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[2022] ZAFSHC 119
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Cawood N.O and Another v Claassen and Others (1191/2022) [2022] ZAFSHC 119 (18 May 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No:
1191/2022
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
WERNER
CAWOOD
N.O.
1
st
Applicant
(In
his
nomino officio
capacity as the duly
appointed
business rescue practitioner for
Joluza
Boerdery (Pty) Ltd)
JOLUZA
BOERDERY (PTY)
LTD
2
nd
Applicant
(in
business rescue)
and
JAMES
LUDWIG CLAASSEN
1
st
Respondent
ANNA
CATHARINA
CLAASSEN
2
nd
Respondent
Any
other person(s) occupying Farm 850,
La
Rochelle, District, Vrede, Free State and/or acting
under
the instruction of Ludwig Claassen or any
person
previously associated with the
Claassen
Agri Boerdery (Pty) Ltd
3
rd
Respondent
CORAM
:
JP DAFFUE J
HEARD
ON
:
29 MARCH 2022
DELIVERED
ON
:
18 MAY 2022
This
judgment was handed down electronically by circulation to the
parties’ representatives by email, and release to SAFLII.
The
date and time for hand-down is deemed to be 16h00 on 18 May 2022.
I
INTRODUCTION
[1]
A person whose
locus standi
as business rescue practitioner
has been challenged decided to launch an urgent application which was
set down for hearing during
the recess on Tuesday, 29 March 2022.
This person and his attorneys, if they had any knowledge of this
court’s Practice Directives,
would have realised that only one
judge was on duty who had to deal with pre-trial conferences, the
normal unopposed motion court
and urgent applications.
[2]
The respondents’ counsel submitted during oral argument that
the application ought to be struck from the roll due to lack
of
urgency, alternatively self-created urgency. I decided not to strike
the matter from the roll insofar as a full set of affidavits
have
been filed pertaining to the main application as well as the
counter-application. A postponement to the first available opposed
motion court roll of 12 April 2022 would merely cause further
inconvenience insofar as another judge would have to be called upon
to read in excess of 700 pages of application papers. I shall deal
later herein in more detail with the alleged urgency and pressure
under which the respondents and I as the presiding judge were placed.
II
THE PARTIES
[3]
Mr Werner Cawood (Mr Cawood) refers to himself as the duly appointed
business rescue
practitioner of Joluza Boerdery (Pty) Ltd (“Joluza”).
He is cited as the first applicant.
[4]
Joluza, who according to the first applicant is still in business
rescue, is cited
as the second applicant.
[5]
Insofar as the
locus standi
of the first applicant is in
dispute, I prefer to refer to him in this judgment as Mr Cawood and
not the business rescue practitioner.
It is recorded that Mr Cawood
is a practising attorney and that his law firm, Cawood Attorneys Inc
of Pretoria, are the instructing
attorneys. Adv HC Van Zyl appeared
in the application before me, allegedly on behalf of the first and
second applicants.
[6]
The respondents are Mr James Ludwig Claassen, a major male person
residing on the
farm La Rochelle, district Vrede, Free State. His
mother, Mrs Anna Catharina Claassen is cited as the second respondent
whilst
all other persons occupying the farm La Rochelle are cited as
the third respondent.
[7]
Adv SJ Reinders appeared for the respondents. The instructing
attorney, Mr Charl van
der Merwe, is also a creditor of Joluza and
the point is made by Mr Cawood that he has a conflict of interest.
III
THE RELIEF CLAIMED
[8]
There is no reason to quote the notice of motion. Save for the
customary order pertaining
to condonation, Mr Cawood sought an order
in terms whereof the first and second respondents be interdicted from
interfering with
the duties of an entity referred to as Park Village,
appointed by Mr Cawood, from having access to various farms of Joluza
as well
as an entity known as Claassen Agri Boerdery (Pty) Ltd
(“Claassen Agri”). An order was also sought in terms
whereof
these respondents had to point out all assets of Joluza and
Claasen Agri as well as to hand over all documents, statements and
records, including banking documents and statements pertaining to
these two companies, failing which the sheriff should be authorised
to assist a representative of Park Village to gain access to the
properties and to obtain access to the assets of the two entities.
[9]
The respondents were given two court days’ notice to oppose the
application
and another three court days to file answering
affidavits. The notice of motion reads incorrectly. In the first
paragraph thereof
the date of hearing is indicated as 29 March 2022,
but the last paragraph makes it clear that the application will be
enrolled
on the
unopposed roll
for hearing on 29 March 2022 in
the event of no notice of intention to oppose be given. Therefore, Mr
Cawood and his attorney knew
beforehand that the matter was supposed
to be set down for 29 March 2022 only in the event of no opposition
being filed.
IV
THE VOLUMINOUS PAPERS
[10]
Papers were still filed as late as Friday, 25 March 2022, bearing in
mind that the application
was set down to be heard the next Tuesday.
