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[2017] ZASCA 50
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FirstRand Bank Ltd v KJ Foods CC (In business rescue) (734/2015) [2017] ZASCA 50; [2017] 3 All SA 1 (SCA); 2017 (5) SA 40 (SCA) (26 April 2017)
SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 734/2015
In
the matter between:
FIRSTRAND
BANK
LTD
APPELLANT
and
KJ FOODS CC (IN
BUSINESS RESCUE)
RESPONDENT
Neutral
citation:
FirstRand
Bank Ltd v KJ Foods CC (In business rescue)
(734/2015)
[2015] ZASCA 50(26 April 2017).
Coram:
Mpati
AP, Theron, Seriti, Van Der Merwe JJA and Schoeman AJA
Heard:
7
September 2016
Delivered:
26
April 2017
Summary:
Companies
Act 71 of 2008
: proposed business rescue plan : proper
interpretation of
section 153(1)
(a)
(ii)
and
153
(7) : the determination whether a vote by a creditor against
the adoption of a proposed business rescue plan was inappropriate and
ought to be set aside entails a single enquiry : a court will set
aside a vote on the ground that its result was inappropriate
if it is
reasonable and just to do so : thus entails a value judgment : effect
of the court setting aside vote : once vote is set
aside, proposed
business plan considered to have been adopted
ex
lege
: no further vote envisaged by the Act.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Mavundla J sitting as court of
first instance):
1 Paragraph 1 of the
order of the court a quo is amended to read:
‘
In
terms of the provisions of
section 157(7)
of the
Companies Act 71 of
2008
the vote of the respondent against the adoption of the revised
business rescue plan exercised on 2 December 2013 is set aside.’
2 Paragraph 2 of the
order of the court a quo is set aside.
3
The appeal is otherwise dismissed.
JUDGMENT
Seriti JA
(dissenting):
[1]
This is an appeal against a judgement and order of the Gauteng
Division of the High Court, Pretoria (Mavundla J) setting aside
in
terms of s 153(7) of the Companies Act 71 of 2008 (the Act), a vote
against the adoption of a proposed revised business rescue
plan. The
court a quo found that the vote of the appellant against the proposed
business rescue plan was inappropriate and consequently
granted an
order in terms of which the voting result of rejection was set aside.
The court further ordered that the proposed revised
business rescue
plan be adopted by the affected parties in terms of the Act. Finally,
it ordered the respondent to pay the costs
of the application, which
costs were to include the reasonable expenses and disbursements of
the joint business rescue practitioners.
The appeal is before this
court with leave of the court a quo.
[2] The principal
issue in this appeal is the proper interpretation of section
153(1)
(a)
(ii) and 153(7) of the Act. In particular, the
questions that arise are (i) whether the court a quo was correct in
finding that
the appellant’s vote against the proposed business
rescue plan was ‘inappropriate’ (ii) whether the court a
quo
was correct to set aside the voting result of the rejection of
the proposed business rescue plan and (iii) whether the court a quo
had any power to refer the rejected plan to the affected persons ‘to
be adopted’ by them.
Factual
Background
[3]
The relevant facts of this case are briefly the following. The main
business of KJ Foods CC is the production and supply of
bread to cash
and carries and the informal market. The respondent has been in
existence for a period exceeding 20 years and employs
approximately
220 employees. It is managed by its sole member, Mr S C B Tuna who
has managed and maintained the respondent for
a period exceeding 20
years.
[4]
The respondent started to experience financial distress towards the
end of 2012. On 15 July 2013 the respondent resolved to
be placed
under business rescue proceedings in terms of s 129 of the Act. One
of the reasons advanced for the respondent’s
financial distress
was that the respondent was in arrears with its payments towards its
account with one of its major supplier
of flour, Pioneer Foods, which
negatively affected the respondent’s business. The respondent,
on the same date approached
two business rescue practitioners
(practitioners) namely Messrs W Cawood and J C Beer and requested
them to accept appointments
as its practitioners. They both accepted
the appointments, and business rescue commenced on 17 July 2013. On
24 July 2013 the appointed
practitioners informed the respondent’s
creditors about their appointment.
[5]
The practitioners investigated the affairs of the respondent. It was
established that the financial distress was caused by various
factors, which included the down turn in the bread baking industry
since September 2012 due to lower consumer demands and an increase
in
direct and indirect input costs. The situation was exacerbated by a
persisting accounting error which occurred in the books
of the
respondent. This resulted in an outstanding tax liability of
approximately R4 million. At the beginning of 2013 the respondent
paid the tax liability in full and that placed further pressure on
the respondent’s cash flow.
[6]
The first meeting of creditors took place on 6 August 2013. Various
creditors of the respondent attended the meeting. Pioneer
Foods was
also represented. Representatives of the appellant arrived at the
meeting after the meeting had been concluded and adjourned.
However
they were allowed to provide the practitioners with their claim,
which was subsequently included in the respondent’s
business
rescue plan. The minutes of the said meeting recorded that ‘all
affected parties present at the meeting were in
agreement that the
respondent’s business can be successfully rescued subject to a
brief moratorium being put in place in
the proposed business rescue
plan’.
[7]
Following the first meeting of creditors a business rescue plan was
published on 28 August 2013. The initial plan was revised
in the
light of new claims that had not been included in the initial rescue
plan and, furthermore the existing creditors of the
respondent
required certain amendments to be effected.
[8]
A second meeting of creditors took place on 10 October 2013. The
purpose of the meeting was to discuss and vote on the revised
business rescue plan. That meeting was adjourned and after certain
adjustments were made, a final business rescue plan was published
on
21 November 2013.
[9]
The third meeting of creditors (a continuation of the adjourned
meeting of 10 October 2013) took place on 2 December 2013. An
annexure which was prepared by the practitioners and presented to the
meeting indicated that the respondent owed different creditors
a
total amount of R40 992 192.42. First National Bank (FNB) and
Wesbank, both secured creditors, were owed R6 337 587.37 in respect
of a loan and R5 645 948.20 for financing a number of
vehicles respectively. The annexure further indicated that Pioneer
Foods which was not a secured creditor was owed an amount of R12 884
850. The combined value of the concurrent claims against the
respondent represented an amount of approximately R 28 million.
[10]
Creditors were invited to make proposals with regard to possible
further amendments to the plan but no proposals for possible
further
amendments were made. At the third meeting of creditors the appellant
held a voting interest of 29.81 per cent and the
remainder of the
creditors held a voting interest of 70.19 per cent.
