (“
the
May meeting
”);
[40.1.4]
20 June 2019 (“
the
June meeting
”)
[40.1.5]
12 August 2019 (“
the
August meeting
”);
[40.1.6]
7 October 2019 (“
the
October meeting
”);
[40.2]
As will appear below, the meeting in
November 2019 was not held, when disputes about the powers of the
provisional liquidators had
been raised;
[40.3]
The winding down of the businesses and the
like were discussed during these monthly meetings; and
[40.4]
The court applications referred to above,
and the third one in issue in the auction application, were obtained
with the consent
of the boards of Holdings and Operations. They were
(are referred to again below)-
[40.4.1]
On 2 April 2019, Tsoka J granted an order
(“
the Tsoka order
”);
[40.4.2]
On 14 May 2019, Mudau J granted a further
order (“
the Mudau order
”);
and
[40.4.3]
On 28 October 2019 Bhoola AJ granted the
third order (“
the Boohla order
”)
already referred to in the relief sought in the
Rule 42
Application.
[41]
Reverting to the chronology and as referred
to above, on 2 April 2019, the Tsoka order was issued. The order
inter alia
extended the provisional liquidators’ powers under section 386
of the 1973 Act to conduct business and required them to exercise
such powers “…
in
consultation with
the board(s) of directors of the specific company or companies
involved in the transaction(s) and decisions
”
(underlining added). This order was issued where there was a pending
appeal against the Ameer decision.
[42]
On 8 April 2019, the April meeting took
place. At this meeting the sale of the assets to potential interested
parties was discussed,
and efforts to do so recorded. All attempts to
find purchasers came to nought.
[43]
On 3 May 2019, the May meeting took place.
At this meeting the sale of surplus assets by the provisional
liquidators was discussed,
with “
offers
”
agreed to have to be between “
retail
and forced values
”. I assume that
was meant that assets should be sold between forced sale values and
market values. Importantly, the discussion
was not that the
provisional liquidators could sell without reserve at an auction. A
forced sale value is lower than market value.
[44]
On 14 May 2019, the Mudau order was issued.
The order had the same terms as the Tsoka order, save for stating
that the order was
only to remain in effect until such time as
judgment was handed down in the SCA. Regarding consent, the order
expressly required
reasonable notice to the boards of the
consultative process (underlining added):
“
6.
The powers in paragraphs 4 and 5 above shall be
exercised by the Applicants
in
consultation with
the board(s)
of directors of the specific company or companies involved in the
transaction(s) and decisions and
the
Applicants shall at all times be obliged to give the directors in
question reasonable notice of the meeting at which it is sought
to
consult and of the subject matter thereof
.”
[45]
This order was issued where there was a
pending appeal against the Ameer decision. Thereafter there was no
notice of an auction,
or on what terms the auction should be held.
[46]
On 3 June 2019, the first session of the
tax enquiry by SARS took place.
[47]
On 20 June 2019, the June meeting took
place.
[48]
On 12 August 2019, the August meeting took
place.
[49]
On 26 August 2019, Mr Gavin Watson passed
away.
[50]
During about August/September 2019, the
provisional liquidators sought to sell assets and prepared the
founding papers in what would
lead to the Boohla order. On 4
September 2019, Mr Gough of Rushmere Noach attorneys (“
Rushmere
”),
who had sight of the draft application, consented thereto on behalf
of all boards of the companies in the group in a letter
addressed to
Mr Ferreira of VLV attorneys (“
VLV
”)
acting on behalf of the provisional liquidators and stated
(underlining added):
“
We
also confirm that by virtue of your clients agreeing
that
they will not exercise their powers other than
:
1.
in consultation
with
our clients; and
2.
without the
consent
of our clients,
and
as a matter of practicality (without conceding the legal position or
rights) our clients consent to the relief claimed in the
notice of
motion
.”
[51]
On 7 October 2019,
the
October meeting
took place. This was
the last meeting and predated the Bhoola order.
[52]
On 28 October 2019, the Boohla order
followed, in express, agreed terms. It is addressed in more detail
below, but I need to reflect
the paragraph that is the main matter in
issue before me (underlining added):
“
The
assets referred to in paragraphs 1 and 2 above shall be sold
in
consultation with and with the consent
of the board of African Global Holdings (Pty) Ltd, African Global
Operations (Pty) Ltd (in liquidation), and the respective boards
of
its subsidiaries referred to in paragraphs 1 and 2 above
.”
[53]
The “
consultation
”
provided for in the earlier orders, became “
consultation
and consent
” in this order.
[54]
Also, on 28 October 2019, Park Village
Auctions already presented an auction proposal to the provisional
liquidators. On 30 October
2019, the provisional liquidators
appointed Park Village Auctions to attend to a sale of the assets of
the group by auction. It
is not clear to me, but the date arranged
was 26 and 27 November 2020, before the hearing of the appeal against
the Ameer decision.
[55]
On 4 November 2019, Park Village Auctions
advised the provisional liquidators that an auction in December is
not advisable as “
we have found
from past experiences, that the buying power declines as buyers are
focused on closing for the holiday period
”.
They would later contend that the first week of December was the last
opportunity.
[56]
On 4 November 2019, Ms L Watson, Mr Joe
Gumede (“
Mr Gumede
”)
and Ms Jacqui Leyds, in a meeting with Park Village Auctions, learnt
of an imminent sale of most movable assets of the
group on 26 and 27
November 2019. They were surprised and objected to the sale. This is
consistent with the version that there
was no agreement of a sale of
assets by public auction.
[57]
On 4 November 2019, Rushmere recorded that
the various boards had not consented to the sale and that they object
to such a sale
without their consent. I pause here, this too was
consistent with the version that there was no agreement of a sale of
assets by
public auction. Rushmere’s clients demanded that a
process be followed that would ensure that informed consent was
given.
The procedure they proposed seems good in parts and unduly
burdensome in others (as a large number of assets are involved,
necessarily
of a range values). The first part of the proposal is
enough of an illustration:
“
(a)
compile a written proposal in respect of each intended sale with
details of the asset, its estimated value, the form of sale,
the
anticipated sale price, tax consequences of the sale, the advantage
of sale as opposed to retention of the asset, details of
any
encumbrance and the manner in which such encumbrance will be
released, expected timeframe of the sale process and all detail
which
would be necessary for consideration by the Directors before consent
can responsibly be given;
b)
…
”
[58]
When this letter was written, the directors
of Holdings were Mr Gumede, Ms Thandi Makoko (“
Ms
Makoko
”), Mr Ismael Dikani (“
Mr
Dikani
”), and Ms Munirah Oliveria
(“
Ms Oliveria
”).
[59]
The issue of an unauthorised auction was
firmly and clearly raised. The provisional liquidators blame Mr J
Watson for this development.
On 5 November 2019, Mr J Watson
consented to his appointment as a director of Holdings.
[60]
On 6 November 2019, VFV responded to
Rushmere, stating that they would seek instructions and recorded that
it seemed that some of
the requirements in paragraph (a) of the
letter, quoted above, “
may well be
a bit over the top, but it is clear that we must agree on a pragmatic
methodology as soon as possible
.”
Tellingly the letter did not record that consent had already been
given. These attorneys had been involved in the obtaining
of the
Bhoola order and the consent thereto.
[61]
In my view, once the issue of consent was
raised, an appropriate response by a provisional liquidator would
have been, not a belligerent
one, but one in which the provisional
liquidators would (a) undertake to comply with the Bhoola order and
with the deal made, or
(b) state that they hold a different view, and
what that view was (and if need be, approach a court for a revised
ruling). Provisional
liquidators, acting in good faith, had to come
clean, if they intended to arrange an auction without seeking consent
as set out
in the Bhoola order.
[62]
On 7 November 2019, having taken
instructions, VFV responded further and provided Rushmere with an
auction proposal (and budget)
for an auction to take place in the
first week of December 2019 and stated that “
there
has been already in principle agreement for the liquidators to
proceed with the sale as reflected
”
in the attachment. This is of course no answer to an interpretation
of the Bhoola order that required consultation and consent
and the
provisional liquidators would have been advised accordingly.
[63]
On 7 November 2019, Mr Gumede, Ms Makoko,
and Mr Dikani resigned as directors of Holdings. The meant that Ms
Munirah Oliveria was
the sole remaining director.
[64]
On 8 November 2019, Rushmere consented to
the sale of the certain assets:
“
a)
firearms;
b) equipment and
furniture in respect of the repatriation and youth centres;
c) equipment to the
Department of Correctional Services; and
d)
shareholding in Ntsimbintle
.”
[65]
Rushmere recorded that in respect of the
remaining assets, Rushmere’s clients were advised by the
auctioneers that it would
be preferable to sell those assets the next
year. They sought an alternate proposal on how to sell the remainder
of the assets
if their proposal was not acceptable.
[66]
On 11 November 2019, Ms L Watson and Mr J
Watson became directors of Holdings.
[67]
On 12 November 2019, VLV recorded their
instructions that (underlining added):
“
2.
Having considered your letter, the liquidators instruct that:
2.1 Your letter runs
quite contrary to the discussions between them and the board members
who in principle consented to the sale as proposed by the
liquidators
.
2.2
…
[18]
2.3 The refusal to
sell will obviously also indirectly impact on the position of the
holding company.
2.4 There is no reason
at all why the sale should not proceed and in the absence of
compelling reasons they are proceeding with
the proper advertisement
and sale of the assets
as previously planned in conjunction with
the boards
.
3.
The above notwithstanding the
liquidators will in the meantime set up an urgent meeting with all
the board members so as to thrash
out any specific issues that there
may
be
.”
[68]
Clearly the provisional liquidators decided
not to follow the suggested approach by their attorney of agreeing
“
on a pragmatic methodology”
to sell assets. The letter quite clearly reflects that the
provisional liquidators knew that they did not have actual consent to
the proposed auction, only consent in principle (that assets may be
sold?). There is no evidence of prior, joint planning of such
an
auction. Indeed, there is no evidence that the consent to the auction
was ever even asked for. The alleged proposed meeting
did not take
place.
[69]
When the above letter was received by
Rushmere, the parties were travelling to Bloemfontein. On 15 November
2019, the Supreme Court
of Appeal heard the appeal against the Ameer
order. On 15 November 2019, Park Village Auction already published
briefly an advertisement
to hold the auctions on 4 December 2019.
This could only mean that the provisional liquidators were busy in
the background to proceed
with the arrangements.
[70]
On 20 November 2020, Rushmere recorded in a
letter directed,
inter alia
,
to VFV that (underlining added):
“
The
liquidators have not consulted the directors of Holdings nor have
those directors granted their consent to the intended sale
.
To the best of the knowledge of the directors of Holdings there has
not been proper consultation with the directors of Operations
or the
subsidiaries, whose assets are the subject matter of the intended
sale, nor have those directors given their consent thereto.
In
the absence of such consultation and consent, the intended sale is in
breach of the order. Moreover, in the absence of a proper
explanation
from the liquidators, their conduct (and possibly their agents in
conducting any sale) will be in contempt of the order
as well
”
;
and
“
...
With regard to the email from Mr.
Ferreira of 12 November 2019, whilst certain directors may have
agreed
in principle to sell the
assets
, this is not to say that
the requisite consent of the boards of Holdings, Operations and the
applicable subsidiary was given.
The
liquidators are invited to produce such consent if they are in
disagreement that it has not been obtained
.”
[71]
Such consent was not produced, despite a
reminder referred to below.
[72]
On 20 November 2019, Mr J Watson and Ms L
Watson were appointed as directors of Holdings.
[73]
On 21 November 2019 VFV placed the
provisional liquidators’ instructions on record (underlining
added):
“
3.2
There is on the part of the
co-liquidators no doubt that the boards have consented to and
participated in the decision-making process
regarding the imminent
auctions
”
;
and
“
4.
With the above in mind the liquidators are committed to the proper
(well publicised) auctions of the assets advertised, on 4,
5 and 6
December 2019
.”
[74]
On 22 November 2019, the Supreme Court of
Appeal reversed the Ameer order. According to the provisional
liquidators’ heads
of argument, the appeal was upheld and the
SCA “
scathingly dismissed and
characterised the Ameer application as an abuse
”.
This is not how I read the judgment. I read nothing therein that
would fairly be characterised as a scathing dismissal
of an abusive
application
.
The
SCA accepted that the process was triggered by the provisional
liquidators taking control of the companies that were in liquidation,
and the SCA criticised the acting judge’s reasoning, but those
two findings do not reflect the application as an abuse.
[75]
Also on 22 November 2019, Park Village
Auctions started to give publicity to the auction to be held on 4 to
6 December 2019.
[76]
On 25 November 2019, Holdings consulted a
business rescue practitioner.
[77]
On 27 November 2019, a new attorney Mr
Goodes at Goodes & Seedat Attorneys (“
Goodes
”),
acting on behalf of Holdings, recorded in a letter that (underlining
added):
“
4.
Neither the board of directors of African Global Holdings (Pty) Ltd,
nor the board of directors of the respective African Global
Group
companies in liquidation
were
consulted in regard to the intended auction
and neither the board of directors of African Global Holdings (Pty)
Ltd, nor the board of directors of the respective African Global
Group companies in liquidation
have
given their consent that the assets can be sold by this hastily
convened auction
.”
[78]
There is no doubt, on the proven facts,
that this letter correctly reflects the factual position. Had there
been an actual version
to the contrary, it would have been produced.
On 28 November 2019, followed this response from VFV:
“
2
,
Unfortunately your clients
have
not properly instructed you
alternatively you have not had the opportunity to fully
appraise
yourself with the legal process
that has ensued since the voluntary winding up of the above-mentioned
companies.
3,
Simply out of courtesy
,
the following
: …”;
[79]
The “
following
”
is then an argument that:
[79.1]
The order was meant to be in place pending
the determination of the appeal;
[79.2]
The SCA judgment rendered the Bhoola order
ineffectual;
[79.3]
Its clients were “
now
singularly vested with the control and authority over the assets of
the group of companies
”;
[79.4]
(In any event) “
there
is on the part of the co-liquidators no doubt that the boards have
consented to and participated in the decision-making process
regarding
the imminent auctions
”, and
[79.5]
“
The attempt by the newly
constituted board of AGH to repudiate the decisions taken their
predecessors is without merit
.”
[80]
One should pause here and reflect on this
letter. The provisional liquidators were never more than provisional
liquidators, in law
with limited powers. The SCA judgment did not
place them in a position where they had “
control
and authority over the assets of the group of companies”
to
do as they pleased. No one could have believed such an interpretation
of the SCA judgment. Still no facts were alleged on which
the
provisional liquidators could rely for consent to the auction. Simply
saying over and over that they had consent to the auction
in
principle, is meaningless, and does not raise a real and
bona
fide
factual dispute, the actual facts
of such consent had to be alleged. Factually further, the issue of
consent to the auctions were
raised by the previous board of
Holdings. It was not a new board that repudiated alleged prior
decisions. I also have referred
to the reaction by the author of this
letter when the issue of consent was raised with him. He too held the
view that consent had
to be obtained.
[81]
On 29 November 2019, Mr J Watson and Mr R
Watson consulted new counsel, who appeared before me.
[82]
On 29 November 2019, SARS issued an Audit
Findings letter pertaining to Supply Change Management, reflecting a
tax liability of
R500 Million.
[83]
Between 30 November 2019 and 2 December
2019 the business rescue application was prepared, and settled. It is
common cause that
the application was prepared under pressure. The
provisional liquidators go as far as to describe the application in
their heads
of argument as “
manifestly
a rushed conflation of [conflicting] company law principles and
provisions
”.
[84]
On 2 December 2019, Goodes recorded that
VFV has not responded to their request for proof of the consent, and
recorded that the
Bhoola order would stand until set aside, and that
the SCA judgment had no impact thereon. He demanded a cancellation of
the auction.
[85]
On 3 December 2019, a short response
followed from VFV, to the effect that there was no reason not to
proceed with the auction.
[86]
On 3 December 2019 Goodes recorded that the
business rescue application was issued, and would be served on that
day. They referred
VFV to section 131(6) of the 2008 Act, that such
an application suspends the winding-up process. The application was
issued on
3 December 2019.
[87]
At 16H44 on 3 December 2019, the business
rescue application was served by e-mail on Mr Ferreira and on
seemingly other provisional
liquidators. It is common cause that Mr
Murray and Mr Lutchman received it. At 17H15, Mr Ferreira of VFV
responded and stated that
he does not hold instructions anymore, and
that Ms Wessels of MacRobert Attorneys does.
[88]
On 4 December 2019, Park Village commenced
to hold an auction
inter alia
of the assets of the
six business rescue
companies
, despite the business rescue
application. The urgent application sought to enforce the Bhoola
order in part, any sale had to be
with the written consent of
Holdings.
[89]
On 4 December 2019, an urgent application
was launched by Holdings, of the liquidated companies. The matter was
stood down till
the next day by Wright J. On 5 December 2019, the
Wright J struck the urgent application from the roll for lack of
urgency.
[90]
On 5 to 6 December 2019, Park Village
Auctions finalised the auction of the assets of the
six
business rescue companies
.
[91]
Park
Village Auctions and Advanced Valuers, valued the assets to be sold
at R95 Million.
[19]
The
movable assets were sold for R30 Million.
[20]
A repeated assertion was that the sales were a great success. It is
not clear to me if this was so, if relevant:
[91.1]
Portion 222 (a Portion of Portion 212) of
The Farm Luipaardsvlei was valued at a market value of R38 Million,
and a forced sale
value of R25 Million, and was sold to Fidelity for
R14 Million. On those valuations, it was not a successful sale on any
basis;
[91.2]
Portion 210 (a Portion of Portion 136) of
The Farm Luipaardsvlei was valued at a market value of R32 Million,
and a forced sale
value of R23 Million, and was sold to the state for
R69 Million. On those valuations, it was not a successful sale;
[91.3]
Portion 214, 215 and 216 (Portions of
Portion 212) of The Farm Luipaardsvlei were valued a market value of
R5.4 Million, and a forced
sale value of R2.7 Million and as sold for
R6 Million. On those valuations, it was not a successful sale; and
[91.4]
The
values of the movable assets sold are not as clear. Only forced sale
values were used in the valuation. These valuations appear
on
valuation sheets, and one of them does not have a final total, making
easy addition difficult. The forced sale valuations excluded
VAT. It
seems from the figures used by the provisional liquidators, that the
total assets to be sold were valued at R95 203 295,
[21]
(and from a quick perusal of the valuation sheets), that the movable
assets had a forced sale value of about R20 Million
[22]
excluding VAT. The auction report reflects sales of movables to the
value R26 Million
[23]
if VAT
is excluded for consistency sake. A finding of a successful auction
would depend on the value used for assessment.
[92]
On 20 December 2019, the auction
application was launched.
[93]
On 7 February 2020, the provisional
liquidators sold the remaining asset in the group, referred to above.
[94]
In a supplementary affidavit dated 10 March
2020 in the auction application, they contend (a) that on a proper
interpretation of
the Bhoola order, they needed no consent after the
SCA judgment, (b) in any event they had consent, and (c) in any event
it was
impossible to comply with the consent provision in the Bhoola
order:
“
75
As such and in law, the subject companies did not have any directors
as at the date upon which the Boohla order was granted and
the
conditions imposed pursuant to paragraph 3 of the Boohla order was a
non-event. It was, as such, impossible to fulfil from
day one as not
a single one of the subject companies had any directors with effect
from 14 February 2019
.”
[95]
The next day, on 11 March 2020, the first
hearing commenced of the auction application and of the business
rescue application. I
have dealt with the rest of the hearings.
[96]
This matter requires interpretation of the
2008 Act, the 1973 Act, the
Insolvency Act 24 of 1936
(“
the
Insolvency Act
&rdquo
;), and of the
Bhoola order. Interpretation plays an important role in this matter.
The law on interpretation
of legal instruments
[97]
I
apply
Natal
Joint Municipal Pension Fund v Endumeni Municipality
,
[24]
and I was particularly influenced by the clarity of the drafting
(where applicable) of the words to be interpreted (off course
read in
context), the decreased emphasis on context in such cases, the status
of court orders, the line where this court’s
powers of
interpretation ends, and the Constitutional right to equal protection
and benefit of the law
(section 9).
Some of my findings give greater
content to a purposive interpretation, especially where the right to
equality plays out and technical
hurdles are sought to be introduced
to the application of the law. I sought to remain faithful to the
fact that this court’s
role is to interpret; the exercise is
one of interpretation. In some instances, my task is made easier by
interpretation binding
on me.
[98]
I
am guided by the fact that both the SCA and the Constitutional Court
must be aware of the tension that I observe and encounter
in
practice. The law requires of me to follow the SCA where I observe
tension, unless and until I can state that a judgment of
the
Constitutional Court is so inconsistent with the
ratio
decidendi
of the SCA, that it implicitly has overruled it. In another context
the Constitutional Court stated that (footnotes omitted):
[25]
“
The
rule of law requires that the law be clear and ascertainable.
