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[2023] ZAFSHC 452
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Standard Bank of South Africa Limited v Franlese Boerdery (Pty) Ltd and Others (3058/2023) [2023] ZAFSHC 452 (9 November 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
Policy
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
Case
No:
3058/2023
In
the matter between:
THE
STANDARD
BANK
OF
SOUTH
AFRICA
LIMITED
Applicant
(Registration
Number: 1962[…])
and
FRANLESE
BOERDERY
(PTY)
LTD
First
Respondent
(Registration
Number: 2018[…])
SUMAIYA
KHAMMISSA
N.O.
Second
Respondent
[In
her capacity as appointed Business Rescue
Practitioner
of
Franlese Boerdery (Pty) Ltd]
ANY
AFFECTED PERSONS RELATING TO
FRANLESE
BOERDERY
(PTY)
LTD
Third
Respondent
RUCA
BOERDERYE (PTY) LTD
Fourth
Respondent
CORAM:
HEFERAJ
HEARD
ON:
12 OCTOBER
2023
DELIVERED
ON:
09
NOVEMBER
2023
[1]
With
reference to Section 128(1)(b) of the Companies Act
[1]
(
"
the
Act'),
the
following was said in
Oakdene
Square Properties (Pty) Ltd v Farm Bothasfontein
(Kyalami)
(Pty)
Ltd
[2]
:
"
business rescue
means to facilitate rehabilitation which in turn means the
achievement of one of two goals: (a) to
return
the
company to solvency, albeit to provide
a
better deal
for creditors and shareholders than what they would have received
through liquidation".
[2]
In terms of Section
132(2), business
rescue
proceedings end when,
inter
alia,
the
Court has converted the proceedings to liquidation proceedings.
[3]
In this matter, the
Applicant approaches the Court to obtain an order in terms of which
the business rescue proceedings
in
respect of
Franlese Boerdery (Pty) Ltd
("Franlese'),
to be
converted into liquidation proceedings
.
[4]
In opposing the
application, the First Respondent together with one of the creditors
of the First Respondent, being Ruca Boerderye
(Pty) Ltd
("Ruca”)
launched
a
counter-application
to
the
effect
that
in
essence
the
vote
by
the Applicant
against
the adoption of the
revised business rescue plan dated June 2023,
which
took
place
on
30
June
2023,
be
declared
inappropriate
and
set
aside in terms
of
Section 157(7)
of
the
Companies
Act
71 of 2008
.
I
shall in this judgment
refer
to 1
st
and 4
th
Respondents
as "Respondents".
Background
facts:
[5]
After the First
Respondent defaulted on the terms and conditions of various accounts
held by the First Respondent with the Applicant,
the Applicant and
amongst
others
the
First
Respondent,
entered
into
a
settlement
agreement
on 29 September 2022
in terms of which, amongst others, the First Respondent admitted
being due to the Applicant the amounts of
R1,031,991.67,
R5,416,613.59
and R27,000,000.00
plus interest
on
all the aforesaid
amounts.
[6]
The aforesaid amounts
were payable to the Applicant within 90 days from signature
of the settlement.
The settlement
agreement
was made an order of
court on 14 October 2022.
[7]
On the 6
th
of December 2022, the
Plaintiff was informed by the Second Respondent that the First
Respondent took a resolution through its board
of directors on the
28
th
of November 2022 to
put the First Respondent in business rescue
and
the
application
was
duly
registered
by
the
Commissioner:
CIPC
on 2
December
2022.
The
Second
Respondent
was
appointed
by
the Commissioner as
business rescue practitioner.
[8]
A sworn statement by
the directors of the First Respondent, clearly determined that the
First Respondent is financially distressed
and will not be able to
pay its debtors
for
at
least
six
months.
It
is
also
the
Applicant's
submission
that
it
is clear that the
First Respondent is commercially insolvent and not capable of
servicing its debtors in the normal course of business
as they become
due from day to day. The First Respondent's
directors
blame the Covid
pandemic
as
well as agricultural conditions for the situation.
[9]
The Applicant then
received a notice by the Second Respondent that the first meeting of
creditors of the First Respondent was to
take place on the 15
th
of December 2022
.
