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[2023] ZAFSHC 25
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Standard Bank South Africa Ltd v Remitto (Pty) Ltd and Others (3538/2022; 3540/2022) [2023] ZAFSHC 25 (3 February 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
no:
3538/2022
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
THE
STANDARD BANK SOUTH AFRICA
LTD
Applicant
(Registration
no. 1962/000738/06)
and
REMITTO
(PTY)
LTD
1
st
Respondent
(Under
Business Rescue Supervision)
(Registration
no. 2005/012357/07)
BARRY
CLAUDE URBAN
N.O
.
2
nd
Respondent
(in
his capacity as appointed Business Rescue Practitioner
of
REMITTO (PTY) LTD)
THE
AFFECTED PERSONS RELATING TO
REMITTO
(PTY)
LTD
3
rd
Respondent
AND
Case
no:
3540/2022
In
the matter between:
THE
STANDARD BANK SOUTH AFRICA
LTD
Applicant
(Registration
no. 1962/000738/06)
and
DNA
PLANT SCIENCE (PTY)
LTD
1
st
Respondent
(Under
Business Rescue Supervision)
(Registration
no. 2013/220477/07)
BARRY
CLAUDE URBAN
N.O
.
2
nd
Respondent
(in
his capacity as appointed Business Rescue Practitioner
of
DNA PLANT SCIENCE (PTY) LTD)
THE
AFFECTED PERSONS RELATING TO
DNA
PLANT SCIENCE (PTY)
LTD
3
rd
Respondent
CORAM:
JP DAFFUE, J
HEARD
ON:
24 NOVEMBER 2022
DELIVERED
ON:
03 FEBRUARY 2023
This
judgment was handed down electronically by circulation to the
parties’ representatives by email, and release to SAFLII.
The
date and time for hand-down is deemed to be 17h00 on 03 February
2023.
ORDER
In
application 3538/2022
1.
Leave is granted to the applicant to commence
and proceed with its
application against the first respondent company in terms of
s
133(1)(b)
of the
Companies Act 71 of 2008
;
2.
The business rescue proceedings in respect
of the first respondent
company are converted into liquidation proceedings in terms of
s
132(2)(a)(ii)
Companies Act 71 of 2008
;
3.
The first respondent company is placed under
provisional liquidation
in the hands of the Master of this court.
4.
A provisional liquidation order is hereby
issued calling upon all
interested parties to show cause, if any, to the court on the
16
th
day of
MARCH 2023
at
09h30
why a final order of
liquidation should not be granted against the first respondent
company.
5.
Service of this rule
nisi
and a copy of the notice of motion
and annexures shall be effected on the first respondent company at
its registered office or
its principal place of business within the
court's jurisdiction.
6.
This order shall, without delay, be published
in the Citizen and the
Government Gazette.
7.
The sheriff shall ascertain whether the employees of the first
respondent
company are represented by a trade union and whether there
is a notice board on the premises to which the employees have access.
8.
A copy of the provisional liquidation order shall be served on -
8.1
Every registered trade union that as far as the Sheriff can
reasonably ascertain, represents any of the employees
of the first
respondent company.
8.2 The
employees of the first respondent company by affixing a copy of the
application and provisional liquidation
order on any notice board to
which the employees have access inside the first respondent company's
premises or if there is no access
to the premises by the employees,
by affixing a copy to the front gate or front door of the premises
from which the first respondent
company conducts any business.
8.3 The
South African Revenue Services.
9.
The applicant shall pay the first and second respondents’
wasted
costs occasioned by the set down of the matter on the roll of
29 September 2022 as well as the postponement thereof.
AND
In
application 3540/2022
1.
Leave is granted to the applicant to commence
and proceed with its
application against the first respondent company in terms of
s
133(1)(b)
of the
Companies Act 71 of 2008
;
2.
The business rescue proceedings in respect
of the first respondent
company are converted into liquidation proceedings in terms of
s
132(2)(a)(ii)
Companies Act 71 of 2008
;
3.
The first respondent company is placed under
provisional liquidation
in the hands of the Master of this court.
4.
A provisional liquidation order is hereby
issued calling upon all
interested parties to show cause, if any, to the court on the
16
th
day of
MARCH 2023
at
09h30
why a final order of
liquidation should not be granted against the first respondent
company.
5.
Service of this rule
nisi
and a copy of the notice of motion
and annexures shall be effected on the first respondent company at
its registered office or
its principal place of business within the
court's jurisdiction.
