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[2019] ZAGPPHC 246
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Cronje NO v B and S Material Handling (Pty) Ltd and Others, Standard Bank of South Africa v B and S Material Handling Proprietary Limited and Others (84122/2017, 57449/18) [2019] ZAGPPHC 246 (25 June 2019)
REPUBLIC OF SOUTH
AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION,
PRETORIA)
CASE
NO: 84122/2017
In the matter between
MATTHYS ISAK CRONJE N.O
APPLICANT
AND
B AND S MATERIAL HANDLING
(PTY) LTD
1
ST
RESPONDENT
VINCENT BASIL SCROOBY
2
ND
RESPONDENT
GRANT
STEYTLER
3
RD
RESPONDENT
VINCENT BASIL SCROOBY
N.O
4
TH
RESPONDENT
JOHN GEORGE SIEBERT
SCROOBY N.O
5
TH
RESPONDENT
AMORICOL (PTY) LTD
6
TH
RESPONDENT
CASE
NO: 57449/18
In the matter between:
THE STANDARD BANK OF
SOUTH AFRICA
APPLICANT
AND
B AND S MATERIAL HANDLING
PROPRIETARY LIMITED
1
ST
RESPONDENT
MATHYS ISAK CRONJE N.O
2
ND
RESPONDENT
VINCENT BASIL SCROOBY
3
RD
RESPONDENT
GRANT STEYTLER
4
TH
RESPONDENT
JOHN GEORGE SIEBERT
SCROOBY
VINCENT BASIL SCROOBY N.O
Cited in their capacities
as the trustees
For the time being of the
Teal and Red Trust
5
TH
RESPONDENT
AMORICOL PROPRIETARY
LIMITED
6
TH
RESPONDENT
JANUARY JOSEPH MABENA
7
TH
RESPONDENT
COMPANIES AND
INTELLECTUAL
PROPERTY
COMMISSION
8
TH
RESPONDENT
JUDGMENT
THOMPSON, A
[1]
Two applications seeking the liquidation of B and S Material Handling
(Pty) Ltd (“the
company”) is enrolled before me.
First in time, is the application brought by the business rescue
practitioner (“the
BRP”) of the company in terms of
Section 141(2) of the Companies Act 71 of 2008 (“the New
Act”). I will
refer to this application as “the
first application”. Second in time, is the application
brought by the Standard
Bank of South Africa (“SBSA”),
the majority creditor of the company, in terms of Section
131(1)(a)(ii) as read with
Section 131(5)(c)(i) of the New Act.
I will refer to this application as the second application.
[2]
In the first application the BRP is the applicant and the company is
the first respondent.
By virtue of an order for intervention,
Messrs V B Scrooby, G Steytler, V B Scrooby N.O. and J G S Scrooby
N.O., together with
Amoricol (Pty) Ltd was joined as second to sixth
respondents to the first application. The first application is
opposed by
the second to sixth respondents.
[3]
In the second application, SBSA is the applicant with the company as
the first respondent
and the BRP as the second respondent. The
second to sixth respondents in the first application is the third to
sixth respondents
in the second application with a Mr J J Mabena, a
former director of the First Respondent being the seventh respondent
in the second
application. The second application is opposed by
the third to sixth respondents
[4]
In order to avoid confusion, I will refer to the applicant in the
first application
as the BRP and the applicant in the second
application as SBSA. In so far I refer to the respondents in
this judgment, I
refer to the opposing respondents, who are in
identity the same in both applications.
[5]
Due to the overlapping nature of the relief sought and the parties
involved in the
first and second applications, the parties agreed
that the applications are to be heard simultaneously before me.
There was
mention made, during the course of argument, to a
consolidation application brought by the respondents. However,
save for
the mention, in passing, of the consolidation application,
the consolidation application was not moved or addressed before me.
In light of the overlapping nature of the relief sought, allegations
made and the parties involved, I deemed it expeditious and
cost
effective to hear the argument pertaining to both applications at the
same time.
[6]
In opposing the first application, the respondents elected not to
deliver an answering
affidavit. Their opposition was limited to
two separate Rule 6(5)(d)(iii) notices wherein they sought to raise
only points
of law. In the first rule 6(5)(d)(iii) notice the
respondents disputed the
locus
standi
of
the BRP on the basis that he had terminated the business rescue
proceedings prior to seeking the liquidation of the company.
