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[2023] ZAFSHC 417
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Smith N.O. and Another v Malan N.O. and Another (4222/2022) [2023] ZAFSHC 417; 2024 (4) SA 624 (FB) (26 October 2023)
FLYNOTES:
COMPANY – Winding up – Disposition –
Liquidators
seeking to set aside payment made to executor of deceased estate
by business rescue practitioner – Lease
of farm concluded
between deceased and practitioner in order to plant crops –
Deceased’s farm utilised to generate
profit for company –
Balance should be struck between rights of creditors and that of
executor – Fairness, good
faith and an honest intention
should be of paramount importance – An inequitable result
should be prevented –
Declared that the payment was validly
made – Companies Act 61 of 1973, s 341(2).
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:
YES
Of
Interest to other Judges: YES
Circulate
to Magistrates: NO
Case
no
4222/2022
In
the matter between:
ELRICH
RUWAYNE SMITH N.O.
1
st
Applicant
ZIYAD
SONPRA N.O.
2
nd
Applicant
(In
their respective capacities as liquidators of
GOLDEN
RIBBON TRADING 86 (PTY) LTD
number:
B62/2019)
and
JACOBUS
FRANCOIS MALAN N.O.
1
st
Respondent
(In
his capacity as executor of the estate late
Jacobus
Francois Malan)
THE
MASTER OF THE FREE STATE HIGH COURT,
BLOEMFONTEIN
2
nd
Respondent
CORAM:
JP DAFFUE J
HEARD
ON:
27 JULY 2023
DELIVERED
ON:
26 OCTOBER 2023
ORDER
1.
The applicants’ application, being the main application, is
dismissed.
2.
It is declared, in accordance with the provisions of section 341(2)
of the Companies Act 61 of 1973,
that the payment of R220 998.23
made by the business rescue practitioner on 26 July 2019 from the
bank account of Golden Ribbon
Trading 86 (Pty) Ltd to Jac N Coetzer
Inc for the benefit of Jacobus Francois Malan was validly made.
3.
The applicants are ordered to pay the first respondent’s costs
of the opposed motion proceedings.
JUDGMENT
Introduction
[1]
Two main issues require adjudication in this opposed
application.
First, whether payment made to a creditor by a business rescue
practitioner of a company in business rescue after
a liquidation
application of that company had been lodged with the registrar of the
court, shall be held to be void as provided
for in s 341(2) of the
Companies Act 61 of 1973 (the 1973 Companies Act). Second, and
insofar as s 341(2) is applicable, whether
the court should in
exercising its discretion order otherwise. The creditor passed away
in the meantime. The liquidators of the
company in liquidation
instituted application procedure against the executor of the deceased
estate, seeking payment of the amount
received by the creditor. After
several legal skirmishes between the parties, this court eventually
heard submissions on the merits
of the disputes between them. The
executor raised several defences and also claimed, in what may be
referred to as a counter-application,
that the aforesaid payment
shall be validated in accordance with s 341(2).
The
parties
[2]
Messrs ER Smith and Z Sonpra, the liquidators of Golden
Ribbon
Trading 86 (Pty) Ltd (in liquidation) (Golden Ribbon), are the
applicants in this application. Adv R van der Merwe appeared
for the
liquidators on instructions of Badenhorst Attorneys.
[3]
Mr Jacobus Francois Malan
in his capacity as executor of the estate of his father, the late
Jacobus Francois Malan (the deceased),
is cited as the first
respondent and the Master of the High Court as the second respondent.
The executor was represented by Adv
AJR van Rhyn SC, instructed by
Jac N Coetzer Attorneys. No relief was sought against the Master who
did not participate in the
proceedings, save to belatedly file a
report on 26 April 2023.
[1]
[4]
In order to avoid confusion, I shall herein after refer
to the
applicants as the liquidators and to the first respondent as the
executor.
Sections
348 and 341(2) of the 1973 Companies Act
[5]
It is appropriate to set
out the following pieces of legislation for a better understanding of
what is to follow. The 1973 Companies
Act was repealed by the 2008
Companies Act, but chapter XIV of the previous Act continues to apply
to the winding-up and liquidation
of insolvent companies.
[2]
Sections 341 and 348 of the 1973 Companies Act fall within chapter
XIV and are therefore applicable
in
casu
.
Section 348 contains a deeming provision pertaining to commencement
of winding-up by a court and reads as follows:
‘
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.’