On Monday, I requested my secretary to email the parties to inform
the first applicant
in particular that:
10.1
the application papers consist of over 700 pages;
10.2
the papers had been indexed and paginated during the course of Monday
only;
10.3
the papers were contained in one bundle fastened with paper binders
which might cause studying
the papers during the course of the
evening extremely difficult and it should be rectified;
10.4
The parties were instructed to file written heads of argument,
failing which I might decide
not to hear the application.
[11]
I did in fact receive heads of argument the next morning just before
the hearing of the application,
but had to be content with an unusual
bundle of documents which is about 7 cm thick. Numerous unnecessary
documents were attached
to the founding affidavit which in any event
consists of 50 pages. Mr Cawood decided to attach his rejected
business rescue plan
dated 10 March 2021, consisting of 155 pages, to
the affidavit.
[1]
Numerous
valuations of assets were attached as well. The relevance hereof
escapes me. The notice of motion and annexures consist
of 420 pages.
Mr Cawood decided that the court should be informed of a lease
agreement, cession agreements and his endeavours till
about July 2021
to manage Joluza. I do not intend to deal with these aspects
which are really irrelevant to the present enquiry.
This background
was totally unnecessary, but in fairness to the parties I decided to
hear the application.
V
THE SECOND BUSINESS RESCUE PROCEEDINGS
[12]
Having been placed in business rescue in January 2020, Joluza’s
first business rescue process
terminated on 21 May 2020 on the basis
that it was no longer in financial distress.
[2]
[13]
The second business rescue proceedings in respect of Joluza commenced
on 3 November 2020 and
Mr Cawood was appointed as business rescue
practitioner on 10 November 2020.
[3]
It is recorded that more than sixteen months have lapsed by the time
this application was issued.
[14]
Five secured claims and one unsecured claim were received. Three of
the secured claims were from
ABSA in the total amount of just under
R32 million. The other two secured claims belonged to Toyota in a
total amount of approximately
R1.3 million. Mr Charl van der Merwe,
the respondents’ attorney, proved an unsecured claim in the
amount of R93 234.50.
Clearly, ABSA’s total claim consists
of approximately 96% of the total claims.
VI
THE LITIGATION PRIOR TO THIS APPLICATION
[15]
Mr Cawood brought a so-called collapse application on behalf of
Joluza in terms whereof it was
declared that Claassen Agri was not a
separate juristic person, but that it collapsed into Joluza and that
the two companies exist
as a single entity as contemplated in s 20(9)
read with s 22 of the Companies Act
[4]
.
Relief was granted on 19 October 2021 in the Mpumalanga division of
the High Court at Middelburg under case number 3064/2. It
is common
cause that there is a pending application for the reconsideration of
the relief granted. Mr Claassen must however pay
the taxed costs
first, but at the stage when the present application was heard, Mr
Cawood had failed to present his bill of costs
for taxation.
[16]
Mr Cawood also came to the conclusion that Joluza could not be
rescued and therefore applied
to the Gauteng division of the High
Court for a conversion in accordance with s 141 of the Companies Act
under case number 52221/2021.
This application was issued on 3
November 2021. His insistence in these circumstances to continue as a
business rescue practitioner
with a fact-finding exercise in order to
obtain data and information and to ask this court for relief on an
urgent basis as his
counsel submitted, is incomprehensible. The
winding up application is opposed by ABSA, alleging that Mr Cawood
has no
locus
standi
to proceed with the application.
[5]
The application is still pending.
[17]
No doubt, ABSA has an interest in the present application, especially
insofar as it is by far
the largest creditor of Joluza and more
importantly, because Mr Cawood’s
locus standi
to act as
business rescue practitioner of Joluza is in dispute, a live issue
that still has to be considered in the Gauteng division
of the High
Court. I expressly insisted during oral argument to be provided with
proof of service of this application on ABSA.
Mr Van Zyl, appearing
for Mr Cawood, submitted that although there was no proof in the
papers before the court, it could be obtained
and forwarded after the
hearing. Leave was granted to him to file proof. Instead of receiving
proof of service on ABSA, I merely
received a service affidavit from
Mr Jan Jacobus Nell, a candidate attorney of Cawood Attorneys,
pertaining to service of the application
papers on the respondents as
well as their attorney, Mr Charl van der Merwe. This is not what I
required. I accept therefore that
ABSA as an affected person and the
largest creditor is unaware of the present application.
[18]
When the business rescue plan of Mr Cawood was rejected on 24 March
2021 – more than a
year ago – the Claassen Family Trust
issued an application out of the Gauteng High Court in terms of s
153(1)(b)(bb)(i) of
the Companies Act in order to declare the vote
inappropriate.
[6]
ABSA opposed
the application and filed a counter-application for the winding up of
Joluza. The inappropriate vote application was
withdrawn on 28
September 2021. A second similar inappropriate vote application,
apparently based on different facts to which Mr
Cawood objected
insofar as he was painted in a bad light, was issued by the Trust in
December 2021. These applications are also
pending.
[19]
Werksmans attorneys, acting on behalf of ABSA, and by agreement with
all the parties, requested
consent in terms of the Gauteng Local
Division Practice Manual for all these applications to be heard
during the week of 11 April
2022 on the basis that all parties agreed
that the matters could be disposed of within one day. The Deputy
Judge President responded
on 10 March 2022, indicating that the
request that the matters be placed under case management was
declined.
