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[2016] ZAFSHC 6
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Stalcor (Pty) Ltd v Kritzinger NO and Others (1841/2012) [2016] ZAFSHC 6 (21 January 2016)
IN THE HIGH COURT
OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 1841/2012
In
the matter between:
STALCOR
(PTY)
LTD
Applicant
(Registration
Number 2006/031549/07)
and
JACOBUS
ELISA KRITZINGER NO
1st Respondent
(In
his capacity as Business Rescue Practitioner
For
TIRADEPROPS 1140 (in Business Rescue –
Registration
Number CK1999/007941/23)
TIRADEPROPS
1140 CC
2nd
Respondent
(Registration
Number CK1999/007941/23)
JAN
JOHANNES BLIGNAUT
3rd Respondent
CORAM:
RAMPAI, J
HEARD
ON:
19 NOVEMBER 2015
JUDGMENT
BY:
RAMPAI, J
DELIVERED
ON:
21 JANUARY 2016
[1]
The applicant applies to have the value of its claim as currently
reflected in the business rescue plan increased, the business
rescue
practitioner directed to investigate certain business affairs of the
financially distressed enterprise and the respondents
directed to pay
the costs on a punitive scale. The respondents resist the grant
of such an order.
[2]
The undisputed facts need to be captured. The applicant
supplied certain goods to the second respondent on credit.
The
second respondent failed to pay the debt. The applicant applied
to have the second respondent liquidated. A provisional
sequestration order was granted on 28 August 2012 by Jordaan J.
He issued the rule
nisi
returnable on 11 October 2012. (vide “anx jmc5”)
[3]
The return date of the rule
nisi
was anticipated to 28 September 2012 by then then sole respondent,
Tiradeprops 1140 CC. On that day I discharged the rule
nisi
on certain conditions as would appear from “anx jmc3”.
The costs relative to the abandoned liquidation proceedings
were, by
consent, awarded to the applicant on the special scale as between
attorney and client. That order applied not only
to the return
proceedings before me but also to the initial proceedings before
Jordaan J.
[4]
Those conditions were not fully met by Tiradeprops. As a result
of the breach, the applicant launched another application
against
Tiradeprops and two others. The application was heard on 22
November 2012 by Kruger J. The matter was settled.
The
first respondent and the second respondent, in other words
Tiradeprops 1140 CC and Jan Johannes Blignaut were directed to pay
the costs of that application on the special scale as between
attorney and client. (vide “anx jmc4”)
[5]
The order I made, “anx jmc3”, paved the way for the
adoption of a resolution by the third respondent whereby the
current
second respondent was placed under business rescue scheme and the
current first respondent was appointed as the business
rescue
practitioner of the second respondent. The business rescue
proceedings effectively commenced on 22 February 2013.
The
first meeting of creditors was held in Bloemfontein on 11 March
2013. After his appointment, the practitioner had various
communiqués with the applicant’s attorney, Mr R C
Christie and the applicant’s directors. At one stage,
on
11 April 2013 to be precise, the practitioner travelled to Germiston
to have an exclusive meeting with the applicant’s
representatives. During that special visit the applicant’s
capital claim of R2 666 482,29 was tabled and discussed.
[6]
The practitioner then convened the second meeting of the second
respondent’s creditors in terms of
section 151
of the
Companies
Act, 71 of 2008
. The meeting was held in Bloemfontein on 21
June 2013. All in all nine creditors attended the meeting.
Among
them was a certain Mr H B Steyn who attended the meeting as the
applicant’s proxy. (vide “anx o3”) During
the
second meeting the creditors were afforded the opportunity of
updating their claims. On behalf of the applicant, Mr Steyn
recorded the applicant’s claim as R2 666 482,00 (vide
“anx o4”). The figure represented the capital
only. The accrued interest and the taxed costs in terms of the
court orders were not included. Besides, there was no
reference
to interest and costs on the ballot paper. (vide “anx o4”)
[7]
The practitioner went ahead during the second meeting to prepare a
business rescue plan. In due course he distributed
the approved
business rescue plan among the creditors. The applicant’s
name was on the distribution list. The
business rescue plan set
out the value of each creditor’s claim. The practitioner
copied the applicant’s attorney
as well as the applicant’s
directors. He received no objection concerning the value of the
applicant’s claim
which was recognised and recorded as
R2 666 482,00. No variation of the business rescue
plan was subsequently requested
by or on behalf of the applicant.
At the creditors second meeting held in Bloemfontein on 21 June 2013
the business rescue
plan was approved by the majority.
