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[2019] ZAGPPHC 314
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Daffue v Espach and Others (45341/19) [2019] ZAGPPHC 314 (22 July 2019)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH
AFRICA
GAUTENG DIVISION, PRETORIA
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES :
YES
/NO
(3)
REVISED:
YES
/NO
CASE
NO: 45341/19
22/7/2019
In the matter between:
JOHANNES MARTINUS DANIEL DAFFUE
APPLICANT
and
JOHAN
ESPACH
FIRST
RESPONDENT
CROCODILE
COTTAGE PROPERTIES (PTY) LTD
SECOND RESPONDENT
(In
liquidation)
CROCODILE
RIVER HOUSE (PTY) LTD
THIRD RESPONDENT
(In
liquidation)
JOHANNES
ZACHARIAS HUMMAN MULLER
N.O.
FOURTH RESPONDENT
ANA
PAULA DE OLVEIRA
N.O.
FIFTH RESPONDENT
COMPANIES
& INTELLECTUAL PROPERTY
SIXTH RESPONDENT
COMMISSION
ABSA
BANK
LIMITED
SEVENTH RESPONDENT
JUDGMENT
VAN
DER SCHYFF, AJ
Introduction
[1] The
applicant in this matter approached the urgent court seeking an order
that
the second and third respondents, both solvent companies that
are under final liquidation in which he holds a 50% shareholding,
be
placed under business rescue, alternatively that the order by which
the companies were placed in liquidation is set aside on
the ground
that it was obtained in his absence, further alternatively for an
interim order which would enable the companies to
trade pending the
subsequent hearing of the business rescue and/or rescission
application.
[2] The
first respondent, the only respondent who opposes the application,
was afforded
seven days to file his answering affidavit before the
matter was enrolled. The first respondent argued that the matter was
not
urgent.
[3] Due
to the fact that urgency is determined on a case-by-case basis I
requested
counsel to argue both the urgency and merits of the
application.
The
facts
[4] Despite
the fact that the documents filed in this application amount to
approximately
720 pages, the facts underpinning the application are
quite simple. It can essentially be summarised as follows: two
solvent companies
with the same two shareholders were liquidated in
an application brought in terms of
s 81
of the
Companies Act, No 71
of 2008
. One shareholder now wishes to prevent the dissolution of the
companies and preserve them as a going business concern, while the
other shareholder could not care less for the economic value of the
companies but just wants to realise his shareholding and shake
the
proverbial dust off his feet.
[5] A
more detailed exposition of the facts, is as follows:
5.1. The
applicant and the first respondent started a business enterprise
around 1997. They
founded two companies. The one company acquired an
immovable property while the other company leased this property and
conducted
the trading business.
5.2. They
were the only shareholders and both were managing directors. The
business was operated
akin to a partnership and based on mutual
trust.
5.3.
However, the relationship between the companies' two
shareholders-cum managing directors
deteriorated in the face of
mutual disillusionment, internal wrangling and distrust.
5.4. The
applicant and first respondent found it impossible to work together
and were frequently
at loggerheads. To their credit, however, they
succeeded in concluding a management agreement in 2016 which
inter
alia
that provided for:
5.4.1. the
first respondent's resignation as a joint managing director and
employee
of the third respondent;
5.4.2. a
dividend pre-payment of R20 000,00 , or
pro
rata
share thereof, to be made on a
monthly basis to the first respondent
5.4.3. the
appointment of an independent manager.
5.5. At this
stage, the acrimony between the applicant and first respondent did
not paralyze
and seriously interfere with the normal operations of
the companies after the agreement was concluded.
5.6. The
first respondent left the property as agreed and for a period of
approximately 13 months,
he received on a monthly basis the R20
000,00 dividend pre-payment as provided for in the agreement.
5.7. From
February 2018 there was an interruption in the continuum of monthly
dividend prepayments.
