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[2017] ZAFSHC 53
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Van Jaarsveld NO v Q-Civils (Pty) Ltd and Another (675/2017) [2017] ZAFSHC 53 (30 March 2017)
I
N
THE
H
I
GH
COURT
OF
SO
U
TH
AFRICA,
FREE
STATE
D
I
VISION,BLOEMFONTEIN
Case
No.: 675/2017
In
the matter between:
DANleL
THEODORUS VAN JAARSVELD
NO.
Applicant
and
Q-C
I
VI
L
S (PTY)
LTD
[in
business
rescue]
1
st
Respondent
THE
COMMISSIONER
OF THE
COMPAN
I
ES
AND
I
NTELLECTUAL
PROPERTY
COMMISSION
2
nd
Respondent
HEARD
ON:
16 MARCH 2017
JUDGMENT
BY:
MBHELE, J
DE
L
I
VERED
ON:
30
MARCH 2017
INTRODUCTION
AND
BACKGROUND
[1]
This is an application for liquidation against the first respondent
brought in terms of Section 141 of the Companies Act 71
of 2008 (The
Act).
[2]
The application is opposed by the first Respondent. The opposing
affidavit deposed to by O. Fortune (Omar) has been filed in
support
of the first Respondent's opposition of the application.
[3]
Omar is the sole ·director and Chief Executive Officer of the
first Respondent.
[4]
The application was set down for hearing on an urgent roll on 14
February 2017 where it was postponed as per agreement between
the
parties to afford the first respondent an opportunity to file its
opposing papers.
[5]
On 13 February 2017 the applicant filed a Rule 7 notice objecting to
the authority of Marius Van Zyl Incorporated to act on
behalf of the
First Respondent.
[6]
On the 15 February 2017 the first respondent filed a resolution taken
on 10 February by the sole director of the first respondent
authorising Marius Van Zyl Incorporated to act on its behalf.
[7]
Subsequent to the liquidation application, the first Respondent filed
a conditional application for the removal of the applicant
as a
business rescue Practitioner.
[8]
Further three intervention applications were filed by O Fortune, CPMS
Civil Road Rehabilitation (PTY) LTD and the O & R
Fortune Family
Trust respectively.
[9]
The applicant raised a point
in
limine
challenging the first Respondent's
locus standi in
judicio.
[10]
The parties requested me to adjudicate the point in
limine
separate from the main application.
[11]
I am called upon to determine whether the opposing affidavit of the
first Respondent is properly before me.
[12]
The first Respondent was placed under Business rescue following a
resolution by its sole director, Omar. Applicant was appointed
as a
business rescue Practitioner to investigate the possibility of
rescuing the first Respondent.
CONTENTIONS
BY THE
PARTIES
[13]
Mr. Zietsman, on behalf of the applicant, submits that the Act
precludes Omar from acting on behalf of the first Respondent
without
the authorisation from the applicant. He contends further that
without express authorisation from the applicant in his
capacity as a
business rescue practitioner the action by the first respondent is a
nullity. He contends that the first respondent
has no authority to be
heard by this court.
[14]
Mr. Plaas Van Amstel, on behalf of the first respondent, submits that
the fact that the applicant entered into an agreement
with the first
Respondent to have the matter postponed to give the first respondent
time to file its opposing papers, is an indication
that the applicant
gave permission to the first respondent to oppose this application.
He further contends that the first respondent
is estopped in law from
raising lack of authority when he acquiesced to the actions of the
first respondent. He contends, further,
that the Act does not
preclude the company from defending itself in liquidation
applications. He painstakingly contends that in
the current matter
Omar does not require the approval of the applicant to take action on
behalf of the first respondent in defending
its liquidation.
Applicable
Legal Principles
[15]
Business rescue is a rescue tool provided for a struggling business
which could survive should it be given breathing space.
[16]
Section 128 defines Business rescue as a process aimed at
rehabilitating a company that is financially distressed by providing
for-
(a)
The temporary supervision of the company, and of the management of
its affairs, business
and property;
(b)
a temporary moratorium on the rights of the claimants against the
property or in respect
of the property in its possession and
(c)
the development and implementation, if approved, of a plan to rescue
the company by restructuring its affairs, business , property
, debt
and other liabilities , and equity in a manner that maximises the
likelihood of a company continuing in existence on a solvent
basis
or, if it is not possible, for a company to so continue in existence
, results in a better return for the company and its
shareholders
than would result from the immediate liquidation of the company.
[17]
Section 137 (2) of the Act provides as follows:
'(2)
During a company's business rescue proceedings, each director of the
company:
(a)
Must continue to exercise the functions of director subject to the
authority of the practitioner.
(b)
Has a duty to the company to exercise any management functions within
the company in accordance
with the express instructions or directions
of the practitioner to the extent that it is reasonable to do so.
Section
137 (4)
"If
during a company's business rescue proceedings the board or one or
more directors of the company purports to take any action
on behalf
of the company that requires the approval of the practitioner that
action is void unless approved by the practitioner."
[18]
The business rescue practitioner has wide management powers of the
company bestowed on him by the Act. The directors must in
terms of
the Act exercise their functions and powers with the authority and
direction of the Practitioner.
[19]
Section 140 ( 1) provides that during a company's business rescue
proceedings , the practitioner , in addition to any powers
and duties
set out in the Act has full management control of the company in
substitution for its board and pre-existing management.
APPLICATION
OF THE LEGAL PRINCIPLES
[20]
It is apparent from the aforementioned provisions of the Act that the
intention of the legislature in prescribing the appointment
of a
business rescue practitioner for a company under financial distress
was to give authority to an individual who will provide
an objective
and independent analysis of the financial status of the company. The
directors may exercise their powers as directors
but such powers may
only be exercised with the express authorisation of the business
rescue practitioner. In essence, the business
rescue practitioner
assumes a position of authority over the directors as their actions
are invalid unless authorised by him.
[21]
Business rescue is aimed at limiting the powers of the people who
played a role in plunging the company into the position it
finds
itself in. The legislature gives the directors constricted powers so
as to afford the practitioner enough room to investigate
the
financial position of the company. It can never be business as usual
once the company has been placed under business rescue.
[22]
If there is no reasonable prospect that the company may be rescued,
the practitioner must inform the court, the company and
all affected
persons. The question to ask is who represents the company during
business rescue proceedings. It is clear from section
140 that the
practitioner takes over the supervision, management and oversight of
the company during the business rescue proceedings.
Directors
function at the instance and instruction of the practitioner. It
follows that the practitioner represents the company
during business
rescue. Directors of a company under business rescue are excluded in
the definition of the affected persons in
terms of section 128 of the
Act.
[23]
The Act provides that the practitioner must give express authority
not implied authority. The argument that the applicant
acquiesced to
the actions of the first respondent is without basis. In my view,
Omar requires the authority of the applicant to
act on behalf of the
first respondent. The applicant's point in
limine
must
be confirmed.
The
following order is made.
Order
1.
Applicant's point in
limine
is confirmed
2.
Costs to be costs in liquidation.
__________________
N.M.
MBHELE, J
On
behalf of applicant:
Adv. P Zietsman
SC
assisted
by:
Adv. Van der Merwe
Instructed
by:
Honey Attorneys
Bloemfontein
On
behalf of respondents:
Adv. Plaas Van Amstel SC
Assisted
by:
Adv. Greyling
Instructed
by:
Marius Van Zyl Inc.
Bloemfontein