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[2021] ZASCA 43
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Timasani (Pty) Ltd (in business rescue) and Another v Afrimat Iron Ore (Pty) Ltd (91/2020) [2021] ZASCA 43; [2021] 3 All SA 843 (SCA) (13 April 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 91/2020
In
the matter between:
TIMASANI
(PTY) LTD
FIRST
APPELLANT
(in
business rescue)
WERNER
CAWOOD
SECOND APPELLANT
and
AFRIMAT
IRON ORE (PTY) LTD
RESPONDENT
Neutral
citation:
Timasani
(Pty) Ltd (in business rescue) and Another v Afrimat Iron Ore (Pty)
Ltd
(91/2020)
[2021] ZASCA 43
(13 April 2021)
Coram:
WALLIS,
SCHIPPERS AND NICHOLLS JJA AND GORVEN AND UNTERHALTER AJJA
Heard:
10
March 2021
Delivered:
This
judgment was handed down electronically by circulation to the
parties’ representatives by email. It has been published
on the
Supreme Court of Appeal website and released to SAFLII. The date and
time of hand-down is deemed to be 15h30 on 13 April
2021.
Summary:
Business rescue –
s 133 of the Companies Act 71 of 2008 (the Act)
–
moratorium on legal
proceedings against company in business rescue – sale of
company’s assets – deposit provisionally
paid pending
conclusion of sale agreements – sale not concluded –
deposit not property belonging to company or lawfully
in its
possession – recovery of deposit not precluded by s 133.
Section
145(1)
(a)
of the Act – notice of court proceedings to
creditors concerning business rescue proceedings – a general
notification
requirement – duty to notify creditors rests on
business rescue practitioner.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Molefe J sitting as court of
first instance):
The appeal is
dismissed with costs.
JUDGMENT
Schippers
JA (Wallis and Nicholls JJA and Gorven and Unterhalter AJJA
concurring):
[1]
The
first appellant, Timasani (Pty) Ltd (Timasani), which formerly
conducted iron and manganese mining, was placed in business rescue
on
28 July 2015. The second appellant, Mr Werner Cawood, an attorney, is
the business rescue practitioner of Timasani (the BRP),
and was
authorised to sell its assets in terms of a business rescue plan
adopted by its creditors. The respondent, Afrimat Iron
Ore (Pty) Ltd
(Afrimat), is a mining company that made an offer to purchase
Timasani’s assets, namely a farm located in Kuruman
together
with fixed improvements, buildings and fittings of a permanent nature
(the farm), and mineral rights and mining equipment.
In terms of that
offer, Afrimat paid a deposit of R1 700 000 to Timasani.
However, the contracts for the purchase of these
assets did not
materialise due to the non-fulfilment of suspensive conditions.
[2]
The
central issue in this appeal is whether Afrimat was precluded from
launching proceedings for repayment of the deposit by the
moratorium
on legal proceedings in s 133 of the Companies Act 71 of 2008 (the
Act). The Gauteng Division of the High Court,
Pretoria
(the high court),
declared that s 133 of the Act was inapplicable and ordered Timasani
to repay the deposit, together with interest,
and the BRP to pay the
costs of the application. The appeal is with its leave.
[3]
The
basic facts are uncontroversial. The BRP instructed Park Village
Auctions (the auctioneer) to invite offers for the purchase
of the
farm, mineral rights and mining equipment. The auctioneer published
an invitation on its website in terms of which offers
for Timasani’s
assets were required to be submitted to the auctioneer’s office
by 10 March 2017. A deposit of 15% was
payable on submission of an
offer and the balance within 30 days of confirmation of its
acceptance. The managing director of Afrimat
raised certain queries
concerning the offer with the auctioneer. The latter answered those
queries, provided Afrimat with a draft
offer to purchase the assets
which it had prepared (the OTP) and advised Afrimat to contact the
BRP directly if it had further
enquiries.
[4]
This
led to Afrimat making a written counter-offer for the purchase of the
assets on 10 March 2017, subject to certain amendments
and additions
to the OTP. The material terms of the counter-offer were these. The
base purchase price for the farm, mineral rights
and mining equipment
was R17 million excluding VAT, transfer duties and agent’s
commission. Afrimat undertook to pay a deposit
of 15% of the base
purchase price within 48 hours of written acceptance of its offer.