[11]
When no further amendments were made to the business rescue plan and
no new proposals were made, the creditors proceeded to
the voting
stage. All the creditors in attendance at the meeting voted in favour
of the business rescue plan except the appellant
who voted against
its adoption. Section 152(2) of the Act requires 75 per cent of the
creditors voting interest to vote in favour
of the business rescue
plan for it to be adopted. The requisite 75 per cent of the creditors
voting interests was not obtained
with the result that the final
business rescue plan was rejected. The appellant voted against the
adoption of the rescue plan because
in its view the plan was vague
and that the appellant had no faith in the plan. The appellant raised
various criticisms of the
plan. Among others, the appellant stated
that the amended business rescue plan provided no basis that consumer
demands would increase,
that the direct and/or indirect input costs
would decrease and/or that the respondent’s cash flow would
increase. Furthermore,
the appellant was of the view that the
proposed plan would not achieve the postulated results due to
erroneous arithmetic and assumptions.
The appellant was also of the
view that the respondent’s revenue will be less and/or its
costs of sales will be higher and/or
its monthly expenses would be
more
–
with
the consequences that the predicted figures in the forecasted figures
were wrong and not workable.
[12]
The amended business rescue plan postulated that if the plan was
adopted, the secured and statutory preferent creditors and
concurrent
creditors would receive 100 cents in the rand, but in the event of
immediate liquidation, the secured and statutory
preferent creditors
would receive 100 cents in the rand and the concurrent creditors
would receive 51 cents in the rand. The business
rescue plan also
stipulated that ‘all liabilities in terms of instalment
agreements and covering bonds with Wesbank, FNB
and ABSA would be
repaid in terms of the original finance agreements’.
[13]
The final business rescue plan envisaged full payment to all
creditors over certain periods. All creditors (excluding secured
creditors) would be repaid over a period of 52 months, secured
creditors would have to wait slightly longer as their repayments
were
to be made in the instalment amounts and time periods reflected in
the original financing agreements. The appellant
as secured
creditor of the respondent would receive 100 cents in the rand in
liquidation and in the business rescue scenario. The
appellant would
also receive interest on its claim in the business rescue scenario
which interest would not necessarily be received
by the appellant in
liquidation. The amended business rescue plan stipulated that the
implementation of the business rescue plan
will be monitored for a
period of two to four months subsequent to the adoption thereof.
[14]
As stated earlier, the appellant voted against the adoption of the
proposed business rescue plan. The practitioners regarded
the vote of
the appellant as inappropriate and consequently the practitioners
issued an application in terms of s153 of the Act
seeking the setting
aside of the vote by the appellant.
[15]
As at 18 November 2013 FNB’s claim was R6 337 587.37. By
July 2016 the outstanding amount had been reduced to R5 294 272.57.
Wesbank was one of the secured creditors of the respondent. It had
provided vehicle asset finance to the respondent for the purchase
of
56 motor vehicles. Its claim as at 18 November 2013 amounted to
R5 645 948.20. The respondent continued making payments
to
Wesbank and as at 13 June 2014, 11 of the 56 vehicles purchased by
the respondent had been paid for in full.
[16]
The position by the time of the hearing of the application was that
the respondent had maintained all payments due to the appellant
in
terms of the existing agreements between the parties. The monthly
payments were honored as provided for in the business rescue
plan. As
at 1 February 2016, taking into account the payments made by the
respondent to the appellant, the claims of the appellant
had dropped
in value, and they represented a voting interest of approximately
20.73 per cent. The claim of FNB will be settled
in full in terms of
the original finance agreement by November 2022. This claim is
secured.
[17]
In a report dated 26 July 2016 and prepared by the practitioners at
the request of Mpati AP, it is stated that the business
rescue plan
has been implemented. As at 21 July 2016, Absa, which was one of the
secured creditors was paid in full. Wesbank and
FNB were also secured
creditors and as at date of business rescue they were owed
R5 645 948.20 and R6 337 587.37
respectively. As
at 21 July 2016, Wesbank’s claim was reduced to R402 430.30
and FNB’s claim was reduced to R5 294 272.57.
[18] As at the
inception of business rescue the claims of unsecured creditors were
R18 145 448.83 in total and as at 21
July 2016 that amount
had been reduced to R8 933 795. According to the said
report as at the commencement of business
rescue the debts of the
respondent amounted to R30 265 457.05 and as at 21 July
2016 the debts had been reduced to R14 630 498.03.
The
report further states that the respondent company was performing in
line with the projected income and expenditure levels as
predicted in
the business rescue plan.
Legal Framework
[19] Section 152(2)
of the Act states that in a vote for the proposed business rescue
plan same will be approved on a preliminary
basis if:
‘
(
a
)
it was supported by the holders of more than 75% of the creditors’
voting interest that were voted; and
(
b
)
the votes in support of the proposed plan included at least 50% of
the independent creditors’ voting interest, if any, that
were
voted.’
[20]
As stated earlier the appellant held approximately 29 per cent of the
voting interest and consequently the business rescue
plan could not
be approved as the appellant voted against its adoption. The proposed
revised business rescue plan was accordingly
rejected.
[21] Section 152(3)
provides that:
‘
If
a proposed business rescue plan -
(
a
)
is not approved on a preliminary basis . . . the plan is rejected,
and may be considered further only in terms of s 153.’
[22] Section
153(1)
(a)
states that:
‘
If
a business rescue plan has been rejected . . . the practitioner may –
(i) seek a vote of
approval from the holders of voting interests to prepare and publish
a revised plan; or
(ii)
advise the meeting that the company will apply to a court to set
aside the result of the vote by the holders of voting interests
or
shareholders, as the case may be, on the ground that it was
inappropriate.’
[23] Section 153(7)
provides the following:
(i)
‘
On
an application contemplated in subsection (i)
(a)
(ii), . . ., a court may order that the vote on a business rescue
plan be set aside if the court is satisfied that it is reasonable
and
just to do so, having regard to –
(a)
the
interests represented by the person or persons who voted against the
proposed business rescue plan;
(b)
the
provision, if any, made in the proposed business rescue plan with
respect to the interests of that person or those persons;
and
(c)
a
fair and reasonable estimate of the return to that person, or those
persons, if the company were to be liquidated.
[24] Section 5(1)
stipulates that the Act must be interpreted and applied in a manner
that gives effect to the purposes as set out
in s 7. Section
7(
k
) stipulates that the purpose 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.’
Discussion
[25]
The remedy of s 153(1) may only be employed when the business rescue
plan has been rejected. The business rescue practitioner
invokes the
provisions of s 153(1)
(a)
(ii) when he or she is of the view
that the result of the vote was inappropriate. The provisions of s
153(1)
(a)
(ii) target the result of the vote which a business
rescue practitioner considers to be inappropriate.