[8]
On 28 August 2014, at the very earliest it would appear, interest due
to the applicant by the second respondent was calculated
in
accordance with the two court orders. A composite document
labelled “anx jmc6” was then drawn up. The
total
interest which accrued from the two applications was the sum of
R622 513,65.
[9]
The applicant’s three bills of costs were drawn up and
presented for taxation on 20 March 2013, 23 April 2014 and 9 May
2014. The total sum of the three taxed bills of costs was
R442 594,94 according to “anx jmc7”.
[10]
The real purpose of the current application is to have the
applicant’s claim recorded as R2 66 482,00 increased
by
R1 065 108,62, being interest in the sum of R622 513,68
plus costs in the sum of R442 594,94, to the total
of
R3 731 590,62. The increased portion thereof
represents a ±40% shortfall. The applicants bemoaned
that its recorded and recognised claim had been substantially
understated and that the enormous deficit would have a materially
adverse impact on the real quantum of its claim. For those
reasons the applicant seeks rectification of its understated claim
as
recorded in the business rescue plan by the first respondent, in
other words the business rescue practitioner. This is
the first
relief sought.
[11]
The second respondent, a business corporate enterprise in rescue
proceedings had eight other creditors besides the applicant.
Those creditors and holders of the securities issued by the second
respondent were all parties to the business rescue plan.
These
proceedings were initiated on 12 May 2015. The applicants
caused the current application to be served on them.
Although
there were, in that way, given notice of this application none of
them was cited as a correspondent. I may add that
none of them
chose to enter the arena on the strength of such notice.
[12]
On 12 August 2013 the applicant’s attorney provided the
practitioner with the exact figures of the interest due to the
applicant by the second respondent. The figure was
R425 937,52. At that stage the exact total figure of the
costs
was still unknown. The applicant’s two more bills
had still not been presented for taxation. The attorney
estimated
a provisional figure. He then concluded that the
claim of his client was not correctly calculated and blamed the
practitioner
for the prejudice suffered by the applicant as a result
of the miscalculation (vide “anx o1”).
[13]
On 22 August 2013 the business rescue practitioner replied. He
declined to increase the value of the applicant’s
claim.
He alleged that the interest and costs components of the applicant’s
claim were out of time. He denied
the applicant’s
contention that he was to blame for the applicant’s understated
claim. He asserted that it was
the responsibility of a creditor
to submit proof of a claim to a business rescue practitioner.
[14]
As regards the first relief, the applicant applies for an order
whereby the business rescue plan is amended. The business
rescue plan was finally threshed out and approved in Bloemfontein on
21 June 2013. It concerned the business rescue of the
second
respondent. I deal with the first relief first.
[15]
The issue was whether the applicant had made out a case for the
relief sought. Mr Roux, counsel for the applicant, submitted
that the answer to the question must be in the affirmative. He,
therefore, urged me to find for the applicant. Mr Snellenburg,
counsel for the first and second respondent, differed. So did
Mr Greyling, counsel for the third respondent. They both
submitted that the relief sought was untenable and that the answer to
the question therefore had to be in the negative.
[16]
The applicable portions of
section 145
of the
Companies Act, 71 of
2008
provide:
“
145
Participation by creditors
(1) Each creditor is
entitled to-
(a) notice of each court
proceeding, decision, meeting or other relevant event concerning the
business rescue proceedings;
(b) participate in
any court proceedings arising during the business rescue proceedings;
(c) formally
participate in a company's business rescue proceedings to the extent
provided for in this Chapter; and
(d) informally
participate in those proceedings by making proposals for a business
rescue plan to the practitioner.
(2) In addition to
the rights set out in subsection (1), each creditor has-
(a) the right to
vote to amend, approve or reject a proposed business rescue plan, in
the manner contemplated in
section 152
; and
(b) if the proposed
business rescue plan is rejected, a further right to-
(i)
propose the development of an alternative plan, in the manner
contemplated in
section 153
; or
(ii)
present an offer to acquire the interests of any or all of the other
creditors in the manner contemplated
in
section 153.
[17]
Section 152
of the
Companies Act, 71 of 2008
provides:
“
152
Consideration of business rescue plan
(1)
At a meeting convened in terms of
section 151
, the practitioner must-
(a) introduce the
proposed business plan for consideration by the creditors and, if
applicable, by the shareholders;
(b) inform the
meeting whether the practitioner continues to believe that there is a
reasonable prospect of the company being
rescued;
(c) provide
an opportunity for the employees' representatives to address the
meeting;
(d) invite
discussion, and entertain and conduct a vote, on any motions to-
(i)
amend the proposed plan, in any manner moved and seconded by holders
of creditors' voting interests,
and satisfactory to the practitioner;
or
(ii)
direct the practitioner to adjourn the meeting in order to revise the
plan for further consideration;
and
(e) call for a vote
for preliminary approval of the proposed plan, as amended if
applicable, unless the meeting has first
been adjourned in accordance
with paragraph (d) (ii).