[10]
In
reaction
to
the
notice,
the
Applicant
sent
an
e-mail
to
the
Second Respondent
in
order
to,
amongst
others,
prove
the
Applicant's
claims
against the
company
in
business
rescue.
At
that
stage,
the
First
Respondent
was
due to the Applicant
on overdraft R7, 509,016.47, on medium term loan R27, 000,000.00 and
on a vehicle and asset finance agreement
R1, 041,564.90. The total
being R34, 550
,
581.37.
[11]
It was also brought
to the attention of the Second Respondent in the same letter dated 9
December 2022 that the Applicant holds
a cession of all book debts of
the First Respondent and that the Applicant requires that all monies
collected pursuant to the debts
ceded to the Applicant,
should be continued
to
be
paid
to
the
current
account
of
the
First
Respondent
and
that
all
existing debtors must
be notified
of
this requirement
forthwith
by the practitioner.
[12]
On
the
same
date
as
the
first
meeting
of
creditors
was
held,
15
December 2022, it was
pointed out by the Applicant to the Second Respondent that the
vehicle
and
assets
finance
account
was
at
that
stage
in
arrears
with R357,127.31 and
the Applicant expected that account to be kept up to date with
payments
notwithstanding
the business
rescue,
in
order
for
the
Applicant
to make a decision
whether to repossess the asset concerned and/or whether the
practitioner
will
keep
the
account
up
to date,
in
other
words
to
repay
the arrears at least, and keep the instalments
in place.
[13]
From the minutes of
the proceedings of the first meeting of creditors which was held on
15 December
2022,
it was noted that the
Second
Respondent
has already appointed
at that stage, an independent person to run the day-to-day farming
operations of the First Respondent, namely,
Farm Rescue. It was
requested
that
the business
plan
be
published
by the
17
th
of
February
2023
for a vote by the
creditors.
[14]
At that stage, as far
as the vehicle and asset finance account is concerned, the Second
Respondent indicated that the arrears could
not be settled as
Applicant will be preferred above other creditors. It was agreed on
same date that the business rescue plan was
to be published on the
1
st
of February 2023
.
[15]
On
the
31
st
of January
2023
the Applicant
received
an e-mail
to
the effect
that the
Second
Respondent
will not be
able
to publish
the aforesaid
plan
by
the
1
st
of February 2023 and
requested an extension of time until the 7
th
of February 2023
which request was granted on same date.
[16]
The business
rescue plan was then
published
on
the 7
th
of February
2023 and the
Applicant through its attorneys, had various queries as to the
published plan which was conveyed to the Second Respondent
on 8
February 2023. These queries had been responded to by the First
Respondent on the 16
th
of February 2023.
[17]
On the 21s
t
of February 2023 the
Applicant, through its attorneys
,
indicated to
the business practitioner that it is not satisfied with the business
rescue plan as published and certain amendments
to the plan were
proposed, namely
:
(i)
The Applicant will,
in respect of all his claims proved, be paid in full within six
months of acceptance of the business rescue
plan
;
(ii)
The payment of
interest on all claims proved by the Applicant will be serviced
monthly in advance;
(iii)
That should the
Applicant not be settled within three months, the Applicant proceed
in terms of its power of attorney and perfect
its notarial bond;
(iv)
That no assets will
be sold within the six month period prior to the written consent
of the Applicant and
that the full proceeds
of
such assets sold to be paid to the Applicant towards reduction of the
claims against the First Respondent; and
(v)
The business
practitioner will not be entitled to any remuneration on any assets
sold as, specified by the Applicant.
[18]
The next
meeting
then
arranged
by the Second
Respondent
took
place
on the 27
th
of
February
2023
for
the
adoption
of
the
business
rescue
plan
.
Because the Applicant
was not satisfied with the business rescue plan as published, it
therefore
voted
against
such plan at the
meeting
on
the 27
th
of February
2023. The
Applicant
was
then
blamed
by
the
Second
Respondent
as
being obstructive
in
its
stance
and
proposed
amendments
which
were
answered
by the Applicant's
attorneys why the Applicant cannot be regarded as obstructive
specifically
based
on the
history
of
the
matter
of
which
neither
the
practitioner nor the
concurrent
creditors
are fully privy to
.
