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[2023] ZAFSHC 396
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Smith N.O. and Another v Pinnar Seed (Pty) Ltd and Another (4999/2022) [2023] ZAFSHC 396 (9 October 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable: YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
Application
no.: 4999/2022
In
the application between:
ELRICH
RUWAYNE SMITH N.O.
1
st
Applicant
ZIYAD
SONPRA N.O.
2
nd
Applicant
[In
their capacity as liquidators of Golden
Ribbon
Trading 86 (Pty) Ltd (in liquidation)
Master
reference number B62/2019]
and
PANNAR
SEED (PTY) LTD
1
st
Respondent
[Reg.
no.: 1986/002148/07]
THE
MASTER OF THE FREE STATE
HIGH
COURT, BLOEMFONTEIN
2
nd
Respondent
CORAM:
VAN ZYL, J
HEARD
ON:
11 MAY 2023
DELIVERED
ON:
9
OCTOBER 2023
[1]
The applicants, in their capacity as liquidators of Golden Ribbon
Trading 86 (Pty)
Ltd [in liquidation] are seeking the following
relief:
“
1.
That the payment in the amount of R571,730.93 made by Golden Ribbon …
to the first respondent on 5 August 2019,
alternatively
the
payment in the amount of R571,730.93 belonging to Golden Ribbon …
made by Silostrat (Pty) Ltd to the first respondent
on 5 August 2019
be confirmed to be void in terms of section 341(2) of the Companies
Act, 61 of 1973, and is set-aside;
2.
That the payment in the amount of R571,730.93 made by Golden Ribbon
…
to the first respondent on 6 August 2019,
alternatively
the
payment in the amount of R571 730.93 belonging to Golden Ribbon …
made by Silostrat (Pty) Ltd to the first respondent
on 6 August 2019
be confirmed to be void in terms of section 341(2) of the Companies
Act, 61 of 1973, and is set-aside;
3.
That the first respondent be ordered forthwith to make payment of
the
amount of R654,372.45 (R1,113,461.86 less repayment in the amount of
R489.972.41 on 19 August 2019) to the applicants;
4.
That the first respondent be ordered forthwith to make payment of
interest on the amount of R654,372.45 at the prescribed rate of
interest as from 19 August 2019 until date of payment, both days
inclusive;
5.
That the first respondent be ordered to pay the costs of this
application
on an attorney and client scale.”
[2]
The first respondent opposed the main application and also filed a
conditional counter-application.
For purposes of clarity, I
will throughout the judgment refer to the parties as cited in the
main application.
[3]
In terms of the conditional counter-application the first respondent
stated that should
it be found that the payments of 5 and 6 August
2019 to the first respondent are void, then and in that instance the
first respondent
is seeking the following relief:
1.
That the two payments of R571,730.93 each made to the first
respondent by Silostrat (Pty)
Ltd on 5 and 6 August 2019
respectively, be declared valid in terms of section 341(2) of the
Companies Act, 61 of 1973;
2.
That the first respondent is authorised to retain the balance amount
of R654,372.45;
3.
That the applicants pay the costs of the counter-application, should
they oppose same.
Background
and chronology:
[4]
The first and second applicants (“the applicants”) are
the duly appointed
co-liquidators of Golden Ribbon Trading 86 (Pty)
Ltd [in liquidation] (“Golden Ribbon”).
[5]
Golden Ribbon commenced business rescue proceedings on 10 August
2018.
[6]
Mr JF van Tonder was appointed as business rescue practitioner on 21
August 2018.
[7]
The business rescue practitioner published a business rescue plan on
30 October 2018
and on 13 November 2018 the business rescue plan was
adopted by the creditors of Golden Ribbon.
[8]
On 20 December 2018 Mr Willie Viljoen, the late director of Golden
Ribbon, signed
an order form, ostensibly on behalf of Golden Ribbon
[in business rescue] in terms whereof Golden Ribbon [in business
rescue] ordered
sunflower seed from the first respondent in the
amount of R558,600.00.
[9]
The first respondent sold and delivered the seed to Golden Ribbon [in
business rescue]
on credit so as to allow Golden Ribbon to cultivate
crops.
[10]
On 4 January 2019 Golden Ribbon [in business rescue] concluded a
cession
in securitatem debiti
in favour of the first
respondent to provide security for the payment of,
inter alia,
the aforesaid purchase price. The cession was concluded and signed on
behalf of Golden Ribbon [in business rescue] by Mr Willie
Viljoen.
[11]
After the crops were harvested, the harvest was sold by Golden Ribbon
[in business rescue] to
Silostrat (Pty) Ltd (“Silostrat”)
and on 5 June 2019 the first respondent’s attorney of first
instance gave written
notice to Silostrat of the cession
in
securitatem debiti
, advising Silostrat,
inter alia,
as
follows:
“
1.