The reference to
‘presentation to the Court’ is to the lodging of the
application with the registrar of the court. The
date of commencement
of the winding-up of a company is of considerable importance and
affects many matters and particularly also
the provisions of s
341.
[3]
Section 341(2) reads as
follows:
‘
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.’
The
relief sought and the defences raised
[6]
The liquidators sought the following relief in the notice
of motion:
‘
1.
The payments in the total amount of
R220 998.23
made by GOLDEN
RIBBON TRADING 86 [IN LIQUIDATION] to the First Respondent in his
capacity as the duly appointed Executor of Estate
Late Jacobus
Francois Malan, during the period 26 July 2019 to 4 September 2019
are confirmed to be void in terms of section 341
(2) of the Companies
Act, 61 of 1973 and are set-aside;
2.
The First Respondent in his capacity as the
duly appointed Executor
of Estate Late Jacobus Francois Malan be ordered forthwith to make
payment of the amount of
R220 998.23
to the Applicants.
3.
That the First Respondent in his capacity
as the duly appointed
Executor of Estate Late Jacobus Francois Malan, be ordered forthwith
to make payment of interest on the amount
of
R220 998.23
at the prescribed rate of interest as from
26 July 2019
until
date of payment, both days inclusive.
4.
That the First Respondent in his capacity
as the duly appointed
Executor of Estate Late Jacobus Francois Malan be ordered to pay the
cost of this Application.’
The liquidators should
have been aware that only one payment was made – not more than
one as paragraph 1 reads - and that
the business rescue practitioner
made the payment by transferring the amount, together with other
amounts payable to other creditors
of Golden Ribbon, they being
clients of Jac N Coetzer Inc, electronically into the firm’s
trust account on 26 July 2019.
[7]
The executor opposed the application on several grounds.
He did not
file a formal counter-application, but it is apparent from the
application papers that he sought an order validating
the aforesaid
payment in accordance with the provisions of s 341(2). It will be
shown that the parties accepted that a counter-application
had in
fact been launched. More about this later.
[8]
The executor relied on the following four points
in limine
in
opposing the liquidators’ application:
a.
the deceased’s estate had been
finalised and distributed
to the heirs and legatees in circumstances where the applicants had
failed to prove a claim against the
deceased’s estate;
therefore, the claim should have been instituted against the
beneficiaries of the estate in terms of the
condictio indebiti
;
b.
the business rescue proceedings came to an
end on 10 October 2019
when the company was provisionally wound-up as provided for in s
132(2)(a)(i) of the 2008 Companies Act,
and in the same breath, the
claim had become prescribed as the application was served more than
three years since payment to the
deceased on 26 July 2019;
c.
non-joinder of the business rescue practitioner;
and
d.
disputes of fact, rendering motion procedure
inappropriate.
History
of the litigation
[9]
On 10 August 2018 a notice of commencement of business
rescue
proceedings was filed with the CIPC on behalf of Golden Ribbon
whereupon Mr JF van Tonder was appointed as business rescue
practitioner on 21 August 2018. On 13 November 2018 Mr Van Tonder’s
business rescue plan was adopted by creditors.
[10]
An application for the liquidation of Golden Ribbon was issued on 17
July 2019.
A provisional liquidation order was granted on 10 October
2019 and a final order on 20 February 2020.
[11]
On 26 July 2019, ie after the application was issued, the business
rescue practitioner
paid an amount of R220 998.23 from Golden
Ribbon’s bank account held with Absa Bank into the account of
Jac N Coetzer Inc,
the firm acting for the deceased at the time.
[12]
The liquidators’
application was issued on 2 September 2022. The executor filed a
notice to oppose the application on 23 September
2022. No notice of a
counter-application was given at any stage, save for what is stated
hereunder. On 25 October 2022 the executor
filed his answering
affidavit, relying on the four points
in
limine
referred
to above. He attached a confirmatory affidavit by the attorney, Mr JN
Coetzer, who provided some background as to why the
aforesaid payment
had been made. This version will be dealt with later herein, but it
is apposite to quote what Mr Coetzer stated
in paragraph 3.9:
[4]
‘
It is hereby
requested that the Honourable Court exercise its discretion to
sanction such payments, if necessary’.
Mr Coetzer emphasised in
paragraph 3.10 that the payment was done ‘in the ordinary cause
of business out of necessity and
did not prefer one creditor above
another as an undue preference.’