Thereafter sporadic payments were made to the
first respondent. The applicant's explanation is that the trading
company went through
a difficult period that is often experienced
during the first six months of the year, but as business picked up it
was possible
to make payments again, hence the payments commenced
again in the second half of the year.
5.8. The
first respondent, convinced that the applicant was intent on causing
him financial harm
and dishonouring the agreement, instituted
liquidation proceedings in the High Court and premised the
liquidation application on
the dual bases that (i) he is a creditor
of the companies because he did not receive all the dividend
prepayments he was entitled
to, and (ii) a deadlock exists which can
only be resolved through liquidation.
5.9. Both
the second and third respondent companies were finally wound up on 10
April 2019,
despite both being solvent companies. The final
winding-up orders were granted in the absence of the applicant.
Despite him being
represented by an attorney, the applicant contends
that he was not aware of the date on which the final liquidation
applications
were set down.
5.10. The applicant contends
that he became aware that the companies were finally liquidated on 20
May 2019. He
attempted to negotiate with the provisional liquidators
to allow the companies to trade whilst in liquidation. The
provisional
liquidators were prepared to agree but subject to the
consent of both shareholders. The first respondent refused to consent
to
the continued trading. It is evident from the first respondent's
approach that he has no interest in trading through the second
and
fourth respondents as prospering companies. He, as I have mentioned,
desires the dissolving of the companies and liquidating
is 50%
shareholding thereby severing ties with the applicant for good.
5.11. On 28 June 2019 the
applicant delivered the notice of motion and founding affidavit to
the first respondent's
legal representative. The application was also
delivered by e-mail to the fourth and fifth respondents on 28 June
2019 and by Sheriff
on 1 July 2019. Service on the sixth respondent
was effected by e-mail on an undisclosed date and by Sheriff on 3
July 2019. Service
on the seventh respondent was done by e-mail on 28
June 2019. Service on the South African Revenue Service and the
Master of the
High Court was effected by e-mail on 14 and 15 July
2019 and by hand on 16 July.
5.12. The matter was enrolled
for hearing in the urgent court on 16 July 2019 and was argued on 17
July 2019.
5.13. By this time the
relationship between the parties has deteriorated to the extent that
they completely distrust
each other - a fact evinced by the tone in
which the affidavits filed in this application were drafted and the
content of the affidavits.
Urgency
[6] The
applicant contends that the matter is urgent. He states that the fact
that
the trading company had to cease trading due to the final
liquidation order having been granted and the respondent's subsequent
refusal to allow the company to trade, create the risk of a solvent
company becoming insolvent and this in itself creates a sense
of
urgency. In addition counsel argued that there is sufficient case law
substantiating the argument that business rescue proceedings,
by
their very nature, should be conducted with the optimum possible
expedition
(DH Brothers Industries v
Gribnitz and Others
2014 (1) SA 103
(KZP) par [27];
Koen v Wedgwood
Village Golf Laundry Estate
2012 (2)
SA 378
0.NCC) ;
Knipe v Kameelhoek
(Pty) Ltd and Others
(2120/2016)
[2017] ZAFSCH 116 (22 June 2017)).
[7] The
applicant states that it is common cause that the trading company was
under
financial strain from February 2019.
[8] This
begs the question as to why the application for business rescue was
only
instituted at the end of June 2019. Business rescue proceedings
undoubtedly should be conducted with the optimal possible expedition,
but this does not entitle an applicant to act leisurely from February
2019 and then at a whim to approach the court on an urgent
basis in
June 2019, without tendering a sufficient explanation.
[9] As
far as the rescission application is concerned, it is accepted that
the applicant
became aware of the final liquidation order on 20 May
2019. Despite this he only served the application for rescission on
28 June
2019.
