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2021
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[2021] ZAKZDHC 41
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Pillay v Personify Investments (Pty) Ltd and Others (D5093/2020; D5094/2020; D5095/2020; D5622/2020; D5623/2020; D5624/2020; D3036/2021) [2021] ZAKZDHC 41 (29 June 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL LOCAL
DIVISION, DURBAN
REPORTABLE
CASE
NO:
D5093/2020
In the matter between:
VENJANDRAN
SHUNMUGUM
PILLAY Applicant
and
PERSONIFY
INVESTMENTS (PTY) LTD First
Respondent
THE
COMPANIES AND INTELLECTUAL Second
Respondent
PROPERTIES COMMISSION
AFFECTED
PARTIES Third
Respondent
CASE
NO:
D5094/2020
In the matter between:
VENJANDRAN
SHUNMUGUM
PILLAY First
Applicant
JENNY
PILLAY Second
Applicant
and
HUNTREX
302 (PTY)
LTD First
Respondent
THE
COMPANIES AND INTELLECTUAL Second
Respondent
PROPERTIES COMMISSION
AFFECTED
PARTIES Third
Respondent
CASE
NO:
D5095/2020
In the matter between:
VENJANDRAN
SHUNMUGUM
PILLAY Applicant
and
MISTY
BLUE INVESTMENTS (PTY)
LTD First
Respondent
THE
COMPANIES AND INTELLECTUAL Second
Respondent
PROPERTIES COMMISSION
AFFECTED
PARTIES Third
Respondent
CASE
NO:
D5622/2020
In the matter between:
INVESTEC
BANK
LTD Applicant
and
PERSONIFY
INVESTMENTS
(PTY)LTD Respondent
CASE
NO: D
5623/202
0
In the matter between:
INVESTEC
BANK
LTD Applicant
and
MISTY
BLUE INVESTMENTS (PTY)
LTD Respondent
CASE
NO:
D5624/2020
In the matter between:
INVESTEC
BANK
LTD Applicant
and
HUNTREX
302 (PTY)
LTD Respondent
CASE
NO:
D3036/2021
In the matter between:
HUNTREX
302 (PTY)
LTD First
Applicant
PERSONIFY
INVESTMENTS (PTY) LTD Second
Applicant
MISTY
BLUE INVESTMENTS (PTY)
LTD Third
Applicant
and
INVESTEC
BANK
LTD First
Respondent
THE
SHERIFF OF THE HIGH
COURT Second
Respondent
INANDA AREA 2
THE
SHERIFF OF THE HIGH
COURT Third
Respondent
DURBAN COASTAL
IAN
WYLES
AUCTIONEERS Fourth
Respondent
ORDER
(a)
The application for recusal is dismissed
with costs.
(b)
The applications in case numbers 5093/2020,
5094/2020 and 5095/2020 are dismissed with costs.
(c)
In each of cases 5622/2020, 5623/2020 and
5624/2020 there will be the following order:
(i)
the
respondent is placed under a provisional winding-up order in the
hands of the Master of the High Court, Pietermaritzburg;
(ii)
a
rule nisi is issued, calling on the respondent and all interested
parties to show cause, if any, to this court on 24 August 2021
at
9.30 am why the provisional order should not be made final.
(iii)
This
order is to be published in the Government Gazette and in the Natal
Mercury on or before 21 July 2021.
(d)
The applicants in case 3036/2021 are
ordered to pay the costs of that application.
(e)
The application for leave to intervene on
14 June 2021 is dismissed with costs.
(f)
The affected parties who delivered
affidavits in support of the business rescue applications will pay
their own costs.
(g)
The applicants in the business rescue
applications are ordered to pay the costs of those affected parties
who delivered affidavits
in opposition to the business rescue
applications, including the costs of the appearance.
(h)
The application by Absa Bank Ltd to
intervene is dismissed with costs.
(i)
The applications by the second to the
thirteenth intervening creditors in the winding-up applications are
dismissed with costs.
(j)
All the costs orders will include those
occasioned by the employment of senior counsel, or two counsel, where
so employed.