[13]
The liquidators responded
to the executor’s answering affidavit under the heading:
‘APPLICANTS’ REPLYING AND ANSWERING
AFFIDAVIT IN RESPECT
OF FIRST RESPONDENT’S COUNTER-APPLICATION’.
[5]
Contrary to the liquidators’ founding affidavit, consisting of
nine pages only, this affidavit consists of 25 pages. Also,
nine
annexures were attached thereto, including a business rescue plan, as
well as an amended plan. These documents were filed
on 15 December
2022.
[14]
The application was set down for hearing on 2 March 2023 on which
date Reinders
J made the following order:
‘
1.
The application with case number 4222/2022 launched by the first and
second applicant
against the first and second respondent is postponed
to
13
APRIL 2023
;
2.
The first respondent shall file his replying affidavit in respect of
his
counterapplication
on or before 24 March 2023;
3.
The heads of argument shall be filed in terms of the Practice
Directives of this
Court;
4.
The first respondent shall pay the wasted costs occasioned by the
postponement.’
(my emphasis)
Although not clearly
indicated in the order, I have been informed during argument that
this order was made by agreement between
the parties. Therefore,
there can be no doubt that the liquidators accepted that a
counter-application had been launched by the
executor. Herein later I
shall say more about this purported counter-application. On 31 March
2023 the executor filed a document
under the following heading:
‘REPLYING AFFIDAVIT AND COUNTER-APPLICATION’.
[6]
On the basis that the parties were
ad
idem
that
a counter-application existed, this document could only be the
executor’s replying affidavit in the counter-application
proceedings.
[15]
The matter was heard on 13 April 2023 by Ramdeyal AJ. Mr Van
Rhyn sought
a separation of issues in accordance with the provisions
of rule 33(4) of the Uniform Rules of Court, submitting that only the
points
in limine
should be argued. This application was,
correctly so, dismissed on 28 April 2023. It is not necessary to deal
with this issue any
further.
[16]
On 26 April 2023 the
Master of the High Court filed a report
[7]
which I shall discuss later herein. On 25 May 2023 Mahlangu AJ
postponed the application to 27 July 2023 and ordered the executor
to
file an affidavit in response to the Master’s report on/or
before 8 June 2023. The executor complied.
[8]
The matter was eventually allocated to me for adjudication on 27 July
2023.
Undisputed
facts
[17]
Over and above the
litigation history set out under the previous heading, it is apposite
to mention a number of undisputed facts.
The liquidators did not
mention a word in their founding affidavit of the business rescue
proceedings and the fact that the relevant
payment was made by the
business rescue practitioner. As an afterthought they attached
correspondence exchanged during April and
May 2019 between the
attorneys acting for the business rescue practitioner and certain
farmers (including the deceased prior to
his death). This was prior
to the presentation of the liquidation application.
[9]
[18]
The deceased and business
rescue practitioner entered into a written agreement of lease in
terms whereof the deceased leased his
farm Weltevreden to Golden
Ribbon in business rescue for the period 1 September 2018 to 31
August 2019 at an annual rental of R222 000.00
plus VAT. Mr WHJ
Viljoen, a shareholder and co-director of Golden Ribbon with his son
with the same initials, signed a suretyship
in his personal capacity
for the payment of the rental. The liquidators did not deny the
existence of the lease agreement, but
merely stated that the executor
had not ‘raised a bona fide real dispute of fact’ in
relying on the agreement.
[10]
[19]
A business rescue plan as
well as an amendment thereto was accepted by Golden Ribbon’s
creditors. In both plans the renting
of several farms, including the
deceased’s farm, Weltevreden, in order to plant crop on the
arable land was communicated
to creditors.
[11]
On 21 February 2019 the business rescue practitioner circulated a
status report, confirming that the conditions of the adopted
report
had not been met. Liquidation was on the cards, but the business
rescue practitioner failed to commence with appropriate
steps.
[12]
During this period the crops on the deceased’s farm were
ripening, ready to be harvested soon.
[20]
In their letter of 30 April 2019 the business rescue practitioner’s
attorneys
recorded the following in paragraph 11:
‘
In respect of the
lease agreement entered with Malan subsequent to the commencement of
the business rescue proceedings the rental
is treated as post
commencement finance (“PCF”) alternatively as costs that
are necessarily incurred in the running
of the business and our
client undertakes to effect payment of the rental with the first
proceeds received from the harvest which
is planned for the latter
part of May 2019. Our client is further prepared to enter into an
agreement confirming the aforesaid.’