(2)
In a vote called in terms of subsection (1) (e), the proposed
business rescue plan will be approved
on a preliminary basis if-
(a) it was
supported by the holders of more than 75% of the creditors' voting
interests that were voted; and
(b) the votes in
support of the proposed plan included at least 50% of the independent
creditors' voting interests, if any,
that were voted.
(3)
…
(4)
A business rescue plan that has been adopted is binding on the
company, and on each of the creditors
of the company and every holder
of the company's securities, whether or not such a person-
(a) was present at
the meeting;
(b) voted in favour
of adoption of the plan; or
(c) in the
case of creditors, had proven their claims against the company.
(5)
The company, under the direction of the practitioner, must take all
necessary steps to-
(a) attempt to
satisfy any conditions on which the business rescue plan is
contingent; and
(b) implement the
plan as adopted.
(6)
…
(7)
…
(8)
When the business rescue plan has been substantially implemented, the
practitioner must file a notice of the substantial implementation
of
the business rescue plan.”
[18]
The application stands to be adjudicated on the trite principles as
set out in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty)
Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634H.
By
now it is a trite principle that an applicant’s founding
affidavit must contain all the allegations necessary to sustain
the
relief sought in the notice of motion. An applicant is required
to set out all the primary and necessary averments of
his or her case
in the founding affidavit. To this end all the affidavits in
motion proceedings constitute the pleadings
and the evidence.
It is impermissible to make allegations in the replying affidavit
later that were supposed to have been
made in the founding affidavit
earlier.
Transnet
Limited v Rubenstein
2006 (1) SA 591
(SCA) [28],
De
Lange v Presiding Bishop Methodist Church of Southern Africa and
Another
2015 (1) SA 106
(SCA),
Minister
van Wet en Orde v Matshoba
1990 (1) SA 280
(A) at 295, 303 and 305.
[19]
The rule that the necessary and primary facts on which the applicant
relies must appear in the founding affidavit and that
the applicant
will not generally be allowed to materially supplement his cause of
action thinly set out in the founding affidavit
by providing material
supporting facts later in the replying affidavit was applied in this
court in
Ferreira
v Premier: Free State and Others
2000 (1) SA 241
(O).
[20]
In this matter the applicant basically applied to have the existing
business rescue plan varied in order to include the amounts
of
interests and the amounts of costs previously awarded to the
applicant in terms of court orders. Yet the very business
rescue plan was not even attached to the applicant’s papers.
Therefore, I was asked to vary a document that I had not
even seen.
Moreover, the applicant tendered no explanation whatsoever in its
founding affidavit as to why its claim as ultimately
recorded in the
business rescue plan did not include such interest and costs at the
crucial time, being 21 June 2013, when the
creditor’s claims in
the business rescue plan were finally revised or updated and finally
approved. Once approved the
business rescue plan binds every
creditor –
sec 152(4).
[21]
The applicant’s credit director and first deponent, Ms J M
Coppin stated the following in connection with the applicant’s
capital amount recorded as its claim:
“
11.
At that time, the Applicant’s claim was recorded in the sum of
R2 666 482,00 (two million six hundred
sixty six thousand
four hundred eighty two rand). However, that amount constituted
only the capital amount owed and did not
incorporate either the
interest accrued nor the Bill of Costs to which the Applicant is also
entitled, which entitlement arises
from the Court Orders referred to
above.”
[22]
On the second element of its claim, in other words interest, Ms
Coppin commented as follows in the founding affidavit:
“
12.
I attach hereto a calculation (as
JMC6
)
in respect of the interest which has accrued on the capital sum and
such was in accordance with the consent agreed between the
parties
pertaining to the Applicant’s claim. Such consent was
confirmed by an Order of this Honourable Court on both
28 September
2012 and again on 22 November 2012.”
[23]
Now “anx jmc6” was unsigned and undated. I have no
idea as to who its author was. Precisely when interest
was
calculated by the anonymous author did not appear anywhere
ex
facie
the documents itself. Those discrepancies were not explained in
the founding affidavit. The business rescue plan was
finally
adopted by the stakeholders in the estate of the second respondent on
21 June 2013. The applicant could easily have
calculate its
interest up to and including the effective date, being 22 February
2013, on which day the business rescue proceedings
commenced.
At that stage accumulated interest was seemingly R152 179,60
(R752 652,99 – R600 473,04)
(vide p30) plus
R470 334,00 (R2 536 343 – R2 066 009) (vide
p28). The calculation could have been done
in order to update
its claim accordingly at the second meeting of creditors. It
was never done. There was no satisfactory
explanation given as
to why it was not done or before or on that crucial meeting.