JUDGMENT
Delivered on: 29 June
2021
Ploos
van Amstel J
[1] There
are seven matters before me, which were heard together. Investec Bank
Ltd seeks winding-up orders against
three companies; their
shareholders seek business rescue orders, rather than winding-up
orders; and the three companies themselves
sought an interdict
against Investec, pending the outcome of the other applications. In
addition there are several applications
by affected persons to
participate in the hearing of the business rescue applications, and
by creditors to intervene in the winding-up
applications.
[2] The
three companies are part of one group. They are Misty Blue
Investments (Pty) Ltd, Personify Investments
(Pty) Ltd and Huntrex
302 (Pty) Ltd. I refer to them in this judgment, respectively, as
Misty, Personify and Huntrex, and collectively
as ‘the
companies’.
[3] It
is undisputed that the companies are indebted to Investec in an
amount of some R200 million, to Nedbank
in an amount of some R3
million, and to Absa in an amount of just over R2 million. The
liabilities are joint and several as there
are suretyships and
cross-suretyships. In addition there are concurrent creditors for a
further approximately R100 million.
[4] Investec
launched winding-up applications against all three companies on 10
and 12 July 2019. These applications
have been adjourned from time to
time, first because of a resolution by the directors to commence
business rescue proceedings (which
was later withdrawn) and on other
occasions because of moratoriums or agreements for the rescheduling
of the debts. They are the
winding-up applications which are before
me.
[5] On
7 August 2020 the applicant and his wife, as shareholders, launched
applications to place the three companies
in business rescue. The
result was that the winding-up applications were suspended in terms
of s 133 of the Companies Act 71 of
2008 (the Act). These are the
business rescue applications which are before me.
[6] The
application for an interdict was launched on 14 April 2021. The
companies sought to restrain Investec,
pending the outcome of the
other applications, from furnishing notice to the companies’
debtors to make payment directly
to Investec in terms of certain
cession agreements. They also sought to restrain the removal of
certain assets which had been attached
pursuant to a notarial bond.
On 15 April 2021 Olsen J adjourned the application for an interdict,
to be heard together with the
other applications. He recorded that
Investec had given an undertaking pending the outcome, which was
acceptable to the companies.
[7] I
need to consider the business rescue applications first. If they
succeed the winding-up applications will
remain suspended. If the
business rescue applications fail, I will need to consider the
winding-up applications on their merits.
Business Rescue
[8] The
shareholders of the companies are Mr Vejandran Pillay and his wife.
Misty and Personify are property owning
companies. Their income
consists mainly of rentals. Huntrex is the trading company and
occupies, in the main, properties owned
by the other two. It operates
hotels, guest houses, conference facilities and so on. It is accepted
on the papers that the companies
are so interdependent that the
outcome of the applications should be the same in respect of all
three.
[9] The
immovable properties owned by the companies are as follows. Misty
owns the Urban Park Apartments and Hotel;
the Auberge Hollandaise
Guest House; the Imperial Hotel; the Central Park sectional title
units and parking bays, together with
the adjacent vacant land;
Aldrovanda Palace; and Section 208, Millenium Towers. Personify owns
The Square Shopping Centre and Boutique
Hotel; and the Waterfront
Hotel and Spa. Huntrex owns no immovable property. It owns moveable
property in the form of furniture
and equipment, which has been
attached by Investec in terms of a notarial bond.
[10] It
is undisputed that the companies are financially distressed and that
they have been unable to service their
debts for a number of years,
resulting in several restructuring agreements.
[11] The
purpose of business rescue proceedings is stated in s 128(b)(iii) of
the Act to be to facilitate the rehabilitation
of a company that is
financially distressed by providing for 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. One
of the requirements for the making of such an order by a court is, in
terms of s 131(4)(a), that
there must be a reasonable prospect for
rescuing the company. This was the real issue before me.
[12] The
applicants bought Misty and Personify in about 2003 and 2004
respectively. They were both shelf companies.
Misty and Personify
bought a number of immovable properties during the period 2012 to
2015. Some were bought as existing buildings.
Others were bought as
land, and buildings were constructed on them. These acquisitions and
developments were funded by Investec
and Nedbank against the security
of the properties and suretyships.