In
this regard the respondents relied on the averment in the founding
affidavit to the first application wherein the BRP stated
“
I
attach hereto. . .my notice to terminate business rescue
proceedings.
”
The second rule 6(5)(d)(iii) notice placed in issue whether the BRP
complied with the provisions of Section 141(2)(a)(i)
[1]
of the Act. In addition hereto, at the hearing, Mr Steyn,
appearing for the respondents also raised the additional point
of the
absence of a Section 346(4A)(b)
[2]
of the Companies Act 61 of 1973 (“the Old Act”) affidavit
that may be furnished to the court either before
or
during
the hearing of the liquidation application. Mr Louw, appearing
for the BRP, indicated that he intends to argue the application
on
the papers at is stands and holds no instructions to hand up any
further affidavit, either at the commencement of the proceedings
or
at any time during the course of the proceedings.
[7]
In opposing the second application, the respondents delivered an
answering affidavit.
In this regard they raised two defences.
The first defence is one of a purely technical nature, in that SBSA
did not have
the written consent of the BRP to launch the second
application during the course of the existing business rescue
proceedings.
[3]
The second
defence is premised thereon that SBSA is precluded from seeking
and/or obtaining a final winding up order against
the company as SBSA
did not come to court with clean hands. In this regard the
submission was refined during the course of
argument, in that SBSA
did not act
bona
fide
during the course of the business rescue proceedings and should thus
be precluded from being allowed to seek or obtain a final
winding up
order. I will revert to this issue later on in this judgment.
[8]
Contrary to the first rule 6(5)(d)(iii) notice in the first
application, the respondents
accepted in their answering affidavit in
the second application that the BRP had not terminated the business
rescue proceedings
prior to launching the first application. At
the commencement of the hearing I enquired from Mr Steyn whether the
respondents
are persisting with this point in the first application
and he appropriately conceded that the point is not being persisted
with.
This concession, in my view, was proper to have been
made.
[9]
The BRP states nothing more in his founding affidavit in the first
application that
he relies on a “
notice
to terminate business rescue proceedings
”.
No manner of reasonable interpretation can lead any reasonable reader
to arrive at the conclusion that the business
rescue proceedings are
terminated by virtue of the notice referred to by the BRP. In
any event, the most unreasonable interpretation
accorded to the
mentioned statement is unequivocally gainsaid if only cursory regard
is had to the express wording of the notice
relied upon. The
wording in the notice is, simply put, unambiguous in nature, in that
it reads as follows “
Section
141(2)(a)
of the
Companies Act 2008
is clear as to the direction I
must follow in this situation. I can confirm that I
will
bring
an application for liquidation of
[the
company]
in
terms of this section
.”
[4]
[9]
Much of the argument before me related to which application should be
granted, in
the event that I am inclined to grant a winding up order
on either of the first or second applications. It was contended
on behalf of the BRP that the first application has substantially
complied with the requisite procedures set out in Section
141(2)(a)(i)
of the New Act and, as the BRP’s application was
first in time I should make an order in the first application.
The
difficulty with this submission is that even if I were to find
substantial compliance has taken place in relation to the procedural
formalities, there still is no Section 346(4A)(b) of the Old Act
affidavit before me and there seems to be no intention to place
such
affidavit before me.
[10]
The BRP did, however, allege in this founding affidavit to the first
application that the company
had retrenched its employees. But
for the further allegation made in the BRP’s founding
affidavit, it would seem as
if the allegation regarding the
retrenchment of the company’s employees may have been
sufficient to satisfy the requirements
of Section 346(4A)(a) as read
with Section 346(4A)(b) of the Old Act. I stress, for the
reasons to follow, that I make no
finding as to whether the
allegations in the founding affidavit may have been sufficient to
satisfy the aforesaid requirements.
[11]
In addition to the retrenchment allegation, the BRP went further and
alleged that the employees
have only received a small portion of the
retrenchment package that was agreed to. It is thus evident
that the employees,
or the former employees as the case may be,
retains a vested interest in the liquidation of the company.
