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[2019] ZAGPPHC 74
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Carroll v Michael Carroll CC In Re: In the application for the Liquidation of: Michael Carroll CC (under supervision) (2018/22808) [2019] ZAGPPHC 74 (15 March 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
(1)
NOT
REPORTABLE
(2)
NOT
OF INTEREST TO OTHER JUDGES
(3)
REVISED
CASE NO
:
2018/22808
DATE:
15
TH
MARCH 2019
In
the matter between:
CARROLL
,
MICHAEL VINCENT
Applicant
and
MICHAEL
CARROLL CC
Respondent
In
Re:
In
the application for the Liquidation of:
MICHAEL
CARROLL CC
(under
supervision)
Applicant
JUDGMENT
ADAMS J:
[1].
This is an opposed application by the applicant, cited herein as a
Close Corporation (under
supervision), represented in these
proceedings by the Business Rescue Practitioner, for an order that
business rescue proceedings
be discontinued and that the applicant be
placed in final liquidation in the hands of the Master. The
application is brought in
term of the provisions of section
141(2)(a)(iii) of the Companies Act, 71 of 2008 ('the
Companies
Act').
[2
].
The application is brought by the duly appointed Business Rescue
Practitioner of the applicant,
Mr T G Nell, who deposed to the
founding affidavit in support of the application. This application is
closely linked and interrelated
to a simultaneous application for the
liquidation of Michael Carroll CC ('Michael Carroll CC'), being the
first of three entities
in respect of which Mr Nel is appointed as
the Business Rescue Practitioner. Michael Carroll CC and the
applicant herein are related
in that the sole member in both these
Close Corporations is Michael Carroll, who was responsible for these
two entities being placed
into Business Rescue.
[3].
On the 2n d June 2016 the sole member passed a resolution that the
close corporations commence
with business rescue. Thereafter, Mr Nell
was appointed as the Business Rescue Practitioner in respect of all
three the Close Corporations,
the third CC being MPC Boerdery CC
('MPC').
[4].
The sole member ('Carrol') opposed the applications
inter alia
on
the basis that the requirements set out in section 141(2)(a)(ii) of
the Act for the liquidation of the applicant have not been
met. He
takes issue with the Business Practitioner's conclusion that there is
no reasonable prospect for the applicant to be rescued.
It is the
contention of Carroll that, in fact, the business has already been
rescued insofar as the Business Rescue Plan, which
was voted upon at
a meeting of all of the Creditors and agreed to by all the relevant
stakeholders, was duly implemented and the
applicant complied with
all of its obligations in terms of the plan.
[5].
The business rescue plan was finally adopted on the 14
th
of September 2016 in terms of
section 151
of the
Companies Act. In
his report, incorporating the business rescue plan, the Business
Rescue Practitioner expressed the following view:
'Whilst there is no possibility
for the Close Corporation to continue its business activities, the
possibility does exist to provide
a better return for affected
persons than what would transpire in liquidation. This alternative is
provided for in section 128
of the Act.'
[6].
Pursuant to the business rescue plan the assets of the applicant was
sold and the net effect
was that the sale of their assets did not
result in the settlement in full of the debts of the applicant. As
predicted in the business
rescue plan, the only proven creditor, the
Land Bank, received a dividend of 79 cents in the rand.
[7].
On the 28
th
of March 2018, the Business Rescue
Practitioner issued a notice in terms of
section 141(2)(a)(i)
of the
Companies Act, advising
all affected parties that he had concluded
that there is no longer a reasonable prospect for the applicant to be
rescued and that
he intends commencing with liquidation proceedings
against the applicant. The basis for these assertions on the part of
the Business
Rescue Practitioner was
inter alia
that, in his
view , full payment of the claim by the Land Bank could not be
achieved as envisaged in terms of the Business Rescue
Plan.
[8].
The applicant was established in 1996 and conducts its primary
business within the farming
and agricultural industry. During the
course of February 2016, the Land and Agricultural Bank of South
Africa (the Land Bank) demanded
payment from the applicant of an
amount of R26 910 478.93. On the 2nd June 2016 Carroll resolved that
business rescue proceedings
be commenced with. On the 6
th
of June 2016 the Business Rescue Practitioner, Mr Nell, was appointed
. On the 21s t of June 2016 the first statutory meeting of
creditors
was held at which the Land Bank was the only proven creditor. On the
15t h of August 2016 a second statutory meeting
of creditors was held
which was subsequently postponed to the 7
th
of September
2016 and again postponed to 14 September 2016. In both instances the
postponements were occasioned by proposed amendments
to the Business
Rescue Plan by the Land Bank. On the 14
th
of September
2016 the Land Bank voted as the only proven creditor in favour of the
Business Rescue Plan, as amended.