The deposit was to bear interest which would
accrue for Afrimat’s
benefit. The balance of the purchase price was payable upon
fulfilment of the following conditions precedent:
the conduct of a
legal, technical and financial due diligence investigation yielding
satisfactory results and approval of an agreement
by Afrimat’s
Board of Directors. Afrimat would not be liable for any liabilities
of Timasani, including any costs associated
with its business rescue.
[5]
By
letter dated 27 March 2017, the BRP confirmed that Afrimat’s
offer had been circulated to all affected parties and unanimously
accepted by creditors. The BRP was therefore authorised to accept
Afrimat’s offer on behalf of Timasani. The letter also
stated
the following. Afrimat’s offer was accepted on the terms as
supplemented in correspondence between the parties after
receipt of
Afrimat’s counter-offer on 10 March 2017 (although a deposit of
15% of the purchase price was required in terms
of the OTP, the
parties had agreed subsequently on a deposit of 10%). The offer was
also accepted on the basis that the agreed
21-day due diligence
period would commence on 28 March 2017. The deposit of 10% of the
purchase price of R17 million, ie R1 700 000
(the deposit)
had to be paid directly into a separate investment account of
Timasani held with Investec Bank. In conclusion the
BRP said:
‘
We
further confirm that the deposit will be retained on behalf of
yourselves in this interest-bearing account pending the outcome
of
the due diligence proceedings and conclusion of the final
agreements.’
[6]
On 29
March 2017 Afrimat paid the deposit into Timasani’s account at
Investec Bank and commenced with the due diligence exercise.
When it
was completed Afrimat furnished the BRP with a draft Sale of Assets
Agreement relating to the movable assets, and a draft
Sale of
Immovable Property Agreement in respect of the farm. According to
those agreements the purchase price of the assets was
R13 million
and that of the farm, R4 million.
[7]
A
dispute then arose concerning the amount of commission for which
Afrimat was liable. In an invoice to the BRP dated 31 May 2017,
the
auctioneer claimed commission on the purchase price of all the
assets, ie on R17 million, as well as costs in relation
to
advertising, publications on social media and security. On the same
day the BRP informed Afrimat that the agreements had to
be amended to
cater for the commission and advertising costs of the auctioneer, ‘as
per the initial offer to the public on
the auction conditions that
Afrimat agreed [it] would pay additionally to the purchase price’.
The BRP said that the deposit
was insufficient to cover those costs
and suggested that any shortfall be paid to the auctioneers on
signature of the agreements.
[8]
Afrimat’s
stance was that it was not liable for the auctioneer’s
commission on the purchase price of all the assets
and that it was
liable for 10% commission on the purchase price of the farm, ie
R400 000. This was based on clause 9 of the
OTP which provided
that the purchaser, in addition to the purchase price, would pay
agent’s commission of 10% plus VAT, calculated
on the purchase
price of the property. The OTP defined the ‘Property’ or
‘Farm’ as ‘the immovable
property’. Further,
clause 5 of the draft Sale of Immovable Property Agreement provided
that the purchase price of the farm
was R4 million. Afrimat also
denied liability for social media and advertising costs.
[9]
Whilst
this dispute remained unresolved, Soliter Myn Ondernemings BK
(Soliter), a mineral rights-holder, asserted its right to the
surface
use of the entire farm in terms of a lease concluded with Timasani.
In a letter to the appellants and the Board of Directors
of Timasani,
Soliter sought confirmation that the farm would only be sold subject
to its rights under the lease agreement. Soliter
also claimed
ownership of certain stockpiles on the farm which were subject to a
mineral beneficiation programme and required an
assurance that
possession of the stockpiles would not be handed over to anyone.
[10]
In a
letter by Afrimat’s attorneys to the BRP dated 13 June 2017, it
was stated that the encumbrance in favour of Soliter
had not been
disclosed to Afrimat during the due diligence it had undertaken. In
the same letter, Afrimat’s position concerning
the auctioneer’s
commission was set out, namely that it had not participated in any
online auction and that it had engaged
the BRP on the basis of the
terms in the OTP which was clear on the commission payable, ie 10% of
the price of the immovable property
sold. The letter went on to state
that Afrimat’s offer remained open for seven days subject to
the following:
‘
4.1
It being accepted that our client is only liable to pay R400,000
(excluding VAT) for the agent’s
commission to the auctioneers
and that our client is not liable for any other costs . . .