As stated by this Court in Affordable Medicines: “The
law must
indicate with reasonable certainty to those who are bound by it what
is required of them so that they may regulate their
conduct
accordingly.” The application of the common law rules of
contract should result in reasonably predictable outcomes,
enabling
individuals to enter into contractual relationships with the belief
that they will be able to approach a court to enforce
their bargain.
It is therefore vital that, in developing the common law, courts
develop clear and ascertainable rules and
doctrines that ensure that
our law of contract is substantively fair, whilst at the same time
providing predictable outcomes for
contracting parties. This is
what the rule of law, a foundational constitutional value, requires.
The enforcement of contractual
terms does not depend on an individual
judge’s sense of what fairness, reasonableness and justice
require. To hold
otherwise would be to make the enforcement of
contractual terms dependent on the “idiosyncratic inferences of
a few judicial
minds”. This would introduce an unacceptable
degree of uncertainty into our law of contract. The resultant
uncertainty
would be inimical to the rule of law.”
[99]
In
my experience, often, paragraph 18 of
Endumeni
is
relied upon for a contention that a court must use context to
such an extent, that the argument is no longer about interpretation
of the document. This is not what
Endumeni
has
found. Perhaps the reason for the approach is that paragraph 18 of
Endumeni
,
with respect, is just too short a formulation of the principles that
I fully support.
[26]
[100]
The
principle remains, where words are read in context, this does not
mean that words can mean whatever a judge wants them to mean.
Repeatedly the warning is sounded to judges: In interpreting legal
instruments, do not cross the divide between the legislative
and
judicial powers; do not make an agreement for the parties that they
did not make. By way of example see
Endumeni
[27]
para 18,
Kubyana
v Standard Bank of South Africa Ltd
para 18,
[28]
and
S
v Zuma and Others
para 17 and 18.
[29]
Judges look at matters with the benefit of hindsight, often able to
see what parties, parliament or litigants should have done
(but in
fact did not do/agree). The risk is high of interpreting documents
without due regard to proper demarcation judicial powers.
[101]
The
use of context in interpretation is without doubt in the SCA.
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
para 29
[30]
adopts with
approval the statement in
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
para 12
[31]
that the approach
that a court only looks at surrounding circumstances (context) when
there is an ambiguity in language, is “
no
longer consistent with the approach to interpretation now adopted by
South African courts in relation to contracts or other documents,
such as statutory instruments or patents
”.
A point made in
Bothma-Batho
para 12 is made again in Novartis para 29, namely that interpretation
is one unitary exercise. See too the statement in
Novartis
para
28:
[32]
“…
A
court must examine all the facts - the context - in order to
determine what the parties intended. And it must do that whether
or
not the words of the contract are ambiguous or lack clarity. Words
without context mean nothing
.”
[102]
The
move in approaches to interpretation now reflected in
Endumeni
,
is part of a history with long roots in this country. Many judgments
that predate
Endumeni
emphasised
the role of context in interpretation. As Gamble J states in
Quest
Petroleum (Pty) Ltd v Walters and Another
[33]
para 44, “
the
authorities go back a century or more
”
before he refers to judgments by Wessels CJ, Greenberg JA, Innes CJ,
Diemont JA, Conradie JA, FH Grosskopf JA, and others.
A further
useful selection of such judgments is to be found in an article
The
Life and Times of Textualism in South Africa
[34]
,
where the author refers to judgments by de Villiers JA, Schreiner JA,
Joubert AJA, Wessels JA, Malan AJA, and others.
[103]
Endumeni
was
part of our law that moved towards a contextual, objective assessment
of language used in legal instruments, based on text,
factual
context, and purpose. The change that
Endumeni
brought, was to cement an approach that
gives effect to the truism that sometimes text goes wrong. There is
another, equally valid
truism, often people write what they mean to
say.
[104]
I must make one more point:
Endumeni
did not do away with the concepts of
variation of court orders, rectification of contracts, findings of
implied and tacit terms
in contracts, parol evidence and the like. It
simply reflects an approach to interpretation where context and text
merge.
[105]
In
this case, some findings that I am asked to make may well not be
findings of interpretation, but of tacit terms. There is a clear
distinction between interpreting express words, and reading a tacit
term into a document. The clear distinction we draw between
implied
and tacit terms is drawn in English law too, but without our
distinctive use of the terminology of tacit versus implied
(by
law).
[35]
In
Marks
and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey)
Ltd and Another
[36]
Lord Neuberger P
[37]
after
inter
alia
referring to the two types of unexpressed terms in a contract in para
15,
[38]
makes a clear
distinction between the process of interpretation versus finding (in
our terms), a tacit term in para 28 - 29:
“
[28]
In most, possibly all, disputes about whether a term should be
implied into a contract, it is only after the process of construing
the express words is complete that the issue of an implied term falls
to be considered. Until one has decided what the parties
have
expressly agreed, it is difficult to see how one can set about
deciding whether a term should be implied and if so what term.
This
appeal is just such a case. Further, given that it is a cardinal rule
that no term can be implied into a contract if it contradicts
an
express term, it would seem logically to follow that, until the
express terms of a contract have been construed, it is, at least
normally, not sensibly possible to decide whether a further term
should be implied. Having said that, I accept Lord Carnwath's
point
in para [71] to the extent that in some cases it could conceivably be
appropriate to reconsider the interpretation of the
express terms of
a contract once one has decided whether to imply a term, but, even if
that is right, it does not alter the fact
that the express terms of a
contract must be interpreted before one can consider any question of
implication.
[29] In any event, the
process of implication involves a rather different exercise from that
of construction. As Sir Thomas Bingham
trenchantly explained in
Philips
[1995] EMLR 472
at 481:
'The
courts' usual role in contractual interpretation is, by resolving
ambiguities or reconciling apparent inconsistencies, to attribute
the
true meaning to the language in which the parties themselves have
expressed their contract. The implication of contract terms
involves
a different and altogether more ambitious undertaking: the
interpolation of terms to deal with matters for which, ex hypothesi,
the parties themselves have made no provision. It is because the
implication of terms is so potentially intrusive that the law
imposes
strict constraints on the exercise of this extraordinary power
.'”
[106]
Endumeni
is
generally seen as a step in breaking from the past, when our courts
for the most part, followed a literal or textual approach
to the
interpretation of legal documents. In the past, if (what seemed to
be) the ordinary meaning was clear, that meaning was
given effect to.
Only if that meaning was absurd, could the ordinary meaning be
departed from and another meaning given to the
word (and certain
contextual matter be considered). Our law largely based on English
law in this regard. It was no doubt influenced
by the view then that
the will of Parliament was supreme.
[107]
With
respect, our law has not yet reached its interpretation destination.
The question remains the extent of the use of context,
especially
when words read in context have a clear meaning. Those words often
were agreed upon, and often those words form part
of a well-written
product. It is useful in this regard to consider an article by the
author of
Endumeni,
Wallis
JA
.
[39]
This judgment does not call for a fuller discussion of the article,
but the article reflects nuances to interpretation that I too
believe
should be part of our law (as it is in current English law) about
when context should carry more weight, as opposed to
text, and when
not. Perhaps ironically, such a move close to English law, could
relieve the tension that I observe.
[108]
As
is clear from
Endumeni
itself, the break from the past as evidenced in
Endumeni
,
in a large part followed not old Roman Dutch authorities, but
development in English law itself. I believe that it is fair to
say
that modern day English law on interpretation changed the approached
in many countries outside the United Kingdom, including
Australia,
New Zealand, Canada, Hong Kong, Singapore, and countries in Southern
Africa. This is addressed in the two articles already
referred to. It
is a journey. In
City
of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association,
[40]
a judgment by Navsa ADP and Mothle AJA,
[41]
the court held at para 60 (footnotes omitted):
“
[60]
It is unrealistic to expect of this court or, indeed, of any court,
pronouncements that will end theoretical debates that have
raged over
many decades and settle for all time, terminology that will obviate
confusion. No practical purpose is served by promoting
one of the
aforesaid approaches above the other, nor is any purpose served by
considering whether this court has more recently
adopted a
revolutionary approach to interpretation, as compared to its prior
practice.”
[109]
English law on this topic too developed
(will develop), and is nuanced, applying rules and principles that
give a judge the tools
to apply those tools with flexibility as
determined by the circumstances of the case. I only refer briefly
thereto. It falls outside
a judgment such as the present to discuss
the current English law and to compare them with
Endumeni
especially regarding the boundaries
between context and text (and possible future development of our law)
and/or the impact of the
Constitution on interpretation.
[110]
Lord
Hoffman’s formulation of five principles followed on
Prenn
v Simmonds
[42]
and
Reardon
Smith Line Ltd. v Yngvar Hansen-Tangen.
[43]
Lord
Hoffman
[44]
formulated the first principle in
Investors
Compensation Scheme v West Bromwich Building Society
[45]
:
“
Interpretation
is the ascertainment of the meaning which the document would convey
to a reasonable person having all the background
knowledge which
would reasonably have been available to the parties in the situation
in which they were at the time of the contract.
[46]
[111]
This
formulation fits
Endumeni
,
but adds that the assessment is objective, not subjective. The
flexibility in applying
Investors
Compensation Scheme
(and as set out in especially three cases that followed it) are
described as follows by Lord Hodge JSC
[47]
in
Barnardo's
v Buckinghamshire and Others
[48]
at para 13:
“
In
the trilogy of cases, Rainy Sky SA v Kookmin Bank
[2011] UKSC 50
,
[2012] 1 All ER 1137
,
[2011] 1 WLR 2900
, Arnold v Britton
[2015] UKSC
36
,
[2016] 1 All ER 1
,
[2015] AC 1619
and Wood v Capita Insurance
Services Ltd
[2017] UKSC 24
,
[2017] 4 All ER 615
,
[2017] AC 1173
,
this court has given guidance on the general approach to the
construction of contracts and other instruments, drawing on modern
case law of the House of Lords since Prenn v Simmonds
[1971] 3 All ER
237
,
[1971] 1 WLR 1381.
That guidance, which the parties did not
contest in this appeal, does not need to be repeated. In deciding
which interpretative
tools will best assist in ascertaining the
meaning of an instrument, and the weight to be given to each of the
relevant interpretative
tools, the court must have regard to the
nature and circumstances of the particular instrument
.”
[112]
It
is a reference to the flexibility referred to above. The current
position in English law, if a summary would suffice, is set
out in
Wood
[49]
as quoted in
Blair
Atholl Homeowners Association
para
59:
“
The
court’s task is to ascertain the objective meaning of the
language which the parties have chosen to express their agreement.
It
has long been accepted that this is not a literalist exercise focused
solely on a parsing of the wording of the particular clause
but that
the court must consider the contract as a whole and, depending on the
nature, formality and quality of drafting of the
contract, give more
or less weight to elements of the wider context in reaching its view
as to that objective meaning. In Prenn
v Simmonds
[1971] 1 WLR 1381
(1383H-1385D) and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen
[1976] 1 WLR 989
(997), Lord Wilberforce affirmed the potential
relevance to the task of interpreting the parties’ contract of
the factual
background known to the parties at or before the date of
the contract, excluding evidence of the prior negotiations
.”
[113]
This
approach is reflected in
Endumeni
,
in my view. Hence Wallis JA (in his capacity as an academic author)
states with reference to
inter
alia
Wood
that:
[50]
“
On
this approach, the process of interpretation is no longer, assuming
it once was, a war between textualism and contextualism.
I venture to
suggest that this does not differ materially from Endumeni. Both text
and context have a role to play, and which will
predominate will
depend on the circumstances of each case
.”
[114]
Endumeni
paragraph 18 was expressly approved and quoted in
Airports
Company South Africa v Big Five Duty Free (Pty) Limited and Others
para 29,
[51]
a judgment by
Froneman J.
[52]
Based thereon
I apply it too.
[115]
However,
this acceptance of
Endumeni
in the Constitutional Court did not address another decision by the
Constitutional Court:
Cool
Ideas 1186 CC v Hubbard and Another,
[53]
a
judgment by Majiedt AJ.
[54]
In
that case the Constitutional Court held in para 28 (underlining
added):
“
A
fundamental tenet of statutory interpretation is that the words in a
statute must be given their ordinary grammatical meaning,
unless to
do so would result in an absurdity
.
[55]
There are three important interrelated riders to this general
principle, namely:
(a)
that statutory provisions should always be interpreted
purposively;
[56]
(b)
the relevant statutory provision must be properly contextualised;
[57]
and
(c)
all statutes must be construed consistently with the Constitution,
that is, where reasonably possible, legislative provisions
ought to
be interpreted to preserve their constitutional validity. This
proviso to the general principle is closely related
to the purposive
approach referred to in (a).
”
[58]
[116]
Cool
Ideas
followed
two years after
Endumeni
.
The reminder therein about the role of the Constitution in
interpretation is undoubtedly necessary. Still, the phrase that “
the
words in a statute must be given their ordinary grammatical meaning,
unless to do so would result in an absurdity
”
in
Cool
Ideas
,
with respect cannot be reconciled with
Endumeni
.
Wallis JA in his capacity as an author, remarked that he does not
believe
Cool
Ideas
correctly reflects the Constitutional Court’s intention.
[59]
Still,
Cool
Ideas
is often quoted with approval by the Constitutional Court, and in a
slightly reduced version, has found its way into the SCA too.
In
Smyth
and Others v Investec Bank Limited and Another
[60]
in a judgment by Petse JA
[61]
the court held (underlining added):
“
[28]
I revert to the crux of the dispute between the parties, the
interpretation of s 252 of the Act. Principles of
interpretation
dictate that a court should pay due regard to the
overall scheme of the Act.
During
an interpretative process, it is as well to remember that a
fundamental principle of statutory interpretation is that words
in a
statute must be given their ordinary meaning, unless to do so would
result in an absurdity.
(See
South African Transport and Allied Workers Union & another v
Garvas & others
[2012] ZACC 13
;
2013 (1) SA 83
(CC) para 37; S v
Zuma & others
[1995] ZACC 1
;
1995 (2) SA 642
(CC) paras 13-14;
Dadoo Ltd v Krugersdorp Municipal Council
1920 AD 530
at 543.)
This
general principle is, however, subject to three interrelated
qualifications. First, the
statutory provision should be
interpreted purposively
. (See
Department of Land Affairs & others v Goedegelegen Tropical
Fruits (Pty) Ltd
[2007] ZACC 12
;
2007 (6) SA 199
(CC) para 5;
Dengetenge Holdings (Pty) Ltd v Southern Sphere Mining Development
Company Ltd & others
[2013] ZACC 48
;
2014 (5) SA 138
(CC) paras
84-86.)
Second, the
relevant statutory provision must be contextualised
.
(See North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
[2013] ZASCA 76
;
2013 (5) SA 1
(SCA) para 24; KPMG Chartered
Accountants (SA) v Securefin Ltd & another
[2009] ZASCA 7
;
2009
(4) SA 399
SCA para 39.)
Third,
closely related to the purposive approach is the requirement that
statutes must be interpreted consistently with the Constitution
so as
to preserve their constitutional validity, where it is reasonably
possible to
do
so
. As Wallis JA put it in Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 581
para 18:
‘
[T]he
“inevitable point of departure is the language of the provision
itself”, read in the context and having regard
to the purpose
of the provision and the background to the preparation and production
of the document. ... A sensible meaning is
to be preferred to one
that leads to insensible or unbusinesslike results or undermines the
apparent purpose of the document.’
[29]
Accordingly, as endorsed in a
long line of cases, the logical point of departure is the language of
the provision itself read in
the context of the overall scheme of the
Act, having regard to the purpose of the provision and against the
background to the production
of the relevant statute
.
(See in this regard South African Airways (Pty) Ltd v Aviation Union
of South Africa & others
[2011] ZASCA 1
;
2011 (3) SA 148
(SCA)
paras 25-30; Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun
Transport (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA) paras
10-12; Novartis SA v Maphil Trading
[2015] ZASCA 111
;
2016 (1) SA 518
(SA) paras 24-31.)
”
[117]
Smyth
thus
held that as a starting point “
that
words in a statute must be given their ordinary meaning
unless to do so would result in an
absurdity
”, whilst
Cool
Ideas
formulated it as “
that
the words in a statute must be given their ordinary grammatical
meaning, unless to do so would result in an absurdity
”.
[118]
In
the most recent judgment in the Constitutional Court, stating the
principles of interpretation,
Chisuse
and Others v Director-General, Department of Home Affairs and
Another,
[62]
the Constitutional Court relies on
Endumeni
(to a limited extent) and on
Cool
Ideas
.
Khampepe J
[63]
held:
“
[47]
In interpreting statutory provisions,
recourse
is first had to the plain, ordinary, grammatical meaning of the words
in question
.
[64]
Poetry
and philosophical discourses may
point to the malleability of words and the nebulousness of
meaning,
[65]
but,
in legal interpretation, the ordinary understanding of the words
should serve as a vital constraint on the interpretative exercise,
unless this interpretation would result in an absurdity
.
[66]
As this Court has previously noted in Cool Ideas, this principle has
three broad riders, namely:
“
(a)
that statutory provisions should always be interpreted purposively;
(b)
the relevant statutory provision must be properly contextualised; and
(c)
all statutes must be construed consistently with the Constitution,
that is, where reasonably possible, legislative provisions
ought to
be interpreted to preserve their constitutional validity. This
proviso to the general principle is closely related
to the purposive
approach referred to in (a).”
[67]
[48]
Judges must hesitate “to substitute what they regard as
reasonable, sensible or businesslike
for
the words actually used
.
To do so in regard to a statute or statutory instrument is to cross
the divide between interpretation and legislation”.
[68]
[49] …
[52]
The
purposive or contextual interpretation of legislation must, however,
still remain faithful to the literal wording of the statute
.
[69]
This means that if no reasonable interpretation may be given to the
statute at hand, then courts are required to declare the statute
unconstitutional and invalid.
[70]
It is now settled that this approach to interpretation is a unitary
exercise.
[71]
”
[119]
I decline to apply the part of the law as
contended for by the provisional liquidators in the heads of argument
in the auction application
as not consistent with
Endumeni
(underlining not added):
“
154
Where the language of a document is clear and unambiguous, a court
must
give effect to the intention of the parties as expressed in the
contract,
however
harsh or unreasonable that may appear to be
.
[72]
155
The golden rule of interpretation dictates that the language in a
document is to be given its grammatical and ordinary meaning
unless
this would result in some absurdity or repugnancy or inconsistency
with the rest of the instrument
.
[73]
”
[120]
Next,
I address the major matters for decision.
First matter for
decision: The Rule 42 application
[121]
Fidelity is of the view that the Bhoola
order, in error, did not include the power to sell the immovable
property it purchased at
the auction, and it seeks a variation of the
order to expressly refer thereto. The relief sought has been quoted
already. The chronology
also already refers to one of the paragraphs
in the order, but I need to expand a bit on the facts set out in the
chronology.
[122]
Paragraph 1 of the Bhoola order
specifically dealt with the power of the provisional liquidators to
sell
movable
assets of the six companies in liquidation, being asses of:
[122.1]
Five of the six business rescue companies
(excluding only Properties)-
[122.1.1]
Operations;
[122.1.2]
Technology Systems;
[122.1.3]
Leading Prospect;
[122.1.4]
Youth Development Centres; and
[122.1.5]
Security Intelligence; and
[122.2]
One other company in liquidation, BOSASA
IT.
[123]
Paragraph 1 of the order extended the
powers of the provisional liquidators “
in
terms of section 386(5), read with section 388
”
of the 1973 Act to sell all of the
movable
assets “
belonging to
”
the companies listed above “
by way
of public auction, public tender or private contract, as contemplated
in section 386(4)(h)
” of the 1973
Act.
[124]
It is common cause that none of the other
companies in liquidation had movable assets.
[125]
The Bhoola order also dealt with
immovable
assets. Paragraph 2 of the order refers to the same sections of the
1973 Act referred to above, and extends the powers of the provisional
liquidators to sell the immovable properties belonging to Properties
by way of public auction, public tender or private contract.
No other
company in liquidation was mentioned. It would later transpire that
Operations, not Properties, owned an immovable property
sold at the
public auction to Fidelity.
[126]
In context, the undoubted purpose of the
relief sought before Bhoola AJ was the interim power to be able to
sell all the assets
of the group, movable and immovable. This appears
from the founding affidavit in that application. The group’s
assets have
become redundant due to the cancelled agreements with the
state, and the winding down of all business conducted by the group.
This
outcome was enabled by the other two court orders referred to.
