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[2019] ZAGPPHC 455
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Ragavan and Another v Kal Tire Mining Services SA (Pty) Ltd and Others (40723/2018) [2019] ZAGPPHC 455 (12 August 2019)
IN THE HIGH COURT OF SOUTH
AFRICA
(GAUTENG DIVISION, PRETORIA)
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED.
Case
Number: 40723/2018
In
the matter between:
RONICA
RAGAVAN
1
ST
APPLICANT
OAKBAY
INVESTMENTS (PTY) LTD
2
ND
APPLICANT
And
KAL
TIRE MINING SERVICES SA (PTY) LTD
1
ST
RESPONDENT
CHAVONNES
BADENHORST ST CLAIR
COOPER
N.O
2
ND
RESPONDENT
THEA
CHRISTINA LOURENS N.O
3
RD
RESPONDENT
THE
MASTER OF THE HIGH COURT
4
TH
RESPONDENT
KGASHANE
CRISTOPHER MONYELA N.O
5
TH
RESPONDENT
MONIQUE
STANDER N.O6
TH
RESPONDENT
CENTAUR
DE ROODEPOORT (PTY) LTD
7
TH
RESPONDENT
JUDGMENT
Fabricius
J,
[1] In
these urgent proceedings, the Applicants, apart from the usual cost
order, sought the following relief: "That the judgment and order
granted in favour of the First Respondent (the Applicant in
the
original application) granted 3 October 2018, under case number
40723/2018, winding-up the Applicant, be rescinded, alternatively
that such judgment be rescinded and replaced with an order of
provisional liquidation returnable on such date as the above
honourable
Court may determine". The alternative relief sought
was abandoned by Counsel for Applicants during argument in reply. The
Seventh Respondent's conditional application was not proceeded with.
[2] In
the Founding Affidavit it was said that the application was brought
in terms
of the common law, alternatively in terms of
Rule
31 (2) (b)
of the
Uniform
Rules of Court
and, further
alternatively, in terms of
Rule 42
(1) (a).
It was
also
alleged that the liquidation was sought and granted in circumstances
which fly in the face of West Dawn's constitutionally
entrenched
right to a fair public hearing in terms of s. 34 of the
Constitution.
The Second Applicant is a
shareholder of West Dawn and the deponent to the Founding Affidavit
is a Director of West Dawn.
[3] It
is clear from the Founding Affidavit that the final liquidation
order, was
challenged on a number of grounds which included not only
the question of non-service, but also challenging the existence of
the
very debt upon which reliance was placed for purposes of the
liquidation application. In this context reference was made to
"highly
suspicious circumstances" upon which the First
Respondent sought the liquidation order without the knowledge of West
Dawn.
[4] These
allegations upon which Applicants rely, are disputed, and not
surprisingly
inasmuch as it was also alleged that First Respondent's
application was intended to mislead the Court and that the relevant
court
process was abused.
Background:
[5] On
3 October 2018, this Court placed West Dawn Investments (Pty) Ltd
under final
liquidation at the instance of one of its creditors, the
First Respondent. West Dawn was finally liquidated because the Court
found
that it was unable to pay its debts and that it was just and
equitable to do so. The application was not opposed. Until set aside,
this Court order is presumed to be correct.
See:
MEC
for Economic Affairs, Environment and Tourism v Kruisenga
2008
(6) SA 264 (CKHC) at 277 A to 8.
On 16 November 2018, the
Applicants applied to rescind this liquidation order. On 14 June
2019, the First Applicant brought an application
to expedite the
hearing of the rescission application so that it be heard on an
urgent basis.
[6]
Before its liquidation, West Dawn operated as a mining contractor and
relied on mining
contracts to generate income. Its main client was
Optimum Coal Mine (Pty) Ltd ("OCM"). A mining contract with
OCM was
West Dawn's only stated source of income. During February
2018, OCM was placed under business rescue. lt no longer produces any
coal and is in the process of being sold. On 14 November 2018, OCM's
business rescue practitioners cancelled the mining agreement
between
West Dawn and OCM, and accordingly West Dawn's primary, if not only,
source of income has become cancelled.
