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[2020] ZALMPPHC 17
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Vleissentraal Bloemfontein (Pty) Ltd and Others v Madikor Sestien (Pty) Ltd; Vencor Holdings (Pty) Ltd v Le Roux N.O and Others (3039/2018; 1699/2019) [2020] ZALMPPHC 17 (6 May 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO
DIVISION, POLOKWANE)
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES: YES/
NO
(3)
REVISED
CASE
NO: 3039/2018
6/5/2020
In
the matter between:
VLEISSENTRAAL
BLOEMFONTEIN (PTY) LTD
FIRST APPLICANT
VLEISSENTRAAL
BOSVELD (PTY) LTD
SECOND APPLICANT
VENCOR
HOLDINGS (PTY) LTD
INTERVENING CREDITOR
and
MADIKOR
SESTIEN (PTY) LTD
FIRST RESPONDENT
CASE
NO: 1699/2019
In
the matter between:
VENCOR
HOLDINGS (PTY) LTD
INTEREVNING CREDITOR
And
PETRUS
JOHANNES STEFANUS LE ROUX NO.
FIRST RESPONDENT
LOUISE
DEKKER NO.
SECOND RESPONDENT
SUSANNA
PETRONELLA LE ROUX NO.
THIRD RESPONENT
MADIKOR
SESTIEN (PTY) LTD
FOURTH RESPONDENT
(IN
LIQUIDATION)
VLEISSENTRAAL
BLOEMFONTEIN (PTY) LTD
FIFTH RESPONDENT
VLEISSENTRAAL
BOSVELD (PTY) LTD
SIXTH RESPONDENT
In
re:
In
the Application of:
PETRUS
JOHANNES STEFANUS LE ROUX NO.
FIRST APPLICANT
LOUISE
DEKKER NO.
SECOND APPLICANT
SUSANNA
PETRONELLA LE ROUX NO.
THIRD APPLICANT
(For
an application to place Madikor Sestien (Pty) Ltd (in provisional
liquidation) in Business Rescue in terms of section 131 of
Act 71 of
2008)
JUDGMENT
MAKGOBA JP
[1]
This
judgment addresses two related applications. The first application
under Case No. 3039/2018 is by Vleissentraal Bloemfontein
(Pty) Ltd
and Vleissentraal Bosveld (Pty) Ltd to wind-up Madikor Sestien (Pty)
Ltd which application is now at the stage of the
return day of a
provisional winding up order issued on 3 December 2018. The second
application under Case No. 1699/2019 is by the
trustees· of
the Kremetart Trust, the sole shareholder in Madikor Sestien (Pty)
Ltd, for an order to begin business rescue
proceedings of Madikor
Sestien (Pty) Ltd pursuant to
section 131(1)
of the
Companies Act 71
of 2008
. The two Vleissentraal creditors and Veneer Holdings (Pty)
Ltd (the Intervening Creditor) oppose the application for an order to
begin business rescue proceedings.
[2]
There
is therefore, essentially, both an opposed application for winding-up
(Case no. 3039/2018) ("the liquidation application")
as
well as an application for business rescue (Case No. 1699/2019) ("the
business rescue application") before this Court,
and both
applications are opposed. Vleissentraal Bloemfontein (Pty) Ltd and
Vleissentraal Bosveld (Pty) Ltd are, for the sake of
convenience, and
unless expressly indicated otherwise, referred to as the
"Vleissentraal creditors".
[3]
The
Vleissentraal creditors are secured creditors of Madikor Sestien
(Pty) Ltd ("Madikor") and have launched a liquidation
application against Madikor under case number 3039/2018 that
culminated in a provisional liquidation order against Madikor on 3
December 2018.