4.2
Soliter in writing waiving in a form acceptable to our client any
reliance on any alleged
claim that it has over the immovable property
of Timasani; and
4.3
the above to be recorded and inserted into the draft written
agreements supplied to you
on 26 May 2017 and to be signed by the
parties.
5.
On the lapse of the aforesaid 7 days:
5.1
our client’s offer is withdrawn and it specifically reserves
its right to institute
any necessary proceedings to recover any loss
suffered by it as a result of this transaction not proceeding; and
5.2
our client’s deposit held by you to be immediately repaid along
with all interest
that accrued thereon.’
[11]
The
subsequent waiver by Soliter of its mineral rights was considered
inadequate inter alia on the ground that it was equivocal
and
Afrimat’s offer was not accepted within seven days.
Consequently, on 21 June 2017 Afrimat’s attorneys informed
the
BRP that its offer to conclude the sale agreements had lapsed and
requested that the deposit be repaid. When it had not been
repaid by
30 June 2017, Afrimat launched an application against the appellants
in the high court for repayment of the deposit.
It sought an order
directing the BRP to pay the costs of the application in his personal
capacity on the basis that its claim arose
as a result of his
conduct.
[12]
The
appellants opposed the application on the following grounds. Afrimat
failed to comply with the provisions of s 133(1) of the
Act because
the application could not be instituted without the written consent
of the BRP or leave of the court. Afrimat’s
failure to join the
auctioneer and Timasani’s creditors as respondents was fatal to
its case. There were material disputes
of fact on the papers which
precluded the granting of final relief. The BRP had throughout acted
in an official capacity and Afrimat
did not establish any basis for
an order that he pay the costs of the application in his personal
capacity.
[13]
As
stated earlier, the high court (Molefe J) made an order declaring
that s 133 of the Act did not apply to the proceedings
instituted and ordered Timasani to repay the deposit to Afrimat. The
court reasoned that s 133(1) was inapplicable because the
deposit was
no longer lawfully in the possession of Timasani when the sale
agreements did not materialise and Timasani had exercised
the powers
of a trustee as contemplated in s 133(1)
(e).
The non-joinder point was dismissed on the basis that neither the
auctioneer nor Timasani’s creditors had a direct and
substantial
interest in the dispute between Timasani and Afrimat in
relation to the repayment of the deposit. The court held that it was
unnecessary
to join the creditors as parties to the application and
to the extent that there was any such duty, it rested on the BRP.
Regarding
the costs order sought against the BRP, the court held that
there was no evidence to justify such an order.
[14]
It is
convenient firstly to deal with non-joinder. It was argued on behalf
of the appellants that the application should have been
dismissed
because Afrimat failed to join all the creditors of Timasani in terms
of s 145(1) of the Act. The application, so it
was submitted,
affected Timasani’s financial position which resulted in less
funds being available to creditors. It was further
submitted that the
auctioneer should also have been joined since this ‘was
imperative for the dispute to be properly ventilated’.
[15]
The
appellants’ reliance on non-joinder was misplaced. The test is
whether a party has a direct and substantial interest in
the subject
matter of the proceedings, ie a legal interest in the subject matter
of the litigation which may be prejudicially affected
by the judgment
of the court.
[1]
The deposit was
a provisional payment pending the fulfilment of suspensive conditions
and the conclusion of final agreements. The
auctioneer had no
interest in the terms upon which the deposit was paid and it was not
held on its behalf. The auctioneer’s
claim for commission and
advertising costs – as against the BRP who had instructed it –
remained unaffected by the
order directing Timasani to repay the
deposit. The high court correctly held that the auctioneer had no
legal interest in the subject
matter of the application.
[16]
As
to the interest of creditors, s 145(1) of the Act provides:
‘
Each
creditor is entitled to–
(a)
notice
of each court proceeding, decision, meeting or other relevant event
concerning the business rescue proceedings;
(b)
participate
in any court proceedings arising during the business rescue
proceedings;
(c)
formally
participate in the company's business rescue proceedings to the
extent provided for in this Chapter; and
(d)
informally
participate in those proceedings by making proposals for a business
rescue plan to the practitioner.’