[24]
The last transaction captured, according to the annexure, were on 28
August 2014 some 15 months since the second meeting that
was held on
21 June 2013 and well over 21 months since the last court order that
was granted on 22 November 2012. It would,
therefore, appear
that interest was calculated on some unknown date after 28 August
2014. It was unclear as to why the applicant
had waited for so
long for something that could have been done long before the second
meeting of creditors was held. The
annexure showed that since
the 7 November 2013 until 28 August 2014 the applicant received
payments in excess of R505 103
(p28 of the record) and further
payments in excess of R150 873 – vide p30 of the record.
Those 14 payments indicated
that the business rescue practitioner had
been implementing the business rescue plan. I am of the view
that, through the
exercise of reasonable diligence, the applicant’s
interest could and should have been accurately calculated between 22
February
2013 and 21 June 2013. Had the applicant done so the
amount of interest at least would have been included in the business
rescue plan.
[25]
On the third element of its claim, in other words costs, Ms Coppin
commented as follows in the founding affidavit:
“
16.
The total costs which are due to the Applicant in accordance with
various Orders of this Honourable Court arising
out of Taxations
which took place on 20 March 2013, 23 April 2014 and 9 May 2014 in
the sum of R442 594,94 (four hundred forty
two thousand five
hundred ninety four rand ninety four cent) as can be seen from
annexure
JMC7.
”
[26]
Firstly, the applicant presented its first bill of costs on 20 March
2013 for taxation. That bill concerned the initial
stage of the
liquidation proceedings heard by Jordaan J on 28 August 2012 (vide
“anx jmc5”). The costs of those
proceedings were
awarded in favour of the applicant on 28 September 2012. The
applicant presented its first bill on 20 March
2013 about six months
after the grant of the court order that entitled the applicant to
recover such costs from the second respondent
but three months before
the second meeting of creditors during which the business rescue plan
was finally approved. Notwithstanding
its availability, the
applicant’s first taxed bill was not submitted to the
practitioner or its amount used to update the
applicant’s claim
– vide “anx o4” the applicant’s ballot paper
signed on 21 June 2013. It can,
therefore, be seen that the
excuse that the taxation of the bills delayed the quantification of
the costs did not really hold water.
[27]
Secondly, the applicants presented its second bill on 23 April 2014
for taxation. That bill concerned the return date
of the rule
nisi
of the liquidation proceedings over which I presided on 28 September
2012. The costs of those proceedings were awarded in
favour of
the applicant on the same day. The applicant’s bill was
presented and taxed about seven months after the
grant of the court
order that entitled the applicant to recover such costs from the
second respondent and about 11 months after
the final approval of the
business rescue plan. A period of 9 months lapsed between the
grant of the court order and the
approval of the business rescue
plan. During that period the second bill could have been drawn
up, presented and taxed.
[28]
Thirdly, the applicant presented its third bill on 9 May 2014 for
taxation. That bill concerned the proceedings relative
to the
attachment of securities over which Kruger J presided on 21 November
2012. On the same day the costs of those proceedings
were also
awarded in favour of the applicant. The applicant’s bill
was presented and taxed over 17.5 months after the
grant of the
entitling court order and over 11.5 months since the business rescue
plan was finally approved at the second meeting
of creditors during
which all the creditors were afforded the last opportunity of
verifying their claims.
[29]
In the founding affidavit there was no explanation as to why the
second and third bills were not drawn up, presented and taxed
before
the business rescue plan was approved on 21 June 2013. I have
already indicated that the applicant had ample opportunity
of 9 and 7
months in respect of the second and the third bills respectively to
have its costs taxed. However the applicant
took its time to
get its bills taxed. That in my view was a problem.
[30]
The applicant’s second deponent and attorney, Mr R C Christie
replied:
“
8.
At the meeting of 11 April 2013, the First Respondent was supplied
with a copy of the Court Order (I handed such
to him), as well as the
fact that being an Order of Court, the aspects of interest and costs
could not at that stage be calculated.
I personally addressed
the First Respondent on the issue that the Taxation of the Bills of
Costs and that the quantification of
the costs would take place as
soon as it was possible for the Bills to be taxed by the Registrar of
the Court. In the premises,
I dispute and deny the First
Respondent’s version of events specifically regarding knowledge
of the Bills of Costs.”