Vencor Holdings (Pty) Ltd
("Vencor") is also a secured creditor of Madikor and has
launched intervention applications
in respect of both the liquidation
application and the business rescue application. The Vleissentraal
creditors also intervene
in the business rescue application in order
to oppose same. Petros Johannes Stefanus Le Roux NO., Louise Dekker
NO. and Susana
Petronella Le Roux NO. are the joint trustees of the
Kremetart Trust ("the Trust"). They are the First, Second
and Third
Applicants under case number 1699/2019 and seek an order to
place Madikor under business rescue.
[4]
In
chronology, the liquidation application was launched first, on 18 May
2018. Madikor, represented by its director Mr Le Roux opposed
the
liquidation application. This Court, per Muller J granted an order
for the provisional liquidation of Madikor on 3 December
2018. It is
this provisional order which has been extended from time to time.
Factual Background: Liquidation
Application
[5]
The
joint claim of the two Vleissentraal creditors is substantia,l in
total the sum of R 5 859 518.05. Vleissentraal Bloemfontein
claimed
an amount of R 3 637 800.64 plus interest at a rate of 12,5% per
annum calculated from 1 May 2018 to date of payment, and
Vleissentraal Bosveld claimed an amount of R 2 221 717.41 plus
interest at a rate of 12,5% per annum calculated from 1 May 2018.
It
is clear from the founding affidavit that the two Vleissentraal
creditors first instituted two separate summons for provisional
sentence against Madikor in the Gauteng Division of the High Court,
Pretoria under case numbers 59265/17 and 75517/17. The debts
were not
disputed by Madikor. The institution of the said proceedings then
culminated in the entering into a deed of settlement
which was signed
on 6 December 2017.
[6]
In
terms of the aforesaid settlement agreement Madikor expressly
acknowledged the debt due to the Vleissentraal creditors and
furnished
an undertaking to make payment of the debts. The settlement
also embodied a further undertaking on the part of Madikor, that in
exchange for granting Madikor an extension of time within which to
pay the debt, Madikor gave an undertaking to ensure that the
trustees
of a trust known as the Mollevelle Plase Trust would ensure that the
trust bind itself as a surety and co-principal debtor
in favour of
the Vleissentraal creditors for the due payment of the debts owed to
those entities by Madikor. It may be mentioned
that this was not the
first acknowledgement of debt made by Madikor. On 13 December 2016
Madikor did make acknowledgement of debt
which expressly acknowledged
in writing the debt due to Vleissentraal creditors.
Madikor made certain payments pursuant to the
entering into the 2016 acknowledgement of debt, but failed to honour
all the undertakings
in order to discharge the debt.
[7]
Vleissentraal
creditors allege in their application for liquidation that
notwithstanding the undertaking given to them, namely to
ensure that
the trust would sign a suretyship and that a mortgage bond in favour
of the Vliessentraal creditors would be registered
over certain
immovable properties, Madikor failed to honour these undertakings.
Madikor, on a number of occasions, made further
requests for indulgences in order for it to be granted an opportunity
to make payment
of the undisputed debt, but by the time the
application for winding-up was launched, Madikor had been in breach
of its repeated
undertakings given to the Vleissentraal creditors for
a protracted period of time.
[8]
Despite some frivolous grounds for
opposition advanced by Madikor, it ultimately became clear that the
debt could not be disputed
bona fide
and upon reasonable grounds by
Madikor and it was furthermore clear that there were grounds for
winding-up order on 3 December 2018.
The first return date of the
provisional winding-up order was 19 March 2019.
[9]
One
day before the return date, and on 18 March 2019 the same Mr Le Roux
(sole director of Madikor) who signed the opposing affidavit
in the
liquidation application on behalf of Madikor, signed a founding
affidavit in terms whereof another trust, the Kremetart
Trust
launched an application for business rescue in respect of Madikor. It
is this application which was launched under case number
1699/2019.
It was alleged that the Kremetart Trust is the sole shareholder of
Madikor, and consequently an affected person as contemplated
in
section 131
of the
Companies Act, 71 of 2008
. In the result, by
virtue of the bringing of the application for business rescue, the
provisional order could not be confirmed
and had to be extended.