[127]
The movable assets of Operations could be
sold too. The immovable property owned by Operations was no different
to the immovable
property owned by Properties.. In fact, it is clear
that the consent sought from Bhoola AJ was intended to include
the property
owned by Operations. The founding affidavit includes a
reference to that property, and its likely forced sale value. It was
referred
to as the “
BOSASA
Campus
", and “
African
Global Operations' headquarters
”
in the affidavit, the need for which has fallen away. It was not
intended to be retained until the final liquidators were
appointed.
[128]
Unsurprisingly, the Bhoola order was
implemented as if consent to the sale of the immovable property of
Operations was given and
Fidelity bought the immovable property at
the public auction. Everybody worked from the wrong assumption when
the property was
sold at the auction and the first disputes arose.
[129]
Accordingly,
the point that the sale to Fidelity was unauthorised (not provided
for in the Bhoola order), was not taken in the founding
papers in the
auction application.
[74]
That
point was only taken after Fidelity discovered the omission.
[130]
The later explanation by the provisional
liquidators was that the omission of Operations in paragraph 2 of the
Bhoola order, was
an error. It seems to be undoubtedly correct.
When the provisional liquidators did not bring an application in
terms of Rule
42, Fidelity approached the court. Fidelity argued that
the omission to refer to immovable property owned by Operations in
the
Bhoola order, was a mere and innocent mistake.
[131]
The main defences raised against the Rule
42 order were:
[131.1]
A
lack of locus standi. Clearly Fidelity is a party affected by the
order as contemplated in Uniform Rule 42(c) and had
locus
standi
;
[75]
[131.2]
It was a unilateral mistake by the
provisional liquidators, not a mistake common to the parties as
contemplated in Uniform Rule
42(c). I disagree, the order was by
consent;
[131.3]
Fidelity unduly delayed bringing the
application for two months. I disagree, there was no improper delay.
[132]
Fidelity argued that it was opportunistic
to seek to exploit the error, and not to consent to the
rectification. I agree. The answering
affidavit further unnecessarily
takes issue with the conduct of Fidelity and of the provisional
liquidators, irrelevant to the
relief sought. It also impermissibly
includes references to case law. It was properly dealt with in reply
by Fidelity as irrelevant
responses.
[133]
Fidelity is entitled to the variation
sought and I grant it. Fidelity sought costs from the parties
opposing the relief sought,
alternatively the costs occasioned by
opposition. In my view this application should not have been opposed.
A short application
by consent became impossible as a result of the
stance taken by the auction applicants. Thereafter mere technical
defences followed.
The three parties that opposed the application,
Holdings, Sun Worx and Kgwerano must pay Fidelity’s costs of
the Rule 42
application.
[134]
When Fidelity brought the application,
there was no reason thereafter for the provisional liquidators to
join the fray, not having
brought the application themselves. They
applied to join the Fidelity application as co-applicants and served
papers on 20 May
2020 shortly before the hearing on 21 May 2020. By
then it was too late properly deal with the application. In the end,
I strike
the application by the provisional liquidators from the roll
and deliberately make no order as to costs. The same applies with
regard to the heads of argument delivered by the provisional
liquidators as a “note”.
Second matter for
decision: Has the business application been “made”?
[135]
The provisional liquidators (SARS and
Fidelity) took the point that the business rescue application could
not be considered as it
had not been “
made
”
as contemplated in section 131 of the 2008 Act. The bigger point was
that the auction could have continued until it was
“
made
”.
The argument was that an application for business rescue was not made
until it is served and given notice of in a prescribed
manner,
including as prescribed by regulation 124 of the Companies
Regulations, 2011 (“
the
Regulations
”).
[136]
I have referred to the unique notice
provisions to affected parties in section 131 of the 2008 Act.
Sections 131(1) to 131(3) read
(underlining added):
“
(1)
Unless a company has adopted a resolution contemplated in section
129,
an affected person may apply
to a court
at any time
for
an order placing the company under supervision and commencing
business rescue proceedings
.
(2) An applicant in
terms of subsection (1)
must
-
(a)
serve a copy of
the application
on the company and the Commission; and
(b)
notify each affected person of
the application
in the
prescribed manner
.
(3)
Each affected person has a right to participate in the hearing of an
application in terms of this section
.”
[137]
The
act therefore draws a distinction between those who need to be
served
[76]
and those who need
to be notified.
[77]
The two
places where “
the
application
”
has to be “
served
”
(even in this case where the companies have been wound up) in terms
of section 131(2)(a) are “
on
the company
”
and on the CIPC. Keywords in sections 131(1) and (2) are “
apply
to a court
”,
“
a
copy of the application
”,
“
of
the application
”
and off course, “
the
application
”.
[138]
In as far as the prescribed service on the
CIPC is concerned, the CIPC only plays a formalistic role in the
present application,
and indeed in practice note 9 of 2017 of 3 July
2017 it provided an e-mail address for service of court papers as a
valid method
of service.
[139]
The
other instance of service, “
service
”
of the application on the company, no doubt had as its purpose a
method to bring the application to the persons in control
thereof.
The SCA held that where reference is made to the service on the
company, service on (in this case) the provisional liquidators
is
meant. In
Van
Staden NO and Others v Pro-Wiz Group (Pty) Ltd
[78]
Wallis JA
[79]
held in para 10
(footnote omitted):
“
[10]
Starting with basic principles, in terms of s 131(2)(a) of the Act an
application for business rescue must be served on the
company or
close corporation. Where it is already being wound up, whether
provisionally or finally, that means that the persons
on whom it must
be served, as representing the company, are its liquidators. That
necessarily follows from the fact that, upon
the compulsory
winding-up of a company, its directors (read members in the case of a
close corporation) are deprived of their control
of the company,
which is then deemed to be in the custody or control of the Master
until the appointment of liquidators. Thereafter
it is in the custody
or control of the liquidators
.”
[140]
In
argument before, service on the provisional liquidators was not seen
as sufficient compliance with section 131(2)(a) of the 2008
Act. I
respectfully disagree. Notice also had to be given in terms of
section 131(2)(b) to “
affected
persons
”.
“
Affected
persons
”,
as alluded to above, are defined in the 2008 Act as creditors,
shareholders, employees not represented by trade unions,
and trade
unions.
[80]
As reflected earlier, they may participate as of right in the
proceedings.
[141]
I
pause to make another point raised in the quotation from
Van
Staden
,
in the chronology, the stance by the provisional liquidators that it
was impossible after the SCA judgment to consult and obtain
the
consent of the boards of the companies in winding-up as if they had
ceased to exist. In law, the companies and their boards
still
existed, although the companies were in liquidation and under
the control of the provisional liquidators. See
Imperial
Bank Ltd v Barnard and Others NNO.
[81]
[142]
I revert to an argument on what is meant
with “
serve
”
too. Section 131(6) of the 2008 Act reads (underlining added):
“
If
liquidation proceedings have already been commenced by or against the
company
at the time an
application is made in terms of subsection (1), the application will
suspend
those liquidation
proceedings until-
(a) the court has
adjudicated upon the application; or
(b) the business
rescue proceedings end, if the court makes the order applied for.”
[143]
The argued issue was when is the
application “
made
”,
and if this finding is linked to the application being served?
[144]
The 2008 Act does not specify when an
application is made. Instead, it simply states in section 132(1)(b)
(underlining added):
“
Business
rescue proceedings
begin when
-
(a)
…
(b)
an affected person applies to the
court
for an order placing the
company under supervision in terms of section 131(1)
”
.
[145]
The keywords in section 131(6) are “
at
the time an application is made in terms of subsection (1), the
application will suspend
…”
They must be read with the words “(b)
usiness
rescue proceedings begin when … an affected person applies to
the court
” in section 132(1)(b)
and “
apply to court
”
in section 131(1).
[146]
On the facts of this matter, the
applications were served by e-mail, and when the matter proceeded
before Wright J, the provisional
liquidators already had the business
rescue application. The provisional liquidators knew that the
application was launched, no
matter whether on a proper
interpretation it is made (a) when issued, (b) when served on some
affected persons (or some notified),
(c) when served on all affected
persons (including where relevant, notified), or (d) when argued in
court. These are the four possible
meanings of “
apply
to court
” and “
when
the application is made
”, if
those words were to be pasted on paper. Pasting words on paper is not
the correct method to interpret legislation.
[147]
Gamble
J in
Blue
Star Holdings (Pty) Ltd v West Coast Oyster Growers CC
[82]
dealt with an application to wind up a company when an application in
terms of section 131(1) of the 2008 was produced in court
(and
provided to the other side). The learned judge formulated the
question
[83]
as:
“…
whether
presentation of the application for business rescue to the registrar
of the court for the issue thereof did not in fact
constitute the
requisite application to court sufficient to interrupt the pending
application for winding-up
.”
[148]
The
learned judge considered the position in earlier compulsory motor
vehicle insurance legislation with regard to an application
made for
condonation.
[84]
Such an
analogy is only helpful in part, as in those cases one deals with a
single defendant, a defendant that obviously must be
joined in the
proceedings. In a business rescue application, one potentially has
complications of service on and notice to possibly
a large group of
people.
[149]
The court in
Blue
Star Holdings
reasoned as follows
(underlining added):
“
[29]
Applying this functional approach to s 131(6), it is obvious that in
this case
the
lodging of the application with the registrar for the issue thereof
constituted the 'making' of the application and the commencement
of
proceedings to place the company under business rescue (as opposed to
the commencement of business rescue per se). It was fortuitously
brought to the intention of the creditor's legal representatives an
hour or so later when a copy was handed to them at court.
Service
therefore occurred almost instantaneously and the application then
fell within the purview of the Rules of Court, read with the
new Act
and the regulations issued thereunder.
[85]
[30]
To suggest
that the application for business rescue only commences when it is
called some day in open court will lead to impractical
and even
absurd consequences
. It would mean that the court seized with the
winding-up application could continue with its work and notionally
even grant a final
order of liquidation before the business rescue
application is heard.
[31]
Our courts are enjoined to interpret statutes purposively.
[86]
This requires the court to examine the objects and purport of an Act
and to interpret legislation in conformity with the Constitution
to
the extent that this is reasonably possible. If one has regard to the
various purposes of the new Act set out in s 7 one finds
under s 7(k)
that the new Act is intended to:
'(k) provide for the
efficient rescue and recovery of financially distressed companies, in
a manner that balances the rights and
interests of all relevant
stakeholders; …'
Such a purpose is
likely to be thwarted if the application for business rescue only
commences when it is called in open court sometime
in the uncertain
future when a winding-up order could already have been granted.
[32]
In the circumstances, I am satisfied that the provisions of s 131(6)
of the new Act apply to this case and that the application
for
winding-up is therefore automatically suspended
.”
[150]
I fully agree. This finding is in
accordance with long-established principles in our law that an
application is made when it is
issued. In some cases, service is
required for the application to take effect, but such provisions are
expressly legislated for,
as is the case of prescription. I only
refer to the findings in a few cases:
[150.1]
Republikeinse
Publikasies (Edms) Bpk v Afrikaanse Pers Publikasies (Edms) Bpk
at
780F-G
[87]
held that a party
is only involved in the litigation after service on her/him, but that
the proceeding commences with the issuing
of the process-
“…
Die
doel van 'n dagvaarding en kennisgewing van mosie is natuurlik om die
verweerder of respondent by 'n geding te betrek, en wat
hom betref,
word hy eers dan betrek wanneer 'n betekening van die dagvaarding of
kennisgewing van mosie plaasgevind het. So word
in Marine and Trade
Insurance Co. Ltd. v Reddinger,
1966 (2) SA 407
, deur hierdie Hof op
bl. 413 verklaar:
[88]
'Although
an action is commenced when the summons is issued the defendant is
not involved in litigation until service has been effected,
because
it is only at that stage that a formal claim is made upon him
.'”
[150.2]
In
Marine
and Trade,
Wessels
JA
[89]
dealt with the Motor
Vehicle Insurance Act, 29 of 1942 and the court held at 413D:
“…
Although
an action is commenced when the summons is issued the defendant is
not involved in litigation until service has been effected,
because
it is only at that stage that a formal claim is made upon him.
(Nxumalo v Minister of Justice and Others,
1961 (3) SA 663
(W))
.
…”
;
[150.3]
In
Labuschagne
v Labuschagne; Labuschagne v Minister Van Justisie
[90]
Wessels JA
[91]
came to the
same conclusion (that the issue of the summons, and not the service
thereof, constituted the commencement of the action);
[150.4]
Nxumalo
v Minister of Justice and Others
[92]
is
a decision of this division by Kuper J and the learned judge dealt
with the question when legal proceedings commence at 667A-668F
and
concluded:
“…
Now,
the commencement of the proceedings is the institution of the action.
It seems to me that no other meaning can be given to
those words, and
assuming that a summons was served and the action later heard and the
question was asked: When did this action
commence? inevitably the
answer would be: The day when the summons was issued.
…”
[151]
I
agree with the formulation of the purpose of the legislation in
Blue
Star Holdings
and
the finding that the application was made when it was issued. It is
without doubt that in our law, an application is made when
it
is issued. Such an interpretation gives effect too to the purpose of
the 2008 Act,
[93]
set out in
section 7(k), to
inter
alia
:
“…
provide
for the efficient rescue and recovery of financially distressed
companies, in a manner that balances the rights and interests
of all
relevant stakeholders
”
.
[152]
Suspending winding-up proceedings
immediately gives effect to such purpose and prevents the response
raised in this matter; that
the horse has bolted. However, such an
approach (that an application is made when issued) troubled other
judges. Before I address
those decisions, I need to reflect more
background.
[153]
Sections 6(9) and 6(10) of the 2008 Act
reflect an approach that one should consider the substance of the
notice, not the form:
“
(9)
If a manner of delivery of a document, record, statement or notice is
prescribed in terms of this Act for any purpose-
(a) it is sufficient
if the person required to deliver such a document, record, statement
or notice does so in a manner that satisfies
all of the substantive
requirements as prescribed; and
(b) any deviation from
the prescribed manner does not invalidate the action taken by the
person delivering that document, record,
statement or notice, unless
the deviation-
(i) materially reduces
the probability that the intended recipient will receive the
document, record, statement or notice; or
(ii) is such as would
reasonably mislead a person to whom the document, record, statement
or notice is, or is to be, delivered.
(10)
If, in terms of this Act, a notice is required or permitted to be
given or published to any person, it is sufficient if the
notice is
transmitted electronically directly to that person in a manner and
form such that the notice can conveniently be printed
by the
recipient within a reasonable time and at a reasonable cost
.”
[154]
Regulation 124 of the Companies
Regulations, 2011 prescribes the manner of notice as follows
(underlining added):
“
An
applicant in court proceedings who is required, in terms of either
section 130(3)(b) or 131(2)(b), to notify affected persons
that
an application has been made to a court
,
[94]
must deliver a copy of the court application, in accordance with
regulation 7, to each affected person known to the applicant
.”
[155]
The exact detail set out in Regulation 7 is
not relevant to the argument advanced by the provisional liquidators,
SARS and Fidelity.
[156]
The
provisional liquidators relied on
Standard
Bank of South Africa Limited v Gas 2 Liquids (Pty) Ltd
,
[95]
a decision that came to a contrary finding to the one made in
Blue
Star Holdings
.
It is a judgment of this division and would ordinarily be binding on
me, unless clearly wrong.
[96]
As will appear below, I decline to follow it.
[157]
In
that case, Satchwell J dealt with the meaning of section 131(6) of
the 2008 Act. The learned judge found that as the application
was not
served on the registered office of the company or on
the provisional liquidator
[97]
(but only on the CIPC),
[98]
no
application had been made. I respectfully disagree.
[158]
The
learned judge held that she was dealing with case where an
obstructive debtor seeks to avoid an inevitable liquidation as part
of an on-going strategy to hinder a creditor.
[99]
This finding, with respect, seems to have influenced her
interpretation as to when the application was made. The finding by
the
learned judge was made in circumstances where an opposed
application for final liquidation was argued, and the respondent
produced
the business rescue application in court (similar to what
occurred
Blue
Star Holdings
).
The learned judge held:
[100]
“
I
am thus of the same mind (although for different reasons) as my
brothers, Makgoba J, in Summer Lodge
[101]
supra and Hartzenberg AJ in Taboo Trading
[102]
supra that there must be service and notification as required in
terms of section 131 of the Act before it can be said that the
business rescue application has been 'made' and that the liquidation
proceedings have been suspended
.
[159]
The
learned judge interpreted “
service
”
to mean service in accordance with Rule 4(1)(a) of the Uniform Rules
being service by the Sheriff and relied, in this regard,
on
Engen
Petroleum Ltd v Multi Waste (Pty) Ltd and Others.
[103]
The “
notification
”
to which she referred, must have been notice to affected parties in
terms of section 131(2)(b) of the 2008 Act.
[160]
I respectfully disagree. There are two
matters for consideration, when is the business rescue application
made for it to suspend
winding-up, and whether the application is
properly before a court when the business rescue application is
argued on its merits.
In my view, sections 131(2)(a) and 131(2)(b) of
the 2008 Act, were not intended to transgress into procedural law to
lay down procedural
requirements for an application before it could
be said that the application was made. A court hearing the matter on
its merits,
will apply procedural law, and make certain that service
complied with the rules of court on the absent respondents, and even
where
necessary condone forms of service.
[161]
In addition, the non-technical use of
“
serve
”
is evident from the omission to use “
file
”
(meaning serve at court), or “
deliver
”
(meaning serve on the person and filed at court) in section 131(2) of
the 2008 Act. See the definition of “
deliver
”
in Uniform Rule 1. It would make no sense to make “
service
”
the line in the sand, and not “
filing
”.
In my view, the word “
serve
”
in section 131(2)(a) means no more than “
to
provide
”, “
to
deliver
”, a complete copy.
[162]
It
does not appear to me, with respect, that
ABSA
Bank Ltd v Summer Lodge (Pty) Ltd
[104]
relied
upon by the learned judge, assists. It dealt with an argument that
section 131(6) of the 2008 Act does not apply before a
winding-up
order has been made.
Taboo
Trading 232 (Pty) Ltd v Pro Wreck Scrap Metal CC and Others
[105]
also does support the finding by the learned judge:
“
[11.3]
The purpose of the notification required by s 131(2)(b) is to
facilitate participation, in terms of s 131(3), by affected
persons
in the hearing of the business-rescue application. Creditors, being
affected persons in the business-rescue application,
also have a
material interest in the liquidation proceedings. In my view, it is
implicit in ss 131(2)(b) and 131(3) that reasonable
notification be
given to affected persons. Short notice rendering participation in
the hearing impossible cannot be regarded as
due compliance with s
131(2)(b). There is a strong policy justification for interpreting
these provisions in a way which would
not facilitate a dilatory or
supine approach by an applicant in business-rescue proceedings.
Service of a copy of the application
on the Commission and
notification to each affected person are not merely procedural steps.
They are substantive requirements,
compliance with which is an
integral part of the making of an application for an order in terms
of s 131(1) of the Companies Act.
[11.4]
A business-rescue application is thus only to be regarded as having
been made once the application has been lodged with the
registrar,
has been duly issued, a copy thereof served on the Commission,
[106]
and each affected person has been properly notified of the
application.”
[107]
[163]
The learned judge was concerned about a
provisional liquidator not knowing of the application.
Republikeinse
Publikasies
provides the answer, he/she
will act innocently in breach of her/his duties. I think is a remote
risk. The one purpose of an application
such as the one before me is
to suspend the winding-up process for a court to consider the
business rescue application. Who would
follow it secretively and not
inform the provisional liquidators of the application?
[164]
I
agree with the reasoning that there must be substantial compliance
before a hearing with section 131(2) of the 2008 Act, but with
respect, this does not mean that no application has been made whilst
such service and notice are being effected on all affected
parties.
This view accords with the judgment by Coppin J in
Kalahari
Resources (Pty) Ltd v ArcelorMittal SA and Others.
[108]
[165]
In
my view, with respect, the application for business rescue was made
on 3 December 2019. By the time that I had to adjudicate
it, there
was substantial compliance with section 131(2) of the 2008 Act, and I
could determine the business rescue application.
As such I do not
have to address further
Engen
Petroleum Ltd v Multi Waste (Pty) Ltd and Others
para 18,
[109]
a judgment by Boruchowitz J.
[166]
With
respect, in my view
Gas
2 Liquids
is
clearly wrong, with respect, and I am not bound by it. The words used
in the 2008 Act have to be interpreted. What meaning would
the words
used in section 131(6) in grammar and syntax convey to (a reasonable
person)
[110]
having all
contextual knowledge, considering the purpose of the legislation,
namely to suspend the winding-up process? This process
would have
required, in part, a contextual analysis of sections 131(1), 131(2),
131(4), and 131(6), including of the words “
at
the time an application is made
”
and of “
the
application will suspend those liquidation proceedings
”
in section 131(6). Part of context is that in our law an application
is made when issued, and no express conditions
have been built
into the legislation before the application would have the
legislative effect. With respect, the wording of section
131(6) of
the 2008 is clear, and leaves no room for adding conditions thereto
in an interpretative exercise. In addition, the date
of issuing of an
application is easily and objectively determinable; it is a line in
the sand that has logic to it. It leaves no
room for a provisional
liquidator to refuse to comply with the application until proven to
him/her that formal service has taken
place and that he/she has
been satisfied that notice has been given to every affected party,
the identity possibly only known
to the provisional liquidator. A
provisional liquidator is not meant to be a judge of his/her powers.
