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[2021] ZAGPJHC 482
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Mentz N.O. v Truck MEC (Pty) Ltd (Under Supervision) (1216/2021) [2021] ZAGPJHC 482 (30 June 2021)
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE
NO: 1216/2021
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED
DATE:
30/6/2021
In
the matter between:
PIETER
MENTZ N.O.
Applicant
and
TRUCK
MEC (PTY) LTD
(UNDER
SUPERVISION)
(Registration
Number:
[....])
Respondent
Application
to terminate business rescue and wind-up company. No case made out.
Application dismissed
JUDGMENT
DE
VILLIERS, AJ:
Introduction
[1]
This matter came before me
in the unopposed motion court on 31 May 2021. The applicant believed
that the application made out a
proper case, and thus sought a draft
order terminating the respondent’s business rescue, and placing
it in final winding-up.
However, the papers are fatally defective. In
this context I state some trite principles upon which I base my
findings:
[1.1]
It
is trite that affidavits in motion proceedings are to set out the
pleadings and the evidence in the affidavits (with admissible
evidence). See
Swissborough
Diamond Mines (Pty) Ltd and Others v Government of the Republic of
South Africa and Others
.
[1]
The Supreme Court of Appeal formulated it as follows in
Quartermark
Investments (Pty) Ltd v Mkhwanazi and Another
:
[2]
“
..
It is trite that in motion proceedings affidavits fulfil the dual
role of pleadings and evidence. They serve to define not only
the
issues between the parties but also to place the essential evidence
before the court. They must therefore contain the factual
averments
that are sufficient to support the cause of action or defence sought
to be made out. Furthermore, an applicant must raise
the issues as
well as the evidence upon which it relies to discharge the onus of
proof resting on it, in the founding affidavit.”
(footnotes omitted)
[1.2]
It
is equally trite that where conclusions are drawn, the facts in
support for such conclusions must be pleaded and proven. See
Die
Dros (Pty) Ltd and Another v Telefon Beverages CC and Others
.
[3]
[1.3]
It
is equally trite that hearsay evidence is inadmissible. See
The
Master v Slomowitz
,
[4]
and see
further
section 3(1) of the
Law
of Evidence Amendment Act
45 of 1988
.
[1.4]
In
addition, this application must always have been known to be, in
effect, an
ex
parte
application, as there was non-service (to which I revert). It is
equally trite that there is a heightened duty in
ex
parte
applications to disclose material facts. See
Trakman
NO v Livshitz and Others
:
[5]
“
...
It is trite law that in
ex
parte
application the
utmost good faith must be observed by an applicant. A failure to
disclose fully and fairly all material facts known
to him (or her)
may lead, in the exercise of the Court's discretion, to the dismissal
of the application on that ground alone (see,
for example, Estate
Logie v Priest
1926 AD 312
at 323; Schlesinger v F Schlesinger
1979
(4) SA 342
(W) at 348E-350B). …”
[2]
As
was implicitly held in
Carroll
v Vlakplaats 335 CC In Re: In the application for the Liquidation of:
Vlakplaats CC (under supervision)
,
[6]
the relief sought is not merely for the asking, a proper case must be
made out:
“
In
the premises, I am of the view that the provisions of section
141(2)(a)(ii) of the Companies Act do not find application in this
matter. There exist no plausible reasons for the Business Rescue
Practitioner to have come to the conclusion that there is no
reasonable prospect for the applicant to be rescued. By all accounts,
the applicant had in fact been rescued by the implementation
of an
approved and adopted business rescue plan. The fact that the main
creditor, nay the only creditor, was unhappy ex post facto
with the
outcome of the implementation of the business plan is irrelevant.
Once the plan had been approved the applicant was well
on its way to
being rescued, and it was assisted in that regard by a compromise
which had been brokered as part of the business
rescue plan.”
Business
rescue practitioner?
[3]
The applicant is Pieter Mentz, purportedly in his capacity as the
business
rescue practitioner of the respondent. I use the word
“purportedly” as such appointment was not proven and, as
the
annexures to the founding papers suggest that the business rescue
practitioner was Mr Bennie Keevy (“Mr Keevy”).
[4]
These are the relevant, unsubstantiated averments of the applicant in
the founding affidavit with regard to his alleged appointment:
[4.1] “
I
am an adult male senior business rescue practitioner, practising
under the name and style of Mentz Consulting
…”
The applicant did not
seek to prove his status as a senior business rescue practitioner.