[7] On
16 May 2019, the Fifth and Sixth Respondents were granted leave to
intervene
the rescission application. That application was heard by
Davis J, who in a written judgment also confirmed that each of West
Dawn's
creditors had a direct and substantial interest in the
rescission application. On that basis, each of West Dawn's creditors,
including
the Seventh Respondent, has
locus
standi
to oppose the rescission
application should they have been notified of it. On 24 June 2019,
the Seventh Respondent brought an application
to intervene and oppose
the rescission application. Seventh Respondent is a creditor of West
Dawn with a claim of at least R45
million. On 25 June 2019, and by
agreement between the parties, Seventh Respondent was granted leave
to intervene in the rescission
application.
Urgency:
[8] First
Applicant contended that West Dawn was a major creditor of OCM with a
pre-
and post- business claim of R472.1 million. It was also implied
that West Dawn's liquidators were conspiring with OCM business rescue
practitioners to vote in favour of a business rescue plan "to
the great detriment of West Dawn and its shareholders".
A vote
on the plan was apparently scheduled for 15 July 2019, and it was
therefore contended that the rescission application had
to be heard
urgently so that West Dawn could be taken out of liquidation before
the vote. The First Applicant, on behalf of West
Dawn could vote
against the plan. It was contended that the entire basis for First
Applicant's claims of urgency is based on:
1. The
alleged disastrous business rescue plan;
2. The
alleged date of the vote on the business rescue plan which was
initially apparently
scheduled to take place on 15 July 2019, but
will now apparently take place towards the end of August;
3. West
Dawn's ability to influence the outcome of the vote
if
it is
taken out of liquidation; and
4. The
suggestion that West Dawn's liquidators will vote in favour of the
plan.
[9]
On behalf of Fifth, Sixth and Seventh Respondents it was contended
that the application
could not be urgent for a number of sound
reasons:
1. The
urgent application was lodged on a Friday before a long weekend
requiring an answer
within three days thereafter. No proper basis was
set out for this time limit, and given the nature of the application
it is patently
unfair and inappropriate;
2. The
business rescue plan that First Applicant was referring to was
published on 6 December
2018, and it was common cause that a new
business rescue plan would be published;
3. It
would be this new business rescue plan that would be voted on, and
neither First
Applicant, nor any other creditor of OCM, could know
what the substance of that plan would be;
4. Accordingly,
it is premature and factually incorrect to contend that the
rescission
application was urgent, because an unknown business rescue
plan must of necessity be voted against;
5. Furthermore,
while First Applicant contends that West Dawn would be able to
influence
the outcome of the vote of the business rescue plan, on no
conceivable basis could that be the case. Even based on the claims
recognized
in the previous business rescue plan, the total claims of
OCM amount RS.184 million. These claims are likely to have increased
by the time the new plan was published. Based on the published
business rescue plan, West Dawn has a voting interest of only 6.3
%.
In comparison, Seventh Respondent and Eskom, have claims of R1.013
billion and R3.75 billion respectively. For any business
rescue plan
to be adopted, it had to be supported by more than 75% of the
creditors, of which at least 50% had to be independent
creditors,
according to the provisions of
s. 152
(2) of the
Companies
Act 71 of 2008
.
West Dawn was a
related party to OCM and its vote therefore could not count towards
the 50 % West dawn's ability to therefore influence
the relevant vote
is non-existent, and therefore it was simply incorrect to contend
that the rescission application was urgent,
because West Dawn could
be able to influence the particular vote;
6. Furthermore,
whilst First Applicant contends that the application had to be heard
urgently, because West Dawn's liquidators would vote in favour of
their plan (whatever that may be), this Is factually incorrect
Inasmuch as on 19 June 2019, the Second Respondent, acting on behalf
of West Dawn's liquidators, deposed to an affidavit in which
it was
stated that West Dawn's liquidators had no intention of voting for
the "old" business rescue plan.
