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[2022] ZAFSHC 102
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Marais v Westline Aviation (Pty) Ltd and Others (1993/2021) [2022] ZAFSHC 102 (30 May 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No:
1993/2021
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
SAREL
RENIER MARAIS
Applicant
and
WESTLINE
AVIATION (PTY) TLD
1
st
Respondent
COMPANIES
AND INTELLECTUAL PROPERTY COMMISSION
2
nd
Respondent
FIRSTRAND
BANK LIMITED
3
rd
Respondent
CORAM
:
JP DAFFUE J
HEARD
ON
:
26 MAY 2022
ORDERS
GRANTED ON
:
26 MAY 2022
These
reasons were 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 14h00 on 30 May 2022.
REASONS
I
INTRODUCTION
[1]
I had to adjudicate an application to place a company under business
rescue and supervision
as well as a counter-application by the
company’s major creditor for the provisional winding-up of the
company. The following
orders were granted on 26 May 2022:
“
1.
The applicant’s application to place the first respondent
company, to wit Westline
Aviation (Pty) Ltd in business rescue is
dismissed with costs, such costs being the third respondent’s
costs, inclusive of
the costs consequent upon the employment of two
counsel.
2.
Leave is granted to the third respondent in terms of the provisions
of Uniform Rule of Court 6(7) and Uniform Rule of Court 24(2) to
institute its counter-application as set out in the notice of
counter-application against the first respondent in the main
application.
3.
Leave is granted to the third respondent in terms of
section
133(1)(b)
of the
Companies Act, 71 of 2008
to bring this application
and to request the relief sought in it.
4.
The first respondent company is placed under PROVISIONAL WINDING-UP
in the hands of the Master of the High Court.
5.
A PROVISIONAL WINDING-UP ORDER is issued calling upon all interested
parties to show cause, if any, to the court on the
21
st
day of
JULY 2022
at
09h30
why a FINAL ORDER OF
WINDING-UP should not be granted against the first respondent
company.
6.
Service of this rule
nisi
and a copy of the third respondent’s
counter-application and annexures thereto as well as a copy of the
founding application
in the main application and annexures thereto
shall be effected on the first respondent company at its registered
office or its
principal place of business within the court's
jurisdiction.
7.
This order shall, without delay, be published in THE CITIZEN
and the
GOVERNMENT GAZETTE.
8.
The sheriff shall ascertain whether the employees of the first
respondent company
are represented by a trade union and whether there
is a notice board on the premises to which the employees have access.
9.
A copy of the provisional winding-up order shall be served on -
9.1
Every registered trade union that as far as the Sheriff can
reasonably ascertain, represents
any of the employees of the first
respondent company.
9.2
The employees of the first respondent company by affixing a copy of
the application and
provisional winding-up order on any notice board
to which the employees have access inside the first respondent
company's premises,
or if there is no access to the premises by the
employees, by affixing a copy to the front gate or front door of the
premises from
which the first respondent company conducts any
business.
9.3
The South African Revenue Service.
10.
Reasons shall be provided on Monday, 30 May 2022 to the parties by
electronic means.”
[2]
During the preparation of these reasons I noted that the court order
issued did not
correspond with the orders granted in open court. I
refer specifically to paragraphs 2 and 3 of the order encapsulated
above. Furthermore,
insofar as I granted a winding-up order in
accordance with the standard order normally given by me, I mistakenly
referred to service
of the rule
nisi
and a copy of the notice
of motion and annexures which is in line with the standard order
normally granted in these kind of applications.
Obviously, in
casu
the standard order granted should have been in line with the wording
in paragraph 5 of the counter-application and the wording
of
paragraph 4 of the typed order should have followed that wording.
This has now been rectified in paragraph 6 of the amended
order in
accordance with the provisions of Uniform Rule of Court 42 which I
was
mero motu
entitled to do as
this part of the order was erroneously made. Consequently, the
amended order to be issued shall also encapsulate
this aspect.
