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[2017] ZAGPPHC 350
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Strocam Projects (Pty) Ltd v Management Information Technology (Pty) Ltd t/a Ivor Lee and Associates (35757/12) [2017] ZAGPPHC 350 (30 March 2017)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION,
PRETORIA
DATE:
30/3/2017
CASE
NO: 35757/12
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED:
30/3/2017
In
the matter between:
STROCAM
PROJECTS (PTY)
LTD
Applicant
(In
the application for leave to appeal)
and
MANAGEMENT
INFORMATION TECHNOLOGY (PTY)
LTD
Respondent
t/a
IVOR LEE & ASSOCIATES
(In
the application for leave to appeal)
JUDGMENT:
Application for Leave to Appeal
AC
SASSON, J
[1]
This is an
application for leave to appeal against this court's judgment on the
following grounds: (i)This court erred in declining
to exercise its
discretion in terms of section 133(1)(b) of the Companies Act
[1]
(and to grant default judgment in favour of the applicant). (ii)
Lis
pendens:
This
court should have found that the business rescue proceedings
suspended the liquidation and action proceedings. (iii) The action
is
not ready to be adjudicated.
Business rescue:
Section 133 of the Companies Act
[2]
Section 133 of the Companies Act reads as follows:
"(1) During business
rescue proceedings, no legal proceeding, including enforcement
action, against the company, or in relation
to any property belonging
to the company, or lawfully in its possession, may be commenced or
proceeded with in any forum, except
-
(a)
with the written consent of the practitioner;
(b)
with the leave of the court and in accordance with any terms the
court considers suitable...
"
[3]
In brief it was submitted that this court should have declined to
exercise its discretion afforded in terms of section 133(1)(b)
of the
Companies Act, in the absence of a substantive application from the
respondent and that the court should have considered
suitable terms
as required by the said subsection.
[4]
The applicant decided not to make any submissions in respect of the
merits or demerits of the hearing of the trial as it is
of the view
that the trial should not have proceeded on 15 November 2016. (I will
return to this aspect herein below).
[5]
Before dealing with the merits of the application for leave to appeal
it is necessary to briefly refer to the background facts:
The action
was instituted in 2012 for the recovery and recoupment of the amount
of R 4 873 359.50 which the applicant denies being
correct and liable
to pay.
[6]
On the first trial date, during 2014, the matter was postponed with
a costs order against the applicant as a result
of its
legal representatives having withdrawn on that date.
[7]
On the second trial date, during March 2016, the business rescue
practitioner filed a notice in terms of section 141(2)(b) of
the
Companies Act to the effect that the applicant was no longer in
financial distress. This had the effect of ending the
business
rescue. The applicant then alleged that it was not
ready to proceed to trial as a result of the
fact that no
pre-trials had taken place. Once again the trial
was postponed and the applicant was ordered
to pay the costs.
[8]
On the third trial date, being 15 November 2016, the applicant
submitted that the matter could not proceed to trial as
business rescue proceedings against the applicant
had (again) commenced on 27 October 2016.
Business
rescue proceedings
[9]
It is important to point out that, despite the fact that business
rescue proceedings had commenced, counsel on behalf
of the
applicant conveyed to the court that the applicant admitted liability
and was prepared to offer an amount in
settlement
together with legal costs which would be paid
before 31 January 2017, irrespective
of whether the application
for business rescue proceedings would be adjudicated on
10 January 2017.
It is further
important to point out that the applicant did not seek a
postponement of the trial.
[10]
Counsel on behalf of the respondent sought leave from the court
that the trial be finalised
on
the basis that it would prove a
claim against the company under
business rescue. It was
submitted that the leave was not asked on the basis that any claim
that could be proved was to be enforced
against the company whilst in
business rescue.
[11]
Counsel on behalf of the respondent further conveyed to the court
that his client was not aware of business rescue proceedings
and that
had it been aware, it would have approached the court with a
substantive application. In the alternative, it was submitted
that,
in any event, it is not a procedural requirement that a substantive
application for leave to proceed, with legal proceedings
(that have
already begun), should be brought. The applicant, however, insisted
that the attorneys on behalf of the respondent were
well aware of the
fact that business rescue proceedings had been launched. In support
thereof the applicant attached an affidavit
confirming this to the
application for leave to appeal.
[12]
In essence, it was submitted on behalf of the applicant, that by
virtue of the fact that business rescue had commenced on 27
of
October 2016, the general moratorium which grants companies
protection against legal action on claims in general, came into
operation.
[13]
Section 133
of the Companies Act does not prescribe a
substantive application as a prerequisite to
obtain the leave
of the court to proceed with legal proceedings, despite
the fact that business rescue proceedings
had commenced. In this
regard the court in
Safari
Thatching Lowveld
CC
v Misty
Mountain Trading 2 (Pty) Ltd
[2]
held as follows and I have taken the liberty of quoting at
lenth from the
judgment:
"[18] Section
133(1
)(b)
however provides that, during business rescue
proceedings, legal proceedings against the company may be 'commenced
or proceeded
with' with the leave of the court 'and in accordance
with any terms the court considers suitable'.