[26]
The appellant’s counsel contended that there are two stages in
the enquiry. First, the court must establish whether the
vote was
inappropriate (s 153(1)
(a)
(ii)) and if so, then the court must
consider whether it would be reasonable and just to set aside the
result of the vote, taking
into account the factors listed in s
153(7). The respondent’s counsel submitted that the principal
issue on appeal concerns
the meaning and proper interpretation of s
153(1)
(a)
(ii) and 153(7) of the Act.
[27]
In
Shoprite
Checkers (Pty) Ltd v Berryplum Retailers CC (Murray NO, Mitateko,
Shirelele NO Intervening Parties)
(47327/2014)
[2015] ZAGPPHC 255; 2015 JDR 0558 (GP) para 40 Tuchten J said that
‘
a
court considering an attack on a vote under s 153(7) must first
determine whether the vote was inappropriate. Only if it finds
that
the vote was inappropriate, can the court proceed to consider
whether, taking this into account, it would be reasonable and
just to
set the vote aside.’
[28]
In
Ex Parte Target Shelf 284 CC (Commissioner for the South
African Revenue Service and Business Partners Ltd Intervening
Parties)
(21955/14; 34775/14) [2015] ZAGPPHC 740; 2015 JDR 2219
(GP), Gauteng Division, Pretoria Kubushi J agreed with Tuchten J on
the
two stage enquiry but held that the court should proceed to the
second stage even if it had come to the conclusion that the vote
was
not inappropriate. In that case she found the vote of Business
Partners against the adoption of the business rescue plan was
not
inappropriate and thereafter examined whether the court can set aside
the vote in terms of s 153(7) of the Act. (See also P
Delport & Q
Vorster
Henochsberg on the Companies Act 71 of 2008
(Service
Issue 12, 2016) at 536(2)).
[29]
The court a quo followed the same reasoning. It first enquired
whether the vote of the appellant was inappropriate, and after
finding that the vote was inappropriate, it invoked the provisions of
s 153(7). In my view a court must first determine whether
or not the
vote was inappropriate and if so, invoke the provisions of s 153(7).
The court’s discretionary powers afforded
by s 153(7) become
applicable once the jurisdictional fact of inappropriateness has been
found or established.
[30] In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA
13
;
2012 (4) SA 593
(SCA) para 18 Wallis JA while dealing with the
approach to interpretation of documents said:
‘
The
present state of the law can be expressed as follows: Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given to
the language used in the light of the ordinary
rules of grammar and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material
known to those
responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the
light of all these
factors. The process is objective, not subjective’.
(See
also
Cloete
Murray & another NNO v Firstrand Bank Ltd t/a Wesbank
[2015] ZASCA 39
;
2015 (3) SA 438
(SCA) para 30).
[31]
In the present matter the appellant’s counsel contended that
the test to be applied in order to determine whether the
vote is
‘inappropriate’ or not is a subjective test. A vote
cannot be held to be inappropriate so it was argued, if
the
creditor’s reasons for voting against adoption of the proposed
business rescue plan reflect a bona fide vote to advance
or protect
that creditor’s interests. Counsel further contended that
having regard to the language used in the relevant section
and in its
immediate context, this suggests that an inappropriate vote is a
dissenting vote that does not honestly reflect the
creditor’s
perception of its own interests. He submitted further that the
exercise of a right, such as the right to vote
against the adoption
of the business rescue plan will be mala fide and therefore
inappropriate, if it is used for a purpose for
which it was not
primarily intended, but also intended to achieve an improper result.
In his view, the test to be applied is a
subjective test and not an
objective test. A creditor has no duty so the argument, continued to
consider the position of other
persons and therefore the vote cannot
be inappropriate if it was intended to advance that specific
creditor’s interests.
[32]
On the other hand, the respondent’s counsel submitted that the
word ‘inappropriate’ does not mean that something
was
unlawful or improper. In the current context, it simply means that
the vote gave rise to a result that is not suitable to the
situation
at hand. He further contended that the inappropriateness pertains to
the result of the vote having regard to merits of
the matter. The
inappropriateness of the vote relates to the manner in which the
company or other creditors perceive the vote against
the plan. An
appropriateness of the vote is not viewed at application stage from
the perspective of the dissenting creditor.
[33]
In order to determine the meaning of the word ‘inappropriate’
the intention of the legislature must be determined
by giving the
word its ordinary grammatical meaning which the context dictates. The
apparent purpose of the Act assists in the
process of interpreting or
ascertaining the meaning of the word inappropriate. The
Shorter
Oxford English Dictionary
6ed (2007) defines the word
‘inappropriate’ as unsuitable, improper, wrong,
inadvisable, misguided, undesirable, misplaced,
etc. As mentioned, s
7(
k
) stipulates that the purpose 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. In my view, the word inappropriate refers to or
means
an act which unduly undermines the achievement of the purpose of the
Act, which is stipulated in s 7
(k).
Any vote which unduly
undermines the achievement of the rescue of a financially distressed
company will be inappropriate.
[34]
In the present matter, the vote of the appellant resulted in the
rejection of the proposed business rescue plan, which rejection
was
to the detriment of the respondent and other affected creditors. The
vote of the appellant had the ability to frustrate the
efficient
rescue and recovery of the financially distressed respondent. In my
view, the test to be applied is an objective test
and not a
subjective test. In this matter the vote against the adoption of the
business rescue plan was inappropriate. The adoption
of the amended
business rescue plan would not have prejudiced the appellant in any
manner whatsoever as the business rescue plan
stated that ‘[a]ll
liabilities in terms of the instalment agreements and covering bonds
with Wesbank, First National Bank
and ABSA will be repaid in terms of
the original finance agreements’. The provision made in the
proposed business rescue
plan for the payments to the appellant does
not deviate from any payment that the appellant stood to receive in
terms of the initial
agreement between the parties. The appellant is
a secured creditor and if, for any reason the business rescue plan
does not yield
the anticipated results, the appellant can fall back
on its security to recover the balance of the money owed to it. If
the proposed
business rescue plan is successfully implemented all the
affected creditors will benefit. In my view the vote of the appellant
against the adoption of the proposed amended business rescue plan was
‘improper’ or ‘misplaced.’
[35]
As stated earlier s 153(7) of the Act provides that a court may order
that the vote on a business rescue plan be set aside,
if the court is
satisfied that it is reasonable and just to do so. The subsection
further provides that when making its decision,
the court must have
regard to the interests represented by the person or persons who
voted against the business rescue plan, the
provision made in the
proposed business rescue plan with respect to the interests of that
person or persons and a fair and reasonable
estimate of the return to
that person, or those persons, if the company were to be liquidated.
