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[2021] ZAMPMBHC 33
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Zeelie N.O v Mjejane Farm Management (Pty) Ltd and Others (2138/2021) [2021] ZAMPMBHC 33 (22 July 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(MPUMALANGA
DIVISION, MBOMBELA)
(1)
REPORTABLE:NO
(2)
OF INTEREST TO OTHER JUDGES
:NO
(3)
REVISED: YES
22/07/2021
CASENO:
2138/2021
In the matter
between:
PETRUS
ZEELIE N.O.
Applicant
and
MJEJANE
FARM MANAGEMENT (PTY) LTD
First
Respondent
CHRISTOFFEL
ANTONIE ROUX
Second Respondent
PIETER
JAKOBUS VAN OOSTHUIZEN
Third Respondent
TSHEPO
CHARLES RAMPATLA
Fourth Respondent
THEODOR
WILHELM VAN DEN HEEVER
Fifth
Respondent
GRANT
CHITTENDEN N.O.
Sixth Respondent
KEYSHA
187 INVESTMENTS (PTY) LTD
Seventh
Respondent
THE COMPANIES AND
INTELLECTUAL
PROPERTY
COMMISSION
Eighth Respondent
JUDGMENT
MASHILE J:
INTRODUCTION
[1]
This is an urgent application that traces its origins to a resolution
of the First
Respondent(“MFM”) adopted on 29 May 2021
placing It in business rescue. The resolution was subsequently
submitted and
filed with the Eighth Respondent (“the
Commission”) on 31 May 2021. Believing that the resolution was
in contravention
of Section 129 of the Companies Act, 71 of
2008 (“the 2008
Companies Act&rdquo
;), the
Applicant launched this urgent application seeking final
relief in the following terms:
“
1.
…
2.
That the resolution taken by the Second and Third Respondents to
place
he First Respondent in business rescue in terms of
Section 129(1)
of the
Companies Act 38 of
2008
be set aside in terms of
Section 130(1)(a)
of the
Companies Act
38 of 2008
;
3.
That, pursuant to an order granted in terms of prayer 2
supra
,
it be declared that the business rescue of the First Respondent has
ended in terms of
Section 132(2)(a)(i)
of the
Companies Act 38 of
2008
;
4.
That, pursuant to an order granted in terms of prayer 2
supra
,
it be declared that the First Respondent is in voluntary winding-up
under the supervision of the Fourth and Fifth Respondents
with effect
from 12 April 2021;
5.
That the Eighth Respondent be ordered to change the status of the
First Respondent
within its records from “Business Rescue”
to “In Liquidation”;
6.
That the Second and Third Respondents be ordered to pay the costs of
this
application on a scale as between attorney and client,
jointly and severally with any other party opposing;
7.
…”
FACTUAL MATRIX
[2]
On 12 April, the Seventh Respondent (“Keysha”), a
shareholder of MFM,
approved a resolution placing the latter
in
voluntary liquidation. The resolution took effect on 15 April 2021.
Following the coming into effect of the voluntary liquidation
of MFM,
the Fourth and Fifth Respondents (“Rampatla and Van Den
Heaver”) respectively, were appointed as liquidators.
On 3 May
2021 and ostensibly unhappy with the voluntary winding-up, the
Applicant initiated compulsory liquidation proceedings
against MFM in
this Court [“the compulsory liquidation application”]. On
6 May 2021, the aforesaid application, which
is still pending, was
served upon MFM.
[3]
On 7 May 2021, the Second Respondent (“Roux”) challenged
the voluntary
placement of MFM in liquidation. The challenge was through a legal
entity
for which he is the sole director and the entity is a
creditor of MFM. Following a
successful intervention as a creditor of MFM, the Applicant opposed
the application by Roux.
On 28
May 2021, the North Gauteng Division per Davis J,
granted an order reversing the
voluntary liquidation status of MFM.
[4]
Purporting to be Acting in terms of the provisions of Section 129(1)
of the
2008
Companies Act, on
29 May 2021, Roux and Van
Oosthuizen as directors of
Keysha, a shareholder in MFM, took a
resolution placing MFM in
business rescue. On 31 May 2021, the resolution was submitted to the
Commission following which the Sixth
Respondent (“Chittenden”)
became the appointed business rescue practitioner for MFM.