II
THE PARTIES
[3]
The applicant in the main application for business rescue and
supervision is Mr Sarel
Renier Marais (“Mr Marais”), a
major male person and director of the first respondent, to wit
Westline Aviation (Pty)
Ltd (“Westline”). Mr Marius
Bruwer, an attorney, who is also a director of the first respondent,
appeared on behalf
of the applicant before me.
[4]
The first respondent is Westline, a registered company that holds
various air service
licences with registered address and principal
place of business at the New Tempe Airport outside Bloemfontein.
[5]
The Companies and Intellectual Property Commission is cited as the
second respondent,
but this entity did not take part in the
proceedings before me.
[6]
Firstrand Bank Ltd (“FNB”), a commercial bank and
registered credit provider
and a major creditor of Westline, is cited
as the third respondent in the main application. Advv DJ Van der Walt
SC and S Tsangarakis
appeared for the third respondent.
[7] FNB filed a
counter-application in which application it sought the provisional
winding-up of Westline. Mr Bruwer appeared for
Westline in this
application.
III
THE LITIGIOUS MATRIX
[8]
The following summary reflects the chronological history of the
relevant events that
culminated in the disputes to be adjudicated:
8.1
on 6 February 2021 FNB issued a so-called hybrid application against
Westline under application
542/2021, seeking the winding-up of
Westline, alternatively payment in the amount of R5 595 176.58
together with interest
and costs;
8.2
on 25 March 2021
[1]
a money
judgment was granted in accordance with a settlement agreement
between the parties whereupon a total amount of R1 million
was paid
to FNB and on 8 April 2021
[2]
,
the date to which the application was postponed, a further money
judgment was granted for payment of the amounts due to FNB in
terms
of an amended settlement agreement, the outstanding amount being
R4 734 033 plus interest;
8.3
Mr Marais’ application to place Westline under business rescue
and supervision was
issued under application 1993/2021 on 5 April
2021, more than a year ago;
8.4
on 9 July 2021 FNB filed a notice of counter-application together
with its answering affidavit
in resistance of the business rescue
application as well as its founding affidavit in the
counter-application;
8.5
although FNB elected not to proceed with the liquidation application,
contemplated in the
order of 8 April 2021 under application 542/2021,
this application was also enrolled for hearing on 26 May 2022,
although FNB made
it clear that they would not proceed with that
application if leave is granted to it to proceed with the
counter-application for
winding-up in application 1993/2021;
8.6
Mr Marais failed to file a replying affidavit in the business rescue
application and Westline
not only failed to file an answering
affidavit in application 524/2021, but also failed to file an
answering affidavit to the counter-application
in application
1993/2021 although a notice of opposition was filed;
8.7
no further steps were taken in the litigation until FNB decided in
April this year to set
down both applications 524/2021 and 1993/2021
for hearing on 26 May 2022;
8.8
FNB filed heads of argument in accordance with the Practice
Directives of this division,
but no heads of argument were filed by
either Mr Marais or Westline, notwithstanding the fact that they were
at all times represented
by an attorney, to wit Mr R Coetzee of
Steenkamp and Jansen Inc who signed the notice of intention to oppose
the counter-application
on behalf of Westline and the notice of
motion in application 1993/2021.
IV
THE BUSINESS RESCUE APPLICATION
[9]
The events on 26 May 2022 when the applications were called need to
be recorded. Mr
Bruwer confirmed that he was appearing for Mr Marais
and Westline in his capacity as attorney employed by Steenkamp and
Jansen
Inc. He requested that the business rescue application be
removed from the roll as he merely intended to make submissions in
respect
of the counter-application for provisional winding-up. I
indicated to him that, bearing in mind the provisions of Uniform Rule
of Court 41, he could not do that without the leave of the opponent
or the court. I requested Mr Van der Walt to respond. He confirmed
that they were taken by surprise as no leave was sought from FNB.
They heard about the intended application for the first time
in
court. He insisted that the matter should not be removed from the
roll as Mr Marais could always enrol it again any time later.
