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[2021] ZAGPJHC 896
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Lockstock Investments (Pty) Ltd and Others v Peter Van Den Steen NO and Others (2020/12079) [2021] ZAGPJHC 896 (10 August 2021)
IN
THE HIGH COURT OF SOUTH AFRICA GAUTENG LOCAL DIVISION, JOHANNESBURG
CASE
NUMBER: 2020/12079
In
the matter between:
LOCKSTOCK
INVESTMENTS(PTY)LTD
AND
47 OTHERS
Applicants
and
PETER
VAN DEN STEEN N.O
.
First Respondent
DAVID
LAKE N
.
O
Second Respondent
GROUP
FIVE LIMITED (in business rescue)
Third Respondent
STANDARD
BANK OF SOUTH AFRICA LIMITED
Fourth Respondent
ABSA
BANK LIMITED
Fifth Respondent
FIRSTRAND
BANK LIMITED
Sixth Respondent
HSBC
BANK LIMITED
Seventh Respondent
BOUNDARY
TERRACES NO 14 (PTY) LTD
Eighth
Respondent
THE
AFFECTED PERSONS OF GROUP FIVE LIMITED
Ninth
Respondent
JUDGMENT
ALI
AJ
[1]
The first and second respondents are the business rescue
practitioners, the third respondent is the company in business
rescue, they are the applicants in this matter and shall be referred
to as ("the BRPs"). The respondents in this
application
are the applicants in the main application and shall be referred to
as (
"
Lockstock")
.
The BRPs have launched a rule 30(2)(b)
application
.
[2]
The relief sought by the BRPs is to set aside the notice of motion
and founding affidavit of Lockstock in the main claim
.
In the alternative they seek to set
aside that portion of the notice of motion that
requires
them to deliver
their
answering affidavits,
if
any, no later than fifteen days after
delivering their notice of intention to oppose
.
[3]
The relief sought by the BRPs is to deliver their answering affidavit
within
fifteen
days
of the later of (i) Lockstock being granted leave by the court in
terms of section 133(1)(b) of the Companies Act 71 of 2008
("the
Act")
to
commence
and/or proceed with the main application under this case number
;
and (ii) Lockstock having attended to
effect service upon each of the remaining affected parties as
provided for in paragraph 3
.
1
of the order granted on 22 July 2020
.
[4]
Lockstock
were
given an opportunity to remove the cause of complaint as set out in
the notice. It chose not to remove the cause of complaint.
Grounds
of Com12laint
[5]
The BRPs have raised two grounds of complaint.
The
first ground:
"The
applicants [Lockstock) are required to
make out a case why they should be granted leave by the court to
commence or proceed with
the
main
proceedings, and in accordance with such terms as the court considers
suitable, in terms of
section 133(1)(b)
of the
Companies Act, 2008
.
The BRPs are prejudiced by this omission
because in the
absence
of Lockstock making out a case for why leave should be granted, the
second respondent and I, as the business rescue practitioners
[the
BRPs] as well as the court, are deprived of any basis upon which to
consider consenting to the commencement of the proceedings,
in the
case of the practitioners, or granting leave to commence or proceed
with the proceedings, in the case of the court.
The
objecting respondents [the BRPs] are accordingly prejudiced in being
required to deliver answering affidavits where the applicants
[Lockstock] have not made out a case for the grant of such leave and
where such leave should in any event be obtained by the applicants
[Lockwood] from the court before the objecting respondents [the BRPs]
are required to deliver an answering affidavit."
The
second ground:
"The
opposing respondents [the BRPs] cannot be expected to deliver
answering affidavits in circumstances where necessary affected
parties have not yet been served with the main application. Until
they are so served, the applicants [Lockstock] are non-suited
by way
of a material non-joinder from obtaining any relief against the
respondents that have been served, in particular, the objecting
respondents [the BRPs]. The objecting respondents [the BRPsJ are
prejudiced in having to deliver answering affidavits in circumstances
where it may be that the applicants [Lockstock] do not effect service
upon the remaining affected parties, and so are not in a
position to
obtain any relief
.