[10] On 3
July 2018 Vencor filed an application in order to:
(1)
intervene
in both the winding-up application and in the business rescue
application; and
(2)
to
procure an order for the dismissal of the business rescue application
and the granting of a final liquidation order.
Vencor
made common cause with the Vleissentraal creditors.
[11]
Vencor explained that it is a major
secured creditor of Madikor. Like the Vleissentraal creditors, Vencor
provided credit to Madikor.
Vencor also purchased from Madikor an
abattoir and certain motor vehicles during 2016. It concluded an oral
lease agreement whereby
Madikor would lease from Vencor a butchery
and that Madikor would also pay to Vencor rental and electricity
expenses in relation
to the butchery. In respect of the oral lease
Vencor alleged that Madikor owed it an amount of R 79 330.93 and on
the credit facility
owed it an amount of R 3 392 475.37. Madikor took
a loan from Vencor and registered in favour of Vencor a continuing
covering mortgage
bond over the farm Kaaienbult, Limpopo securing a
debt of R 4 million, which Madikor undertook to repay over 15 years.
[12]
Vencor further alleges that Madikor
failed to pay any instalment to Vencor, but a bulk payment of R 200
000.00 was made on 3 July
2018. As at 30 April 2019 the following
amounts were owed by Madikor to Vencor:
R 1 263 179.46 : for credit
facility
79 330.93 : for rental
R 4 502 429.53 : for loan
5 845 429.92
Vencor also gave examples in its
papers of financial difficulties experienced by Madikor over a
protracted period of time and also
stated that Madikor breached the
agreement of sale entered into between Vencor and Madikor, in the
sense that Madikor, in breach
of the sale agreement, competed with
Vencor by being involved in "groot handel" in competition
with Vencor.
[13]
Vencor mentioned that Madikor is also
indebted to another creditor, Kuyanda, in an amount of R 442 146.45
and that on 24 January
2018 Kuyanda issued an application for the
winding-up of Madikor in this Court under case number 491/2018. It
also became apparent
that Madikor was in the process of selling
certain of its assets. On 13 March 2018 Kuyanda and Madikor concluded
a written agreement
of settlement in respect of the liquidation
application under case number 491/2018. In terms of the settlement
order Madikor was
obliged to make payment to Kuyanda of the sum of R
440 000.00 from the proceeds of the sale of an immovable property of
Madikor.
By so earmarking the proceeds of the sale of immovable
property as a source of funds to pay a creditor, Madikor, according
to Vencor,
breached the terms of the security which it provided to
the Vleissentraal creditors.
[14]
On 11 June 2018, and prior to its
intervention in the liquidation application Vencor instituted an
action under case number 3544/2018
in which Vencor claimed an amount
of R 5 052 868.33 from Madikor. Vencor further stated that Madikor
was concealing its 2017 annual
financial statements from the Court
because those financial statements, according to Vencor, would
illustrate that the liabilities
of Madikor are far more than those
stated in the papers.
Factual
Background: Business Rescue pplication
[15]
Madikor was established during 2001- in
order to produce cattle destined for slaughter, with an abattoir and
wholesale distribution
and retail outlets. As explained in its
founding papers for the business rescue application, Madikor was
initially successfully
conducted as a business but its financial
predicament started when it assumed liability, during 2013, for a
debt of the father
of the deponent (Mr Le Roux) and a company under
the father's control. This then, so the explanation continued, led to
a realisation
during 2015/2016 that Madikor has to be restructured
and in this regard certain steps were allegedly implemented , such as
for
example selling the abattoir to Vencor for an amount of R 18 125
000.00. In this regard reference is made to Madikor's financial
statements which shows a total liabilities of R 83 249 111.00 and
assets allegedly valued at R 108 114 510.00.