[7]
VII
URGENCY
[20]
I mentioned in paragraph 2
supra
that the first available opposed motion court day in the Free State
after 29 March 2022 was Thursday, 12 April 2022. Mr Cawood
and his
alleged expert could not be heard to be serious in stating that
irreparable harm would result if the application was set
down for
hearing two weeks later. Mr Cawood suggested that the “new
harvest is apparently on the land, and the nature of
the crop itself
and the potential yield needs to be determined as soon as
possible.”
[8]
Later it is
alleged that Joluza planted soybeans, sorghum and maize which were
harvested between May and August 2021. However,
based on Mr Maree’s
input, it was alleged that soybeans might be harvested this year from
the beginning of April. Mr Maree
has not provided any facts to show
that he is an expert on the harvesting seasoning in the north-eastern
Free State where Vrede
is situated. There is also no evidence that
crops like sorghum and maize might have been harvested by the
beginning of April. In
any event, Mr Cawood did nothing to ensure
that the yield of the 2021 crop received in September 2021 was
attached in the interests
of creditors. He knew at all relevant time
that Joluza was in the business of cultivating crop and should have
known that crops
had been planted to be harvested this winter. In
reply, Mr Cawood admitted a total lack of knowledge of what crop was
planted,
[9]
clearly proving that
the reliance of early harvesting of soybeans was a fabricated story
which can easily be rejected. The
respondents made it clear
when is harvesting season and their version is in line with Mr
Cawood’s memory of what transpired
the previous year. He has
known since at least September 2021, if not earlier, due to the
animosity between him and the Claassens
and the history of litigation
between them, that he could not rely on their cooperation. Yet, he
waited until the middle of March
2022 to issue an urgent application.
He averred that the respondents had siphoned about R45 million
relating to the proceeds of
the 2021 harvest, and consequently, there
was reason to believe that they will do the same this year. But, so
he averred, no reliance
could be placed on the events of 2021 to show
that urgency was self-created. This is without substance. As said, he
unnecessarily
and unreasonably put not only the respondents, but also
the court, under pressure. Mr Reinders submitted with reference to
all
the usual authorities and trite principles that the application
should be struck from the roll. I declined to do so as mentioned
above, but with the benefit of hindsight and bearing in mind the
extremely busy recess period encountered, I should have done so.
I
shall consider the lack of urgency again when I exercise my
discretion pertaining to costs.
VIII
BUSINESS RESCUE PROCEEDINGS
[21]
'Business rescue' is defined in s 128
(b)
of
the Companies Act to mean —
“‘
proceedings to
facilitate the rehabilitation of a company that is financially
distressed by providing for —
(i) the
temporary supervision of the company, and of the management of its
affairs, business and property;
(ii) the
temporary moratorium on the rights of claimants against the company
or in respect of property in its possession;
and
(iii) the
development and implementation, if approved, of a plan to rescue the
company by restructuring its affairs, business,
property, debt and
other liabilities, and equity in a manner that maximises the
likelihood of the company continuing in existence
on a solvent basis
or, if it is not possible for the company to so continue in
existence, results in a better return for the company's
creditors or
shareholders than would result from the immediate liquidation of the
company; ...'”
[22]
In
Absa
Bank Ltd v Caine NO
[10]
I stated that business rescue proceedings were much better suited to
provide solutions for financially distressed companies than
judicial
management under the previous Companies Act
[11]
and continued as follows:
“
Business rescue
proceedings are much more flexible and financially distressed company
friendly than judicial management. The potential business
rescue
plan provided for in ss 128(1)
(b)
(iii) has
two objects in mind, the primary object being to facilitate the
continued existence of the company in a state of
solvency and
secondly and in the alternative, in the event that the primary
objective cannot be achieved or appears not to be viable, to
facilitate a better return for the creditors or shareholders of the
company than would result from immediate
liquidation
.
Consequently the
Supreme Court of Appeal found in
Oakdene
Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami)
(Pty) Ltd and Others
2013
(4) SA 539
(SCA)
in para [26] as follows:
‘
It follows, as I
see it, that the achievement of any one of the two goals referred to
in section 128(1)
(b)
would qualify as 'business rescue'
in terms of section 131(4).’
As further
stated by the Supreme Court of Appeal in para [27]:
‘
. . .
business rescue proceedings are not limited to the return of the
company to solvency …’”
[23]
In their article dealing with the last decade’s
authorities pertaining to business rescue proceedings,
O’Brien
and Calitz
[12]
used a medical
metaphor which they believe are apposite to business rescue
proceedings. They argued that as a medical practitioner
cannot do
anything for the dead, so, business rescue must have regard to the
reality that some companies are simply beyond resuscitation.
Also, in
medical treatment the support of all structures available to a
patient are important; likewise, with business rescue the
support of
the relevant stakeholders is important. Just as the recovery of a
patient is difficult where there is serious disharmony
among those
who should ideally provide a support structure for the patient
undergoing medical treatment, disharmony between relevant
stakeholders of the company may make business rescue difficult, if
not impossible.