6.
This order shall, without delay, be published
in the Citizen and the
Government Gazette.
7.
The sheriff shall ascertain whether the employees of the first
respondent
company are represented by a trade union and whether there
is a notice board on the premises to which the employees have access.
8.
A copy of the provisional liquidation order shall be served on -
8.1
Every registered trade union that as far as the Sheriff can
reasonably ascertain, represents any of the employees
of the first
respondent company.
8.2 The
employees of the first respondent company by affixing a copy of the
application and provisional liquidation
order on any notice board to
which the employees have access inside the first respondent company's
premises or if there is no access
to the premises by the employees,
by affixing a copy to the front gate or front door of the premises
from which the first respondent
company conducts any business.
8.3 The
South African Revenue Services.
9.
The applicant shall pay the first and second respondents’
wasted
costs occasioned by the set down of the matter on the roll of
29 September 2022 as well as the postponement thereof.
JUDGMENT
[1]
Standard Bank of SA Ltd is the applicant in two similar applications
in
terms whereof it seeks leave to commence and proceed with
applications against the companies in business rescue in terms of
subsec
133(1)(b) of the Companies Act 71 of 2008 (the 2008 Act), that
the business rescue proceedings of the companies be converted into
liquidation proceedings in terms of subsec 132(2)(a)(ii) and that the
companies be placed under provisional liquidation in the
hands of the
Master of this court, together with the further customary orders.
[2]
In application 3538/2022 Remitto (Pty) Ltd (Remitto) is the first
respondent.
In application 3540/2022 DNA Plant Science (Pty) Ltd (DNA
Plant Science) is the first respondent. In both matters Mr Barry
Claude
Urban, the business rescue practitioner, (the practitioner) is
cited as second respondent. The affected persons relating to the
two
companies are cited as third respondent in both applications.
[3]
The applicant successfully applied for leave to serve the notice of
motion
and founding affidavit together with annexures on the affected
persons collectively by way of substituted service. This was done.
Nothing turns on this and none of the affected persons filed notices
to oppose or any answering affidavits in these proceedings.
[4]
The two applications were set down for hearing on 29 September 2022
as
the first and second respondents in both matters failed to file
answering affidavits although notices of opposition were filed.
On
that day the applications were postponed by agreement to the opposed
roll of 24 November 2022, the wasted costs to be reserved
for later
adjudication. I shall return to the issue of wasted costs.
[5]
Mr Smit on behalf of the first and second respondents submitted that
the
outcome of the two applications should be the same as the
companies are inextricably bound. According to him the applications
should
be dismissed with costs. He drafted one set of heads of
arguments in respect of both applications. Although Mr Els, appearing
for
the applicant filed two sets of heads of argument, the one set is
to a large extent a mirror image of the other. The practitioner
filed
one answering affidavit on 28 September 2022 in respect of both
applications to which the applicant responded with one replying
affidavit on 13 October 2022. Thereafter, and a mere three days
before the hearing of the opposed application, the practitioner
filed
one supplementary affidavit on 21 November 2022 totally out of
sequence and without prior leave of the court. Mr Els did
not object
to the filing of this document and also indicated that in order to
prevent a postponement, his client will not insist
on an opportunity
to respond. The nature of the proceedings is the same in respect of
the two applications although some factual
differences are apparent.
I heard argument on the same day and consequently one judgment will
be delivered dealing with both matters.
Insofar as there are factual
differences, I shall herein later refer thereto.
[6]
In adjudicating these two
applications I shall keep in mind that the legislature earnestly
tried to avoid the problems experienced
with judicial management
provided for in the Companies Act 61 of 1973. I also accept that the
2008 Act must be interpreted and
applied in a manner that gives
effect to all those purposes set out in s 7, one being relevant in
this case, to wit to provide
for the efficient rescue and recovery of
financially distressed companies in a manner that balances the rights
and interests of
relevant stakeholders.
[1]
[7]
‘Business rescue’ is defined as follows in subsec 128(b):
‘
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)
the 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.’
‘
Financially
distressed’ is defined as follows in subsec 128(1)(f):
‘
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 reasonable likely that the company
will become insolvent within the immediately
ensuing six months.’
[8]
It is common cause that the two companies were indeed financially
distressed
at the time the resolutions were taken to be placed under
voluntary business rescue. Nothing has changed to arrive at a
different
conclusion.