He
submitted that the applications should be argued and adjudicated –
pari passu
- upon on the papers as they stand, with which
submission I agreed. Upon reconsidering the matter and without
arguing the merits
of the business rescue application, Mr Bruwer
submitted that the court may dismiss the main application for
business rescue. When
I requested submissions about the costs of the
main application, he again made no submissions, save to say that an
award of costs
was in the court’s discretion. Mr Van der Walt
sought costs in favour of FNB, including the costs of two counsel,
whereupon
I made an order as reflected in paragraph 1 above. I
requested Mr Bruwer whether it was necessary to provide any reasons
for the
order, but he forfeited the right to receive any reasons.
Hereafter I allowed the parties an opportunity to argue the
counter-application.
[10]
Notwithstanding Mr Bruwer’s stance on reasons, I shall herein
later briefly deal with the business
rescue application as much of
the evidence relied upon by FNB in that application has been
incorporated in the founding affidavit
of the counter-application.
[3]
[11]
'Business rescue' is defined in
s 128
(b)
of
the
Companies Act
[4
]
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; ...'”
[12]
In
Absa
Bank Ltd v Caine NO
[5]
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
[6
]
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 …’”
[13]
In their article dealing with the last decade’s authorities
pertaining to business rescue proceedings,
O’Brien and
Calitz
[7]
used a medical
metaphor which they believe are apposite to business rescue
proceedings. They argue 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.
[8]
In
casu
,
FNB can be equated to the affluent uncle of the seriously ill
patient, Westline, confined to a ventilator providing oxygen in
ICU.
The affluent uncle is not prepared to spend any further money in the
hope that the patient will recover. Nobody else can provide
financial
support although the patient’s brothers believe that his life
can be saved. Medical opinion is that the chances
of recovery are
slim. The hospital is not prepared to provide further assistance in
the absence of financial backing. The outcome
is not difficult to
predict.
[14]
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:
[9]
“
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.
[15]
In
Diener
NO v Minister of Justice and Correctional Services and others
[10]
the Constitutional Court summed up the purpose of business rescue
proceedings in the following words:
“
[54] The
purpose of business rescue is to assist a financially distressed
company with paying its debts, avoiding insolvency,
and maximising
the benefit to stakeholders upon liquidation (if inevitable). It is
stated expressly in
s 7
(k)
of
the
Companies Act that
one of the purposes of the Act is to
'provide for the efficient rescue and recovery of financially
distressed companies, in
a manner that balances the rights and
interests of all relevant stakeholders'. It must be emphasised that
this must be done while
balancing the rights of all affected persons,
including creditors, employees, and shareholders. The primary goal of
business rescue
is to avoid liquidation and its attendant
negative consequences on stakeholders. In addition, a secondary
purpose is to achieve
a better outcome on liquidation or
disinvestment, whereby '[t]he underlying principle behind
restructuring or reorganisation proceedings
is that a business may be
worth a lot more if preserved, or even sold, as a going concern than
if the parts are sold off piecemeal'.
At
the same time, where it is not viable to rescue a company, it should
be liquidated and its business sold
.
Business rescue can only begin where there is a reasonable prospect
of saving the company. This was highlighted in
KJ
Foods
, where the Supreme Court of
Appeal quoted with approval the High Court in
DH
Brothers Industries
, which stated
that —
'Chapter [6] as a whole
reflects ''a legislative preference for proceedings aimed at the
restoration of viable companies rather
than their destruction''
but
only of viable companies, not of all companies placed under business
rescue
.'
This
is in line with the ultimate aim of balancing the rights and
interests of all relevant stakeholders.” (emphasis added)
[16]
In
casu
,
Mr Marais correctly conceded that Westline is commercially insolvent,
although it was averred that it’s assets exceeded
its
liabilities and that it was not factually insolvent. In this regard
Westline relies on the say-so of Mr Marais and outdated
financial
statements for the year ending 28 February 2020. I shall deal with
factual solvency when I evaluate the evidence and
submissions
pertaining to the winding-up application later herein. Save for the
payment of R1 million referred to above, Westline
has not made any
further payments to FNB since 1 April 2021. Although Mr Marais tried
to make out a case that Westline’s
difficulties had arisen as a
result of the Covid pandemic, FNB presented uncontested evidence that
Westline was already financially
distressed before the Covid pandemic
hit this country.