[17]
Two
points are required to be made. First, s 145(1) sets out in some
detail the rights and obligations of creditors when participating
in
business rescue proceedings as a whole, in addition to the rights
conferred on creditors as ‘affected persons’ by
specific
provisions of Chapter 6 of the Act.
[2]
Subsection 1
(a)
is a general notification requirement to creditors of court
proceedings, decisions and meetings concerning the business rescue
.
It
has nothing to do with the joinder of creditors in legal proceedings
involving a company in business rescue. Having regard to
the
language, context and purpose of s 145,
[3]
this is underscored by ss 145(2) and 145(3). Subsection (2)
provides that in addition to the rights in subsection (1), each
creditor has the right to vote to amend, approve or reject a proposed
business rescue plan and if that plan is rejected, to propose
an
alternative plan or make an offer for the interests of other
creditors.
[4]
In terms of
subsection (3), creditors are entitled to form a committee to be
consulted by a business rescue practitioner in the
development of a
business plan.
[18]
Second,
and consistent with the text, context and purpose of s 145,
subsection (1)
(b)
confers on creditors a statutory right to participate in any legal
proceedings that arise during the business rescue proceedings
of a
company. In this respect s 145(1)
(b)
stands on an equal footing with s 131(3) of the Act, in terms of
which each affected person has a right to participate in an
application
to place a company in business rescue.
[5]
In both cases the leave of the court to intervene in the proceedings
is not required, but the court may need to regulate the procedure
to
be followed if the affected person or creditor wishes to file
affidavits.
[6]
[19]
Inasmuch
as a company in business rescue must be cited in legal proceedings
against it, the duty to give notice to creditors in
terms of s
145(1)
(a)
rests on the business rescue practitioner. Being a general
notification requirement, the purpose of s 145(1)
(a)
is to inform creditors of court proceedings brought during business
rescue: it does not require the joinder of every creditor in
such
proceedings. This is hardly surprising as the business rescue
practitioner has full management control of the company during
business rescue proceedings;
[7]
is obliged under the Act to keep creditors abreast of developments in
the business rescue, and knows who the creditors are and
which of
them may wish to participate in the relevant legal proceedings. Two
cases were cited in support of the submission that
s 145(1)
(a)
required the joinder of all creditors in any legal proceedings
involving the company in business rescue.
[8]
However, both these cases involved the fate of the business rescue
plan and contentions that directly affected the financial interests
of creditors. They were not authority for the submission advanced.
[20]
It
follows that in the circumstances, Afrimat was not required by
s 145(1) of the Act to join all Timasani’s creditors
in
the application to recover its deposit. The deposit was paid
provisionally pending the conclusion of final agreements. When
this
did not happen Afrimat was entitled to repayment thereof. No right of
any creditor to payment of any amount was affected by
the high
court’s order directing Timasani to repay the deposit. On this
aspect too, the high court was correct.
[21]
This
brings me to the alleged disputes of fact in the answering affidavit.
They have no substance. In short, the appellants alleged
that Afrimat
‘misrepresented its commitment toward the purchase of the
assets’ as a result of which Timasani did not
proceed with the
online auction. Afrimat, the BRP said, ‘effectively hijacked
the online auction’, snatched at a bargain
and was trying to
force Timasani to agree to terms and conditions relating to costs and
commissions that suited Afrimat. Then it
was alleged that all
prospective purchasers were required to pay a deposit which
‘represented a payment to secure participation’
in the
sale of Timasani’s assets. The BRP went on to say that ‘[t]he
deposit never represented a payment that was to
be paid back to the
Applicant’.
[22]
None
of these allegations however established any dispute of fact. Neither
are they sustainable on the evidence. Nowhere was it
stated –
in either the auctioneer’s invitation to submit offers or the
correspondence that passed between Afrimat and
the BRP which
culminated in the draft agreements – that a non-refundable
deposit was payable. On the contrary, the BRP’s
letter of 27
March 2017 makes it clear that the deposit would be retained on
behalf of Afrimat and kept separately in an interest-bearing
account,
‘pending the outcome of the due diligence proceedings and
conclusion of the final agreements’.