[9].
In accordance with the basic plan envisaged in the accepted Business
Rescue Plan as amended,
the Business Rescue Practitioner proceeding
to wind-down the affairs of the applicant. He proceeded to sell all
of the known assets.
The proceeds derived from the aforesaid were
paid over to the Land Bank, but the Land Bank was left with a
shortfall of approximately
R5 427 634.21.
[10]. The
Business Rescue Plan was accepted in terms of
section 151
of the
Companies Act on
14 September 2016.
[11]. A
central issue for decision in this application relates to the
interpretation of the approved business
rescue plan. Importantly, the
question to be asked is whether the plan envisaged a compromise,
which, once implemented, would have
discharged the applicant from
further indebtedness to its creditors for the balances due to them.
Carroll is of the opinion that
this was the case and that the
question should be answered in the affirmative. The Business Rescue
Practitioner is of the view
that the implementation of the plan did
not release the applicant from further indebtedness to its creditors.
The Business Rescue
Practitioner therefore contends that the plan has
not been implemented or even substantially implemented because given
its wording
the plan will only be implemented once the Land Bank is
paid in full.
[12]. The
Business Rescue Practitioner cannot in the business rescue
proceedings do anything further in
order to assist the Land Bank to
get what it wants namely payment in full. The Business Rescue
Practitioner is accordingly of the
opinion that a liquidator will be
better equipped than a Business Rescue Practitioner.
[13]. The
case of the Business Rescue Practitioner is that a Business Rescue
Plan could only be implemented
in respect of MPC. In that matter the
Land Bank was paid in full. The Business Rescue Plans in respect of
Carroll Michael CC and
the applicant could not be implemented, since
the sale of assets could not return a 100% settlement of the claims
by the Land Bank
as envisaged in terms of the Business Rescue Plans
in its amended form.
[14]. The
Business Rescue Practitioner contends that the liquidation of the
applicant will result in the
appointment of a liquidator who can use
the mechanisms of the
Companies Act in
liquidation to locate hidden
movable assets, conduct investigations and enquiries to proceed with
the pending litigation.
[15].
Section 141(2)(a)(ii) of the Act provides as follows:
'If, at any time during business
rescue proceedings, the practitioner concludes that there is no
reasonable prospect for the company
to be rescued, the practitioner
must ... apply to the court for an order discontinuing the business
rescue proceedings and placing
the company into liquidation'.
[16]. Mr
Van Nieuwenhuizen, Counsel for the Respondent, submitted that the
aforesaid section may only find
application when certain
prerequisites are met.
[17].
In terms of Section 128(1)(b)(iii) of the Act, 'business rescue' is
defined as proceedings to facilitate
the rehabilitation of a company
that is financially distressed by providing for 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.
Alternatively, 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.
[18].
Section 128(1)(h) of the Act provides that 'rescuing the company'
means achieving the goals as set
out in the definition of 'business
rescue' as per section 128(1)(b) of the Act.
[19]. In
this matter, as was the case with the other two related entities, the
business rescue proceedings
constituted the development and
implementation of a plan approved where it was not possible for the
applicant to so continue in
existence. This means that the purpose of
the business rescue proceedings was to achieve better returns for the
creditors or shareholders
then would result from the immediate
liquidation of applicant. In other words, the business rescue plan
envisaged the above alternative
scenario and same was approved as
required in terms of Section 150(2)(a)(iii) and (b)(vi) of the Act.
[20]. It
was submitted on behalf of Carroll that in terms of the approved
business rescue plan Land Bank
would receive a probable dividend of
79 cents in the rand compared with 31 cents in the rand should the
applicant be liquidated.
This was expressly provided for in the
business rescue plan. The applicant made the aforegoing proposals and
undertook to comply
with its obligations in terms of that settlement.
The Land Bank would, in consideration for the right to receive the
amounts in
terms of the business rescue plan, upon the applicant
fulfilling the conditions contained in the business rescue plan,
which confines
Land Bank's right to claim payment from the applicant,
so Carrol submitted, in terms of the business rescue plan. The
proposed
payment to Land Bank would be the proposed higher dividend
compared with a dividend that would be achieved upon the liquidation
of applicant.
[21].
