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[2017] ZASCA 131
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Kransfontein Beleggings (Pty) Ltd v Corlink Twenty Five (Pty) Ltd and Others (624/2016) [2017] ZASCA 131 (29 September 2017)
SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 624/2016
In
the matter between:
KRANSFONTEIN
BELEGGINGS (PTY) LTD
APPLICANT
and
CORLINK
TWENTY FIVE (PTY) LTD
FIRST RESPONDENT
JOHANNES
FREDERICK
KLOPPER
NO
SECOND
RESPONDENT
ANTHONY
NORMAN FLYNN NO
THIRD
RESPONDENT
WEISS
& PARTNERS
INCORPORATED
FOURTH RESPONDENT
ABSA
BANK LTD
FIFTH RESPONDENT
GRIEKWALAND
WES
KORPORATIEF
BPK
SIXTH RESPONDENT
GERT
VAN DER WALT JOUBERT NO
SANDRA
ANN JOUBERT NO
HENDRIK
JOHAN JOUBERT NO
In
their capacities as trustees for the time being of
THE
GERT TRUST
SEVENTH RESPONDENT
REGISTRAR
OF DEEDS,
BLOEMFONTEIN
EIGHTH RESPONDENT
Neutral
citation:
Kransfontein
Beleggings (Pty) Ltd
v
Corlink
Twenty Five (Pty) Ltd,
(
624/2016
)
[2017] ZASCA 131
(29 September 2017)
Coram:
Lewis,
Bosielo and Saldulker JJA and Mokgohloa and Rogers AJJA
Heard:
07
September
2017
Delivered:
29
September 2017
Summary:
Application
to set aside business rescue proceedings – creditors have
direct and substantial interests – non-joinder
of creditors is
fatal to the relief sought in the application.
ORDER
Application
for leave to appeal referred in terms of
s 17(2)(d)
of the
Superior
Courts Act 10 of 2013
:
The
application for leave to appeal is dismissed with costs.
JUDGMENT
Mokgohloa
AJA (Lewis, Bosielo and Saldulker JJA and Rogers AJA concurring):
[1]
The application for leave to appeal in this matter was referred by
the direction of this court for oral argument in terms of
s 17(2)(
d
)
of the
Superior Courts Act.
[1
]
The parties were forewarned that they should be prepared, if called
upon, to address this court on the merits. As a result, arguments
were heard on both the application for leave to appeal and the merits
of the matter.
[2]
The applicant is the registered bondholder of a general and special
notarial bond (the notarial bond) in terms of the Security
by Means
of Movable Property Act
[2]
registered over certain movable property owned by the first
respondent (Corlink). Rights under the bond were ceded to the
applicant
and the cession registered at the Deeds Office on 19
November 2014. The movable property specially pledged in terms of the
notarial
bond comprised assets listed in annexures to the bond,
including irrigation and other farming equipment, livestock and,
purportedly,
water rights pertaining to three farms. The water rights
were rights in terms of s 21(
a
)
of the National Water Act.
[3]
I
say these rights were ‘purportedly’ pledged because it
was accepted at the hearing of the application before us that
the
water rights were incorporeal property and thus not capable of being
pledged by way of the notarial
[3]
As a result of the dire financial position in which Corlink found
itself, three farms registered in its name and some of its
movables
were sold by public auction to the seventh respondent (the Gert
Trust) on 28 August 2014. Deeds of sale between Corlink
and the Gert
Trust were subsequently executed on 1 October 2014. The farming
operations were sold as going concerns, the sales
including, so it
appears, some of the movable items that had been pledged to the
applicant. The water rights supposedly pledged
to the applicant
pertained to these three farms. The fifth respondent (Absa) and sixth
respondent (GWK) held first and second mortgage
bonds respectively
over the farms. They consented to the sales.
[4]
On 30 October 2014, Corlink’s sole director passed a resolution
placing it in business rescue proceedings in terms of
s 129(1)(
b
)
of the Companies Act,
[4]
on the
basis that it was financially distressed. Pursuant to this, the
second and third respondents were appointed as business
rescue
practitioners (the practitioners). The applicant’s
attorney informed the practitioners on 20 January 2015 that
the
applicant was a secured creditor of Corlink by virtue of the notarial
bond. They were requested to include the applicant as
such in the
business rescue plan.
[5]
In the meanwhile, the practitioners had prepared a business rescue
plan which was considered at a creditors’ meeting on
30 January
2015. We may infer that the applicant’s claim was not reflected
in this plan. The creditors resolved to adjourn
the meeting. They
also resolved that the practitioners should implement the sale of the
farms to the Gert Trust.