[9]
Although the court is not
faced with applications to place the companies in business rescue, it
is instructive to remind ourselves
of what Brand JA stated several
years ago in
Oakdene
Square Properties (Pty) Ltd & Others v Farm Bothasfontein
(Kyalami) (Pty) Ltd & Others,(Oakdene)
[2]
dealing with an argument
that all the applicant for business rescue has to show is that a plan
to rescue the respondent is capable
of being developed and
implemented, regardless of whether or not it may fail:
‘
I
do not agree with this line of argument. As I see it, it is in direct
conflict with the express wording of s 128(1)
(h)
.
According to this section ‘rescuing the company’ indeed
requires the achievement of one of the goals in s 128(1)
(b)
.
Self-evidently the development of a plan cannot be a goal in itself.
It can only be the means to an end. That end, as I see it,
must be
either to restore the company to a solvent going concern, or at least
to facilitate a better deal for creditors and shareholders
than they
would secure from a liquidation process. ….. But the applicant
must establish grounds for the reasonable prospect
of achieving one
of the two goals in s 128(1)
(b)
.’
[10]
In
Oakdene
the court continued as
follows, emphasising that it is not the purpose of business rescue
proceedings to achieve a winding-up of
a company and thereby avoiding
the consequences of liquidation proceedings:
[3]
‘
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
sch 5 of the 2008 Act. I do not
believe, however, that this could
have been the intention of creating business rescue as an
institution…….
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, which is what the appellants apparently seek to
achieve.’
[11]
The idea with the introduction of business rescue proceedings is
surely to facilitate the
rehabilitation of a financially distressed
company within a relatively short space of time as it cannot be in
the interest of affected
persons to drag out the procedure over a
year or even several years. Section 132 stipulates as follows
concerning the duration
of business rescue proceedings:
‘
132.
Duration of business rescue proceedings.
(1)
……
(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.
(3) 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.’ (Emphasis added.)
[12]
The
court confirmed that business rescue proceedings should be dealt with
expeditiously in
Koen
and Another v Wedgewood Village Golf & Country Estate (Pty) Ltd
and Others
as
follows:
[4]
‘
[10]
It is axiomatic that business rescue proceedings, by their very
nature, must be conducted with the maximum possible expedition.
In most cases a failure to expeditiously implement rescue
measures when a company is in financial distress will lessen or
entirely negate the prospect of effective rescue. Legislative
recognition of this axiom is reflected in the tight time lines given
in terms of the Act for the implementation of business rescue
procedures if an order placing a company under supervision for
that purpose is granted. There is also the consideration that the
mere institution of business rescue proceedings — however
dubious might be their prospects of success in a given case —
materially affects the rights of third parties to enforce their
rights against the subject company.’
The
Supreme Court of Appeal accepted this dictum with approval in
Louis
Pasteur Holdings (Pty) Ltd and Others v Absa Bank Ltd and Others.
[5]
[13]
In
Van
Staden NO and Others v Pro-Wiz Group (Pty) Ltd
[6]
the Supreme Court of Appeal commented as follows:
‘
[22]
…. 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.’
[14]
The
Supreme Court of Appeal recently stated the following in
Diener
v Minister of Justice
:
[7]
‘
[28]
Business recue is not an open-ended process. Its very rationale is
that it must end, either when its aim has been attained
or when the
realisation arises that rescue is not attainable. To this end, s
132(3) provides that if business rescue proceedings
have not ended
within three months of commencement or a longer period sanctioned by
a court, the BRP must prepare a progress report
which he or she must
update monthly until the end of the business rescue proceedings, and
deliver the report and each update to
each affected person and to
either the court (if the proceedings were the subject of a court
order) or the Commission.’
[15]
As mentioned, one of the declared 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
relevant stakeholders.
If business rescue
proceedings are carried out correctly and the spirit and purpose of
the 2008 Act are given effect to, these proceedings
will not become
redundant as was the case with judicial management under the 1973
Companies Act. If a purposive approach to interpretation
of the Act
is undertaken as one should do, there can be little doubt that
companies, being vehicles to obtain economic and social
well-being,
should be rescued if at all possible, rather than ‘killed’
in a winding-up process. However all stakeholders
will have to
participate
bona fide
all
the time and within the prescripts of the law.