[23]
Regarding
the costs and commissions relating to the auction, the high watermark
of the appellants’ case was that the auctioneer’s
attorneys had ‘confirmed that the terms and conditions of sale,
pertaining to the costs and commissions, apply to any agreement
reached’. This is hearsay. No affidavit by the auctioneer was
filed. The appellants simply did not present a factual version
in the
answering affidavit. And there was no dispute concerning Afrimat’s
commitment to an agreement as is evidenced by the
BRP’s letter
of 27 March 2017 and the reasons why the final agreements were not
concluded. Neither was there any genuine
dispute of fact in relation
to Afrimat’s stance that it did not participate in an online
auction and that in accordance with
the OTP, it was liable for a
commission of only 10% of the purchase price of the farm.
[24]
There
remains the question whether s 133(1) of the Act precluded Afrimat
from claiming repayment of the deposit. It provides in
relevant part:
‘
General
moratorium on legal proceedings against company.
– (1) During business rescue proceedings, no legal proceeding,
including enforcement action, against the company, or in relation
to
any property belonging to the company, or lawfully in its possession,
may be commenced or proceeded with in any forum, except–
(a)
with
the written consent of the practitioner;
(b)
with
the leave of the court and in accordance with any terms the court
considers suitable;
(c)
.
. .
(d)
.
. .
(e)
proceedings
concerning any property or right over which the company exercises the
powers of a trustee;
(f)
.
. .
(2)
During business rescue proceedings, a guarantee or surety by a
company in favour of
any other person may not be enforced by any
person against the company except with the leave of the court and in
accordance with
any terms the court considers just and equitable in
the circumstances.
(3)
If any right to commence proceedings or otherwise assert a claim
against the company
is subject to a time limit, the measurement of
that time must be suspended during the company’s business
rescue proceedings.’
[25]
Section
133 must be read as a whole: the different subsections of a provision
dealing with the same subject matter must not be considered
in
isolation but read together so as to ascertain the meaning of the
provision.
[9]
Section 133(1) is
a general moratorium provision that applies in relation to the assets
and liabilities of the company at the stage
when business rescue
comes into effect.
[10]
It
protects the company against legal action in respect of claims in
general, save with the written consent of the business rescue
practitioner and failing such consent, with the leave of the court.
This Court has stated the purpose of s 133(1) as follows:
‘
It
is generally accepted that a moratorium on legal proceedings against
a company under business rescue is of cardinal importance
since it
provides the crucial breathing space or a period of respite to enable
the company to restructure its affairs. This allows
the practitioner,
in conjunction with the creditors and other affected parties, to
formulate a business rescue plan designed to
achieve the purpose of
the process.’
[11]
[26]
Both
Cloete
Murray
v
FirstRand Bank
and
Chetty
v
Hart
were concerned with claims existing prior to the commencement of
business rescue. The same is true of the cases in the High Court
involving attempts to recover possession from companies in business
rescue of leased premises or a leased motor vehicle, the possession
of which had been lawful prior to the commencement of business
rescue.
[12]
So far as we can
ascertain, this is the first occasion on which it has been sought to
invoke the moratorium in s 133(1) in
relation to a transaction
concluded after the commencement of business rescue or property
coming into a company’s possession
after that date. Entirely
different factors come into play in that situation. A business rescue
practitioner may borrow money,
employ people or, as in this case,
sell property, in the course of business rescue. If the business
rescue practitioner does not
meet those commitments, it is not
apparent that imposing a moratorium on the enforcement of those
contracts, or the recovery of
what is due to third parties, serves
any significant purpose of business rescue. It may operate to
dissuade third parties from
entering into transactions that are
necessary to keep the business afloat while attempts are made to
rescue it. We raised with
counsel whether properly construed s 133(1)
is concerned only with transactions concluded prior to the
commencement of business
rescue and the possession or ownership of
property acquired or possessed prior to that date. However, neither
was in a position
to make any helpful submissions to us and it would
not be appropriate to decide the point without full argument.
Fortunately the
case can be resolved on the assumption that the
moratorium may have effect in relation to transactions occurring
after the commencement
of business rescue.