[4.2] “
I
am the duly appointed business rescue practitioner of the
Respondent.
”
The applicant did not
seek to prove his appointment as the respondent’s business
rescue practitioner. He also failed to allege
the date of his alleged
appointment.
[4.3] “
I
was appointed by the Companies and Intellectual Properties Commission
of South Africa (hereinafter referred to as "the CIPC"),
as
the business rescue practitioner of the Respondent
.”
Stating again, the
applicant did not prove his alleged appointment as the respondent’s
business rescue practitioner, and failed
to allege the date of his
appointment. Reading the founding affidavit as a whole, the applicant
conveys that he was the appointed
business rescue practitioner from
the commencement of the respondent’s business rescue process in
mid-2017.
[4.4] “
The
business rescue process commenced on 31 July 2017
…”
[4.5] “
I
have complied with all my duties in terms of the Companies Act,
including but not limited to: … Initially exercising full
management control of the Respondent in substitution for its members
and pre-existing management
”;
One example is used above
of the steps that the applicant avers that he took (and the remainder
in similar vague terms have been
omitted). No detail was given, or
even dates when steps were taken, such as publishing a business
rescue plan or when he ceased
to exercise management control.
[4.6] “
The
first meeting of creditors and employees' representatives in terms of
Section 147 and 148 of the Act, was held on 16 August
2017
…”
The applicant seeks to
convey that he attended the meeting without stating that fact. A
minute of a meeting of 16 August 2017 is
attached to the founding
affidavit. It contradicts the applicant’s version in a number
of instances.
[5]
The minute shows simply that
it was a meeting of the respondent’s creditors (and not that
the respondent’s employees
also formed part of the process, as
alleged). According to the minute, the chairperson of the meeting was
the business rescue practitioner,
Mr Keevy, not the applicant. The
applicant is not even listed as having been present.
[6]
Mr Keevy acted as the
chairperson at the meeting. Also present were two more persons who,
like Mr Keevy, were representing “Commonwealth
Trust”.
That entity seems to be
Commonwealth
Trust (Pty) Ltd, as also attached to the founding affidavit, but not
referred to therein, are an affidavit and a letter
by Mr Keevy from
Commonwealth Trust (Pty) Ltd
wherein
he sought to accept appointment as the respondent’s business
rescue practitioner.
[7]
Under these circumstances,
the application stands to be dismissed as the applicant has failed to
plead and prove his
locus
standi
as the
respondent’s business rescue practitioner.
Respondent
insolvent?
[8]
The applicant sought that the business rescue proceedings of the
respondent
be discontinued and that the respondent be placed in final
liquidation in terms of section 141(2)(a)(ii) read with section
132(2)(a)(ii)
of the Companies Act 71 of 2008 (“the 2008
Companies Act”).
[9]
This
relief was sought as the applicant seemingly believed that the
respondent is insolvent. He made no averment about solvency,
it is a
conclusion I draw. I could draw the conclusion from the fact that the
applicant purportedly sought to comply with the provisions
in terms
of
section 9(4A)
of the
Insolvency Act 24 of 1936
,
[7]
and correctly also with the similar winding-up formalities set out in
section 346A of the Companies Act 61 of 1973 (“the
1973
Companies Act”).
[8]
I
could draw the conclusion further as no attempt was made to justify
the winding-up of a solvent company by its business rescue
practitioner (as opposed to by other interested parties) in terms of
section 81(1)(b) of the 2008 Companies Act. That section reads
(underlining added):
“
(1)
A court
may
order
a solvent company
to be wound up if-
(a)
…;
(b)
the practitioner
of a company appointed during business rescue
proceedings has applied for liquidation in terms of section
141(2)(a),
on the grounds that there is no reasonable prospect of
the company being rescued
; or
(c)
one or more of the company's creditors have applied to the court for
an order to wind
up the company on the grounds that-
(i)
the company's business rescue proceedings have ended in the manner
contemplated in section
132 (2) (b) or (c) (i) and it appears to the
court that it is just and equitable in the circumstances for the
company to be wound
up; or
(ii)
it is otherwise just and equitable for the company to be wound up;
(d)
…”
[10]
If one has regard to section
132 of the 2008 Companies Act, a section upon which the applicant
does rely, the section deals with
the termination of business rescue
proceedings in section 132(2) (underlining added):
“
(2)
Business rescue
proceedings end when
-
(a)
the court
-
(i)
sets aside the resolution or order that began those proceedings
;
or
(ii)
has converted the proceedings to liquidation proceedings
;
(b)
the practitioner
has filed with the Commission a notice of the
termination of business rescue proceedings; or
(c)
a business rescue plan has been
-
(i)
proposed and rejected
in terms of Part D of this Chapter, and
no affected person has acted to extend the proceedings in any manner
contemplated in section
153; or
(ii)
adopted
in terms of Part D of this Chapter, and the practitioner has
subsequently
filed a
notice of substantial implementation of that plan
.”