[16]
In
Commissioner,
South African Revenue Service v Beginsel NO and Others (Beginsel)
[8]
the Commissioner
challenged the validity of a decision taken at a meeting of creditors
to adopt a business plan and sought a conversion
of the business
rescue into winding-up proceedings. The court found that the
implementation of the business plan was far advanced,
there was
already planning for the sale of some of the respondent’s
operations and the business rescue plan was supported
by 87% of the
value of creditors present at the meeting of creditors whilst only
SARS took an opposite view. Consequently, the
court found that
nothing would be achieved if the business rescue proceedings would be
converted into liquidation, bearing in mind
the extra costs to be
incurred. The court was also satisfied that the continuation of the
business rescue proceedings would result
in a better return for the
company’s creditors as a whole than would result from the
reintroduction of the liquidation process.
However, the court
accepted without having to decide the issue that it has the power to
intervene where it is shown that a business
rescue practitioner has
committed a material mistake in concluding that the continued
implementation of the business rescue plan
would result in a better
return for the creditors of the company as envisaged in subsec
128(1)(b)(iii).
[9]
In refusing
the application the court stated that to convert the business rescue
proceedings to liquidation proceedings the claims
of creditors would
be delayed and the dividends would be reduced as a result of
increased costs.
[10]
[17]
The facts in
Beginsel
are clearly distinguishable. There has
been non-compliance with the 2008 Act as will be shown and the
business rescue proceedings
have not been completed as projected in
the business rescue plans. It cannot avail the two companies and the
practitioner to argue
that all these should be disregarded and
business rescue be allowed to proceed. In
Beginsel
the
implementation of the business rescue plan was far advanced, but
in
casu
it cannot be implemented as will be shown. Also, liquidation
will not cause any delay in the payment of claims, especially bearing
in mind the litigation that may take years to finalised as I shall
point out later.
[18]
The following facts are common cause although I
shall in some instances make certain comments:
a.
Business rescue plans were approved for both companies on 17 March
2021.
Remitto
b.
In
the case of Remitto the business rescue plan had in mind a structured
winding down of Remitto’s business.
[11]
The practitioner noted that in the absence of working capital a
structured winding down was the only option. He undertook to
liquidate
the assets within a period of six months from the effective
date which would include ‘trading out of all current
stockholding
and inventory to generate revenue; collection of
debtors; placing all the assets on auction…’ and
‘auction of
assets cannot be guaranteed to be completed within
6 months as the current economic restrictions may hamper the proses.’
It was also emphasised by the practitioner that secured creditors
would receive payment of 90 cents in the rand whilst they would
have
received only 65 cents in the rand in the case of a liquidation.
[12]
c.
Remitto’s
business rescue plan anticipated “agterskot” payments to
concurrent creditors which would provide them
with a dividend of 100
cents in the rand. The date of substantial implementation of the
business rescue plan was 28 December 2021.
[13]
By then the applicant would have been paid. Contrary to the
statements in the business rescue plan, the practitioner’s
statement
attached to the plan inter alia reads as follows: ‘we
believe that this business can be rescued and return to
profitability.’
[14]
d.
According
to the report of the practitioner dated 30 October 2021 all the motor
vehicles have been sold and the secured creditors
in respect of these
claims have been paid in full. By then the immovable properties,
being plots 47 and 48 Vrischgewaagd, had not
been auctioned off. The
practitioner stated that the sale of these two properties would
enable Remitto to settle the amounts owed
to the applicant as secured
creditor.
[15]
It was also
stated that a large and well-resourced investor had shown interest in
the company and that negotiations were ongoing.
This statement is
clearly wrong as it could only relate to DNA Plant Science and not
Remitto. Notwithstanding this report, noting
has been forthcoming
from the practitioner in this regard ever since. The practitioner
also reported that the claim against the
BASF was served on 27 August
2021 and that the legal process was ongoing.
e.
This
claim against BASF is for an amount in excess of R35 million based on
damages as a result of alleged defective products delivered
to
Remitto. In the first answering affidavit filed on
28
September 2022 the practitioner alleged that this claim would be
finalised in 2023. In the supplementary affidavit he stated
that the
matter would probably be in court during 2026. There is no indication
who will finance the litigation and whether there
is a reasonable
possibility of success. It is apparent that BASF will not lie down
easily. The case is defended and pleadings have
been closed. It can
be expected that the trial will run over several days, if not weeks,
bearing in mind that several expert witnesses
will probably have to
testify. Ironically, the practitioner also issued summons on behalf
of Remitto against attorney Coetzee in
the North West Division of the
High Court for alleged defamation. According to him, he intends to
consolidate this matter with
the BASF matter which was instituted in
the Gauteng High Court. He apparently does not realise the different
causes of action against
different defendants in different divisions
of the High Court. Consolidation will in all probabilities never be
granted.