[19]
On the 31
st
of March 2023 an
e-mail was received from the Second Respondent whereby amongst others
she indicated that the Applicant's proposal
that the Bank be repaid
in a 12-month period will not be achievable. The latter was suggested
in a previous e-mail on behalf of
the Applicant by Mr Otto, the
attorney acting on behalf of the Applicant after the Applicant
previously
held
the
view
that
the
Applicant
should
be
repaid
in full
within
six months.
[20]
On the 13
th
of April 2023 the
Applicant received a notice from the Second Respondent
that she proposed
that the next meeting of creditors be held in the first week of May
2023. The Applicant through its attorney then
attempted to arrange
a
meeting
with
the
Second
Respondent
so
that
the
Applicant's proposals
can
be
discussed
with
the
practitioner
for
the
final
amended
plan
to be published so
that a following meeting can be arranged of creditors for the
possible approval of such an amended plan
.
Various e-mail
followed and it appears that such a meeting could not be arranged
because a preliminary arranged meeting
could not take place
during the beginning
of
May 2023
when
the Second Respondent informed the Applicant's attorney that she is
in Saudi Arabia.
[21]
On the 25
th
of May 2023 however
the Applicant was informed that an amended business
rescue
plan
will
be
published
on
31
May
2023
and
that
the
next meeting of
creditors were to take place on the 14
th
of June 2023 to vote
on the published plan.
[22]
The Applicant's
proposals as to how the plan should be amended was still subject to
the meeting that would have taken place between
the Applicant's
attorney and/or the Applicant and/or the practitioner, which never
materialised.
[23]
On the 13
th
of June 2023 the
Applicant's attorney received an e-mail to the effect that an amended
plan had been published, that the creditors'
meeting will
take
place on 30 June 2023, during which meeting the Applicant voted
against the revised rescue plan.
[24]
The
deponent
to the founding
affidavit
in support
of the
counter-application, which
also
serves
as
answering
affidavit
in opposition
to the application,
is one Mr Lakhoo, in
his capacity as director of Ruca Boerderye, one of the concurrent
creditors of Franlese who seeks to be joined
as a Fourth Respondent
and be granted leave to intervene in the liquidation application by
the Applicant against the First Respondent.
[25]
In
the
same
regard,
there
had
been
no
opposition
to
Applicant's
application
to be granted
leave to commence
and proceed with the
proceedings
against
the First
Respondent
in
terms
of
Section
133(1)
(b)
of
the
Companies
Act.
There
also did not
appear to be opposition to the joinder of Ruca and subsequent
intervention
in
the liquidation proceedings to follow.
[26]
It
appears
that
Ruca
is
a
concurrent
creditor
of
Franlese
in
the
approximate sum
of R5,
150,000.00
with
a voting
right
of 11.90%
in business
rescue.
[27]
According to Ruca it
was confirmed that the first business rescue plan was
rejected
by
the
Applicant
on
7
February
2023.
According
to
Ruca
further, between
the rejection
of the first
business
rescue
plan
and the development
of the revised
business
rescue
plan dated June
2023,
the Applicant
commenced with
the drafting
of
its liquidation
application
against
Franlese.
At the meeting
of 30
June
2023
the
Applicant
was,
according
to
Ruca,
the
only
creditor
who voted
against the adoption
of the revised
rescue
plan. Although
the Applicant
is a
minority
creditor
in
number,
who
voted
against
the
business
rescue
plan,
it has a majority
in voting
rights and according
to its vote, caused
the rejection
of the business
rescue plan. From the explanation as provided in reply by the
Applicant,
it
does however
appear
that at the stage
when
the affidavit
in
support of the application
had
been drafted,
the
Applicant
was
already in possession
of
the revised business rescue plan.
Inappropriateness
[28]
It appears that it is
First and Fourth Respondents' case that by voting against the
business rescue plan on the 30
th
of June 2023, such
vote by the Applicant constituted an inappropriate vote which is,
according to the Respondents, to be set aside.
In regards to the
inappropriateness thereof, the Respondents' reasons can be summarised
as follows:
[29]
In terms of the
revised business plan:
(i)
The
Applicant
is
to
receive
full payment
of
its
bond
facility
over
a
period of
12
years,
which
payments
being
made
bi-annually.
