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[2021] ZAGPJHC 464
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ERF [....] Hyde Park (Pty) Ltd and Another v United Technical Equipment Company (Pty) Ltd and Others (30706/2021) [2021] ZAGPJHC 464 (3 August 2021)
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Note:
Certain
personal/private details of parties or witnesses have been
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 30706/2021
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED
DATE:
3/8/2021
In
the matter between:
ERF
[....] HYDE PARK (PTY) LTD
FIRST APPLICANT
KHOMOTSO
TEFFO N.O.
SECOND APPLICANT
And
UNITED
TECHNICAL EQUIPMENT COMPANY
FIRST
RESPONDENT
(PTY)
LTD
TERRENCE
KOMMAL
SECOND RESPONDENT
SHERIFF
SANDTON SOUTH
THIRD RESPONDENT
REGISTRAR
OF DEEDS, PRETORIA
FOURTH RESPONDENT
JUDGMENT
MAKUMEJ:
INTRODUCTION
[1]
In this application which was brought on an urgent basis in terms of
Rule
6(12) of the Uniform Rules the Applicant seeks the following
relief:
a)
Declaring the sale in execution of the first Applicants
immovable property being Erf [....] Hyde Park Extension 47,
Johannesburg
which sale took place on the 15th June 2021 to be
unlawful and be set aside.
b)
Interdicting the Respondents from selling alienating,
encumbering and transferring the immovable property to the second
Respondent
or any other person whilst the Applicant is still under
business rescue.
[2]
This matter served before me in the urgent court on the 6
th
July 2021 and stood down for argument on the 7th July 2021.
[3]
It is common cause that the first Applicant owns the immovable
property
known as [....] Hyde Park, Johannesburg. Mr Bamoza Eric
Molefe is presently the sole director of the Applicant. He and his
family
live on the property it is their residential home. The
property is located at 2 Townsend Avenue, Hyde Park, Sandton.
[4]
During or about the 27th July 2020 the first Respondent obtained a
money
judgment against the Applicant in this court for payment of the
amount of R9 million (See case number 34709/2019) Mr Eric Bamoza
Molefe and his wife Veronica Sibongile Molefe were co-defendants in
that matter in their capacities as Trustees of a Trust,
[5]
Simultaneously with the judgment the court declared the immovable
property
owned by the Applicant specially executable.
EVENTS
THAT TOOK PLACE PRIOR TO AND AFTER THE JUDGMENT
REFERRED
TO ABOVE
[6]
It needs be mentioned that at the time that judgment was entered
against
the Applicant as described above the directors of the
Applicants were the daughters of Mr BE Molefe namely:
i)
Jessica Molefe;
ii)
Violet Molefe.
[7]
On the 7
th
November 2019 a resolution was passed by the
Company (Applicant) in terms of which it was resolved to voluntarily
begin business
rescue proceedings and to place the Applicant under
supervision since according to the directors there existed then
reasonable
grounds and belief that the company was in financial
distress. The resolution authorised Mr Eric Bamoza Molefe to sign all
documents
on behalf of the company to give effect to the resolution.
In the resolution one Michiel Jacobus Van Tonder was appointed
business
rescue practitioner for the company.
[8]
That resolution was never given effect to and accordingly lapsed in
terms
of
Section 129
(5) (a) of the
Companies Act 71 of 2008
.
[9]
The judgment referred to above in paragraph (4) was granted after it
was
opposed. Counsel appeared on behalf of the Applicant. Applicant's
attorneys then one Mario Kyriacon engaged first Respondent's
attorneys in an attempt to settle the judgment debt. The negotiations
came to a nullity.
[10]
On the 28th May 2021 the first Respondent in its capacity as the
judgment creditor published notices in both the Star Newspaper
and
the Government Gazette that a sale in execution of the attached
immovable property will take place on the 15th June 2021.
[11]
On the 27
th
May 2021 first Respondent's attorneys
received an email from one Michael Snyman informing them that they as
JF Van Deventer. Incorporated
had just been appointed to act as
attorneys for the Applicant and requested that they be invited on
case line's to enable them
to peruse the court file and advise their
client accordingly. This was done. However Mr Snyman never reverted
to first Respondent
attorneys as to what their instructions were.
[12]
On the 15
th
June 2021 third Respondent proceeded
with the Sale in Execution and sold the property to the second
Respondent. The Sale in Execution
took place earlier in the day and
at 14h32 first Respondent's attorneys received an email from the
Applicant's attorneys namely
Messrs Mashabane and Associates in which
they informed first Respondent's attorneys that the Applicant had
been placed under business
rescue and that the second Applicant is
the appointed Business Rescue practitioner.
[13]
In the letter the Applicants attorneys called upon the first
Respondent's attorneys to admit that the sale was null and void
as it
took place when the Applicant was already under Business rescue they
demanded an undertaking to that effect by close of business
on the
15th June 2021 failing which they will launch on urgent application
in the High Court to set aside the sale.