[13]
Having
said this, I do not make any finding in respect of the financial
viability of Joluza, but want to drive the point home that
the
serious disharmony between Mr Cawood as business rescue practitioner,
ABSA, the major creditor and the directors and shareholders
of Joluza
is indicative of the failure to rescue Joluza. There are two options
left: either Joluza settles its debt, or it will
be wound up.
[24]
A substantial degree of urgency is envisaged once a company has
decided to adopt a resolution
to institute business rescue
proceedings. While sentiments expressed in adopting business rescue
procedure to avoid liquidation
of a company may be noble, it should
not lead to a situation that an extraordinary amount of time is
taken in an attempt –
often futile - to achieve this result.
Delay is often at the expense of the rights of creditors. Although
this is not an application
to terminate business rescue proceedings,
I respectfully agree with the following
dictum
of Kusevitski AJ in
South
African Bank of Athens v Zennies Fresh Fruit CC:
[14]
“
In my view the
mechanisms of business rescue proceedings were not designed to
protect a company indefinitely to the detriment of
the rights of its
creditors. The delay in the finalisation of the business rescue
proceedings is unreasonable in the circumstances
and I am satisfied
that an order terminating the proceedings is justified.”
A
balancing of the various rights of affected persons and that of the
company should always be paramount in order to achieve fairness.
IX
MR CAWOOD’S
LOCUS STANDI
[25]
In
casu,
Mr
Cawood’s business plan has been rejected. This is common cause.
He did not receive instructions to finalise an amended
plan for
consideration
[15]
and he was
under a statutory duty to file a notice of termination. There has
been an extraordinarily long period of time since
the business rescue
proceedings were initiated. These proceedings have terminated. I
refer to ss 132(2) which reads as follows:
“
(2)
Business rescue proceedings
end
when-
(a) the court-
(i)
sets aside the resolution or order that began those
proceedings; or
(ii) has converted the
proceedings to liquidation proceedings;
(b) the
practitioner has filed with the Commission a notice of the
termination of business rescue proceedings; or
(c)
a business rescue
plan has been-
(i)
proposed and rejected
in terms of Part D of this Chapter, and
no affected person has acted to extend the proceedings in any manner
contemplated in section
153; or
(ii)
adopted in terms of Part D of this Chapter, and the practitioner has
subsequently
filed a notice of substantial implementation of that
plan.” (Emphasis added)
Mr Cawood failed to apply
for an extention in accordance with ss 132(3) which reads as follows:
“
(3)
If
a company's business rescue proceedings have not ended
within
three months
after the start of those proceedings,
or
such longer time as the court, on application by the practitioner,
may allow,
the practitioner must-
(a)
prepare a report on the progress of the business
rescue proceedings,
and update it at the end of each subsequent month until the end of
those proceedings; and
(b)
deliver the report and each update in the prescribed
manner to each
affected person, and to the-
(i) court, if the
proceedings have been the subject of a court order; or
(ii) Commission, in
any other case.” (Emphasis added)
[26]
Koen J held in
The
Land and Agricultural Development Bank of South Africa v Agri Oil
Mills (Pty) Ltd
[16]
that the
locus
standi
of a business rescue practitioner to continue with business rescue
ends
ex
lege
as
a consequence of his plan being rejected by creditors. I quote from
his judgment with which I respectfully agree:
“
[33] Section
153(5) provides for good administrative governance – that is,
that the CIPC must be advised promptly of
the termination of business
proceedings by the practitioners. Section 153(5) does not prescribe
an additional prerequisite for
the termination of business rescue
proceedings where a business rescue plan has been rejected and no
further steps were taken,
otherwise the end of business rescue
proceedings would be in the hands of practitioners and the speed and
diligence with which
they may file a notice of termination, subject
only to the constraint that they must act 'promptly.' More
specifically,
if business rescue would only terminate after
the business rescue plan has been rejected once the notice of
termination is
filed, then there would be no need for s 132(2)(c)(i),
because in every instance where the business plan was rejected and it
would be required to be followed by a notice of termination,
the
business rescue would terminate in terms of s 132(2)(b).
Section
132(2)(c)(i) would be rendered unnecessary and superfluous.
[34] The business
rescue terminated on 26 February 2020 when the business rescue plan
was rejected and no affected person
had acted to extend to extend the
proceedings in any manner contemplated in s 153. The mechanism of
business rescue proceedings
was not designed to protect a company
indefinitely to the detriment of the rights of its creditors. The
practitioners' locus
standi to continue as business practitioners
ended with the business rescue coming to an end. That is a
consequence which flowed
ex lege from the business rescue plan being
rejected by creditors. It follows that the practitioners then did not
have locus standi,
following the rejection of the business plan, to
bring the second application for conversion and for the liquidation
of AOM….