[13] A
development in Umhlanga Rocks did not go according to plan and there
were substantial delays. The companies
ran into financial
difficulties and were not able to service their debts. A number of
moratorium agreements were concluded from
time to time, but the
companies continued to default on their payments. In July 2019
Investec applied for the companies to be liquidated.
Those
applications were later put on hold, and further attempts were made
to enable the companies to rectify the situation. The
last moratorium
agreement was concluded on 5 February 2020. It provided for the sale
of various immovable properties and the payment
of the proceeds to
Investec. It also provided for the payment of the balance in
instalments, and the settlement of the entire indebtedness
by 30 June
2020.
[14] Clause
one of the agreement provided for a guarantee to be furnished to
Investec by 14 February 2020, in an
amount of R15 million, and
payment of that amount by 28 February 2020. Clause two provided
for a second guarantee to be furnished,
also by 14 February, and
payment of R15 million by 28 February 2020. These amounts related to
Central Park Phases One and Two.
The first guarantee was furnished,
but expired without payment being made. The second guarantee was not
furnished, nor was payment
made. I mention these two breaches because
they occurred before the national lockdown that was caused by the
Covid pandemic. The
companies were in other words already financially
distressed.
[15] The
other guarantees referred to in the agreement were also not
furnished, as the sales contemplated in the
agreement did not take
place. Nor were the payments made when they fell due. These included
amounts of R10 million and R50 million
that were payable on 31 May
2020.
[16] The
national lockdown as a result of the Covid pandemic took effect on 26
March 2020. The applicants say the
hospitality industry was hit
particularly hard by the lockdown, and potential purchasers of the
properties which had been earmarked
for sale became hesitant and
would not commit.
[17] It
appears from Investec’s answering affidavit that Misty and
Personify had a history of defaulting
in their loan obligations, from
2017 through to the present. The applications for their liquidation
were launched well before the
Covid pandemic resulted in a national
lockdown. Investec points out that the restructuring agreements of 17
July 2019 and 5 February
2020 both contemplated the selling of
properties owned by the companies so as to enable them to discharge
their debts. There was
never a suggestion that the income from the
trading company, Huntrex, would ever be sufficient to pay the debts.
The agreements
contemplated the disposal of assets so that creditors
could be paid.
[18] The
applicants contend that the companies should not be liquidated as
there is a reasonable prospect that
they can be rescued. In an
attempt to establish this they put up a proposed business strategy,
prepared by a business rescue practitioner,
Mr K Maharaj. The
proposal was heavily criticised by Investec, who contended that no
case for a reasonable prospect was made.
[19] The
test for a reasonable prospect was considered in
Prospec
Investments
[1]
.
Van der Merwe J said: ‘I agree that vague statements and mere
speculative suggestions will not suffice. 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.’ And in
Oakdene
[2]
Brand
JA said it must be a prospect based on reasonable grounds.
[20] The
proposal by Mr Maharaj contemplates the sale of a number of the
properties, the conversion of two hotels
into old age care
facilities, and the continued operation of a guesthouse. Investec
raised a number of criticisms of the proposal,
such as the fact that
the companies themselves have not been able to sell the properties at
the prices mentioned in the proposal;
it reflects Investec as a
secured creditor for R95 million instead of R195 million; it does not
mention Misty’s liability
to Absa Bank in a sum of R2 322 014;
the information with regard to the sale of The Square is incorrect;
the information with regard
to the Imperial Hotel, Central Park Phase
Two, Aldrovanda Palace and Millenium Towers is unsubstantiated; there
is no factual basis
for the claim that the dividend in the case of
business rescue will exceed the dividend on liquidation; the proposal
is superficial
and lacking in essential information; it refers to
annexures which are not there; none of the companies has any
experience in the
running of old age care facilities; there is no
information as to the cost of equipping and running the facilities,
or where the
money will come from; the expected income will not be
sufficient to service the debts to the banks; and there is no reason
to think
the debts will be restructured in such a way that the banks
will get paid in the foreseeable future. Investec also points out
that
in the moratorium agreement of 5 February 2020 the applicants
acknowledged that business rescue would not have a reasonable
prospect
and would be inappropriate.