[27]
Section
133(2) is a special provision that deals specifically with the
enforcement of claims against the company based on a guarantee
or
suretyship given by the company, which may be enforced only with the
leave of the court. Being a special provision, s 133(2)
applies to
the exclusion of s 133(1) in relation to claims based on guarantees
or suretyships.
[13]
In keeping
with the purpose of the moratorium to provide a company in business
rescue with breathing space to enable it to restructure
its affairs,
and to protect creditors, s 133(3) extends the time within which
proceedings must be commenced or claims asserted
against the company.
[28]
The
general moratorium in s 133(1) is a defence
in
personam
:
it is a personal, temporary benefit in favour of a company undergoing
business rescue that cannot be utilised indefinitely to
delay the
claims of creditors or result in the extinction of their claims.
[14]
Indeed, and as stated, legal proceedings in relation to those claims
may be initiated or continued with the consent of the BRP
or leave of
the court.
[29]
The
section is not easy to construe.
[15]
The prohibition says that 'no legal proceeding … may be
commenced or proceeded with in any forum', save in the circumstances
specified in the various sub-paragraphs. That stark prohibition is
then qualified by inserting the words 'including enforcement
action
against the company, or in relation to any property belonging to the
company, or lawfully in its possession'. Enforcement
action appears
to relate to contractual or other obligations incurred prior to the
business rescue. It would include any claim
for specific performance,
payment of a purchase price, or delivery of property or goods that
had been sold. The second and third
instances involve property that
is either owned by the company or in its lawful possession. The
insertions must be directed to
some purpose, because they are
unnecessary if a blanket prohibition on legal proceedings of any kind
was the aim. But, prefacing
them with the word 'including', suggests
that there are other unspecified situations hit by the prohibition.
On the other hand,
if all claims of whatever type were the target,
the insertions serve no useful purpose. Courts have treated the
reference to property
'belonging to the company, or in its lawful
possession' as excluding such property from the prohibition of legal
proceedings. It
would have been simpler then to refer to it in a
sub-paragraph, as was done with property over which the company
exercised the
powers of a trustee. However, we must take the section
as we find it and there seems no other reason for this insertion. No
purpose
connected to the process of business rescue warrants the
company under business rescue being protected against proceedings to
recover
property that it neither owns, nor lawfully possesses.
[30]
In my
view, properly construed s 133(1) provides that during business
rescue proceedings:
(1)
no legal proceedings, including enforcement action, against the
company; and (2) no legal proceedings in relation to property
belonging to or in the lawful possession of the company,
may
be commenced or proceeded with in any forum. Put differently, the
words ‘no legal proceedings’ straddle both the
circumstances envisaged in (1) and (2). Thus, in
Cloete
Murray v FirstRand Bank
,
[16]
it was stated that the inclusion of the term ‘enforcement
action’ under the generic phrase ‘legal proceedings’
seems to indicate that ‘enforcement action’ is a species
of ‘legal proceeding’ or meant to have its origin
in
legal proceedings.
[31]
This
appeal concerns the moratorium in (2). Afrimat contends that s 133(1)
is inapplicable because the deposit does not belong to
Timasani and
it is in unlawful possession thereof. The plain language of the
words, ‘no legal proceedings in relation to
any property
belonging to the company or lawfully in its possession may be
commenced or proceeded with’, limits the reach
of the
moratorium and renders it inapplicable to legal proceedings in
relation to property belonging to an entity other than the
company in
business rescue, or property unlawfully possessed by the company.
[17]
Property ‘belonging to the company’ in s 133(1), sensibly
construed, can only mean property belonging in a legally
valid sense,
such as property owned by the company,
[18]
which in s 133(1) is expressly distinguished from property ‘lawfully
in its possession’. Common sense dictates that
it could never
have been intended that the restructuring of the affairs of a company
during business rescue should prevent recovery
of property not
belonging to it or unlawfully in its possession.
[19]
[32]
This
construction is reinforced by the immediate context. Section
134(1)
(c)
of the Act which deals with the protection of property interests
during business rescue of a company is cast in similar terms and
provides:
‘
134
Protection
of property interests
–(1) Subject to subsections (2) and (3), during a company’s
business rescue proceedings–
. . .