… Kindly take note that all amounts due to Golden Ribbon
[in
business rescue] … have been ceded to our client.
2.
We understand that you are currently and will in future be indebted
to Golden Ribbon and we hereby perfect the said cession. You
therefore have to make payment of any and all amounts due by
yourselves to Golden Ribbon, to our client as the cessionary.
3.
The said payments have to be made into our trust account …”
[12]
On 17 July 2019 First National Bank (“FNB) lodged an
application for the liquidation of
Golden Ribbon.
[13]
Silostrat made two payments of R571,730.93 each to the first
respondent`s attorney of first instance
on 5 and 6 August 2019,
respectively.
[14]
It is common cause between the parties that the amount which was due
by Golden Ribbon to the
first respondent at the time was R654,372.45,
which the first respondent’s attorney of first instance paid
over to the first
respondent from the payment received from
Silostrat. The surplus balance of R489,972.41 was refunded to
Silostrat.
The first respondent therefore received a nett
payment of R654,372.45.
[15]
Golden Ribbon was subsequently provisionally liquidated on 10 October
2019 and finally liquidated
on 20 February 2020.
[16]
The main issues to be decided are, firstly, whether the payment of
the nett amount of R654,372.45
by Silostrat to the first respondent
is void in terms of the provisions of section 341(2) of the Companies
Act, 61 of 1973 (“the
1973-Act”), and, secondly, should
it be found that the said payment is indeed void, whether the payment
is to be validated
in terms of the proviso contained in section
341(2) of the 1973-Act.
The
validity of the cession:
[17]
The applicants dispute the validity of the cession,
inter alia,
on the basis that Mr Willie Viljoen signed the cession without having
been authorised thereto by the business rescue practitioner
and
further that FNB, who at the time also held security over the crops,
did not consent to the conclusion of the cession.
[18]
Mr van der Merwe, who appeared on behalf of the applicants, relied,
inter alia,
on the provisions of section 137 of the Companies
Act, 71 of 2008 (“the 2008-Act”) in terms whereof the
appointed business
rescue practitioner, during a company’s
business rescue proceedings, has full management control of the
company in substitution
for its board and pre-existing management.
Mr van der Merwe also specifically referred to the provisions of
section 137(2)
of the 2008-Act, which section determines that during
a company’s business rescue proceedings a director of a company
must
continue to exercise the functions of director, but subject to
the authority of the business rescue practitioner. Mr van der
Merwe consequently relied on section 137(4) of the 2008-Act which
determines as follows:
“
(4)
If, during a company’s business rescue proceedings, the board,
or one or more directors
of the company, purports to take any action
on behalf of the company that requires the approval of the
practitioner, that action
is void unless approved by the
practitioner.”
[19]
In the founding affidavit the applicants made the bold statement in
paragraph 29.5 thereof that
the business rescue practitioner
“
conceded in the insolvency enquiry held in the Hoopstad
Magistrate’s Court that he did not authorise Mr Viljoen to act
on
behalf of the company”.
[20]
In paragraph 42.6 of the answering affidavit the first respondent
stated as follows in response
to the aforesaid allegation:
“
42.6
It is denied that the BR practitioner at the enquiry conceded not
being authorised.
This transcript shall be made available if so
required. The session was in fact not even dealt with in the
enquiry, but rather
the control over the bank accounts. It is
apparent that the BR practitioner allowed the directors to continue
the farming
operation.”
[21]
The first respondent also referred to and relied on certain
correspondence attached to the answering
affidavit on the basis of
which it alleges that the business rescue practitioner had been aware
of the cession, that he authorised
the director, Mr Willie Viljoen,
to sign same and that FNB also consented to the conclusion of the
cession. The applicants, in
their replying affidavit, also attached
and referred to correspondence on the basis of which they deny the
alleged authorisation
by the business rescue practitioner and consent
by FNB.
[22]
In my view, the following relevant facts and circumstances are
evident from the papers:
1.
A copy of the order for the sunflower seed which Mr Willie Viljoen
placed at
the first respondent, was also e-mailed to the business
rescue practitioner on 20 December 2018, the very same day on which
Mr
Willie placed and signed the order. A copy of the e-mail is
attached to the first respondent`s answering affidavit as “AA4”.
The business rescue practitioner did not cancel or object to the
order; instead he addressed the e-mail of 22 December to FNB,
which
e-mail I deal with in the next paragraph.
2.
On 22 December 2018 the business rescue practitioner addressed an
e-mail to one
Ms Cawood, an employee/representative of FNB. The
subject line of the e-mail reads “Cession on harvest”.
The e-mail,
inter alia,
reads as follows:
“
I apologise for
the late message while you are most probably on leave. The
weather however determines work activities on a
grain farm.