[11]
Omitted from the express
provisions in section 132(2)(a) is an express power for a court to
order that business rescue proceedings
terminate, without ordering
that the company be wound up. As will appear below there is authority
that the court does have such
a power.
[12]
The applicant further relies
on section 141 of the 2008 Companies Act. Section 141(1) addresses
the investigative obligation of
the business rescue practitioner
(underlining added):
“
As
soon as practicable after being appointed
,
a practitioner
must
investigate
the
company's affairs, business, property, and financial situation, and
after having done so,
consider
whether there is any reasonable prospect of the company being
rescued
.”
[13]
The aforesaid investigative
task in terms of section 141(1) ought to have been completed shortly
after July 2017, four years ago.
If the business rescue practitioner
forms the view at any time (upon the conclusion of the investigation
or thereafter) that there
is no reasonable prospect (or anymore such
a reasonable prospect) that the respondent could be rescued, section
141(2) comes into
play. It has two main provisions (underlining
added):
“
(2)
If, at any time during
business rescue proceedings, the practitioner concludes that
-
(a)
there is no reasonable prospect for the company to be rescued, the
practitioner must
-
(i)
so inform the court, the company, and all affected persons in the
prescribed manner
; and
(ii)
apply to the court for an order discontinuing the business rescue
proceedings and placing the company into liquidation
”;
(b)
there no longer are reasonable grounds to believe that the company
is financially distressed
, the practitioner must so inform the
court, the company, and all affected persons in the prescribed
manner, and-
(i)
if the business rescue process was confirmed by a court order in
terms of section 130, or
initiated by an application to the court in
terms of section 131, apply to a court for an order terminating the
business rescue
proceedings; or
(ii)
otherwise, file a notice of termination of the business rescue
proceedings; or
(c)
….”
[14]
It seems to me that the
business rescue practitioner must make an assessment continuously: Is
the company under business rescue
still financially distressed?
Section 128 of the 2008 Companies Act defines “financially
distressed” to mean if it
“
appears
to be reasonably unlikely that the company will be able to pay all of
its debts as they become due and payable within the
immediately
ensuing six months
”,
or it “
appears to
be reasonably likely that the company will become insolvent within
the immediately ensuing six months
”.
[14.1]
If
the company is not or no longer financially distressed, he or she
must seek that the company be restored in terms of section
141(2)(b).
Once a company is no longer so distressed, the original reason for
the directors placing it under business rescue without
court approval
in terms of section 129(1)(a),
[9]
would fall away. The papers before me contain no averment, proven
with admissible evidence, that it is likely that the respondent
will
not
be
able to pay all of its debts as they become due and payable within
the immediately ensuing six months or that it appears to be
reasonably likely that the company will become insolvent within the
immediately ensuing six months. The contrary is the case, the
averment is that its debts have been paid. As such the inference on
the papers is that the respondent is no longer financially
distressed, which is in conflict with the relief sought by the
applicant;
[14.2]
If the company remains
distressed, one of two courses remain available:
[14.2.1]
The one course is that the
business rescue plan be implemented, or sought to be implemented. The
papers before me contain no averment,
proven with admissible
evidence, that such a plan was ever proposed and voted upon. I
address below the authority that a court
has the power to set aside a
business rescue process if a business rescue practitioner does not
fulfil his or her duties;
[14.2.2]
Assuming
that a business rescue practitioner after duly complying with his or
her obligations find that a business rescue plan is
doomed, and there
is no reasonable prospect for the company to be rescued, liquidation
must follow
in
terms of section 141(2)(a). Normally such a company would be
insolvent (which is the approach taken by the applicant in this
case). But what happens if the company is financially distressed, and
the business rescue plan is doomed, but the company is solvent?