The
12-year period may be
shortened
if
cashflow
allows
for it;
(ii)
In respect of the
Applicant's overdraft facility, it shall be paid R230,000.00 per
month from the end of July 2023 until it is settled
in
full;
(iii)
The Applicant as far
as the vehicle and asset finance agreement on the baler
is concerned,
will be paid
in ordinary
course
of business
according to
the
original
agreement.
(1
March
and
1
October)
without
any reference
to
the
arrears.
The
amount
in
arrears
in
approximately R357
000.00.
(iv)
Farm Equity shall be
paid in full over a period of 24 months in respect of post-commence
finance;
(v)
The concurrent
creditors shall be paid in full over a period of 48 months commencing
at the end of month 13.
[30]
According to the
Respondents, the effect of the revised business rescue plan is thus:
(i)
Franlese will be
rescued;
(ii)
As a result of
Franlese's
rescue,
Franlese
will
continue to be able to provide employment to persons in the community
and/or area that is rife with unemployment and/or who
are dependent
on continued farming operations
for
the sustainable
income
to provide
for them
and their families;
(iii)
The continued
employment of the aforesaid persons as apparently informed by Mr
Francois Wiid, the director
of
the First Respondent,
will
also ensure that their family members
will not be left
destitute;
(iv)
The Applicant
will receive
full payment
of its overdraft
facility;
will be paid in
the
ordinary
course
of
business
according
to
the
original
agreement: (1 March
and
1 October)
without
any
reference
to the
arrears.
The amount in arrears
is approximately
R357
000.00;
(v)
The Applicant
will receive
payment
in full of its asset
finance facility;
(vi)
The concurrent
creditors will also in due course receive full payment of what is due
to them; and
(vii)
The provider of the
post-commencement finance will also in due course receive payment in
full.
[31]
According to the
Respondents, the Applicant's rationale for rejecting the revised
business plan can be summarised as follows:
(i)
In liquidation in the
Applicant will receive its full outstanding balance of its claim
whereas with the business rescue it will
have to wait 12 years before
being fully paid;
(ii)
The BRP is allowed to
invoice the Second Respondent at the rate of R3000.00
per
hour
or 5%
of the
sale
of
all
assets,
the business
or equity of any part
thereof whichever is the higher which, according to the Respondents,
Applicant submits, is not to the advantage
of the Applicant and not
to the advantage
of
any of the creditors
of
Franlese;
(iii)
The
revised
business
rescue
plan
does
not
make
provision
for
any dividend for the
South African Revenue Services.
[32]
According to the
Respondents, the aforesaid complaints are ill-founded and
demonstrates
how
little
thought
the
Applicant
has put
into
the
consideration
of the revised
business rescue plan.
[33]
For pragmatic
reasons, I will deal with the alleged inappropriateness of the vote
by the Applicant first.
[34]
Mr
Charles
Thompson,
counsel
appearing
on
behalf
of
the
Respondents,
referred
me
to the matter
of
Firstrand
Bank
Ltd v KJ Foods CC
[3]
in
regards
to
the
proper
interpretation
of
Section
153(1)
(a)
(ii)
and
153(7).
In
this
judgment
the
court
referred
to
the
matter
of
Shoprite
Checkers
(Pty)
Ltd
v
Berryplum
Retailers
CC
2015
JDR
0558
(GP)
where
Tuchten
J
said:
'A
court considering
an attack on
a
vote under
section 153(7)
must first determine
whether
the vote
was
inappropriate.
Only if it finds
that
the vote
was
inappropriate,
can the court
proceed
to consider
whether, taking
this
into
account,
it would
be
reasonable
and
just
to
set the
vote
aside. In Ex Parle
Target Shelf 284
CC
(Commissioner
for the South African
Revenue
Services
and Business
Partners Ltd
Intervening Parties) 2015 JOR 2219 (GP), Kubushi J agreed with
Tuchten Jon
the
two stage enquiry but held that the court should proceed to the
second stage even if it had come to the conclusion that the
vote was
not inappropriate.
[35]
According to Sereti JA in the KJ Food matter, a court must first
determine whether or not the vote was inappropriate
and if so, invoke
the provisions of
section 153(7).
The court's discretions and powers
afforded by
section 153(7)
become applicable once the jurisdictional
fact of inappropriateness has been found or established. Sereti JA
further came to the
conclusion that
'inappropriate' refers to or
means an act which unduly undermines the achievement of the purpose
of the act which is stipulated
in
section 7(k).