[16]
f.
The applicant
informed the practitioner that it would be willing to assist with the
sale of the two immovable properties, but the
practitioner was not
prepared to accept that offer.
[17]
More than one attempt was made to sell the two immovable properties
on auction, but they were eventually put on auction on 16 November
2022 and long after the present proceedings were instituted. An offer
was received in respect of plot 47 for R870 000.00 and an
increased
offer in respect of plot 48 for R750 000.00. These offers are much
lower than the amounts for which the mortgage bonds
were registered,
the amounts of the applicant’s claim as well as the valuations
of the properties. There is no indication
whether the practitioner
accepted these offers, but it would be a real risk, bearing in mind
the institution of the present applications
and the possibility of
winding-up orders being granted eventually against the two companies
and Remitto in particular.
g.
Remitto’s
debt due to the applicant in the amount of R2 581 837.78 and its
security are not in contention.
[18]
The practitioner indicated in the business rescue plan that the
secured creditors would be paid an amount of R2 574 029.00 during
October 2021 and a further amount of R764 557.00 during January
2022.
[19]
The total amount of
the secured creditors is R3 338 586.00 which includes the applicant’s
claim. They would receive dividends
equal to 90 cents in the rand. No
payments have been received.
h.
The practitioner has not submitted any reports according to
the record pertaining to the sale of stock and how this was accounted
for by him.
DNA
Plant Science
i.
DNA Plant Science
admittedly owes the applicant R1 549 986.28.
[20]
The bank holds security for its claim, inter alia a guarantee by
Remitto, limited to the amount of R2.2 million as well as a cession
of book debts.
[21]
j.
In the case of DNA
Plant Science, the practitioner was more optimistic. According to him
the company could be traded out of distress
and returned to solvency.
According to his opinion product registrations owned by the company
made it an attractive investment
opportunity and the business rescue
plan forshadowed an approval of the plan whereupon R1.5 million would
be raised against equity
to be used for working capital.
[22]
By April 2022, that is more than a year after the business rescue
plan was approved, the practitioner was still trying to find
a
suitable investor.
[23]
k.
According to the three year projection of income forecasts the
practitioner expected a gross profit of R3.75 million by March 2022
and a nett profit for the period of R269 494.00. There is no
indication that this was achieved or that there is any realistic
prospect of a recovery of DNA Plant Science. If an investor was found
who was willing to invest R1.5 million or any other amount,
I would
have expected the practitioner to record this, but he failed to do.
l.
The practitioner
stated in his business rescue plan that the applicant’s claim
of R1 375 018.00 would be paid in full during
July 2021. Although
this amount is about R200 000.00 less than the claim of the applicant
admitted in the proceedings before me,
the practitioner indicated in
the business rescue plan that payment of this full amount would be
made during July 2021.
[24]
No
payment was received.
m.
In the business
rescue plan of DNA Plant Science reference is again made of the claim
instituted against BASF and the so-called
“agterskot” to
be paid. Although there is a cession of book debts in favour of the
applicant, no proper reporting has
been done as to the total amount
of book debts, what was collected and how it was accounted for. It is
just not good enough to
state, as the practitioner has done, to say
that there are no collectable debtors bearing in mind what he
submitted in the business
rescue plan. It appears from his
supplementary answering affidavit that further debtors were generated
post commencement of business
rescue in the amount of R3.9
million.
[25]
The
practitioner’s initial observation pertaining to the company’s
financial position was recorded in his business
plan.
[26]
He reported a lack of cash and an inability to purchase products to
sell, specifically because of Remitto’s financial problems.
Remitto was DNA Plant Science’s main distributor of products.
n.
The practitioner
attached to his supplementary affidavit an email of a person alleging
that DVA Chemicals objected to liquidation.
According to him this
entity is a major creditor with a claim valued at 41.9% of all the
claims. I have perused both the business
rescue plans and could not
find any evidence of a creditor identified as DVA Chemicals. It is
apparent from the Remitto application
that DVA Chemicals is actually
a debtor of Remitto, owing it R584 075.00.