[19] In
Elias
Mechanicos Building
&
Civil Engineering Contractors (Pty)
Ltd v Stedone Developments (Pty) Ltd and Others
2015 (4) SA 485
(KZD) it was found that the moratorium on legal
proceedings against a company has the result that
leave to institute proceedings must be obtained by way of separate
proceedings before the commencement of proceedings and
not
(even) as part of relief in the main proceedings.
[20] A contrary
position was taken in
African Bank Corporation of
Botswana Ltd v Kariba Furniture Manufacturers (Pty) Ltd and
Others
2013 (6) SA 471 (GNP) ([2013] ZAGPPHC 259),
where the requisite leave to commence proceedings was granted
as part
of the relief claimed in the main proceedings.
[21] Whilst s
133(1) clearly prescribes substantial rights and consequences
pertaining to the 'general moratorium
on legal proceedings'
against companies in circumstances like those of the
respondent, no procedural requirements are
laid down regarding the
obtaining of the leave of the court.
[22] The
requirement for the obtaining of the leave of the court (for example,
by way of a separate application) prior
to the
commencement of legal proceedings against a company
whilst business rescue proceedings
are pending (as
found in the
Elias Mechanicos
matter) is readily
understandable and accords with the wording of the section. The
judge in the aforesaid matter
reasoned in this regard as
follows:
'[11]
The construction which the applicant
seeks to place on s
133(1
)(b)
is
that the proceeding may be commenced without the
leave of the court and that leave to do so may
be sought
as part of the relief in the main application. This is
inconsistent with the wording of the section.
It will also
defeat one of the purposes of the moratorium, which
is to give the company and the business rescue
practitioner space and
time to deal with the rescue of the company without having to deal
with litigation by creditors.
The
practitioner will in each
such proceeding have to deal not only
with the application for
the court's leave in terms of s 133(1
)(b),
but
also with the merits of the claim, because it is all part of
one application.'
[23] To my
mind, and with respect to the learned judge, the position is
fundamentally different when proceedings have
already been commenced
and predate the commencement of the business rescue proceedings. The
same considerations applicable to the
requirement of obtaining the
leave of the court prior to the commencement of
legal proceedings would
often be
substantially different from those applicable to the requirement of
obtaining leave to continue with legal
proceedings which had
already commenced. Although numerous permutations might arise, an
illustrative example is the following -
say, for instance, a trial
had commenced, and after the many months that it customarily takes to
exchange pleadings, make discovery,
deliver expert notices, apply for
and obtain a trial date and have a matter set down have expired and
taken place, and say, for
example, further, the trial is on its
third, fourth or fifth day of evidence, or even if evidence had been
concluded and during
argument, a director of the
defendant company then suddenly 'commences' business
rescue proceedings. Although
the substantive law imposed by s 133(1)
suspends the legal proceedings, it would be contrary to the
administration of justice to
require the trial to be postponed as a
part-heard matter and to impose on the plaintiffs therein the
obligation to launch a substantive
application (possibly even on a
different roll of the court) to obtain leave (from the same or a
different judge) to continue with
the trial. Both practicalities and
the considerations contemplated in the Act clearly suggest that the
trial court seized with
the previously commenced legal proceedings
would be in a position to consider the granting of the requisite
leave to proceed with
the trial or not. This would particularly be so
where the applicant in such fresh business rescue proceedings would
be a party
to the action before that court.
[24] To bring the
example closer to the present application, say, that the trial
referred to in my example was one where an
application for winding-up
launched by one of the directors of the company had been referred to
trial. To read into the Act that
the consequences of the requirement
for leave of the court contemplated in s 133(1
)(b)
were that
the trial had to be 'halted' (to use a word used in the
Elias
Mechanicos
judgment) so that the one director can launch a
substantive separate application to obtain the leave of the court to
continue with
a pending trial, where a moratorium had been imposed by
his co director simply by the filing of an application
commencing
business rescue proceedings, may not only lead to
absurdity, but might notionally unduly infringe the first-mentioned
director's
constitutional right of access to court contemplated in s
34 of the Constitution."
[14]
I am in agreement with the approach take in the
Safari-
matter.
In the present matter I am likewise of the view that it would result
in an absurdity and unduly
infringe
upon the respondent's right of access to court to halt the present
proceeding, to allow the respondent to bring a separate
substantial
application for leave to continue with proceedings that have already
commenced. I have also, in excersing discretion,
taken into account
that the action against the applicant had already been instituted as
far back as 2012 and that the proceedings
have already been postponed
on two previous occassions. Further I have taken into account that
counsel on behalf of the applicant,
had admitted liability and that
the applicant was prepared to offer an amount in settlement together
with lelgal costs which would
be paid before 31 January 2017,
irrespective whether the application for business rescue proceedings
would be adjudicated on 10
January 2017.
[15]
In light of the above I am therefore not persuaded that the applicant
has a reasonable prospect of success on appeal in respect
of this
ground.
Lis
Pendens
[16]
The applicant submitted that the fact that liquidation proceedings
have been instituted by the
respondent (under a different
case number) on 11
October 2010, meant
that there is a pending
lis
between the parties and that the
trail could therefore not have proceeded..