[35] The above
interpretation is also consistent with the wording of s
141(2)
which provides that business rescue practitioners may bring an
application to end the business rescue proceedings where there
is no
reasonable prospect of business rescue succeeding, that is during the
business rescue proceedings. It is also consistent
with the
investigative and rescue function practitioners are required to
perform. But once that comes to an end because the plan
the
practitioners were able to devise is rejected, then the practitioners
have no further business with the company
save to hand its
administration, assets and the like, back to the company. No
provision is made in s 141 for a conversion and,
specifically, an
order 'discontinuing the business rescue proceedings' post the
rejection by creditors of the business rescue plan.”
(Emphasis
added)
[27]
Wallis JA set the record straight as follows in a unanimous judgment
of the Supreme Court of
Appeal in
Knoop
N.O and Another v Gupta and Another
:
[17]
“
[39]
Potentially the most difficult issue relates to the purported
termination of the
business rescue of the two companies. Reliance was
placed upon the principles in cases such as
Tasima
to
contend that there needed to be an application to set aside the
termination. But that was based upon the misconception that
the
termination was an official act by the CIPC. This is not correct.
When one is dealing with a company that is placed in business
rescue
voluntarily by way of a resolution of the board of directors, the
process of business rescue is conducted on the basis of
the actions
of the company; affected persons, that is, shareholders, any trade
union representing employees, and employees; the
BRP; and the
creditors. It is the company, acting through its directors, that
commences the process and appoints the BRP. The company
then gives
notice of the resolution to commence business rescue. During the
course of the business rescue the directors of the
company remain in
office and must continue to perform their functions as directors and
perform their management functions
in accordance with the express
instructions of the BRP to the extent that it is reasonable to do so.
The BRP must investigate the
affairs of the company and develop a
business rescue plan to be considered by affected persons. If the
plan is adopted, the company
is obliged to implement it under the
direction of the BRP.
[40]
If it transpires at any stage of the process that the company
cannot be rescued, the BRP is obliged to give notice of this and
approach
the court for a liquidation order
. If the business
rescue plan is substantially implemented, the BRP files a notice with
the CIPC and the business rescue terminates
when that notice is
filed.
If the business rescue plan is proposed and rejected and no
affected person has acted to extend it in terms of s 153(1) of the
Act,
the business rescue terminates.
The BRP is obliged in that
event to file a notice of termination of the business rescue. If at
the end of the BRP's investigation,
they conclude that there are no
longer grounds for thinking that the company is financially
distressed, they must inform the court,
the company and all affected
persons of that fact and file a notice of termination of the business
rescue. On filing that notice,
the business rescue proceedings end.”
(Emphasis added)
[28]
Bearing in mind the legislation and the authorities quoted, the
business rescue proceedings have
terminated on 30 March 2021, five
days after the business rescue plan was rejected, or at the latest
and at best for Mr Cawood,
on 28 September 2021.
[18]
ABSA requested Mr Cawood to file a notice in terms of s 153(5) of the
Act, terminating the business rescue proceedings, but he
refused to
do so. Alternatively, the business rescue proceedings terminated in
terms of s 132(2)(c)(i).
[19]
As mentioned, it is evident that Mr Cawood never asked for an
extension of the business rescue proceedings in accordance with the
provisions of s 132(3) of the Act. Even if I am wrong in coming
to anyone or all of these conclusions, there is no sufficient
reason
to grant relief in favour of Mr Cawood as explained herein before and
after.
[29]
It is appropriate to caution the drafters of the various affidavits
with reference to what Wallis JA said
in
Knoop
NO v Gupta
:
[20]
‘
Before concluding
it is appropriate to remark that the application papers in this
matter reflect little credit on the legal practitioners
responsible
for their preparation. They were replete with allegations in emotive
terms not borne out by any of the evidence. Ms
Ragavan’s
allegations against the BRPs did not stand up to scrutiny and the
charges of incompetence, conflict of interest,
lack of independence,
a failure to live up to the high professional standards expected of
BRPs, and the like, were unwarranted.
It should not be necessary to
remind legal professionals who draft affidavits for their clients
that they bear a responsibility
for the contents of those documents
and may not use them for the purpose of abusing their clients’
opponents. Such allegations
should only be made after due
consideration of their relevance and whether there is a tenable
factual basis for them. This aggressive
tone was likewise reflected
in the affidavits of Mr Knoop where he described Ms Ragavan and
others as “Gupta acolytes”,
an expression more
appropriate to a newspaper report than an affidavit. On many points,
he would have been better advised to set
out greater detail and less
rhetoric. As to some of the correspondence between the attorneys, the
less said, the better. It was
marked by aggression, hostility and
accusations, but little of great relevance to the case, and little
that reflected well on the
authors.’
The
attitude of the parties, evident from the papers
in casu
, is
in line with those in
Knoop.
I concur respectfully with the
admonishment of Wallis JA. Some of the averments border on the
hysterical and should not be countenanced.
X
COSTS
[30]
The respondents alleged in their answering affidavit that this was an
appropriate case where
costs
de
bonis propriis
ought to be awarded against Mr Cawood in his personal capacity.
[21]
Mr Cawood responded thereto by merely saying that such an order could
not be granted insofar as he was not personally cited in
the
proceedings.
