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[2024] ZAFSHC 10
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Standard Bank of South Africa v Franlese Boerdery (Pty) Ltd and Others (3058/2023) [2024] ZAFSHC 10 (25 January 2024)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN THE HIGH COURT
OF SOUTH AFRICA
FREE STATE
DIVISION, BLOEMFONTEIN
Case No:
3058/2023
Reportable: YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
THE
STANDARD BANK OF SOUTH AFRICA LIMITED
Applicant
(Registration
Number: 1962[…])
And
FRANLESE
BOERDERY (PTY) LTD
First
Respondent
(Registration
Number: 2018[…])
SUMAIYA
KHAMMISSA N.O.
Second
Respondent
[In
her capacity as appointed Business Rescue
Practitioner
of
Franlese Boerdery (Pty) Ltd
]
ANY
AFFECTED PERSONS RELATING TO
FRANLESE
BOERDERY (PTY) LTD
Third
Respondent
RUCA
BOERDERYE (PTY) LTD
Fourth
Respondent
CORAM:
HEFER AJ
HEARD
ON
:
8 DECEMBER 2023
DELIVERED
ON
: 25
JANUARY 2024
[1]
First and Fourth Respondents applied for leave to appeal to the
Supreme Court of Appeal, alternatively the
Full Bench of this
division, against part of the judgment and order granted by this
Court during November 2023.
[2] The
Applicant approached the Court to obtain an order in terms of which
the business rescue proceedings in
respect of the First Respondent,
to be converted into liquidation proceedings.
[3] In
opposing the application, First Respondent together with one of the
creditors of the First Respondent,
being Ruca Boerderye (Pty) Ltd
(“
Ruca”
), launched a counter-application to the
effect that in essence the vote by the Applicant against the adoption
of a revised business
rescue plan be declared inappropriate and set
aside in terms of
Section 153(7)
of the
Companies Act 71 of 2008
.
[4]
After hearing arguments, an order was indeed granted in terms of
which the business rescue proceedings were
converted into liquidation
proceedings, the counter-application in regards to the
inappropriateness of the vote was dismissed and
the First Respondent
was provisionally liquidated.
[5]
In
Matoto
v Free State Gambling & Liquor Authority and Others
[1]
,
Daffue J,
with reference to
Section
17
of the
Superior Courts Act 10 of 2013
, stated as follows:
“
[5]
There can be doubt that the bar for granted leave to appeal has been
raised. Previously, the test was
whether there was a reasonable
prospect that another court might come to a different conclusion. Now
the use of the word ‘would’
indicates a measure of
certainty that another court will differ from the court which
judgment is sought to be appealed against.
See Acting National
Director of Public Prosecutions and Others v Democratic Alliance
(19577/2009) [2016] ZAGPPHC 489 (24 June 2016).
The use by the
legislator of the word ‘only’, emphasized supra, is a
further indication of a more stringent test.”
[6] In
terms of
Section 17(1)
, leave to appeal may only be given where the
judge or judges concerned are of the opinion that
(i)
the appeal would have a reasonable prospect of success; or
(ii)
there is some other compelling reason why the appeal should be heard.
[7]
As far as the second ground is concerned, namely whether there is a
compelling reason why an appeal should
be heard, in
Minister
of Justice and Constitutional Development v Southern Africa
Litigation Centre
[2]
,
the Supreme Court of Appeal stated:
“
That
is not to say that merely because a High Court determines an issue of
public importance it must grant leave to appeal. The
merit of the
appeal remains vitally important and will often be decisive.”
[8]
Mr
Thompson
,
appearing on behalf of First and Fourth Respondents, at the initial
hearing as well as during the application for leave to appeal,
relied
to a large extent on the decision of the Supreme Court of Appeal in
Firstrand
Bank Ltd v KJ Foods CC
[3]
.
In this case the main issue was whether Section 153(1)(a)(ii) of the
Companies Act 71 of 2008 (“
the
Act”
)
or Section 153(1)(b)(i)(bb), read with Section 153(7) entailed that
the Court must first establish whether the vote was inappropriate
before invoking its discretion under Section 153(7) to set it aside.
[9] In
terms of a majority judgment, Section 153(1)(a)(ii) and Section
153(1)(b)(i)(bb) were found to be inextricably
linked to Section
153(7). On an application to set aside the result of a vote in terms
of any of these subsections, the Court was
enjoined by Section 153(7)
to determine only whether it was reasonable and just to set aside the
particular vote, taking into account
the factors set out in Section
153(7)(a) to (c) and also all circumstances relevant to the case,
including the purpose of business
rescue in terms of the Act. Put
differently, in an application on the grounds that its result was
inappropriate, the vote would
be set aside if it were reasonable and
just to do so in terms of Section 153(7). This entailed a single
enquiry and value judgment.
[10] Mr
Thompson
,
inter alia
, argued that the Court erred in holding that “…
the interest of the party who voted against the proposed business
plan is paramount”
.
[11] Although the
word “paramount” may have been putting it too strong, it
is clear that Section 153(7) confers
on a Court a discretion to order
that the vote on a business rescue plan be set aside if it is
satisfied that it is reasonable
and just to do so having regard to
the factors listed in Section 7(a) to (c).
“
The
factors referred to apply only in respect of the person or persons
who voted against the proposed business rescue plan.”
[4]
[12] Those factors
are specified in Section 153(7) and in that sense, it is those
factors which needs to be considered in
respect of a person who voted
against the proposed business rescue plan together with all
circumstances relevant to the case. These
factors were specified in
Section 153(7) for a reason, that being a Court must take it into
account together with the other factors.