[21] Counsel
for the applicants based his argument for a reasonable prospect on
what he called a mix of selling
properties, trading as old age care
facilities, and the continued trading in the hospitality industry. He
submitted that as matters
improve the companies will be able to trade
out of their difficulties. The facts show that this is unlikely. They
have been unable
since 2017 to service their debts, and the last
moratorium of 5 February 2020 was designed to give them time to sell
a number of
the properties so that they can pay their debts. It did
not envisage that they would be able to trade out of their
difficulties.
Their poor prospects have been exacerbated by the Covid
pandemic. There are no facts before me that demonstrate a reasonable
prospect
that the companies can be returned to a position where they
exist on a solvent basis. It is not the purpose of business rescue to
give a debtor unlimited time to trade out of its financial
difficulties. The creditors are entitled to be paid within a
reasonable
time and the applicants have to show that business rescue
will have a reasonable prospect of achieving this. The report by Mr
Maharaj
seems to me to be based on vague statements and speculative
suggestions. It does not reveal a factual foundation for the
existence
of a reasonable prospect, based on reasonable grounds, as
required in
Prospec Investments
and
Oakdene
.
[22] With
regard to the suggestion of converting the hotels into old age care
facilities Investec pointed out that
none of the companies has any
experience in this field and the report says nothing about the
equipment or trained staff for such
a venture. Counsel for the
applicants sought to counter this by submitting that what was
contemplated was not a care facility,
but rather accommodation for
the aged, where they can be seen by their own doctors. This was not
the case made in the papers. The
report refers to a ‘care
facility’, and the supplementary report that the applicants
sought to introduce refers to
the ‘provision of meals, medical
and other necessary services’.
[23] A
number of affected persons delivered affidavits in support of the
business rescue applications, and some
in opposition. They were
entitled to do so in terms of s 131(3). Those in support did not take
the matter any further, and it is
perhaps fair to say that they were
merely expressing their support. Those in opposition contended that
the applicants have not
discharged the onus of showing a reasonable
prospect for rescuing the companies. They contended that the
applicants have not demonstrated
that there will be a better return
for creditors under business rescue as opposed to liquidation; they
pointed to the lack of particulars
in the proposed strategy; and they
contended that a liquidator will be in a better position to deal with
the assets of the companies
and investigate their affairs.
[24] Four
persons brought an urgent application on 14 June 2021, seeking leave
to intervene. I pointed out to counsel
that they did not have to be
joined as respondents because in terms of section 131(3) they were
entitled to participate in the
hearing. Counsel for Investec agreed
and said Investec would file an answering affidavit and the
affidavits would be dealt with
in argument.
[25] The
main affidavit in the application of 14 June was deposed to by Mr MY
Khan. The other ‘intervening
parties’ deposed to
confirmatory affidavits. The four of them had bought apartments in
Central Park and paid the purchase
price in full. None of them has
received transfer.
[26] Khan
says on 10 June 2021 he was told by one Des Govindasamy, a creditor
of Misty’s, that there were
prospects that the liquidation and
business rescue proceedings could be settled in the light of ‘certain
lucrative offers’
that had been made by third parties. He asked
his attorney to make enquiries, who wrote to the applicants’
attorney and requested
certain information. Then follows a number of
pages that contain financial and contractual information which was
supplied to Khan’s
attorney by the applicants’ attorney.
Annexed to the affidavit are copies of a number of agreements and
guarantees. It seems
plain to me that Khan’s affidavit is a
disguised supplementary affidavit by the first applicant. Most of the
affidavit consists
of inadmissible hearsay evidence. I therefore
ruled that these affidavits would not be allowed in. The right of an
affected person
to participate in the hearing does not extend to the
introduction of hearsay evidence at the last minute through the back
door.
[27] I
was informed from the bar that in the affidavit delivered by Investec
in opposition to the introduction
of these affidavits, it took the
point that Khan’s affidavit consisted of inadmissible hearsay.
This is confirmed by the
first applicant in his affidavit. This no
doubt explains the application by the applicants, during the hearing
before me, for leave
to deliver a supplementary affidavit and a
supplementary report by Mr Maharaj. When counsel for the applicants
commenced his argument
he informed me that such an application was
being prepared and would be available in the course of the morning.