Third matter for
decision: Did the provisional liquidators have the power to continue
to sell the assets of the six subsidiaries
in issue?
[167]
I
have found that it was made on 3 December 2019. My finding brings
into effect another inevitable finding, the provisional liquidators
had no authority to continue with the sale of the assets of the six
business rescue companies from that day by operation of law.
This
appears from section 131(6) of the 2008 Act. I have already addressed
its wording.
[111]
[168]
The
provisional liquidators took the stance that
Richter
v Absa Bank Limited
[112]
opened the prospect of an abuse of process, namely that
“
opportunistic
business rescue applications
”
are brought “
only
to have the effect of the section 131(6) suspension triggered, with
the ulterior motive to stagnate liquidation proceedings
”.
In my view, the SCA did no more than to give effect to the clear
wording of section 131(6) of the 2008 Act, the effect
of the business
rescue application is to suspend winding-up. Whether the provisional
liquidators agree or not, the SCA judgment
binds them (and me).
[169]
Dambuza
AJA
[113]
held in
Richter
para 18 that section 131(6) of the 2008 Act applies even where there
is a final order for liquidation. Not only is the judgment
correct,
with respect, but the court dealt with the alleged error it made in
para 16 (underlining added):
“
[16]
Counsel for Absa expressed concern that a liberal interpretation of s
131(1) may have negative results for the liquidation
process. These
include repetitive disruptions and uncertainty that may result from
various affected parties making applications
for business rescue at
different times during the winding-up process, reversion of business
control to the same directors who may
have been the cause of the
financial distress experienced by the company, and the capacity of a
company under final liquidation
to conduct effective business,
including concluding contracts, during the implementation of the
rescue plan. All these concerns
are valid and appear to have been
uppermost in the mind of Bam J when he considered the issues. Indeed
implementation of the Act
may produce some seemingly awkward results
in the initial stages.
However,
that does not justify an unduly restrictive approach in the
interpretation of the provisions of the Act
.
[114]
The
simple answer is that a court can dismiss any application for
business rescue that is not genuine and bona fide or which does
not
establish that the benefits of a successful business rescue will be
achieved
.”
[170]
In
GCC
Engineering (Pty) Ltd and Others v Maroos and Others
2019
(2) SA 379 (SCA)
[115]
Seriti
JA
[116]
dealt with the
effect of a business rescue application on the powers of provisional
liquidators. The court made the point in para
11 that “
the
functions of a provisional liquidator are essentially to take
physical control and to manage the administration of the property
and
affairs of the company pending the appointment of a liquidator
”
and in para 13 that “
it
is not the responsibility of the provisional liquidators to wind up
the company.
”
The effect of the business rescue application is to suspend “
the
process of continuing with the realisation of the assets of the
company in liquidation
”
(para 17) and stated in para 17:
“
[17]
In terms of s 131(6) of the Act, it is liquidation proceedings, not
the winding-up order, that is suspended. What is suspended
is the
process of continuing with the realisation of the assets of the
company in liquidation with the aim of ultimately distributing
them
to the various creditors. The winding-up order is still in place; and
prior to the granting or refusal of the business rescue
application,
the provisional liquidators secure the assets of the company in
liquidation for the benefit of the body of creditors
.”
[171]
I fully agree with
Richter
and
Maroos
(which are off course binding on me too) that a business rescue
application suspends the process of continuing with the realisation
of the assets of the company in liquidation. I add, a business rescue
application suspends the process of continuing with the realisation
of the assets of the company in liquidation from the moment the
application is made (issued).
[172]
I pause to reflect that
Maroos
made the point very clear, the overturning of the Ameer decision or
not, the function of the provisional liquidators remained a
holding
and preservation function. They did not become final liquidators who
had to wind up the companies in liquidation.
Fourth matter for
decision: Did the provisional liquidators ever have the power to sell
the assets of the six subsidiaries in issue?
[173]
In case I am wrong about when the
application was made (3 December 2019) and the consequent lack of
authority by the provisional
liquidators to sell the group’s
assets by auction, I reach the same conclusion along another route,
the interpretation and
application of the Bhoola order.
[174]
I have already referred to the holding
function of provisional liquidators, as set out in
Maroos
.
They are not meant to wind a company up. Any powers that they may
receive must be seen in terms of a court order, in this context.
In
law, a liquidator (both final and provisional) may only sell the
assets of a company in liquidation:
[174.1]
One,
if such authority is granted by a meeting of creditors.
[117]
In this matter, a first meeting of creditors has not been arranged as
yet.
Section 82(1)
of the
Insolvency Act, 24 of 1936
(“
the
Insolvency Act
&rdquo
;),
sets this procedure out as the usual position in sequestrations too;
[174.2]
Two,
before the first meeting of creditors, the liquidator may recommend
and motivate to the Master that the assets be sold, and
the Master
may authorise such sale (subject to consent by the holder of a
preferential right to the property in issue).
[118]
I point out that
section 82(1)
of the
Insolvency Act also
sets out a
procedure to involve to a limited extent the Master in sequestrations
too;
[174.3]
Third,
if such authority is granted by a court.
[119]
In this regard it is an important contextual fact that the court has
a wide discretion. Section 388(2) of the 1973 Act reads (underlining
added):
“
The
Court may, if satisfied that the determination of any such question
or the exercise of any such power
will
be just and beneficial
, accede
wholly or partly to the application
on
such terms and conditions as it may determine, or make such other
order on the application as it thinks fit
.”
The
Insolvency Act does
not contain such a section to be applied in sequestrations. This
distinction between the two Acts is of importance later herein
when
one considers the effect of an unauthorised sale.
[175]
The Bhoola order inter alia provided that
the boards of Holdings and Operations had to consent to the sale of
assets of companies
in liquidation. Paragraph 3 of the Bhoola order
reads:
“
The
assets referred to in paragraphs 1 and 2 above shall be sold in
consultation with and with the consent of the board of African
Global
Holdings (Pty) Ltd, African Global Operations (Pty) Ltd (in
liquidation), and the respective boards of its subsidiaries
referred
to in paragraphs 1 and 2 above
.”
[176]
The first defence by the provisional
liquidators is that they had such consent. In argument, they argued
that
Plascon Evans
prevented me from deciding the matter. I disagree. Without seeking to
be unkind, their version is that I must find that they had
consent
because they say that they had consent. The chronology clearly
illustrates their version not to be a
bona
fide
factual version. They could not
refer me to any request for consent to the auction and its terms, who
consented, when this happened,
where this happened, or what the terms
of the consent were given. Their attorney’s spontaneous
reaction when the issue of
consent was raised, was not to dispute the
need for consent. An averment in the supplementary affidavit
delivered the day before
the first hearing was:
“
57
The fact that their consent to sell Bosasa assets was obtained is
beyond doubt. However, if any doubt whatsoever existed, the
fact that
they consented to an order being granted in terms of paragraphs 1 and
2 of the Boohla order, puts any doubt to rest
.”
[177]
The Bhoola order required consent. It is
finally dispositive of the matter, but on reasoning that is quite
different. Had consent
been given already, the order would not have
required consent. For completeness sake, I also do not read the
e-mail exchanges with
two former directors to mean that they
distanced themselves from the challenge of the consent to the auction
(as if they imply
that they had consented thereto). I read their
response to mean no more than to say that they are no longer
directors.
[178]
The
bald version by the provisional liquidators, with respect, can and
should be rejected. See
Fakie
NO v CCII Systems (Pty) Ltd
para 55-56
[120]
and
Wightman
t/a J W Construction v Headfour (Pty) Ltd and Another
para 12-13.
[121]
[179]
The simple fact of the matter is that the
provisional liquidators must have known that they were acting without
the consent of Holdings
and Operations when they arranged the
auction. They ignored the Bhoola order.
[180]
The second defence by the provisional
liquidators is an argument that the Bhoola order, on a proper
interpretation, was only meant
to be in place pending the SCA
judgment. The provisional liquidators argued that paragraph 3 of the
Boohla order was, “
logically and
obviously, never intended to operate after the outcome of the appeal
and that everyone understood it as such
”.
Fidelity supports them herein. I disagree, with respect. It is not a
finding that could be made on any principle of interpretation.
[181]
The clearer the text (read in context), the
less room there is to depart from the wording actually used in
interpreting the words.
In my view, applying
Endumeni
I cannot find that, in context,
paragraph 3 meant anything but what its simple words convey. I
cannot, based on a contextual interpretation,
interpret paragraph 3
of the Bhoola order to mean that the provisional liquidators could
arrange a sale by auction of the assets
of the liquidated companies
as they pleased, once the pending appeal was resolved. Neither the
text nor the context could justify
such an interpretation.
[182]
The structure of the 1973 Act is that such
control preferably should be by creditors, and in rare cases, by the
Master, and in rarer
cases by the Court. The structure of the 1973
Act is that the powers of liquidators are regulated. Provisional
liquidators have
an interim role only. In setting up controls in a
court order over the powers of provisional liquidators, a court
should exercise
its wide discretion, in my respectful view, not in
such a manner that the provisional liquidators become a law onto
themselves.
It is necessary to control their interim actions from the
perspective that the creditors are meant to exercise control over the
finally appointed liquidators (with the function wind-up the
company), and if creditors cannot do so, someone else should. In the
case of disruptive conduct, the provisional liquidator may always
approach the court again for permission to sell assets. The mere
fact
of a sale by public auction could be an insufficient controlling
mechanism on the power to sell of a liquidator, as it would
depend on
factors such as the timing of the auction, the marketing of the
auction, locality of the auction, and the like. In this
instance, the
timing of the auction is criticised by the applicants for the
interdict, as well as the notice period. Their case
is that it was an
unnecessarily rushed affair, at a time of the year when the economy
starts closing for the December holiday period
and that optimum
prices could not be obtained.
[183]
Another contextual fact in interpreting the
Bhoola order, is the background. In context the Tsoka order
authorised the provisional
liquidators to continue to conduct
business in the name of the eleven companies in liquidation, defend
proceedings and the like.
Those companies were listed in the order
and defined as “
the companies
”.
Paragraph 5 reads (underlining added):
“
The
powers in paragraphs 3 and 4 above shall be exercised by the
applicants
in consultation with
the board(s) of directors of the specific company or companies
involved in the transaction(s) and decisions.
”
[184]
The Mudau order, to some degree, overlapped
with the Tsoka order. The eleven companies in liquidation were listed
in the order and
were again defined as “
the
companies
”. Paragraph 5 (again)
reads (underlining added):
“
The
powers in paragraphs 3 and 4 above shall be exercised by the
applicants
in consultation with
the board(s) of directors of the specific company or companies
involved in the transaction(s) and decisions
.”
[185]
The Mudau order was not a final order.
Paragraph 6 reads (underlining added):
“
The
orders in paragraphs 1 to 5 above shall, by agreement between the
applicants on the one hand and African Global Holdings (Pty)
Ltd and
the directors of the companies listed in paragraphs 4.1 to 4.11,
above on the other, and solely to facilitate urgent interim
relief,
operate as interim orders with immediate effect,
and
shall remain operative only pending final outcome of this application
in the ordinary course
. It being
noted that African Global Holdings (Pty) Ltd and the board of
directors of the companies referred to in 2. above intend
to apply
for leave to intervene in and oppose the relief detailed in
paragraphs 1 to 4 above
…”
[186]
Paragraph 3 of the Bhoola order then reads
(underlining added):
“
The
assets referred to in paragraphs 1 and 2 above shall be sold
in
consultation with and with the consent of
the board of African Global Holdings (Pty) Ltd, African Global
Operations (Pty) Ltd (in liquidation), and the respective boards
of
its subsidiaries referred to in paragraphs 1 and 2 above
.”
[187]
The progression from 2 April 2019 (the
Tsoka order) and from 14 May 2019 (the Mudau order) until 28 October
2019 (the Boohla order)
must not be lost sight of. The first two
orders provided for consultation in the exercise of the powers, the
last one (with irreversible
consequences) for consent to the public
auction. The earlier powers were in effect holding powers, the last,
a disposition power.
A control in a court order that a provisional
liquidator may sell an asset with the consent of a board, seems to me
to be a proper
mechanism to control provisional liquidators. It is
also material that the paragraph in the Mudau order that would bring
involvement
of the boards to an end upon finalisation of the appeal
against the Ameer decision, was not repeated in the Bhoola order.
[188]
A further contextual fact is that Boohla
AJ, and every lawyer involved in the process, would have known that:
[188.1]
The
control of a company in liquidation no longer vests in the board of
directors of that company.
[122]
(I can see no reason why such boards, although no longer in control
of the companies in liquidation, would not be ideally placed
to
consent to the sale of assets in the absence of controls by the
creditors. They are best placed, as they know the companies
and their
assets);
[188.2]
Bhoola
AJ had the power to impose conditions to the extension of the
provisional liquidators’ powers;
[123]
and
[188.3]
In law, despite any appeal against the
Ameer judgment, the companies remained in liquidation pending the
appeal. In this regard
Richter
para
10 made a point (footnote omitted):
“
The
reasoning of the court a quo was motivated by an erroneous premise
that upon liquidation Bloempro ceased to exist, that it was
'stripped
of its original legal status'. The correct position is that upon the
final order of liquidation being granted the company
continues to
exist, but control of its affairs is transferred from the directors
to the liquidator who exercises his or her authority
on behalf of the
company. As to when liquidation commences, in terms of s 348 of the
Companies Act 61 of 1973 (the 1973 Act) liquidation
of a company by
the court is deemed to commence on presentation to the court of the
application for the winding-up and continues
until the affairs of the
company have been finally wound up and the master's certificate to
that effect is published in the Government
Gazette, thus dissolving
the company. Similarly s 82 of the Act provides for existence of a
company until deregistered by the Commission
.
[189]
Taking it all into account, I am not
convinced that the context, being the facts known to the parties, the
purpose of the order
read as a whole, the legislative context of
control over provisional liquidators, the formality of a court order,
the progression
from consultation to consent in the court orders,
would justify in effect a change to textual meaning of the order,
read in that
context. On trite interpretation principles, I cannot
take into account in interpretation, what the provisional liquidators
say
were their subjective intent.
[190]
In any event, paragraphs 37 to 39 of the
founding affidavit that served before Bhoola AJ made no mention of
powers that would become
unlimited after the SCA appeal. Those
paragraphs set out the purpose of the application, to obtain the
power to sell assets, whilst
acknowledging,
inter
alia
, the interests of Holdings “
in
the outcome of the sale of the assets
”.
[191]
Any outcome as sought by the provisional
liquidators would have required that a case be made out for such a
tacit term in the court
order, a process distinct from
interpretation. As this was not argued, I need not consider the
limits to tacit court orders (which
could be a problematic concept.)
[192]
The third defence raised by the provisional
liquidators is that a condition in the Bhoola order could not be
fulfilled once the
SCA overruled the Ameer Order (bold not added):
“
68
However, on 22 November 2019 as aforesaid, the SCA handed down its
judgment in respect of the appeal against the Ameer application,
which judgment:
68.1 …
68.4
had the effect of forthwith
removing each individual that was appointed as a director of
Operations and the subsidiaries from office
by operation of law
.”
[193]
Put differently, they argued:
“
75
As such and in law, the subject companies did not have any directors
as at the date upon which the Boohla order was granted and
the
conditions imposed pursuant to paragraph 3 of the Boohla order was a
non-event. It was, as such, impossible to fulfil from
day one as not
a single one of the subject companies had any directors with effect
from 14 February 2019
.”
[194]
The point has been raised belatedly, and
does not provide an answer why they pressed ahead with the auction
sale despite the obligation
placed on them in the Bhoola order to get
consent. With respect, the point is without merit.
[194.1]
As
was held in
Richter
para
10,
[124]
the companies in
liquidation (and thus their boards) continued to exist after
liquidation, only control is removed from the board.
The SCA judgment
did not remove them from office, they had lost their control months
earlier. Thus the fulfilment of any pure condition
was possible. I
disagree with the argument in the provisional liquidators heads of
argument in the auction application:
“
197
As such and in law, the subject companies did not have any directors
as at the date upon which the Boohla order was granted
and the
conditions imposed pursuant to paragraph 3 of the Boohla order was a
legal nonsense and non-event
.”
[194.2]
In
any event, the alleged condition (if it is a condition at all) is in
fact a mixed condition, in part dependent on the will of
the
provisional liquidators. The provisional liquidators had to seek the
consent. By failing to seek the consent, they breached
an obligation
to seek consent. In this sense, the condition is potestative and
non-fulfilment due to the breach of their obligation
is not an excuse
for non-compliance with the Bhoola order. Any condition is deemed to
have been fulfilled. See
Scott
and Another v Poupard and Another
at 578G-579H,
[125]
MV
Snow Crystal Transnet Ltd t/a National Ports Authority v Owner of MV
Snow Crystal
[2008] ZASCA 27
;
2008 (4) SA 111
(SCA) para 28,
[126]
and
Du
Plessis NO and Another v Goldco Motor & Cycle Supplies (Pty) Ltd
para 22-29.
[127]
[195]
I do not believe, as contended for by the
provisional liquidators, that my interpretation nullifies any court
order, is not in accordance
with a principle that a court order
stands until set aside. My view is that my judgment fully complies
with both principles.
[196]
The extremely disquieting aspect of this
matter is that the provisional liquidators knew that they had not
sought consent to the
auction or the terms of the auction. They were
challenged and they pressed ahead as if they were a law onto
themselves. If they
had
bona fide
difficulties with the wording of the court order, they should have
approached a court to vary the order, to give them the power
to sell
on any terms they may decide to use. I doubt that any court would
have given them carte blanche to do as they please. It
is difficult
not to view their conduct as contemptuous of a court order.
[197]
In
this regard, I fully agree with the submission in the heads of
argument of the provisional liquidators, relying on
Eke
v Parsons
para 64
[128]
that
“
disobedience
of a court
order
constitutes a violation of the Constitution.”
[198]
On both grounds, the application of the
2008 Act regarding the effect of a business rescue application being
made, and the interpretation
of the Bhoola order, the provisional
liquidators had no authority to proceed with sale of the assets of
the group on 4 December
2019 and thereafter.
Fifth matter for
decision: The effect of the unauthorised auction
[199]
Having found that the sales of the assets
of business rescue companies were unauthorised and indeed unlawful on
two alternate grounds,
the next hard question is what the effect of
the sales by the provisional liquidators was. These findings would
impact on the business
rescue application.
[200]
Fidelity
requested me to use my powers under section 388 of the 1973 Act to
order that despite the provisional liquidators’
lack of
authority to sell the assets bought by Fidelity, to validate
all sales on the basis that it would be “
just
and beneficial
”
to do so. I cannot do so. They ignored the impact of section 131(6)
of the 2008 Act on an untenable version. If there was
some room for
legal sophistry for ignoring the business rescue application,
[129]
none exists with regard to the deliberate contravention of the
Bhoola order. Their conduct to proceed with the sale
was
unlawful. I am not prepared to condone their unlawful conduct, even
if I could. The illegality would taint whatever I could
do.
[201]
This creates a huge practical problem.
First principles in law is that the
rei
vindicatio
of the owner trumps other
later rights of
bona fide
possessors (
ubi rem meam invenio ibi
vindico
), and that no one could
transfer more rights than what she or he has (
nemo
dat quod non habet
).
[202]
There is one possible way forward. Section
339 of the 1973 Act reads (underlining added):
“
In
the winding-up of a company unable to pay its debts the provisions of
the law relating to insolvency shall,
in
so far as they are applicable
,
be applied
mutatis
mutandis in respect of any matter not specially provided for by
this Act
.”
[203]
One
interpretation of the section is that it excludes application where
the 1973 Act provides expressly for a situation. For instance,
section 20
of the
Insolvency Act
(
inter
alia
that the effect of the sequestration of the estate of an insolvent is
to divest the insolvent of his/her estate and to vest it
in first the
Master, and, upon the appointment of a trustee, in the trustee), does
not apply to the winding up of companies. See
section 361 of the 1973
Act read with
Secretary
for Customs and Excise v Millman
,
NO at 502G.
[130]
[204]
On the other hand, the phrase “
mutatis
mutandis
” read with “
in
respect of any matter not specially provided for by this Act
”
could allow for changes beyond mere changes of nomenclature (such as
to swop “
insolvent
”
for “
company
”)
in the application of the
Insolvency Act to
unchartered waters in the
winding up of a company under the 1973 Act.