[5]
On 31 May 2021, the Applicant launched an application for leave to
appeal the
order of Davis J setting aside the
resolution placing MFM in voluntary liquidation. Davis J
dismissed the application
for leave to appeal on 1 June 2021. During
the hearing hereof Counsel for the Applicant stated that the
Applicant has petitioned
the Supreme Court of Appeal and that outcome
was still pending. I was urged to
ignore this evidence as it lacked supporting material.
[6]
At a properly constituted meeting of 3 June 2021, the Board of
Directors of Keysha
endorsed the decision of 12 April 2021 to place
MFM in voluntary winding-up. On 7 June 2021, the Applicant became
aware of the
resolution to place MFM in business rescue. In
response to receipt of news of the placement of MFM on business
rescue, the Applicant launched these urgent proceedings on 10 June
2021 seeking relief as described above.
ISSUES
[7]
The first issue for determination is whether or not the application
was urgent. This
becomes of interest to this Court because firstly,
the Applicant was granted permission to remove the application from
the urgent
roll of the 29
th
of June 2021 and to re-enroll
it at his convenience. Secondly, by majority vote the creditors of
MFM have decided to grant indulgence
for the meeting to decide on the
business rescue plan to 31 August 2021. The second issue for
determination is the validity of
the business rescue resolution of 29
May 2021 especially having regard to the allegation that at the time
when it was taken the
compulsory liquidation application was extant.
ASSERTIONS
OF THE APPLICANT ON URGENCY
[8]
When the application first served before this Court on 29 June 2021,
the Applicant
had by then acquired knowledge that the directors of
Keysha had adopted a resolution for the placement of MFM in business
rescue.
News of the placement of MFM came to his attention on 7 June
2021 and three days thereafter he launched this urgent application.
In terms of
Section 150(5)
read with Section 151 of the 2008
Companies Act a
meeting of creditors ought to be held within 35 days
to vote on the business plan prepared by Chittenden.
[9]
Thus, by the time the matter came before this Court the Applicant
thought that a
meeting for the adoption of the business rescue
plan was to be held on 5 July 2021. Labouring under this
impression,
it was evident to him that he would not
obtain substantial redress in due
course if he elected to bring this
application under
the normal motion
court proceedings. See,
East
Rock Trading 7 (Pty) Ltd and Another v Eagle Valley Granite (Pty) Ltd
and Others
(11/33767)
[2011] ZAGPJHC 196 (23 September 2011)
.
This soon changed when Counsel for Roux and Van Oosthuizen advised
that Chittenden would not do so as he was not in possession
of
documents that would assist him to prepare the business rescue plan.
The documents were still in the possession of Rampatla
and Van Den
Heever.
[10]
It became clear that the meeting to vote on the business rescue plan
would not proceed
on 5 July 2021 and that as such,
Chittenden would seek a postponement from the creditors. This fact
coupled with the Applicant’s
omission to serve the application
on the employees of MFM persuaded this Court to allow the Applicant
to remove the application
from the roll but held him liable for the
costs of the postponement. So, clearly on the facts stated above the
application was
urgent as the Applicant had limited time within which
to bring the matter before court. Had it not been for lack of service
upon
the employees, I would have allowed the application to proceed
as an urgent matter.
[11]
The Applicant subsequently attended to the outstanding issues and
enrolled the application on
the urgent roll of the 13
th
of July 2021. He argued that he will still
not obtain substantial
redress were he to enrol this application in
the ordinary motion court. The meeting of the creditors of MFM
having been
postponed to the
31
st
of August 2021 and the first available opposed motion
date being the 26
th
of
October 2021, it is inexorable to conclude that he will not obtain
substantial
redress in due course because by the time he is heard on
the 26
th
of October 2021 the meeting would have been held
possibly validating the business rescue plan thereby rendering the
outcome of
the application vain.
