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2024
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[2024] ZAKZPHC 40
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Volkar N.O and Others v Big Sky Trading 219 CC and Another (12601/23) [2024] ZAKZPHC 40 (24 April 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO: 12601/23
In
the matter of:
PATRICK
JOHN VOLKAR N.O.
FIRST APPLICANT
(in
his capacity as co-trustee of the Volkar
Recoverable
Trust)
SANDRA
ANN VOLKAR
N.O.
SECOND APPLICANT
(in
her capacity as co-trustee of the Volkar
Recoverable
Trust)
SWISS
SAFARI AND ECO TOURS (PTY) LTD
THIRD APPLICANT
(Registration
Number: 1995/001321/07)
and
BIG
SKY TRADING 219
CC
FIRST RESPONDENT
(IN
BUSINESS RESCUE)
(Registration
Number: 2002/079700/23)
KARUN
NAIDOO N.O.
SECOND RESPONDENT
(in
his capacity as Business Rescue Practitioner
of
Big Sky Trading 219 CC)
ORDER
The
following order is granted:
1.
The application for leave to appeal is dismissed with costs,
such
costs to be on scale C and to include the costs of two counsel, where
so employed.
JUDGMENT
PIETERSEN
AJ:
[1]
This is an application for leave to appeal against the whole of the
judgment and order,
which was handed down on 9 February 2024 under
the above case number, in which I granted a reconsideration order
against the rule
nisi
issued by this Court on 24 August 2023.
[2]
The Applicants seek leave to appeal on the following grounds:
a)
The Court erred in finding that the failure to join the creditors is
a fatal
non-joinder; and
b)
The Court erred in finding that there were alternative remedies
available to
the Applicants.
[3]
The Applicants further argue that there are compelling reasons to
grant leave to appeal
on the basis that there are conflicting
judgments on the question of whether creditors must be joined to an
application brought
against a company in business rescue after the
publication, but before adoption, of a business rescue plan.
The Applicants
also submit that the issue is of substantial
importance, not only to the parties but also to the general public,
legal practitioners
and the industry in relation to the application
of the relevant provisions of the Companies Act 71 of 2008 (the
“
Companies Act&rdquo
;) which involve an important question of
law that requires legal certainty.
[4]
In terms of
section 17(1)
of the
Superior Courts Act 10 of 2013
leave
to appeal may only be given where the judge concerned is of the
opinion that the appeal would have a reasonable prospect
of success
or if there is some other compelling reason why the appeal should be
heard. Prior to the coming into effect of
the
Superior Courts
Act 10 of 2013
the test to be applied in an application for leave to
appeal was whether there were reasonable prospects that another court
may
come to a different conclusion
[1]
.
However, the position has changed in that
section 17(1)(a)(i)
provides for leave to appeal to be given only where the judge is of
the opinion that the appeal would have a reasonable prospect
of
success.
[5]
The Supreme Court of Appeal held in
S
v Smith
[2]
that the test is now stringent, and an appellant faces a higher and
more stringent threshold, in terms of the
Superior Courts Act
compared
to the provisions of the repealed Supreme Court Act 59 of
1959. Plasket JA held that more is required to be established
than
that there is a mere possibility of success, that the case is
arguable on appeal or that the case cannot be categorised as
hopeless.
He held that there must be a sound and rational basis
for the conclusion that there are prospects of success on appeal.
This
finding in
S
v Smith
was again more recently confirmed by the Supreme Court of Appeal in
Four
Wheel Drive Accessory Distributors CC v Rattan N.O.
[3]
.
[6]
In
Mont
Chevaux Trust v Tim Goosen and 18 Others
[4]
Bertelsman J also held that the threshold for granting leave to
appeal has been raised in the new Act. He found that the
use of
the word “would” in the new statute indicates a measure
of certainty that another court will differ from the
court whose
judgment is sought to be appealed against.
[7]
In terms of the first ground of appeal the First and Second
Applicants (the “Applicants”)
[5]
submitted that the court erred in finding that the non-joinder of the
First Respondent’s creditors was fatal to the application
and
that, on this basis alone, the rule
nisi
must be
discharged.