The situation relating to
this message is that the initial plan to plant soybeans came to a
standstill due to the drought and late
rains. … an
alternative plan was made to proceed with sunflower … because
it is too late in the season for
planting soybeans.
Another supplier
(Panard)
(
sic)
is willing to provide sunflower seed on
a delayed payment basis at a low interest rate but require a cession
on the harvest. They
also ask for confirmation that FNB will not lay
claim to the sunflower harvest based on the covering bond registered
in favour
of FNB over the immovable property of Golden Ribbon. …
See waiver document attached.
(My emphasis)
I therefore ask for your
support to proceed with the new operational plan to plant sunflower
(if adequate rainfall is received)
on the farms owned and rented by
Golden Ribbon Trading; as well as your approval to waive your rights
only over the sunflower harvest
in favour of Panard (
sic
) who
provide the seeds.
The cost of the seeds is
R558 600.00 and only the amount planted will be invoiced. The
harvest will be delivered to grain
silos in the district and
depending on favourable rains are expected in April/May 2019.
The main benefit for all
creditors, of the new operational plan, is that it will become more
likely to find long-term finance if
the loan amount is reduced with
the nett proceeds from these farming operations (estimated at R2,9
million). This is also
still aligned with the Business Rescue
Plan which stated that the business operations must proceed to
provide income for dividend
payments and ongoing future operations.
Because the seeds are
required with the first good rainfall I urgently hope to receive your
feedback as soon as possible.”
3.
On 10 January 2019 Ms Cawood of FNB addressed an e-mail to the
business rescue
practitioner in which she stated as follows:
“
We are prepared to
sign the waiver as amended – see attached. If you accept
the amendment, kindly confirm and we will
sign and forward the waiver
to you.”
4.
The aforesaid amended waiver, annexure “AA8” to the
answering affidavit,
reads,
inter alia,
as follows:
“
The Bank hereby
irrevocably waives all its rights, title, interest, liens as well as
any other encumbrances, whatsoever, in and
to the Crop as cultivated
during the 2018/2019 season and financed by Pannar Seed. As
such Pannar shall be entitled to the
proceeds of the Crop.”
[23]
I agree with the contention of Mr Pretorius, who appeared on behalf
of the first respondent,
that it is evident from the aforesaid that
the business rescue practitioner was aware of the first respondent`s
requirement of
a cession of the proceeds and he supported same.
It is furthermore clear that FNB agreed that the first respondent
“
shall be entitled to the proceeds of the crops
”,
therefore consenting to such rights vesting in the first respondent
and waiving its own entitlement thereto.
[24]
In the business rescue practitioner’s Business Rescue Status
Report, dated 20 February
2019, which report is attached to the
founding affidavit as “FA9”, the business rescue
practitioner expressly confirmed
the cession in favour of the first
respondent:
“
5.
Furthermore, PANARD
(
sic
)
provided sunflower seed
with a cession on the harvest planted. The land owners approved
the cession and it was completed middle
February 2019.
” (My
emphasis)
[25]
In their replying affidavit the applicants dealt with communications
exchanged between the respective
roll players on which they rely in
support of the following contentions:
1.
That the director, Mr Willie Viljoen, did not have the authorisation
from the
business rescue practitioner to have signed the cession in
favour of the first respondent; and
2.
Although FNB was willing to waive its rights to the proceeds of the
harvest,
it was not willing to consent to a cession being given in
favour of the first respondent.
[26]
However, as correctly pointed out by Mr Pretorius, the confirmation
of the conclusion and existence
of the cession was expressly stated
by the business rescue practitioner in his aforesaid report of 20
February 2019.
[27]
In my view it is consequently to be accepted that the business rescue
practitioner authorised
Mr Willie Viljoen to have ordered and bought
the seed from the first respondent on behalf of Golden Ribbon and to
have concluded
the cession agreement; alternatively, the business
rescue practitioner ratified Mr Willie Viljoen’s aforesaid
actions, since
it is evident from his e-mail to Ms Cawood on 22
December 2018 that he was well aware of the transaction with the
first respondent
and in his report of 20 February 2019 he confirmed
the existence of the cession. At no stage did the business rescue
practitioner
repudiate any of the two agreements. See
Molefe v
Dihlabeng Local Municipality & Others
(1885/2003) [2003]
ZAFSJHC 12 (14 August 2033). See also
Bohica Business
Consulting CC v Bathusi Investments (Pty) Ltd
(6229/2013)
[2017] ZAGPPHC 1118 (8 December 2017).
[28]
With regard to FNB, one has to be mindful of the fact that what the
first respondent required,
was a waiver by FNB of its rights and
entitlement to the crop and the proceeds thereof. This is also what
was requested from FNB
by the business rescue practitioner in the
already mentioned e-mail of 22 December 2018 and which was agreed to
by FNB. It was
never required by any party that FNB should consent to
the conclusion of the cession as such. There is also no indication in
the
papers that FNB is averring the opposite. In fact, the
report of 20 February 2019 would have been furnished to all
creditors.