In paragraph 13 the
business rescue practitioner made it clear that he was prepared to
treat the rental as PCF, affording the deceased
a preferential claim.
[21]
Mr Badenhorst, the
liquidators’ attorney, acted for Golden Ribbons and its
director, Mr WHJ Viljoen (herein after referred
to as the late Mr
Viljoen as he also passed on since then) at all relevant times during
the business rescue proceedings. The executor’s
version that
the late Mr Viljoen, Mr Badenhorst and the major creditor, First
National Bank, were fully aware of and consented
to the farming
operations embarked upon on Weltevreden must be accepted as common
cause.
[13]
[22]
The proceeds of the
crops, being the security of the deceased landlord, exceeded the
claim for rental by far.
[14]
In respect of the deceased’s farm, Weltevreden, the proceeds
were predicted to be about R1.2m, compared to rental due of
R222 000.00.
[23]
Ex facie
the amended first and
final liquidation and distribution account in the estate of Golden
Ribbon in liquidation
[15]
Mr
Badenhorst played a significant role in
inter
alia
selling
assets on behalf of the liquidators. He is also the attorney for the
Viljoens who proved claims against the liquidated company’s
estate. The Viljoens,
ie
the estate of the late Mr
Viljoen and/or his heirs, will benefit if the liquidators’
claim against the executor is successful.
[24]
As long ago as 14
September 2021 the executor obtained approval to advertise the
deceased’s first and final liquidation and
distribution account
which has lain for inspection without objection. Creditors have been
paid and distribution to the heirs have
taken place as well as
transfers of the immovable properties to legatees.
[16]
The administration of the deceased estate has been wound up in terms
of
s 35(12)
of the
Administration of Estates Act 66 of 1965
.
[17]
Procedural
aspects pertaining to the counter-application
[25]
The rules are made for the court and not the other way around.
Notwithstanding
this, it is necessary to consider the procedural
aspects.
Rule 6(7)
reads as follows:
‘
(7) (a) Any party
to any application proceedings may bring a counterapplication or may
join any party to the same extent as would
be competent if the party
wishing to bring such counter-application or join such party were a
defendant in an action and the other
parties to the application were
parties to such action. In the latter event
rule 10
shall apply
mutatis mutandis.
(b) The periods
prescribed with regard to applications shall apply mutatis mutandis
to counter-applications: Provided that the court
may on good cause
shown postpone the hearing of the application.’
[26]
It is trite that counter-applications are subject to the general
principles
applicable to applications, although a counter-application
does not have to be served in accordance with the provisions of
rule
4.
The notice of counter-application does not have to be in the form
of a notice of motion, but the respondent must set out the relief
claimed in the counter-application. Usually, the evidence pleaded in
the answering affidavit also serves to support the relief
claimed in
the counter-application.
[27]
Notwithstanding the executor’s non-compliance with all
formalities required
by
rule 6(7)
, the liquidators accepted that the
executor had filed a counter-application. Therefore, it would be
wrong to be too technical and
find against the respondent for
non-compliance with
rule 6(7).
Both counsel dealt extensively in
their written heads of argument and oral submissions with the
executor’s purported counter-application.
There can be no
prejudice if it is adjudicated on the basis presented to the court.
Fairness and the interests of justice dictate
that this
counter-application be considered and adjudicated upon.
Legal
principles pertaining to
s 341(2)
[28]
I quoted
s 341(2)
above.
I deal with my evaluation of the evidence and legal principles under
the next heading. It is pointed out at this stage already
that, in
principle, the liquidators’ entitlement to payment in terms of
this subsection cannot be seriously doubted. It is
now appropriate to
deal with relevant authority. In
Eravin
Construction CC v Bekker N.O and Others
[18]
the Supreme Court of Appeal held as follows:
‘
The
question to be answered in this case is thus when the debt was owed.
That must be answered in the first instance with reference
to
s
341(2)
of the old Act. It states expressly that a disposition in the
terms contemplated by it ‘shall be void’. The recipient
has no right, on this account, to retain it. Consequently, it owes a
debt to the body which made the prohibited disposition, and
that debt
is owed as soon as the disposition was received.’
In
Pride
Milling Company (Pty) Ltd v Bekker N.O. and Another
[19]
(Pride
Milling)
the
court articulated the legal position in the following words:
‘
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.