ASSERTIONS
OF ROUX AND VAN OOSTHUIZEN ON URGENCY
[12]
On the application being urgent on the first time it came to court,
29 June 2021, Roux
and Van Oosthuizen asserted that the
Applicant had confessed that he had
known MFM to have been
financially struggling as early as the latter
part of 2020. The claim that the application was urgent some ten to
eleven months
later was rather staggering. Similarly, Roux and
Oosthuizen persist with their argument of lack of urgency even with
the date of
13 July 2021 notwithstanding their acceptance that the
first available opposed motion court date is on 26 October 2021 and
that
as a result the horses would have bolted when the date of
opposed motion court finally arrives on 26 October 2021.
EVALUATION
[13]
I am somewhat at loss why Roux and Van Oosthuizen stretch as far as
the latter part of 2020 to determine
whether or not the application
that served before this Court on 29 June 2021 was
urgent. Insofar as I am concerned
that period is neither here nor
there. The clock on urgency started ticking on 7 June 2021, the
moment the Applicant acquired knowledge
of the fact of the adoption
of the resolution placing MFM on business rescue and the date on
which the meeting of creditors were
likely to vote on the business
plan. Having regard to the time within which the Applicant launched
this application, 10 June 2021,
and the date of the meeting of the
creditors, it can hardly be said that the urgency was self-created.
Accordingly, the application
was urgent when it served before this
Court on 29 June 2021.
[14]
Turning to the question of urgency for the date of 13 July 2021. Once
it is established that
the first available date for opposed
motion court is the 26
th
of
October 2021 and that the meeting of the creditors to vote
on the
business plan is set for 31 August 2021, it is unproductive to argue
that this application should wait until 26 October
2021. That said,
it is probably necessary to state that the urgency is not as usual as
any other urgent matter but it should nonetheless
be considered as
such because of the peculiar circumstances around it. For what it is
worth, perhaps I should spell it out that
the Applicant will not
receive substantial redress in due course.
ASSERTIONS
OF THE APPLICANT ON THE VALIDITY OF THE RESOLUTION
[15]
The Applicant’s approach in this regard is that the resolution
to place MFM in
business rescue
adopted in terms of Section 129(1) of the 2008
Companies Act
by
Roux and Van Oosthuizen on 29 May 2021 is invalid because of the
provisions of
Section 129(2)(a)
of the same Act, which I will cite in
full and discuss later below.
Briefly, the section prohibits
the adoption of a resolution placing a
company in business rescue in circumstances where liquidation
proceedings have been initiated.
When the resolution was adopted by
Roux and Van Oosthuizen on 29 May 2021 the Applicant had on 6 May
2021 already initiated proceedings
to liquidate MFM. Accordingly,
concluded the Applicant, the resolution that ushered in business
rescue on 31 May 2021 is unlawful
and ought to be set aside.
ASSERTIONS
OF ROUX AND VAN OOSTHUIZEN ON THE VALIDITY OF RESOLUTION
[16]
It was argued on behalf of Roux and Van Oosthuizen that the
liquidation proceedings initiated by the
Applicant on 6 May 2021 were
conversion liquidation proceedings brought in terms of the old
Companies Act, 61 of 1973. Inherent
in Davis J’s order of 28
May 2021 setting aside the voluntary status of MFM that was brought
about by the resolution of 12
April 2021 was the incapacitation of
the conversion application.
[17]
This meant somehow that the compulsory liquidation application
pending before this Court could not
go ahead and that the Applicant
will have to start the process all over again. Roux and Van
Oosthuizen’s justification for
this was that the voluntary
liquidation and the compulsory liquidation were intricately linked
such that one cannot set aside the
first one without any consequences
on the second. Surprisingly, Roux and Van Oosthuizen conceded that
the order of Davis J could
not have set aside the compulsory
liquidation application pending before this Court.
[18]
Roux and Van Oosthuizen were elaborate in showing that submission of
the
resolution on 31
May 2021 to the Commission meant filing as defined in the 2008
Companies Act. Here
the argument was that by the time the Applicant
noted his appeal the business
rescue had taken
effect already. The Applicant had
mentioned during argument in court that he has appealed the order of
Davis J
dismissing his appeal. This could not be taken into consideration
as
relevant documents that would
serve as supporting material was not before court.
LEGAL
FRAMEWORK
RELEVANT
LEGISLATIVE PROVISIONS
[19]
The parties have made numerous references to various statutory
provisions. As a result, it could be
useful to cite a few of those
and perhaps look at case authority to determine what other courts
have made of those provisions.