I
raise this only to test my findings, as it is not the case made out
by the applicant. Section 141(2)(b) would not apply to such
a case.
Does section 141(2)(a) apply to a solvent company? One indication is
that section 81(1)(b) of the 2008 Companies Act (already
referred to)
foresees a possibility that a solvent company be wound-up by a
business rescue practitioner (instead of by another
party with locus
standi). Section 81(1)(b) caused considerable difficulties to the
presiding judge in
Firstrand
Bank Ltd v Wayrail Investments (Pty) Ltd
,
[10]
who came to conclusion in para 45 that, in effect, section 81(1) was
included in 2008 Companies Act in error. This would limit
the
application of section 141(2)(a) to insolvent companies. I need not
make a finding in this regard, as it is not in issue before
me.
[15]
The relief that the
applicant sought before me might have been inappropriate to commence
with, as my options may well not have been
only the two possibilities
set out in section 141(2) of the 2008 Companies Act, as read with
section 81(1)(b). There might have
been a third option that ought to
have been addressed on the facts of this case where there has been an
extraordinary delay in
the matter.
[16]
A business rescue practitioner must act without undue delay. Section
147 of the 2008 Companies
Act deals with a meeting of creditors that
the business rescue practitioner must convene within ten business
days after being appointed.
There is no evidence that the applicant
held such a meeting. Section 148 of the 2008 Companies Act deals with
a meeting of employees’
representatives that the business
rescue practitioner also must convene within ten business days after
being appointed. There is
no evidence that this ever happened.
Section 150 of the 2008 Companies Act obliges the business rescue
practitioner, after consulting
the creditors, other affected persons,
and the management of the company, to prepare a business rescue plan
for consideration and
possible adoption at a meeting held in terms of
section 151. Section 150(5) obliges the business rescue practitioner
to do so within
a limited period:
“
(5)
The business rescue plan must be published by the company within 25
business days after the date on which
the practitioner was appointed,
or such longer time as may be allowed by-
(a)
the court, on application by the company; or
(b)
the holders of a majority of the creditors' voting interests.”
[17]
Shortly thereafter, in terms of section 151(1) of the 2008 Companies
Act the plan must
serve before “a meeting of creditors and any
other holders of a voting interest”:
“
Within 10 business
days after publishing a business rescue plan in terms of section 150,
the practitioner must convene and preside
over a meeting of creditors
and any other holders of a voting interest, called for the purpose of
considering the plan.”
[18]
In the case before me there
is no evidence of the business rescue plan, or that it was ever
submitted for approval, or that a court
extended the business rescue
process, or that monthly reports were duly submitted as required by
section 132(3) of the 2008 Companies:
“
If
a company's business rescue proceedings have not ended within three
months after the start of those proceedings, or such longer
time as
the court, on application by the practitioner, may allow, the
practitioner must-
(a)
prepare a report on the progress of the business rescue proceedings,
and update it
at the end of each subsequent month until the end of
those proceedings; and
(b)
deliver the report and each update in the prescribed manner to each
affected person,
and to the-
(i)
court, if the proceedings have been the subject of a court order; or
(ii)
Commission, in any other case.”
[19]
It
was held in
South
African Bank of Athens Ltd v Zennies Fresh Fruit CC
[11]
(whether or not the respondent remains distressed), that an
unreasonable delay to finalise business rescue proceedings in itself
is sufficient reason to terminate the proceedings. Hence a court
would not be obliged to wind-up a company that is solvent in order
to
terminate business rescue proceedings. The solution retains a
discretion to this court to see that justice is done. One
consideration
would be the question why a business rescue
practitioner, and not the other affected parties, should make the
winding-up call,
especially a business rescue practitioner who failed
in the carrying out of his or her duties. I thus make no finding that
I ought
to apply
Zennies
Fresh Fruit
in this case, as the indications of neglect in this matter may be the
result of the manner in which the founding affidavit
omitted to plead
and prove the applicant’s case. I thus make no finding that I
ought to apply
Zennies
Fresh Fruit
.