’
(my
emphasis)
[29]
In
Mazars
Recovery & Restructuring (Pty) Ltd and Others v Montic Dairy
(Pty) Ltd (in liquidation) and Others
(
Mazars
)
[20]
the Supreme Court of Appeal considered s 341(2) again. Ponnan JA,
writing for the majority, opined as follows:
‘
[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. A court hearing such
an application has
a wide discretion. Second, and naturally, the BRP enjoys a preference
in the ranking of creditors in the winding-up.
That preference was
considered in
Diener
-
a BRP ranks after the costs of the liquidation, but before all other
creditors. A BRP thus enjoys a substantial preference.
[29]
These remedies cater entirely for any undue hardship (if such exists)
that the appellants rely
upon. The exercise of the court’s
discretion under the proviso in s 341(2) serves to balance all
relevant interests. Thus,
in a situation where a BRP may have raised
excessive fees, a court can either refuse to validate the payments or
may validate them
in part. …..’
[30]
It is evident from the
dicta
quoted in the previous
paragraphs that creditors may avail themselves to the remedy provided
in the proviso in s 341(2) in order
to validate payments. It is
reiterated that the available remedy caters entirely for any undue
hardship if such exists, whilst
the exercise of a court’s
discretion under the proviso serves to balance all relevant
interests. The warning sounded in
Gainsford
N.O and Others v Tanzer Transport (Pty) Ltd, In re; Gainsford N.O and
Others v Tanzer Transport (Pty) Limited
[21]
must be adhered to.
The Supreme Court of Appeal dealt with an argument that a disposition
made in good faith in the ordinary course
of business should be
declared valid in the following terms:
‘…
The
court will only order otherwise in terms of this section in limited
circumstances. To have the defence proferred by Tanzer upheld
in
general terms would have the effect of avoiding the objects of the
Act in that it would undoubtedly prefer one creditor above
another.’
[31]
Bearing in mind that the
court has a wide discretion as confirmed by Ponnan JA in
Mazars
,
being the latest authority in place, it will be apposite to consider
the guidelines provided in
Lane
N.O v Olivier Transport
referred
to with approval by the Supreme Court of Appeal in
Pride
Milling:
[22]
‘
(a)
…
(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 (here the first respondent)
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)
…’
Evaluation
of the evidence and submissions by the parties
[32]
I indicated to the
parties at the onset during oral argument that I did not intend to
adjudicate the executor’s points
in
limine
separately,
but together with my evaluation of the evidence. The liquidators did
not file a claim against the deceased estate in
terms of the
Administration of Estates Act 66 of 1965
. However, the legislature
did not intend to deprive creditors of their common law right to sue
deceased estates. Consequently,
the liquidators were not precluded
from instituting these proceedings for the recovery of the debt
allegedly owed by the deceased.
This principle was authoritatively
restated by the Supreme Court of Appeal in
Nedbank
v Steyn.
[23]
[33]
Mr Van Rhyn submitted
that the first point
in
limine
pertaining
to
s 35(12)
of the
Administration of Estates Act presented
an
impossible hurdle for the liquidators to overcome. He referred to
numerous authorities in this regard. Mr Van der Merwe submitted
that
the executor could not hide behind
s 35(12)
in order to escape
liability. Relying on Meyerowitz,
[24]
he submitted that a creditor who lodges a claim after the executor
has distributed the assets of the estate is not without a remedy,
but
still entitled to participate in the distribution of any further
assets which have not been distributed yet, or which may later
be
discovered. This may be so – as confirmed long ago in
Estate
Stanford v Kruger
[25]
- but in this instance
there is no suggestion that any further assets may be discovered for
distribution to heirs or liquidated
for the benefit of creditors.
[34]
The undisputed facts show
that, long before the filing of the present application, the first
and final liquidation and distribution
account in the deceased estate
was accepted by the Master of the High Court. Consequently, creditors
were paid and distributions
were done to the heirs, including
transfers of immovable properties to the legatees in terms of the
provisions of
s 35(12).
The liquidators’ version that the
Master had not discharged the executor from his duties
[26]
as such is irrelevant. As a result, Mr Van Rhyn submitted that the
liquidators had no claim against the executor, but might claim
any
amount allegedly due from the beneficiaries of the deceased estate in
terms of the
condictio
indebiti
.
Such a course is available to them as confirmed by the authorities
and accepted by
Meyerowitz
.