[11]
[17]
Mr Marais believed that Westline could be saved by making use of the
aircraft that are mortgaged in
favour of FNB, but FNB made it clear
that it was not prepared to assist Westline in this regard and that
it would vehemently oppose
any business plan to be prepared by a
business rescue practitioner based on the information provided in the
founding affidavit.
Mr
Marais made the point in the founding affidavit that the plan to
rescue Westline was not premised on the injection of post
commencement
finance insofar as it “possesses of all the
necessary equipment in order to render training services.”
[12]
.
He stated that once “business is back to normal, Westline’s
income will slowly increase and, within at least the next
15
(fifteen) months, return to normal.” Then it will be able to
meet its financial obligations.
[13]
I agree with FNB that the proposed business rescue plan, insofar as
it may be found that a proper plan was put on the table which
I am
not prepared to accept even for the argument, is based on the
proposition that Westline can carry on conducting business with
FNB’s
money and security in circumstances where FNB is not interested in a
continued business relationship with Westline.
FNB has a cession in
its favour over all debts due to Westline and Westline will not be
able to continue to trade and generate
a profit simply because all
monies earned will have to be paid to FNB by virtue of this security.
Secondly, FNB is not prepared
to allow Westline to use the aircraft
to generate income. These aircraft are subject to registered aircraft
mortgages in favour
of FNB and by utilizing them, they will be
exposed to risk and a decrease in value if used during the business
rescue process which
will dilute and diminish FNB security.
[14]
[18]
If the time when the business rescue application was issued and the
delay in finalising that application
is considered, Mr Marais and
Westline did exactly what is not required of affected persons and a
company in financial distress,
ie
to keep creditors on a
string instead of finalising the business rescue process as soon as
possible.
[19]
No reasons have been advanced as to why Mr Marais shall not pay the
costs of the business rescue application
incurred by FNB, inclusive
of the costs of two counsel. Consequently, such order is appropriate
in the circumstances.
V
EVALUATION OF THE EVIDENCE AND SUBMISSIONS BY THE PARTIES PERTAINING
TO THE WINDING-UP
APPLICATION
[20]
As mentioned, the winding-up application was not opposed insofar as
no answering affidavit had been
filed. No heads of argument were
filed on behalf of Westline. Mr Bruwer made it clear during oral
argument that he did not rely
on any technical points or possible
non-compliance with statutory requirements. That was a wise decision.
I was satisfied that
all statutory requirements pertaining to the
provision of security and service had been complied with. Mr Bruwer
also insisted
to argue the winding-up application on the evidential
material before the court, expressly stating that Westline did not
intend
to file an answering affidavit.
[21]
In principle an applicant seeking a provisional winding-up order must
merely establish its entitlement
to such order on a
prima
facie
basis,
ie
it must show that the balance of probabilities on the affidavits is
in its favour.
[15]
I
also wish to quote the following
dictum
of Brand J (as he then was) in
Payslip
Investment Holdings CC v Y2K Tec Ltd
[16]
and
wish to emphasize that this is applicable for provisional winding-up
orders only and not final orders:
“
Guidelines
as to how factual disputes should be approached in an application
such as the present were laid down by the Appellate
Division in
Kalil
v Decotex (Pty) Ltd and Another
1988
(1) SA 943
(A)
.
According to these guidelines a distinction is to be drawn between
disputes regarding the respondent's liability to the applicant
and other disputes. Regarding the latter, the test is whether the
balance of probabilities favours the applicant's version on the
papers. If so, a provisional order will usually be granted. If not,
the application will either be refused or the dispute referred
for
the hearing of oral evidence, depending on,
inter
alia
,
the strength of the respondent's case and the prospects of
viva
voce
evidence
tipping the scales in favour of the applicant. With reference to
disputes regarding the respondent's indebtedness,
the test is whether
it appeared on the papers that the applicant's claim is disputed by
respondent on reasonable and
bona
fide
grounds.
