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[2019] ZANCHC 7
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Hitachi Construction Machinery Southern Africa Co (Pty) Ltd v Botes and Another (205/2018) [2019] ZANCHC 7 (15 March 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTHERN
CAPE HIGH COURT, KIMBERLEY)
CASE
NO.: 205/2018
Date
heard: 22-06-2018
Date
delivered: 15-03-2019
In
the matter between:
Hitachi Construction
Machinery
Applicant
Southern Africa CO
(PTY) LTD
And
Wiets
Jacobus
Botes
1
st
Respondent
Martin
Van
Zyl
2
nd
Respondent
CORAM:
WILLIAMS J:
JUDGMENT
WILLIAMS
J:
1.
On
27 March 2014, the applicant, Hitachi Construction Machinery Southern
Africa CO (Pty) LTD and Blue Chip Mining and Drilling (Pty)
Ltd (Blue
Chip) concluded an agreement (the agreement) in terms of which Blue
Chip leased certain mining machinery from the applicant.
2.
Pursuant
to the agreement, the first and second respondents, Messrs WJ Botes
and M Van Zyl, directors of Blue Chip, concluded a
deed of suretyship
in terms of which they stood as co-sureties and co-principal debtors
with Blue Chip for all amounts owing by
Blue Chip to the applicant.
3.
Blue
Chip was placed under business rescue in terms of the provisions of
Chapter 6 of the Companies Act, No 71 of 2008, (the Act)
on 10
December 2014. Thereafter and on or about 5 February 2015 the
applicant lodged a claim with the appointed business
rescue
practitioners (BRPs) in the amount of R6 526 729, 58 in
respect of pre-business rescue debt. This amount
was
acknowledged and admitted by the BRPs as owing by Blue Chip to the
applicant.
4.
The
applicant alleges that after the commencement of business rescue
proceedings, Blue Chip remained in possession and continued
to
utilise the machinery of the applicant and as such its indebtedness
to the applicant continued to accumulate up to about 31
March 2015,
when the machinery was returned to the applicant. Accordingly
Blue Chip incurred a further debt owing to the
applicant in respect
of post-commencement finances in the amount of R1 264 154.55
5.
Pursuant to the adoption of the business rescue plan, which was
approved by the applicant, the
BRPs paid two dividends to the
applicant in the amounts of R977 954, 98 and R423 135, 37
(totalling R1 404 090,
35) in respect of the pre-business
rescue debt, leaving a balance outstanding in terms of the agreement
in the amount of R5 125 639,
23.
6.
The
post-commencement financing claim was settled through payment of
R841 775,90 consisting of a credit note issued in the
amount of
R241 778,90 and a payment by the BRPs in the amount of R600
00,00, leaving a balance of R422 375.65.
7.
The
applicant now on the strength of the deed of suretyship, claims the
balance of the pre-business rescue debt from the respondents
in the
amount of R5 125 639,23 together with interest thereon, as
well as the balance of R422 375, 66 in respect
of
post-commencement financing together with interest thereon plus the
costs of the application.
8.
The
respondents oppose the application on two main grounds. Firstly
it is contended that once the business rescue plan was
adopted the
applicant lost the right to claim any further amounts from the
respondents. Secondly, they place the quantification
of the
indebtedness in dispute.
The liability of
sureties after a business rescue plan has been adopted
.
9.
In
this regard, Mr Hoffman, who appeared for the applicant relied
heavily on the Supreme Court of Appeal judgment in
New
Port
Finance Co (Pty) Ltd and Another v Nedbank Ltd
2016 (5) SA 503
(SCA),
where on a similar set of facts the court held that the adoption of a
business rescue plan would not release a surety where
the deed of
suretyship contained a clause entitling the creditor to accept a
dividend in the business rescue and to recover the
balance from the
surety.
The argument by Mr Theron
SC for the respondents, is that upon a reading of the business rescue
plan and deed of suretyship
in casu
, it is clearly
distinguishable from the position in
New Port
and that in any
event the remarks made by Wallis JA in
New Port
are obiter.
10.
It
is imperative therefore to examine the relevant portions of these
documents.
10.1 In the
business rescue plan paragraph 7.2.5 thereof applies, which reads as
follows:
“
The BRPs are of
the view that the controlled winding down of the company’s
affairs and the successful finalisation of Proceedings
will only be
achieved
upon
adoption of this Business Rescue Plan in terms of which the Company
will be released from payment of some of its debts.”