[16]
It is stated in its papers that Madikor
has 6 immovable properties registered in its name, namely one farm
and a number of other
erven and residential units. It was explained
that a decision was made that Madikor would sell some of its
immovableproperties,
save for the farm Kaaienbult 675, Limpopo which
was valued at R 13 million, and that in respect of certain of these
immovable properties
successful sale agreements were already
concluded. It is stated that Madikor is solven,t and that by virtue
of the sale of the
other immovable properties Madikor would be in a
position to make significant payments to its creditors. In fact it is
stated in
its papers that Madikor is simply not as at that particular
point in time immediately in a position to pay the debt due to the
Vleissentraal creditors, but if some breathing space was to be given
to the company, it would soon be in a position to pay its debts
by
effectively converting its assets into cash.
[17]
The appropriate contents of paragraph 5
of Madikor's founding affidavit reads as follows:
"5.
2.
I submit that it is furthermore clear that the Company has more than
enough current assets, in other words assets that can be converted
into cash relatively easy, in order to pay the full amount due and
payable to Vleissentraal.
5.3.
The simple reality is,
unfortunately, that all these assets, which are that is the
implements, and the sable antelope, which are
all unencumbered,
totaling
a
value
of R 5 750 000.00, can be sold at the fair market value, only if the
Company is granted the opportunity to market the assets
appropriately
to prospective buyers. The Company would need approximately one year
to sell these assets. In this regard specific
mention must be made to
the fact that the Sable were purchased for breeding purposes.
5.4.
Should the asset simply be
realized on
a
public
auction (as will no doubt happen in liquidation proceedings), I have
no doubt in my mind that bargain hunters will simply
buy the assets
at fire sale prices, substantially lower than what the assets are
worth, and such
a
sale
will be in nobody's interests.
5.5.
I submit therefore that it is
clear that the Company is financially distressed, but that the
Company is by no means technically
insolvent and furthermore, that
the Company has the ability, given enough time,
to
realise enough assets to pay Vleissentraal and all its creditors in
the near future, if given the opportunity."
[18]
It is clear from the above and from
Madikor's founding affidavit that the Company has unequivocally
conceded that it is financially
distressed, which concession means
that Madikor is not in a position to pay its debts when the debts
fall due. Furthermore it would
appear that what was intended and
explained as a business rescue plan, was in effect, a voluntary
liquidation of the bulk of Madikor's
assets. This aspect will be
dealt with more later in this judgment when I consider the question
whether there are reasonable prospects
that the Company can be
rescued.
Grounds· for Opposing
the Business Rescue Application
[19]
Towards the end of May 2019 the
Vleissentraal creditors filed papers in order to oppose the business
rescue application launched
by the Kremetart Trust.
[20]
It was contended on behalf of the
Vleissentraal creditors that the bringing of the application for
business rescue constitutes abuse.
In particular it was pointed out
that the then financial position of Madikor was not placed before
Court and that the bulk of the
allegations in the founding affidavit,
in support of the application for business rescue, are of
insignificant evidential value.
In this context it was pertinently
pointed out that the Kremetart Trust had failed to attach a single
deed of sale to its founding
affidavit in order to corroborate the
allegations that the immovable properties other than the farm are in
the process of being
sold. Furthermore the value ascribed to all the
assets (movable and immovable) is a thumb-suck in as much as no
valuation reports
by a sworn valuator where attached to properly
establish the value of the assets disclosed.
[21]
The Kremetart Trust was also criticised
by the Vleissentraal creditors for not disclosing to the Court that
Madikor, in its application
for credit which it made at the
Vleissentraal creditors, ceded as security to the Vleissentraal
creditors, its right, title and
interest in and to all claims for
payment due to Madikor, as a result of a sale by Madikor of its
assets to a third party. What
this entails is that the Vleissenraal
creditors hold security over the right, title and interest of Madikor
to receive payment
from a third party if it sells its assets, and
therefore this cession would make it impossible for Madikor to
utilise Vleissentraal
security to pay the other creditors in a
business rescue.