[8]
The Applicants submitted that the court erred in following the
judgment of
Industrial Development Corporation of South Africa
Limited v Van Der Steen N.O. and Others
[2018] ZAGPJHC70 (“
IDC”
)
as the court’s reasoning in
IDC
was obiter and based on
precedents where the published business rescue plans had been adopted
and creditors had secured substantive
rights under those plans.
[9]
In addition, the Applicants rely on the judgment in
Hlumisa
Investment Holdings (RF) Limited v Van Der Merwe N.O.
2015 JDR
2231 (GP) (“
Hlumisa
”) where it was held that the
grievance by an affected person that a meeting had to be interdicted
and postponed for proper
consultation to take place and information
provided, was not of interest to other affected persons and their
joinder was not necessary.
The Applicants also relied on the
judgments in
Cooper N.O. and Others v Knoop N.O and Others
[unreported High Court, Johannesburg case no. 43452/2019, dated 26
September 2020] (“
Cooper”
) and
Blue Nightingale
Trading 709 (Pty) Ltd v Nkwe Platinum South Africa (Pty) Ltd (in
business rescue) and Others
[unreported High Court, Johannesburg
case no. 28760/21, dated 18 August 2018] (“
Blue
Nightingale”
) where the courts found that the right to vote
on a business rescue plan is a statutory right of a procedural nature
to participate
in a process and which requires only notice to, and
not joinder, of creditors.
[10]
The relevant principles pertaining to joinder of interested parties
are set out in paragraphs
34 to 39 of my judgment. It has been
held in
Absa
Bank Ltd v Naude N.O. and Others
[6]
that the test whether there has been non-joinder is whether a party
has a direct and substantial interest in the subject matter
of the
litigation which may prejudice the party that has not been joined.
[11]
It therefore needs to be considered whether the relief sought in this
matter may prejudice the
rights of any creditors that have not been
joined. I agree with Mr Potgieter SC, who appeared for the
Respondents together
with Mr Van Der Walt, that one should commence
by considering the exact relief sought and then consider the impact
on parties and
decide whether the joinder of parties is necessary or
merely convenient. There is also merit in the submission of Mr
Stais
SC, who appeared for the Applicants together with Ms Acker,
that the authorities relied on by the court in
IDC
dealt with
a situation where a business plan had already been adopted.
However, the facts in
IDC
are substantially similar to the
present matter and I agree with the reasoning of Meyer J (as he then
was) in
IDC
.
[12]
In
Hlumisa
the relief sought was to interdict a meeting
pending the delivery of certain documents and information and an
application to be
launched within thirty (30) days for,
inter
alia
, the setting aside of the business rescue proceedings. At
paragraph 14 of the judgment the court referred to the nature of the
relief sought where it considered the non-joinder issue. The
court concluded that the Applicant’s grievance, being the
lack
of consultation and the possible loss of their investment, and the
relief sought, to postpone a meeting, to be consulted and
to be
provided with information, is not of interest to the parties not
joined.
[13]
Hlumisa
can, therefore, be distinguished from the present
matter as the relief sought in this matter seeks the indefinite
postponement
of the section 151 meeting pending recognition of the
Applicants’ claims in specified amounts by an unknown and an
unspecified
party. The effect of the relief in the present
matter on creditors is profound and vastly more prejudicial to
creditors than
in
Hlumisa
. The relief sought in
Hlumisa
will not affect the voting rights of other creditors for an
indefinite period whereas the voting rights as reflected in the BR
Plan in the present matter would be directly affected. This
constitutes a direct and substantial interest in the matter to all
creditors.
[14]
In
Cooper
, Keightley J also considered the issue of
non-joinder and held that in the circumstances of that matter it was
not necessary to
join all creditors. However, the facts can be
distinguished from the present matter as the relief sought was to
direct the
First to Fifth Respondents to withdraw the publication of
the revised business rescue plan, alternatively, that the decision by
the BRP’s to publish the plan is reviewed and set aside as well
as further alternative relief. Keightley J held that
where the
relief sought is simply to delay the exercise of the vote, this would
not ordinarily require the formal joinder of all
creditors. It
is clear from the judgment in
Cooper
that Keightley J did not
go to the extent of finding that creditors need only to be joined
after the acceptance of the business
rescue plan. This is also
apparent from the judgment by Keightley J in
Blue Nightingale
which concerned an application in terms of
Section 130
of the
Companies Act to
set aside a business rescue resolution. The
court held at paragraph 26 that it may be that there will be cases
where, because
of the particular facts involved, common law joinder
of creditors is necessitated prior to the adoption of a business
rescue plan.