[36]
The appellant is a secured creditor of the respondent. The respondent
never defaulted on any payments due to the appellant,
neither before
nor after the commencement of the business rescue. Provision made for
payments to the appellant in the proposed
business rescue plan does
not differ from any payment that the appellant stood to receive in
terms of the initial agreements between
the parties. The appellant,
as secured creditor of the respondent, will receive 100 cents in the
rand in liquidation and will also
receive 100 cents in the rand in a
business rescue. The interests of the appellant will therefore not be
compromised in the business
rescue scenario.
[37]
Furthermore the business rescue has certain obvious advantages to
other affected persons. In a business rescue, the concurrent
creditors will receive 100 cents in the rand and in liquidation the
concurrent creditors will receive 51 cents in the rand. The
business
rescue, as compared to liquidation benefits both secured and
concurrent creditors.
[38]
Section 136(1) of the Act provides that during a company’s
rescue proceedings, employees of the company continue to be
so
employed on the same terms and conditions. The only exception to this
provision is where changes to the employee’s status
occur in
the ordinary course of attrition or where the employees and the
company agree to different terms and conditions. On the
other hand
s
38(1)
of the
Insolvency Act 24 of 1936
provides that the contracts of
service of employees whose employer has been sequestrated are
suspended with effect from the date
of the granting of a
sequestration order. The suspended contracts of employment, depending
on certain circumstances, may be terminated
during the sequestration
or liquidation process. In the business rescue scenario, the
employees of the company will retain their
employment whereas in the
sequestration or liquidation scenario employees may lose their
employment.
[39]
The facts of this case clearly indicate that it is reasonable and
just that the vote on the business rescue plan should be
set aside.
[40]
The appellant’s counsel contended that s 153 of the Act does
not give the court any power (expressly or impliedly) to
order that a
rejected plan be adopted by an affected person. On the other hand the
respondent’s counsel contended that once
the court sets aside
the dissenting vote, the business rescue plan is deemed to have been
‘adopted.’
[41]
I agree with the contention that the court has no powers to refer
back the business rescue plan to the affected parties for
adoption
thereof. The vote on the business rescue plan, which was set aside
was substituted by the court order. The business rescue
plan was
deemed approved and there was no need to refer the business rescue
plan to the affected parties for adoption.
[42]
The respondent has succeeded substantially in this appeal. If there
was no settlement agreement referred to hereunder the respondent
would have been entitled to its cost.
[43] However, after
the matter was argued in this court a judgement was prepared. Before
the judgment was ready for delivery the
parties informed the
Registrar of this court that the matter had been settled. It appears
that Mr and Ms Tuna were sued by the
appellant in their capacity as
sureties for payment of the amounts owed by the respondent to the
appellant. In terms of the settlement
agreement, the two sureties
undertook to pay the sum of R12 million on or before 5 December 2016,
in full and final settlement
of the respondent’s indebtedness
to the appellant. However, in paragraph 5 of the settlement agreement
it is stated that
–
‘
[Appellant]
and KJ Foods (in business rescue) agree as follows: (a) (Appellant)
does not withdraw the appeal and judgement will
be delivered by the
Supreme Court of Appeal;
(b) This agreement
of settlement be noted.’
The Settlement
[44]
The settlement agreement reached between the parties means that there
is no longer a
lis
between the parties to this appeal.
However, in a letter from Koster Attorneys accompanying the copy of
the agreement, it is argued
on behalf of both parties that ‘the
industry can greatly benefit from a judgement dealing with section
153 (1) read with
section 153 (7) of the Act, and the Honourable
Court is with the greatest respect requested to, notwithstanding the
settlement
reached, deliver judgement in the matter….’Although
the merits of the case are now no longer relevant , I agree with
the
submission that this court’s interpretation of section 153(1)
and (7) of the Act will benefit the industry. It is for
that reason
that judgement will be delivered despite the settlement agreement.
[45]
In terms of the settlement reached each party ‘ is liable for
payment of its own costs’. No costs order will be
therefor be
made.
[46]
Save for paragraph (ii) of the order of the court a quo, which is
hereby set aside, the appeal is otherwise dismissed.
[47]
In the result, I would have made the following order:
1 Paragraph 1 and 3
of the order of the court a quo are confirmed.
2 Paragraph 2 of the
order of the court a quo is set aside.
__________________
W
L SERITI
JUDGE
OF APPEAL
Schoeman
AJA (Mpati AP, Theron and Van der Merwe JJA concurring)
[48]
This appeal concerns the question whether it was reasonable and just,
in terms of s 153(7) of the Companies Act 71 of 2008
(the Act) for
the Gauteng Division of the High Court, Pretoria (Mavundla J) to set
aside a vote by the appellant, Firstrand Bank
Ltd (Firstrand) against
the adoption of a business rescue plan in respect of the respondent,
KJ Foods CC (KJ Foods). Firstrand’s
vote against the adoption
of the business rescue plan had resulted in the rejection of the
plan. The ancillary question is: what
are the consequences for
business rescue proceedings, once the result of such a vote had been
set aside.
[49]
After the matter was argued in this court a judgment was prepared.
Events however overtook the delivery of the judgment: the
parties
informed the Registrar of this court that the matter had been settled
due to a settlement that had been reached between
Mr and Ms Tuna, who
signed as sureties for KJ Foods’ indebtedness to Firstrand. KJ
Foods and Firstrand however agreed that
Firstrand did not withdraw
the appeal and that a judgment ‘will be delivered by the
Supreme Court of Appeal.’ In an
attorneys’ letter
accompanying a copy of the settlement agreement both parties
expressed a view that ‘. . . the industry
can greatly benefit
from a judgement dealing with section 153 (1) read with section 153
(7) of the Act, and the Honourable Court
is with the greatest respect
requested to, notwithstanding the settlement reached, deliver
judgement in the matter . . .’.
I agree.
[50] I have read the
judgment of Seriti JA but unfortunately I disagree with his finding
that a two pronged approach is necessary
to determine whether the
result of a vote should be set aside. Furthermore, the effect of the
setting aside of the vote has not
been addressed with sufficient
detail in my colleague’s judgment. Due to the view I take in
this matter it is necessary to
set out the background facts.
Background
[51]
KJ Foods has been a producer and supplier of bread to the informal
sector of the community and cash and carry wholesalers and
a customer
of Firstrand for more than 20 years. On 17 July 2013 KJ Foods
commenced business rescue proceedings after it had experienced
financial distress that I will elaborate on later. Messrs Cawood and
De Beer were appointed as the business rescue practitioners
(the
practitioners) on 24 July 2013. A first meeting of creditors took
place on 6 August 2013 and on 28 August 2013 a business
rescue plan
was published. The second meeting of creditors was postponed and
after further claims were proved and claim figures
revised, the final
revised business rescue plan was published on 21 November 2013.