[22]
I agree that the Vleissentraal creditors
have demonstrated in their opposition, that the application for
business rescue is fundamentally
flawed in that the instrument of
security held by the Vleissentraal creditors was earmarked by Madikor
as the source to pay other
creditors. It is trite that the secured
claims of creditors are protected in a business rescue - See
section
134(3)
of
the
Companies Act 71 of
2008
; CGG Engineering (Pty) Ltd v Maroos [200] ZASCA 178 (3 December
2018)
and
Louis
Pasteur Holdings (Pty) Ltd v ABSA Bank
[2008] ZASCA 163
(29 November
2018)
where it was held that a
creditor's security interests cannot be utilised by a business rescue
practitioner as it has to be paid
to the security holder.
[23]
The Kremetart Trust failed to deal
accurately with the debt owed by Madikor to a major secured creditor,
Veneer. Veneer holds security
in the form of a mortgage bond over the
farm Kaiienbult 675. It became apparent, according to Veneer, that
Madikor was in the process
of selling certain of its assets. Again,
by so earmarking the proceeds of the sale of an immovable property as
a source of funds
to pay a creditor, Madikor breached the terms of
the security which it provided to the Vleissentraal creditors.
[24]
It has been submitted on behalf of the
Vliessentraal creditors and Veneer that the business rescue
application brought by the Kremetart
Trust is nothing but an informal
liquidation by the Company itself. The bases for such submissions
follow hereunder.
[25]
The crux of the business rescue plan as
suggested by the Kremetart Trust is that certain immovable properties
would be sold and
the proceeds thereof would then be utilised as a
source with which to make payments to creditors. But, in doing so
Madikor will
have to utilise both the Vleissentraal security and
Vencor security for that purpose because in terms of the cession
granted to
Vleissentraal, Madikor ceded as security to Vleissentraal
the right, title and interest in and to the debts of Madikor, arising
from the sale by Madikor of its assets. What this effectively means,
is that both Vleissentraal and Vencor are secured creditors
and their
security may not be destroyed. Such security can also not be
suspended during business rescue by utilising
section 136(2)
of the
Companies Act, 2008
. As such, the securities cannot be disposed of
without the consent of Vleissentraal and Vencor -
BP
Southern Africa (Pty) Ltd v lntertrans Oil SA (Pty) Ltd
2017 (4) SA
592
(GJ)
at par
[42]-[48].
Energy Systems (Pty) Ltd v Tin Can Man (Pty) Ltd
2017 (3) SA 539
(GJ)
at par
[18]-[22].
[26]
In business rescue secured claims are
protected.
Section 134(3)
of the
Companies Act, 2008
specifically
provides that, if during a Company's business rescue, the Company
wishes to dispose of any property over which another
person has any
security or title interest, the Company must first obtain the prior
consent of that other person, unless the proceeds
of the disposal
would be sufficient to fully discharge the indebtedness protected by
that person's security or title interest and
the Company must further
then promptly pay that person, holding security, the sale proceeds
attributable to that property up to
the amount of the Company's
indebtedness to the person holding the security or provide substitute
security to the satisfaction
of the creditor.
[27]
I accordingly make a finding that
Madikor cannot utilise the sale proceeds of its assets to pay
dividends to other creditors in
the business rescue, as the proceeds
had been earmarked for Vleissentraal and Vencor creditors. Moreso, it
has been shown that
there is no admissible evidence to establish the
value of Madikor's assets and thus show that the sale proceeds would
be sufficient
to even pay the Vleissentraal or Vencor debts. On the
true value of assets, see
African
Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers
[2015] ZASCA 69
(20 May 2015)
at
para
[34].
[28]
It has been held authoritatively that a
Court will not sanction a business rescue which is in effect nothing
but an informal liquidation
process. See
Oakdene
Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami)
(Pty) Ltd and Others
2013 (4) SA 539
(SCA)
at
para
[33]
where
Brand JA said:
".