Motived, no doubt
by this premise, the BRP further alleged in his
founding affidavit that “
the
sheriff will be instructed to . . .serve a copy on the Association of
Mineworkers and Construction Union, being the union representing
the
majority of employees
.”
There is simply no affidavit or return of service to confirm that
this, in fact, occurred. Although there is
no requirement in
terms of Section 346(4A)(a) of the Act that service must be effected
on a trade union, the BRP has seemingly
formed the opinion that the
best manner to comply with the purpose of Section 346(4A)(a) of the
Old Act is to serve a copy on the
relevant trade union.
[5]
[12]
Proceeding from the presupposition that the BRP was motivated in his
allegation that service
will take place on the union due to the
employees retained vested interest, I must, although substantial
compliance with Section
346(4A)(b) is sufficient and there need not
be strict compliance, remain mindful that there must be emphasis on
achieving the statutory
requirements, in particular bringing the
application to the attention of the employees.
[6]
The return of service relief upon for service on the employees
indicated that the first application was served by affixing
it to the
principal entrance at the principal place of business as the premises
were found locked. In large block letters
the sheriff then also
indicated that “
no
responsible persons could be found and the premises appears to be
abandoned
”.
There can be no clearer evidence that the statutory purpose of
bringing the application to the attention of the employees
had not
been met through this service. Again, I remain alive to the
fact that this situation may arise must be the reason
why the BRP
elected to make the allegation that the application will be served on
the union. For fear of over-repitition,
the need to serve on
the union must have been motived by the BRP’s acceptance that
the employees retain a vested interest
in the liquidation of the
company.
[13]
In the absence of this court being satisfied that the statutory
purpose of bringing the application
to the attention of the employees
having been met, this court is precluded from granting a final order
of winding up.
[7]
I may,
however, grant a provisional winding up order and order the BRP to
show compliance with Section 346(4A) of the Old
Act. However,
in light of the compliant second application, I see no reason why the
funeral of the company must be postponed
for any reason whatsoever.
[14]
It is common cause between SBSA and the respondents, and the BRP for
that matter, that SBSA has
complied with the procedural formalities
as statutorily required. I am equally satisfied that the
procedural formalities
have been complied with and satisfied.
In my view the winding up of the company should be determined on the
second application.
[15]
The technical defence raised by the respondents in terms of Section
133 of the Act can be succinctly
disposed of. As is evidenced
by Annexure “FA38” to SBSA’s founding affidavit in
the second application,
the BRP provided the necessary written
consent as contemplated in terms of Section 133(1)(a) of the New Act
to SBSA to proceed
with the second application.
[8]
In any event, this point was not seriously pursued during
argument and, in fact, was not persisted with as argument proceeded.
[16]
In further opposing the second application, the respondents have not
disputed that the company is factually
and commercially insolvent.
They do, however, by virtue of a counter-application to the second
application, seek the removal
of the BRP and, by implication, seek to
retain the company under supervision and in business rescue.
This is part-and-parcel
of the
bona
fides
argument.
The argument went as follows: SBSA flouted the purpose of
business rescue proceedings by insisting on collecting
the security
of debtors ceded in its favour and thereby bled the company dry.
The BRP, instead of convincing SBSA that they
should allow their
security to be utilised for business rescue proceedings, paid SBSA
their security as and when it was collected
and, in doing so, failed
in his duties as BRP to achieve the objects of business rescue.
As a result, it would be proper
to refuse SBSA the final winding up
of the company, remove the BRP as business rescue practitioner and
allow a new business rescue
practitioner to be appointed to achieve
the objects of business rescue.
[17]
This argument must fail on various grounds. It is common cause
that the company has not
traded for almost two years. The
company has no work force, as all employees have been retrenched
since, at least, December
2017. All of the equipment that the
company utilised in its operations have been returned to the relevant
financial institutions.
Save for a vague allegation that the
“
newly
appointed business rescue practioner. . . may be in a position to
recover possession of the equipment and vehicles returned
to the
supplies
”,
there is no evidence suggesting that any of these pieces of equipment
are still, or will still, be made available to the
company.