[52]
In terms of this business rescue plan KJ Foods owed a total amount of
R40 992 192.42. The secured creditors were Absa
Bank Ltd and
Firstrand. The latter’s claim consisted of a secured loan by
First National Bank (FNB) to KJ Foods in an amount
of approximately
R6 million and motor vehicle finance agreements between the latter
and Wesbank in a total amount of approximately
R5.5 million. Absa’s
claim was for an amount of R141 541.95. The main concurrent
creditor was Pioneer Foods (commonly
known as Sasko) whose claim was
in excess of R12 million. The total claims of the independent
concurrent creditors were R17 152 435.30.
[53]
The revised business rescue plan, made provision for secured
creditors to be paid in full, in terms of the instalment agreements
and covering bonds in their favour. It was postulated that concurrent
creditors would also be paid in full, but if KJ Foods were
to be
liquidated, the secured creditors would be paid in full, while the
concurrent creditors would only receive 51 per cent of
the money
owing to them.
[54]
Firstrand held 29 per cent of the creditors’ voting interests.
It voted against the adoption of the plan and due to its
vote, the
business rescue plan could not be approved on a preliminary basis, as
75 per cent of creditors’ voting interests
that had voted had
to approve the business rescue plan.
[1]
The practitioners advised the meeting that application will be made
to court in terms of s 152(3)
(a)
to
set aside the result of the vote, on the grounds that it was
inappropriate. Thereafter the meeting was adjourned.
[55] On 13 December
2013 an application was launched for a declaratory order that ‘the
result of the vote by the holders of
voting interests . . . rejecting
the revised business rescue plan, be set aside’ on the grounds
that it was inappropriate
and that the business rescue plan be
adopted. On 10 October 2014 the high court ordered that the result of
the vote be set aside
‘on the grounds that the voting against
the plan was inappropriate’; that the revised business rescue
plan be adopted
by the parties and that the costs of the application,
including the costs of the practitioners, be paid by Firstrand. On 23
April
2015 reasons were given for the mentioned order and
subsequently leave to appeal to this court was granted on 12 August
2015.
The Financial
Position of KJ Foods
[56]
Before September 2012 KJ Foods sold approximately five million loaves
of bread per month. However, the input costs of the bread
baking
industry increased sharply with a concomitant increase in the price
of bread and a downturn in consumer demand. Therefore,
in September
2012, due to a sharp decline in market demand, sales volumes
decreased to 2.8 million loaves per month. KJ Foods was
also indebted
to the South African Revenue Service in the amount of approximately
R4 million due to an accounting error by a bookkeeper.
This amount
was paid at the beginning of 2013 and this resulted in further
cash-flow problems.
[57] Prior to the
commencement of business rescue proceedings, the only member of KJ
Foods, Mr Tuna, informed representatives of
Firstrand that he
contemplated commencing business rescue proceedings due to
difficulties with one of the suppliers, Pioneer Foods.
This resulted
in Firstrand immediately freezing KJ Foods’ trading account,
which was approximately R1 million overdrawn.
The Creditors’
Meetings
[58]
At the first creditors’ meeting the practitioners refused to
admit three further claims totalling R 16 430 923
which
included a claim where KJ Foods bound itself as surety for the
obligations of Nancefield Properties towards Firstrand in
the amount
of R13 867 281.13. Following the first meeting of
creditors, a rescue plan was duly published.
[59]
On 10 October 2013, the second meeting of creditors was held. At this
meeting, the initial rescue plan was considered. Firstrand
raised
certain issues with the plan, including the fact that it excluded the
surety liability in respect of Nancefield Properties
and that the
plan was vague and provided no basis upon which KJ Foods could be
rescued. The meeting was, thereafter, duly adjourned
and
a decision taken to publish an adjusted plan within 21 business days.
[60]
Prior to the publishing of the revised business rescue plan the
Department of Trade and Industry (the DTI) deposited an amount
of
approximately R2,7 million into K J Foods’ then frozen account
held with Firstrand. The deposit represented a non-repayable
grant by
the DTI in favour of KJ Foods. Firstrand used this amount to pay off
the value of t
he
overdraft held on KJ Foods’ account. Firstrand retained R1
006002.17 of the amount paid by the DTI, and refused to release
this
amount. A further amount of
approximately
R20 000 was paid into the frozen account of the KJ Foods on or
during 16 November 2013.
A
revised business rescue plan was published incorporating the payment
of the R2.7 million by the DTI. The revised business rescue
plan was
aimed at substantially improving the creditors’ ability to
recover their debt and to rescue the company as opposed
to immediate
liquidation.
[61]
The practitioners envisaged that concurrent creditors would be repaid
over a period of 52 months and that the liabilities in
respect of
instalment agreements and covering bonds of Firstrand and ABSA would
be repaid in terms of the original finance agreements.
[62] The amended
business rescue plan was voted upon during the second meeting of
creditors on 2 December 2013. It did not include
the approximately
R13 million liability for which KJ Foods stood surety for Nancefield
Properties. The business rescue plan stated
that the reason for
exclusion of the surety liability was that the obligation of the
principal debtor was up to date. The practitioners
opined that the
surety claim did not fall under the definition of ‘affected
party’ for purposes of the alleged claim.
The Rescue Plan
[63] According to
the plan, the elected practitioners were required to get the cash
flow to the optimal level while simultaneously
negotiating and
restructuring the repayment terms of the debt. With regards to the
employees, the practitioners did not envisage
any changes in their
number or the terms and conditions of employment if the business
rescue plan was adopted. In relation to the
benefits of adopting the
plan as opposed to liquidation of the entity, it noted that creditors
stood to receive a substantially
better return, while KJ Foods stayed
in business and 220 employees retained their jobs.
The Financial
Position after Implementation of the Plan
[64]
As from the date of the launching of the application, the
practitioners implemented the business rescue plan. The parties were
requested to provide details regarding the implementation of the plan
before the hearing of the appeal. From the information provided
on 26
July 2016 it is apparent that (a) the secured debt of Firstrand
regarding the commercial property finance loan had diminished
from R6
337 587.37 to R5 294 272.57 and the business rescue
practitioners had kept up with payments in terms of the original
agreements; (b) Wesbank’s debt in respect of vehicle financing
had been reduced from the disputed amount of R5 645 948.20
to
R402 430.30 with KJ Foods keeping up with payments in terms of
the agreements; (c) ABSA’s secured debt of R141 541.95
had
been paid in full; and (d) the unsecured debts had been brought down
from R18 145 448.83 in November 2013 to R8 933 795.16
in July 2016.
[65] From the above
it is apparent that business rescue has benefitted all the creditors.
The agreements between the company and
Firstrand have been strictly
adhered to and payments have been made in compliance with those
agreements.