[20]
The fact that a court is not
a rubber stamp. As set out above, a significant number of matters
were not addressed. Disquieting is
that the applicant’s case of
insolvency is in conflict with the information that appears in the
annexures to the founding
affidavit. This of course impacts on any
implicit (but not pleaded) belief that that it is likely that the
respondent will
not
be
able to pay all of its debts as they become due and payable within
the immediately ensuing six months or that it appears to be
reasonably likely that the company will become insolvent within the
immediately ensuing six months for a finding that the respondent
remains distressed. I address the context and the facts next.
[21]
The founding affidavit
states that “
the
board of directors
”
of the respondent passed a resolution in terms of section 129(1) of
the 2008 Companies Act on 31 July 2017 in terms whereof
the
respondent voluntarily commenced business rescue proceedings. That
resolution is attached to the founding affidavit. A sworn
statement
of the facts on which the board resolution was founded is attached
too, but the author is not identified in the founding
affidavit.
Having regard to the two annexures:
[21.1]
The resolution is dated 31
July 2017 was by a single person, Mr Anastassis Christoforou (“
Mr
Christoforou
”).
Two averments stand out (underlining added)-
“
1.3
The company is financially distressed
and
currently unable to pay off its debts as they have become due and
payable
and hence it
appears reasonably likely that without such voluntary supervision the
company will become insolvent within the immediately
ensuing
six-month period If Business Rescue Proceedings are not initiated;
1.4
There is a reasonable prospect of
rescuing the company. The board has contemplated a rehabilitation
plan to deal with this
”
.
[21.2]
These statements point to
temporary commercial insolvency. The affidavit was deposed to on 31
July 2021. In as far as the reasons
for the distress are concerned,
four reasons were provided-
“
3.2.1
Certain of the Company's contracts were not renewed;
3.2.2
During January 2017 it was discovered that certain service providers
defrauded the Company to a value in
excess of R 2 000
000.00;
3.2.3
The Company is currently involved in a dispute with the Motor
Industries Bargaining Council regarding contributions
of over R 1
000 000.00 claimed;
3.2.4
The Provident Fund obtained judgment against the Company despite the
Company disputing the quantum of their
claim. The director was
unaware of the court proceedings and did not oppose the application,
whereafter default judgment of over
R5 000 000.00 was granted
”
;
[21.3]
These statements still point
to temporary commercial insolvency. In as far as the way forward was
concerned, the affidavit envisaged
the following rehabilitation plan-
“
4.1 A capital
injection from the current shareholder;
4.2 Selling off assets
that are not encumbered, sufficient to restore the business
rehabilitation; and/or
4.3 More profitable
contracts will be negotiated with existing clients and possible new
clients;
4.4 A significant
reduction in monthly overheads in order to improve the cash flow
position;
4.5 Investigating and
reducing or eliminating the disputed Motor Industries Bargaining
Council and Provident Fund claims.”
[22]
In short, the company needed breathing space, it would restructure if
given time and its
shareholder would make a cash injection. That was
the position as at 31 July 2017, almost four years ago. The applicant
does not
dispute the accuracy of these averments, despite alleging
that he had fully investigated the affairs of the respondent at some
unspecified time.
[23]
On 8 December 2020 the applicant avers in the founding affidavit
(there is no paragraph
5.9, and underlining added):
“
5.8 In
an attempt to restructure and rescue the Respondent,
a financier
had agreed to invest in the vicinity of R29 000 000.00 (Twenty Nine
Million Rand) in the Respondent in order to enable the Respondent
to
meet all its
financial trade obligations
in terms of the
business rescue plan.
The company director settled creditors in
his personal capacity over time
.
5.10 I submit
there
is no longer a reasonable prospect of rescuing the Respondent for one
or more of the following reasons
:
5.10.1
The
company stopped trading in April 2018
.
5.10.2 The prospect of
rescuing the Respondent was dependent on the fulfilment of conditions
of third parties investing in the company,
and the possible
fulfilment of which is questionable and in my view will not take
place.”
[24]
There is an obvious tension in paragraph 5.8. Once creditors have
been paid (another unproven
averment), why would a further investment
of R29 million still be needed from the unidentified financier? The
original intended
plan referred to above, was to raise capital
through a capital injection from “
the shareholder
”
and the sale of some assets. Although the founding affidavit does not
address these matters with any clarity, it appears
that “
the
director
” and “
the shareholder
” are one
person, Mr Christoforou. Assuming that it is him, then he settled
creditors to the value of many millions of rand,
as will appear
below. There is no suggestion that the payments by Mr Christoforou
constituted a loan. He did make, in effect, the
intended capital
injection. Why would a financier (seemingly not an additional
shareholder, if one has regard to the term “financier”)
still be needed? After creditors were paid, why would R29 million be
needed to meet financial trade obligations as alleged by the
applicant? What conditions stood in the way of the investment by the
financier? This point must be made, the fact that the company
stopped
trading, does not stand in its way to commence trading again. It is a
heavy-duty transport business. As will appear below,
it seemingly
still has assets worth large sums of money.
