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[2021] ZASCA 140
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Park 2000 Development 11 (Pty) Ltd v Mouton and Others (684/2020) [2021] ZASCA 140 (6 October 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 684/2020
In
the matter between:
PARK
2000 DEVELOPMENT11 (PTY)
LTD APPELLANT
and
JOHAN
MOUTON FIRST
RESPONDENT
VAN
SCHALKWYK VERVOER CC SECOND
RESPONDENT
COMPANIES
AND INTELLECTUAL
PROPERTY
COMMISSION THIRD
RESPONDENT
SMOKEN
CONSULTING (PTY) LTD FOURTH
RESPONDENT
KENETH
LOGAN STEWART N.O FIFTH
RESPONDENT
Neutral
Citation:
Park 2000
Development 11 (Pty) Ltd v Mouton and Others
(Case
no 684/21)
[2021] ZASCA 140
(06 October 2021)
Coram:
WALLIS,
MBHA, PLASKET, CARELSE and MABINDLA-BOQWANA JJA
Heard:
06
September 2021
Delivered:
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication on
the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be have been at 10h00 on
06 October
2021.
Summary:
Civil
Procedure – Section 16(2)(
a
)(
i
)
of the
Superior Courts Act 10 of 2013
, proscribes the hearing of an
appeal which will not have any practical effect – as the only
noteworthy property the appellant
owned had since been lawfully sold
and transferred to an independent purchaser, restoring appellant to
its former status of being
under business rescue would not have any
practical effect – appeal dismissed with costs.
REASONS
Mbha
JA (Wallis, Plasket, Carelse and Mabindla-Boqwana JJA concurring):
[1] At
the hearing of this appeal on, 06 September 2021, this Court made the
following order:
‘
1 In
terms of
s 16(2(
a
)(
i
)
of the
Superior Courts Act 10 of 2013
, the appeal is dismissed with
costs, such costs to include those consequent upon the employment of
two counsel.
2 The
reasons for this order will follow shortly.’
The reasons follow
hereunder.
[2] The
appellant, a property development company and erstwhile registered
owner of two pieces of land, to wit
Erf 541 in Riversdale and Erf
4573 in Stilbaai West, the latter being the remainder of portion 60,
Plattebosch Farm (the properties),
appealed against the whole
judgment of the Western Cape Division, Cape Town (Sher J) delivered
on 23 July 2019, in terms
of which a resolution adopted by
a director of the appellant to place the appellant under business
rescue, was declared invalid
and set aside. In addition, the
appointment of the fourth respondent as business rescue practitioner
was discharged.
[3] This
appeal, with leave of this Court, mainly related to an application
launched by the first respondent, Johan
Mouton (Mr Mouton), in which
he sought the above mentioned relief (the main application). The main
application was heard together
with two other related applications:
one was launched by the fifth respondent, Kenneth Logan Stewart
(Mr Stewart) in his capacity
as the purported business rescue
practitioner (the BRP) of the appellant seeking an order interdicting
the intended sale in execution
of the aforementioned properties
belonging to the appellant (the interdict application). The
other application was brought
by two of the appellant’s
creditors, in which they sought to intervene in the interdict
application. The c
ourt a quo
dismissed
both applications with costs.
[4] It
is necessary to briefly set out the background facts underpinning the
determination of this appeal. The
appellant was a property
development enterprise. The properties were the only noteworthy
assets it owned. It had earmarked the
two pieces of land for certain
development in the course of its business activity.
[5] For
the purpose of raising finance for the Stilbaai development, from
2006 onwards, the appellant offered debentures
which were limited to
proposed erven. These debentures were redeemable by a certain date
from the net proceeds which were to be
realised from the sale of
erven, unless the requisite rezoning of the remainder of portion 60
had not occurred by 01 December 2009,
in which event the directors
could extend the redemption date. It appears that extensions were
effected, the last of which supposedly
occurred during November 2017.
[6] During
May 2007, Mr Mouton purchased certain debentures from the appellant
and on 04 February 2016 he sought
to redeem the debentures by
claiming repayment of the capital loan amount linked to the
debentures plus interest alleging
inter
alia,
that the extended redemption date
for the debentures had since come and gone. As no payment was
forthcoming, Mr Mouton issued summons
against the appellant claiming
the total amount of R400, 000.00 plus interest in respect of two
debentures that he was holding
and costs. In July 2016, default
judgment was granted in favour of Mr Mouton after the appellant had
failed to file a plea. However,
the appellant successfully applied to
have the judgment rescinded during February 2017. After the appellant
had again failed to
deliver a plea, Mr Mouton applied for and
obtained default judgment against the appellant for a second time on
11 October 2017.
[7] As
the appellant failed to satisfy the judgment, Mr Mouton obtained a
writ of execution against its movable
property resulting in a
nulla
bona
return. In July 2018 Mr Mouton
obtained a writ of execution authorising the attachment and sale of
the appellant’s immovable
property by public auction which was
advertised and scheduled to take place on 12 December 2018.