The Parties’
Contentions
[66]
It is apposite at this stage, to set out the parties’
respective entrenched positions.
Firstrand
contended that the decision of the high court to set aside its vote
in the business rescue was wrong. It averred that
the enquiry in
relation to the question whether the vote in the business rescue must
be set aside in an application of this nature,
is two-pronged. First,
it must be determined whether Firstrand’s vote was
inappropriate, and second, if so, whether it would
be reasonable and
just to set aside the result of the vote. It relied on two high court
judgments namely,
Shoprite
Checkers (Pty) Limited v Berryplum Retailers CC
[2]
and
Ex
Parte Bhidshi Investments CC
[3]
to support its
contentions. It was argued in this court that the question whether it
was reasonable and just to set aside a vote
rejecting the adoption of
a rescue plan can only be considered after it had been found that
such a vote was inappropriate. Therefore,
if the vote was
appropriate, the application must fail for then there is no need to
consider whether it was just and reasonable
to set aside the vote. KJ
Foods, on its part, submitted that the court a quo’s finding
that Firstrand’s vote against
the rescue plan was inappropriate
should be upheld. KJ Foods submitted that s 153 of the Act allowed
the court a quo a discretion
which it exercised around the parameters
of what it considered to be ‘reasonable and just’. It
further contended that
the language of s 153(7) did not support the
interpretation propagated by Firstrand.
[67] Before us,
Firstrand heavily criticised the rescue plan. It argued that the plan
would fail to achieve the result postulated
due to erroneous
arithmetic and assumptions and conditions that will cause one
creditor to be preferred over the others. It submitted
that forecasts
made in the plan were not workable, that the plan was vague and
erroneous, and that its failure to deal with the
disputed claims
exacerbated this. It bemoaned the fact that the plan allegedly caused
preferences and relegated secured creditors
to a subordinate status
of concurrent creditors, because they were paid last and could not
rely on their security, as they would
have been entitled to in
liquidation proceedings.
The Salient
Provisions of the Act
[68]
Business rescue is the development and implementation of a plan to
rescue an entity by restructuring its affairs, business,
property,
debt and other liabilities in a manner that maximises the likelihood
of the entity continuing in existence on a solvent
basis. If it is
not possible for the entity to so continue in existence, the plan
must be developed and implemented in a manner
that results in a
better return for the entity's creditors or shareholders than would
result from its immediate liquidation.
[4]
The manner in which the plan envisaged in s 128(1)
(b)
(iii)
must be developed and approved is dealt with in, amongst others, ss
150
[5]
and 151.
[6]
In terms of s 151(1) the plan must be considered at a meeting of
creditors and any other holders of a voting interest.
[7]
Section 152(1)
(d)
(ii)
of the Act directs the practitioner to adjourn the meeting in order
to revise the plan for further consideration. Approval
of the plan
occurs in terms of s 152(2) which reads:
‘
In a vote
called in terms of subsection (1)
(e)
,
the proposed business rescue plan will be approved on a preliminary
basis if-
(
a
) it was
supported by the holders of more than 75% of the creditors' voting
interests that were voted; and
(
b
) the votes
in support of the proposed plan included at least 50% of the
independent creditors' voting interests, if any, that were
voted.’
An independent
creditor is defined in s 128(1)
(g)
as a person who is a creditor of the company, including an employee
of the company who is a creditor in terms of s 144(2) and who
is not
related to the company, a director, or the practitioner, subject to
subsection (2)
.
[8]
[69]
Section 152(3)
(a)
states that if a proposed business rescue
plan is not approved on a preliminary basis, as contemplated in
subsection (2), the plan
is rejected, and may be considered further
only in terms of s 153. Section 153 determines:
‘
(1)
(a)
If
a business rescue plan has been rejected as contemplated in section
152 (3)
(a)
. . . the practitioner may-
(i) . .
. ;
(ii)
advise the meeting that the company will apply to a court to set
aside the result of the vote by the holders of
voting interests or
shareholders, as the case may be, on the grounds that it was
inappropriate.’
[9]
[70]
In this instance the business rescue plan was not approved but
rejected in terms of s 152(3)
(a)
because
it could not muster the required support of holders of more than 75
per cent of the creditors' voting interests that were
voted; and it
is not clear from the papers whether there were independent creditors
who voted. T
he
application to set aside the vote was brought in terms of the
provisions of s 153(7) which reads as follows:
‘
(7) On an
application contemplated in subsection (1)
(a)
(ii),
or (1)
(b)
(i)(
bb
),
a court may order that the vote on a business rescue plan be set
aside if the court is satisfied that it is reasonable and just
to do
so, having regard to-
(a)
the interests
represented by the person or persons who voted against the proposed
business rescue plan;
(b)
the provision, if
any, made in the proposed business rescue plan with respect to the
interests of that person or those persons;
and
(c)
a fair and
reasonable estimate of the return to that person, or those persons,
if the company were to be liquidated.’
[71]
Whilst s 153(1)
(a)
(ii) makes provision for a company seeking
to be placed under business rescue to apply to a court to set aside
‘the result
of the vote’, s153(7) confers on that court a
discretion to order that ‘the vote on a business rescue plan be
set aside’
if it is satisfied that it is reasonable and just to
do so, having regard to the factors listed in subsec (7)
(a)
to
(c)
. It is clear from a reading of those factors that the vote
that may be set aside is not the entire vote on the business rescue
plan, but only the vote exercised against the approval or adoption of
the plan. The factors referred to apply only in respect of
the person
or persons ‘who voted against the proposed business rescue
plan’. It follows that once the vote against
the approval of
the plan is set aside the result thereof, namely the rejection of the
plan, will be nullified. The difference in
the wording of subsecs
(1)
(a)
(ii) and (7) of s 153 is, therefore, of no real
consequence.
The
Different Interpretive Approaches of the High Courts
[72]
There are a few cases of the high courts which have dealt with the
interpretation of s 153(1)
(a)
(ii) and (7) of the Act, with
divergent views. I have mentioned, in para 21, that Firstrand relied
on the interpretation adopted
in
Shoprite Checkers (Pty) Limited v
Berryplum Retailers CC (Murray NO, Mikateko, Shirilele NO Intervening
Parties)
and
Ex Parte Bhidshi Investments.
Seriti JA has
discussed
Shoprite Checkers
in para 27 of his judgment, thus
it is not necessary to deal with again.
[73]
In the earlier case of
Copper
Sunset Trading 220 (Pty) Ltd v Spar Group Ltd & another
[10]
,
the Limpopo Division of the High Court, Polokwane, Makgoba J focused
solely on the attitude of the creditors who voted against
the
business rescue plan. The first respondent’s attitude in voting
against the business rescue plan was found to be self-serving
and
unreasonable, while the second respondent’s vote against the
business rescue plan was irrational for, absent such plan,
it would
receive no dividend.