[35]
In
Visser
v Schmidt NO
[27]
a special plea of
plene
administravit
[28]
was upheld by the trial
court. The full bench dismissed the special plea on appeal, but
ordered that ‘any judgment obtained
against defendant upon the
resumption of the trial may be executed only against such further
asset or assets belonging to the estate
represented by the defendant
which has or have not prior to date of judgment been duly distributed
by the executor in terms of
a liquidation and distribution account
approved by the Master.’ This judgment does not support the
liquidators insofar as
there is no suggestion that further deceased
estate assets will be found for distribution to heirs or to be
liquidated for the
benefit of creditors. I am prepared to accept the
cogency and validity of Mr Van Rhyn’s submission that
s 35(12)
of the
Administration of Estates Act presented
an impossible hurdle
for the liquidators to overcome. Even if I am wrong in this regard, I
remain vested with a discretion as is
evident from the authorities
quoted above.
[36]
The second point
in
limine
dealt
with the payment by the business rescue practitioner on 26 July 2019
in respect of rent due. Mr Van Rhyn submitted, relying
on s
132(2)(a)(ii) of the 2008 Companies Act, that the business rescue
proceedings were still
in
esse
at
the time of payment. These proceedings, so he submitted, had been
terminated on 10 October 2019 only,
ie
on the day when the
provisional liquidation order was granted. I do not agree with Mr Van
Rhyn’s submission. The legislature
specifically provided for
the continued application of liquidation proceedings in chapter IV of
the 1973 Companies Act pertaining
to insolvent companies. When the
2008 Companies Act was promulgated, the legislature would have been
fully aware of the provisions
of
inter
alia
ss
341(2) and 348 of the 1973 Companies Act and the effect thereof.
These remained unaltered. The Supreme Court of Appeal confirmed
the
principle in
Mazars
.
[29]
[37]
Mr Van Rhyn also relied on s 135 of the 2008 Companies Act,
submitting that
the rent owed to the deceased should be regarded as
Post Commencement Finance (PCF). Consequently, the business rescue
practitioner
was fully within his rights to settle the claim for rent
as he did. This payment, as submitted, was made before the business
rescue
proceedings were terminated on 10 October 2019 and the
provisions of ss 341(2) and 348 did not apply. I already dismissed
the latter
portion of the argument above. The liquidators vehemently
disputed the alleged entitlement to rely on s 135. They submitted
that
the business rescue practitioner continued to incur costs to the
detriment of the body of creditors and in conflict with an adopted
business plan. According to them the business rescue practitioner
continued farming on the deceased’s farm whilst the plan
did
not provide for that. In any event, so they submitted, the payment to
the deceased was made in conflict with the ranking of
creditors who
provided PCF as contemplated in s 135.
[38]
I do not deem it necessary to deal in any detail with the submissions
pertaining
to non-compliance with the amended business rescue plan or
PCF in light of the evaluation preferred hereunder, save to make one
comment. Both the original and amended business plans dealt with the
renting of Weltevreden in order to plant crop on the arable
land and
the business rescue practitioner informed all creditors in his status
reports – particularly the one of 29 April
2019 – of the
crops on the various properties, including the farm Weltevreden, and
the good harvest forecast for Golden Ribbon.
All interested
parties, including First National Bank, the major creditor, the
attorney, Mr Badenhorst and his client at the time,
the late Mr
Viljoen, were aware of the crops on Weltevreden.
[39]
It is evident that the business rescue practitioner was aware of
First National
Bank’s intention to proceed with liquidation
proceedings against Golden Ribbon. He should have been aware also of
the fact
that the liquidation application was filed with the
registrar prior to making payment to the deceased. I repeat that the
authorities
are clear: the payment was a disposition falling within
the purview of s 341(2). Having said this, the only issue to be
determined
is whether the payment should be validated.
[40]
Before I finally consider validation of payment, I deem it
appropriate to briefly
deal with the further points raised by Mr Van
Rhyn. He also submitted that the applicants’ cause of action
had become prescribed
insofar as the present application had been
served on the executor long after the expiry of the three-year
prescription period,
which according to him, expired on 25 July 2022.
Although the commencement of winding-up of Golden Ribbon is deemed to
have taken
place on 17 July 2019 in accordance with s 348 of the 1973
Companies Act, the deeming provision only applies in the event of the
company eventually being placed in final liquidation. This occurred
on 20 February 2020 only.