[25]
The applicant’s version appears to be in conflict with the
content of the minutes
of the meeting of 16 August 2017 and he omits
to explain the intervening four years. The minute of a meeting of 16
August 2017
shows a solvent company, with many unencumbered assets.
At this meeting Mr Keevy conveyed the following information to the
creditors:
[25.1]
He confirmed what a cursory reading
of the original documents
prepared by Mr Christoforou did show too, the respondent was placed
in business rescue due to a dispute
with the Bargaining Council and
provident fund. He stated the debt to be more than R5 million
and not more than R6 million
as Mr Christoforou had alleged. The
company was unable to effect payment of the judgment amount as its
cashflow did not allow for
such a large payment, which caused the
company's financial distress. According to Mr Keevy, the respondent
admitted to about R300
000.00, and that he would dispute the claim.
(It really no longer matters, if it is true that Mr Christoforou paid
the debt);
[25.2]
The respondent is factually and
commercially solvent. Mr Keevy was of
the view that the company is capable of being rescued, whether by
entering into an envisaged
empowerment transaction to grow the
business, or by the selling off of assets. The largest creditors
(prior to the alleged payment
by Mr Christoforou) were-
[25.2.1]
Standard Bank, an overdraft claim of
R5 million (prior to payment by
Mr Christoforou), but which was secured by a fixed deposit of R10
million and a cession of book
debts in the amount of R3 million. In
some conflict, later during the meeting the total amount of the claim
was stated to be R5.5
million;
[25.2.2]
Investec, a claim of R2 million (prior
to payment by Mr
Christoforou), secured by an immoveable property to the value of R5
million. In some conflict, later during the
meeting the total amount
of the claim was stated to be R2.8 million;
[25.2.3]
Unsecured trade creditors, claims of
about R4 million (prior to
payment by Mr Christoforou), but which were subject to confirmation.
In some conflict, later during
the meeting the total claims were
stated to be R4.6 million;
[25.2.4]
Loan accounts in favour of associated
entities in the amounts of R9.5
million and R2.5 million (prior to payment by Mr Christoforou). In
some conflict, later during
the meeting the total claims were stated
to be R11.5 million;
[25.2.5]
Arrear rental in the amount of R 600
000.00 (prior to payment by Mr
Christoforou);
[25.2.6]
Bargaining Council, a disputed claim
of R5.5 million (prior to
payment by Mr Christoforou), which was much more than the previous
recordals;
[25.2.7]
Wes Bank, a claim of R6.6 million. (It
really no longer matters, if
it is true that Mr Christoforou paid the debt);
[25.2.8]
No amount was stated to be due to Mercedes-Benz
Financial Services.
(It really no longer matters, if it is true that Mr Christoforou paid
the debts);
[25.2.9]
No amount was stated to be due to the
South African Revenue Services.
(It really no longer matters, if it is true that Mr Christoforou paid
the debts);
[25.2.10]
No amount was provided for payment to employees. (It
really no longer
matters, if it is true that Mr Christoforou paid the debts).
[25.3]
The respondent had substantial assets,
and the valuations would take
about another two-and-a-half weeks. The respondent had approximately
250 vehicles and trailers (and
on the facts alleged in the founding
affidavit, must still have them). The majority of these were
unencumbered, with (prior to
payment of the debts) only five being
financed by WesBank and two financed by Mercedes-Benz Financial
Services. On the papers before
me, these movable assets were still
available, as well as the immoveable property mortgaged to Investec;
[25.4]
Financial statements were near completion,
and would be distributed
within about a week to creditors, and management accounts for the
previous six months were being prepared
too;
[25.5]
The company would be trading as
normal, provided that Mr Keevy would
be in control of the company's banking accounts, he would be the only
person authorising payments.
The applicant avers that he took full
control for an unspecified period.