The notice of motion
was dated 17 June 2020, as were the affidavits
of the first applicant and Mr Maharaj, and his supplementary report.
The first applicant
says in his affidavit that he provided Mr Maharaj
with the information and documents referred to in his affidavit.
Neither he nor
Mr Maharaj says when this occurred.
[28] The
supplementary report mentions sale agreements which have been
concluded in respect of some of the properties.
These include: the
sale to one Charles Thompson of land in Central Park for R15 million
and the Auberge Hollandaise Guest House
for R10 million. The
agreements were concluded on 7 May 2021; offers totalling R41 million
for units in Urban Park. The dates are
not provided, nor are the
offers. The report does not say why the offers have not been
accepted; the sale of a number of floors
in Urban Park for R60
million; the sale of three ground floor units for R3 million; and the
sale of The Square for R75 million,
on I June 2021.
[29] There
are oddities in some of the agreements. Clause 3.3 of the agreement
for the sale of the land and the
guest house refers to the transfer
of a three bed unit for ‘NIL consideration and pay the seller
an amount of R2 000 000…
in settlement’. This appears to
be in ‘payment’ of the purchase price. The agreement for
the sale of a number
of floors in Urban Park is conditional on
Investec consenting to the sale, or the winding-up application being
dismissed, or the
seller being placed under business rescue and the
agreement being accepted by the practitioner. There is no explanation
as to why
the agreement is conditional on the liquidation application
being dismissed. This suggests manipulation on the part of the first
applicant.
[30] It
seems plain that the applicants could have placed the additional
information before the court much earlier
than the date of the
hearing. Some of the agreements were concluded as long ago as 7 May
and 1 June. There is no explanation in
the papers as to why this was
not done. Further, as counsel for Investec submitted, the new
information hardly changes the picture.
It concerns the sale of
properties and adds very little to the prospect to rescue the
companies. Counsel for the applicants referred
me to a number of
authorities mentioned in Erasmus
[3]
,
to the effect that a court should lean towards allowing additional
information by way of supplementary affidavits. That may be
correct
as a general proposition. But the rules and practice relating to
motion proceedings are there for good reason. In this
matter the
first applicant tried to introduce the new information by providing
it to Khan so that he could introduce it as an affected
person. When
this did not work he resorted to an application to deliver a
supplementary affidavit during the hearing. I do not
regard the new
information as sufficiently weighty to persuade me to allow this
abuse of the process.
[31] The
remarks by Brand JA in
Oakdene
should be borne in mind. He said:
[4]
’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… 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 costs 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 a company to avoid the consequences of liquidation
proceedings…’
[32] The
application to supplement the papers is disallowed.
[33] I
do not consider that the applicants have shown a reasonable prospect
to rescue the companies, and all three
those applications will be
dismissed with costs.
[34] This
brings me to the applications for liquidation. At the commencement of
the proceedings before me I directed
that the business rescue and
winding-up applications be heard together, for practical reasons.
They had all been set down together.
The
Liquidation Applications
[35] The
companies are liable jointly and severally for debts of approximately
R300 million. The submission that
they are not commercially insolvent
is based on the notion of intervening impossibility, or
vis major
.
The contention is that the Covid pandemic and the national lockdown
had the result that they could not perform in terms of the
moratorium
agreement of 5 February 2020; this was out of their control and they
are consequently not in breach as their obligations
have been
suspended, albeit temporarily. Counsel submitted that this continues
to be the case.
[36] The
moratorium agreement of 5 February 2020 contemplated the sale of a
number of properties, including The
Square, The Waterfront Hotel and
Spa, the Auberge Hollandaise Guest House, and units in Urban Park
Apartments and Hotel. It obliged
the companies to make the following
payments to Investec: two amounts of R15 million each by 28 February
2020, in respect of Central
Park Phases One and Two, and the
furnishing of guarantees by 14 February; R10 million by 31 May 2020
in respect of Auberge Hollandaise
Guest House; R50 million by 31 May
2020 in respect of Urban Park; R500 000 by 7 February 2020; R500 000
by 14 February 2020; R1
500 000 by 28 February 2020; and R1 500 000
by 31 March 2020. The balance of the total liability had to be paid
by 30 June 2020.