[27]
This alleged creditor did not intervene in the application and did
not even file a confirmatory affidavit.
o.
The practitioner
failed to file monthly reports to affected persons. The last report
according to the documents in front of me was
circulated in April
2022. The practitioner did not deny the applicant’s version in
this regard.
[28]
No reports
have been forthcoming for the period May to November 2022, bearing in
mind that the belated supplementary affidavit
of the practitioner was
filed on 21 November 2022 only. I do not have to make a finding in
this regard, but if it is indeed the
case that no such reports were
forthcoming, the practitioner has failed to comply with s 132.
p.
This application was heard on 24 November 2022. By then a period of
20 months
has lapsed since approval of the business rescue plans in
March 2021. The payments promised to secured creditors in both
matters
have not been forthcoming, but over and above that, it is
apparent that the practitioner intends to carry on as such until
finalisation
of the two actions instituted against attorney Coetzee
and BASF. The last action will not be heard in the Gauteng High Court
before
2026 and even if that is the case, there is no indication as
to the reasonable prospects of success and whether the case will in
fact be finalised during that year. It is also important to note that
the practitioner failed to state who will be funding this
expensive
litigation.
q.
I
have referred to the business rescue reports of the practitioner
attached as Annexures “FA12.1 – FA 12.4” to
the
founding affidavit. It is apparent that inventory in excess of
R700 000.00 has been sold. In this regard the applicant
referred
in the replying affidavit to the fact that the practitioner has not
made any payments to it as the cessionary of book
debts, but has paid
the amounts collected into a different FNB account, apparently to the
disadvantage of the applicant.
[29]
[19]
It is apparent from the papers that the
practitioner has in mind the liquidation of the respondents, not in
terms of the provisions
of Chapter 14 of the 1973 Act, but in his own
time and in accordance with his own processes and procedures. He is
utilising an
informal kind of winding-up in the words of Brand JA in
Oakdene
which should not be tolerated.
[20]
It may be accepted that at the beginning of 2021 the companies have
established grounds
for the reasonable prospect of achieving one of
the two goals contemplated in subsec 128(1)(b)(iii), to wit the
primary goal which
is to facilitate their continued existence in a
state of solvency and if it is not possible to so continue in
existence, the secondary
goal, to obtain a better return for their
creditors and shareholders than would result from their immediate
liquidation. But, now
two years later the question to be answered is
whether these gaols are achievable. If not, the business rescue
proceedings should
be terminated and provisional winding-up orders
should be issued. Both business rescue plans should have been amended
for approval
by affected persons in light of the changed
circumstances and that no substantial implementation thereof is
possible. This did
not happen. Clearly, if the applicant was fully
appraised with the events as they turned out, it would never have
consented to
the business rescue plans.
[21]
Insofar as the applicant
relies on the companies’ inability to pay their debts and that
it is just and equitable to be wound
up, subsecs 344(f) and (h) of
the 1973 Act should be considered. Unpaid creditors who cannot obtain
payment and who bring their
claims within the parameters of subsec
344(f), read with s 345, are entitled to relief, subject to the
limited discretion of the
court.
[30]
[22]
In
Moosa
NO v Mavjee Bhawan (Pty) Ltd
[31]
the court held that the
just and equitable principle, ‘postulates not facts, but only a
broad conclusion of law, justice and
equity, …’ This
expression and ground for liquidation have been considered in
numerous judgments since then. Several
other examples, for example
the disappearance of a company’s substratum can be provided,
but in essence, if its business
has closed down and/or if there are
no prospects to become viable in future, the necessary conclusion
should be arrived at that
winding-up is just and equitable.
[23]
It has been said that
business rescue provides a shield that, absent the delivery of the
proverbial mortal blow by an unsympathetic
creditor, can be rescued.
However, I agree with the sentiment that the procedure was never
intended to provide a sword to be used
by the directors and/or
business rescue practitioners to keep the creditors at bay in all
circumstances.
[32]
[24]
In weighing up the advantages and disadvantages of business rescue
proceedings versus liquidation
proceedings I take cognisance of the
co-operation between business rescue practitioners and directors and
managers of companies
in business rescue on the one hand and
liquidators acting on the instructions of creditors on the other
hand. I do not point fingers
to the practitioner, but I am satisfied
that liquidators to be appointed in the case of a winding-up will be
able to utilise ss
417 and 418 of the 1973 Companies Act in order to
do interrogations. There are several related companies involved in
casu and there
are many aspects that need proper investigation, for
example the reason why book debts cannot be collected and the
transactions
between various related companies.