[26]
On the papers, those were the last words on the solvency of the
respondent. Another important
possible source document would have
been the business rescue plan. Mr Keevy stated that he would need
until after 31 October 2017
to produce it. The applicant averred that
he had complied with all his duties in terms of the Companies Act,
including but not
limited to, “
developing a business rescue
plan to be considered by the affected persons of the Respondent, in
accordance with Part D of Chapter
6 of the Act
.” As already
set out, he mentions no date or that he ever submitted the plan to
affected parties for approval. Had the plan
been prepared, it would
have contained detailed financial information in terms of section 150
of the 2008 Companies Act.
[27]
The application stands to be
dismissed as the applicant has failed to plead and prove the case he
pursued, namely that the respondent
is actually or commercially
insolvent. The founding papers suggest that it is solvent. No case
has been made out for such a winding-up.
The respondent seems no
longer to be financially distressed either.
No
notice to affected parties and non-service
[28]
The notice of motion gives
the address of the company, its employees and Mr Christoforou, as 4
Boron Street, Alrode, Alberton. If
one has regard to the founding
affidavit, the applicant does state that his attorneys will ensure
that
inter alia
the formalities of proper service on the respondent, the employees of
the respondent and “
the
director
” would be
complied with. “
The
director
”
(presumably Mr Christoforou) is not identified, and his (or her)
address is not stated.
The
respondent’s registered address is given as alleged to be the
address mentioned above, 4 Boron Street, Alrode, Alberton,
but the
fact is not proven. A judge could never evaluate the founding papers
to see if proper service had taken place.
[29]
An obvious indication that
there was a problem in the matter, was the returns of service
themselves. They appear to be returns of
non-service as the papers
were served at an address where the applicant, according to the
founding affidavit, knew the respondent
no longer conducted business
since April 2018. That is three years ago. Service at its previous
business address would therefore
be non-service and would not comply
with
inter alia
Uniform Rule 6(5)(a) that “
every
application other than one brought ex parte must be brought
on notice of motion as near as may be in accordance
with Form 2(a) of
the First Schedule and
true
copies of the notice, and all annexures thereto, must be served upon
every party to whom notice thereof is to be given
”.
[30]
The fact of non-service
appears from the returns of service too as they were served upon the
employee or at the gate of a different
company. There were three
returns of service loaded onto the electronic case file:
[30.1]
The first return of service was
for service on the respondent. The
material parts read (underlining added):
“
On this 12th day
of April 2021 at 12:10 I served the NOTICE OF MOTION FOUNDING
AFFIDAVIT AND ANNEXURES in this matter upon MRS L
GLEESON,
EMPLOYEE
OF CONSTANN INVESTMENTS
apparently a responsible employee and
apparently not less than 16 years of age, of and in control of and
at
the principal place of business
within the court's jurisdiction
of TRUCK MEC (PTY) LTD (UNDER SUPERVISION) at 4 BORON STREET ALRODE
ALBERTON by, handing to the
PARTY SERVED a copy thereof after
explaining the: nature and exigency of the said process. RULE
4(1)(a)(v).”
[30.2]
The second return of service was
for service on the respondent’s
director. The material parts similarly read (underlining added):
“
On this 12th day
of April 2021 at 12:12 I served the NOTICE OF MOTION FOUNDING
AFFIDAVIT AND ANNEXURES in this matter upon MRS L
GLEESON,
EMPLOYEE
OF CONSTANN INVESTMENTS
apparently a responsible employee and
apparently not less than 16 years of age, of and in control of and
apparently in authority
at the place of employment of ANASTASSIS
CHRISTOFOROU at 4 BORON STREET ALRODE ALBERTON by being temporarily
absent and by handing
to the PARTY SERVED a copy thereof after
explaining the nature and exigency of the said process. RULE
4(1)(a)(iii).”
[30.3]
The third return of service was
for service on the respondent’s
employees. It differs slightly from the wording of the previous two
returns. The material
parts read (underlining added):
“
On this 12th day
of April 2021 at 12:11 I properly served the NOTICE OF MOTION
FOUNDING AFFIDAVIT AND ANNEXURES in this matter by
affixing a copy
thereof to the MAIN ENTRANCE of the PLACE OF EMPLOYMENT of TRUCK MEC
(PTY) LTD (UNDER SUPERVISION) at 4 BORON STREET
ALRODE ALBERTON,
which is kept locked and thus prevent alternative service
.