[11]
[74]
It is clear from the cases referred to above that the provisions of s
153 have given rise to considerable uncertainty. I agree
with Leach
JA in
African
Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers
(Pty) Ltd & others
where
he said that it was not unfair to comment that many of the provisions
of the Act relating to business rescue, and s 153 in
particular,
‘were shoddily drafted.’
[12]
I
turn to consider the appropriate approach to the provisions under
discussion.
The Correct
Interpretation of Section 153(1)
(a)
(ii) and (7) of the Act
[75]
In interpreting the provisions of the Act the principles enunciated
in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[13]
and
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
[14]
find
application. These cases and other earlier ones,
[15]
provide support for the trite proposition that the interpretive
process involves
considering
the words used in the Act in the light of all relevant and admissible
context, including the circumstances in which
the legislation came
into being.
Furthermore,
as was said in
Endumeni,
‘a
sensible meaning is to be preferred to one that leads to insensible
or unbusinesslike results’. Thus when a problem
such as the
present arises the court must consider whether there is a sensible
interpretation that can be given to the relevant
provisions that will
avoid anomalies.
[16]
Accordingly, in this instance, the proper approach in the
interpretation of the provisions is one that is in sync with
the
objects of the Act, which includes ‘[enabling] the efficient
rescue and recovery of financially distressed companies,
in
a manner that balances the rights and interests of all relevant
stakeholders
.’
[17]
(My
emphasis.)
[76]
In interpreting s 153(1) and (7) the words of the Act are taken into
consideration. However, these words must not be considered
in
isolation, but in the light of the context of the provision, the Act
as a whole and the purpose for which it was enacted. The
interpretation is ‘essentially one unitary exercise’.
[18]
[77]
In
DH
Brothers Industries (Pty) Ltd v Gribnitz
[19]
Gorven J said the following about chapter 6 of the Act, dealing with
business rescue:
‘
I
respectfully agree that the chapter 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.’
[78]
It is so that there is no definition of ‘inappropriate’
in the Act. I do not have any issue employing the dictionary
meaning
to the word, as was done in the cases highlighted above, in terms of
which ‘inappropriate’ is described as
meaning, ‘not
suitable or proper in the circumstances’.
Despite
my acceptance
of
this definition, I am readily aware that it is still the court’s
role to ascertain the legal meaning of the word. As G
E Devenish
Interpretation
of Statutes
(1992) said (at 141), this meaning will normally correspond with the
ordinary grammatical meaning of the word, but this may not
always be
the case since the meaning of the word is determined by language and
legal context.
[20]
[79]
Firstrand’s counsel argued that it is the subjective view of
Firstrand in voting against the business rescue plan that
determines
whether the vote was inappropriate. This submission is unsustainable
in light of the wording of s 153(1). I agree with
the authors of
Henochsberg
[21]
that if ‘. . . creditors are to be allowed to exercise their
votes freely it has to be assumed that they would only vote
in
support of the business rescue plan if its implementation would be to
their benefit.’ If the issue was to be approached
on the basis
as proposed by counsel for Firstrand, the probabilities are that it
would always be appropriate if the plan is to
a creditor’s
advantage as it is difficult to think of circumstances where the
creditors’ votes for the rejection of
a business rescue plan
would be inappropriate.
[22]
However,
Henochsberg
suggests
that the provisions of s 153(7)
(a)
to
(c)
provide
some insight as to what the court should take into account when
determining whether it would be reasonable and just to set
aside the
vote on a business rescue plan on the grounds of the vote being
inappropriate’.
[23]
[80]
It
is clear that s 153(1)
(a)
(ii)
and s 153(1)
(b)
(i)
(bb)
are inextricably linked to s 153(7). On an application to set
aside the result of a vote in terms of any of these subsections,
the
court is enjoined by s 153(7) to determine only whether it is
reasonable and just to set aside the particular vote, taking
into
account the factors set out in s 153(7)
(a)
to
(c)
and all circumstances relevant to the case, including the purpose of
business rescue in terms of the Act. Put differently, the
vote would
be set aside on application on the grounds that its result was
inappropriate, if it is reasonable and just to do so
in terms of
s 153(7). To my mind this entails a single enquiry and value
judgment.
[81]
In opposing the application Firstrand averred that its vote against
the business rescue plan was ‘appropriate’.
It argued
that the employees of the company would not lose their employment as
the business would be sold as a going concern. Furthermore,
the
deponent to the answering affidavit stated that the creditors would
not receive a substantially better return as compared to
liquidation,
but that the ‘creditors would be in a far worse position if the
plan is approved and implemented’.
[82]
The argument that liquidation would not negatively affect the
position of the employees is fallacious. The winding-up of a
company
results in the suspension of all employee contracts without
remuneration.
[24]
Business rescue, on the other hand, protects employees as they
continue, subject to certain provisions, to be employed by the
company on the same terms and conditions that applied prior to the
company being placed under business rescue.
[25]
[83]
It is clear that the allegation that the creditors would be worse off
with business rescue is wrong. The court a quo mentioned
that the
dividend, with liquidation, would be 39 cent in the rand. However, at
this stage, the concurrent creditors have already
been paid
approximately 70 per cent of their claims, with payments still being
made.
[84]
The determination that a vote was inappropriate is therefore a value
judgment made after consideration of all the facts and
circumstances.
The view held by the practitioners that the result of the vote was
inappropriate in the instant matter was clearly
based on the
proposition that Firstrand’s claim would be paid in full with
business rescue and payment would be on the same
terms that Firstrand
and KJ Foods had agreed when the contract or contracts were initially
concluded. The only exception in this
regard was the overdraft of KJ
Foods, which had already been paid in full. Furthermore, with
business rescue, all the other creditors,
both secured and unsecured,
would also be paid in full, whereas with immediate liquidation, the
unsecured creditors would be paid
at most 51 per cent of their
claims. Liquidation would also have the result that approximately 200
employees would be rendered
unemployed.
[85]
It is clear, when taking Firstrand’s interests into
consideration, that the only negative feature for it would be that
it
would not be paid its full claim immediately, but payment would be in
terms of the contracts entered into between the parties.
Therefore,
it would still be paid in full albeit, not immediately. Taking all
these factors into consideration, being the interests
of Firstrand,
the employees of KJ Foods and other creditors, it is indeed
reasonable and just to set aside the vote against the
approval or
adoption of the rescue plan in terms of the provisions of s 153(7) of
the Act.
[86]
In this instance, it is clear from the implementation of the plan
that Firstrand’s reservations were unfounded. I am
of the view
that it was reasonable and just to set aside Firstrand’s vote.