[205]
The 1973 Act does not specifically provide
for (to use the terminology in section 339) what would happen if a
liquidator sells assets
of the company in liquidation without
authorisation. One could formulate different scenarios:
[205.1]
The liquidator may ignore the directions
given to him by a meeting of creditors, the Master or the court.
Those are three different
acts of non-compliance, dependent on
different facts. In this matter the second scenario is at play. I ask
later herein if it matters;
[205.2]
The liquidator may sell the assets before
or after a meeting of creditors. In this matter the second scenario
is at play. I ask
later herein if it matters;
[205.3]
The lack of authority of the liquidator may
be the result of the operation of law (for instance the effect of an
application for
business rescue being made on the winding-up process)
or simply because of a lack of authority. I ask later herein if it
matters;
and
[205.4]
The liquidator may be finally or
provisionally appointed. I ask later herein if it matters.
[206]
Only some of these scenarios are expressly
dealt with in the
Insolvency Act, in
this case,
section 82(8)
reads
(underlining added):
“
If
any person other than a person mentioned in subsection (7)
[131]
has
purchased in good faith from an insolvent estate any property which
was sold to him in contravention of this section
,
or if any person in good faith and for value acquired from a person
mentioned in subsection (7) any property which the last mentioned
person acquired from an insolvent estate in contravention of that
subsection,
the
purchase or other acquisition shall nevertheless be valid
,
but the person who sold or otherwise disposed of the property shall
be liable to make good to the estate twice the amount of the
loss
which the estate may have sustained as a result of the dealing with
the property in contravention of this section
.”
[207]
“
In contravention of this
section
”, and relevant to the
present case, refers to the following permissible sales by a trustee
in terms of insolvency law:
[207.1]
A
trustee who sells assets as he/she “
is
authorized to do so at the second meeting of the creditors of that
estate, … in such manner and upon such conditions as
the
creditors may direct
”;
[132]
[207.2]
A
trustee who sells assets, but where “
the
creditors have not prior to the final closing of the second meeting
of creditors of that estate given any directions the trustee
”.
In such a case he/she “
shall
sell the property by public auction or public tender
”,
“
after
notice in the Gazette
”
and “
after
such other notices as the Master may direct and in the absence of
directions from creditors as to the conditions of sale,
upon such
conditions as the Master may direct
”.
[133]
[208]
There
are other limitations in the section on the powers of the trustee to
sell that could be contravened regarding tenders,
[134]
rights acquired from the state, or the sale of certain prohibited
items.
[135]
These are not
relevant here.
[209]
Section 82(8)
only applies to one scenario,
a sale in terms of insolvency law after the second meeting of
creditors “
in such manner and upon
such conditions as the creditors may direct
”.
No mention is made of prior sales, contravention of legislation,
contravention of court orders, and indeed sales by a provisional
trustee. This is a sale by the finally appointed trustee after the
second meeting of creditors.
[210]
The question then is if section 339 of the
1973 Act should be applied in such a way that section 82(8) is
interpreted only to apply
in winding-up of companies to sales by the
final liquidator after the second meeting of creditors, and leave all
other purchasers
to deal with the effect of the Common Law.
[211]
In
Chater
Developments (Pty) Ltd (In Liquidation) v Waterkloof Marina Estates
(Pty) Ltd and Another
[136]
an immovable property of a company was sold by a final liquidator
after the second meeting of creditors. He complied with section
82(8)
as set out in the previous paragraph, but did not obtain a resolution
to authorise a sale in terms of section 386(3)(a) of
the 1973
Act read with section 386(4)(h). Theron JA
[137]
held at para 17:
“
[17]
The provisions of s 387(4) do not detract from the applicability of
s
82(8)
of the
Insolvency Act. The
right in
s 82(8)
is a substantive
right that offers protection to an innocent third party such as the
first respondent, from the consequences of
an unenforceable
transaction. It validates a purchase in good faith. By contrast, the
provisions of
s 387(4)
provide for a situation where the relief
sought is dependent upon the exercise of a discretion by the court.
Waterkloof Marina
should not be obliged to rely on a discretionary
remedy in circumstances where it is able to assert a valid purchase
by virtue
of the provisions of
s 82(8)
of the
Insolvency Act. It
was
common cause that Chater Developments was a company unable to pay its
debts as envisaged in
s 339.
There is no provision in the 1973
Companies Act that validates a purchase in good faith from a
liquidator who is not authorised
to sell. Such a situation is not
'specifically provided for in this Act' and it follows that s 82(8)
is applicable
.”
[212]
This reasoning is binding on me. It expands
the application of section 82(8) in winding-up situations to beyond
the strict wording
of section 82(8) where mere terminology is swapped
around. With respect, this interpretation complies with the
principles set out
in
Endumeni
.
[213]
The purpose of section 82(8) is to protect
bona fide
purchasers of assets against harsh consequences of invalidity in
terms of the Common Law. Winding-up sales, unlike sales
in
execution, are special types of sales, where there is room to
consider the position of the innocent purchaser. I can see no
reason
why the line in the sand should be the second meeting of creditors.
It seemed to me to be irrelevant if the innocent purchaser
faces an
invalid sale as:
[213.1]
A final liquidator or a provisional
liquidator went rogue; or
[213.2]
A liquidator made a
bona
fide
error in interpreting the consent
by creditors, or in interpreting the consent by the Master, or in
interpreting the consent by
a court; or
[213.3]
A liquidator exceeded his powers and the
innocent purchaser faces an invalid sale as liquidation proceedings
were suspended due
to section 131(6) of the 2008 Act.
[214]
The
applicants for an interdict sought to rely on
Oertel
and Others NNO v Director of Local Government and Others.
[138]
It does not assist, with respect. In that matter, the contract in
issue contravened an ordinance, and as such,
section 82(8)
of the
Insolvency Act could
not provide relief to the innocent purchaser of
land. It is in that sense that remark at 508F is made that relief
under
section 82(8)
“
obviously
presuppose that the sale of estate property is not unlawful or
prohibited
”.
[215]
I can see no reason, once protection to one
bona fide
purchaser is given (and the Common Law is thus overruled), not to use
section 339 of the 1973 Act and interpret section 82(8) to
cover a
wide range of unauthorised sales in the winding-up of companies. It
seems to me to have, as a purpose, to be a tool to
achieve justice. I
can see no reason for the anomalies that would flow from a
restrictive interpretation of “
mutatis
mutandis
”. Such extended classes
of
bona fide
purchasers are protected due to the right to equal protection and
benefit of the law (section 9(1) of the Constitution), in the
context
that I have addressed, and in the purpose of such protection
[216]
I accordingly find that properly
interpreted,
section 82(8)
of the
Insolvency Act also
applies to a
sale by a provisional liquidator where such a power is sought to be
exercised in terms of a court order, and the provisional
liquidator
fails to adhere to the terms of the court order, or fails to give
effect to the effect of the business rescue application
on the
winding-up process.
[217]
In my understanding, the auction took place
in December 2019, the purchase price in each case has been paid, and
delivery of movable
assets has taken place in each case. I do not
know which of the purchasers of movable assets purchased the assets
bona fide.
That aspect will have to be dealt with on a case by case basis.
[218]
In the circumstances, I have to make no
finding on applying section 388 of the 1973 Act to validate
bona
fide
purchases on the basis that it
would be “
just and beneficial
”
to do so (despite my view that a blanket ruling to ignore unlawful
conduct by the provisional liquidators would not be appropriate).
[219]
The
case before me dealt with one aspect of
section 82(8)
of the
Insolvency Act, its
application on
bona
fide
purchasers. The other part of the section, the liability of the
trustee for unauthorised sales, did not serve before me. That second
aspect may have been decided already in favour of the provisional
liquidators. See
Swart
v Starbuck and Others,
[139]
para 26-27 of the judgment by Khampepe J
[140]
is of some importance.
“
[26]
The High Court and the Supreme Court of Appeal judgments regarding
this claim are well reasoned and cannot be faulted. It cannot
be put
more plainly: Mr Swart's claim was based on
s 82(1)
read with s 82(8)
of the Act. The application of this section depends on, among other
things, the absence of a valid authorisation
by the Master for the
sale of the properties. The Master authorised the sale of the
properties in terms of s 80bis. This authorisation
has legally valid
consequences until it is set aside. This authorisation has not been
set aside. Section 82 can find no application
in the present matter.
[27]
In the circumstances, there is no damages claim to be proved in terms
of s 82(8) of the Act. In any event, even if there were
a damages
claim to be proved under any other branch of the law, the conclusion
is inescapable that Mr Swart has not been able to
prove any damages.
…”
[220]
The matter before me is not if the
provisional liquidators are liable for damages, but if by applying
section 82(8)
of the
Insolvency Act in
a winding-up, only some
bona
fide
purchasers should be protected, or
all of them.
[221]
This leaves the rights of
bona
fide
purchasers of immovable property.
Transfer of the immovable assets has been interdicted. It does seem
to me that
section 82(8)
of the
Insolvency Act had
a shield in mind
for
bona fide
purchasers, not a sword. It also seems to me that where transfer has
not yet taken place, a purchaser cannot contend that she/he/it
“
has
purchased
” the property is thus
entitled to protection under
section 82(8).
I interpret “
has
purchased
” in
section 82(8)
to
mean that delivery also had to have taken place.
[222]
In
as far as Fidelity sought to rely on
section 82(8)
to demand
transfer, I find that they are no longer
bona
fide
purchasers and have no cause of action to demand transfer. I am aware
of the decision in
Naude
v Serfontein, NO, en 'n Ander
[141]
where
Klopper JP held that a purchaser need not have been in
obtaining transfer for
section 82(8)
to apply, but not only are the
facts distinguishable, but the decision is also not binding on me.
[223]
Fidelity
also relied on
Legator
McKenna Inc and Another v Shea and Others
2010 (1) SA 35 (SCA),
[142]
but that decision does not assist were (a) transfer has not taken
place, and (b) the real (“saaklike”) agreement fails
for
authority.
[224]
I therefore do not apply
section 82(8)
of
the
Insolvency Act with
regard to purchased, but not transferred,
immovable property. Under those circumstances too, section 388 of the
1973 Act remains,
in my view, inapplicable where the provisional
liquidators deliberately acted unlawfully.
Sixth matter for
decision: Bad faith/abusive proceedings
[225]
In considering the many averments of bad
faith made by and on behalf of the provisional liquidators, I point
out that I have already
found that they acted unlawfully in
proceeding with the sales.
[226]
It is true, in limited instances, a court
may regulate its proceedings to avoid an abuse. This does not mean
that a judge sits in
judgment of motive and on a case by case basis
decides to hear a case, or not. In any event, I am unpersuaded that
the applications
before me, were an abuse. I do dismiss the business
rescue application, but as will appear below, it was perfectly
arguable in
accordance with the test to be applied. Had I found that
it was inarguable, and thus brought in bad faith, I would have
dismissed
it. The SCA has ruled what the remedy is of an application
for business recue brought in bad faith, a court must dismiss an
application
without merit. See
Richter
para 16:
“…
The
simple answer is that a court can dismiss any application for
business rescue that is not genuine and bona fide or which does
not
establish that the benefits of a successful business rescue will be
achieved
.”
[227]
The
provisional liquidators relied on
Van
Staden
.
[143]
In that case Wallis JA
[144]
held that the provisional liquidators were entitled to oppose an
application for business rescue on the basis that it was an abuse
of
the process of court. In
Van
Staden
,
two days before the hearing, the applicant delivered a notice of
withdrawal of the application and tendered to pay the costs of
the
intervening creditor, SARS, but did not tender to pay the provisional
liquidators' costs. The court in
Van
Staden
agreed
with the submission that the business rescue application was brought
for reasons ulterior to any genuine belief that the
close corporation
in issue would benefit from being placed under business rescue, The
court held that penalising costs was appropriate
in that the
withdrawn application ought to have been dismissed as it had no merit
at all and clearly was brought for ulterior motives:
“
[21]
It is apparent that Pro-Wiz could never have thought that a viable
business rescue could be instituted in relation to Oljaco.
Its
failure to engage with the liquidators or the principal creditor on
that subject prior to launching its application speaks
volumes in
that regard. The timing of the application suggested that its true
purpose was to stultify the interrogation of Mr Smith.
The failure to
deal with any of the issues raised by the liquidators and Sars in
this regard indicates that no response was possible.
Finally, the
withdrawal at the very last minute, without explanation, when
confronted with the reality of having to argue the application
in
court, conveyed the impression of an absence of any bona fide belief
in the merits of the case and a lack of intention genuinely
to pursue
it. I conclude that it was brought to provide a reason for avoiding
Mr Smith's interrogation and with a view to delaying
the liquidators
in their enquiries as to the squirrelling away of assets.
[22]
All of that constituted an abuse of the process of the court and an
abuse of the business rescue procedure. It has repeatedly
been
stressed that business rescue exists for the sake of rehabilitating
companies that have fallen on hard times but are capable
of being
restored to profitability or, if that is impossible, to be
employed where it will lead to creditors receiving an
enhanced
dividend. Its use to delay a winding-up, or to afford an opportunity
to those who were behind its business operations
not to account for
their stewardship, should not be permitted. When a court is
confronted with a case where it is satisfied that
the purpose behind
a business rescue application was not to achieve either of these
goals, a punitive costs order is appropriate
.”
[228]
On those facts, I fully agree. They are not
the facts in this matter. The bad faith case argued by the
provisional liquidators is
largely based on inferences based on the
timing of the business rescue application. The chronology reflects
exasperation at provisional
liquidators proceeding as if they were
not bound by the Bhoola order. The business rescue application may
have been rushed when
new lawyers were appointed to bring it before
the auction started. That fact on its own does not make the
application
mala fide
.
It could have been a supplementary purpose with a completely
bona
fide
application. Similarly, if the
application for business rescue is dismissed for lack of merit on the
viability of rescuing the
business rescue companies, it also does not
mean that the application was brought in bad faith. It is an
assessment that I must
make on the facts of the case. As I read
Van
Staden
, it only reflects that
upon dismissal of the application, an application brought in bad
faith will result in penalising costs.
I do not read that judgment as
providing the provisional liquidators with a bad faith ground for a
dismissal of the application,
distinct from the merits of the
business rescue application. A distinguishing fact is the unlawful
conduct by the provisional liquidators
in this matter, as opposed to
Van Staden
.
Seventh matter for
decision: Merits of the business rescue application
[229]
In the matter before me, there was in the
end, substantial compliance with the service of the business rescue
application when I
was asked to make a finding on the merits thereof.
[230]
In dealing with a business rescue
application, one needs to start with what is set out as a definition
of “
business rescue
”
in section 128(1)(b) of the 2008 Act (underlining added):
“
(1)
In this Chapter-
…
(b) 'business rescue'
means proceedings
to facilitate the rehabilitation of a company
that is financially distressed by providing for-
(i) the temporary
supervision of the company, and of the management of its affairs,
business and property;
(ii) a temporary
moratorium on the rights of claimants against the company or in
respect of property in its possession; and
(iii)
the development and implementation, if approved, of a plan
to
rescue the company by restructuring its affairs
,
business, property, debt and
other liabilities, and equity in a manner that maximises the
likelihood of the company continuing in
existence on a solvent basis
or
, if it is not possible for
the company to so continue in existence,
results
in a better return for the company's creditors or shareholders than
would result from the immediate liquidation of the company
”
.
[231]
This definition is intended to give effect
to section 7(k) of the 2008 Act:
“
The
purposes of this Act are to-
(a) ...
(k) provide for the
efficient rescue and recovery of financially distressed companies, in
a manner that balances the rights and
interests of all relevant
stakeholders; and
(l)
…
”
[232]
The purpose of business rescue proceedings
is therefore “
the rescue and
recovery of financially distressed companies
”,
or put differently in the same act, “
the
rehabilitation of a company that is financially distressed
”.
The rights and interests of all stakeholders need to be balanced. As
already pointed out, in the same Act, the defined
term is one of
“
affected person
”
and not “
stakeholder
”.
A creditor is defined in section 128 to be an affected person. It is
no doubt a stakeholder too.
[233]
When an application is made to court in
terms of section 131 of the 2008 Act, to place a company under
supervision and to commence
business rescue proceedings, the powers
of a court are set out in section 131(4) (underlining added:
“
After
considering an application in terms of subsection (1), the court
may
-
(a) make an order
placing the company under supervision and commencing business rescue
proceedings,
if the court is satisfied that
-
(i)
the company is financially distressed;
(ii) the company has
failed to pay over any amount in terms of an obligation under or in
terms of a public regulation, or contract,
with respect to
employment-related matters; or
(iii) it is otherwise
just and equitable to do so for financial reasons,
and
there is a reasonable prospect for rescuing the company
;
or
(b)
dismissing the application, together with any further necessary and
appropriate order, including an order placing the company
under
liquidation
.”
[234]
It was common cause that all six business
rescue companies are financially distressed. On one reading, in
exercising the “
discretion
”
section 131(4) gives me, I also need to be satisfied that (an onus
must be met) that “
there is a
reasonable prospect for rescuing the company
”.
I need to address two issues pertaining to such a reading of
the section:
[234.1]
Oakdene
Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami)
(Pty) Ltd and Others
para
21
[145]
by Brand JA
[146]
held that my discretion is not a discretion in the strict sense (I
agree):
“…
In
a case such as this, the court's discretion is bound up with the
question whether there is a reasonable prospect for rescuing
the
company. The other pertinent requirement in s 131(4), namely, that
the company must be financially distressed, seems to turn
on a
question of fact. As to whether there is a reasonable prospect of
rescuing the company, it can hardly be said, in my view,
that it
involves a range of choices that the court can legitimately make; of
which none can be described as wrong. On the contrary,
as I see it,
the answer to the question whether there is such a reasonable
prospect can only be 'yes' or 'no'. These answers cannot
both be
right
. …”
[234.2]
Brand JA further held in
Oakdene
Square Properties
in para 23 to 28
found that even “… w
here it
is clear from the outset that the company can never be saved from
immediate liquidation and that the only hope is for a
better return
than that which would result from liquidation
”,
the requirements of section 131(4) are still met if the “
a
better return for the creditors or shareholders of the company than
would result from immediate liquidation
”
could be achieved. This finding is binding on me. It reads into
section 131(4) a further alternate condition not reflected
in the
words of the section.
[235]
In my view, the balance that I have to
strike between the rights and interests of all relevant stakeholders
coincides with my finding
that the business rescue companies are not
viable companies in respect of which a case has been made out that
there is a reasonable
prospect of rescuing them:
[235.1]
The liquidation of the companies took place
on during early 2019. The directors in the context of the events
leading up to the resolutions
to wind-up, saw no way forward;
[235.2]
The group’s existing business model
of doing business with the state and state-owned entities, has come
to a stop;
[235.3]
There is no indication of any resumption of
the past business model;
[235.4]
Business stopped a long time ago, and the
key employees of the business rescue companies probably have found
alternate employment;
[235.5]
Any new business would require employing
personnel;
[235.6]
The movable assets of the business rescue
companies have been sold and are unlikely to be recovered. This would
require funding
in a distressed environment, a capital injection, or
the availability of credit finance, or own funding;
[235.7]
Any venturing into the private sector would
be in effect a start-up business, with a complete inability by anyone
to predict likely
success. Such ventures would have to commence from
a discredited basis (rightly or wrongly), making success even less
likely;
[235.8]
In the normal course, it takes time to
establish new businesses, more so with the reputational risk
suffered by the group.
The business operations would need funding.
The longer it takes to establish the new businesses, the greater the
need;
[235.9]
At least ABSA and FNB seem unlikely to get
involved in funding. There is the additional difficulty that the
business rescue companies
do not have bank accounts and will have to
use an account of Sun Worx. Not only does this exclude them from
receiving government
tenders (should the bar on doing business with
them ever be lifted), but it is a structure with business risk;
[235.10]
The ability to develop a business rescue
plan hampered by the absence of reliable accounting records. On the
common cause facts,
the accounting records of the group are
unreliable and have been unreliable at least for some years. The
business rescue applicants
had to rely on them;
[235.11]
There is proof of wrongdoing in the
accounting records, according to the reports by auditing firms;
[235.12]
SARS
has a substantial claim against the group. The business rescue
companies are unable to settle that debt. SARS is of the view
that it
is the single largest third-party creditor of the group of companies.