[22]
Such an
approach is flawed. It could not be expected to join him in his
personal capacity. He is accused of improper conducted
in the alleged
execution of his duties as business rescue practitioner. That is how
he refers to himself. Furthermore, he averred
that he was duly
authorised by Joluza’s Board of Directors to launch these
proceedings.
[31]
If the main application is dismissed with costs, it would mean that
Joluza, in business rescue,
would have to pay such costs. That would
be an inappropriate order as there is no reason why the creditors of
Joluza or any of
the affected persons should be prejudiced
indirectly. Mr Cawood cannot avoid an order against him personally on
the basis that
he was not cited in his personal capacity. The issue
was clearly and patently raised by the respondents under oath and he
had full
opportunity to respond thereto. He was duly warned that a
punitive costs order would be sought against him as will be shown
hereunder.
Mr Reinders pointed out that Joluza should not be
prejudiced by granting costs against it. According to him, Mr Cawood
knew that
his
locus standi
was in dispute. Mr Van Zyl, on the
other hand, submitted that Mr Cawood did not want to be guilty of a
dereliction of duties and
did what was required of him in accordance
with the Companies Act. Therefore, he shall not be penalised with a
costs order as requested.
[32]
Orders
de
bonis propriis
are punitive orders and are not usually made except in exceptional
circumstances. There must have been egregious conduct on the
part of
the party acting in a representative capacity to attract such an
order of costs. The assessment of the gravity of the conduct
is
objective and lies at the discretion of the court.
[23]
Such orders are made as a mark of the court’s displeasure with
the conduct
[24]
of the
particular party
.
[33]
It is also appropriate to refer to Herbstein &
Van Winsen.
[25]
I quote:
“
An award of
costs
de bonis propriis
may be made only when a
person acts or litigates in a representative capacity.
It is unusual to order a
litigant in a fiduciary position to pay costs
de
bonis propriis
,
and good reason for such a course should be shown, such as want
of
bona
fides
,
negligent or unreasonable action, or improper conduct by a trustee or
executor.
288
The
basic notion is material departure from the responsibility of office,
which includes absence of
locus
standi
. Other
litigants who institute or defend proceedings in a representative
capacity, such as executors, guardians, sureties
or agents, or public
officers such as a mayor, are in a similar position. Thus, costs
have been awarded
de
bonis propriis
against
a trustee whose conduct was actuated by an ulterior motive, and
because he did not believe it was for the benefit
of the estate, and
against an executor who was clearly pursuing his personal interest,
the estate having no funds. In
Kohlberg
v Burnett
,
where the executor's real reason for deciding to appeal was a
personal interest (intestacy, being to his financial advantage),
the
court dismissed the appeal with costs, as it would have been
inequitable to have ordered that the executor's costs of appeal
should come out of the estate of the deceased.
A representative litigant
whose conduct is so unreasonable as to justify this special order
can, despite acting in good faith, be
ordered to pay the costs
de
bonis propriis
. The court will not, however, make such an order
lightly, and mere errors of judgment will not be sufficient. It
has been
held that such an order should not be granted in the absence
of some really improper conduct, and that the fairness or
unfairness
of proceedings honestly brought should not be scrutinised
too closely. The criterion has been stated to be actual
misconduct
of any sort or recklessness, and the reasonableness
of the conduct should be judged from the point of view of the person
of
ordinary ability bringing an average intelligence to bear on the
issue in question, not from that of the trained lawyer.
Costs
de bonis
propriis
, if sought, should be specially asked for, or an
application for an order for the payment of costs
de bonis
propriis
should be made at the hearing, but the court may
entertain a subsequent application if made within a reasonable
period.
In a proper case the
court will also order company directors, liquidators,
administrators or even insolvents to pay
costs
de
bonis propriis
.” (footnotes omitted)
[34]
An order
de
bonis propriis
shall not be made against a person or party unless he or she had been
afforded an opportunity to respond to the allegations in
question and
to state his or her case.
[26]
In
casu
,
Mr James Ludwig Claassen, the first respondent, made three
allegations against Mr Cawood in his capacity as the business rescue
practitioner which he backed up with facts, to wit
1.
Mr Cawood lacked
locus standi
to launch the application in his
alleged capacity or on behalf of Joluza;
2.
lack of urgency;
3.
non-joinder of a party with a direct and material interest in
the
outcome of this application.
[27]
[35]
There is a pending application in Gauteng by ABSA as majority
shareholder for the winding up
of Joluza, but Mr Cawood failed to
join ABSA in the present proceedings. In fact, as will be shown, he
even failed to give notice
to ABSA of the proceedings. His own
application for Joluza’s winding up is opposed by ABSA who is
of the opinion that
he has no
locus
standi
.
In fact, the respondents warned Mr Cawood beforehand that his
locus
standi
is diputed.
[28]
[36]
ABSA requested the applicant to file a notice in terms of s 153(5) of
the Act to terminate the
business rescue proceedings, but Mr Cawood
refused to do so.