[31]
The aforesaid explanation constituted a new matter. Apart from
that it was clear that the last two bills had hardly been
drawn up as
at 11 April 2013. There was no explanation given as to why the
costs would not be quantified at that stage, 2.5
months before the
adoption of the business rescue plan. But the real sting in the
tail was that the first bill had already
been drawn up, presented and
taxed before 11 April 2013. Therefore, there was no good reason
why it took such inordinately
long periods to have the other two
bills expeditiously taxed.
[32]
Any suggestion or insinuation that the taxation process was retarded
by the registrar of this division is untenable.
The practice in
this division has always been that an attorney submits a written
request for the allocation of a taxation date.
The relevant
dropbox is emptied thrice a week on Mondays, Wednesdays and Fridays,
The requests are then distributed among three
taxing officials.
They respond to such requests within 2 days after receipt and
allocate a date within 30 days of the reply.
Therefore, the
turn-around period from the date of the receipt of the request to the
date of taxation is, at most, five weeks.
[33]
The belated allegation of the second deponent that the applicant had
to wait its turn to tax its costs was a hollow point.
There was
no substance in that excuse. There was no patent error
communicated by the first respondent in the recording of
the
applicant’s claim or in the adoption of the business rescue
plan. It has to be stressed that the applicant through
a proxy
participated in the final approval process he raised no objection
that voting was based on incorrect values. The
fact of the
matter was that he was mandated to record the applicant’s claim
as he did – “anx o4”).
He was an attorney.
He was simply not briefed about the outstanding and still to be
quantified elements of the applicant’s
claim.
[34]
The applicant’s first and even second deponent did not given
any material facts to substantiate the applicant’s
belated
excuse for the considerable delays in having its bills drawn up,
presented and taxed before the business rescue plan was
finally
approved by the creditors.
[35]
Of course the applicant was entitled to proceed in order to have its
costs taxed. However the applicant was not entitled
to proceed
at a snail’s pace as if the applicant had all the time in the
world. It must be borne in mind that there
were other creditors
who looked up to the business rescue practitioner to expeditiously
execute the business rescue plan so that
their debts could be paid.
Time is money. The applicant’s fellow creditors clearly
wanted the business rescue
plan implemented and the business rescue
proceedings completed without undue delay. The business rescue
practitioner was
aware that the applicant’s claim flowed from
court orders with three elements being capital, interest and costs.
However,
it remained the responsibility of the applicant, as a
creditor, and not the first respondent as the business rescue
practitioner,
to quantify the interest and costs relative to the
applicant’s claim and to incrementally adjust and update its
claim.
The applicant had several opportunities to do just that
but hopelessly failed to do so because it unreasonably assumed or
erroneously
believed it was the practitioner’s duty to prove a
creditor’s claim.
[36]
The approved business rescue plan was subsequently sent to the
directors of the applicant. None of them immediately raised
any
objection. The same plan was also sent to the applicant’s
attorney. He too raised no immediate objection
that the
applicant’s claim had been inadequately recorded in the
business rescue plan. In the replying affidavit the
applicant
accused the business rescue practitioner for the omission of the
interest and costs in the business rescue plan.
He said:
“
23.
Accordingly, first respondent was at fault in not recognising the
capital, interest and cots at that time.”
[37]
The crux of the matter is that the practitioner did not repudiate the
applicant’s claim in respect of interest and costs.
The
undisputed fats showed that the applicant furnished the practitioner
with no details concerning interest and costs notwithstanding
the
considerable passage of time and ample opportunities given to the
applicant. These were material considerations.
The
omission of those two components was, in my view, due to lack of
reasonable diligence coupled with erroneous assumption on
the part of
the applicant.
[38]
The applicant applied for an order: whereby its claim in the estate
of the second respondent and its corresponding voting rights
were
amended to accord with the relevant court orders. Mr Greyling
contended that the applicant’s apparently wished
to get the
blessing of the court to go back in time, to undo what had already
been done, to rescind the business rescue plan and
to restart the
whole rescue process all over again. I share those sentiments.
The practical problem was that the business
rescue plan was approved
some time ago. It has been largely implemented. The
business rescue operation was almost nearing
its natural end at the
time the current application was initiated. That factor is a
material consideration.
[39]
Section 154(2)
of the
Companies Act, no 71 of 2008
reads:
“
(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.”
The
debt owed by the financially distressed enterprise, the second
respondent, existed immediately before the commencement of the
business rescue plan. Its three constituent elements were
capital, interest and costs. It is no one’s fault but the
applicants that its debt was partially provided for in the business
rescue plan. The interest and costs were not provided
for in
the business rescue plan. Because they were excluded, albeit
negligently or inadvertently or deliberately, the applicant
as a
creditor is precluded by the section from enforcing directly or
indirectly those two elements of the original debt.