It is of the view that the group is indebted to it
in the sum of R850
Million, and about R312 Million in respect of the six business rescue
companies
[147]
a sum that it
is not final, and could be much more due to further assessment,
understatement penalties and interest. These are
evolving numbers, in
formal assessments the figures are in round figures R600 million and
R62 Million. The amounts and additional
amounts may still be
challenged, but it is the closest to working figure that is
available. The available funding may have
to be used to pay
SARS. SARS contends, with merit, that the application is doomed to
fail without a plan to pay SARS. It is not
a minimal amount;
[235.13]
The only creditor before me, SARS, does not
want to see a business rescue process allegedly to increase its
return. It is unlikely
to vote in favour of a business rescue plan;
and
[235.14]
In any event, ultimately, as was held in
Oakdene Square Properties
para
39, merely to have more cash in the bank, is not a proper business
rescue purpose.
[236]
The provisional liquidators put it as
follows:
“…
the
Rescue Companies have no assets, have no employees, have no contracts
to service nor any monetizable or commercialisable concerns,
do not
have transactional bank accounts and that they have entirely been
divested of their substratum
”
.
[237]
The stance by the applicants (and perhaps
somewhat crudely put) is that the business rescue practitioner must
devise a plan. There
is no such plan as there is no such plan. My
overall impression was that no one truly could argue that new
business on a balance
of probabilities would be established and would
be successful. They needed, as a minimum, to establish a prospect
based on reasonable
factual grounds, and not speculation, as was held
in
Oakdene Square Properties
para
29-30, and could not do so.
[238]
Under these circumstances, I make no
finding based on the alleged fraudulent activity in Consilium
Business Consultants (Pty) Ltd,
alleged fraudulent activity in Miotto
Trading and Advisory Holdings (Pty) Ltd, alleged fraudulent activity
in Supply Chain Management,
piercing of the corporate veil (of the
business rescue companies) as a result, the effect of section 22 of
the 2008 Act, or that
such evidence tendered was admissible before
me.
[239]
This is not the end of the argument, as
based on
Oakdene Square Properties,
the requirements of section 131(4) are still met if “
a
better return for the creditors or shareholders of the company than
would result from immediate liquidation
”
could be achieved.
[240]
The
business rescue applicants approached the matter largely with the
second purpose in mind, a better winding-up. In my reading
of the
cases, this is a difficult hurdle. It seems to me that the
Constitutional Court (see below) is of the view that the companies
to
be rescued are at least primarily, those where there is “
a
reasonable prospect for rescuing the company”,
the
same requirement contained in evaluating a resolution under section
129(1) of the 2008 Act,
[148]
as addressed in
Panamo
Properties (Pty) Ltd and Another v Nel N.O. and Others
para
9,
[149]
a judgment by Wallis
JA.
[150]
See too the
objection to such a resolution on the basis that there is no
reasonable prospect for rescuing the company, as set out
in section
130(1)(a).
[151]
[241]
The
Constitutional Court case that I refer to is
Diener
NO v Minister of Justice and Correctional Services and Others
para 54,
[152]
where Khampepe
J
[153]
held (underlining
added):
“
The
purpose of business rescue is to assist a financially distressed
company with paying its debts, avoiding insolvency, and maximising
the benefit to stakeholders upon liquidation (if inevitable). It is
stated expressly in section 7(k) of the Companies Act that
one of the
purposes of the Act is to “provide for the efficient rescue and
recovery of financially distressed companies,
in a manner that
balances the rights and interests of all relevant stakeholders”.
It must be emphasised that this must
be done while balancing the
rights of all affected persons, including creditors, employees, and
shareholders.
[154]
The primary goal of business rescue is to avoid liquidation and its
attendant negative consequences on stakeholders.
[155]
In addition, a secondary purpose is to achieve a better outcome on
liquidation or disinvestment, whereby “[t]he underlying
principle behind restructuring or reorganisation proceedings is that
a business may be worth a lot more if preserved, or even sold,
as a
going concern than if the parts are sold off piecemeal”.
[156]
At
the same time, where it is not viable to rescue a company, it should
be liquidated and its business sold.
[157]
Business rescue can only begin where there is a reasonable prospect
of saving the company
.
[158]
This was highlighted in KJ Foods, where the Supreme Court of Appeal
quoted with approval the High Court in DH Brothers Industries,
which
stated that -
'Chapter
[6] as a whole reflects ''a legislative preference for proceedings
aimed at the restoration of viable companies rather
than their
destruction''
but
only of viable companies, not of all companies placed
under
business rescue.'
[159]
42
This
is in line with the ultimate aim of balancing the rights and
interests of all relevant stakeholders.
“
[242]
It seems to me that this approach is in
fact in accordance with the judgment by Brand JA, who was compelled
to read into section
131(4)(a) of the 2008 Act the secondary purpose
due to the poor drafting of the 2008 Act. The 2008 Act contains
inexplicable omissions
to reflect the secondary purpose of business
rescue proceedings consistently. This does not mean that in every
winding-up case,
one must choose between two methods.
[243]
It
further appears from the rest of
Oakdene
Square Properties
,
as I read the judgment, that the learned judge does not see business
rescue appropriate where the motivation for it is say a cheaper
form
of liquidation (rendering a larger return). In this regard see the
remarks by Gamble J in
Van
der Merwe and Others v Zonnekus Mansion (Pty) Ltd (in liquidation)
and Another (Commissioner for the South African Revenue Service
and
Another Intervening)
para 35-41 on
Oakdene:
[160]
“
[35]
In circumstances where a business rescue practitioner, as opposed to
the liquidator, is likely to have to sell property belonging
to the
embattled company, Brand JA points out that the purpose of business
rescue is not intended to serve as a less expensive
form of winding
up.
“
[33]
My problem with the proposal that the business rescue practitioner,
rather than the liquidator should sell the property as
a whole, is
that it offers no more than an alternative, informal kind of
winding-up of the company, outside the liquidation provisions
of the
1973 Companies Act which had, incidentally, been preserved, for the
time being, by item 9 of schedule 5 of the 2008 Act.
I do not
believe, however, that this could have been the intention of creating
business rescue as an institution. For instance,
the mere savings on
the cost of the winding-up process in accordance with the existing
liquidation provisions could hardly justify
the separate institution
of business rescue. A fortiori, I do not believe that business rescue
was intended to achieve a winding
up of the company to avoid the
consequences of liquidation proceedings, which is what the
appellant’s apparently seek to
achieve.”
[36]
Further, Brand JA refers to the important investigative powers of a
liquidator acting under the old Companies Act in circumstances
where
there have been, for example, questionable transactions on the part
of the company or its directors or employees, and which
warrant
further investigation by way of interrogation.
“
[35]
…On the respondents’ version the company has been
stripped of all its income and virtually all its assets while
under
the management [of one of the company’s directors]. These
allegations are, of course, denied by the appellants. But,
as I see
it, that is not the point. The point is that these are the very
circumstances at which the investigative powers of the
liquidator -
under s417 and 418 of the 1973 Companies Act - and the machinery for
the setting aside of the improper dispositions
of the company’s
assets - provided for in the
Insolvency Act 24 of 1936
- are aimed.
In this light I believe there is a very real possibility that
liquidation will in fact be more advantageous to creditors
and
shareholders - excluding, perhaps, the appellants - than the proposed
informal winding up of the company through business rescue
proceedings.”
[37]
Finally, Brand JA points out that where the majority of creditors are
against the proposed business rescue scheme, that is
an important
consideration for the court to have regard to –
“
[38]
…As I see it, the applicant for business rescue is bound to
establish reasonable grounds for the prospect of rescuing
the
company. If the majority creditors declare that they will oppose any
business rescue scheme based on those grounds, I see no
reason why
that proclaimed opposition should be ignored. Unless, of course, that
attitude can be said to be unreasonable or mala
fide. By virtue of
s132
(2) (c) (i) read with s152 of the Act, rejection of the proposed
plan by the majority of creditors will normally sound the death
knell
of the proceedings. It is true that such rejection can be revisited
by the court in terms of s153. That, of course, will
take time and
attract further costs. Moreover, the court is unlikely to interfere
with the creditors’ decision unless their
attitude was
unreasonable. In the circumstances I do not believe that the court
can be criticised for having regard the declared
intent of the major
creditors to oppose any business rescue plan along the lines
suggested by the appellants.”
[38]
An applicant for business rescue is not required to set out a
detailed business rescue plan. However, the applicant must establish
grounds for the reasonable prospect of achieving one of the two goals
mentioned in section 128 (1)(b) of the Act (ie a return to
solvency
or a better deal for creditors and shareholders than through
liquidation). A reasonable prospect means a possibility that
rests on
objectively reasonable grounds.
[161]
[39]
In Propspec
[162]
van der Merwe J observed that –
“
There
can be no doubt that, in order to succeed in an application for
business rescue, the applicant must place before the court
a factual
foundation for the existence of a reasonable prospect that the
desired object can be achieved.”
Expanding
thereon, the court noted
[163]
that-
“
..(A)
reasonable prospect in this context means an expectation. An
expectation may come true or it may not. It therefore signifies
a
possibility. A possibility is reasonable if it rests on the ground
that it is objectively reasonable.… [a] reasonable
prospect
means no more than a possibility that rests on an objectively
reasonable ground or grounds.”
[40]
In Wedgewood Village
[164]
Binns-Ward J held the view that an applicant for business rescue must
be able to place before the court a cogent evidential foundation
to
support the existence of a reasonable prospect that the desired
object could be achieved.
[41]
Lastly, by way of background, it is generally accepted that business
rescue is intended to be a short-term measure. In Gormley
[11]
[165]
Traverso DJP made the following observation:
“…
.The
Act envisages a short-term approach to the financial position of the
company. This is so for self-evident reasons. There must
be a measure
of certainty in the commercial world. Creditors cannot be left in a
state of flux for an indefinite period. The provisions
of the Act
make it clear that the concept of business rescue only applies to
companies which are financially distressed as defined
in the Act. If
a company is not so financially distressed, the provisions of Chapter
6 of the Act will not apply. It must either
be likely that the debts
can be repaid within 6 months or that there is the likelihood that
the company will go insolvent in the
ensuing 6 months.”
Traverso
DJP went on to find that because the company in question was at the
time insolvent and that it required a moratorium to
pay its debts,
the company was not financially distressed within the meaning of
section 128(1)(f) of the Act
”
.
[244]
I do not read the authorities binding on me
that such a better liquidation purpose should easily sway a court. It
is not an inarguable
case, but it is a hard one to succeed with. Our
law has settled, generally applicable winding-up proceedings apply
for good reason.
There is some merit in the argument about lower
expected fees in business rescue proceedings, but if the issue is the
remuneration
of liquidators, that issue must be addressed instead of
applying business rescue as an alternate method of liquidation.
[245]
There is some merit in the submission that
the inquiries under section 417 of the 1973 Act may be derailed if
the business rescue
applications were to succeed. To date, that risk
has not materialised, but it cannot be excluded. This too point away
from a better
liquidation as a motivation for relief.
[246]
The anti-dissipation tools in the
Insolvency Act are
powerful tools to set aside impeachable
transactions. This too point away from a better liquidation.
[247]
As stated, the only creditor before me,
SARS, does not want to see a business rescue process allegedly to
increase its return. This
is a material fact. Ultimately, creditors
can look after themselves best in the liquidation process. They can
direct the liquidators.
[248]
I am not convinced to any reasonable extent
that business rescue would result in a better return than liquidation
on the case argued
by the business rescue applicants, leaving aside
the limitations that
Plascon Evans
places on them. Again, as was held in
Oakdene
Square Properties
para 34, in
principle, there is no reason why a business rescue practitioner
would obtain a better price for the property, and it
is difficult to
seek to compare the fees of the two offices. Also, in this case, more
litigation and thus higher business rescue
(time based) fees could be
expected. I am not convinced that there is a reasonable prospect of
better values being obtained in
a less hasty sales process. In a
period of almost a year before the auction, no such purchasers
materialised. In addition, even
considering the timing of the auction
(on short notice, in December 2019), potential purchasers knew of the
liquidation of the
companies, knew that assets would/might become
available for sale, and a public auction was held. It achieved in
most cases at
least forced sale values.
[249]
In light of my finding on the effect
of
section 82(8)
of the
Insolvency Act on
the sales of movables, my
sense is that such sales are unlikely to be set aside in at least
many cases. There is time to consider
the sales of the immovable
assets. I am not persuaded that business rescue will result in a
better return, despite the various
illustrative sums done by the
applicants.
[250]
Despite some success in the auction
application, the business rescue application still stands to be
dismissed. I disagree that there
is a factual basis for the
conclusion by the business rescue practitioners in their
supplementary heads of argument:
“
134
We furthermore submit that the Rescue Application:
134.1 is, in and of
itself, the quintessential example of a flagrant abuse of the
business rescue and court processes;
134.2 is persisted
with the clear ulterior motive to neutralise the appointment of
independent liquidators to the subject companies
under circumstances
where the Bosasa protagonists had a clearly intended plan in mind
when they placed the said companies in liquidation
on day one; and
134.3
is otherwise in want of merit on every
and
any conceivable basis
.”
[166]
[251]
The
alleged “
Bosasa
protagonists
”
brought an arguable business rescue application to court. I dismiss
it, but I disagree that the application was so lacking
in merit that
it constituted an abuse. The inference that the provisional
liquidators seek to draw, is not consistent with all
the proven
facts, nor is an evil scheme from the start, the most plausible
conclusion. See the judgment by Southwood J,
Skilya
Property Investments (Pty) Ltd v Lloyds of London Underwriting
at 780H-781D.
[167]
As the
provisional liquidators correctly argued in the auction application
(underlining not added, but footnotes omitted):
“
37
Primary facts are those capable of being used as a basis for the
drawing of inferences as to the existence or nonexistence of
other
facts. Such further facts in relation to primary facts are called
secondary facts. Secondary facts, in the absence of primary
facts are
nothing more than the deponent’s own conclusions and do not
constitute evidential material capable of supporting
a cause of
action.
38
Moreover, inference is to be distinguished from speculation, and is
to be based on
properly proved
objective facts. As held in
Skilyia
Property Investments (Pty) Ltd v Lloyds of London Underwriting
,
an inference sought to be drawn must further be consistent with all
proved facts
.”
[252]
On the same reasoning, I reject the
argument in the provisional liquidators’ heads of argument in
the auction application
that the business rescue application was
impermissibly used as a springboard to bring the auction application.
Again, there is
no factual basis for such an inference. The fact that
the application was made had legal consequences, and these are
addressed
in the auction application, the proper forum.
Eighth matter for
decision: Costs
[253]
I have already at the outset dealt with
some interlocutory cost orders. Where I grant costs in the order
below, I mostly followed
the rule that costs follow the result.
[254]
Emotions
ran high in this matter. I take into account the pressure under which
the papers were prepared, and the increasing tension
in the matter.
Usually in litigation, one simply reads past those instances where,
on reflection, the lawyers should have acted
more measuredly, and
simply deal with the merits of the matter. It was not possible in
this matter. The matter was argued with
unpleasant animosity between
the legal representatives representing the provisional liquidators
and those representing the applicants
in the business rescue and
auction applications.
[168]
[255]
This
case mainly had to be decided on affidavit by applying
Plascon
Evans.
[169]
It does not assist at all to pepper a letter (in reality written for
the court) or an affidavit or heads of argument with averments
and
innuendo about dishonest motives, adjectives and adverbs conveying
imputations of dishonest motives, and the like. I have already
reflected the argument regarding the business rescue application.
[256]
Reynolds
NO v Mecklenberg (Pty) Ltd
[170]
is
clear that improper argument must be removed from papers and a
disciplined approach to pleading cases in opposed motions should
be
followed. In that case, Stegmann J dealt with a record of only 430
pages. Yet another plea for restraint is the useful summary
of the
authorities in
Venmop
275 (Pty) Ltd and Another v Cleverlad Projects (Pty) Ltd and Another
at para 7-14.
[171]
There was
no such restraint in this matter. The case was not argued on facts,
placed in a chronological order, proven where necessary
with
documents, from which permissible factual and legal conclusions were
drawn. The papers and the heads of argument by the provisional
liquidators are replete with averments and innuendo that persons
involved in the business rescue and auction applications are
dishonest and have dishonest motives. Much of this was aimed at Mr J
Watson. Predictably with certainty, it added nothing to the
matter.
[257]
I already have made serious findings of
unlawful conduct by the provisional liquidators. In light of those
findings, their unduly
aggressive litigation becomes even more
unacceptable. It was argued before me, on their behalf, that upon
winding-up, “
the law
”
takes control of the company in liquidation. My distinct impression
was that the provisional liquidators equated that concept
with
themselves. They may be used to wielding wide powers in insolvency
matters, but the exercise of such wide power is the more
reason for
humility and restraint.
[258]
Wallis
JA
[172]
held in
Murray
and Others NNO v African Global Holdings (Pty) Ltd and Others
para 42:
[173]
[258.1]
That it was assumed in error that the
provisional liquidators-
“…
would
not discharge their duties properly under the supervision of the
Master and in accordance with the directions of creditors
”
,
[258.2]
That Ameer AJ-
“
ignored
the fact that as provisional liquidators their powers were limited
and did not extend to doing the things he attributed
to them
”
.
[259]
It is my respectful view, whilst I take no
issue with the finding by SCA, that what Ameer AJ accepted, became
true: The provisional
liquidators acted unlawfully and exceeded their
powers.
[260]
I do penalise the provisional liquidators
with attorney-and-client costs in one instance (the auction
application), and I deprive
them of part of their costs in the
business rescue application. I did so as they crossed the line in the
litigation and they acted
unlawfully in two major respects
(disregarding the Bhoola order and the business rescue application).
[261]
The heads of argument in the business
rescue application gives a clue as to their motivation:
“
183
The practice of delivering an application for business rescue has,
since the SCA’s judgment in Richter, been open to abuse
.”
[262]
The heads of argument of the provisional
liquidators in the auction application repeats the above almost
verbatim:
“
134
The practice of delivering an application for business rescue to
stifle liquidation proceedings has, since the SCA’s judgment
in
Richter, been open to abus
e”,
[263]
It was not for them to decide not to apply
the law if they disagree with the SCA. The heads of argument of the
provisional liquidators
in the auction application gives this answer
why they continued with the auction (and took it upon themselves to
continue without
seeking relief in a court):
“
12
The business rescue application, comprising in excess of one thousand
pages [supported by a founding affidavit that without its
annexures
span one hundred and sixty-two pages] could have been brought as long
ago as March 2019 but it was rather issued the
day before the
auction.
13 It was manifestly
purposefully only issued on 3 December 2019 in an [unsuccessful]
attempt to trigger the provisions of 131(6)
of the 2008 Act, to
suspend the liquidation proceedings and derail the auction.
14
However, having formed the view that the business rescue application
is an abuse and in want of merit on every conceivable basis,
MacRoberts duly informed the applicants on 4 December 2019 that the
liquidators would be proceeding with the auction on the morning
of 4
December 2019, the issue of the business rescue application
notwithstanding
.”
[264]
Not only was it not for the provisional
liquidators to ignore the fact that the business rescue application
was made, but the inference
of an abuse factually fails at three
common cause facts: The recent change in legal representation by the
applicants, the recent
change in the board of Holdings, and that
Ameer AJ had ruled that the winding-up should be set aside.
[265]
In considering the conduct of the
provisional liquidators in the litigation, one must not lose sight of
the facts that they had
acted unlawfully, deliberately.
[266]
This brings me to the extent to which the
provisional liquidators crossed a line. I do not have to go beyond
the heads of argument
of the provisional liquidators to reflect the
unacceptable way the provisional liquidators conducted themselves.
[267]
This is an extract from the heads of
argument in the business rescue application dealing with the
chronology:
“
14
The calculated timing of this application is telling. It was
manifestly purposefully only issued on 3 December 2019 in an
[unsuccessful]
attempt to trigger the provisions of 131(6) of the
2008 Act i.e. to suspend the liquidation proceedings and derail the
auction.
15 It is, in and of
itself, a further quintessential example of a flagrant abuse of court
process.
16
However, having diagnosed this application as an abuse and to be in
want of merit on every conceivable basis, the liquidators
duly
informed the applicants on 4 December 2019 that the liquidators of
the subject companies would be proceeding with the auction
on the
morning of 4 December 2019, the issue of this application
notwithstanding
.”
[268]
These submissions are repeated almost word
for word in the heads of argument in the auction application:
“
89
It suffices to state that the business rescue application:
89.1 comprising in
excess of a 1000 pages [supported by a founding affidavit that
without its annexures span 162 pages];
89.2 could have been
brought as long ago as March 2019, but was demonstrably purposefully
only issued on 3 December 2019 in an [unsuccessful]
attempt to
trigger the provisions of section 131(6) of the 2008 Act i.e. to
suspend the liquidation proceedings and derail the
auction;
89.3
is the quintessential example of a flagrant abuse of court process
and in want of merit on every conceivable basis
.”
[269]
I
have earlier quoted a similar extract from the supplementary heads of
argument.
[174]
[270]
In context, the provisional liquidators
acted illegally in proceeding with the sale. In context, it is common
cause that the applicants
for business rescue obtained new legal
representation mere days before the business rescue application was
made. New legal representation
would have looked afresh at matters.