[37] The
companies furnished one of the guarantees for R15 million, and it was
apparently extended to 10 April
2020. The second guarantee was not
furnished. Neither of the payments of R15 million was paid. Counsel
for Investec submitted that
the companies were in
mora
when the second R15 million payment was
not made on 28 February, and was still in
mora
when the national lockdown was announced on 20 March 2020.
[38]
It
was held in
Tweedie
[5]
that when a debtor is in
mora
any subsequent supervening impossibility does not relieve him from
his duty to perform. Counsel for the companies did not contest
this,
but submitted that they were not in
mora
as Investec had agreed to an extension of the time to pay.
[39] The
request for an extension was made by the first applicant on 2 April
2020. He asked Investec ‘to
defer any payments due for a period
of 90 days’. The reply from Investec’s attorney, on 9
April, was that Investec
had agreed to defer payment in respect of
clauses 15.2 and 15.3 of the settlement agreement for a period of 90
days, and that an
addendum to the settlement agreement would be sent
to him for signature. Those clauses referred to two payments of R1,5
million
each, which were payable on 28 February and 31 March
respectively. There was no extension of the time for payment of the
second
sum of R15 million that was due on 28 February 2020. In any
event, the extension was granted on 9 April 2020, when the national
lockdown was already in place. If the
mora
on 20 March prevented the lockdown from qualifying as an intervening
impossibility then a subsequent extension would not have changed
that.
[40] Further,
an inability to pay seems to me to be a subjective impossibility. It
was held in
Unibank
[6]
that impossibility is not implicit in a change of financial strength
or in commercial circumstances which cause compliance with
the
contractual obligations to be difficult, expensive or unaffordable.
[41] The
event must render performance absolutely or objectively impossible.
Mere personal incapacity to perform
does not render performance
impossible, unless performance is of a personal nature, so that, for
example the death of a contracting
party does not render performance
by that party impossible unless the performance was personal in the
sense that only the deceased
could have performed it.
[7]
The death of an opera singer is a good example.
[42] The
companies were therefore not excused by the national lockdown or the
pandemic from paying their debts.
It seems plain that they are not
able to pay their debts and are commercially insolvent. In
Murray
NO
[8]
Wallis JA referred with approval to the following passage in LAWSA:
‘A company is unable to pay its debts when it is unable
to meet
current demands on it, or its day-to-day liabilities in the ordinary
course of business, in other words, when it is “commercially
insolvent”. The test is therefore not whether the company’s
liabilities exceed its assets, for a company can be at
the same time
commercially insolvent and factually solvent, even wealthy. The
primary question is whether the company has liquid
assets or readily
realisable assets available to meet its liabilities as they fall due,
and to be met in the ordinary course of
business and thereafter
whether the company will be in a position to carry on normal trading,
in other words whether the company
can meet the demands on it and
remain buoyant’.
[43] On
the evidence before me the companies are plainly unable to pay their
debts. I see no basis for exercising
my discretion against the
granting of a provisional liquidation order. Counsel for the
intervening creditors submitted that there
are matters that need to
be investigated by a liquidator, such as what happened to the
deposits that were paid in respect of the
sale agreements that were
cancelled. This is a valid point as a liquidator has powers to
investigate wrongdoing and contraventions
of the
Companies Act, which
a business rescue practitioner does not have.
The
Interdict.
[44] The
interdict was sought pending the determination of the business rescue
and winding-up applications. Investec
gave an undertaking that
applies until the outcome of the applications. An interdict is
therefore no longer required. The relief
that was sought was to
restrain Investec from furnishing notice to the companies’
debtors to pay it in terms of cession agreements,
and to restrain it
from removing goods that had been attached under a notarial bond.
[45] The
basis on which the interdict was sought was that the companies had
not defaulted in terms of the settlement
agreement and that
consequently Investec was not entitled to exercise its rights in
terms of the cession. The contention was based
on the alleged
intervening impossibility of performance, which excused them from
performance. I have already dealt with this contention,
and concluded
that it is without merit.