It was the
applicant’s responsibility to see to it that provision was made
for them in the business rescue plan prior to
its approval and
implementation.
[40]
In the instant matter the business rescue plan was approved by the
stakeholders in the presence of the applicant. There
was no
objection. It was subsequently sent to the applicant.
There was no objection. The applicant’s attorney
was
copied. There was no objection. Almost 8 weeks after the
approval of the business rescue plan the applicant complained
to the
business rescue practitioner that its claim in the business rescue
plan was not correctly calculated because interest and
costs were not
taken into account. The complaint was dated 12 August 2013 –
vide “anx o5”. Ten days
later the business rescue
practitioner dismissed the applicant’s complaint. He
declined to have the business rescue
plan re-opened and revised in
order to increase the applicant’s claim – vide “anx
o2”.
[41]
It will, therefore, readily be appreciated that the dispute between
the applicants and the first respondent was declared on
22 August
2013. No further action was immediately taken by the aggrieved
applicant. That was in keeping with its tendency
to go slow.
The applicant apparently set back and relaxed. The first
respondent carried on to implement the business
rescue plan in the
meantime as finally approved on 1 June 2013. The applicant
received14 payments distributed in accordance
with the business
rescue plan from 7 March 2013 until 28 August 2014 – vide “anx
jmc6”. I guess many more
payments were subsequently made
by the first respondent to the applicant in accordance with the
business rescue plan and the practitioner’s
distribution
scheme. It seemed to me, therefore, that the applicant
notwithstanding its earlier objection later acquiesced
and willingly
participated in the pro-rata distribution made by the first
respondent in accordance with the business rescue plan,
now under
attack. The applicant was not allowed to probate and reprobate
as it did. The first respondent said the applicant
must be
deemed to have waived its interest and costs by omitting to include
them in the ballot paper – vide “anx 04”.
Although I would be reluctant to say that the applicant had waived
its right, I am nonetheless inclined to believe that it can
be fairly
said that the applicant had tacitly abandoned the said portions of
its original claim. “Anx 04” was
the forerunner to
the business rescue plan. The subsequent participation of the
applicant in the implementation phase of
the business rescue plan
tended to strengthen the first respondent’s point.
[42]
On 10 November 2015, some 28.5 months since the final approval of the
business rescue plan and some 25.5 months since the dispute
was
declared, the applicant rushed to court. I pause to make an
obvious comment. The applicant’s conduct in relation
to
this matter was characterised by endless acts of remissness.
This is yet another, example thereof. Worse still none
of the
second respondent’s creditors were cited as co-respondents,
their direct and substantial interest notwithstanding.
That too
was a material omission.
[43]
The mere service of the application, although it constituted proper
notice to them, was not enough. It could not be regarded
as a
proper substitute for citation. Citation is not a mere notice
of intention to go to war. It is a declaration of
war itself.
Once a party is cited as a respondent then the rules of engagement
apply. Such rules do not have their
ordinarily binding force
where, as in this matter, an uncited individual or enterprise with a
direct and substantial interest in
the relief sought is merely given
notice of the application.
[44]
In an application for setting aside of a business rescue plan every
creditor of a company in financial distress has a direct
and
substantial interest in the matter and should, as such, be joined.
Absa
Bank Limited v Naude
(20264/2014)
[2015] ZASCA 97
(1 June 2015). In my view there
was substance in the submission of Mr Snellenburg, which was
supported by Mr Greyling, that
the applicant’s omission was
fatal. The material defect could not be cured by a mere notice
in terms of
section 130
of the
Companies Act, 71 of 2008
given to the
creditors.
[45]
So far I have approached the matter from the angle, obviously
assumed, in favour of the applicant but without deciding the
point,
that it was permissibly on good cause shown, to have a business
rescue plan revised and varied. Having done so, I
have come to
the conclusion that the applicant failed to make out a case in its
founding affidavit as to why the business rescue
plan should be
varied, amended or rectified by supplementing its claim –
Rubenstein
,
supra
.
The replying affidavit contained a whole range of new explanations,
accusations and facts contrary to the rules of engagement
in motion
proceedings. There was hardly any hint of those in the founding
affidavit. Therefore, the matter had to be
decided primarily on
the version of the respondent –
Plascon-Evans
,
supra
.
I am, therefore, inclined to deny the applicant the first relief.
[46]
Now I turn to the second relief, prayer 2 of the notice of motion.