In this event it is not sufficient that the applicant has made out a
case on the probabilities. The stated exception
regarding disputes
about an applicant's claim thus cuts across the approach to factual
disputes in general.”
In casu
no
evidence was presented on behalf of Westline, neither in the business
rescue application, nor in the counter-application, to
dispute FNB’s
version that Westline is not only commercially insolvent, but also
factually insolvent. I shall deal briefly
with these allegations
hereunder. More importantly, FNB’s status as creditor and the
amount due to it is common cause and
not in dispute. Some authorities
will be referred to in the next paragraphs where after the parties’
submissions will be
considered.
[22]
More than a century ago Innes CJ made the following statement in
De
Waard v Andrews & Thienhaus Ltd
:
[17]
“
To my mind the
best proof of solvency is that a man should pay his debts; and
therefore I always examine in a critical spirit the
case of a man who
does not pay what he owes.”
[23]
It is also necessary to refer to the often quoted
dictum
of Berman J in
ABSA
Bank Ltd v Rhebokskloof (Pty) Ltd and Others:
[18]
“
The
primary question which a Court is called upon to answer in deciding
whether or not a company carrying on business should be
wound up as
commercially insolvent is whether or not it has liquid assets or
readily realisable assets available to meet its liabilities
as they
fall due to be met in the ordinary course of business and thereafter
to be in a position to carry on normal trading - in
other words, can
the company meet current demands on it and remain buoyant? It matters
not that the company's assets, fairly valued,
far exceed its
liabilities: once the Court finds that it cannot do this, it follows
that it is entitled to, and should, hold that
the company is unable
to pay its debts within the meaning of
s 345(1)
(c)
as
read with s 344
(f)
of the Companies Act 61 of 1973 and is
accordingly liable to be wound up.”
[24]
Recently Wallis JA considered the test for commercial insolvency in a
unanimous judgment of the Supreme
Court of Appeal. He held as follows
in
Murray
NO and others v African Global Holdings (Pty) Ltd and others
:
[19]
“
[31]
The argument about timing misconceived the nature of commercial
insolvency. It is not something to be measured at a single
point in
time by asking whether all debts that are due up to that day have
been or are going to be paid. The test is whether the
company 'is
able to meet its current liabilities, including contingent and
prospective liabilities as they come due'. Put slightly
differently,
it is whether the company —
'has
liquid assets or readily realisable assets available to meet its
liabilities as they fall due to be met in the ordinary course
of
business and thereafter to be in a position to carry on normal
trading — in other words, can the company meet current
demands
on it and remain buoyant?
'
Determining
commercial insolvency requires an examination of the financial
position of the company at present and in the immediate
future to
determine whether it will be able in the ordinary course to pay its
debts, existing as well as contingent and prospective,
and continue
trading.” (Emphasis added and footnotes omitted)
[25]
Mr Bruwer repeatedly tried to rely on facts not forming part of the
evidential material before the
court and even legislation to obtain
what he called a “just and equitable” order. Mr Van der
Walt objected to this
unprocedural approach, but I decided to provide
some lee-way to Mr Bruwer. I shall return hereto.
[26]
It is trite law that a party relying in litigation – motion
procedure included – on statutory
provisions must quote the
specific Act and the relevant section with clarity. The same applies
to regulations, ordinances or other
statutory provisions. Evidence
tendered from the bar is unacceptable and inadmissible. The
affidavits in motion proceedings serve
not only as the pleadings, but
must contain the essential evidence which would ordinarily be led at
the trial.
[20]
A party
opposing relief in motion procedure must comply with the well-known
and oft-quoted
dicta
of the Supreme Court of Appeal in
Wightman
t/a JW Construction v Headfour (Pty) Ltd and another.
[21]
In
casu,
Westline
did not even file an answering affidavit in an attempt to engage with
relevant factual averments.
[27]
Contrary to the trite legal principles, Mr Bruwer made two points.
First, there was an alternative
remedy available to FNB and
winding-up procedure was not called for. Second, it was not just and
equitable to wound up Westline.
In the process he
inter
alia
referred to an article dealing with aviation finance as well as the
Convention on the International Recognition of Rights in Aircraft
Act
(“the Rights in Aircraft Act”).