... ...For instance, the
mere savings on the costs of the winding-up process in accordance
with the existing liquidation provisions
could hardly justify the
separate institution of business rescue. A fortiori, I do not believe
that business rescue
was
intended to achieve
a
winding-up
of
a
company to avoid the consequences of liquidation
proceedings, which is what the appellants apparently seek to
achieve."
Whether there are prospects of
Madikor Company being rescued
[29]
The purpose of a business rescue is that
set out in
section 128(1)(b)
of the
Companies Act 71 of 2008
and it
is these statutory objectives which is the aim of the order. These
objectives are defined as follows:
""
business rescue" means proceedings to facilitate the
rehabilitation of
a
company that is
financially distressed by providing for-
(i)
the
temporary supervision of the company, and of the management of its
affairs, business and property;
(ii)
a
temporary moratorium on the rights of
claimants against the company or in respect of property in its
possession; and
(iii)
the
development and implementation, if approved, of
a
plan to rescue the company by
restructuring its affairs, business, property, debt and other
liabilities, and equity in
a
manner
that maximises the likelihood of the company continuing in existence
on
a
solvent
basis or, if it is not possible for the company to so continue in
existence , results in
a
better
return for the company's creditors or shareholders than would result
from the immediate liquidation of the company."
[30]
The threshold standard for deciding that
an order is appropriate is whether there is a reasonable prospect of
achieving a rescue
through those statutory objectives and in this
regard, the point of departure is that it is preferable to rescue a
company than
let it drift or plummet into extinction. See
Oakdene
Square Properties supra; and Koen and Another v Wedgewood Village
Golf & Country Estate (Pty) Ltd and Others
2012 (2) SA 378
(WCC).
[31]
Section 128(1)(b)
envisages that
measures to be taken in order to facilitate the rehabilitation of the
company should provide for temporary supervision,
and for a temporary
moratorium of the rights of the claimants against the company. They
are not meant to provide companies with
a mechanism with which to
delay payments to creditors with no feasible plan of ever paying its
debts, or a means of restructuring
its debts over lengthy periods of
time -
Firstrand Bank v Normandie
Restaurants Investments and Another 189/2016
[2016] ZASCA 178
(25
November 2016)
at para
[19].
[32]
The intrusion within the context of
business rescue proceedings is done for reasons of policy and within
tightly set parameters.
Business rescue proceedings are geared at
providing a window of opportunity to restore an ailing company to
financial health and
funsctionality. This is in case the company in
question may be able to continue to contribute to the flow of the
lifeblood of the
economy by way of a plan (D H Brothers Industries
(Pty) Ltd v Gribnitz NO and Others
2014 (1) SA 103
(KZP)) In
ABSA
Bank Limited v Newcity Group (Pty) Ltd
and
Another
related
matter
(2013]
2 All SA 146
(GSJ)
at
para
(28]
the
following warning was sounded:
"It is however, necessary
to caution against the possible abuse of the business rescue
procedure, for instance, by rendering
the company temporary immune to
actions by creditors so as to enable the directors or other
stakeholders to pursue their own ends...........
it is necessary that
an application for business rescue be carefully scrutinised so as to
ensure that it entails
a
genuine attempt
to achieve the aims of the statutory remedy."
See
also
Southern
Palace Investments 265 (Pty) Ltd v Midnight Storm Investments 386
(Pty) Ltd 2012 (2) SA 423 (WCC)
at
para
[3].
[33]
The business rescue application brought
by the Kremetart Trust in the present case cannot be said to be
genuine. The manner in which
the application was made, both in terms
of time and basis or grounds leaves much to be desired. The
application was brought a day
before the confirmation of the
provisional liquidation order as if aimed at frustrating the final
order of winding-up. No proper
value of Madikor's assets was brought
before Court but a mere thumb sucked valuation of the assets was
given. Furthermore only
two creditors, namely Vleissentraal and
Vencor were disclosed leaving out other creditors like SARS and
others. In my view, the
whole application was an abuse of process and
is fundamentally flawed.