The prayer has its origin from two paragraphs in the
founding
affidavit. Those were paragraphs 18 and 19. The
applicant, so it seemed to me, suspects that before the business
rescue proceedings started the second respondent and third respondent
had committed certain voidable transactions or engaged themselves
in
reckless trading or committed material breach of certain contractual
obligations. Based on that suspicion the applicant
applies for
an order in terms of
section 141(2)(c)
of the
Companies Act, no 71 of
2008
whereby the first respondent as the business rescue practitioner
is directed to investigate the activities of the close corporation
and its member, and to file a report within 6 months with the
registrar – vide paras 18 and 19, founding affidavit.
[47]
The first respondent answered as follows:
“
43.
The provisions of
section 141
is clear. I duly investigated the
affairs of the company. There is no support of the relief, at
least none that I can
comment on without speculating. I am not
called on to speculate and I will refrain from doing so. This
is not an invitation
to the applicant to supplement its papers in its
replying affidavit. It was supposed to make out its case in the
founding
affidavit.”
[48]
The applicant’s second deponent did not specifically deal with
par 43 of the first respondent’s answering affidavit.
In
the replying affidavit the only allegations of the first respondent
that were selectively and pertinently challenged were paras
24 and
27. The former was only partially dealt with. The
applicant’s second deponent denied the allegation of
the first
respondent that no basis was laid down for the second relief.
At paragraph 13 of the replying affidavit he said:
“
As
regards the allegation that no legal basis is laid for the relief
sought, I respectfully submit that the first respondent is
essentially incorrect in his understanding. This application
does not seek a variation after the event, simply to supplement
its
claim with the additional amounts as ordered by this Court. He
was fully aware at all times that the applicant’s
claim
consisted of capital and interest and costs to be taxed.”
[49]
The aforesaid passage represented the high watermark of the legal
basis for the second relief sought. In my view the
applicant
was groping in the dark here. The point was what was the
factual foundation of the relief sought? There was
absolutely
no evidence tendered by the applicant in the founding affidavit or
even in the replying affidavit to substantiate its
prayer for the
second relief. No
facta
probanda
whatsoever appeared anywhere – not in the founding affidavit
and not even in the replying affidavit. I was completely
at a
loss as to what factual matrix gave rise to the applicant’s
belief or suspicion concerning the alleged voidable transactions,
reckless trading and material contractual breaches. Virtually
no particulars, however flimsy, were mentioned about any of
the
alleged suspicious activities committed before the business rescue
proceedings commenced. The reason for the relief was
simply not
given at all, not even belatedly in the replying affidavit let alone
properly in the founding affidavit –
Goldfields
Limited & Others v Montley Rice
,
supra
at para [122].
[50]
I have considered the three sets of affidavits, and the annexures
attached to them, which constituted both the pleadings as
well as
evidence in motion proceedings. There was absolutely no reason
to believe that the proposed investigation would unearth
possible
illegal dealings by the second respondent and third respondent.
The first respondent averred, and the applicant
did not deny, that he
had already investigated the prior activities of the co-respondents.
I understood him to mean that
a second investigation would,
therefore, serve no useful practical purpose.
[51]
In the light of all these material considerations I am satisfied that
it had not been shown that there was cause to be concerned;
that
there is no reason to believe that the applicant’s suspicion
was well founded; that the proposed further investigation
is likely
to reveal any foul play by the suspected respondents and that the
first respondent had not properly complied with his
obligations in
terms of
section 141.
In any event
section 141(2)(c)
does not
countenance the type of relief sought by the applicant. I
would, therefore, also deny the relief.
[52]
In appropriate cases there is a constitutional imperative that a high
court should develop common law. However, before
a judge can
embark upon such an exercise a party calling upon the court to do so
has demonstrate there are
facta
nova
and
lacuna
in existing law. This is important because common law cannot be
developed in a vacuum. Accordingly I decline the invitation
extended to me by the applicants to develop common law by extending
the scope of
section 141(2)(c).
[52]
On two occasions the question of costs was reserved for later
adjudication. The answering affidavit of the first respondent
and the second respondent was filed on 18 June 2015. So was the
third respondent’s answering affidavit. The applicant
was
supposed to file its replying affidavit on 2 July 2015 at the very
latest – vide
rule 6.
The applicant did not meet that
formal deadline. Days went by. The respondents called
upon the applicants to
file the replying affidavit. However,
they got no joy.
[53]
Thirty two days later, the applicant’s replying affidavit was
still outstanding. On 4 August 2015 Messrs Honey
Attorneys took
it upon themselves on behalf of the first and second respondents to
enrol the matter. The matter was enrolled
for hearing on
Thursday, 20 August 2015. Therefore, the applicant’s
heads of argument together with the counsel’s
practice notes
were supposed to be filed by 12:00 on Wednesday, 12 August 2015 –
vide
rule 13(3).
[54]
On 14 August 2015 the applicants filed its replying affidavit.