[22]
He wrongly referred to a 1953 Act instead of the 1993 Act. The
relevance of either the article or the Act escapes me. FNB referred
to this Act to confirm that aircraft owned by Westline were subject
to aircraft mortgages. I repeatedly asked Mr Bruwer to which
section
of the Act he was referring, but he merely insisted that it was “a
short Act” without providing the alleged
relevant section. I
did not foresee that this piece of legislation would be dealt with
during argument, but I undertook to do my
own research in this
regard. My
prima
facie
view as expressed during argument was that the only relevance might
be pertaining to aircraft mortgages and a mortgagee’s
right to
liquidate its security, in the same vein as the perfection of
notarial bonds, but that a creditor who has such security
is not
necessarily barred from applying for winding-up although it is a
factor to be considered.
[28]
The Rights in Aircraft Act referred to by Mr Bruwer was studied by me
over the weekend. This Act contains
absolutely nothing to support Mr
Bruwer’s submission that a provisional winding-up order should
not be granted. It deals
with the mortgage of aircraft, the priority
of mortgages and the rights of mortgagees. As anticipated, s 7 of the
Act, dealing
with the rights of mortgagees, stipulates as follows
which is in line with the perfection of notarial bonds:
“
7
Rights of mortgagee
(1)
The mortgagee under
a registered mortgage of an aircraft or a share in an aircraft
shall
be entitled to recover the amount due under the mortgage in any court
of competent jurisdiction, and when giving judgment
or thereafter the
court may direct that the mortgaged aircraft or share be sold in
execution of the judgment.
(2)
Subject to the
provisions of subsection (1), the mortgagee under a registered
mortgage of an aircraft or a share in an aircraft shall not merely by
virtue of the mortgage be entitled to sell or otherwise dispose
of
the mortgaged aircraft or share.”
The article referred to
above, by Van Zuylen and Msimang,
[23]
which Mr Bruwer handed up to me from the bar deals with aviation
finance and the security provided by mortgages over aircraft.
Again,
there is nothing that supports any of Mr Bruwer’s submissions.
Mr Bruwer’s allegation that the mortgaged aircraft
were worth
much more than FNB’s claim is not supported by any evidence.
[29]
Bearing in mind the common cause fact that Westline is commercially
insolvent, it is strictly speaking
unnecessary to deal with factual
insolvency. I shall therefore just briefly refer to the version
presented by FNB in this regard.
[30]
Westline terminated its insurance policy in respect of all the
aircraft mortgaged to FNB without FNB’s
knowledge, consent or
permission and although it obtained alternative insurance, it did not
cede its rights in terms of the relevant
insurance policy to FNB.
[24]
This poses a serious risks to FNB and must be considered in the light
of Mr Bruwer’s submissions pertaining to FNB’s
security
over the aircraft. According to the version of FNB which should be
considered as uncontested at this stage, notwithstanding
certain
allegations in Mr Marais’ founding affidavit in the business
rescue application, Westline is factually insolvent
in an amount of
R5 140 847.04.
[25]
Westline has not shown that it is factually solvent in the sense that
its liabilities, fairly estimated, exceed its assets fairly
valued.
Mr Marais’ version that Westline is factually solvent in the
amount of approximately R13 million is based on inadmissible
evidence, irrelevant and does not have any probative value.
[26]
No affidavit was filed of any expert to establish the market value of
its corporeal assets. Its financial statements for the year
ending on
29 February 2020 are more than two years old. It is also interesting
to note that the loan agreements of related parties,
indicating an
indebtedness to them by Westline, to wit Central AMO (Pty) Ltd,
Charann Hanger Trust and Mrs DA Marais, showed an
increase over the
period from March 2019 to 29 February 2020 in an amount of
R5 290 283. FNB alleged that a reasonable
deduction may be
made from this that Westline, whilst being commercially insolvent,
colluded with these related parties to the
prejudice of its
creditors. In the absence of any contradictory evidence, this appears
to be justified.