The
remaining affected parties, once served, are also deserving of an
opportunity to make submissions as to whether the statutory
moratorium on legal proceedings in terms of
section 133
should be
uplifted.
"
[6]
Lockstock oppose the
rule 30
application on the grounds that:
Rule
30
is an inappropriate application and has no application here as the
rule applies only to irregularities of form and not to matters
of
substance
.
Lockstock
rely on
SA
Metropolitan
Lewensversekeringsmaatskappy
Bpk v Lauw NO
[1]
.
It
accepts that
section 133
requires them to obtain permission, which
they can obtain on their own.
[7]
The BRPs contend that it is for Lockstock who have commenced with the
main proceedings to persuade the court, that such
leave need only be
obtained at the hearing of the main application.
[8]
Lockstock's standpoint is that
rule 30
has no application here as the
rule applies only to irregularities of form and not to matters of
substance. And secondly, if one
can conceptually obtain leave in
terms of section 133 of the Act at the hearing of the main
application, it flows that the issue
is not procedural and is
primarily (if not exclusively) a matter of substance
.
Once it is accepted that the granting of
relief under and in terms of section 133 of the Act is a matter of
substance and not form,
it must follow that compliance with section
133 of the Act falls outside the scope of rule 30.
[9]
For most of the answering affidavit, Lockstock state, at length the
difficulties it encountered in obtaining details of
the affected
parties
.
However
,
Lockstock contends that if the present
application did fall within the ambit of Rule 30, the BRPs are
required to show prejudice
that they have or will suffer as a result
of the irregular step.
[10]
Lockstock substantiate their contention by extrapolating that when
leave is obtained at the hearing of the main application,
it means
that the issue is not procedural which then becomes a matter of
substance. And if this happens, the granting of relief
under and in
terms of section 133 is a matter of substance and not form, it must
follow, Lockstock further contend, that compliance
with section 133
falls outside the scope of rule 30.
[11]
Section 133(1)(a) and (b) provides for a general moratorium on legal
proceedings against a company which is in business rescue
except with
the written consent of the business rescue practitioner or
"with
the leave of the court and in accordance
with any
terms the
court
considers suitable
.
"
[12]
Lockstock are required to make out a case why they should be granted
leave to commence or proceed with the main proceedings
in accordance
with such terms as the court considers suitable
.
[13]
Lockstock seek that this application be dismissed
.
Lockstock contends
that
the issue as to whether they should get
permission should be left to the court hearing the main proceed
i
ngs
.
[14]
Were that the case, it would mean that the BRPs are to file their
answering affidavits now. To file their answering affidavits
in
circumstances, where Lockcstock might
not be given permission to bring the main application.
[15]
The
second
ground of complaint
relates
to
the service of the main application upon
the
necessary affected parties
.
There was much ado about obtaining the
requisite
details
of the affected parties
.
Ultimately,
Lockstock are required
to effect
service
on all the affected parties
.
Until
such time where all the affected
parties
are served, the BRPs contend that they
are not in a position to file their
answering
affidavit. It is
in
issue that not all the affected parties
have been served with the main application
.
[16]
In
SA
Airlink
(Pty)
Ltd
and
South African Airways (SOC) Limited & others
[2]
it
was held
that
the
intention
of
section 133(1) is to cast the net as wide as possible in order to
include any conceivable type of action against the company
which
is under business rescue
.
It
held further
that
the
moratorium
is necessary for the effectiveness of the business rescue procedure.
[17]
The
contention of Lockstock that to interpret rule 30 which
is
procedural
vis-a vis substantive,
where
if it is not the one then it should be
the
other,
is
contrary
to
what was held by Fabricius
J
in Cheetah
Chrome
South
Africa (Pty) Ltd
[3]
where
the learned Judge repeated what he had said in a recent judgement
delivered by him in the matter of Absa Bank Limited and
Another v
CSARS (21825/19 [2020) ZAGPPHC
414
where it was held: (at para 10).
"a
technical approach is to be avoided
nor should an excessively formalistic approach in the application of
the Rules be adopted. One
should aim at an expeditious and
inexpensive approach to determine
cases
on their real merits
.