[8] On
11 December 2018, the day before the auction for the sale of the
immovable properties was to be held, Mr
Mouton received, at around
15h44, an email from attorneys acting on behalf of a company called
Meiprops Twee en Twintig (Pty) Ltd
(Meiprops), notifying them that
Meiprops had launched an application for the liquidation and winding
up of the appellant. Furthermore,
this application was enrolled for
hearing on 14 December 2018.
[9] About
15 minutes after the receipt of the notification of the intended
liquidation application, Mr Mouton’s
attorneys received a
separate email from Smoken Consulting (Pty) Ltd, through which Mr
Stewart conducted his business in consulting
and business rescue
services. This email advised Mr Mouton’s attorneys that the
appellant had made an application that same
day to be placed under
business rescue. It is common cause that two days later, the
Companies and Intellectual Property Commission
(the CIPC) duly
appointed Mr Stewart as the appellant’s business rescue
practitioner (BRP). The liquidation application of
the appellant
by Meiprops was subsequently withdrawn on 12 December 2018.
[10] It
is not disputed that in both the liquidation and the business rescue
applications, Mr Renier van Rooyen
(Snr) a director of the appellant
deposed to the motivating affidavits on 11 December 2018. In the
liquidation application, he
deposed to the founding affidavit on
behalf of the creditor, Meiprops, of which he was a director,
claiming that the appellant
was indebted to this company in an amount
of R2, 359,642, that it was unable to pay this amount and was
therefore hopelessly
insolvent. Consequently, it was just and
equitable that it be wound up for the benefit of creditors. However,
in stark contrast
to these averments he alleged, in an affidavit he
filed with the CIPC in support of the business rescue application,
that the appellant
was financially distressed, that it was
‘reasonably unlikely’ that it would be able to pay its
debts within the ensuing
six months, but that based on current
sales volumes ‘it could in all probability trade profitably’
if it was placed
in business rescue.
[11] The
auction for the sale of the immovable properties proceeded as
scheduled on 12 December 2018. It took place
notwithstanding the fact
that the appellant had sought to place itself under business rescue
and that Mr Stewart had demanded that
the sale in execution should be
suspended and not take place. Mr Mouton’s attorneys took the
view that the business rescue
proceedings were irregular, and that
the appellant had not been validly placed in business rescue. The two
properties, Erf 541
Riversdale and Erf 4573 Stilbaai West, were sold
to the second respondent for R135, 000.00 and R3.89 million
respectively.
[12] The
court a quo
found, rightly in my view, that the averments by Mr van Rooyen (Snr)
were mutually contradictory and that, in at least one of the
affidavits, he was being mendacious. The
court
a quo
justifiably had harsh words for
the conduct of Mr van Rooyen and Mr Stewart, the BRP who deposed to
the founding affidavit in support
of the business rescue application.
It concluded, rightly in my view, that the resolution adopted to
place the appellant in business
rescue was not passed in good faith,
that it had no intention of attaining the objectives of the
Companies
Act 71 of 2008
, as amended (the 2008 Act) in regard to business
rescue and that it was done with a view to frustrate the sale in
execution. Importantly,
the
court a quo
found that on its assessment of the facts, the resolution to
institute liquidation proceedings was adopted by Meiprops at some
point prior to when the appellant adopted its resolution to go under
business rescue.
[13] In
its judgment, the
court a quo
specifically granted an order declaring
the sale in execution of the two properties valid and enforceable.
Importantly, it also
authorised the transfer of ownership in them to
the purchaser, the second respondent against payment of any amount
owing in respect
thereof. It is significant to mention that transfer
of ownership to the second respondent has since been effected.
[14] The
issues that arise from the appellant’s grounds of appeal
against the
court
a quo’s
judgment can be summarised as follows: whether the alleged failure of
Mr Mouton to serve and join the appellants’ creditors
in the
main application was fatal; whether the resolution adopted to place
the appellant under business rescue complied with the
requirements
contemplated in s 128 of the 2008 Act; whether the setting aside
of the resolution commencing business rescue
was just and equitable
as contemplated in s 130(5) of the 2008 Act; and whether the
court
a quo
erred in its treatment
[1]
of the
timing of the business rescue resolution and its regard to
conflicting authorities regarding when liquidation proceedings
are
initiated. The
court
a quo
was of the view that ‘initiation’ used in s 129(2)
of the 2008 Act was intended to refer to the preceding causative
act
or conduct whereby the legal process in relation to such proceedings
was set in motion.