[34]
The granting of the business rescue
application in the circumstances will amount to this Court
sanctioning an informal liquidation
which can only benefit the
directors of Madikor and / or its shareholders. I am of the view that
the business rescue application
must be branded as abuse and refused.
This then leaves the way open to consider the fate of the provisional
winding-up order.
Should the Provisional
Winding-up Order be confirmed or discharged?
[35]
In the winding-up of a company unable to
pay its debts (like in the present case) the provisions of the law
relating to insolvency
shall, in so far as they are applicable, be
applied
mutatis mutandis
in
respect of any matter not specifically provided for in the old
Companies Act 61 of 1973. The provisions of sections 344, 345,
346
and 347 of the old Act are applicable in the present case.
[36]
it is common cause that Madikor is
indebted to both Vleissentraal and Vencor in the amounts stated
earlier in this judgment, that
is, R 3 327 416.60 and R 5 845 429.92
respectively. It matters not that the debtor's assets, fairly valued,
far exceeds its liabilities:
once the Court finds that the debtor
cannot pay its debts as they fall due to be met in the ordinary
course of business, it follows
that the Court is entitled to, and
should, hold that the debtor is unable to pay its debts within the
meaning of section 345(1)(c)
of the Companies Act 61 of 1973 ("the
Old Act"). See
ABSA Bank Ltd v
Rhebokskloof (Pty) Ltd and Others
1993 (4) SA 436
(C).
[37] In
Rosenbach
&
Co (Pty) Ltd v Singh's Bazaars (Pty) Ltd
1962 (4) SA 593
(D & CLO)
it was held that the proper
approach in deciding whether a company should be wound-up because it
is commercially insolvent appears
to be that if it is established
that a company is unable to meet the current demands upon it, its day
to day liabilities in the
ordinary course of its business, it is in a
state of commercial insolvency.
[38]
Section 347 of the Old Act provides that the Court may grant or
dismiss any application for winding-up
or adjourn the hearing thereof
conditionally or unconditionally, or make any other order it may deem
just. The plethora of judicial
authority spawned by disputes about
the powers provided for in section 347 has included the notion that
even where the rationale
for a liquidation was "commercial
insolvency" (i.e the assets did
de
facto
exceed
liabilities and liquidity was the reason for non-payment) the Court's
discretion to refuse an order was limited because a
creditor with an
unpaid debt is entitled
ex
debto justitiae
to
an order of winding-up. See
Rosenbach
& Co (Pty) Ltd v Singh's Bazaar (Pty) Ltd
supra
at
597 EF.
[39]
This issue was well set out and settled,
in my view, in the case of
ABSA Bank
Limited v Rhebokskloof (Pty) Ltd,
supra,
at
440F - 441A
by
Berman J when he said the following:
"Turning
to the merits of the matter, Mr Gauntlett contended that ABSA
was
entitled to
a
final winding-up
order on the basis that Rhebokskloof was "commercially
insolvent". The concept of commercial insolvency
as
a
ground for
winding up
a
company is
eminently practical and commercially sensible. The primary question
which
a
court
is
called
upon to answer in deciding whether or not
a
company carrying
on business should be wound up
as
commercially
insolvent, is whether or not it
has
liquid
assets
or readily
realisable
assets
available to meet
its liabilities
as
they fall due to
be met in the ordinary course of business and to thereafter be in
a
position to carry
on normal trading,
-
in other words,
can the company meet current demands on it and remain buoyant? It
matters not that the company's
assets,
fairly valued,
far exceed its liabilities,
-
once the Court
finds, that it cannot do this, it follows that it
is
entitled to, and
should, hold that the company
is
unable to pay its
debts within the meaning of section 345(1)(c) as read with section
344(f) of the Companies Act, and is accordingly
liable to be wound
up."
[40]
In casu,
it
is clear that Madikor does not have liquid assets or readily
realisable assets available to meet its liabilities, hence it
proposes
to sell the available assets in order to pay its debts. The
value of the said assets has not even been fairly determined to
ensure
that the company is in a position to pay its debtors.
