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[2008] ZASCA 20
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Macru Farming CC v Standard Bank of South Africa Ltd. (64/07) [2008] ZASCA 20 (27 March 2008)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
Case No: 64/07
NOT REPORTABLE
In
the matter between:
MACRU FARMING CC ...
APPELLANT
v
THE
STANDARD BANK OF SOUTH AFRICA LTD ... RESPONDENT
Coram:
Farlam, Van Heerden, Cachalia JJA
Heard:
11 March 2008
Delivered:
27 March 2008
Summary:
Appeal against the grant of a final winding-up order – whether
High Court had failed to investigate the surrounding
circumstances
that applicant had been improperly induced to institute winding-up
proceedings. Held that the facts showed no such
inducement. Appeal
dismissed.
Neutral
citation: This judgment may be referred to as
Macru
Farming CC v Standard Bank of South Africa Ltd
(64/2007)
[2008]
ZASCA 20
(27 March 2008).
JUDGMENT
CACHALIA
JA
[1]
This is an appeal against an order granted by Landman J in the
Mmabatho High Court confirming a provisional order for the
appellant’s
final winding-up.
[2]
The respondent, as the appellant’s creditor, instituted urgent
proceedings on 24 October 2005 to wind-up the appellant.
It based its
application on the appellant’s inability to pay its debts as
contemplated in s 68(c), read with s 69(1)(c) of
the Close
Corporations Act 69 of 1984 (the CC Act). The matter came before
Zwiegelaar AJ, who granted a provisional winding-up
order on 31
October 2005.
[3]
When the matter came before Landman J on 15 December 2005, counsel
for the appellant conceded that the appellant was commercially
insolvent and unable to pay its debts. It nevertheless opposed
confirmation of the rule on the ground that the court should, in
the
exercise of its discretion in terms of s 347(1)
1
of
the Companies Act 61 of 1973, read with s 66 of the CC Act, postpone
the hearing to give it the opportunity to sell its assets
on its own
and use the proceeds of the sale to settle its debts. In effect, what
the respondent contended for was an order entitling
it to liquidate
its assets and to distribute the proceeds thereof amongst its
creditors.
[4]
The court below refused the request for a postponement and confirmed
the provisional order on 23 January 2006. The reasons given
were:
‘
(a)
The two major creditors, the applicant and Agri Feed Operations
Limited, are opposed to the request. They seek confirmation
of the
rule.
(b)
The realisation of the respondent’s immovable and movable
assets is likely to be a complex exercise which will take some
time
to be implemented.
(c)
More importantly, the exercise involving the realisation of those
assets will be executed privately and outside the control
of the
creditors.
(d)
The respondent has attempted to hold an auction on 10 November 2005.
This was in conflict with the provisional liquidation order.
The
respondent’s actions support the proposition that the
realisation of the respondent’s assets should be done under
the
supervision of the Master and in accordance with the procedure
provided for the winding-up of estates.
(e)
There appears to be no prospect of saving the close corporation.
Respondent intends selling the land upon which farming operations
are
conducted as well as its farming implements and equipment.’
[5]
In the light of the appellant’s concession in the court below
that it was commercially insolvent and unable to pay its
debts, it
could not attack these reasons. Instead, leave to appeal was sought
and granted by Zwiegelaar AJ primarily on the ground
that Landman J,
in exercising his discretion to grant the final winding-up order, had
failed to investigate the surrounding circumstances
leading to the
appellant’s liquidation. The appellant contends that, had the
court below done this investigation, it would
have established that
the respondent had been improperly induced to bring the application.
If this contention were correct, it
would follow that by disregarding
such circumstances, the court below had not properly exercised its
discretion when it placed
the appellant under a final winding-up
order. This court would accordingly be at large to substitute its own
discretion for that
of the court below.
[6]
In this court counsel for the appellant had difficulty explaining the
appellant’s reliance on this ground of appeal when
the remedy
it had sought in the court below was a postponement of the
proceedings, not a discharge of the rule. For if the respondent’s
predominant motive or purpose was something other than the bona fide
bringing about of the appellant’s liquidation for its
own sake,
the appropriate remedy to seek would have been that the rule be
discharged.
[7]
Be that as it may, the appellant now relies on the following ‘facts’
to support its contention that the respondent
obtained the winding-up
order improperly:
7.1
The appellant’s former attorney disclosed privileged
information to a liquidator as a result of which rumours regarding
the appellant’s financial affairs circulated, causing the
respondent to call up the overdraft facility;
7.2
the respondent failed to comply with its ‘Code of Banking
Practice’, which required it to take reasonable steps
to
develop a plan to assist the appellant with its financial
difficulties before resorting to liquidation.
[8]
With regard to the first complaint, there is no suggestion on the
papers that the respondent procured any information from the
errant
attorney. Once it is accepted that the appellant had indeed exceeded
its overdraft facility with the respondent on more
than one occasion,
and this is not disputed, the respondent was entitled to call it up.
The fact that there may have been ‘rumours’
circulating
regarding the appellant’s parlous financial situation does not
detract from this entitlement.
[9]
I turn to the second complaint – the respondent’s alleged
failure to comply with its ‘Code of Banking Practice’.
The Code commits the bank to assist its clients to develop a plan to
deal with their financial difficulties, consistent with the
bank’s
interest and its clients. It does not prevent the respondent from
instituting liquidation proceedings. The facts show
that before
instituting winding-up proceedings, the respondent held a meeting
with the appellant on 23 August 2005 to discuss the
latter’s
precarious financial position. The appellant acknowledged its
indebtedness to the respondent and further agreed
to the respondent
perfecting the general notarial bond which it had registered over all
the appellant’s movable property
in 2003. This was done on
25 August 2005.
[10]
On 29 August 2005 the appellant advised the respondent that it wished
to sell some of its movable assets so that it might liquidate
amounts
owed to its creditors. The respondent subsequently advised the
appellant’s attorneys that it was not amenable to
the appellant
alienating any of its assets and also that it intended launching
winding-up proceedings. On 17 October 2005
the respondent learnt
that Agri Feed Operations Limited, the appellant’s other major
creditor, had also launched urgent proceedings
to perfect its
notarial bond.
[11]
Against this background the respondent, on 24 October 2005,
instituted urgent winding-up proceedings, the urgency being created
by the fact that the appellant intended to sell certain of its
assets. Had the impending sale gone ahead and the movable assets
which were the subject matter of the respondent’s notarial bond
been sold, the respondent would have lost its security. In
addition,
the general body of creditors would have been prejudiced. In these
circumstances it would have been irresponsible for
the respondent not
to liquidate the appellant. The appellant’s reliance on the
Code is therefore misplaced.
[12]
In my view the appellant’s attempt to impugn the conduct of the
respondent has no merit. Had the court below given consideration
to
the ‘facts’ referred to in para 7 above, it would
doubtless have come to the same conclusion.
[13]
The appeal is dismissed with costs.
__________________
A
CACHALIA
JUDGE
OF APPEAL
CONCUR:
FARLAM
JA
VAN
HEERDEN JA
1
Section
347(1): ‘The Court may grant or dismiss any application under
section 346, or adjourn the hearing thereof, conditionally
or
unconditionally, or make any interim order or any other order it may
deem just, but the Court shall not refuse to make a winding-up
order
on the ground only that the assets of the company have been
mortgaged to an amount equal to or in excess of those assets
or that
the company has no assets.’