FNB did not subsequently thereto object to the said
cession.
[29]
I consequently conclude that the cession agreement between Golden
Ribbon and the first respondent
constituted a valid cession
in
securitatem debiti
agreement.
The
date of liquidation and the voidness of the payments:
[30]
Section 341(2) of the 1973-Act provides as follows:
“
341
Dispositions and share transfers after winding-up void
(1)
…
(2)
Every disposition of its property (including rights of action) by any
company being wound-up and unable to pay its debts made
after the
commencement of the winding-up, shall be void unless the Court
otherwise orders.”
[31]
Section 348 of the 1973-Act determines as follows:
“
348
Commencement of winding-up by Court
A
winding-up of a company by the Court shall be deemed to commence at
the time of the presentation to the Court of the application
for the
winding-up.”
[32]
Mr Pretorius, however, submitted that in terms of section 132(2)(a)
of the 2008-Act, business rescue
proceedings only end when the Court
sets aside the resolution or order which started the business rescue
proceedings.
[33]
The relevant part of section 132(2)(a) of the 2008-Act reads as
follows:
“
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.”
[34]
Mr Pretorius pointed out that the provisional liquidation order in
respect of Golden Ribbon,
dated 10 October 2019, attached to the
founding affidavit as “FA 5.2”, determined in addition to
the provisional sequestration
of Golden Ribbon, the following:
“
The Business
rescue proceedings and supervision of the respondent is terminated.”
[35]
Mr Pretorius consequently submitted that the only reasonable and
business-like interpretation
is that section 348 of the 1973-Act does
not find application where a company was in business rescue before it
was liquidated.
He therefore contended that the payments which were
made to the first respondent were done whilst Golden Ribbon was still
under
business rescue and are therefore not void as stipulated in
section 341(2) of the 1973-Act.
[36]
In response to the aforesaid arguments, Mr Van der Merwe relied,
inter alia,
on the judgment of
Pride
Milling Co (Pty) Ltd v Bekker NO and Another
2022 (2) SA 410
(SCA)
,
in which the Supreme Court of Appeal re-affirmed the purpose and
effect of section 341(2) of the 1973-Act at paras [30] - [31]
of the
judgment:
[30]
The provisions of s 341(2) could not be clearer. They, in unequivocal
terms, decree that every disposition of its property
by a company
being wound up is void. Thus, the default position ordained by this
section is that all such dispositions have no
force and effect in the
eyes of the law, ie the disposition is regarded as if it had never
occurred. The mischief that s 341(2)
seeks to obviate is plain
enough. It is to prevent a company being wound up from dissipating
its assets and thereby frustrating
the claims of its creditors.
[31]
As to the rider to s 341(2), its manifest purpose is to give a court
an unfettered discretion to decide whether or not to direct
otherwise
and thus depart from the default position decreed by the legislature.
As already discussed, this discretion is only exercisable
in relation
to payments made between the date of lodging of the application for
winding-up and the grant of a provisional order.
In exercising this
discretion, a court will, amongst other relevant factors, naturally
have regard to the underlying purpose of
the provision in the context
of winding up a company unable to pay its debts, the interests of the
creditors and those of
the beneficiary of the disposition.”
[37]
In addition Mr Van der Merwe relied on the judgment of
Mazars
Recovery & Restructuring (Pty) Ltd and Others v Montic Dairy
(Pty) Ltd (in Liquidation) and Others
2023 (1) SA 398
(SCA)
in which the aforesaid
Pride
Milling
-judgment was referred to
with approval. In addition, the Supreme Court of Appeal specifically
dealt with the question whether sections
341(2) and 348 of the
1973-Act are applicable in instances where business rescue
proceedings precede the provisional liquidation
of a company. In
that matter business rescue proceedings commenced in respect of the
first respondent on 2 November 2015.
The business rescue
practitioners who were in the employment of the appellant, were
appointed with effect from the said date. On
14 April 2016 a number
of the company's creditors commenced liquidation proceedings against
the company. On 16 May 2016 the business
rescue practitioners made
their own application to convert the business rescue proceedings into
liquidation proceedings. On 23
May 2016 and on 2 June 2016, two
payments were made to the appellant by the business rescue
practitioners in respect of their fees
during the business rescue. On
14 June 2016 the High Court ordered that the business rescue
proceedings be discontinued and the
company was placed in provisional
liquidation. The liquidators, who were the respondents in the appeal,
issued an application in
October 2018, in which they sought a
declaration that both payments were void in terms of s 341(2) of the
1973 Act and an order
that the moneys be repaid, together with
interest. The application succeeded. On appeal the Supreme Court of
Appeal,
inter alia,
made
the following findings:
“
[22]
In terms of item 9(1) of sch 5 to the Companies Act 71 of 2008 (the
2008 Act) certain provisions of the 1973 Act are preserved
and apply
to the winding-up of commercially insolvent companies. These
include s 341(2), which provides:
'Every
disposition of its property (including rights of action) by any
company being wound-up and unable to pay its debts made after
the
commencement of the winding-up, shall be void unless the court
otherwise orders.'