Conclusion
and Orders
[41]
I come to the conclusion that both
Vleissentraal and Vencor established their grounds of winding-up as
Madikor is commercially insolvent
by reason of one or more of the
following:
(1)
Madikor failed to pay Vleissentraal in
terms of an Acknowledgement of Debt.
(2)
Madikor failed to pay Vleissentraal
notwithstanding an Agreement of Settlement that was made an order of
Court.
(3)
Madikor admitted in correspondences to
Vleissentraal that it is in dire financial circumstances and even
requested the monthly instalments
payable to Vleissentraal to be
reduced.
(4)
According to Madikor's own financial
statements it is commercially insolvent as it simply does not have
sufficient current assets
in order to pay current liabilities.
(5)
Notwithstanding a restructure that has
been going on for 5 years by the sale of its assets, Madikor has not
been able to cure its
commercial insolvency.
(6)
The Kremetart Trust has applied for
business rescue in respect of Madikor and thereby conceded that
Madikor is financially distressed.
(7)
Notwithstanding the indebtedness owing
to Vencor, Madikor failed to pay the instalments owing to Vencor as
well as to keep the credit
facility within its limit. Notwithstanding
various demands to pay, Madikor failed to do so.
[42]
In the result, the following orders are granted:
Case No. 1699/2019
1.
Leave is granted to Vencor Holdings
(Pty) Ltd, Vleissentraal Bloemfontein (Pty) Ltd and Vleissentraal
Bosveld (Pty) Ltd to intervene
and oppose the application launched by
the First, Second and Third Applicant under Case No. 1699/2019 for an
order to commence
business rescue as envisaged in
section 131(1)
and
131
(4) of the
Companies Act, 71 of 2008
, in respect of Madikor
Sestien (Pty) Ltd (in provisional liquidation).
2.
The application launched by the First,
Second and Third Applicant under Case No. 1699/2019 to place Madikor
Sestien (Pty) Ltd (in
provisional liquidation) under business rescue
is dismissed.
3.
The First, Second and Third Applicant
shall pay the costs incurred by Vencor Holdings (Pty) Ltd,
Vleissentraal Bloemfontein (Pty)
Ltd and Vleissentraal Bosveld (Pty)
Ltd.
Case
No. 3039/2018
1.
Leave is granted to Vencor Holdings
(Pty) Ltd to intervene in the liquidation application launched by
Vleissentraal Bloenfontein
(Pty) Ltd and Vleissentraal Bosveld (Pty)
Ltd against Madikor Sestien (Pty) Ltd under Case No. 3039/2018.
2.
Madikor Sestien (Pty) Ltd is placed
under final winding-up in the hands of the Master at the instance of
Vleissentraal Bloemfontein
(Pty) Ltd and Vleissentraal Bosveld (Pty)
Ltd.
3.
The costs incurred by Vleissentraal
Bloenfontein (Pty) Ltd, Vleissentraal Bosveld (Pty) Ltd and Veneer
Holdings (Pty) Ltd shall
be costs in the liquidation of Madikor
Sestien (Pty) Ltd's insolvent estate.
E
M MAKGOBA
JUDGE PRESIDENT OF THE
HIGH COURT, LIMPOPO
DIVISION, POLOKWANE
APPEARANCES
Heard
on
:26 March 2020
Judgment
delivered on
: 6 May 2020
For
Vleissentraal Creditors
: MP Vander Merwe SC
Instructed
by
:Symington & De Kok Attorneys
c/o Niland Pretorius Inc
For
Intervening Creditor
: L Meintjies
(Vencor
Holdings (Pty) Ltd
Instructed
by
: Espag Magwai Attorneys
For
Applicants
: G J Diamond
(Kremetart
Trust)
Instructed
by
: De Bruin Oberholzer Attorneys
For
Respondent
: M Bresler
(Madikor
Sestien (Pty) Ltd
Instructed
:DDKK Attorneys