What
is the Effect of Setting Aside the Result of the Vote?
[87]
In terms of the provisions of s 153(2)
(b)
after the
practitioners had informed the meeting that they intended bringing an
application to set aside the result of the vote,
the meeting was
adjourned until the court has disposed of the contemplated
application.
[88]
Firstrand contended that the business rescue plan must again be put
to the vote at the resumption of the postponed meeting.
That,
however, does not result in a businesslike interpretation, for if the
creditor who voted against the adoption of the business
rescue plan
were to vote once more against it, the whole process would start all
over again, causing a possible never-ending loop.
The Act clearly
does not envisage another round of voting. In my view a businesslike
interpretation is that the vote rejecting
the business rescue plan
having been set aside, it follows by operation of law that the
business rescue plan would be considered
to have been adopted, for,
as stated above, no further voting is envisaged. At the resumption of
the meeting of creditors that
had been adjourned in terms of
s153(2)
(b)
, it would only be necessary for the business rescue
practitioner to report on the outcome of the application to court.
[89]
Therefore, once the result of the vote is set aside the business
rescue plan is adopted, by the operation of law.
That
being the position, the declaratory order of the court a quo that the
revised business rescue plan be adopted by the affected
parties is
superfluous, as it is a natural consequence of the setting aside of
the result of the vote.
[90]
Due to the settlement agreement referred to above, it is appropriate
that no costs order is made in the appeal.
[91] The following
order is made:
1 Paragraph 1 of the
order of the court a quo is amended to read:
‘
In
terms of the provisions of
section 157(7)
of the
Companies Act 71 of
2008
the vote of the respondent against the adoption of the revised
business rescue plan exercised on 2 December 2013 is set aside.’
2 Paragraph 2 of the
order of the court a quo is set aside.
3 The appeal is
otherwise dismissed.
_______________________
IRMA
SCHOEMAN
ACTING
JUDGE OF APPEAL
APPEARANCES
:
For
Appellant:
L Meintjes
Instructed
by:
Rorich,
Wolmarans & Luderitz Inc
c/o
Symington & De Kok Attorneys
For
Respondent:
T
L Van der Merwe SC with
L
K Van der Merwe
Instructed
by:
Koster
Attorneys, Pretoria
c/o
Botha
& De Jager Inc., Bloemfontein
[1]
In terms of s
152 (2) of the Act, a proposed business rescue plan will be approved
on a preliminary basis if, in a vote called
for its approval, (a) it
was supported by the holders of more than 75 per cent of the
creditors' voting interests that were voted;
and (b) the votes in
support of the proposed plan included at least 50 per cent of the
independent creditors' voting interests,
if any, that were voted.
[2]
Shoprite
Checkers (Pty) Limited v Berryplum Retailers CC (Murray NO,
Mikateko, Shirilele NO Intervening Parties)
2015
JDR 0558 (GP).
[3]
Ex Parte
Bhidshi Investments CC
2015 JDR 2161 (GP).
[4]
Section
128(1)
(b)
(iii)
of the Act.
[5]
In terms of s
150(1) of the Act, the practitioner, after consulting the creditors,
other affected persons, and the management
of the company, must
prepare a business rescue plan for consideration and possible
adoption at a meeting held in terms of s 151.
[6]
Section 151
reads:
‘
(1)
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.
(2) At
least five business days before the meeting contemplated in
subsection (1), the practitioner must deliver a notice of the
meeting to all affected persons, setting out-
(a)
the date, time and place of the meeting;
(b)
the agenda of the meeting; and
(c)
a summary of
the rights of affected persons to participate in and vote at the
meeting.
(3) The meeting contemplated in
this section may be adjourned from time to time, as necessary or
expedient, until a decision regarding
the company's future has been
taken in accordance with sections 152 and 153.
[7]
A ‘voting
interest’ means an interest as recognised, appraised and
valued in terms of subsecs 145 (4) to (6) of the
Act. These
provisions deal with participation by creditors respect of any
decision contemplated in Chapter 6 of the Act.
[8]
Section 128 (2) states that for
the purpose of subsection (1)
(g)
,
an employee of a company is not related to that company solely as a
result of being a member of a trade union that holds securities
of
that company.
[9]
Professor Piet Delport et al
Henochsberg on the
Companies Act 71 of 2008
Companies Act 71 of 2008
and Commentary
(eds)
(Service
issue 10, May 2015) at 530, the provisions of this section amount to
a last-gasp attempt to have a proposed business
rescue plan approved
by (1) attacking the rejection of the plan by the holders of the
creditors’ voting interests as “inappropriate”.
[10]
Copper
Sunset Trading 220 (Pty) Ltd v Spar Group Ltd & a
nother
2014
(6) SA 214
(LP) para 38.
[11]
See ibid para
37, where the court described the first respondent’s
‘attitude’ as unreasonable, and that of the
second
respondent as irrational.
[12]
African Banking Corporation
of Botswana Ltd v Kariba Furniture Manufacturers (Pty) Ltd &
others
[2015] ZASCA
69
;
2015
(5) SA 192
(SCA) para 43.
[13]
Natal Joint Municipal Pension
Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) para 18.
[14]
Novartis SA (Pty) Ltd v
Maphil Trading (Pty) Ltd
[2015]
ZASCA 111
;
2016 (1) SA 518
(SCA) para 27.
[15]
See for
instance,
Jaga
v Dönges NO & another; Bhana v Dönges NO & another
1950 (4) SA 653
(A) at 662G-H and 664E-H. See also
Bastian
Financial Services (Pty) Ltd v General Hendrik Schoeman Primary
School
2008 (5) SA 1
(SCA) paras 16-19, and the cases cited therein.
[16]
Panamo
Properties (Pty) & another v Nel & others NNO
[2015] ZASCA 76
;
2015 (5) SA 63
(SCA) para 27.
[17]
Section
5(1) of the Act directs that its
interpretation and application must give effect to the purposes
stated in s 7 of the Act. Section
7
(k)
states that one of these purposes 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;’
[18]
Bothma-Batho
Transport (Edms) v S Bothma & Seun Transport (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA) para12.
[19]
DH
Brothers Industries (Pty) v Gribnitz NO & others
2014 (1) SA 103
(KZP) para 10.
[20]
See in this regard,
City
of Johannesburg v Engen Petroleum Ltd & another
[2009] ZASCA 5
;
2009 (4) SA 412
(SCA) para 11.
[21]
Henochsberg
op
cit Vol 1at 530.
[22]
Henochsberg
at
530. See, however,
Copper
Sunset Trading
fn
10 above.
[23]
Henochsberg
at
530.
[24]
Section 38
of
the
Insolvency Act 24 of 1936
.
[25]
S 136(1)
(a)
of the Act.