In
terms of s 348 of the 1973 Act:
'A
winding-up of a company by the court shall be deemed to commence at
the time of the presentation to the court of the application
for the
winding-up.'
[23]
It was not in dispute that: (i) in view of s 348 of the 1973 Act, the
deemed commencement date of the winding-up of the company
was 16 May
2016 (when the application to convert the business rescue into
liquidation proceedings was lodged by the BRPs); and,
(ii) the
payments made by the BRPs to Mazars were accordingly made after the
commencement of the winding-up of the company. It
thus came to be
accepted by the appellants that the provisions of ss 341(2) and 348,
if applied according to their terms, would
render the payments void.
That ought to be the end of the matter because, as this court
recently observed in
Pride Milling
, 'the provisions of s
341(2) could not be clearer'. The 'predominant purpose [of s
341(2)] is to decree that all dispositions
made by a company being
wound-up are void'. …
[24]
However, the appellants contend that 'the two payments do not
constitute dispositions by the company of its property' and that
the
interpretation of s 341(2) must be informed by the more recent
provisions in the 2008 Act relating to business rescue …
…
[28]
Section 341(2) dictates that every disposition made after the
commencement of the winding-up is void, unless the court orders
otherwise. Thus, unless a creditor avails him- or herself of the
remedy provided in the proviso in s 341(2) (which the appellants
chose not to do in this case), payments made after the commencement
of the winding-up are void. However, a BRP is not remediless:
First,
and most obviously, a BRP may approach a court in terms of the
proviso to s 341(2) to validate a payment. …
…
[30]
Accepting the argument advanced on behalf of the BRPs would not only
render nugatory the discretion conferred upon a court
by the proviso
in s 341(2), but also place all payments made by BRPs in the relevant
period beyond judicial scrutiny. That could
hardly have been the
intention of the legislature. On the other hand, the case of the
respondents is simple and relatively straightforward.
It accords with
the unambiguous provisions of the 1973 Act — that the payments
are void and must be repaid.
…
[31]
In view of the common-cause facts, as well as the clear wording and
object of s 341(2) of the 1973 Act, the High Court cannot
be faulted
for having declared the payments void in terms of that section and
ordering Mazars and the BRPs to make repayment. There
is accordingly
no merit in the appeal.”
[38]
I consequently find that sections 341(2) and 348 of the 1973-Act are
mutatis mutandis applicable
in instances where business rescue
proceedings precede the provisional liquidation of a company. They
are consequently also applicable
in casu.
The
so-called “perfection” of the cession:
[39]
Mr Pretorius contended on behalf of the first respondent that the
first respondent perfected
the cession on 5 June 2019 by means of the
e-mail which the first respondent`s attorney of first instance
addressed to Silostrat,
informing Silostrat of the cession. I have
already referred to the relevant contents of the said e-mail earlier
in the judgment.
Mr Pretorius submitted that because the cession
in
securitatem debiti
was perfected before the deemed date of
sequestration (17 July 2019), the rights in terms of the cession and
the entitlement to
the proceeds of the crops, thereafter vested in
the first respondent as the cessionary and no longer in the cedent,
Golden Ribbon.
The payments were consequently, according to his
submission, correctly and lawfully made and did not fall within the
ambit of section
341(2) of the 1973-Act.
[40]
I cannot agree with the aforesaid submission. The case law which Mr
Pretorius referred to does
also not support his contention. In
BP
Southern Africa (Pty) Ltd v Intertrans Oils SA (Pty) Ltd and Others
2017 (4) SA 592
(GJ), to which
he referred, it was specifically stated at para [46] of the
judgment that “
even the
reversionary right was ceded to the creditor in this agreement
”.
That cession was therefore similar to an out-and-out session, which
is not the case in the present matter. Mr Pretorius
also relied on
the judgment of
Grobler v
Oosthuizen
2009 (5) SA 500
(SCA)
and submitted that “
it is now
trite that such cession is likened to a pledge, vesting in the
cessionary and not in the cedent”.
However,
that is not how I understand the said judgment. Brand, JA, in my
view, held that under the pledge theory, which had been
accepted as
applying in South African law, the effect of a cession
in
securitatem debiti
is that
the principal debt is 'pledged' to the cessionary, while the
cedent retains the 'bare
dominium
'
or a 'reversionary interest' in the claim against the principal
debtor.