Any vote which unduly
undermines the achievement of the rescue of
a
financially
distressed company will be inappropriate.
Furthermore, according
to Sereti JA, the test to be applied is an objective test and not
subjective.
[36]
In the majority judgment of Schoeman AJA, though it was held that the
determination that a vote was inappropriate
is therefore a value
judgment made after consideration of all the facts and circumstances.
The SCA held that it is clear when taking
the appellant's interest
into consideration, that the only negative feature for it would have
been that it would not be paid its
full claim immediately, but
payment would be in terms of the contracts entered into between
the
parties.
Therefore,
it
would
still
be
paid
in
full
albeit
not
immediately. Taking all
these factors into consideration, being the interest of Firstrand,
the
employees
of KJ Foods
and
other
creditors,
the
court
held
that
it is indeed
just and reasonable
to set aside the vote
against the approval."
[37]
In the
KJ
Foods
-matter,
the Court further held that on a business-like interpretation,
the
vote
rejecting
the
business
rescue
plan
having
been
set aside, it follows
by operation of law that the business rescue plan would be considered
to have been adopted for no further
voting is envisaged.
At the next meeting
of creditors, it would only be necessary for the business rescue
practitioner
to
report
on
the implementation of the business
rescue plan.
[38]
According
to
the
Respondents,
Ruca
is
a
concurrent
creditor
of
First Respondent in
the approximate amount of R5, 150,000.00. Ruca is Franlese's second
largest
creditor
with the voting
right of 11.90%
in business
rescue.
[39]
According to the
Respondents, the revised business plan dated June 2023 was voted
upon
on
30
June
2023
and
the
only
creditor
who
voted
against
its adoption
was
indeed
the
Applicant.
Although
the
Applicant
is
the
minority creditor
in number
who voted
against
the business
rescue
plan,
it is the majority in
voting rights and accordingly
its
vote caused the rejection
of
the business rescue plan.
[40]
It is further the
Respondent's case that whereas the founding affidavit in support of
the main application was disposed to on 15
June 2023, the Applicant
rejected
the
revised
business
rescue
plan
already
prior
to the business
rescue meeting of
June 2023.
[41]
In
DH
Brothers
Industries
(Pty)
Ltd
v
V
Gribnit -
2014(1)
SA
103
KZP
Govern
J said the following dealing with business rescue, with reference to
chapter 6 of the Act:
"I
respectfully
agree
that
the
chapter
is
aimed
at
the
restoration
of viable
companies rather than their destruction" but only at viable
companies,
not
at all companies
placed
under business
rescue".
[42]
In the
KJ-Foods-matter
the Court
took further into account that the concurrent creditors would receive
100 cents in the rand if the proposed BRP was adopted
whereas they
would receive 51 cents in the rand if KJ Foods were to be liquidated.
[43]
In
Ferrostaat
GNBH and another v Transnet SOC Ltd & another 2021(5) SA 493
(SCA)],
Molemela
JA
said
that
the
relatively
low
dividend
that
can
be
yielded on liquidation must not be considered in isolation.
[44]
In
Oakdene
Square Properties (Pty) Ltd & Others v Farm Bothas Fontein (Pty)
Ltd and Others
(Supra)
it was said that the legislature has accepted that is a legitimate
object of business rescue if the plan envisages a better
dividend for
creditors.
[45]
In
Collard
v
Jatara
Connect
(Pty) Ltd
and
Others
2018(5)
SA. 238 (WCC),
with
reference to Oakdene Square, (Supra), Dlodlo J, said the following:
in
respect
of
Business
Rescue:
'
primary
goal
is to
facilitate
the continued
existence of the company in
a
state of
solvency. Indeed
a
secondary
goal (provided for
as
an
alternative
in
the event
that
the
achievement
of
the primary goal proves not to be viable is
to
facilitate
a
better
return for the creditors or shareholders
of
the
company
then
would
result
in
immediate
liquidation."
par 11
[46]
Sec 153(7)
at the Act reads as
follows:
"(7)
In an application contemplated in subsection (1)(a)(ii) or
1(b)(i)(bb)
a
court may order that the vote be set aside
if
the court
is satisfied that it
is reasonable and just to do so having regard
to
–
(a)
The
interests
represented
by
the
person
who
voted
against
the
proposed business
rescue plan;
(b)
The
provision,
if
any
made
in
the
proposed
business
rescue
plan
with respect to the
interests
of
that person or those persons and;
(c)
A
fair
and
reasonable
estimate
of
the
return
to
that
person,
or
those persons, if the
company is to be liquidated."