[17]
On behalf
of the respondent it was submitted that no special plea of
lis
pendens
had
been raised in the pleadings and the respondent furthermore submitted
that this court is not entitled to raise the issue of
lis
pendens mero motu
-
it has to
be pleaded by the defendant. See
Kerbel
v Kerbel:
[3]
"Therefore, with
great respect to the learned Judge, I cannot go along with the
suggestion that the Court has inherent power
or as he puts it, an
inherent discretion, to prevent
'inter alia
a multiplicity of
actions'. It is always open to the parties themselves to decide
whether the multiplicity is desirable or
not and when they or one of
them should take the necessary steps to put an end to one or other of
the actions on the basis of
lis
alibi
pendens
then it is their prerogative to apply to Court to do so. The
Court adjudicates on that exception along certain principles but
based
on all the facts which the parties (both of
them) then put before the Court. The history of the exception
of
lis alibi pendens
shows that it is
exactly that, namely an exception ; not one that the Court
mero
motu
takes. But that is really the effect of saying in this
context that the Courts have an inherent discretion to prevent
multiplicity
of actions, namely that this exceptio can be taken by
the Court
mero motu."
[18]
Furthermore, it is trite that, as one of the requisites
of a plea of
lis pendens,
the pending
proceedings must be based on the same cause of action. This is
not the case in the present proceedings: The
cause of
action in an appli cation for liquidation is
not to determine liability as is the case in
an action. Furthermore,
the application for liquidation could not be proceeded
with as there was a dispute regarding
the applicant's
liability. Once liability is esta blished (by way of action) the
application for liquidation
may be proceeded
with. Moreover, there exists no legal basis in law
or in fact, why
an application for
liquidation cannot pend, whilst awaiting the outcome of
an action to establish the relevant
indebtedness.
[19]
In light of the above, I am therefore not persuaded that the
applicant has a reasonable prospect of success on
appeal
in respect of this ground.
The
action is not ready to be adjudicated
[20]
According to the applicant, the respondent did not comply with its
notice dated 4 July 2016, to discover important documents
which had a
direct bearing on the merits and the quantum, as well as the
determination of the quantum contained in the summons,
which
documents would have been the subject of cross-examination during a
trial. These documents are, according to the applicant,
important in
light of the fraud alleged against the respondent in the applicant's
plea of defence, with regard to the listing of
ghost employees.
In this regard it was submitted that the court ought to have afforded
the applicant the opportunity to issue
an application to compel the
respondent to comply with Rule 35(3), alternatively
that the court had the inherent
power and should have ordered the
respondent to comply with the rules
mero motu
in
accordance with any terms that the court considered suitable.
[21]
The respondent denied that it is alleged in the
plea that the respondent had listed ghost employees
in
its claims or invoices and pointed out that what is alleged in
paragraph 7 of the plea is that - "The plaintiff attempted
to mislead the defendant by submitting fictitious
claims".
[22]
The respondent, however, conceded that it
should have replied to the notice in terms
of
Rule 35(3) but submitted that its failure to do so, is, in the
context of the applicant's conduct, of no consequence
for
the following reasons: (i) Despite the applicant's objections
regarding the respondent's failure to
respond
to the Rule 35(3) notice, the applicant had adequate
information to be able to admit liability
on record (as
it did) and to submit an offer to settle the claim;
(ii) Respondent's counsel was only informed
on the morning of the
trial of the allegation that the respondent had
allegedly loaded ghost employees
on its system. (iii) The
applicant did not avail itself of an
application to compel compliance with Rule
35(3). (iv)
The applicant furthermore also did not avail itself of the
opportunity to address the issues referred to
in the Rule 35(3)
notice at the pre-trials. In fact, according to the respondent,
the applicant
failed
to attend the
pre-trial conferences.
(v)
Despite the fact that the matter was set down for 15 November 2016,
the applicant at no stage informed
the respondent
that it was unable to proceed to trial as
a result of the
respondent's failure
to comply with Rule 35(3).
(vi)
The applicant did not seek a postponement of the trial on the morning
of
15
November 2016 but merely raised the fact that the matter could not
proceed as a result of the moratorium afforded to it in terms
of
section 133(1) of the Companies Act. (vii) Lastly, when the court
granted leave for the matter to proceed, the applicant and
its legal
representatives merely withdrew from the proceedings and wilfully
excused themselves without moving for a postponement
or to withdraw
as legal representatives of the applicant.
[23]
In light of the above, I am
therefore not persuaded that the applicant
has a
reasonable prospect of success on appeal in respect of
this ground.
Order
The
application for leave to appeal is dismissed with costs.
_____________________
AC
SASSON
JUDGE
OF THE HIGH COURT
Appearances:
For
the applicant
: Adv FAG Swart
Instructed
by
: Jan Kriel Attorneys
For
the respondent
: Adv F Arnoldi SC
Instructed
by
: Barnard & Patel Incorporated
[1]
Act 71 of 2008.
[2]
2016 (3) SA 209
(GP).
[3]
1987 (1) SA 562
(W) at 566G -1.