[41]
At the commencement of the hearing of the present application, I
indicated to the parties that
I have previously written a judgment in
which I specifically dealt with the effect of a cession
in
securitatem debiti
and also with the legal position, as I
understood it at the time, in instances where such security was
“perfected” by
the cessionary before the deemed date of
liquidation of the cedent, but where the proceeds were only paid to
the cessionary after
the deemed date of liquidation. I consequently
stood the hearing of the present application down in order to grant
counsel an opportunity
to peruse the said judgment, where after we
continued with the hearing and they were granted the opportunity to
address me on the
said judgment.
[42]
The aforesaid judgment is reported as
Nedbank
Ltd v Cooper NO and Others
2013
(4) SA 353 (FB)
, which matter served before me as a stated case.
I am not going to repeat the detailed facts in that matter, other
than to state
that to my mind they were basically on all fours with
the facts
in
casu,
although
part of the dispute was the liquidators’ entitlement to certain
fees
.
In short, in that matter a company to which I shall only refer as
“Marlim” was liquidated and the first and second
respondents were the finally appointed joint liquidators in the
liquidated estate of Marlim. Prior to its liquidation Marlim
concluded
certain deeds of pledge and cession pertaining to,
inter
alia,
specific
Momentum policies which it ceded, assigned and made over to Nedbank
in
securitatem debiti.
On
30 January 2009 Nedbank called up Marlim’s banking facilities
and surrendered the policies and requested payment of the
proceeds
thereof from Momentum. This occurred a couple of days before the
deemed date of liquidation, which was 4 February 2009.
Pursuant to
Nedbank`s surrendering of the policies and prior to the provisional
liquidation of Marlim on 26 February 2009, Nedbank
received payment
of certain amounts of money from Momentum. Nedbank subsequently
received two further payments of money from Momentum
subsequent to
the provisional liquidation of Marlim. I dealt with the applicable
legal principles at paragraphs [20] – [30]
of that judgment. My
conclusions in that judgment which are, in my view, directly relevant
to this matter, were the following,
at paras [27] and [28] of the
judgment:
“
[27] …It is
evident that by means of a cession
in
securitatem debiti
a
personal right is pledged, that the pledgor retains the dominium of
the right, that he transfers only the power to realise
the right to
the pledge, and accordingly the right falls into his estate upon his
insolvency. See Susan Scott,
The
Law of Cession,
paras
12.2.1.5.1 at 240 – 1. Therefore, when book debts are ceded
in
securitatem debiti
,
the effect thereof is as was held in
Bank
of Lisbon and South Africa Ltd v The Master and Others
1987
(1) SA 276 (A)
at 294C – D:
'When book debts are
ceded
in securitatem debiti
, as in the cession
to Nedbank, the cedent cedes to the cessionary the exclusive
right to claim and receive from the existing
and future ''book
debtors'' the amounts owing by them. The amount so collected by the
cessionary are credited to the account of
the cedent. Any amount
collected in excess of the cedent's debt belongs to the latter. Thus
it cannot be said that by such a cession
that it was intended to pass
ownership.'
Therefore, even if it
were accepted that in the current instance the surrendering of the
policies terminated them as such, it is
irrelevant. What was
effectively ceded in this instance was Marlim's right to claim and
receive the surrender value of the policies.
Therefore, even if
the policies were terminated because of the surrendering
thereof, Marlim still held the dominium in the
said right, being,
inter alia, the 'entitlement' to the money. That is why, when the
money was to be received by the applicant
— had it not been for
the liquidation of Marlim — it still was to be credited to the
account of Marlim to reduce Marlim's
liability towards the applicant.
Should there have been any excess, Marlim would have been
entitled to claim it back from
the applicant.
[28] Therefore, where the
proceeds had not yet been received by the applicant by the deemed
date of liquidation, Marlim was still
to be considered to have held
the ownership of those proceeds, and accordingly it vested in
Marlim's estate upon its liquidation.
Even if it were accepted
that the surrendering of the policies terminated them, up and until
the proceeds of the policies
were in fact paid out, the dominium of
the right to receive payment of the surrender values of the policies
remained vested in
Marlim and formed an asset in the estate of
Marlim. …”
[43]
Despite proper research I could not find any judgment which
criticizes or overturned the aforesaid
principles or findings. In
addition, from the case law I studied for purposes of the present
judgment, it appears to me that my
findings are still in accordance
with other more recent judgments.
Conclusion
in respect of the main application:
[44]
I therefore conclude that Golden Ribbon retained its reversionary
interest in the cession agreement
and consequently its claim against
Silsostrat in terms of the cession
in securitatem debiti.