[14]
The urgent application was only launched on the 28th June 2021 some
13 days later. The
Respondent's attorneys responded to that letter on
the 17
th
June 2021 informing them that it was the first
time that this information was brought to their attention and then
requested that
Applicants attorneys urgently forward to them the
following document's
a)
the resolution adopted to commence business rescue proceedings
(Section 129(1)
of the
Companies Act.
b
)
A copy of the letter or notice that they the Applicant sent to first
Respondent
attorneys as is set out in their letter of the 15
th
June 2021.
c)
Notice of appointment of the business rescue practitioner
(Section
129(3)
and (4) of the
Companies Act).
d)
A sworn statement of the facts relevant to the grounds on which the
board resolution
was founded.
[15]
No response was forthcoming from Applicant's attorneys instead the
second Applicant send
a letter on the 18th June 2021 to the Sheriff
(third Respondent) asking them to confirm if the sale did in fact
take place despite
them having informed the Sheriff about business
rescue.
[16]
It was only after receiving the letter mentioned above that Mashabane
attorneys responded
on the 21st June 2021 and attached a document
marked "MNI" which they say is a confirmation from CIPRO
that the Applicant
was placed under Business Rescue. The document
marked "MNI" is not from CIPRO it is in fact a document
attached to the
replying affidavit by the second Applicant which is
signed by Mr Eric Bamoza Molefe dated the 11th June 2021 in which he
says he
in his capacity as the sole director of the Applicant has
appointed the second Applicant as business rescue practitioner.
[17]
On the 18th June 2021 the second Applicant sent a letter to all
creditors inviting then
to a creditors meeting to be held on the 25
th
June 2021. On the 25th June 2021 at the said, creditors meeting first
Respondent's attorneys Ms Silberman informed the second Applicant
that until they shall have received documents requested on the 17
th
June 2021 they are unable to participate meaningfully in the business
rescue proceedings.
[18]
Documents were eventually sent to Ms Silberman and from that the
first Respondent deduced
that the whole business rescue was a
nullity. This was confirmed by CIPRO who on getting the truth removed
the company from business
rescue.
[19]
The business rescue process is bristling with procedural
irregularities as will be demonstrated
hereunder.
[20]
The first Respondent decided to do its own investigation and to get
to the root of the
origin of the business rescue application and in
the process discovered that in fact the Applicant was never in
business rescue
at the time the sale in execution took place.
[21]
It is common cause that voluntary proceedings to place a company
under business rescue
commences with a board resolution. Such
resolution must be adopted at a board meeting and will only take
effect once it has been
filed with CIPRO in terms of
Section 129
(2)(b).
[22]
Annexure "VK12" is an official document issued by CIPRO
which indicates that
Mr Molefe was appointed a director of the
Applicant on the 10th June 2021 that is on the same day that his two
daughters resigned
as Directors. Which means that as on the 9
th
June 2021 his two daughter were the only directors who had the
authority to resolve about placing the company under business rescue
not Mr Molefe.
[23]
This then means that what appears on annexure "VK13" being
a letter from CIPRO
signed by one Joel Mphahlele and dated the 9th
June 2021 in which it is indicated that the Applicant was placed
under Business
Rescue on the 9th June 2021 is flawed not only because
Mr Molefe was not a director capable of adopting a resolution in
terms of
Section 129(1)
but also that the documents that he places
reliance dated 9th June 2021 is not a resolution in terms
Section 129
(1) it is just notification that the second Applicant has been
nominated as a business rescue practitioner.
[24]
On the 14th June 2021 the second Applicant addressed a letter to all
creditors and affected
persons in which he says that the company was
placed under business rescue on the 14th June 2021. This is clearly
in contradiction
with the CIPRO letter signed by Mphahlele dated the
9th June 2021.
[25]
Based on the above irregularities CIPRO amended its records on the
28
th
June 2021 to place the Applicant back in business
(See Annexure VK19"). When this application was launched the
company was
not in business rescue accordingly the second Applicant
had no
locus standi
there is accordingly no evidence before
this court to accede to the notice of motion. The Application falls
to be dismissed on that
basis alone. Secondly a letter was produced
in the supplementary affidavit by the second Respondent to the effect
that the second
Applicant Khomotso Teffo is not a registered Business
Rescue Practitioner. He is accordingly disqualified and could never
have
been appointed by CIPRO had that information been made available
to CIPRO.
[26]
The second Applicant in his own words at paragraph 17 of his replying
affidavit tells the
court that on Monday the 28th June 2021 he was
informed that the status of the first Applicant had been changed to
indicate that
the first Applicant is no longer in business rescue,
that being the case he could never have been acting as a business
rescue practitioner
of a company that was not in business rescue.