[27]
[31]
In conclusion, Mr Bruwer’s submission that an alternative
remedy existed is not founded on any
acceptable evidence. To the
contrary, FNB is fully entitled to obtain finality. It is evident
that Westline is unable to pay its
debts and I am also satisfied that
it is just and equitable that it be wound up.
[32]
Mr Bruwer submitted that the application for winding-up should be
dismissed, alternatively that the
application be postponed for six
weeks to enable Westline to settle its debt. This submission was
again confirmation that Westline
did not have any defence whatsoever,
did not dispute FNB’s debt and merely wished to obtain a
further delay. As mentioned,
the last payment made by Westline to FNB
was on 1 April 2021. There was no reason to adhere to Mr Bruwer’s
request.
[33]
The point that Mr Bruwer wanted to drive home is that Westline is a
valuable asset to the Free State
aircraft community and it would be a
sad day if it had to be wound up. Many employees would become
unemployed and no company would
be available to take charge of the
Tempe Airport over which Westline has complete control. No further
training would be provided
to aspirant pilots from within and outside
the borders of this country. Furthermore, the equity in the aircraft
mortgaged in favour
of FNB by far exceeded its claim. None of these
submissions are based on acceptable evidence.
VI
CONCLUSION
[34]
In conclusion, and after having been satisfied that FNB had
prima
facie
proven an entitlement to a provisional winding-up order,
the orders were granted as encapsulated in paragraph 1 above with the
rider contained in paragraph 2.
JP DAFFUE J
On
behalf of the applicant &
1
st
respondent:
Mr M Bruwer
Instructed
by:
Steenkamp Jansen Inc
BLOEMFONTEIN
On
behalf of the 3
rd
respondent: Advv DJ Van der
Walt SC & S Tsangarakis
Instructed
by:
Symington
& De Kok
BLOEMFONTEIN
[1]
Annexure “FA15”, pp 82 - 92
[2]
Annexure “FA16”, pp 93 - 101
[3]
Paras 19 & 20 of the founding affidavit in the
counter-application read with paras 18 to 111 of the answering
affidavit
in the main application
[4]
71 of 2008
[5]
[2014] ZAFSHC 46
at para 40
[6]
61 of 1973
[7]
“Considerations that inform the view of whether there is a
reasonable prospect of rescuing a company: A decade of legal
precedent”, 2022 TSAR 25
[8]
Ibid
:
p 27
[9]
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
[10]
2019 (4) SA 374 (CC)
[11]
See
inter
alia
the answering affidavit: para 32, pp 151 - 156 & paras 36
– 43, p 159 - 161
[12]
Founding affidavit: para 69, p 28 read with
[13]
Ibid
:
para 52, p 23
[14]
FNB relied in this regard on:
Oakdene
Square Properties (Pty) Ltd & Others v Farm Bothasfontein
(Kyalami) (Pty) Ltd and Others
2013 (4) SA 539
(SCA) at para 38
[15]
Kalil v
Decotex (Pty) Ltd and Another
1988 (1) SA 943
(A) at 975 J – 979 F
[16]
2001
(4) SA 781
(CPD) at 783
[17]
1907 TS 707
at p 733
[18]
1993 (4) SA 436
(C) at 440 F – 441 A
[19]
2020 (2) SA 93
(SCA) at para 31
[20]
Transnet
Ltd v Rubenstein
2006
(1) 591 (SCA) at 600G – H; see also
Minister
of land Affairs and Agriculture and others v D & F Wevell Trust
and others
2008 (2) SA 184
(SCA) at 220B - E
[21]
[2008] ZASCA 6
;
2008
(3) SA 371
at para 13
[22]
59 of 1993
[23]
Van Zuylen and Msimang,
Aviation
Finance in South Africa
[24]
Paras 22.4 and 22.5 of the founding affidavit to the
counter-application read with the applicable paragraphs of the
answering
affidavit in the business rescue application
[25]
Answering affidavit in the business rescue application, paras 18 –
27, pp 145 – 150
[26]
Founding affidavit, paras 38 – 38.2, p 19
[27]
Founding affidavit in the counter-application, para 27, p 13