This is the least of the respondents’ difficulties. All
contracts that the company had by which to generate
income has been
cancelled and save for a vague allegation relating to “
previous
and potential new sites
”
no evidence is presented on what basis the company will return to
previous sites or how it will acquire new sites to operate
from.
In addition, no debtors’ exist which can be collected in order
for the company to meet its day-to-day obligations
should it remain
in business rescue and attempt to commence business operations.
There is similarly no suggestion
of post-commencement
finance being available for any business rescue proceedings.
[18]
That the respondents’ counter-application for the removal of
the BRP and the continuation
of business rescue proceedings is
unreasonable, cannot be doubted. After the BRP formed the
opinion that the company cannot
be rescued, the respondents did not
seek the BRP’s immediate removal as business rescue
practitioner on the basis that they
now contend for. As a
matter of fact, on their own version they adopted a “
passive
resolution to acquiesce to the instructions given
” to them
by the BRP.
[19]
In so far the respondents seek to contend that SBSA received undue
preferences, flouted the object
of business rescue proceedings and
bled the company dry, those allegations are dangerously made and, in
my view, are vexatious,
malicious and/or unreasonable. SBSA
acted within the realms of the law by insisting on receiving its
ceded security
[9]
and there is
no challenge as to the correctness of the present law as it stands.
In the absence of any challenge to this
legal position, the BRP was
lawfully obligated to give effect to the ceded security provisions
and the BRP cannot be faulted for
his conduct. Similarly, SBSA
cannot be criticised that it elected to enforce its contractually
held security in circumstances
where they were rightfully entitled to
do so in terms of the law.
[10]
[20]
The respondents’ contention that “
it
is not al all far-fetched or implausible that the business of
[the
company]
may
still be sold
”
is premised on nothing more than mere conjecture and speculation.
No factual basis is established by the respondents
that there is a
reasonable prospect of achieving any of the goals of business
rescue.
[11]
It bears
mentioning that it is not even disclosed that a potential buyer
exists and what the potential buyer would be willing
to pay for the
company.
[21]
The respondents simply had to defence to the second application and
their opposition of the second
application was nothing more than a
dilatory design to postpone the inevitable. Their opposition
was dilatory, unreasonable
with various allegations being made
against the BRP and SBSA solely for the intention to harass and annoy
without any real expectation
that the serious allegations levelled
against them has any basis in law. A punitive costs order is
warranted against the
respondents to show this court’s
displeasure at their conduct. The company has died a natural
death as far back as
October 2017. There is no reasonable
prospect that any life can be forced back into the company that would
enable its resuscitation.
The time has come for finality to be
reached. In my view the time has come to issue the final death
certificate of the company,
in order for the necessary funeral to be
held by way of the final winding up of the company.
[22]
In the premises I make the following order:
A.
In the
first application under case number 84122/2017:
1.
the matter
is removed from the roll;
2.
no order as
to costs;
B.
In the
second application under case number 57449/2018:
1.
The
resolution placing the first respondent under supervision and in
business rescue is hereby set aside;
2.
The first
respondent is placed under final winding up and in the hands of the
Master of the High Court;
3.
The
applicant’s costs are costs in the winding up of the first
respondent;
4.
The third
to sixth respondents, jointly and severally, are to pay the
applicant’s costs arising from the opposition of the
application on the attorney and client scale, which costs are joint
and several with the costs in paragraph 3;
5.
The third
to sixth respondent’s counter-application is dismissed, with
costs to be paid jointly and severally by the third
to sixth
respondents on the attorney and client scale.
C E THOMPSON
ACTING JUDGE OF THE HIGH
COURT
COUNSEL FOR APPLICANT
(SBSA)
: ADV B M
GILBERT
APPLICANT’S
ATTORNEYS (SBSA)
:WERKSMANS
ATTORNEYS
COUNSEL FOR APPLICANT
(BRP)
: ADV M LOUW
APPLICANT’S
ATTORNEYS (BRP)
: MATTHYS KROG ATTORNEYS
COUNSEL FOR
RESPONDENTS
: ADV B STEYN
RESPONDENT ‘S
ATTORNEYS
:SCHOEMAN ESTERHUYSEN ATTORNEYS
DATE OF
HEARING
: 20 JUNE 2019
JUDGMENT DELIVERED
ON
: 25 June 2019
[1]
“
(2)
If, at any time during business
rescue proceedings, the practitioner concludes that-
(a)
there
is no reasonable prospect for the company to be rescued, the
practitioner must-
(i)
so
inform the court, the company, and all affected persons in the
prescribed manner;
”
[
my
emphasis
]
[2]
“
(b) The applicant must, before or during the hearing, file
an affidavit by the person who furnished a copy of the application
which sets out the manner in which paragraph (a) was complied with.