[37]
On 3 November 2021 Mr Cawood also filed an application for Joluza’s
winding up in the Gauteng
High Court. In doing so, he had to aver
that there was no reasonable prospect of Joluza being rescued, that
he therefore applied
for an order discontinuing the business rescue
proceedings and placing Joluza into liquidation.
[29]
[38]
According to the respondents the business rescue
proceedings terminated five days after rejection of the
business plan
on 24 March 2021; alternatively, Mr Cawood could not act as business
rescue practitioner after 28 September 2021,
the date on which the
inappropriate vote application was withdrawn.
[39]
A factual dispute has arisen insofar as it is
clearly stated on behalf of the respondents that the crop
is
harvested between June and August every year as was the case last
year as well. Consequently, the reliance on urgency was attacked.
[30]
[40]
It is also alleged that Mr Cawood did nothing since his appointment
on 3 November 2020 to inspect
any assets belonging to Joluza. He
never attempted over the course of almost a year and three months to
inspect the harvests. This
is also the case since the collapse
application,
ie
for a period of five months since 19 October 2021.
[31]
[41]
In paragraphs 41.9 and 41.10 it is pointed out that Mr Cawood was
harassing the respondents and
running up substantial legal costs.
Consequently, whilst this application is not urgent, he should be
ordered to pay the costs
on a punitive scale.
[32]
[42]
It
is stated that Mr Cawood did not have authority from Joluza’s
board of directors to bring the application, that he acted
on his own
volition and without any authority and that it would be unfair to
burden Joluza with the costs of the application. Therefore,
Mr Cawood
should be ordered to pay the costs on an attorney and client scale
insofar as the application is
vexatious
and
mala
fide
.
It is clear from the papers that Mr Cawood and the Claassens do not
see eye to eye, accusing each other of even fraud and
malpractices.
[33]
[43]
In paragraph 28 of his replying affidavit Mr Cawood said the
following:
“
I
have already dealt with the legal arguments contained in these
paragraphs. I have not been joined to these proceedings and a costs
order against me cannot be granted. The application is necessitated
by the respondents who refuse access to the assets. Had access
been
provided, the report could have been obtained with no prejudice to
any of the parties.”
[44]
The case is distinguishable from the facts in
Kgoro
Consortium (Pty) Ltd and Another v Cedar Park Properties 39 (Pty) Ltd
and Others.
[34]
In that case the draft order presented to the High Court reasonably
indicated to the particular attorneys that no costs order would
be
sought against them and also, the High Court did not call upon the
firm of attorneys to explain itself. Consequently, the Supreme
Court
of Appeal found that it was denied an opportunity to state its case
and the appeal against the punitive costs order succeeded.
It should
be born in mind that in that case the firm of attorneys was
representing one of the parties in the court
a
quo
and
was not even cited as a party to that proceedings. In
casu
Mr Cawood in his representative capacity cited himself as first
applicant. There is no substance in his argument that in order
for a
punitive costs order to be made against him, he should be cited in
his personal capacity as well.
XI
THE COUNTER-APPLICATION
[45]
The counter-application should have been lodged in the Gauteng High
Court where the registered
address of Joluza is situated, but over
and above that, the orders are of academic value only. The
respondents sought declaratory
orders in terms whereof Joluza’s
business rescue proceedings had come to an end and that Mr Cawood’s
appointment as
business rescue practitioner had terminated. Mr
Reinders conceded that there was no necessity in granting the orders
as requested.
[46]
In my view the counter-application should be dismissed and the
parties be ordered to pay their
own costs. The dismissal of the
counter-application does not mean that the respondents’ factual
averments, which were made
in opposition to the main application as
well as in support of the counter-claim may be disregarded. They have
raised valid points
as indicated above. I do not exercise my
discretion to order costs in favour of Mr Cawood for the reasons
advanced herein. There
is also no reason to award costs in favour of
Joluza who was unnecessarily made a party to the litigation.
XII
CONCLUSION
[47]
I conclude in repeating that Mr Cawood had no
locus standi
to
launch the present proceedings, but even if I am wrong in this
regard, no relief could be granted as requested,
inter alia
insofar as ABSA was not joined in these proceedings or at least duly
informed accordingly. I refer again to the metaphor of the
sick
patient. Just as his recovery is difficult where there is serious
disharmony among those who should ideally provide a support
structure
for him while undergoing medical treatment, disharmony between
relevant stakeholders of a company in financial distress
may make
business rescue difficult, if not impossible. Mr Cawood
accepted this and decided to launch the winding up application
in
November 2021. Now, four months later, he wants to continue as
business rescue practitioner whilst that and others applications
are
pending.
[48]
Mr Cawood failed to show that he was entitled to an interdict. The
requisites for a final interdict have not been met. He failed
to
prove a clear right. The absence thereof should be the end of the
enquiry. It is averred by him that no affected person would
be
prejudiced if the inspection of assets and managerial control over
Joluza are allowed, but in my view he has no right to access,
inspection or management in the circumstances as explained above.
Serious costs implications apply. He acted on a frolic of his
own.