Clause 11.1 of the business rescue plan expressly provides and
contemplates that the proceeds from
the sale of the applicant's
assets would be available for settlement of the claims of the Land
Bank. The Land Bank approved the
plan. Therefore, on the full
implementation of the business rescue plan, the applicant would be
released from its indebtedness
for the amount owed to Land Bank. Mr
Van Nieuwenhuizen therefore submitted that at the time when the full
amount as set out in
the business rescue plan had been paid, Land
Bank's claim would become compromised. I find myself in agreement
with these submissions.
[22]. I am
persuaded that the business rescue plan contemplated a compromise
which was conditional upon
the applicant meeting its obligations to
Land Bank as set out in the business rescue plan, failing which, the
full balance due
to Land Bank in terms of Land Banks's original claim
would be immediately due, owing and payable. The business rescue plan
would
come to an end upon all payments being made in terms of the
business rescue plan.
[23].
Therefore, in my judgment, having regard to the wording and the
phraseology of the business rescue
plan, it must be accepted that the
approved business rescue plan expressly contemplated a settlement or
compromise.
[24]. The
contention of the Business Rescue Practitioner that the business
rescue plan contemplated that
the full amount outstanding to Land
Bank was to be paid is not sustainable. It flies in the face of the
express wording of the
plan. There is no express and unambiguous
provision that full payment of all outstanding debts must be achieved
in terms of the
business rescue plan. Had the parties intended this
agreement, they would undoubtedly have said so.
[25].
Furthermore, if the business rescue plan in fact intended to record
the extent of the payment required,
it would have followed the same
tenor of the remainder of its provisions, which were in fact very
clear and exact. I therefore
agree with the submission by Mr Van
Nieuwenhuizen that the failure to expressly record the requirement
for a complete payment of
the outstanding debt of Land Bank is a
deliberate change from the tenor of exactitude otherwise employed and
must be accepted to
have been done deliberately.
[26].
In any event the interpretation contended for by the Business Rescue
Practitioner, in my view, disregards
completely the express wording
of the plan. Our law requires meaning to be ascribed to every word
and phrase used in a document.
The interpretation of an instrument
always starts by having regard to the ordinary syntax and grammar of
words and phrases.
[27]. The
context in which the plan was hedged also belies the interpretation
contended for by the Business
Rescue Practitioner. The circumstances
surrounding the adoption of the business rescue plan, notably the
fact that the final plan
was approved only after same incorporated
certain proposals by the Land Bank, support the interpretation
contended for by Carroll.
In that regard, the business rescue
practitioner's subsequent conduct in preparing and finalising the
first and final liquidation
and distribution account, is instructive
ad lends credence to Carroll's contention that all three business
rescue plans were to
be considered jointly in determining whether
Land Bank's debt would be compromised.
[28]. Once
the dividend sought to be achieved in terms of the business rescue
plan was realised, the applicant
would then be 'rescued' as envisaged
by Sections 128(1)(b)(iii) and (h) as a dividend better than that
which would have been achieved
in the case of a liquidation.
[29]. In
the premises, I am of the view that the provisions of
section
141(2)(a)(ii)
of the
Companies Act do
not find application in this
matter. There exist no plausible reasons for the Business Rescue
Practitioner to have come to the
conclusion that there is no
reasonable prospect for the applicant to be rescued. By all accounts,
the applicant had in fact been
rescued by the implementation of an
approved and adopted business rescue plan. The fact that the main
creditor, nay the only creditor,
was unhappy
ex post facto
with
the outcome of the implementation of the business plan is irrelevant.
Once the plan had been approved the applicant was well
on its way to
being rescued, and it was assisted in that regard by a compromise
which had been brokered as part of the business
rescue plan.
[30]. The
application of the applicant for its liquidation therefore stands to
be dismissed.
Costs
[31]. It
was argued by Mr Van Nieuwenhuizen that the costs
de bonis
propriis
should be awarded against the Business Rescue
Practitioner . In launching this application for the liquidation of
the applicant,
so the argument went, he acted mala
fide.
[32]. I am
not persuaded that a proper case has been made out for such an Order.
It may be that Mr Nel was
somewhat overzealous, whilst under pressure
from the Land Bank, and in his mind he may genuinely have believed
that he was acting
in the interest of the applicant and its creditors
when he launched this application. However. I do not believe that it
has been
demonstrated that he acted ma/a
fide.
[33].
In the exercise of my discretion, I therefore intend ordering the
applicant (under supervision) to
bear the cost of the application.
Order
In
the result, I make the following order:-
1.
The applicant's application for its liquidation be and is hereby
dismissed.
2. The
applicant (under supervision) shall pay, Mr Michael Carrol's cost
of
this opposed application.
L R ADAMS
Judge of the High Court
Gauteng Division, Pretoria