[46] The
application for an interdict would have failed. Firstly, the
companies were in breach of their obligations
and Investec was
entitled to exercise its rights under the cessions. Secondly, the
debts did not belong to the companies as they
had been ceded in
securitatem
debiti
and were not affected by the business rescue application. Thirdly,
collecting the debts as cessionary did not amount to
paratie
executie
.
See
De
Beer
[9]
,
where it was held that micro lenders were entitled to use their
clients’ cash cards and PIN numbers to draw their money
in
order to pay their debt, and this was not against public policy.
[10]
The
order
of 10 July 2019 authorised Investec to attach and take possession of
the goods. In those circumstances an interdict restraining
the
removal of the goods would not have been granted.
[47] The
application for an interdict was misconceived and the applicants will
be ordered to pay the costs.
The
Intervening parties
[48] A
number of affected persons and creditors applied for leave to
intervene. I deal with them briefly.
[49] The
persons who sought leave to intervene on 14 June 2021 claimed to be
affected persons in the business rescue
applications. These were the
affidavits which I refused to accept as they consisted of
inadmissible hearsay, which the first applicant
sought to introduce
through them. They will be ordered to pay the costs occasioned by
their abortive application, which necessitated
an urgent hearing on
14 June.
[50] The
other affected parties were entitled to participate in the business
rescue applications as they had delivered
affidavits and some were
represented by counsel. Those who supported the applications for
business rescue will be ordered to pay
their own costs. Those who
successfully opposed the applications for business rescue are
entitled to have their costs paid by the
applicants.
[51] Absa
sought leave to intervene as a creditor, but was not represented at
the hearing. It in any event relied
on actual insolvency, which was
not established. Its application to intervene will be dismissed with
costs.
[52] The
second to the thirteenth intervening creditors in the winding-up
applications did not file security bonds
as was required by section
346(3) of the 1973
Companies Act. Their
applications are defective
and will be dismissed with costs.
Recusal
application
[53] There
is one further matter that I need to deal with. After these
applications were allocated to me and while
I was in the process of
reading the papers it occurred to me that I should probably inform
the parties that I was a client of Investec
Bank. Whether or not that
was necessary is now academic. It appears from
Bernert
[11]
that it was in fact not necessary. Nevertheless, on 1 June 2021 my
secretary informed the parties that I was a long-standing private
bank client of Investec and if any of the parties wished to object to
me hearing the matter such party should notify me and the
other
parties as soon as possible. This resulted in a substantive
application by the applicants for me to recuse myself. I heard
argument on this application on 10 June 2021, and dismissed it with
costs.
[54] The
reasons for my doing so were as follows. Although I bank with
Investec I own no shares in it, nor do I
know any of the Investec
employees involved in the transactions between the parties, or in the
applications themselves. I had never
heard of the matter until it was
allocated to me. The liabilities of the group of companies to
Investec are not in issue on the
papers. The real issue is whether
those companies should be placed in liquidation or in business
rescue.
[55] The
basis on which the application for my recusal is based is, if I
understood it correctly, an alleged apprehension
that I made the
disclosure because I had doubts about my own impartiality. I told
counsel during argument that I made the disclosure
not because I had
any reservation about my impartiality in the matter, but because I
did not want my relationship with Investec
to be raised at the
hearing of the main applications and result in the matter being
delayed. Nor did I want the issue to be raised
after the matter had
been heard. I was also conscious of the fact that the relationship
between judges and their banks had been
raised before in other
proceedings, and in the questioning of a judge in the Judicial
Service Commission.
[56] Counsel
for the applicants submitted that they were not able to assess
properly whether they should be concerned
as no information has been
provided as to my dealings with Investec. This submission is
misplaced. The test for recusal is objective
and the onus of
establishing it rests on the applicant. The question is whether a
reasonable, objective and informed person would
on the correct facts
reasonably apprehend that the Judge has not or will not bring an
impartial mind to bear on the adjudication
of the case, that is a
mind open to persuasion by the evidence and the submissions of
coun
sel.
See
Bernert
[12]
and the cases referred to there. Ngcobo J referred to the presumption
of impartiality, the effect of which is that a judicial officer
will
not lightly be presumed to be biased. He said this is a consideration
a reasonable litigant would take into account.