Within a very short time span, the business rescue application was
issued. Why would the most
probable inference from such facts be
dishonest manipulation of court processes (“
a
flagrant abuse of court process
”)?
Why would the period from March 2019 be relevant where new lawyers
are appointed? More importantly, in opposed motion
court, which judge
would make a positive finding of a dishonest manipulation of court
processes on the reasoning of the provisional
liquidators?
[271]
The same tone was adopted throughout the
litigation by the provisional liquidators. In the supplementary heads
of argument, with
the stated aim to address a supplementary affidavit
introduced by them, and
inter alia
to address:
“
The
unconscionable abuse of the separate juristic entities by the Bosasa
protagonists in pursuance of the perpetration of substantial
frauds
and their involvement in numerous corrupt activities
”
.
[272]
It
is common cause that there was a change in directors. The persons
involved in the winding-up resolution are no longer active
in the
matter. The questions then are who these “
Bosasa
protagonists
”
are with ulterior motives, and what their plan all along was. How are
they involved in the “
perpetration
of substantial frauds and … in numerous corrupt activities
”?
These are most serious allegations and could only be directed at Mr J
Watson and Ms L Watson (apart perhaps from the lawyers).
On what
factual basis are they accused of committing fraud and corruption?
The long heads of argument by the provisional liquidators,
[175]
in my reading of them, does not reflect proof that any person
involved in the matter before me committed fraud, or acts of
corruption.
Even more objectionable is that the same heads of
argument also argue that Mr J Watson lacks personal knowledge of
matters that
predated about the time of his appointment as
director.
[176]
[273]
At the heart of the Constitution stand the
rights to equality and to dignity. These two rights are for good
reason mentioned first
and second in the Bill of Rights. I firmly
believe that courts should be vigilant in protecting the rights to
equality and to dignity
of those who find themselves involved in
court processes. It matters not what wrong any family member of you
is alleged to have
done (or conversely how highly regarded your
family name is). In a court you will be treated with dignity, and
equal to everyone
else. I will put it bluntly: If in the end it is to
be found that the late Mr Gavin Watson and other employees of the
group committed
fraud, or acts of corruption, and that the books of
account of the group constituted a fiction, Mr J Watson and Ms L
Watson still
will be treated with respect in my court.
[274]
It
does not end here. The provisional liquidators accused senior counsel
and a senior attorney for the business rescue applicants
in their
heads of argument in the business rescue application of misleading
the Honourable Wright J in chambers about the length
of urgent
application that was being prepared (70 pages
[177]
versus an ultimate 170 pages)
[178]
for hearing on 4 December 2020. The lawyers were meeting the judge in
chambers whilst the papers were being prepared in their absence.
This
conduct is then submitted to have been intended to mislead Wright J:
“
173
The actual extent of the urgent application papers was certainly not
correctly represented to Wright [J] in chambers
”
;
“
175.
The actual extent of what was truly contained and traversed in the
urgent application and what were to be required for it to
be heard
was, in the circumstances, equally not accurately represented to
Wright [J]
”
;
“
177.
Essentially, through the manipulative non-disclosure of material
detail, the applicants unconscionably orchestrated an obligation
upon
the liquidators to have consulted on, consider and respond to
affidavits in excess of 1200 pages
[179]
over-night and within approximately 18 hours
.”
[275]
Wright J ordered that an answering
affidavit in the urgent application be delivered the next morning and
stood the matter down (certainly
not an unusual step for a judge). He
then struck the urgent application from the roll. Please bear in
mind, the urgent application
to which this dispute relates, was not
before me. It had been dealt with by Wright J.
[276]
The same version of the lawyers (senior
counsel and a senior attorney) misleading Wright J is repeated
verbatim in paragraph 102
of the heads of argument in the auction
application:
“
102.
Essentially, through the manipulative non-disclosure of material
detail, the applicants unconscionably orchestrated an obligation
upon
the liquidators to consult on, consider and respond to affidavits in
excess of
1200 pages
over-night
and within approximately
18
hours
.”
[277]
Why is this relevant in the matters before
me, even if true? Which judge would make such a finding in these
applications? If the
papers were longer than expected, why is the
most probable inference that the lawyers are involved in a dishonest
manipulation
of court processes or that they re-considered what to
add to the papers?
[278]
The provisional liquidators, in their heads
of argument in the auction application go as far as accusing the
lawyers preparing the
business rescue application to have “
been
in the process of preparing an application contemplated by section
354 of the 1973 Act and after they reflected on the SCA
Judgment and
realised that such an application will not achieve a stay of the
auction, they, at the last minute converted that
application to a
business rescue application
”.
This is done despite those counsel only being briefed days earlier.
The averment is made in the case pursued of a counsel
being part of a
conspiracy to abuse the court process. There is no factual basis for
this, and an unreserved apology should have
been tendered. Reflection
should have led to moderation.
[279]
Under
these circumstances, the application to strike out should have been
dealt with at the outset. More than just offensive matters
were in
issue, these papers could have been a lot shorter if relevance and
admissibility of, in effect opinion, were to be considered.
It is
ironic that the provisional liquidators quoted
Van
Zyl and Others v Government of the Republic of South Africa and
Others
para 45-46
[180]
about
endless repetition.
[280]
Threats of further steps were made during
argument by one counsel. If Wright J was misled, it is a matter that
must be dealt with
by the professional bodies and it was the duty of
the lawyers to have done so a long time ago, or face themselves,
possible disciplinary
steps by the professional bodies for failing to
refer the matter. If the provisional liquidators crossed the line in
this litigation
(as I believe they did), the matter must be dealt
with by the professional bodies, and potentially in our courts.
Concluding remarks
[281]
I have said little about
Plascon
Evans.
I endeavoured to apply it. No
one seriously suggested that I should refer the matter to oral
evidence or to trial. It seems to me
that no factual issue stood in
the way of deciding the matter and that kicking the can down the road
for another judge to deal
with, would not have been in the interest
of anyone. As such, I limited my comments on contested versions, and
focussed on the
facts required to come to a decision. Those were by
and large objectively determinable.
[282]
I order that this judgment be referred to
the Master. I bring two matters to her/his attention:
[282.1]
The deliberate unlawful conduct by the
provisional liquidators and the penalising costs order that I make
against the provisional
liquidators; and
[282.2]
The potential impact of the deliberate
unlawful conduct by the provisional liquidators on the costs of
winding-up the companies
in liquidation.
[283]
I know that my judgment does not resolve
the matter, and will cause delay. I could not prevent such delay on
my application of the
law to the facts. That is an unsatisfactory
outcome, but an outcome caused by the provisional liquidators who
acted unlawfully.
Much more litigation is now foreseeable. Continued
litigation may delay the matter more. In hope, I did seek to provide,
in my
order, for negotiated, or compulsory, sales of assets, if
negotiated progress could be made, as opposed to continued
litigation.
[284]
It gave me no pleasure to comment on the
conduct of the litigation. Litigation is stressful, the stakes are
high, and we all have
different personalities. In many ways I prefer
bluntness in argument, it extracts the principles, and do not bury
them under wordiness.
My comments, which I did make lightly, do not
reflect the extreme pleasure to preside in a difficult matter where
able counsel
present argument, well researched, and where the
attorneys who saw to pagination binding, the continuous updating of
my files,
and the continuous loading of papers onto CaseLines did
such splendid work. I would be remiss if I did not acknowledge the
outstanding
work too.
[285]
I would be remiss too if I did not
acknowledge the fact that it took me effectively three months to
deliver this judgment. The period
that I blocked out to do it in
during recess, was in hindsight, far too short. It was much more work
than what I thought it would
be. I tender my apology too, substantial
time had to be spent to complete this judgment, dealing with many
issues.
[286]
I make the following orders:
Case Numbers
44827/19 and 42741/19
1.
I bring this judgment to the attention of
the Master of the High Court;
Case Number
44827/19
2.
The reserved costs of the postponement of
the hearings of 11 and 12 March 2020 of the application under case
number 44827/19, hereinafter
called “
the
auction application
”, are to be
costs in the cause of the auction application;
3.
The reserved costs of the postponement of
the hearings of 4 and 5 May 2020 of the auction application, are to
be costs in the cause
of the auction application, save that the
applicants in the application for postponement dated 18 April 2020
must bear their own
costs of that application;
4.
The reserved costs of the application for
intervention by the first intervening party, (“SARS”), in
the auction application,
are to be costs in the cause of the auction
application, save that the applicants in the auction application are
to pay the costs
occasioned by any opposition to the intervention,
such costs are to include the costs of two counsel;
5.
The reserved costs of the application for
intervention by the second intervening party (Fidelity Security
Services (Pty) Ltd), hereinafter
called “
Fidelit
y,
in the auction application, are to be costs in the cause of the
auction application, save that the applicants in the auction
application are to pay the costs occasioned by any opposition to the
intervention;
6.
The costs of the application to strike out
content of affidavits in the auction application, are to be costs in
the cause;
7.
Any auction of and any other sale, whether
by private treaty or otherwise, of assets of AFRICAN GLOBAL
OPERATIONS (PTY) LTD (in
liquidation); BOSASA PROPERTIES (PTY) LTD
(in liquidation); GLOBAL TECHNOLOGY SYSTEMS (PTY) LTD (in
liquidation); LEADING PROSPECT
TRADING 111 (PTY) LTD (in
liquidation); BOSASA YOUTH DEVELOPMENT CENTRES (PTY) LTD (in
liquidation); BLACK ROX SECURITY INTELLIGENCE
SERVICES (PTY) LTD
(“
the six business rescue
companies”
)-
a.
Before the second meeting of creditors;
and/or
b.
Without the written consent by resolution
of the board of directors of AFRICAN GLOBAL HOLDINGS (PTY) LTD
(“
Holdings
”);
and/or
c.
Without the consent of the court,
is prohibited;
8.
Any sale prior to date of this order,
whether by auction or private treaty or otherwise, of assets of any
of the six business rescue
companies, sold whilst such company was in
liquidation and without the written consent by resolution of the
board of directors
of Holdings, is declared to be unauthorised;
9.
The transfer and registration of immovable
property to any prospective purchaser of assets of any of the six
business rescue companies,
sold prior to date of this order and
whilst such company was in liquidation-
d.
Without the consent of the second meeting
of creditors; and/or
e.
Without the written consent by resolution
of the board of directors of Holdings; and/or
f.
Without the consent of the court,
is prohibited;
10.
The first to thirty-ninth respondents
(excluding the fourth and the thirty-fifth respondents), SARS and
Fidelity are ordered to
pay the applicants’ costs of the
auction application jointly-and-severally, the one to pay the others
to be absolved from
liability, such costs are to include the costs of
two counsel;
11.
The scale of such costs payable by the
first to thirty-ninth respondents (excluding the fourth and the
thirty-fifth respondents)
are to be on the attorney-and-client scale,
Case Number 42741/19
12.
The reserved costs of the postponement of
the hearings of 11 and 12 March 2020 of the application under case
number 42741/19, hereinafter
called “
the
business rescue application
”, are
to be costs in the cause of the business rescue application;
13.
The reserved costs of the postponement of
the hearings of 4 and 5 May 2020 of the business rescue application,
are to be costs in
the cause of the business rescue application, save
that the applicants in the application for postponement dated 18
April 2020
must bear their own costs of that application;
14.
The reserved costs of the application for
intervention by the first intervening party, (the Commissioner for
the South African Revenue
Services), hereinafter called “SARS”,
in the business rescue application are to be costs in the cause of
the business
rescue application;
15.
The costs of the application to strike out
content of affidavits in the business rescue application, are costs
in the cause;
16.
The application to place the six business
rescue companies in business rescue, is refused;
17.
The applicants are ordered to pay 50% of
the respondents’ costs of the business rescue application, such
costs are to include
the costs of two counsel;
18.
The applicants are ordered to pay SARS’
costs of the business rescue application, such costs are to include
the costs of two
counsel where so employed;
Case Number 32083/19
19.
The application by the fourth to sixth,
eighth to thirty-seventh, and thirty-ninth to forty-first respondents
to join as co-applicants
is struck from the roll;
20.
Paragraph 2 of the order granted by the
Honourable Boohla AJ dated 28 October 2019 in case number 32083/19 is
varied by the insertion
of the words "
and
African Global Operations (Pty) Ltd (in liquidation)
"
after the words "
Bosasa Properties
(Pty) Ltd (in liquidation)
”;
21.
The first, second and third respondents are
ordered to pay the applicants’ costs of the Rule 42 application
occasioned by
their opposition thereto.
_____________
DP de Villiers AJ
Heard on: 21 and 22 May
2020
Delivered
on: 24 August 2020 electronically, by e-mail and by uploading on
CaseLines
On behalf of the
applicants in case numbers 44827/19 and 42741/19 and on behalf of the
first to third respondents in case number
32083/19
Adv
F Joubert SC
Adv
J de Vries
Instructed
by Goodes & Seedat Attorneys
On behalf of the first to
thirty-ninth respondents (excluding the fourth and the thirty-fifth
respondents) in case numbers 44827/19
and 42741/19 and on behalf of
the eighth to forty-first respondents (excluding the seventh and the
thirty-eighth respondents) in
case number 32083/19
Adv
KW Lüderitz SC
Adv P Lourens
Instructed
by MacRobert Attorneys
On behalf of the first
intervening party in case numbers 44827/19 and 42741/19 and on behalf
of the forty-third respondents in case
number 32083/19
Adv
HGA Snyman SC
Adv K Kollapen
Instructed
by VZLR Inc
On behalf of the second
intervening party in case numbers 42741/19 and on behalf of the
applicant in case number 32083/19
Adv
AC Botha SC
Instructed by Blake
Bester De Wet Jordaan Inc
[1]
Case
No 42741/19.
[2]
Case
No 44827/19.
[3]
Case
No 32083/19.
[4]
Whom
are identified later herein.
[5]
Erasmus,
Superior Court Practice
,
Volume 2, RS 13, 2020, D1-125.
[6]
Golden
Dividend 339 (Pty) Ltd and Another v Absa Bank Limited
[2016] ZASCA 78.
[7]
Absa
Bank Limited v Naude N.O and Others
2016 (6) SA 540 (SCA).
[8]
Cape
Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Another
(Advantage Projects Managers (Pty) Ltd Intervening)
2011 (5) SA 600 (WCC).
[9]
Mhlonipheni
v Mezepoli Melrose Arch (Pty) Ltd and Others; Lwazi v Mezepoli
Nicolway (Pty) Ltd and Another; Moto v Plaka Eastgate
Restaurant CC
and Another; Mohsen and Another v Brand Kitchen Hospitality (Pty)
Ltd and Another
[2020] ZAGPJHC 136 para 49.
[10]
Why
they all joined in the fight, is not quite clear to me.
[11]
Operations,
Properties, Technology Systems, Leading Prospect, Youth Development
Centres, and Security Intelligence.
[12]
Ms
M Oelofsen and Ms JF Barnard (who was not appointed in any of the
six business rescue companies).
[13]
Valentino
Globe BV v Phillips and Another
[1998] ZASCA 43
;
1998 (3) SA 775
(SCA).
[14]
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
1984 (3) (SA) 623 (A) at 634 E - 635 D.
[15]
Such
an outcome in the striking-out applications, was almost predictable.
When large matters serve before judges in this busy
division, they
invariably seek to address the real issues. Limited time does not
allow for enforcing the required disciplined
approach to pleading
and proving cases in opposed motions, and the time spent normally
will have no impact on the outcome. This
opens the door to abuse, as
seldomly will a sanction be imposed.
[16]
The
service affidavits were necessary.
[17]
I
refer to him by name hereon to distinguish him from Mr J Watson and
Ms L Watson also referred to herein.
[18]
A
motivation for the auction.
[19]
R95
203 295.00.
[20]
R30
048 407.50, including VAT
[21]
R89
803 295.00 is also used.
[22]
R19
803 295.00.
[23]
R26
129 050.00.
[24]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA).
[25]
Beadica
231 CC and Others v Trustees for the time being of the Oregon Trust
and Others
[2020] ZACC 13
para 83, a judgment by Theron J (Khampepe ADCJ,
Jafta J, Majiedt J, Mathopo AJ, Mhlantla J and
Tshiqi J concurring).
[26]
Para
18 reads (footnotes omitted):
“
Over
the last century there have been significant developments in the law
relating to the interpretation of documents, both in
this country
and in others that follow similar rules to our own. It is
unnecessary to add unduly to the burden of annotations
by trawling
through the case law on the construction of documents in order to
trace those developments. The relevant authorities
are collected and
summarised in Bastian Financial Services (Pty) Ltd v General Hendrik
Schoeman Primary School. The present state
of the law can be
expressed as follows. Interpretation is the process of attributing
meaning to the words used in a document,
be it legislation, some
other statutory instrument, or contract, having regard to the
context provided by reading the particular
provision or provisions
in the light of the document as a whole and the circumstances
attendant upon its coming into existence.
Whatever the nature of the
document, consideration must be given to the language used in the
light of the ordinary rules of grammar
and syntax; the context in
which the provision appears; the apparent purpose to which it is
directed and the material known to
those responsible for its
production. Where more than one meaning is possible each possibility
must be weighed in the light of
all these factors. The process is
objective not subjective. A sensible meaning is to be preferred to
one that leads to insensible
or unbusinesslike results or undermines
the apparent purpose of the document. Judges must be alert to, and
guard against, the
temptation to substitute what they regard as
reasonable, sensible or businesslike for the words actually used. To
do so in regard
to a statute or statutory instrument is to cross the
divide between interpretation and legislation. In a contractual
context
it is to make a contract for the parties other than the one
they in fact made. The ‘inevitable point of departure is the
language of the provision itself’, read in context and having
regard to the purpose of the provision and the background
to the
preparation and production of the document
.”
[27]
Supra,
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA)
para
18
.
[28]
Kubyana
v Standard Bank of South Africa Ltd
2014 (3) SA 56
(CC) para 18.
[29]
S
v Zuma and Others
[1995] ZACC 1
;
1995 (2) SA 642
(CC) para 17 and 18.
[30]
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
2016 (1) SA 518
(SCA) para 29.
[31]
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014 (2) SA 494
(SCA) para 12.
[32]
Supra,
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
2016 (1) SA 518
(SCA) para 28.
[33]
Quest
Petroleum (Pty) Ltd v Walters and Another
[2019] 1 All SA 547
(WCC).
[34]
Perumalsamy
K "
The
Life and Times of Textualism in South Africa
"
PER / PELJ 2019 (22).
[35]
See
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 526E and
Wilkins
NO v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at 136I-137D.
[36]
Marks
and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey)
Ltd and Another
[2016] 4 All ER 441.
[37]
With
whom Lord Sumption and Lord Hodge SCJJ agreed.
[38]
“
As
Lady Hale pointed out in Geys v Socieìteì Geìneìrale,
London Branch
[2012] UKSC 63
,
[2013] 1 All ER 1061
,
[2013] 1 AC 523
(at [55]), there are two types of contractual implied term. The
first, with which this case is concerned, is a term which is
implied
into a particular contract, in the light of the express terms,
commercial common sense, and the facts known to both parties
at the
time the contract was made. The second type of implied terms arises
because, unless such a term is expressly excluded,
the law
(sometimes by statute, sometimes through the common law) effectively
imposes certain terms into certain classes of relationship
.”
[39]
Interpretation
Before and after Natal Joint Municipal Pension Fund v Endumeni
Municipality
2012 (4) SA 593
(SCA)
PER / PELJ 2019 (22) by M Wallis.
[40]
The
City of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
2019 (3) SA 398
(SCA) para 52.
[41]
Swain
and Dambuza JJA and Mokgohloa AJA concurring.
[42]
Prenn
v Simmonds
[1971]
3 All ER 237.
[43]
Reardon
Smith Line Ltd. v Yngvar Hansen-Tangen
[1976]
3 All ER 570.
[44]
With
whom Lord Goff of Chieveley, Lord Hope of Craighead and Lord Clyde
agreed.
[45]
Investors
Compensation Scheme v West Bromwich Building Society
[1998] 1 All ER 98.
[46]
Perumalsamy
K "
The
Life and Times of Textualism in South Africa
"
PER / PELJ 2019(22) makes the interesting point that Endumeni omits
to state that the standard is that of the reasonable
reader.
[47]
With
whom Lady Hale P, Lord Wilson, Lord Sumption and Lord Briggs JJSC
agreed.
[48]
Barnardo's
v Buckinghamshire and Others
[2019] 2 All ER 175.
[49]
Wood
v Capita Insurance Ltd
[2017]
4 All ER 615
para 10.
[50]
Interpretation
Before and after Natal Joint Municipal Pension Fund v Endumeni
Municipality
2012 (4) SA 593
(SCA) PER / PELJ 2019(22)
page 13.