[13] As is evident
from the judgment, all the factors which were considered in the
KJ
Foods
matter in which the Court came to a finding in favour of
the setting aside of a vote having been inappropriate, have been
considered
by the Court in the present matter and the Court also
fully associated itself with the reasoning of the SCA in coming to
its conclusion
in regards to inappropriateness of the vote in that
matter. That included
inter alia
, the fact that also in the
present matter, had the business rescue plan been implemented, the
employees of
KJ Foods
would have been able to remain employed
as was also considered in the
KJ Foods
matter. However, all
the factors and particularly those as contained in Section 153(7)(a)
to (c) needs to be considered. That has
been set out in particularity
in the Court’s judgment. Whereas Mr
Thompson
still
relies on the
KJ Foods
judgment in support of its application
for leave to appeal, the differences between the present matter, and
the
KJ Foods
matter needs to be pointed out again.
[14] In the present
matter, a settlement agreement was concluded between the Applicant
and First Respondent subsequent to
which the business rescue process
was initiated. That was not the case in
KJ Foods
. In terms of
the settlement agreement, Applicant was to receive payment of its
outstanding debt in certain instalments at a specified
time, being
only 90 days from the date of signature thereof.
[15] In
KJ
Foods
, the following important facts were also present which are
not the case in the present matter, namely:
“
As
from the date of the launching of the application, the practitioners
implemented the business rescue plan. The parties were requested
to
provide details regarding the implementation of the plan before the
hearing of the appeal.”
[5]
[16] Clearly by
implication that is one of the factors the Court took into
consideration in coming to its decision. In the
present matter, at
the time the revised business plan was put to the vote, such plan had
not been implemented, because the revised
business rescue plan has
not yet been approved. It was therefore also not possible for the
Court to ask for a report regarding
such implementation as suggested
by Mr
Thompson
.
[17] In the present
matter, a notarial bond was registered over the movable properties,
in favour of the Applicant. In the
KJ Foods
matter, that was
not the case. The whereabouts of the movable assets and the continued
use thereof, resulting in the diminishing
value thereof, still
remains a matter of concern which was not addressed in the revised
business rescue plan.
[18]
Mr
Thompson
further, during argument, concentrated on the distinction between the
implementation of the business rescue plan and the development
thereof. It is indeed common cause that at the time the relevant vote
had been taken in regards to which inappropriateness was
raised, the
plan had not yet been finally developed nor implemented. In respect
of the duration, reference was indeed made to the
Forty
Squares
-matter
[6]
,
in the Court’s judgment. However, in respect of the present
matter, the twelve year period was not in respect of implementation
of the business rescue plan, but indeed in the words used by the
First and Fourth Respondents themselves, “
It
is obvious that ‘reverberating’ effects of the revised
business rescue plan will have a 12 year lifespan in particular
in
respect of the applicant”
.
This was not held in regards to the implementation of the business
rescue plan.
[19] Mr
Thompson
further argued that the Court placed undue weight on the apparent
extra-curial concession relating to the fees to be charged by
the
Second Respondent which was not incorporated in the revised business
rescue plan. The Respondents however do not even consider
the
proposition that such lesser fees that should have been included in
the revised business rescue plan, would have been to the
advantage
not only of the Applicant, but all the creditors concerned.
[20] Mr
Thompson
further argued that the Court erred by placing undue weight on the
fact that the Second Respondent did not act in terms of Section
132(3) of the Act. However, no explanation whatsoever has been
forthcoming in respect of such failure. The Respondents’
further submission to the effect that “
failing to consider
that despite the business rescue proceedings not having ended within
3 months after the start of those proceedings
and further, despite
the non-compliance with section 132(3) of the Act, the Applicant
continued to participate in the business
rescue process without
objection”
, do not take into consideration that the actions
of the Applicant since the start of the business rescue process up
until the meeting
where the “
alleged inappropriate vote”
was taken, indeed shows the willingness and
bona fides
of the
Applicant to partake in the business rescue proceedings, but up until
a certain point. At that point, the business rescue
practitioner,
Second Respondent, had been “
dragging her feet”
without providing any explanation, the revised business rescue plan
which was published shortly before the meeting, still contained
certain aspects with which the Applicant was dissatisfied. As stated
by Schoeman AJA, the objects of the Act include,
inter alia
,
“
the rescue and recovery of financial distressed companies
in the manner that balances the rights and interests of all
relevant stakeholders
”
(own emphasis).
[21] In the
consequence, I am not persuaded that another Court would come to a
different conclusion and that there is a reasonable
prospect of
success for the relevant Respondents. This is so even without
reliance on the
KJ
: matter , taking into all relevant
circumstances.
[22] Furthermore,
although it may be desirable that the effects of the non-compliance
of Section 132(3) of the Act be considered
at some stage, I do not
find this as a compelling reason as such for leave to appeal to be
granted.
[23] Whereas First
and Fourth Respondents did not succeed in the application for leave
to appeal, such Respondents are to
pay the costs of such application.
Order
:
Therefore, I make the
following order:
The application for leave
to appeal is dismissed with costs.
J J F HEFER, AJ
On
behalf of the Appellant:
Adv
P Zietsman SC
Instructed
by: Phatshoane Henney Attorneys
Bloemfontein
On
behalf of First and Fourth Respondent:
Adv
C Thompson
Instructed
by: Martin Van Vuuren Attorneys
c/o
Du Toit Lambrecht Inc.
Bloemfontein
[1]
(4629/2015)
[2017] ZAFSHC 80
(8 June 2017)
[2]
2016 (3) SA 317
(SCA) at 330 C
[3]
2017 (5) SA 40 (SCA)
[4]
Firstrand Bank v KJ Foods
supra
at p. 57, par. [71]
[5]
KJ Foods
supra
at p. 54, par. [64]
[6]
Forty Squares (Pty) Ltd v Norris Fresh Produce Ltd
2023 (5) SA 249
(WCC)