(c)
despite
any provision of an agreement to the contrary, no person may exercise
any right in respect of any property in the lawful
possession of the
company, irrespective of whether the property is owned by the
company, except to the extent that the practitioner
consents in
writing.’
[33]
Section
134(1)
(c)
conditionally prohibits the exercise of any right in respect of
property ‘
in
the lawful possession of the company
’
during business rescue proceedings, regardless of whether that
property is owned by the company. It does not prohibit the
exercise
of a right in relation to property in the
unlawful
possession of the company.
[20]
[34]
Thus,
in
Cloete
Murray v FirstRand Bank
,
[21]
the cancellation of an instalment sale agreement by a creditor
rendered unlawful the continued possession by a company in business
rescue of the goods that formed the subject matter of that agreement.
This Court held that although the moratorium in s 133(1)
of the
Act grants the company breathing space, the legislature did not
intend to interfere with contractual rights and obligations
of
parties to an agreement. Likewise, in
Kythera
Court v Le Rendez-Vous Café CC
,
[22]
it was held that the moratorium did not preclude vindicatory
proceedings or proceedings for the repossession or attachment of
property in the unlawful possession of a company in business rescue.
The case concerned legal proceedings for ejectment where a
lease had
been validly cancelled and the company was an unlawful occupier.
[35]
Applied
to the present case, the agreement in terms of which the deposit was
paid did not materialise. It is trite that when a contract
is subject
to a suspensive condition which is fulfilled, the obligations under
the contract become enforceable.
[23]
On the other hand, if the condition is not fulfilled then it is as if
the contract never came into existence, ie it is regarded
as being
void
ab
initio
.
[24]
A party who has made a payment under a contract in anticipation of
the fulfilment of a suspensive condition is entitled to the
return of
the money, unless the contract provides otherwise.
[25]
Once Timasani and Afrimat did not conclude the draft agreements
submitted by Afrimat, there was no right to retain the deposit
because it was not money that belonged to the company; neither was it
property lawfully in its possession. The agreement in regard
to the
deposit was that it would be held in a specific account and would
accrue interest for the benefit of Afrimat. That made
it clear that
if the anticipated agreement did not materialise the deposit had to
be repaid. Timasani was rightly ordered to repay
the deposit.
[36]
The
deposit was not property over which Timasani exercised the powers of
a trustee as contemplated in s 133(1)
(e)
of the Act. The high court, with reference to the definition of
‘trustee’ in the Concise Oxford Dictionary, namely
‘a
person or a member of the board given control or powers of
administration of property in trust with a legal obligation
to
administer it solely for the purposes specified’, concluded
that s 133(1)
(e)
also limited the application of the moratorium.
[37]
The
high court erred. Timasani held no title to any trust property
belonging to Afrimat. The deposit was not paid as property in
trust.
Timasani was not given any powers of administration typically
exercised by a trustee, such as taking investment decisions
regarding
trust assets, advancing trust capital or distributing trust assets to
beneficiaries. It did not incur any fiduciary duty
in respect of the
deposit. Fundamentally, Afrimat’s claim was not founded on any
breach of trust on the part of the appellants.
The section is
addressed to companies that hold funds in trust, such as incorporated
firms of attorneys, estate agents, professional
trustees and
financial institutions owing fiduciary duties in terms of the
Financial Institutions (Protection of Funds) Act 28 of 2001
.
[38]
In the
result the appeal is dismissed with costs.
A SCHIPPERS
JUDGE OF APPEAL
APPEARANCES
For
appellant:
L K van der Merwe
Instructed by:
Koster Attorneys,
Pretoria
McIntyre van der
Post, Bloemfontein
For
respondent: A J
Daniels SC
Instructed by:
Webber Wentzel,
Johannesburg
Noordman Attorneys,
Bloemfontein
[1]
Amalgamated Engineering Union
v Minister of Labour
1949
(3) SA 637
(A) at 657;
Transvaal
Agricultural Union v Minister of Agriculture and Land Affairs and
Others
2005 (4) SA
212
(SCA) para 66.
[2]
Professor P Delport et al
Henochsberg on
the
Companies Act 71 of 2008
at
506.