His allegation that if the relief is granted, it will benefit all
affected parties and in the event of winding up, the appointed
liquidators will benefit from his report and the supporting documents
obtained, is without substance. The liquidators to be appointed
in
the event of winding up will have the backing of the legislation to
assist them. I find it amazing that Mr Cawood has now all
of a sudden
elected to ensure “proper administration” in light of the
excessive delay, his failure to ask for extention
of time as he was
required to do, the rejection of his business plan more than a year
ago and in the face of the pending winding
up applications and other
applications in Gauteng. It was not shown that irreparable harm would
be caused to Joluza or any affected
persons if the interdict is not
granted. Mr Cawood has no interest in the business of Joluza and
should have handed over the administration
thereof to its directors
as stipulated in the authorities quoted above. The obvious
alternative remedy, if it is alleged that Joluza
cannot be saved, is
to apply for its winding up and such processes are underway in
Gauteng. Once Joluza is wound up, its liquidators
will take charge.
It is not expected of Mr Cawood to pave the way for them as he
articulated in his papers. My impression of his
conduct is that he is
rather interested in ensuring that his interests, and nobody else’s
interests, are catered for. Furthermore,
in the exercise of my
discretion and bearing in mind the pending litigation in Gauteng,
there is no reason why relief shall be
granted to Mr Cawood. The
steps taken in that court serve as proof that an alternative remedy
exists.
XIII
ORDERS
[49]
The following orders are made:
1.
The main application is dismissed.
2.
Mr Werner Cawood, the first applicant, shall be liable
de bonis
propriis
for the applicants’ costs of the main application
as well as the respondents’ costs in opposing the main
application
and he shall not be entitled to claim any such costs
payable by him from Joluza Boerdery (Pty) Ltd.
3.
The counter-application is dismissed.
4.
The parties shall pay their own costs in respect of the
counter-application.
JP
DAFFUE J
On
behalf of the Applicants:
Adv HC Van Zyl
Instructed
by:
Cawood Attorneys
c/a McIntyre & Van
Der Post
BLOEMFONTEIN
On
behalf of the Respondents:
Adv SJ Reinders
Instructed
by:
Charl Van der Merwe Attorneys
c/a Badenhorst Attorneys
BLOEMFONTEIN
[1]
Annexure “J7”, pp 101
[2]
Founding affidavit: para
17,
p 19
[3]
Ibid
:
para 19, p 26
[4]
Act 71 of 2008
[5]
Founding
affidavit: para 15, pp 18 & 19
[6]
Ibid
:
para 30, p 34 read with the letter of Werksmans at pp 696 - 698
[7]
Annexure “W2”, p 699
[8]
Founding affidavit: para 49, p 53
[9]
Replying affidavit: para 35, p 687
[10]
[2014] ZAFSHC 46
at para 40
[11]
Act 61 of 1973
[12]
“Considerations that inform the view of whether there is a
reasonable prospect of rescuing a company: A decade of legal
precedent”,
2022 TSAR 25
[13]
Ibid
:
p 27
[14]
2018 (3) SA 278
(WCC) at para 43; see also
Advanced
Technologies & Engineering Co (Pty) Ltd (in Business Rescue) v
Aeronautique et Technologies Embarquées SAS
GNP
72522/11
[15]
Section 153(3) of the Act
[16]
2021
JDR 1238 (KZP) at paras 33 - 39
[17]
2021
(3) SA 135
(SCA) at paras 39 & 40
[18]
Answering
affidavit: pp 440 – 449 & founding affidavit:
para 15, p 18
[19]
Ibid:
para
8.1, p 440 & para 9.2, p 443
[20]
Knoop
at para 145
[21]
Answering
affidavit: paras 12 – 19, pp 446 - 448
[22]
Replying
affidavit: para 27, pp 684 – 685; the matter was also
revered to in the answering affidavit: paras
56 – 60, pp
475 - 478 and responded to in the replying affidavit: paras 56
– 57, p 694
[23]
Public
Protector v South African Reserve Bank
2019
(6) SA 253 (CC)
[24]
See
also the Constitutional Court judgment in
SA
Liquor Traders’ Association and Others v Chairperson, Gauteng
Liquor Board and Others
2009 (1) SA 565
(CC) at para 54
[25]
Cilliers
et
al, Herbstein & van Winsen, The Civil Practice of the High
Courts of South Africa
,
vol 2, 982 - 987
[26]
CB
& Another v HB
2021
(6) SA 332
(SCA) at para 20
[27]
Answering
Affidavit: para 5, p 436
[28]
See
the detailed letter of attorney Charl van der Merwe dated 2 March
2022: annexure “J36”, p 401/2
[29]
See the requirements of s 141 of the Companies Act
[30]
See
para 35.1, p 459
[31]
See p
aras
41.3 & 41.4, p 463
[32]
See
also paras 55 – 59, pp 576 & 578
[33]
See
pars 12 – 19, pp 446 – 448 & the Cawood’s
response in paras 27 & 28, pp 684 &685 as well as
paras 55 –
60, p 475 – 478 and the response paras 56 & 57, p 694
[34]
(
935/2020)
[2022] ZASCA 65
(9 May 2022)