[10] The
applicant provides an explanation for the failure of filing of an
opposing affidavit in the liquidation
application, but for the
reasons set out below I do not deem it necessary to deal with it in
detail. The applicant does not, however,
set out a valid reason for
only filing the application for rescission 28 court days after
becoming aware of the existence of the
liquidation order. The
question falls to be determined whether this (28 court days) is a
time period which would be considered
reasonable in the circumstances
of this case. In
Gisman
Mining and Engineering
Co
(Pty) Ltd (In
Liquidation) v LTA Earthworks (Pty) Ltd
1977
(4) SA 25
(W) at 27-28, McEwan J held that where no time period is
stated within which a document is to be filed, guidance might be
obtained
from a rule regulating a similar situation.
Prima
facie
a
reasonable time would "certainly be no longer than the time
prescribed" in a similar rule, "unless there were some
special circumstances applying". The 20 day period provided for
in rule 31(2)(b) of the Uniform Rules of Court is of relevance
as
well as the court's reasoning in
Nkata
v First Rand Bank Ltd and Others
2014
(2) SA 412
(WCC) para 26 and 27, where the court held that there is
no reason why a litigant should have more time when seeking
rescission
in terms of the common law than under rule 31(2)(b). I
accept that time periods prescribed in rule 31(2)(b) cannot be
prescriptive
but it provides guidance in the determination of a
"reasonable time".
[11] The
applicant explains that the urgency of the application arose when he
became aware of
the fact that the liquidators would not guarantee
that he would be refunded for carrying the operational costs of the
companies
from his own pocket, and again when the first respondent
refused consent to the provisional liquidators to trade.
[12] This
does not explain why the application for rescission was not filed as
soon as possible
after the applicant became aware of the existence of
the liquidation order. When a rescission application is considered on
the
normal motion court roll, a court may well be convinced that 28
court days do not constitute an undue delay in the circumstances,
considering that rule 31(2)(b) does not apply. However, when the
court is approached on an urgent basis to rescind an order that
the
applicant has been aware of for 28 court days prior to the
application being served on a respondent, the delay needs to be
explained in sufficient detail to satisfy the court that urgency
exists.
[13] In
addition it is trite that a final liquidation order has the effect of
putting an end
to business operations with the resultant liquidation
of assets and distribution to creditors in order of ranking. A
liquidation
order divests the management or directors of the control
of the liquidated entity and vests same in the hands of the Master
until
a liquidator has been appointed. The liquidators are limited to
the powers they are endowed with. Mr van der Westhuizen, acting
on
behalf of the liquidators, confirms in an affidavit dated 12 July
2019, that the provisional liquidators have not been given
express
powers, either by the Master or the Court to continue trading
activities. Significantly, no application has been made to
extend the
liquidators' powers to enable them to carry on any part of the
business of the company.
[14] For
all the above reasons I am of the view that such urgency as may
exist, was self-created.
[15] I must
add that, as far as the application for the rescission of the
liquidation order
and the interim relief sought are concerned, it is
fatal that the application was only served on the Master by email,
one court
day preceding the date on which the application was
enrolled to be heard. The Master has a direct and substantial
interest in this
application and will not be competent for the court
to set aside the final liquidation order under circumstances where
the Master
of the High court has not been given adequate notice (GCC
Engineering (Pty) Ltd and Others v
Maroos and Others
2019 (2) 379
(SCA)). The applicant sought to overcome this difficulty in
submitting that a rule nisi would afford the Master sufficient
time
to respond. I do not agree. A rule nisi brings about a change in the
status quo,
which
without having affording a party with a substantial interest the
opportunity to take part in the court proceedings, would
have been
inappropriate..
Order
In
the result the following order is made:
1.
The application is struck from the roll.
2.
The applicant is to pay the costs of the application.
E
VAN DER SCHYFF
ACTING
JUDGE OF THE HIGH COURT
Counsel
for applicant
Adv M Louw
Instructed
by
JF van Deventer Inc
Counsel
for 1
st
respondent
Adv MP van der Merwe SC
Instructed
by
Weavind & Weavind
Date
of hearing
17 July 2019
Date
of judgment:
22 July 2019