Although the replying affidavit was awfully belated, it
was not
accompanied by any formal application to have its late filing
condoned.
[55]
On Thursday 20 August 2015 the matter came up for hearing. The
applicant’s condonation application and heads of
argument were
still outstanding. The matter could not proceed, it had to be
postponed in order to afford the applicants an
opportunity of filing
a condonation application for the late filing of the replying
affidavit. I pause to comment that the
applicant’s heads
were also still outstanding. A second condonation application
would, in due cause also be required
for the late filing of such
heads. The costs of that first postponement were reserved.
[56]
On Thursday, 10 September 2009 the matter once again came up for
hearing once again. On that day the applicant was still
in
default. The required condonation application was still
outstanding. Once again the matter could not proceed but
had to
be postponed to give the applicant another change to file its
condonation application. The late replying affidavit
could not
simply be allowed without an acceptable explanation for its late
filing. The costs relative to the second postponements
were
reserved.
[57]
At last the applicant filed the required condonation application on
Thursday 8 October 2015. The next day, being Friday,
9 October
2015, the applicant filed the long outstanding heads of argument.
Those heads were filed some 7 weeks out of time.
At the very
latest they were supposed to have been filed on Wednesday 7 October
2015 so that the respondents could file theirs
on Friday 9 October
2015 before 11:00 for the matter to be heard the next Thursday.
The procedural rights of the respondents
were therefore infringed.
They were hardly afforded one day after the condonation application
and the applicant’s heads
of argument were filed. The
applicant again breached
rule 13(3).
There was no explanation
or an apology extended to the respondents for the infringements of
their procedural rights.
[58]
There was no formal explanation for the applicant’s
non-compliance. The papers were also not paginated and indexed
on time. In the absence of satisfactory explanation
non-compliance with the court directives should not be tolerated.
The directives were designed to afford the respondents a minimum of
47 hours to consider the applicant’s heads of argument
and to
draft and file the respondent’s heads of argument. Since
the applicant’s heads of argument were filed
at 12:49 not on
Wednesday but on Thursday 8 October 2015. The respondents were
robbed of 13 out of the permissible minimum
of 47 hours. They
were left with 34 hours only to react to the applicant’s heads
in order to meet their formal deadlines
at 11:00 on Friday 9 October
2012. Violation of other litigant procedural rights is a
serious matter.
[59]
On Thursday 15 October 2015 before the substantive merits of the
matter could not be heard. The applicant’s condonation
application for the late filing of the replying affidavit had to be
considered first. The third respondent intended to oppose
such
a condonation application. The third respondent required time
to prepare the required opposing affidavit. Consequently
the
condonation application could not be heard. That necessitated
the third postponement of the main application. Both
applications had to be postponed. The costs were reserved one
more time.
[60]
On Thursday 19 November 2015 I was seized with the matter. The
respondents decided not to oppose the applicant’s
condonation
application for the late filing of its replying affidavit any more.
I granted condonation. I have to mention
that the applicant
never filed a condonation application for the late filing of its
heads of argument.
[61]
The reserved costs were argued. The applicant’s counsel
submitted that the applicant was entitled to the reserved
costs.
Counsels for the respondents submitted that the applicant’s
disregard of the local directives was the cause
of all the wasted
costs. Like the applicants, the respondents urged met to award
costs on the special scale as between attorney
and client.
[62]
I am persuaded that the applicant, and none of the respondents, was
to blame for all the postponements. The applicant’s
conduct was characterised by a series of acts of omissions. The
applicant flagrantly breached the rules and practice directives
of
the court. In the circumstances, I am inclined to award all the
costs in favour of the respondents. To ensure that
the
respondents are not put out of pocket as a result of the applicant’s
failings, I believe that it is appropriate and just
to award the
costs on the special scale as between attorney and client in favour
of the respondents. I cannot demonstrate
my displeasure
strongly enough.
[63]
Accordingly I make the following order:
63.1 The
application is dismissed.
63.2 The costs of
this application including all the wasted costs occasioned by the
postponements shall be borne and paid
by the applicant.
63.3
The respondents are entitled to have their costs taxed on the special
scale as between attorney and client.
______________
M.H.
RAMPAI, J
On
behalf of applicants: Adv. C. D. Roux
Instructed
by:
L &
V Attorneys
BLOEMFONTEIN
and
R C
Christie
JOHANNESBURG
On
behalf of the first and
second
respondents: Adv. N.
Snellenburg SC
Instructed
by:
Honey
Attorneys
BLOEMFONTEIN
On
behalf of the third
Respondent:
Adv. P. du P Greyling
Instructed
by:
Steenkamp,
De Villiers Coetzee
BLOEMFONTEIN
/EB