[25]
In conclusion I am satisfied that the applicant has made proper cases
for the relief claimed
in both applications. Remitto and DNA Plant
Science are hopelessly insolvent, if not actually insolvent, clearly
commercially insolvent.
They are not in a position to carry on with
any business activities and it is therefore also just and equitable
that they be wound-up.
[26]
The last issue to be considered is the wasted costs of 29 September
2022. I do not intend
to deal with all the allegations made in this
regard by the parties, save to say the following:
a.
On 29 August 2022 the first and second respondents duly gave notice
to oppose
the applications.
b.
Settlement negotiations were conducted, initiated by the practitioner
on 22 August
2022. Having received no reply, the practitioner sent an
email to the applicant’s attorney on 6 September 2022.
c.
The attorney for the applicant did not respond immediately, but
eventually made
a counter proposal, but the parties could not come to
an agreement.
d.
Pending these settlement negotiations, the first and second
respondents did not
file any answering affidavit.
e.
The applicant’s attorney sent an email on 21 September 202 with
his client’s
counter proposals for consideration. However, in
the same email the practitioner was informed that as no answering
affidavits had
been filed, the applications would be enrolled for 29
September 2022.
f.
The practitioner’s attorney responded on 27 September 2022
wherein
he explained the reasons why answering affidavits have not
been filed and requested that the matter be postponed to a later
date.
The applicant’s attorney responded the next day, refusing
to adhere to the request. As a result, the practitioner caused an
affidavit to be drafted and deposed to on the same day, to wit 28
September 2022.
g.
In my view, there were bona fide attempts to settle the dispute and
it is acceptable
for parties in such a case not to proceed with the
filing of pleadings or affidavits in the hope that a settlement can
be reached.
I am satisfied that the conduct of the applicant’s
attorney to set the matter down in the manner which he did, warrants
a
costs order against his client. He should have known better,
especially insofar as he was the one delaying settlement negotiations
and bearing in mind the complexity of the applications and the
serious consequences that may follow.
[27]
The following order is issued:
In
application 3538/2022
7.
Leave is granted to the applicant to commence and proceed with its
application
against the first respondent company in terms of
s
133(1)(b)
of the
Companies Act 71 of 2008
;
8.
The business rescue proceedings in respect of the first respondent
company are
converted into liquidation proceedings in terms of
s
132(2)(a)(ii)
Companies Act 71 of 2008
;
9.
The first respondent company is placed under provisional liquidation
in the hands
of the Master of this court.
10.
A provisional liquidation order is hereby issued calling upon all
interested parties to show cause,
if any, to the court on the
16
th
day of
MARCH 2023
at
09h30
why a final order of
liquidation should not be granted against the first respondent
company.
11.
Service of this rule
nisi
and a copy of the notice of motion
and annexures shall be effected on the first respondent company at
its registered office or
its principal place of business within the
court's jurisdiction.
12.
This order shall, without delay, be published in the Citizen and the
Government Gazette.
7.
The sheriff shall ascertain whether the employees of the first
respondent company are represented
by a trade union and whether there
is a notice board on the premises to which the employees have access.
8.
A copy of the provisional liquidation order shall be served on -
8.1
Every registered trade union that as far as the Sheriff can
reasonably ascertain, represents any of the employees of the first
respondent company.
8.2
The employees of the first respondent company by affixing a
copy of
the application and provisional liquidation order on any notice board
to which the employees have access inside the first
respondent
company's premises or if there is no access to the premises by the
employees, by affixing a copy to the front gate or
front door of the
premises from which the first respondent company conducts any
business.
8.3
The South African Revenue Services.
9.
The applicant shall pay the first and second respondents’
wasted costs occasioned by
the set down of the matter on the roll of
29 September 2022 as well as the postponement thereof.
AND
In
application 3540/2022
1.
Leave is granted to the applicant to commence and proceed with its
application
against the first respondent company in terms of
s
133(1)(b)
of the
Companies Act 71 of 2008
;
2.
The business rescue proceedings in respect of the first respondent
company are
converted into liquidation proceedings in terms of
s
132(2)(a)(ii)
Companies Act 71 of 2008
;
3.