Section 13
of the
Prescription Act 68 of
1969
pertaining to the interruption of prescription must also be
considered. The application was served on 13 September 2022. Although
Mr Van Rhyn made submissions about prescription in his heads of
argument, he did not advance this during oral argument. Insofar
as
this aspect has not been argued, I do not deem it necessary to
adjudicate thereon, especially bearing in mind the exercise of
my
discretion that will become clear soon.
[41]
The third point
in limine
, dealing with the failure to cite
the business rescue practitioner as a party in these proceedings, is
a red herring and needs
no further consideration. No relief is sought
against him and he has no interest in the outcome of the application.
The fourth
point
in limine
pertaining to the alleged disputes
of fact does not have to be considered as a point
in limine
.
[42]
It is apparent that not much is in dispute. I set out the history of
the litigation
and the undisputed facts above. It is now my task to
exercise a discretion based on the facts presented to me and after
considering
the parties’ submissions, the legislation and
authorities quoted. In doing so I accept that the court has a wide
discretion
as confirmed by Ponnan JA in
Mazars
quoted above.
It is also apposite to consider the guidelines provided in
Lane NO
v Oliver Transport
quoted earlier. I accept that it is impossible
to lay down general rules and that a court should be slow to make
orders that avoid
the objects of the legislature as contained in
legislation, to wit
s 341(2)
in this instance. Having said this, a
balance must be struck when considering the rights of the executor
in
casu
on the one hand and the creditors of Golden Ribbon on the
other. Fairness, good faith and an honest intention should be of
paramount
importance. An inequitable result should, if at all
possible, be prevented.
[43]
I am satisfied that the opportunity granted to the business rescue
practitioner
to rent the deceased’s farm, Weltevreden, as well
as farms of other people and entities in order to produce a harvest
was
to the advantage of Golden Ribbon and its creditors. I also bear
in mind, with reference to the amended first and final liquidation
and distribution account of Golden Ribbon referred to earlier, that
several of the creditors who proved claims against the insolvent
company are Viljoens, all apparently related to the late Mr WHJ
Viljoen. There can be little doubt that the Viljoens will benefit
to
the prejudice of the deceased estate of Mr Malan if the aforesaid
payment is not validated.
[44]
The business rescue practitioner did not benefit from the payment as
was the
case in
Mazars
and
Diener
, referred to in
Mazars
. He merely paid the deceased what he believed was due
to him if one considers the correspondence referred to herein.
Although an
incorrect procedure might have been adopted by the
business rescue practitioner during the business rescue proceedings,
an aspect
that I do not have to consider for purposes hereof, the
evidence which I am prepared to accept points in one direction only.
The
late Mr Viljoen, his attorney (and now also the liquidators’
attorney), Mr Badenhorst, First National Bank as major creditor
and
the business rescue practitioner believed that it was in the interest
of Golden Ribbon and its body of creditors to enter into
the lease
agreement in respect of Weltevreden and to produce crops on the farm.
There is no doubt in my mind that this is not a
case of skulduggery
or a dishonest business rescue practitioner who conspired with a
creditor to snatch an unfair advantage over
the company’s body
of creditors.
[45]
In the exercise of my discretion I have special regard to the role Mr
Badenshorst
has played, first of all in executing the late Mr
Viljoen’s mandate, and the role that he is now playing as the
attorney
for the liquidators, the role played by the late Mr Viljoen
and perhaps also his son with the same initials, they being the only
directors of Golden Ribbon at the time. The deceased’s farm was
utilised to generate profit for the Viljoens’ company.
In my
view good faith and an honest intention are apparent from the manner
in which the business rescue practitioner and the deceased
acted
throughout. A balance should be struck between the rights of Golden
Ribbon’s creditors and that of the executor in
these particular
circumstances. Justice and fairness require that the executor shall
not be ordered to pay back that which has
been received. The payment
by the business rescue practitioner in the amount of R222 998.23
shall be validated.
[46]
During the preparation of
this judgment I became aware of the judgment in
Smith
NO and another v Magnus NO and Others
by
Reinders J.
[30]
The
liquidators in this application also featured as applicants in that
application. They unsuccessfully sought similar relief
in those
matters against other parties. I agree with the outcome of that
judgment.
Conclusion
[47]
Insofar as the payment to the late Mr Malan should be validated, the
effect
thereof is that the main application should be dismissed and
the relief sought in the counter-application be granted. The
general principle applicable to awards of costs should be followed,
ie
the liquidators as the unsuccessful parties shall be
ordered to pay the first respondent’s costs of the opposed
motion proceedings.