The starting point
should be Section 130(1)(a) of the 2008 Companies Act which
is the
Section under which this application has been brought. It provides
that:
“
130.
Objections
to
company resolution. —
(1)
Subject to subsection (2), at any
time after the adoption of a resolution in terms of section 129,
until the adoption of a business
rescue plan in terms of section 152,
an affected person may apply to a court for an order—
(a)
setting aside the resolution, on the grounds that—
(i)
there is no reasonable basis for
believing that the company is financially distressed;
(ii)
there is no reasonable
prospect for rescuing the company; or
(iii)
the company has failed to
satisfy the procedural requirement set out in section 129”.
[20]
Section 129(1) allows the adoption of a resolution to place a company
in business rescue where a Board
of that company believes that
reasonable grounds listed in Section 129(1)(a) or (b) exist. Section
129(2)(a), on the other hand,
prohibits a Board from doing so where
liquidation proceedings have been initiated. The two scenarios are
cited below in the sequence
discussed in this paragraph.
“
129.
Company
resolution
to
begin
business
rescue
proceedings.
—
(1)
Subject to subsection (2) (a), the
board of a company may resolve that the company voluntarily begin
business rescue proceedings
and place the company under supervision,
if the board has
reasonable grounds to
believe that—
(a)
the company is financially distressed; and
(b)
there appears to be a reasonable prospect of rescuing the company.
(2)
A resolution contemplated in
subsection (1)—
(a)
may not be adopted if liquidation proceedings have been initiated by
or against the company; and
(b)
has no force or effect until it has been filed.”
[21]
Section 150(5) provides that:
“
(5)
The business rescue plan must be
published by the company within 25 business days after the date on
which the practitioner was appointed,
or such longer time as may be
allowed by—
(a)
the court, on application by the
company; or
(b)
the holders of a majority of the creditors’ voting interests.”
[22]
Section 151 is headed: Meeting to determine future of company.
Subsection (1) thereof provides that:
“Within 10 business days
after publishing a business rescue
plan in terms of section 150,
the practitioner must convene and
preside over a meeting of creditors and any other holders of a voting
interest, called for the
purpose of considering the plan.”
[23]
To the extent that controversy exists on the validity of the
resolution adopted in
terms of Section 129(1), the
meaning of ‘initiate’ as mentioned in Section 129(2)
may require
clarification regardless of the common cause stance of
the parties on what the meaning of the word is as used in the
Section. Clarity
on the meaning of the word is vital because
depending on the meaning attributed to it, business rescue
proceedings will prevail
over liquidation proceedings or the latter
will over the former. To put this to rest, in Tjeka Training Matters
(Pty) ltd v KPPM
Construction (Pty) Ltd and Others
2019
(6) SA 185
(GJ) the court, dealing with compulsory liquidation
application and after considering a number of decisions,
had the
following to say about the word:
“
[2
2]
Accordingly, in my view:
22.1
The liquidation proceedings
contemplated in section 129(2) of the
2008
Act must be served on the company, not merely issued to
meet the requirements of the section.”
The
court reached the above after concluding that for a liquidation
application to trump over a resolution placing a company in
business
rescue liquidation proceedings must have been initiated which means
that such application must have been served.
EVALUATION
[24]
The central question concerning this matter is the validity of the
resolution to place MFM in business
rescue. Roux and Van Oosthuizen
leaned heavily on the conversion application for the
liquidation of MFM by the Applicant
and the
supposed inextricable relationship between the voluntary
and the
compulsory liquidation
applications. The intricacy of the relationship between
the two
applications, together
dubbed, ‘conversion application’ is contrived
and
imaginary.
[25]
The above became palpable upon Roux and Van Oosthuizen admitting that
the order of Davis
J could not have affected the
validity of the compulsory liquidation proceedings
currently pending before this Court.
The pertinent part of Davis J’s
order reads
“
The
voluntary liquidation of Mjejane Farm Management (Pty) Ltd and
all winding up proceedings
in respect thereof, initiated by a
resolution dated 12 April
2021 and registered
at 15 April 2021, are hereby set aside.”