The first respondent company is placed under provisional liquidation
in the hands
of the Master of this court.
4.
A provisional liquidation order is hereby issued calling upon all
interested
parties to show cause, if any, to the court on the
16
th
day of
MARCH 2023
at
09h30
why a final order of
liquidation should not be granted against the first respondent
company.
5.
Service of this rule
nisi
and a copy of the notice of motion
and annexures shall be effected on the first respondent company at
its registered office or
its principal place of business within the
court's jurisdiction.
6.
This order shall, without delay, be published in the Citizen and the
Government
Gazette.
7.
The sheriff shall ascertain whether the employees of the first
respondent company are represented
by a trade union and whether there
is a notice board on the premises to which the employees have access.
8.
A copy of the provisional liquidation order shall be served on -
8.1
Every registered trade union that as far as the Sheriff can
reasonably ascertain, represents
any of the employees of the first
respondent company.
8.2
The employees of the first respondent company by affixing a copy of
the application and
provisional liquidation order on any notice board
to which the employees have access inside the first respondent
company's premises
or if there is no access to the premises by the
employees, by affixing a copy to the front gate or front door of the
premises from
which the first respondent company conducts any
business.
8.3
The South African Revenue Services.
9.
The applicant shall pay the first and second respondents’
wasted costs occasioned by
the set down of the matter on the roll of
29 September 2022 as well as the postponement thereof.
J
P DAFFUE, J
On
behalf of the Applicant:
Adv J Els
janhertzogels@yahoo.com
Instructed
by:
Phatshoane Henney Inc
hannes@phinc.co.za
BLOEMFONTEIN
On
behalf of the 1
st
& 2
nd
Respondents:
Adv Jan G. Smit
jansmit@law.co.za
Instructed
by:
Christo Reeders Attorneys
hcr@crattorneys.co.za
JOHANNESBURG
c/o
Badenhorst Attorneys
pieter@badenhorst.law
BLOEMFONTEIN
[1]
Section 5
read with subsec 7(k) of the Act.
[2]
2013 (4) SA 539
(SCA) at para 31
[3]
Ibid
,
para 33
[4]
2012
(2) SA 378
(WCC) para 10.
[5]
2019 (3) SA 97
(SCA) para 25.
[6]
2019
(4) SA 532
(SCA) para 22.
[7]
2018
(2) SA 399
(SCA) para 28.
[8]
2013 (1) SA 307 (WCC)
[9]
Ibid
para 57.
[10]
Ibid
para 63.
[11]
Record pp 131 and 174 with reference to paras
1.1
and 3.1.1.
[12]
Record
p 178: para 7 of the business rescue plan.
[13]
Record
p 144 and the definition set out in the plan.
[14]
Record
p 220 para 5.7, appendix 7.
[15]
Record
p 237.
[16]
Record pp 320 and 321 p
aras
5 – 8.
[17]
Record
pp 43 – 45 para 36.
[18]
Record
p 32 read with the reply on p 321.
[19]
Record p 39: p
aras
33.12 and 33.13 and the business rescue plan record 177 and 178.
[20]
Record
p 24: para 19 read with p 321.
[21]
Record
p 24 and 25, annexures “FA8” and “FA10”.
[22]
Record
pp 128 and 167: paras 1.1 and 3.1.1 of the business rescue plan.
[23]
Page
32 para 25 read with annexures “FA12.1 - FA12.4”.
[24]
Record
p 170 read with record p 31 para 23.11.
[25]
Record
of Remitto application p 428.
[26]
Record
147 business rescue plan para 2.1.15.
[27]
Record
p 163:
[28]
Record p 32, para 25 read with annexure “FA12.1 – 12.4”
[29]
Record in Remitto application p 373, para 11.
[30]
Absa
Bank Ltd v Rhebokskloof (Pty) Ltd
1993
(4) SA 436
(C) at 440 - 441 and Meskin,
Henochberg
on the
Companies Act
vol
1 at 698 - 700.
[31]
1967 (3) SA 131
(T) at 136; see also
Sunny
South Canners (Pty) Ltd v Mbangxa
[2001]
1 All SA 474
(SCA) at 481, a case where the respondent company
suspended its business, has not been trading for three years and was
factually
hopelessly insolvent.
[32]
Commissioner,
South African Revenue Service v Louis Pasteur Investments (Pty) Ltd
(in provisional liquidation) And Others
2022
(5) SA 179
(GP) para 84.