See: Trans-African Insurance
Co
Ltd v Maluleka
1956 (2) SA 273
(A) at 278 F-G
.
In
recent times the above well-known considerations have been amplified
by the notion that Rules of Court should be seen and given
life
against the background of relevant constitutional law considerations,
such as the right of
access
to
Courts The core function of a Court is after all to dispense justice
without being hamstrung. The object of courts is two-fold:
the first
is to ensure a fair trial or hearing
.
The second
is
to 'secure the inexpensive and
expeditious completion of litigation and to further the
administration of justice
.
See:
Eke v Parsons [2015) ZACC 30 at par [39] and [40],
as
well as Kgolane v Minister of Justice
1969 (3) SA 365
(A) at 369 H"'
[18]
Fabricius
J in the Cheetah Chrome South Africa (Pty) Ltd matter,
supra,
(at
para 13) after considering various author
i
ties
[4]
outlined
the relevant principles emanating from these decisions and which are
applicable hereto
.
The
learned Judge held that the principles
outlined
below are to be considered in each
particular
case.
These
are:
"In
certain instances, but not in
all
,
a
formal application
is
required
to place sound factual material and sound legal contentions before
the court;
In
other
cases
such
facts
may
be self-evident.
Context
is everything
in law, I may add;
Whenever
relaxation
is
sought,
the rights of the company, affected persons and the interests of
those persons must be considered in the context of the
purpose of the
particular business rescue plan;
The
court
has a
wide
discretion dictated by the interests of justice. It must be asked
:
what is the purpose of the
moratorium in any given context,
and
what will be the consequence
of
it being lifted?
Will
the particular business rescue plan be enhanced or defeated by the
moratorium being lifted?
The
object and purpose of business rescue proceedings
as
set out in sl(k) and
128(b) of the Act must be considered;
"Exceptional
circumstances" are however not required;
An
application
can
be brought
within
the context of
a
main
application; It is not necessary to establish on
a
prima facie basis that the main
application will succeed, as long as the basis laid is bona fide and
reasonably arguable."
[19)
In the present matter, Lockstock have not
included
or proposed any terms for the court who
will be seized with the main application, to consider that any terms
may be suitable in
the circumstances. To do so, the court must take
all the factors into account. Lockstock, is after all, seeking the
indulgence
of the court, to grant leave
.
Seeking leave to proceed is not there
for the asking
.
A
substantive application to seek leave is necessary.
[20]
It is my view that Lockstock have not made out a case why leave
should be
granted at the main hearing.
Lockstock
do
not provide any reasonable explanation, let alone any explanation why
leave should be granted in their favour to apply for leave
at the
main hearing
.
[21]
Lockstock are required to address each of the principles as set out
by Fabricius Jin their application for leave whether the
application
is argued upfront or at a separate hearing
.
Lockstock, in this application have not
done
so
.
[22]
While
I
accept
that our courts tend to agree that a flexible approach be followed
and that a one-size-fits-all approach is to be avoided
.
What
will be required and what will be sufficient, will depend on the
circumstances of each particular matter. It will in each case
be a
matter for the court's discretion, which as was held recently in
Arendse, is to be exercised judicially on the basis of considerations
of convenience and fairness, and what will be in the interests of
justice
[5]
.
The
Gauteng Division in the Full Bench appeal of LA Sport 4x4 Outdoor CC
and another v Broadsword Trading 20 (Pty) Ltd and others
[6]
called for a flexible approach, which depends on the circumstances of
the case
.
The
court in Booysen v Jonkheer
,
supra,
adopted
a similar approach, that a flexible approach is to be adopted,
depending on the circumstances of the case.
[23]
The BRPs, have outlined, at great length, the prejudice it will
endure if the rule 30 is not upheld. In respect of the prejudice
it
will suffer
,
the
BRPs have outlined,
inter alia,
that
the
main
application is lengthy and comprises complex issues including
challenging alleged financial assistance rendered by Group Five
to
related companies many months before for billions of rands- the
various lenders are also cited as parties; the opposition to
the main
application will involve multiple and lengthy answering affidavits;
the BRPs will prepare opposing papers while the court
may reject
leave to proceed; the BRPs will accumulate expenses for a matter that
might not proceed
.