Despite that he proceeded to depose to an affidavit.
[27]
In his replying affidavit the second Applicant makes a new case and
now relies on the resolution
passed during November 2019 to place the
Applicant under business rescue. This is flawed and untenable because
that resolution
lapsed and in any case in his founding affidavit he
relies on the resolution apparently passed on the 9th June 2021 (See
paragraph
10 of his founding affidavit).
THE
APPLICATION OF THE LAW TO FACTS
[28]
The Supreme Court of Appeal in
Panamo Properties (Pty) Ltd and
Another v MEC and Others NNO
2015 (5) SA 63
(SCA)
dealt with an
almost similar matter. In paragraph 3 of that judgment Wallis JA
summarising the facts therein said the following:
"[3]
In order to prevent a sale of the property and afford the Nels time
to resolve Panama's financial problem the Trust resolved
on the 19th
August 2011 to place Panamo in business rescue. A little over two
years later in September 2013 the Trust sought an
order declaring
that the original resolution to place Panamo in business rescue had
lapsed and consequently that the entire business
rescue process was a
nullity. That was after the appointment of a business rescue
practitioner (Mr van der Merwe the second Applicant),
the adoption of
a business rescue plan and the sale of property pursuant to that
plan. It is undisputed that the sole purpose behind
the application
was to prevent the sale of the property and to prolong Mr and Mrs
Nels occupation of their home."
[29]
Although the facts as I indicated in this matter are similar to those
in Panama the distinguishing
factor which led to the Supreme Court of
Appeal finding that the resolution had not lapsed for want of
compliance with
Section 129
(3) and (4) is that in Panama a business
plan had already been adopted and the property was sold in terms of
that plan. In this
matter none of that had taken place in accordance
with the November 2019 resolution. In the present matter the sale of
the immovable
property arises out of a judicial attachment pursuant
to a judgment that still stands.
[30]
Section 133
of the Act temporarily halts legal processes against a
Company in Business Rescue. It is designed to provide the company
with breathing
space whilst the Business Rescue Practioner attempts
to rescue the company by designing and implementing a business plan.
[31]
The court in
Chetty t/a Nationwide Electrical v Hart N.O. and
Another
2015 (6) SA 424
(SCA) at paragraph [40]
concluded as
follows:
"But
Section 133
(1) (a) is not a shield behind which a company not
needing protecting may take refuge to fend
off
legitimate
claims. Thus
Section 133
(1) (b) which is to be read disjunctively
with
Section 133(1)(a)
because of the use of the word "or"
in exception (a) - (e) permits a creditor to seek the court's
imprimatur to initiate
or continue legal proceedings against a
company in the event of a practitioner refusal to give consent or
directly, even without
the permission of the practitioner having been
sought. So
Section 133(1)
(a) is not an absolute bar to legal
proceedings being instituted or continued against a company under
Business Rescue. This is
a strong indication that non compliance
with the section is not to be visited with the Sanction of a
nullity."
[32]
In the present matter the Applicant and the Business Rescue
Practitioner did not inform
the Respondent that business rescue had
commenced there was therefore no basis for having to have first
sought the consent of the
practitioner prior to going ahead with the
sale in execution. In any case as in the Chetty decision failure to
have sought such
consent does not invalidate the sale in execution.
[33]
The first Applicant knew as far back as the 28th May 2021 that a sale
in execution was
set for the 15th June 2021 the easiest route would
have been to bring an application to stay the sale rather than embark
on its
dubious process of business rescue which process as I have
indicated above was flawed and of no effect. This application falls
to be dismissed with costs. What remains is who is to be held liable
for the costs.
[34]
It is so that the issue of costs is always at the discretion of a
trial court. In this
matter the Company was dragged through a process
of business rescue which was flawed and meant only to stop the
transfer of a sale
that had taken place lawfully and procedurally
correct.
[35]
The deponent to the affidavit being the second Applicant had no
locus
standi
to bring the application and must bear the legal costs in
his personal capacity or a punitive scale.
In
the result I make the following order:
ORDER
1.
The application is dismissed.
2.
The second Applicant is ordered to pay the costs of this
application on an attorney and client scale.
DATED
at JOHANNESBURG this the 3
rd
day of AUGUST 2021.
M
A MAKUME
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
DATE
OF HEARING
:
7
TH
JULY 2021
DATE
OF JUDGMENT
:
3
RD
AUGUST 2021
FOR
APPLICANT
:
ADV S MATHIBA
INSTRUCTED
BY
:
Messrs Mashabane & Associates Inc
FIRST
RESPONDENT
:
ADV JE SMIT
INSTRUCTED
BY
:
Messrs Werksamans Attorneys
SECOND
RESPONDENT
:
ADV SNYMAN
INSTRUCTED
BY
:
Messrs Seddat Attorneys