[3]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
,
2012 (4) SA 593
(SCA), affirmed recently in
Airports
Company South Africa v Big Five Duty Free
(Pty)
Ltd and Others
[2018]
ZACC 23
;
2019 (5) SA 1
(CC) para 29.
[4]
Section
145(2)
Companies
Act 71 of 2008
(the
Act) provides:
‘
In
addition to the rights set out in subsection (1), each creditor has–
(a)
the
right to vote to amend, approve or reject a proposed business rescue
plan, in the manner contemplated in section 152; and
(b)
if
the proposed business rescue plan is rejected, a further right to–
(i)
propose
the development of an alternative plan, in the manner contemplated
in section 153; or
(ii)
present
an offer to acquire the interests of any or all of the other
creditors in the manner contemplated in section 153. . .
.’
[5]
In terms of s
128(1)
(a)
of the Act, an ‘
affected
person’
includes
‘a shareholder or creditor of the company’.
[6]
Cape Point
Vineyards (Pty) Ltd v
Pinnacle
Point Group Ltd and Another (Advantage Projects Managers (Pty) Ltd
Intervening)
2011 (5)
SA 600
(WCC) para 21;
Engen
Petroleum Ltd v Multi Waste (Pty) Ltd and Others
2012 (5) SA 596
(GSJ) para 30.
[7]
Section 140(1)
(a)
of the Act.
[8]
Absa Bank Ltd v Naude NO and
Others
[2015] ZASCA
97
;
2016 (6) SA 540
SCA and
Kransfontein
Beleggings (Pty) Ltd v Corlink Twenty Five (Pty) Ltd
[2017] ZASCA 131.
[9]
Aziz v Divisional Council,
Cape and Another
1962
(4) SA 719
(A) at 726E.
[10]
Chetty t/a Nationwide
Electrical v Hart and Another NNO
[2015]
ZASCA 112
;
2015 (6) SA 424
(SCA) para 28.
[11]
Cloete
Murray and Another NNO v FirstRand Bank Ltd t/a WesBank
[2015] ZASCA 39
;
2015 (3) SA 438
(SCA) para 14. See also
Chetty
fn 10 para 28.
[12]
Madodza
(Pty) Ltd v Absa Bank Limited and others
[2012]
ZAGPPHC 165;
Kythera
Court v Le Rendez Vous Café CC & another
2016
(6) SA 63
(GJ);
JVJ
Logistics (Pty) Ltd v Standard Bank of South Africa Ltd and others
2016 (6) SA 448
(D);
Southern
Value Consortium v Tresso Trading 102
(Pty) Ltd
2016
(6) SA 501 (WCC).
[13]
Investec Bank Ltd v Bruyns
2012 (5) SA 430
(WCC) para 17.
[14]
See
Henochsberg
fn 2 at 482(32) and
the authorities there cited.
[15]
See the
detailed discussion by Olsen J in
JVJ
Logistics
fn 12.
[16]
Cloete Murray
fn
11 para 32.
[17]
Kythera Court
fn
12 para 9.
[18]
Southern Value Consortium
fn
12 para 30.
[19]
Southern Value Consortium
fn 12 para 35.
[20]
Kythera Court
fn
12 paras 10-11.
[21]
Cloete
Murray
fn 11 para 40.
[22]
Kythera
Court
fn 12 paras 9, 14 and 15.
[23]
Tamarillo
(Pty) Ltd v BN Aitken (Pty) Ltd
1982
(1) SA 398
(A) at 432C;
Jurgens
Eiendomsagente v Share
[1990] ZASCA 81
;
1990 (4) SA 664
(A) at 674E-J, approving
Design
and Planning Service v Kruger
1974
(1) SA 689
(T) at 695C-E.
[24]
JW Wessels
The
Law of Contract in South Africa
2 ed (1951) para 1380;
Command
Protection Services (Gauteng) (Pty) Ltd t/a Maxi Security v South
African Post Office Ltd
[2012] ZASCA 160
;
[2013] All SA 266
,
2013 (2) SA 133
(SCA) para 10.
[25]
See G B
Bradfield and R H Christie
Christie's
Law of Contract in South Africa
7 ed (2016) at 172 and the authorities collected in fn 162.