On
13 March 2015 the practitioners published a revised plan (the plan).
This plan did not reflect the applicant as a creditor, secured
or
otherwise. The plan was approved and adopted on 22 April 2015 at the
creditors’ meeting. The applicant attended the meeting
and its
representative voted against the acceptance of the plan.
[6]
In terms of the plan as adopted, the lion’s share of the
proceeds of Corlink’s assets was to go to Absa and GWK
as
secured creditors – R46 265 000 and R24 236 100
respectively. Their concurrent shortfall was calculated
at R3 637 360
and R4 281 365 respectively. The claims of concurrent
creditors, including Absa and GWK, totaled
R35 401 876. The
plan stated that if there were a liquidation, the concurrent
creditors would receive nothing. In terms
of the plan they were
offered a ‘sweetener’ of 1.58 cents in the rand. The
total amount available for division among
concurrent creditors was
R560 000.
[7]
On 9 June 2015, the applicant launched an urgent application in the
Free State Division of the High Court, Bloemfontein to interdict
the
transfer of Corlink’s immovable properties and the
implementation of the business rescue plan pending determination of
a
rule nisi to have the plan declared invalid. The only creditors cited
as respondents were Absa and GWK, both of whom opposed
the
application. GWK delivered a notice of opposition in terms of Uniform
Rule 6(5)(
d
)(iii)
and raised, among other points, the non-joinder of Corlink’s
other creditors.
[8]
At the hearing on 10 June 2015, the parties reached an agreement
which was recorded in a court order as follows (the formatting
is not
reproduced here):
‘
By
agreement between the applicant, the fifth and sixth respondents:
The
applicant’s application for and insofar as it pertains to
final relief (‘the main application’) is postponed
sine
die.
Further
affidavits in the main application shall be delivered by the above
parties in terms of the Rules of Court, as if notice(s)
of
opposition had been delivered on 10 June 2015.
The
applicant shall pay the fifth and sixth respondents’ taxed
party and party costs of the proceedings on 10 June 2015.
It
is recorded that:
4.1 The sixth
respondent and its attorneys have given an undertaking to, pending
the final adjudication of the main application,
hold in trust the sum
of R7 217 500.00 being the portion of the proceeds of the sales
of the three immovable properties referred
to in the founding
affidavit and to which the applicant lays claim on the strength of
the Notarial Bond upon which it relies.
4.2 This undertaking
does not constitute or imply an admission or a concession that such
amount or any part thereof is due or owing
to the applicant and that
the applicant has any rights thereto (which aspect shall be
determined in the adjudication of the main
application).
The
second and third respondents, not having entered appearance to
oppose the relief sought, are ordered to provide details to
the
applicant as to the whereabouts of the proceeds of the movable
assets sold by public auction on 28 August 2014 and 24 September
2014 respectively, insofar as those assets are included in the
Special Notarial Bond BN 8134/2011 dated 1 December 2011, within
ten
(10) days of the date of service of this order.”
[9]
The amount of R7 217 500 (the ringfenced amount) was the
maximum amount at which the applicant valued its security
under the
notarial bond. As a result of the agreement incorporated in the court
order, transfer of the three farms to the Gert
Trust was registered
and Absa received the full amount to which it was entitled in terms
of the plan (this was less than its full
legal entitlement).
[10]
The postponed application was heard on 22 October 2015. On the day of
the hearing, the applicant’s counsel handed up
a draft order
which modified the relief sought in the notice of motion by asking
(i) that the plan be set aside only to the extent
that it failed to
reflect the applicant as a secured creditor of Corlink; (ii) that the
plan be amended by reflecting the applicant
as a creditor in an
amount not exceeding R7 217 500 in respect of specified
movable property including the water rights;
and (iii) that the
ringfenced amount remain in trust pending the final determination of
the amount payable to the applicant under
the notarial bond.
[11]
The court a quo dismissed the application with costs on the basis
that the applicant had failed to join the other creditors
of Corlink.
[12]
The test whether there has been a non-joinder is whether a party has
a direct and substantial interest in the subject matter
of the
litigation which may prejudice the party that has not been joined.
[5]
[13]
The applicant submitted that the issue of joinder was considered
prior to the hearing on 22 October 2015, and that its legal
team
concluded that it was not necessary to join any other creditors
because the amended relief which the applicant sought did
not affect
any creditor except GWK.
[14]
If the applicant had persisted in the relief set out in the notice of
motion, that is, interdicting the implementation of the
plan and
having it set aside as invalid, there is no doubt that it would have
been necessary to join all the creditors.
[6]
However
by 22 October 2015, the applicant had abandoned that relief and
confined itself to the amended relief reflected in the draft
order.
By design the amended relief was intended to affect only GWK.