7. The
date for the vote on the new business rescue plan has now been
extended to
end of August 2019, and it was contended on behalf of the
Seventh Respondent that this date is also likely to be postponed
again.
Rule
42
(3):
[10] This
Rule
states:
"The Court shall not make any order rescinding or varying any
order or judgment unless satisfied that all parties whose
interests
may be affected, have notice of the order propose." With
reference to
Old Mutual Life
Assurance Company SA Ltd and
Another v Schwemmer
2004 (5) SA 373
(SCA)
at par. /251,
it was contended
on behalf of the Seventh Respondent that West Dawn's creditors as
affected parties ought to have been joined, or
at the very least,
proper notice of the application should have been given to them in
terms of
Rule 42
(2) and
42
(3).
It
is common cause that First Applicant did not notify any of West
Dawn's creditors of the rescission application, let alone join
them
as parties. This point was squarely raised in Seventh Respondent's
Answering Affidavit, but despite that, First Applicant
had still not
notified West Dawn's creditors of the rescission application. It was
known who these creditors were.
Sufficient grounds for
reliance on
Rule 42
(1) (a)?
[11] The
Rule 42
(1) (a)
reads as follows:
"(1)
The Court may, in addition to any other powers it may have,
mero
motu
or upon the application of any party affected, rescind or
vary:
(a) An order
or judgment erroneously sought or erroneously granted in the absence
of any party
affected thereby;"
(2)
Rule 42
(2).
“Any party desiring any leave under
this Rule shall make application therefore upon notice to all parties
whose interests
may be affected by any variations sought.
This section is wholly procedural
and does not deal with substantive law. It is clear from
Colyn
v Tiger Food Industries Ltd Ila Meadow Feed Mills (Cape)
2003
(6) SA 1
(SAC)
and
Lodhi 2 Properties Investments CC v Bondev
Developments [Pty] ltd
2007 (6) SA 87
(SCA),
that a judgment is
erroneously granted if there existed at the time of its issue a fact
which the Court was unaware of, which would
have precluded the
granting of a judgment which would have induced the Court, if aware
of it, not to grant a judgment. It is clear
that a judgment cannot be
said to have been granted erroneously in the light of subsequently
disclosed defence which was not known
or raised at the time of the
default judgment.
On the present facts, the Return
of Service by the Sherriff is totally in order and upon the mere
reading of it, would not have
precluded the Court from granting the
judgment. Service was disputed in these affidavits thereafter. First
Respondent has not opposed
this application, but has not placed any
version before me as a basis to allege or conclude that the order was
erroneously sought
or granted. I must accept that the Court granting
the order had satisfied itself that procedural and jurisdictional
requirements
had been complied with. There are no facts before me to
indicate otherwise at the time of granting of the order. It is clear
that
where a Plaintiff is procedurally entitled to judgment in the
absence of Defendant, the judgment if granted, cannot said to have
been granted erroneously in the light of a subsequently disclosed
defence. A defence on the merits is an irrelevant consideration
and,
if subsequently disclosed, cannot transform a validly obtained
judgment into an erroneous judgment.
See also:
Erasmus Superior
Court Practice, Volume 2, Second Edition by D. E.
van
Loggerenberg, Juta and Company at D11568,
where the relevant
requirements are correctly stated with reference to the case law.
[12] I
need to emphasize that a Return of Service is regarded as prima facie
evidence of its content and
in the absence of evidence of the First
Respondent, and/or any version by the Sherriff of this Court, there
is nothing before me
to show that there was any error in the
proceedings.
See:
Seale v
Van Rooyen N.O, Provincial Government, North West
Province
v Van Rooyen N.O 208 (4) SA 43 SCA at 528 to C.