Order
[48]
The following order is issued:
1.
The applicants’ application, being the main application, is
dismissed.
2.
It is declared, in accordance with the provisions of section 341(2)
of the Companies Act 61 of 1973,
that the payment of R220 998.23
made by the business rescue practitioner on 26 July 2019 from the
bank account of Golden Ribbon
Trading 86 (Pty) Ltd to Jac N Coetzer
Inc for the benefit of Jacobus Francois Malan was validly made.
3.
The applicants are ordered to pay the first respondent’s costs
of the opposed motion proceedings.
JP
DAFFUE J
Counsel
for the applicants:
Adv R
van der Merwe
Badenhorst
Attorneys
BLOEMFONTEIN
Counsel
for the first respondent:
Adv
AJR Van Rhyn SC
Jac N
Coetzer
c/o
Lovius Block
BLOEMFONTEIN
[1]
Record:
pp 317 – 319.
[2]
Item
9 of Schedule 5 of the 2008
Companies
Act
.
[3]
Henochsberg on the
Companies Act 71 of 2008
vol 2 APPI-94(16) &
(17).
[4]
Record:
Annexure JNC1 at pp 65 – 68 and p 68 in particular.
[5]
Record:
pp 79 & 83.
[6]
Record:
pp 199 & 201.
[7]
Record:
pp 317 – 319.
[8]
Record:
pp 321 & 322.
[9]
Annexures FA6 – FA8, record pp 31 – 42.
[10]
Record: p 100, replying affidavit para 24.
[11]
Record:
pp 116 – 163, particularly para 3.2.5 of annexure RA2 on p 121
and para 3.2.5 of annexure RA3 on p 150.
[12]
Record: paras 5. 9 – 5.14, pp 88 – 90.
[13]
Record: p 222; para 11.6 of the replying affidavit in the
counter-application, read with annexure ABC21 on p290, being a
letter
of Mr Badenhorst to the business rescue practitioner dated 3
April 2019.
[14]
Record: pp 221, para 11.5, read with the status report of the
business rescue practitioner dated 29 April 2019 attached by the
liquidators as exhibit RA5, pp 167/8.
[15]
Record: pp 300 – 313.
[16]
Record: pp 203 – 211; pp 235 – 257.
[17]
See Master’s report on pp 317 – 319, read with the
executor’s affidavit in response at pp 325 – 340.
[18]
(20736/2014)
[2016] ZASCA 30; 2016 (6) SA 589 (SCA) (23 March 2016) at para 21.
[19]
(393/2020)
[2021] ZASCA 127; [2021] 4 All SA 696 (SCA); 2022 (2) SA 410 (SCA)
(30 September 2021) para 30.
[20]
(526/2021)
[2022] ZASCA 135; 2023 (1) SA 398 (SCA) (13 October 2022) at paras
28 & 29, but see also paras 30 & 31.
[21]
(076/2013)
[2014] ZASCA 32; 2014 (3) SA 468 (SCA); [2014] 3 All SA 21 (SCA) (28
March 2014) at para 27.
[22]
1997
(1) SA 383
(C) at pp 386 – 7, approved in
Pride
Milling supra
at
para 24.
[23]
(20085/2014)
[2015] ZASCA 30
;
[2015] 2 All SA 671
(SCA);
2016 (2) SA
416
(SCA) (25 March 2015) paras 6 & 11.
[24]
Cilliers, Meyerowitz on Administration of Estates and Their
Taxation, 2023 ed para 16.4.
[25]
1942 TPD 243.
[26]
Record: p 104, replying affidavit para 38, read with annexure RA9,
together with para 5 of the Master’s report, p 318.
The
executor dealt with the issue in detail in his replying affidavit to
the counter-application in support of what he already
testified to
earlier in the answering affidavit at para 17, p 59; see further
para 6 pp 203 – 211, confirmed by Mr Coetzer,
the attorney
that handled the estate, at pp 258 – 260, as well as the
affidavits of the executor and Mr Coetzer in response
to the
Master’s report at pp 325 – 339.
[27]
2001 JDR 0091 (T) at p 28.
[28]
Such a plea may be raised to prevent a creditor from participating
in or laying claim to assets of a deceased estate that have
been
duly distributed to heirs or legatees.
[29]
Ponnan JA’s
dicta
in
Mazars
are quoted in para 29
above.
[30]
(4220/2022; 4221/2022)
[2023] ZAFSHC 307
(4 August 2023).