(own underlining)
10.2 Of
significance in the deed of suretyship is the following clause:
“
It is agreed
and declared that all admissions and acknowledgements of Indebtedness
by the Debtor shall be binding on us; that the
Creditor shall be at
liberty, without affecting the rights of the Creditor hereunder to
release securities and to give time to
or compound or make any other
arrangements with the Debtor or other person or persons, company or
companies aforesaid without reference
to or approval of us, and that
in the event of liquidation, judicial management, insolvency or
compromise, no such liquidation,
judicial management, insolvency or
compromise and no dividend/s or payment/s which the Creditor may
receive from the Debtor or
any other person or persons, company or
companies, or from us shall prejudice the rights of the Creditor to
recover from us to
the full extent of this Suretyship any sum which
after the receipt of such dividend/s or payment/s may remain owing by
the Debtor.”
11.
Mr
Theron argues thus, that since the implementation of the business
rescue plan had released Blue Chip from its debt to the applicant,
there is nothing due and owing anymore by Blue Chip to the applicant
and the applicant has lost the right to claim any further
amounts
from Blue Chip. He referred to sec154 of the Act which deals
with the discharge of debts and claims and which reads
as follows:
“
154 (1) A
business rescue plan may provide that, if it is implemented in
accordance with its terms and conditions, a creditor
who has acceded
to the discharge of the whole or part of a debt owing to that
creditor will lose the right to enforce the relevant
debt or part of
it.
(2)
If a business rescue plan has been approved and implemented in
accordance with this Chapter, a creditor
is not entitled to enforce
any debt owed by the company immediately before the beginning of the
business rescue process, except
to the extent provided for in the
business rescue plan.”
12.
The
argument continues that since nothing remains owing by the debtor
Blue Chip, the deed of suretyship does not assist the applicant
since
it entitles it only to go after the sureties (respondents) for “
any
sum which after the receipt of such dividend/s or payment/s may
remain
owing
by the Debtor.”
(Own underlining)
13.
It
is not in dispute that the business rescue plan released Blue Chip
from its debt to the applicant, but does this mean that the
debt has
been extinguished? Sec 154 of the Act has been said in
New
Port
to
be “
capable
of the construction that it deals only with the ability to sue the
principal debtor and not with the existence of the debt
itself.
If that is the case then the liability of the surety would be
unaffected by the business rescue, unless the plan
itself made
specific provision for the situation of sureties.” (
at
paragraph 14 thereof)
14.
The
business rescue plan makes no provision for the position of
sureties. Therefore on the construction given to sec 154 in
New
Port
,
the liability of the sureties is in my view preserved. And
while the debt may not be enforceable against Blue Chip, it does
not
detract from the obligation of the sureties to pay in the
circumstances of this case. The argument by Mr Theron that
since no amount remains owing by Blue Chip, the respondents are not
liable in terms of the deed of suretyship would render the
terms of
the deed of suretyship nonsensical and militates against the very
reason for a creditor obtaining security against the
indebtedness of
a debtor i.e. to mitigate the risk of the debtor being unable to
fulfull its obligations due to
inter
alia
business rescue.
15.
Paragraph
12 of the
New
Port
judgment applies squarely to the situation at hand, wherein Wallis JA
held that:
“
Of
necessity therefore it had to be argued that the liquidation of
Wedgewood and Danger Point had altered the situation. But that
only
brought clause six into sharper focus. It identified four broad
situations when its terms would apply. They were liquidation,
judicial management under the
Companies Act 61 of
>
1973,
the submission of an offer of compromise by the debtor and the
submission of a scheme of arrangement by the debtor.
If
any of those events occurred, clause six entitled Nedbank to accept
any dividend on account or any alternative securities arising
out of
that event and ‘to recover from the surety, to the full extent
of this suretyship’ any sums remaining owing
thereafter. In
other words, the fact that in any of those situations the principal
debtor would be released in whole or in part
from its obligations
would not disentitle the bank from recovering the outstanding amount
from the sureties.
Neither suggestion by counsel as to ways in which this could be
avoided held water. In particular
the
suggestion that a clause in these terms did not encompass business
rescue
–
an
institution that did not exist under that name when the deeds were
executed –
was
incorrect
.
(Own highlighting)
16.