[24]
There
is
great
merit in the BRP's contention, 1 may find that they will suffer
prejudice
.
While
I
accept
all of this,
I
believe
that the prejudice is immense and
irreparable
and accordingly I conclude that
Lockstock must first acquire the permission of the court, where
section 133 provides "with
the leave of the court and
in
accordance with any terms the court
considers suitable"
.
Until
Lockstock have done so, the BRPs are not required to file their
answering affidavits. The Order will reflect this
.
[25]
Lockstock have not set out, in detail
,
reasons for applying for leave at the
main hearing. They wish to approach the court at the main hearing as
of right. Lockstock have
not properly canvassed the rights of the
business rescue practitioners
,
the
rights of the company and the rights of the affected parties.
[26]
A
further consideration to bear in mind is that whenever relaxation is
sought, the rights of
the
company,
affected persons and the practitioner
must
be
protected
.
[7]
[27]
In light of the above, the rights of the affected persons are not
raised as the service of the main application has not been
finalised,
alternatively that the service of the main application is in the
process of reaching finality. The rights
of
the affected persons have not been set out at all in the main
application.
[28]
Insofar as the contention raised by Lockstock that rule 30 does not
apply to omissions but to positive steps or proceedings
and as a
result rule 30 has no place in this application. My view is to adopt
the approach set out by Fabricius
Jin
the Cheetah Chrome case,
supra,
where
it
was held that a technical approach is to
be avoided nor should an excessively formalistic approach
in
the application of the Rules be adopted.
(at para 10)
.
[29]
In the result, I make the following order:
1.
The first, second and third respondents ["the BRPs"] need
only deliver
their
answering
affidavits within fifteen days of the later of:
1.1
the applicants [Lockstock] being granted leave by the court in terms
of section
133(
1)(b)
of the
Companies Act, 71 of 2008
to commence and
I
or proceed with the main application
under this case number;
1.2
Lockstock having attended to effect service upon each of the
remaining affected parties
.
2.
I believe that the matter does not warrant the employ of 2 counsel.
Lockstock
are to pay the costs of one counsel.
N
.
ALI
ACTING
JUDGE OF THE HIGH COURT OF SOUTH AFRICA GAUTENG DIVISION,
JOHANNESBURG
DATE
OF HEARING
:
28
JULY 2021
DATE
OF JUDGMENT: 10 AUGUST 2021
COUNSEL
FOR THE APPLICANT:
J
M HOFFMAN
INSTRUCTED
BY:
SWARTZ
WEIL VAN DER MERWE GREENBERG INC
COUNSEL
FOR FIRST TO THIRD RESPONDENTS:
A
SUBEL SC & B M GILBERT
INSTRUCTED
BY:
WERKSMANS
[1]
1981 (4) SA 329 (0
[2]
[2020]ZASCA 156 (30 November 2020)
[3]
And Dilokong Chrome Mine (Pty) Limited (in business rescue) and
Others- case no: 45259/2020 GPHC
[4]
Merchant West Working Capital Solutions (Pty) Ltd v Advanced
Technologies and Enginee1ing Co (Pty) Ltd
[2016] JOL 36732(GSJ)
, LA
Sport 4 x 4 Outdoor CC v Broadwalk Trading 20 (Pty) Ltd 2015 JDR
8405 GP ( a full bench decision of this division), Arendse
and
Others v Van der Merwe and Another NNO
2016 (6) SA 490
(GJ),
Msunduzi Municipality v Uphill Trading 14 (Pty) Ltd 2015 JDR 0702
CKZP, and Booysen v Jonkheer Boerewynmakery (Pty) Ltd
(in business
rescue)
[2017] 1 All SA 862
(WCC) at para 54
[5]
Booysen v Jonkheer Boerewynmakery (Pty) Limited and another 2017 (4)
SA 51 (WCC)
[6]
[2015] ZAPPHC 78 (GP), 2015 JDR 0405 {GP)
[7]
LA Sport case,
supra