REMARK: MRS L GLEESON,
EMPLOYEE OF CONTANN INVESTMENTS INFORMED DEPUTY
THERE ARE NO
EMPLOYEE OF TRUCK MEC (PTY) LTD.
”
[31]
The point is that the
applicant must have known that there would be no trace of the
respondent at 4 Boron Street, Alrode, Alberton
where it ceased to
trade three years ago. He could not be surprised to find Contann
Investments in control of the property.
[32]
It is not the end of the matter, as section 141(2)(a) of the 2008
Companies Act expressly
requires that the company, and all affected
persons, be notified in the prescribed manner that the business
rescue practitioner
is of the view that the company cannot be
rescued. “
Affected parties
” is defined in section
128 to include all shareholders, creditors, any registered trade
union representing employees of the
company, and if any of the
employees of the company are not represented by a registered trade
union, each of those employees or
their respective representatives.
The applicant failed to address even the existence of such persons
and entities, not even mentioning
the prescribed notice to them.
These provisions are more extensive than section 346A of the 1973
Companies Act, save for the addition
in the latter of the South
African Revenue Service.
[33]
The application stands to be
dismissed as the applicant has failed to plead and prove the address
details of the respondent and
of interested parties. The application
also stands to be dismissed as the applicant has failed to serve the
application. The application
lastly stands to be dismissed as the
applicant has failed to comply with section 141(2)(a) of the 2008
Companies Act.
On the facts
of this case, I decline to exercise a discretion to postpone the
matter for re-service.
Conclusion
[34]
The application is so
lacking in factual detail and evidence, that no case has been made
out for the relief sought. It appears form
the annexures to the
papers that the applicant may have no locus standi, the respondent
may no longer be financially distressed,
the respondent may be
solvent, and there may have been neglect in the matter. In addition,
the application was not properly served
or brought to the attention
of affected parties.
Accordingly,
I make the following order:
1.
The application is dismissed;
2.
The applicant may not recover any fees or disbursements pertaining to
this application
from the estate of the respondent.
DP
de Villiers AJ
Heard
on:
31 May 2021
Delivered
on:
30 June 2021 by uploading on CaseLines
On
behalf of the Applicant:
Adv. A P Allison
Instructed
by
Tony Berlowitz Attorneys
[1]
1999 (2) SA 279
(T) at 323F-324A.
[2]
2014 (3) SA 96
(SCA) at para 13.
[3]
2003 (4) SA 207
(C) at para 28.
[4]
1961 (1) SA 669
(T) at 672A.
[5]
1995 (1) SA 282
(A) at 288E-F.
[6]
[2019] ZAGPPHC 75 at para 29.
[7]
“(a) When a petition is presented to
the court, the petitioner must furnish a copy of the petition-
(i)
to every registered trade union that, as far as the petitioner
can
reasonably ascertain, represents any of the debtor's employees; and
(ii)
to the employees themselves-
(aa)
by affixing a copy of the petition to any notice board to which the
petitioner and the
employees have access inside the debtor's
premises; or
(bb)
if there is no access to the premises by the petitioner and the
employees, by affixing a copy
of the petition to the front gate of
the premises, where applicable, failing which to the front door of
the premises from which
the debtor conducted any business at the
time of the presentation of the petition;
(iii)
to the South African Revenue Service; and
(iv)
to the debtor, unless the court, at its discretion, dispenses
with the furnishing of a copy where the court is satisfied that it
would be in the interest of the debtor or of the creditors to
dispense with it.”
[8]
“(1) A copy of a winding-up order must
be served on-
(a)
every trade union referred to in subsection (2);
(b)
the employees of the company by affixing a copy of the application
to any notice
board to which the employees have access inside the
debtor's premises, or if there is no access to the premises by the
employees,
by affixing a copy to the front gate, where applicable,
failing which to the front door of the premises from which the
debtor
conducted any business at the time of the presentation of the
application;
(c)
the South African Revenue Service; and
(d)
the company, unless the application was made by the company.
(2)
For the purposes of serving the winding-up order in terms of
subsection (1), the
sheriff must establish whether the employees of
the company are represented by a registered trade union and
determine whether
there is a notice board inside the premises of the
company to which the employees have access.”
[9]
“(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.”
[10]
[2012] ZAKZDHC 91.
[11]
2018 (3) SA 278
(WCC) at para 43.