[13]
[57] My
relationship with Investec is the usual, professional relationship
that millions of other people have with
their banks. It has nothing
to do with the transactions in the papers, or the applications
themselves. The outcome of the main
applications is entirely
irrelevant to my own interests and to my relationship with Investec.
[58] I
concluded that the application for my recusal was devoid of merit.
[59] The
orders that I make are as follows:
(a) The application for
recusal is dismissed with costs.
(b)
The applications in case numbers 5093/2020,
5094/2020 and 5095/2020 are dismissed with costs.
(c)
In each of cases 5622/2020, 5623/2020 and
5624/2020 there will be the following order:
(i)
the
respondent is placed under a provisional winding-up order in the
hands of the Master of the High Court, Pietermaritzburg;
(ii)
a
rule nisi is issued, calling on the respondent and all interested
parties to show cause, if any, to this court on 24 August 2021
at
9.30 am why the provisional order should not be made final.
(iii)
This
order is to be published in the Government Gazette and in the Natal
Mercury on or before 21 July 2021.
(d)
The applicants in case 3036/2021 are
ordered to pay the costs of that application.
(e)
The application for leave to intervene on
14 June 2021 is dismissed with costs.
(f)
The affected parties who delivered
affidavits in support of the business rescue applications will pay
their own costs.
(g)
The applicants in the business rescue
applications are ordered to pay the costs of those affected parties
who delivered affidavits
in opposition to the business rescue
applications, including the costs of the appearance.
(h)
The application by Absa Bank Ltd to
intervene is dismissed with costs.
(i)
The applications by the second to the
thirteenth intervening creditors in the winding-up applications are
dismissed with costs.
(j)
All the costs orders will include those
occasioned by the employment of senior counsel, or two counsel, where
so employed.
Ploos
van Amstel J
Appearances:
(Case
No: 5093/2020, 5094/2020, 5095/2020, 5622/2020, 5623/2020,5624/2020,
D3036/2020)
For
the Applicants: G
D Harpur SC (with D Dheoduth)
Instructed
by: T.
Giyapersad Incorporated
Durban
(Case
No: 5093/2020, 5094/2020, 5095/2020, 5622/2020, 5623/2020,5624/2020,
D3036/2020)
For
the 2
nd
to 13
th
Intervening
Applicants: M
Manikam
Instructed
by: Anand
Nepaul
Durban
(Case
No: 5093/2020,5094/2020,5095/2020)
For
the Intervening Applicants: G
Harrison
Instructed
by: Nair
Attorneys Incorporated
Durban
(Case
No: 5093/2020,5095/2020 5622/2020,5624/2020, D3036/2020)
For
the 1
st
and 2
nd
Respondents: A
Stokes SC (with R M Van Rooyen)
Instructed
by: Johnston
& Partners
Durban
Date
Judgment Reserved: 17
June 2021
Date
of Judgment: 29
June 2021
[1]
Prospec
Investments (Pty) Ltd v Pacific Coast Investments 97 Ltd
2013
(1) SA 542
(FB) para 11.
[2]
Oakdene
Square Properties (Pty) Ltd v Farm Bothasfontein (Kyalami)
2013
(4) SA 539 (SCA)
[3]
Erasmus
Superior Court Practice.
[4]
At
para 33.
[5]
Tweedie
and Another v Park Travel Agency (Pty) Ltd t/a Park Tours
1998
(4) SA 802
(WLD) 805F-I.
[6]
Unibank
Savings and Loans (formerly Community Bank) v Absa Bank
2000
(4) SA 191
(WLD) 198.
[7]
Christie’s
Law
of Contract in South Africa
,
7
th
ed, 550;
Scoin
Trading (Pty) Ltd v Bernstein NO
2011 (2) SA 118
(SCA) para 22.
[8]
Murray
NO v African Global Holdings (Pty) Ltd
2020
(2) SA 93
(SCA) para 28.
[9]
De
Beer v Keyser
2002
(1) SA 827
(SCA) at 838.
[10]
This
practice was later prohibited by legislation.
[11]
Bernert
v Absa Bank Ltd
2011
(3) SA 92
(CC) para 79.
[12]
At
para 29 and further.
[13]
Para
33