[47]
It must be kept in
mind that it appears that at the meeting where the questioned vote
was taken, the Applicant at that stage already
referred to the
affidavit in the liquidation proceedings as the reason for voting
against the revised business plan.
[48]
That means that one
should in effect consider the reasons as advanced in the Applicant's
Founding
Affidavit
in
respect
of
the
vote
against
the
revised business
plan.
[49]
It is evident that
the revised business rescue plan was published
on 13 June 2023
.
This was
almost seven months after the commencement of the Business Rescue
process.
.
[50]
Mr. Paul Zietsman
SC,
appearing on behalf of the applicant, pointed out that right from the
beginning, after the resolution was taken
,
the Applicant
pointed out to the practitioner that the vehicle and finance
agreement (with reference to the "haler") are
in arrears in
the amount of R357, 127, 31, which should at least be paid before
further instalments can be kept in place.
[51]
Furthermore the
Applicant has also pointed out to Second Respondent that it has a
notarial bond over the movable assets of the First
Respondent and
that it is
not
satisfied
with
the
fact
that
such
assets
are
being
utilized
in
order
to continue farming
diminishing in value on
the
properties concerned,
which were obviously
[52]
The Applicant has
also specifically referred to the Notarial Bond registered over the
movable assets to the value of R20 and that,
as far as the Second
Respondent
is
concerned,
no
other
assets
are
referred
to by the
practitioner
besides
the "baler." This either means, according to the Applicant
that the company alienated those assets since 2019
or that the
practitioner did not even bother to enlighten the creditors
of such assets.
[53]
On the 28 March 2023,
the Applicant through its attorney, proposed that the business
rescue
practitioners
fee
be
amended
to
a
reduced
hourly
fee
of R2000, 00 per hour
and that the percentage of the scale of assets should be reduced
to
3%.
The
Second
Respondent
subsequently
conceded
to
an
hourly rate
of
R2750-00
and
the
fee
for
the
realization
of
assets
to be
set
at 4%.
This concession
was however
not contained in the revised rescue plan.
[54]
The question was also
raised, on more than one occasion
,
who is the
real driving force to the counter application, whereas the founding
affidavit was deposed to by a director of Ruca and
not 1
st
Respondent
[55]
The
submission
on behalf
of the Applicant
is further
to the effect
it
is
not
correct
to argue
that
the Bank
is
put in the same position
as
if the
credit
agreements
in
any event would have ran their course. The Applicant has already
called up the outstanding
balances
during
2022
because
of
the
failure
by
the
First Respondent to
comply with the terms and conditions thereof
.
Why should the
Applicant
then
be
put
back
in
the
situation
as
if
the
credit
agreements
should run
its
normal
course
in
the
process
taking
the
risk
over
the
next
five
years, whilst
concurrent creditors are paid in full, including the post
commencement finance
creditor
within
48
months
from
the date
of the adoption
of the
plan.
[56]
I
was
also
referred
to
a
decision
in
this
division
by
Justice
Daffue
being
Standard
Bank of SA v Remitto (Pty) Ltd and 2 Others
unreported,
case 20
3538/2022
delivered
on 3 February
2023,
where the following
was said:
"The
idea
with
the
introduction
of
business
rescue
proceedings
is surely to
facilitate the rehabilitation of
a
financial
distressed company within 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"
[57]
In
Koen and Another v Wedgewood Village Golf & County Estate Pty Ltd
2012 (2) SA 378 WCE par 10
the
following
was
said:
"it
is
axiomatic that business rescue proceedings, by their nature, must be
conducted with the maximum possible expedition. The legislative
recognition of this axiom is reflected in the tight timelines 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."
[58]
In
Forty
Squares (Pty) Ltd v Noris Fresh Produce Pty Ltd 2023(5) SA 249 WWC
par
34
the
WWC
regarded
the
proposed
duration
of
a
plan,
in
other words
the
implementation thereof
(my
emphasis)
a
fixed three years by the business rescue practitioner, as an
extraordinary long time where the court said “
this
is an extraordinary
long
time given that business rescue is meant to be
a
speedy
procedure
aimed
at a
so
called
“
quick
fix
solution.”