The
said claim and hence the proceeds paid by Silostrat to the first
respondent consequently vested in the liquidated estate of
Golden
Ribbon and therefore in the hands of the applicants as the appointed
liquidators.
[45]
The payments by Silostrat to Golden Ribbon consequently fall within
the ambit of the first part
of section 341(2) of the 1973-Act and are
consequently void, unless the Court, as determined in the proviso
contained in section
341(2), orders otherwise.
The
conditional counter-claim:
[46]
Due to my conclusion in the preceding paragraph, the first
respondent`s conditional counter-claim
becomes relevant and needs to
be adjudicated.
[47]
I have already cited the
Pride Milling
-judgment above
where the Supreme Court of Appeal specifically found at para [31]
that “
as to
the rider to s
341(2), its manifest purpose is to give a court an
unfettered
discretion
to decide whether
or not to direct otherwise and thus depart from the default position
decreed by the legislature
”
and “
in exercising this
discretion, a court will, amongst other relevant factors, naturally
have regard to the underlying purpose of
the provision in the context
of winding up a company unable to pay its debts, the interests of the
creditors and those of
the beneficiary of the disposition”
.
(My emphasis)
[48]
In
Lane N.O. v Olivier Transport
1997 (1) SA 383
(C) at 386 C – 387
B the Court set out some guidelines for the exercise of the said
discretion:
“
(a)
The
discretion should be controlled only by the general principles which
apply to every kind of judicial discretion. …
(b)
Each
case must be dealt with on its own facts and particular
circumstances.
(c)
Special
regard must be had to the question of good faith and the honest
intention of the persons concerned.
(d)
The
Court must be free to act according to what it considers would be
just and fair in each case. …
(e)
The
Court, in assessing the matter, must attempt to strike some balance
between what is fair
vis-à-vis
the
applicant as well as what is fair
vis-à-vis
the
creditors of the company in liquidation.
(f)
The
Court should gauge whether the disposition was made in the ordinary
course of the company's affairs or whether the disposition
was an
improper alienation. …
(g)
The
Court should investigate whether the disposition was made to
keep the company afloat or augment its assets. …
(h)
The
Court should investigate whether the disposition was made to secure
an advantage to a particular creditor in the winding-up
which
otherwise he would not have enjoyed or with the intention of
giving a particular creditor a preference and which latter
factor may
be decisive. …
(i) The
Court should enquire whether the recipient of the disposition was
unaware of the filing of the application
for winding-up or of the
fact that the company was in financial difficulties.
(j)
Little
weight should be attached to the hardship which will be suffered by
the applicant if the payment is not validated, the purpose
of the
subsection being to minimise hardship to the body of creditors
generally. …
(k)
The
payment should not be looked upon as an isolated transaction if
in fact it formed part of a series of transactions….
(l)
Generally
a Court will refuse to validate a disposition by a company when it
occurs after the winding-up has commenced unless the
liquidator (duly
authorised) consents accordingly and there is a benefit to the
company or its creditors. …”
[49]
In
casu
Golden Ribbon and the first respondent dealt at arm`s
length when Golden Ribbon ordered the sunflower seed from the first
respondent.
Golden Ribbon was not an existing client of the first
respondent. The business rescue practitioner was aware of and
authorised;
alternatively ratified the ordering of the seed and the
conclusion of the cession
in securitatem debiti.
FNB conceded
to the waiver of its rights pertaining to the crop as was requested
by the first respondent. The first respondent therefore
supplied the
seed under the
bona fide
and reasonable impression and belief
that payment will in fact materialize as e secured by the cession.
[50]
I have earlier referred to the e-mail which the business rescue
practitioner addressed to
Ms Cawood, an
employee/representative of FNB, dated 22 December 2018, annexure
“AA6” to the replying affidavit. For
ease of relevance I
repeat certain relevant parts thereof:
“…
The
situation relating to this message is that
the initial plan to
plant soybeans came to a standstill due to the drought and late
rains
. With only a fraction of the soybean harvest planted (35%)
an alternative plan was made to proceed with sunflower
. The
rest of the soybean seed (65%) will be handed back, because
it is
too late in the season for planting soybeans
.
Another supplier
(Panard) (
sic)
is willing to provide sunflower
seed
on a delayed payment basis at a low interest rate but
require a cession on the harvest. …
I therefore ask for your
support to proceed with
the new operational plan to plant
sunflower
(if adequate rainfall is received) on the farms owned
and rented by Golden Ribbon Trading…
The main benefit for
all creditors, of the new operational plan
, is that it will
become more likely to find long-term finance if the loan amount is
reduced with the nett proceeds from these farming
operations
(estimated at R2,9 million). This is also still aligned with the
Business Rescue Plan which stated that the business
operations must
proceed to provide income for dividend payments and ongoing future
operations. (My emphasis)
Because the seeds are
required with the first good rainfall
I urgently hope to receive
your feedback as soon as possible.” (My emphasis)
[51]
From the aforesaid it is evident that the first respondent`s
willingness to have sold the sunflower
seed to Golden Ribbon was an
essential life line to Golden Ribbon and all its creditors at the
time, without which its creditors
would have suffered even bigger
losses.