The learned judge then proceeds to deal with the
judgment of Opperman J in
EBM Project (Pty) Ltd (in business
rescue) and Another v Barak Fund SPC Limited
[unreported judgment
of the Gauteng division Johannesburg, under case no. 18884/21 (14
June 2021)] (“
EBM Project
”). In
EBM
Project
Opperman J concluded that it was necessary to give notice
to affected persons/creditors as these persons have a real and
substantial
interest in the outcome of the proceedings before her.
[15]
The Applicants further submitted that the alternative remedies dealt
with under paragraphs 42
to 50 of the judgment do not constitute
adequate alternative remedies in the circumstances. The
Applicants submitted that
the review procedure provided for in the
business rescue plan are only available to creditors once the
business rescue plan is
adopted. However, it is at the behest
of the Applicants that the
section 151
meeting cannot proceed where
the business rescue plan can be adopted. As a result, if the
business rescue plan is adopted
at the
section 151
meeting an
alternative remedy in the form of review is available to persons in
the position of the Applicants.
[16]
The Applicants further submitted that it is not an answer to find
that they ought to have exercised
their rights in terms of section
152(1)(d) of the Act by attending the meeting and bringing a motion
to amend the proposed plan
in order to provide for the full extent of
their claims. However, the Applicants do not explain on what basis
they exercised this
remedy at the first section 151 meeting held on
11 July 2023.
[17]
The Applicants for the first time in the application for leave to
appeal complain that the business
rescue practitioner failed to
consult with them and to explain the reduction of their voting
interest and failed to provide a lawful
notice of the meeting that
informed the Applicants of their right to participate in and vote at
the meeting. This issue was not
raised by the Applicants in their
papers or in argument before me at the hearing. In the circumstances,
the issue was not properly
raised and will not be considered for the
first time in an application for leave to appeal.
[18]
The Applicants further submitted that the proposed remedy that they
must apply to court to set
aside the resolution in terms of
section
130(1)(a)(ii)
of the
Companies Act is
not available to a creditor
post adoption of the business rescue plan. In support of this
argument the Applicants rely on
the wording of
section 130(1)
of the
Companies Act which
provides that an affected person may apply to
court to set aside the resolution to commence business rescue
proceedings at any
time after the adoption of the resolution but only
“until the adoption of a business rescue plan”.
[19]
With reference to the authorities referred to in paragraphs 48 and 49
of the judgment, it is
clear that the alternative remedy under
section 130(1)(a)(ii)
to apply to set aside the resolution to
commence business rescue on the basis that there is no reasonable
prospect of rescuing
the company, as the plan was not validly adopted
in circumstances where the plan was approved on the strength of
affected persons
exercising voting interests which they did not have,
remains an adequate remedy in the circumstances.
[20]
As a result, I am unable to find that an appeal would have a
reasonable prospect of success.
I am also unable to find that
there are conflicting judgments and issues of substantial importance
that require leave to appeal
to be granted. The judgments
relied on by the Applicants can be distinguished, as set out above.
Order
[21]
The following order is made:
1.
The application for leave to appeal is dismissed with costs,
such
costs to be on scale C and to include the costs of two counsel, where
so employed.
PIETERSEN
AJ
Date
of
hearing:
24 April 2024
Date
of
Judgment:
24 April 2024
APPEARANCES
Applicants
in Application for leave to appeal:
Adv P
Stais SC
Ms L
Acker
Respondents
in the application for leave to appeal:
Adv AE
Potgieter SC
Adv CG
van der Walt SC
[1]
Section
20 of the Supreme Court Act 59 of 1959 and Commissioner of Inland
Revenue v Tuc
1989 (4) SA 888
(T).
[2]
2012
(1) SACR 567 (SCA).
[3]
2019
(3) SA 451 (SCA).
[4]
2014
JDR 2325 (LCC).
[5]
The
Third Applicant has since been placed under provisional winding-up
and its provisional liquidators delivered a notice to abide.
[6]
2016
(6) SA 540
(SCA).