[13]
Rule 42
(1) (a)
is therefore not applicable on the
facts. In any event, and in addition, I am not satisfied, as I must
be, in accordance with the
provisions of
Rule 42
(3),
that
all parties whose interests may have been affected, have been given
notice of the order proposed herein.
Section
354 of the Companies Act of 1973:
[14] This
section states that:
"(1)
The Court may at any time after the commencement of a winding-up, on
the application of
any liquidator, creditor or member, and on proof
to the satisfaction of the Court that all proceedings in relation to
the winding-up
ought to be stayed or set aside, make an order staying
or setting aside the proceedings or for the continuance of any
voluntary
winding-up on such terms and conditions as the Court may
deem fit.
(2)
The Court may, as to all matters relating to winding-up, have regard
to the wishes of the
creditors or members as proof to it by any
sufficient evidence".
It was contended on behalf of the
Respondents, that inasmuch as the provisions of
Rule 42
did
not apply to the present facts, Applicants ought to have relied on
the provisions of the mentioned section. On behalf of Applicants
it
was contended that these provisions were simply irrelevant to these
proceedings. In
Ward and Another v Smit and Others: In re Gurr v
Zambia Airways Corporation Ltd
1998 (3) SA 175
(SCA) at 180E to
F,
the following was held: "The language of the section is wide
enough to afford the Court a discretion to set aside a winding-up
both on the basis that ought not to have been granted at all and on
the basis that it falls to be set aside by reason of subsequent
events... In the case of the former, the onus on an Applicant is that
generally speaking the order will be set aside only in exceptional
circumstances". In my view, it is correct to say that s. 354 is
the legislated basis to rescind winding-up orders, and that
this
would include orders that were allegedly erroneously sought or
granted. Applicants did not bring the rescission application
with
reference to this section, and on behalf of the Respondents it was
contended that this was fatal to the rescission application.
[15] It is
clear from the allegations made in the Founding Affidavit that
Applicants rely both
on procedural deficiencies at the time of the
hearing of the liquidation application, relating to non-service of
the application
and/or notice thereof, and on allegations that the
debt relied upon was in issue. On the facts of this case, I am
therefore in
agreement with Counsel for the Respondents that the
provisions of s. 354 are of application. The Court has a discretion
in that
regard and needs to take into account all surrounding
circumstances and the wishes of parties that have an interest in the
subject
matter. On the facts of this case it is clear that all West
Dawn's creditors remain unpaid and the liquidators' fees remain
unpaid.
It must be clear that I am not re-hearing the winding-up
proceedings, nor sitting in appeal upon the merits of the judgment in
respect of those proceedings. Applicants have not relied on these
provisions, and have certainly not laid facts before me on the
basis
thereof that show that the order ought not to have been granted
either at all, or on the basis that it falls to be set aside
by
reason of subsequent events. Exceptional circumstances have also not
been shown.
[16]
Viewing the matter holistically and exercising my discretion in any
event in the light
of the above, the following order is made:
1.
The
application is dismissed with costs, including the costs of two
Counsel where so employed;
2.
The
cost order includes the costs of the proceedings before Neukircher J
on 5 July 2019.
JUDGE H.J FABRICIUS
JUDGE OF THE HIGH COURT GAUTENG
DIVISION, PRETORIA
Case
number: 40723/2018
Counsel for the Applicants:
Adv P. Lauw SC
Instructed by: BOK Attorneys
Counsel
for the 5
th
& 6
th
Respondents:
Adv C. Erasmus SC
Adv J. Klepper
Instructed by: Cavanagh &
Richards Attorneys
Counsel
for the 7
th
Respondent:
Adv N. J. Graves SC
Adv J. Brewer
Instructed by: Mervyn Taback
Incorporated
Date
of Hearing: 31 July 20192018
Date
of Judgment: 12 August 2019 at 10:00