[26]
Their admission is right because the order of Davis J is clear that
it does not seek
to legislate on matters that fall outside of the jurisdiction of the
North Gauteng
Division. That leaves the compulsory liquidation application pending
before this Court intact.
That
tramples over the notion that the two liquidation applications, the
voluntary and compulsory, are intricately connected such
that the
setting aside of the voluntary liquidation would necessarily affect
the compulsory somehow.
[27]
If it is acknowledged, as Roux and Van Oosthuizen do, that the effect
of Davis J’s order reversed
the voluntary status of MFM such as
to render it void, it must also
be recognised that the only surviving liquidation application is the
compulsory one pending before this Court. The disentanglement
of what
has been referred to as a conversion application leaves the
compulsory liquidation application that was initiated by service
of
the founding papers on MFM on 6 May 2021 extant. It is thus manifest
that the compulsory liquidation application preceded the
resolution
placing MFM in business rescue on 29 May 2021.
[28]
The resolution was as such, taken in contravention of Section
129(2)(a) to which I have referred
supra
.
The compulsory liquidation application in this case must
prevail over the business rescue. In view of
the provisions of
Section 129(2)(a) of the 2008 Companies Act, a
court was never expected to weigh up which
of the two would be more
appropriate in a particular set of circumstances. The conclusion of
this Court means that it is gratuitous
to deal with all matters that
occurred post the 29
th
of May 2021.
[29]
Among these, was the question of what came first between the leave to
appeal and the filing
of the resolution placing MFM in
business rescue and whether or not the Applicant has appealed the
order of Davis J that he dismissed
on 1 June 2021. Additionally, it
is also superfluous to traverse the questions that arise in terms of
Section 130(1)(a)(i) and
(ii) because I have already found that MFM
has failed to adhere to the procedural requirements of Section 129.
[30]
A further and necessary corollary of Davis J’s order, which has
been accepted by
both parties to this dispute, is the reversal of the voluntary status
of MFM. It ought to be a matter of course that Prayer 4 of
the Notice
of Motion seeking this Court to declare that MFM is in voluntary
liquidation cannot be granted. The true situation now
is that MFM is
not in any form of liquidation but proceedings to have it declared
insolvent are pending before this Court.
COSTS
[31]
Finally, I turn to the issue of costs. I note that the Applicant has
asked for costs on the scale as
between attorney and client. I do not
think there can be any
justification for
such costs, certainly not on the basis levied by
the Applicant. I believe that
Roux and Van
Oosthuizen were not necessarily mindful of the
unlawfulness of the business rescue resolution that they adopted on
29 May 2021.
As such, the appropriate scale in these circumstances
should be the normal party and party.
CONCLUSION
[32]
Given the above background, the application in terms of Section
130(1)(a) of the 2008 Companies Act
succeeds and I make the following
order:
1.
The Applicant’s
non-compliance with the Uniform Rules relating to forms, time periods
and service is condoned and the matter
is heard as one of urgency in
terms of Uniform Rule 6(12);
2.
The resolution taken by
Roux and Van Oosthuizen to place the First Respondent in business
rescue in terms of
Section 129(1)
of the
Companies Act, 71 of 2008
is
set aside in terms of
Section 130(1)(a)
of the
Companies Act 71 of
2008
;
3.
Pursuant to the order
granted in terms of prayer 2
supra
,
it is declared that the business rescue of MFM has ended in terms of
Section 132(2)(a)(i)
of the
Companies Act 71 of 2008
;
4.
The Commission is
directed to remove or cancel the business rescue status of MFM from
its records such that it accords with prayer
3
supra;
5.
Roux and Van Oosthuizen
are directed to pay the costs of this application, jointly and
severally.
B A MASHILE
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA
This judgment was
handed down electronically by circulation to the parties and/or
parties’ representatives by email. The date
and time for
hand-down is deemed to be 22 July 2021 at 10:00.
APPEARANCES:
Counsel for the
Applicant:
Adv G Egan
Instructed by:
Du Toit Smuts & Partners
Counsel for the
Second & Third Respondents:
Adv Van Der Merwe SC
Instructed by:
Weavind & Weavind
Date of
Hearing:
13 July 2021
Date of Judgment:
22 July
2021