”
[3]
See section 133(1) of the New Act:
“
(1)
During business rescue
proceedings, no legal proceeding, including enforcement action,
against the
company, or in relation to any property belonging
to the company, or
lawfully in its possession, may
be commenced or proceeded with in any
forum, except-
(a)
with
the written consent of the practitioner;”
[4]
[
my emphasis
]. It must be pointed out that the
founding affidavit refers to Annexure ‘MIC5” whilst the
correct annexure
the BRP intended to refer to was Annexure “MIC4”.
This mistake is common cause between the parties.
[5]
See
EB Steam Company (Pty) Ltd v Eskom
Holdings Soc Ltd
(979/2012)
[2013]
ZASCA 167
(27 November 2013)
“
.
. .
it is accepted
that the purpose of the section is,
so
far as reasonably feasible to bring the application to the attention
of the employees””
[6]
EB Steam
,
supra at para 23
“
Throughout
the emphasis must be on achieving the statutory purpose of so far as
reasonably possible bringing the application to
the attention of the
employees.”
[7]
EB Steam,
supra
at
para 25
“
The
fact that the requirement that these persons be furnished with the
application papers is peremptory means that it is not permissible
for the court to grant a final winding-up order without that having
occurred. Does that mean that it is equally impermissible
for the
court to grant a provisional winding-up order? In my view it does
not.
”
[8]
See, however, also
Booysen v Jonkheer Boerewynmakery (Pty) Ltd
& Another
(10999/16) ZAWCHC 192;
[2017] 1 All SA 862
(WCC);
2017 (4) SA 51
(WCC) (15 December 2016) at para 27 and the
authorities cited at fn 45 for the contention that no consent in
terms of Section
133(1)(a) of the New Act is necessary in relation
to applications in
terms of
Section 130(1) and (5) of the New Act.
[9]
BP Southern Africa (Pty) Ltd v Intertrans
Oil SA (Pty) Ltd and Others
(34716/2016) [2016] ZAGPJHC 310;
2017 (4) SA 592
(GJ) (25 November
2016) at para 42 to 47
[10]
See
Energydrive Systems (Pty) Ltd v Tin Can Man (Pty) Ltd &
others
2017 (3) SA 539
(GJ) para 18 as quoted with approval
in
Diener N.O. v Minister of Justice and
Others
(926/2016)
[2017] ZASCA
180
;
[2018] 1 All SA 317
(SCA);
2018 (2) SA 399
(SCA) (1 December
2017) at para 44
“
From
the sections of chapter 6 that deal with security, it is apparent
that security is treated in the same way as it is in the
law more
generally. There is, in other words, no indication that, in business
rescue proceedings, security is to be diluted or
undermined in any
way. For instance, s 134(3) provides that if a company wishes,
during business rescue proceedings, to dispose
of property that is
held as security by another person, it may only do so with that
person’s prior consent, unless the
proceeds of the disposal
‘would be sufficient to fully discharge the indebtedness
protected by that person’s security’;
and then the
company must pay the person promptly up to the company’s
indebtedness to him or her, or provide satisfactory
security for
that amount. This is consistent with what was held in Energydrive
Systems (Pty) Ltd v Tin Can Man (Pty) Ltd &
others, namely that
the ‘purpose and context’ of business rescue ‘are
not aimed at the destruction of the rights
of a secured creditor’.
”
[footnote omitted]
[11]
Oakdene Square Properties (Pty) Ltd and
Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others
(609/2012)
[2013] ZASCA 68
;
2013 (4) SA 539
(SCA);
[2013] 3 All SA 303
(SCA) (27 May 2013) at para 29 to 31