In this regard
it is to be
noted
that
Section
132(3)
of
the
Companies
Act
contemplates
the completion of
business rescue proceedings within three months of commencement,
failing
which
the
BPP
must
approach
the
Court
on
a
month
by-month basis for an extension of the process.”
[59]
Mr. Thompson,
submitted that upon the business rescue of the first respondent, the
applicant
will
receive
the
indebtness
due
to
it
over
a
period
of
12
years, which
is
very
much
commune
with
the time period
within
which
the
monies
for the applicant
would
in
any
event have been payable in terms of the initial agreements.
[60]
It is further the
Respondent's
case that in
liquidation
concurrent
creditors will
receive 0 cent in the Rand, opposed to the fact that in business
rescue, the concurrent
creditors
will receive payment
of the debts in full.
[61]
Another point raised
by the Respondents is that the adoption of the business plan will
ensure that the present employees employed
by the Respondent will
remain to be gainfully employed.
[62]
I have considered all
the factors which were considered in the KJ-Foods matter in which the
court came to a finding in favour of
the setting aside of a vote
against as being inappropriate. I associate myself fully with the
reasoning of the SCA in coming
to
its conclusion
in
regards to inappropriateness of the vote in
that
matter.
The
facts
of
the
present
matter
is
however
distinguishable,
as
will be dealt with
below.
[63]
In the words of
Schoeman AJA, the
KJ-Foods
-
matter
,
in respect
of the question whether it will be just and reasonable to set aside a
vote as being inappropriate,
"entails
a
single
enquiry and value judgment."
[64]
It
is
clear
from
the
provisions
of
Section
153(7)
that
the
paramount
consideration
in
deciding
whether
a
vote
is
to
be
set
aside,
is
the
interests
of the party who
voted against the proposed business plan, in this instance the
Applicant.
[65]
What the applicant
has shown in the present matter is First of all that the second
respondent has indeed been dragging her feet,
to say the least, in
the business rescue process. The publication of the first business
rescue plan was late, she did not meet
with the attorney at a set
time to discuss the proposals in respect of the first business plan
and then eventually, the publication
of the rescue business plan was
also late
.
[66]
By the time the
revised plan had been established the three months period as
envisaged
in
Section 132(3)
, has been exceeded
by almost another 3
months yet second Respondent failed to take the steps as envisaged in
Section 132(3).
[67]
The present
counter
application
was
brought
in terms
of
Section
(1)
(b)
(i)
(bb) by a concurrent
creditor of Franlese and (with a 90% vote) together purportedly with
the 1
st
Respondent.
This
same
creditor,
being
Ruca
will have
received
its full amount
within 48 months
.
[68]
Now we get to the
interests of the Applicant.
[69]
The First Respondent
has already in September 2022 signed a settlement Agreement with
Applicant in respect if its indebtness towards
Applicant in the total
amount of approximately, R34 million. The agreement was made an order
of court.
[70]
Then follows the
resolution by 1st Respondent in respect of Business Rescue,
approximately
only
two months
after
the conclusion
of the deed
of settlement.
[71]
The first business
rescue plan:
(i)
set out the
Applicant's indebtness to be settled in 20 years;
(ii)
dealt
with the assets of the 1
st
respondent in respect
of which a notarial bond
was
registered
in
favour
of
the
Applicant,
on
the
basis
to
be utilized
in
future
by
First
Respondent
and
therefore
diminishing
the value thereof;
(iii)
save for the
"baler",
Second
Respondent did not deal with any other movables (the whereabouts
cannot be ascertained)
.
[72]
The
Revised
Business
plan
now
provides
for
the
Applicant
to
be
paid
in
full
in 12 years
.
This is in
respect of a secured creditor who concluded an agreement with first
Respondent in respect of
the
amount due,
being approximately R34 million
and
,
who
holds
a
voting
right
in the Business
Rescue
of almost
80%.
[73]
It is obvious that
"reverberating"
effects of the
revised business rescue plan will have a 12 year
lifespan
,
in particular
in
respect
of the Applicant.