[51]
Airports
Company South Africa v Big Five Duty Free (Pty) Limited and Others
2019 (5) SA 1
(CC) para 29.
[52]
Dlodlo
AJ, Goliath AJ, Khampepe J, Madlanga J, Petse AJ and Theron J
concurring.
[53]
Cool
Ideas 1186 CC v Hubbard and Another
2014
(4) SA 474
(CC) para 28.
[54]
Moseneke
ACJ, Skweyiya ADCJ, Khampepe J and Madlanga J concurring.
[55]
“
[18]
See SATAWU and Another v Garvas and Others
[2012] ZACC 13
;
2013 (1)
SA 83
(CC);
2012 (8) BCLR 840
(CC) (Garvas) at para 37; S v Zuma and
Others
[1995] ZACC 1
;
1995 (2) SA 642
(CC);
1995 (4) BCLR 401
(CC)
(S v Zuma) at paras 13-4; and Dadoo Ltd and Others v Krugersdorp
Municipal Council
1920 AD 530
at 543
.”
[56]
“
[19]
Dengetenge Holdings (Pty) Ltd v Southern Sphere Mining and
Development Company Ltd and Others
[2013] ZACC 48
;
2014 (3) BCLR 265
(CC) at paras 84-6 and Department of Land Affairs and Others v
Goedgelegen Tropical Fruits (Pty) Ltd
[2007] ZACC 12
;
2007 (6) SA
199
(CC);
2007 (10) BCLR 1027
(CC) at para 5
.”
[57]
“
[20]
North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
[2013] ZASCA 76
;
2013 (5) SA 1
(SCA) at para 24; KPMG Chartered
Accountants (SA) v Securefin Ltd and Another
[2009] ZASCA 7
;
2009
(4) SA 399
(SCA) at para 39; and Bhana v Dőnges NO and Another
1950 (4) SA 653
(A) at 664E-H
.”
[58]
“
[21]
Garvas above n 18 at para 37.”
[59]
Interpretation
Before and after Natal Joint Municipal Pension Fund v Endumeni
Municipality
2012 (4) SA 593
(SCA) PER / PELJ 2019(22)
.
After referring to cases in which the Constitutional Court
encouraged a new approach to interpretation (
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs
[2004] ZACC 15
;
2004
(4) SA 490
(CC) para 90;
Department
of Land Affairs v Goedgelegen Tropical Fruits (Pty) Ltd
[2007] ZACC 12
;
2007
(6) SA 199
(CC) para 52) the author at page 8 footnote 19 stated the
following:
“
On
its face the summary in Cool Ideas para 28 appears to be a
retrograde step from this perspective, but I doubt that this was
intended
.“
[60]
Smyth
and Others v Investec Bank Limited and Another
2018 (1) SA 494
(SCA) para 28 - 29.
[61]
Navsa,
Lewis and Mathopo JJA and Schippers AJA concurring.
[62]
Chisuse
and Others v Director-General, Department of Home Affairs and
Another
[2020] ZACC 20
para 46-59.
[63]
Jafta
J, Madlanga J, Majiedt J, Mathopo AJ, Mhlantla J, Theron J, Tshiqi J
and Victor AJ concurring.
[64]
“
[45]
See Diener N.O. v Minister of Justice and Correctional Services
[2018] ZACC 48
;
2019 (4) SA 374
(CC);
2019 (2) BCLR 214
(CC) at para
37; Mankayi v AngloGold Ashanti Ltd
[2011] ZACC 3
;
2011 (3) SA 237
(CC);
2011 (5) BCLR 453
(CC) at para 70; and Commissioner, South
African Revenue Service v Executor, Frith’s Estate
[2000]
ZASCA 94
;
2001 (2) SA 261
(SCA) at para 2 of Plewman JA’s
judgment
.”
[65]
“
[46]
As
TS Elliot has eloquently stated, “[w]ords strain, crack and
sometimes break, . . . slip, slide, perish, [d]ecay with
imprecision
. . .”. Elliot Burnt Notion (No. 1 of Four
Quarters) at Part V
.”
[66]
“
[47]
See Cool Ideas 1186 CC v Hubbard
[2014] ZACC 16
;
2014 (4) SA 474
(CC);
2014 (8) BCLR 869
(CC) (Cool Ideas) at para 28; SATAWU v
Garvas
[2012] ZACC 13
;
2013 (1) SA 83
(CC);
2012 (8) BCLR 840
(CC)
(Garvas) at para 37; and Dadoo Ltd v Krugersdorp Municipal Council
1920 AD 530
at 543. See further Bishop and Brickhill, “‘In
The Beginning Was The Word’: The Role of Text in the
Interpretation
of Statutes”
(2012) 129 SALJ 681
at 697 8.”
[67]
“
[48]
Cool Ideas id at para 28
.”
[68]
“
[49]
Natal Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) (Endumeni) at para 18
.”
[69]
“
[55]
Bertie Van Zyl above n 53 at para 22
.”
[70]
“
[56]
National Coalition for Gay and Lesbian Equality v Minister of Home
Affairs
[1999] ZACC 17
;
2000 (2) SA 1
(CC);
2000 (1) BCLR 39
(CC) at
paras 23-4
.”
[71]
“
[57]
See Endumeni above n 49 at para 19
.”
[72]
“
34
See Anchor Secunda (Pty) Ltd v Sasol Synthetic Fules (Pty) Ltd
(624/10)
[2011] ZASCA 158
(28
September 2011) at par 5
.”
[73]
“
See
Coopers and Lybrand & Others v Bryant
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at
767.”
[74]
The
founding affidavit in the business rescue application states that
the property is owned by Properties.
[75]
“
42 Variation
and rescission of orders
(1)
The court may, in addition to any other powers it may have, mero
motu or upon the application of any party affected, rescind
or vary:
(a) An order or
judgment erroneously sought or erroneously granted in the absence of
any party affected thereby;
(b) an order or
judgment in which there is an ambiguity, or a patent error or
omission, but only to the extent of such ambiguity,
error or
omission;
(c) an order or
judgment granted as the result of a mistake common to the parties.
(2)
Any party desiring any relief under this rule shall make application
therefor upon notice to all parties whose interests may
be affected
by any variation sought.
(3)
The court shall not make any order rescinding or varying any order
or judgment unless satisfied that all parties whose interests
may be
affected have notice of the order proposed
.”
[76]
Section
131(2)(a).
[77]
Section
131 (2)(b).
[78]
Van
Staden NO and Others v Pro-Wiz Group (Pty) Ltd
2019 (4) SA 532
(SCA) para 10.
[79]
Makgoka
JA, Schippers JA, Mokgohloa AJA and Rogers AJA concurring.
[80]
See
section 128(1)(a) of the 2008 Act.
[81]
Imperial
Bank Ltd v Barnard and Others NNO
2013 (5) SA 612
(SCA) para 14.
[82]
Blue
Star Holdings (Pty) Ltd v West Coast Oyster Growers CC
2013
(6) SA 540 (WCC)
[83]
Para
17.
[84]
One
distinguishing factor is that in those cases, one deals with
one respondent.
[85]
“
10.
Regulation 124, for example, prescribes the method of service on
parties affected by the lodging of the business rescue application
.”
[86]
“
11.
Investigating Directorate: Serious Economic Offences and Others v
Hyundai Motor Distributors (Pty) Ltd and Others: In re Hyundai
Motor
Distributors (Pty) Ltd and Others v Smit NO and Others
2001 (1) SA
545
(CC)
(2000 (2) SACR 349
;
2000 (10) BCLR 1079
;
[2000] ZACC 12)
at
558 para 22 to 559 para 24.
”
[87]
Republikeinse
Publikasies (Edms) Bpk v Afrikaanse Pers Publikasies (Edms) Bpk
1972 (1) SA 773
(A) at 780F-G.
[88]
Due
to the quotation that follows, a translation is unnecessary, the
same point is made.
[89]
Beyers
ACJ, Van Blerk JA, Ogilvie Thompson JA, and Rumpff JA concurring.
[90]
Labuschagne
v Labuschagne; Labuschagne v Minister Van Justisie
1967 (2) SA 575
(A) at 586D-E.
[91]
Steyn
CJ, Botha JA, Van Wyk JA and Potgieter JA concurring.
[92]
Nxumalo
v Minister of Justice and Others
,
1961 (3) SA 663 (W).
[93]
Expressly
required by section 5(1) of the 2008 Act.
[94]
I
find it interesting that the regulation refers an application that
already has been made, but cannot use it to interpret the
2008 Act.
The Minister of Trade and Industry, in consultation with CIPC and
the Chairperson of the Takeover Regulation Panel,
made the
regulations. They knew how that phrase is applied in our law.
[95]
Standard
Bank of South Africa Limited v Gas 2 Liquids (Pty) Ltd
2017 (2) SA 56 (GJ).
[96]
Our
authorities have not caught up with the fact of a single judiciary
for the whole country, where there is no logical reason
for a
division-based rule or precedent. In case of conflict in judgments,
I should be able to follow the decision I believe to
be correct,
with respect, wherever that judge sat in this country.
[97]
Para
8.
[98]
Para
7.
[99]
Para
5.
[100]
Para
26.
[101]
A
reference to
ABSA
Bank Ltd v Summer Lodge (Pty) Ltd
2013
(5) SA 444
GNP.
[102]
A
reference to
Taboo
Trading 232 (Pty) Ltd v Pro Wreck Scrap Metal CC and Others
2013 (6) SA 141
KZP.
[103]
Engen
Petroleum Ltd v Multi Waste (Pty) Ltd and Others
2012 (5) SA 596
GSJ.
[104]
ABSA
Bank Ltd v Summer Lodge (Pty) Ltd
2013
(5) SA 444
GNP.
[105]
Taboo
Trading 232 (Pty) Ltd v Pro Wreck Scrap Metal CC and Others
2013 (6) SA 141
KZP para 11.3 and 11.4.
[106]
“
23
Section 131(2)(a) of the Companies Act.
”
[107]
“
24
Section 131(2)(b), read with ss 6(9), 6(10) and 6(11) of the
Companies Act, together with regs 7 and 124, and table CR3
.”
[108]
Kalahari
Resources (Pty) Ltd v ArcelorMittal SA and Others
[2012] ZAGPJHC 130 para 66.
[109]
Engen
Petroleum Ltd v Multi Waste (Pty) Ltd and Others
2012 (5) SA 596
(GSJ) para 18.
[110]
I
know that it is questioned if this is expressly part of our law.
[111]
“
If
liquidation proceedings have already been commenced by or against
the company at the time an application is made in terms of
subsection (1), the application will suspend those liquidation
proceedings until-
(a)
the court has adjudicated upon the application; or
(b)
the business rescue proceedings end, if the court makes the order
applied for
.”
[112]
Richter
v Absa Bank Limited
2015 (5) SA 57 (SCA).
[113]
Mhlantla
JA, Leach JA, Pillay JA and Fourie AJA concurring.
[114]
“
8
Section 5 of the Act provides that the Act must be interpreted in a
manner that gives effect to its purposes”.
[115]
GCC
Engineering (Pty) Ltd and Others v Maroos and Others
2019 (2) SA 379 (SCA).
[116]
Cachalia
JA, Molemela JA, Schippers JA and Mothle AJA concurring.
[117]
Sections
386(1)(d) and 386(3)(b) of the 1973 Act.
[118]
Sections
386(2A) and (2B) of the 1973 Act.
[119]
Section
388(1) of the 1973 Act.
[120]
Fakie
NO v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) para 55-56.
[121]
Wightman
t/a J W Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) para 12-13.
[122]
See
section 353(2) of the 1973 Act.
[123]
See
Section 388(2) of the 1973 Act.
[124]
See
too
Secretary
for Customs and Excise v Millman, NO
1975 (3) SA 544
(A) para 552H.
[125]
Scott
and Another v Poupard and Another
1971 (2) SA 373
(A) at 578G-579H.
[126]
MV
Snow Crystal Transnet Ltd t/a National Ports Authority v Owner of MV
Snow Crystal
[2008] ZASCA 27
;
2008 (4) SA 111
(SCA) para 28.
[127]
Du
Plessis NO and Another v Goldco Motor & Cycle Supplies (Pty) Ltd
2009 (6) SA 617
(SCA) para 22-29.
[128]
Eke
v Parsons
2016 (3) SA 37
(CC) para 64.
[129]
It
is not alleged that they received such advice and from who they
received such advice.
[130]
Secretary
for Customs and Excise v Millman, NO
1975 (3) SA 544
(A) at 502G.
[131]
It
is not relevant here:
“
(7)
The trustee or an auctioneer employed to sell property of the estate
in question, or the trustee's or the auctioneer's spouse,
partner,
employer, employee or agent shall not acquire any property of the
estate unless the acquisition is confirmed by an order
of the
court
.”
[132]
Section
82(1).
[133]
Section
82(1).
[134]
Sections
82(2) and (5).
[135]
Section
82(6).
[136]
Chater
Developments (Pty) Ltd (In Liquidation) v Waterkloof Marina Estates
(Pty) Ltd and Another
2015 (5) SA 138
(SCA).
[137]
Navsa
ADP, Wallis JA, Mbha JA and Dambuza AJA concurring.
[138]
Oertel
and Others NNO v Director of Local Government and Others
1981 (4) SA 491 (T).
[139]
Swart
v Starbuck and Others
2017 (5) SA 370
(CC) para 26-27.
[140]
Mogoeng
CJ, Nkabinde ADCJ, Cameron J, Froneman J, Madlanga J, Mhlantla J and
Pretorius AJ concurring.
[141]
Naude
v Serfontein, NO, en 'n Ander
1978 (1) SA 633
(O).
[142]
Legator
McKenna Inc and Another v Shea and Others
2010 (1) SA 35 (SCA).
[143]
Supra,
Van
Staden NO and Others v Pro-Wiz Group (Pty) Ltd
2019
(4) SA 532
(SCA).
[144]
Makgoka
JA, Schippers JA, Mokgohloa AJA and Rogers AJA concurring.
[145]
Oakdene
Square Properties (Pty) Ltd and Others v Farm Bothasfontein
(Kyalami) (Pty) Ltd and Others
2013 (4) SA 539
(SCA) para 18.
[146]
Cachalia
JA, Van der Merwe AJA, Zondi AJA and Meyer AJA concurring.
[147]
In
round figures: Operations R184 Million, Properties R27 Million,
Technology Systems R31 Million, Leading Prospect R19 Million,
Youth
Development Centres R45 Million, and Security Intelligence R6
Million.
[148]
“
129
Company resolution to begin business rescue proceedings
(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
.”
[149]
Panamo
Properties (Pty) Ltd and Another v Nel N.O. and Others
2015 (5) SA 63
(SCA) para 9.
[150]
Navsa
ADP, Majiedt and Zondi JJA and Dambuza AJA concurring.
[151]
“
130
Objections to company resolution
(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) there is no
reasonable basis for believing that the company is financially
distressed;
(ii)
there is no reasonable prospect
for rescuing the company
; or
(iii)
the company has failed to satisfy the procedural requirements set
out in section 129
”
.
[152]
Diener
NO v Minister of Justice and Correctional Services and Others
2019 (4) SA 374
(CC) para 54.
[153]
Mogoeng
CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ,
Mhlantla J, Petse AJ and Theron J concurring.
[154]
“
[37]
Sections 7(k) and 128(1)(h) of the Companies Act above n 1. See also
KJ Foods id at para 68; Panamo Properties above n 21
at para 1;
Cloete Murray N.O. v Firstrand Bank Ltd t/a Wesbank
[2015]
ZASCA 39
;
2015 (3) SA 438
(SCA) at para 12; Oakdene Square
Properties (Pty) Ltd v Farm Bothasfontein (Kyalami) (Pty) Ltd
[2013]
ZASCA 68
;
2013 (4) SA 539
(SCA) at para 23
.”
[155]
“
[38]
Cassim “Business Rescue and Compromises” in Cassim
Contemporary Company Law 2 ed (Juta & Co Ltd, Cape Town
2012) at
862. For a critical reprisal of this rationale, see Loubser
“Tilting
at
windmills? The quest for an effective corporate rescue procedure in
South African law” (2013) 25 SA Merc LJ 4
.”
[156]
“
[39]
McCormack “Super-priority new financing and corporate rescue”
(2007) Journal of Business Law 701 at 703
.”
[157]
“
[40]
KJ Foods above n36 para 77, endorsing DH Brothers Industries (Pty)
Ltd v Gribnitz NO and Others
2014 (1) SA 103
(KZP) (DH Brothers
Industries); Cassim above n38 at 863
”.
[158]
“
[41]
Section 129(1)(b) of the Companies Act above n1
”.
[159]
“
[42]
DH Brothers Industries above n40 para 10
.”
[160]
Van
der Merwe and Others v Zonnekus Mansion (Pty) Ltd (in liquidation)
and Another (Commissioner for the South African Revenue
Service and
Another Intervening)
[2016] ZAWCHC 193
para 35-41.
[161]
“
[7]
Propspec Investments (Pty) Ltd v Pacific Coast Investments 97 Ltd
2013(1) SA 542 (FB) at [12
]”.
[162]
“
[8]
[31
]”.
[163]
“
[9]
[12
]”.
[164]
“
[10]
Koen and Another v Wedgewood Village Golf and Country Estate (Pty)
Ltd and Others 2012(2) SA 378 (WCC) at [17]”.
[165]
“
[11]
Gormley v West City Precinct Properties (Pty) and Another
[2012]
ZAWCHC 33
(18 April 2012) at [11]”.
[166]
This
submission is in effect repeated in the heads of argument in the
auction application:
“
24
The context already provided, even only by way of introduction,
persuasively evinces that this application:
24.1 is the
quintessential abuse of the business rescue process legislated under
Chapter 6 of the 2008 Act; and
24.2
was purposefully employed by the applicants with the sole purpose of
obstructing, frustrating and derailing the liquidation
proceedings
pending in respect of the subject companies
.
25 …
26
Ultimately, this application is persisted with the clear ulterior
motive to neutralise the appointment of independent liquidators
to
the subject companies under circumstances where the Bosasa
protagonists had a clearly intended plan in mind when they placed
the said companies in liquidation on day one
.”
[167]
Skilya
Property Investments (Pty) Ltd v Lloyds of London Underwriting
2002 (3) SA 765
(T) at 780H- 781D, reversed on appeal but not on the
summary of the law.
[168]
I
stress that I exclude the representatives for SARS and Fidelity. The
disputes between the applicants in the business rescue
and auction
applications and the intervening parties were argued, firmly and
directly, but without unpleasant animosity. This
included the case
that substantial tax was improperly avoided, a case that imputes
unlawful conduct by the companies-in-liquidation.
[169]
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
1984 (3) (SA) 623 (A) at 634E-635C.
[170]
Reynolds
NO v Mecklenberg (Pty) Ltd
1996 (1) SA 75
(W).
[171]
Venmop
275 (Pty) Ltd and Another v Cleverlad Projects (Pty) Ltd and Another
2016 (1) SA 78
(GJ) at para 7-14.
[172]
Mokgohloa,
Plasket and Nicholls JJA and Gorven AJA concurring.
[173]
Murray
and Others NNO v African Global Holdings (Pty) Ltd and Others
2020 (2) SA 93
(SCA) para 42.
[174]
“
134
We furthermore submit that the Rescue Application:
134.1
is, in and of itself, the quintessential example of a flagrant abuse
of the business rescue and court processes;
134.2
is persisted with the clear ulterior motive to neutralise the
appointment of independent liquidators to the subject companies
under circumstances where the Bosasa protagonists had a clearly
intended plan in mind when they placed the said companies in
liquidation on day one; and
134.3
is otherwise in want of merit on every and any conceivable basis
.”
[175]
Heads
in the business rescue application (156 pages), heads in the
business auction application (114 pages), supplementary heads
in the
business rescue and auction applications (43 pages), and note in the
Rule 42 application (28 pages).
[176]
“
33
That being said, this application is premised on a founding
affidavit deposed to by one Jared Michael Watson (“Mr
Watson”),
the nephew of the late Gavin Watson, who was only
appointed to the board of Holdings on 20 November 2019, thereby
entailing the
obvious and unassailable conclusion that he himself
does not have primary personal knowledge of any facts that precede
his appointment
as such
.”
[177]
“…
Wright
[J], who was informed in chambers by the applicants:
170.1
First, that the urgent application papers [still at that time in the
process of being collated] comprised of
approximately
70 pages
;”
[178]
“ …
172
However, when the urgent application had subsequently come to hand,
at around 16h00 on 4 December 2019, it emerged that
it in actual
fact comprised
more
than 170 pages
.”
[179]
Referring
to the business rescue application papers too.
[180]
Van
Zyl and Others v Government of the Republic of South Africa and
Others
2008 (3) SA 294
(SCA) para 45-46.