Mr
Theron’s argument, that the pronouncements in
New
Port
relating to the liability of sureties after a business rescue plan,
are obiter, may be so in the sense that the issues in
New
Por
t
were decided on a different ground. It can however not be said
that these are only passing remarks, since the SCA had heard
full
argument on the business rescue point and had found the issues to be
of such importance that it was appropriate to state why
the business
rescue defence would not have availed the appellants in that matter.
I would be slow to ignore these findings.
17.
That
being said, the defence raised by the respondents, that the business
rescue plan released them from their indebtedness to the
applicant,
is unsustainable.
The
quantification of the claims
18. In
support of the quantum of its claims the applicant has annexed, in
respect of the pre-business rescue debt,
the claim form submitted to
the BRPs. The post-business rescue debt is supported by
invoices and payments received by and
credits given to the BRPs.
In respect of the total of the pre – and post- business debts a
certificate issued by the
applicant’s auditors Ernst &
Young is annexed.
In addition the applicant
contends that the acknowledgment and admission of these debts by the
BRPs constitute an admission and
acknowledgement of the indebtedness
by Blue Chip to the applicant which is binding on the respondents.
In this regard reference
is made to the deed of suretyship which
provides that “
all admissions and acknowledgments of
indebtedness by the Debtor shall be binding upon us. . .”
19.
The
respondents attack the quantification of the claims on three main
bases. Firstly, that the document Annexure “C07”
is
in its own terms not a certificate. Secondly that the BRPs
merely perform a statutory function in terms of sec 145(5)
of the
Act, by including the applicants claim in the schedule of creditors
and do not act in any other capacity or on behalf of
Blue Chip and
therefore an admission by the BRPs of Blue Chip’s indebtedness
is not an admission by Blue Chip. Thirdly that
the applicant failed
to supply any primary facts to support their post-business rescue
claim when challenged to prove the actual
hours worked by the
machines, and the fact that an invoice was included for a machine
which did not form part of the schedule to
the agreement between Blue
Chip and the applicant.
20.
I
deal with the powers and functions of the BRPs first since in my
view, my finding in this regard is dispositive of the quantification
defences. Sec 145 of the Act deals with the participation by
creditors in the business rescue proceedings. Sec 145(5)
specifically
relates to the determination by the BRPs of the
independence of a creditor and to the determination, or appraisal and
valuation
of a concurrent creditor’s voting interest.
Besides the fact that sec 145 has nothing to do with the
disputes
herein, these are not the only functions of the BRPs.
Chapter 6 of the Act abounds with functions of the BRPs in business
rescue proceedings. What is relevant
in
casu
is
sec 140(1) (a) of the Act which states that:
“
(1)
During a company’s business rescue proceedings, the practioner,
in addition to any other powers and
duties set out in this chapter-
(a)
Has
full management control of the company in substitution for its board
and pre-existing management.”
21.
The
BRPs therefore step into the shoes, as it were, of the company in
business rescue. They are not merely a postbox for the
receipt
of claims as seems to be suggested by the respondents. In fact
the business rescue plan, at paragraph 3.6 thereof,
states that the
BRPs assumed management control of the company in conjunction with
the board of directors and pre-existing executive
management.
The claims were reviewed in detail as in obvious from paragraph 5.2
of the Final Report to Creditors dated 2
December 2016. I may
just repeat at this stage that the respondents are both directors of
Blue Chip as well as members of
the executive management and it would
be surprising if they did not participate and assist in the
verification of the claims submitted
by the creditors and which they
now dispute.
Mr Hoffman is correct
when he argues that the admission and acknowledgment of indebtedness
by the BRPs constitute an admission and
acknowledgment by Blue Chip
which, in terms of the deed of suretyship, is binding on the
respondents. This effectively puts
an end to the quantification
defences.
22.
It
follows that the applicant is successful in this application and
there is no reason why costs should not follow the result.
The
following orders are made:
a)
The
application succeeds.
b)
Orders
are granted in terms of paragraph 1 and all its sub- paragraphs and
paragraph 2 of the Notice of Motion.
CC
WILLIAMS
JUDGE
For
Applicant:
Adv J M
Hoffman
Cliffe Decker Hofmeyer
Inc
c/o Duncan & Rothman
Attorneys
For
Respondents:
Adv E L Theron SC
Louw & Da Silva
Attorneys
c/o Engelsman Magabane
inc