[74]
In view of all these
factors, coupled with the manner in which Second Respondent has been
conducting the process up to date, with
reference to
Section 153(7)
of the Act
,
I
am not satisfied that it will be reasonable and just on the basis of
being inappropriate, that Applicant's vote against the revised
business rescue plan be set aside
.
[75]
The
counterapplication therefore stands to be dismissed as far as the
relief sought in terms of
Sec 153(7)
is concerned and the First and
Fourth respondents are to pay the costs thereof.
[76]
Whereas the
counterapplication was in essence for the vote by the applicant to be
declared inappropriate, I deem it appropriate
that the costs
in
regards to the
counterapplication be amended on a punitive scale. The Respondents,
being First and Fourth Respondents, actions appear
to be
ma/a
fide
in
that it has chosen to instigate the counterapplication and oppose the
main application with primary consideration at the intervening
creditor with a 11,9% vote as opposed to the majority vote of
the
Applicant.
Coupled
with this is the fact
that the Applicant
in
good
faith
has
signed
a
settlement
agreement
with
First Respondent
which
was
made
an
order
of
court
a
mere
two
months
later,
the First Respondent,
in corroboration with Ruco, then decided to "defeat" the
consequences
of
the settlement
agreement
and order of Court.
[77]
Furthermore, how the
Respondents can argue that the Applicants vote is deemed to be
inappropriate, taken into account all the factors
referred to is
beyond relief.
[78]
I find in view of all
the factors referred to, especially the manner in which the Business
Rescue Practitioner, has conducted the
Business Rescue process that
the Business Rescue process be converted into liquidation
proceedings.
[79]
The Applicant dealt
with the advantage further of placing the Applicant in liquidation
namely:
(a)
dividend of an
estimated 80%;
(b)
the
appointment
of
a
liquidator
to
ascertain
the
whereabouts
of
the movable assets as
well as;
(c)
the preservation of
such assets;
[80]
Whereas the Applicant
has made out a case for the liquidation of the First Respondent, I
make the following order
ORDER:
(1)
Applicant
is granted
leave to commence
and proceed
with its application
against
the
First Respondent
in
terms
of
Section
133(1)(b)
of the Companies Act 71 of 2008;
(2)
2.1
Prayers 1, and 2 of
the counterapplication are granted.
2.2
Prayer 3 of the
counterapplication is dismissed.
2.3
First and Fourth
Respondents are to pay the costs of the counter application on an
attorney client scale jointly and severally,
payment by the one to
absolve the other
.
(3)
The business rescue
proceedings in respect of the First Respondent are converted into
liquidation proceedings in terms of Section
132(2)(a)(ii) of the
Companies Act 71 of 2008;
(4)
The Second Respondent
is ordered to provide a copy of this application to the Third
Respondent;
(5)
The First Respondent
is placed under provisional liquidation in the hands of the Master of
the High Court,
Bloemfontein;
(6)
A
rule
nisi
is
issued
calling
upon
all
interested
parties
to
furnish
reasons,
if any, to this
Honourable
Court
at 9h30 on
21
December
2023
,
why
a final order of liquidation
should not be granted
against the First
Respondent;
(7)
That this order be
served forthwith on the First Respondent at its registered address
and to be published in THE CITIZEN and the
GOVERNMENT GAZETTE;
(8)
A copy
of the provisional
winding-up
order must be served
upon:
(8.1)
The employees of the First Respondent (if any) and every registered
Trade Union (if any) which as far as the Sheriff can reasonable
ascertain represents any of the employees of the First Respondent (if
any);
(8.2)
The South
African
Revenue
Services;
(8.3)
The Master
of the High Court,
Bloemfontein;
(9).
The costs of this
application is costs in the liquidation.
J
J F HEFER, AJ
On
behalf of the Applicant:
Adv
P Zietsman SC
Instructed
by:
Phatshoane
Henney Attorneys
BLOEMFONTEIN
On
behalf of the Respondent:
Adv
C
.
Thompson
Instructed
by:
Martin
Van Vuuren Attorneys
C\O
Du Tait Lamprecht Inc
BLOEMFONTEIN
[1]
71
of
2008
[2]
2013
(3) All SA 303
(SCA)
[3]
2017
(5) SA 40
(SCA)