[52]
The seed so supplied by the first respondent enabled Golden Ribbon to
generate substantial proceeds which
were to the benefit of all the
creditors of Golden Ribbon. In fact, the initial estimate of the
proceeds from the maize and sunflower
crops, was an amount of
R6 951 300 as stated in the Business Rescue Status Report
dated 19 April 2019, whilst it eventually
yielded an actual income of
R7 554 134. More importantly, R6 026 516 of the
last-mentioned total emanated from
the sunflower crops.
[53]
The transaction therefore benefitted the general body of creditors,
since it generated surplus
funds for distribution. All the secured
creditors of Golden Ribbon had also been paid in full.
[54]
Silostrat was not a party to the agreement pertaining to the ordering
of the seed nor was it
a party to the cession. In fact, the cession
provided for the sale of the crop by Golden Ribbon to
either
Silostrat or Senwes Limited. In fact, on the papers Silostrat only
became aware of the cession when informed thereof by the first
respondent`s attorney of first instance by means of the letter dated
5 June 2019, which was prior to the date of the issuing of
the
liquidation application. Silostrat subsequently made the payments to
the first respondent in accordance with the terms of the
cession, as
advised by the first respondent`s attorney of first instance. There
is no indication on the papers that there was anything
untoward or
mala fide
about the fact that Silostrat made the payments to
the first respondent.
Conclusion
in respect of the counter-application:
[55]
In the totality of the aforesaid facts and circumstances I consider
it just and fair that the
disposition in favour of the first
respondent be declared not to be void and that I exercise my judicial
discretion accordingly.
Costs:
[56]
Mr Van der Merwe submitted that even should the main application be
unsuccessful and the counter-application
be successful, the first
respondent should be ordered to pay the costs of both the
applications. In support of this submission
Mr Van der Merwe relied
upon the correspondence between the respective attorneys of first
instance during which the applicant`s
attorney of first instance
eventually stated in a letter, dated 12 August 2022, that the first
respondent should bring the necessary
validation application within
fifteen days, failing which the applicants “
shall proceed to
institute legal proceedings against Pannar…for repayment of
the amounts received by them after 17 July 2019”.
Mr Van
der Merwe submitted that it was the first respondent`s failure to
have launched such a validation application that necessitated
the
applicants to have launched the main application, since they were
statutorily obligated to do so.
[57]
Mr Pretorius submitted that even if the first respondent had
approached court for an order of
validation in terms to the proviso
in terms of section 341(2) of the 1973-Act, the result in respect of
the nature and extent of
the papers that would have been filed in
those circumstances would have been the same as presently. The
applicants would have opposed
the first respondent`s application and
would also have launched a counter-application to have the
disposition be declared void.
[58]
I have to agree with the submission of Mr Pretorius. There would have
been no difference in the
nature and extent of the papers and also
not in the essence of the outcome. In the circumstances I can find no
reason why the applicants
should not be ordered to pay the costs of
both the application and the counter-application from the liquidated
estate of Golden
Ribbon.
Order:
[59]
The following order is made:
1.
The main application is dismissed, with costs.
2
The counter-application is granted, with costs, in the following
terms:
2.1
The payment of R571 730.93 made to Pannar Seed (Pty) Ltd by
Silostrat (Pty) Ltd on 5 August 2019 is declared
to be valid in terms
of the proviso contained in section 341(2) of the Companies Act, 61
of 1973.
2.2
The payment of R571 730.93 made to Pannar Seed (Pty) Ltd by
Silostrat (Pty) Ltd on 6 August 2019 is declared
to be valid in terms
of the proviso contained in section 341(2) of the Companies Act, 61
of 1973.
2.3
It is declared that Pannar Seed (Pty) Ltd is authorised and entitled
to retain the nett payment of R654 372.45
received from
Silostrat (Pty) Ltd.
3.
The aforesaid costs of the main application and the counter-
application are to be paid by the applicants
from the estate of
Golden Ribbon Trading 86 (Pty) Ltd [in liquidation].
C.
VAN ZYL, J
On
behalf of the applicants:
Adv.
R. van der Merwe
Instructed
by
:
Badenhorst
Attorneys
Bloemfontein
(pieter@badenhorst.law)
On
behalf of the first respondent:
Adv.
J.J Pretorius
Instructed
by:
Muller
Gonsior Attorneys
Bloemfontein
(johanette@mullergonsior.co.za)