[15]
However, the amendment to the plan which the applicant sought would
inevitably have affected concurrent creditors. If GWK’s
secured
entitlement under the plan were reduced by R7 217 500, its
concurrent claim would increase by the same amount.
Since the
applicant did not allege any basis on which GWK could be required to
forfeit this concurrent claim, the dividend payable
to concurrent
creditors out of the surplus of R560 000 would have reduced from
1.58 cents to 1.31 cents. While one may speculate
that this modest
reduction would not have affected how creditors voted, the fact
remains that the amendment did affect their rights
under the plan.
[16]
As stated in
Absa
v Naude
,
if the creditors who voted for the business rescue plan are not
joined, their position would be prejudicially affected in that
a
business rescue plan would be set aside, money that they had
anticipated they would receive would not be paid and the money that
they had received would have to be repaid. It thus follow that the
non-joinder of Corlink’s other creditors was fatal to
the
amended relief sought by the applicant for non-joinder. Since
the question of joinder had been raised at the previous
hearing and
since the applicant had taken a deliberate decision not to join other
creditors, I do not think that the court a quo
was required to afford
the applicant a further opportunity to join the other creditors.
[17]
However, and even if non-joinder was not a sufficient basis for
dismissing the application, the application was in any event
doomed
to fail for the reasons elaborated below. Because the applicant did
not persist in the relief originally claimed, it is
unnecessary to
investigate on what grounds a court may set aside an adopted business
rescue plan and whether such relief ceases
to be competent once the
plan has been implemented. The question is whether a court can
partially set aside and amend an adopted
plan so as to alter its
operation in relation to one or more of the creditors. In my view the
answer is no.
[18]
A business rescue plan can only be implemented if approved by the
prescribed majority of creditors in terms of s 152 of
the
Companies Act. The court has no power to foist on creditors a plan
which they have not discussed and voted on at such a meeting.
This is
what the applicant was asking the court a quo to do. The plan which
the creditors discussed and voted on was one in terms
of which the
applicant was not reflected as a creditor and a specified
amount from the proceeds of the farms was to be paid
to GWK in
settlement of its secured claims. If the applicant was granted the
relief it seeks, the plan would become one in which
the applicant
receives its full secured claim up to a maximum of the ringfenced
amount while GWK receives proportionately less.
And as I have
explained, concurrent creditors would also receive slightly less than
the plan promised them. The creditors have
not discussed or voted on
such a plan. Quite conceivably GWK would have voted against it.
Creditors may have taken the view
that the plan could not be
finalized and put to a vote until the value of the applicant’s
secured claim was established.
[19]
We do not have enough information to determine whether GWK on its own
could have defeated the plan or whether other creditors
might have
voted differently and in any event I do not think it matters. A court
cannot be asked to delve into these matters. The
simple point is that
the only plan which practitioners can implement is one adopted by
creditors in accordance with s 152
of the Companies Act.
[20]
The applicant’s counsel submitted that, by consenting to the
order of 10 June 2015, GWK had agreed that the applicant,
if it
proved the existence and value of its security, would be entitled to
receive such value from the ringfenced amount, in which
event GWK
would receive proportionately less. No such case was made out on the
papers. As at 10 June 2015, the applicant was seeking
to have the
entire plan set aside. This is the case which Absa and GWK proceeded
to answer. It was only on 22 October 2015 that
the applicant changed
course. Even then, the applicant did not claim that GWK had agreed to
a two-way fight in which the ringfenced
amount would either go to the
applicant or to GWK depending on an adjudication of the applicant’s
legal rights. The applicant’s
modified case was that it was
entitled to a partial setting aside and amendment of the plan.
[21]
I therefore find that the court a quo was correct in dismissing the
application. The applicant has failed to show that there
are
prospects of success in the appeal.
[22]
In the circumstances, the following order is made:
The
application for leave to appeal is dismissed with costs.
__________________
FE
MOKGOHLOA
ACTING
JUDGE OF APPEAL
APPEARANCES
For
the Applicant:
J H Roux SC (with him P S Van Zyl)
Instructed
by:
Bill Tolken
Hendrikse Incorporated, Belville
Matsepe Inc,
Bloemfontein
For
the Respondent: M H
Wessels SC (with him S Tsangarakis)
Instructed
by:
Symington
& De Kok, Bloemfontein
Phatshoane Henney
Attorney, Bloemfontein
[1]
10 of 2013
[2]
57 of 1993
[3]
36 of 1998
[4]
71 of 2008
[5]
Absa Bank
Limited v Naude NO & others
[2015] ZASCA 97
;
2016 (6) SA 540
(SCA) para 10;
Golden
Dividend 399 (Pty) Ltd & another v Absa Bank Ltd (
569/2015
)
ZASCA
78 (30 May 2016)
[6]
Above