[15] In
his answering affidavit to the appellant’s application for
leave to appeal to this Court, Mr Mouton
averred
inter
alia
that the appeal is moot. His basis
was the following: The appellant is no longer under business rescue
and the two immovable properties
concerned have since been sold and
transfer into the name of the purchasers has been effected. In
addition, the appellant did not
apply for leave to appeal the costs
order and accordingly, there is no live issue to be determined on
appeal.
[16] As
the issue of mootness was not dealt with in the appellant’s
heads of argument, this Court directed
the Registrar to dispatch
correspondence to the parties to file additional arguments on the
question of mootness and any reasons
why the Court should not
consider and dispose of this point in terms of s 19(
d
)
of the
Superior Courts Act 10 of 2013
. Both counsel duly filed their
respective supplementary heads and the Court is indebted to them for
their assistance.
[17] The
appellant submitted that if it were successful with the appeal i.e.
if the appellant’s erstwhile
business rescue status was
restored, the transfer of the two properties to the second respondent
could be set aside retrospectively
by the fifth respondent who should
also have been reinstated to his previous position as the appellant’s
BRP. The appellant
sought to place reliance on the case of
Knox
N.O. v Mofokeng
[2]
by
drawing an analogy with the facts
in
casu
.
In that case the sale in execution had indeed been perfected, but the
purchaser had knowledge of the proceedings instituted by
the judgment
debtor for rescission prior to registration.
[18] The
appellant submitted further that even if the second respondent was
oblivious to the fact that the appellant
was under business rescue at
the time it purchased the properties, it undoubtedly subsequently
gained knowledge of the fact of
business rescue before transfer was
taken. As the second respondent was alive to the appellant’s
assertion that it was under
business rescue and its attack on the
validity of the sale due to s 133(1) of the 2008 Act might fail,
so it was further argued,
the second respondent assumed the risk that
the sale might be set aside in due course.
[19] In
my view the aforesaid argument by the appellant cannot succeed and
falls to be rejected outright. The reliance
on
Knox
N.O
was misconceived as the facts in
that case, which concerned a rescission and not a business rescue are
totally distinguishable.
Significantly, the validity of the sales in
execution was not even challenged in the
court a quo
.
[20] It
is important to note that the court a quo specifically granted an
order dismissing with costs the application
to interdict the transfer
of the properties that was launched by the fifth respondent under
case number 8488/2016. Significantly,
that application does not form
the subject matter of this appeal. In this regard, it is noted that
in paragraph 24 of the founding
affidavit of the appellant’s
petition to this Court for leave to appeal, it stated as follows:
‘
Although
other interlocutory applications were also launched subsequently, it
is the aforesaid (main) application that forms the
subject matter of
the current application. The other
applications
are rendered moot and need not be discussed here
.’
(My emphasis)
[21] It
is clear from the aforesaid founding affidavit that the appellant
accepted that it was no longer under
business rescue and that Mr
Stewart was the applicant’s erstwhile BRP. The appellant had
the two immovable properties concerned
as its only noteworthy assets
and nothing else. It has no assets left to administer. Clearly in
those circumstances restoring it
to business rescue will serve no
purpose. The grant of the appeal will not reverse the transfer of the
properties. The submission
that the BRP once restored to his previous
position, will be able to reverse the transfer of the properties
which were lawfully
and validly authorised by the
court
a quo
cannot be sustained. It is by no
means clear that Mr Stewart wishes to be restored to that position.
[22] Section
16(2)(
a
)(
i
)
of the
Superior Courts Act provides
that ‘when at the hearing
of an appeal the issues are of such a nature that the decision sought
will have no practical effect
or result, the appeal may be dismissed
on this ground alone’. The effect is that if there is no longer
any live controversy
between the properties, then there is no longer
an appeal that would have any practical effect.
[23] In
Legal
Aid South Africa v Magidiwana and Others
[3]
the court reiterated the position that ‘courts should not and
ought not to decide issues of academic interest only’.
[24] In
light of what I have stated above, I find that there are no longer
any live issues between the parties.
The issues on appeal were
accordingly of such a nature that the decision sought would have no
practical effect or result between
the parties. In the result, the
Court granted an order dismissing the entire appeal with costs
including the costs of two counsel,
as set out in paragraph [1]
above.
B
H Mbha
Judge
of Appeal
APPEARANCES:
For
appellant: J
P Steenkamp
Instructed
by: BDP
Attorneys, Cape Town
Honey
Attorneys, Bloemfontein
For
1
st
and 2
nd
respondents: T
Dicker SC (with her, M A McChesney)
Instructed
by: ST
Attorneys, Cape Town
Bezuidenhouts
Incorporated, Bloemfontein
[1]
The court
a
quo
took
a different stance to that of Swain J in
First
Rand Bank Ltd v Imperial Crown Trading (Pty) Ltd
2012
(4) SA 266
(KZN) where it was held that the word ‘initiated’
in s 129(2) of the 2008 Act must have been intended to have
the
same meaning as the word ‘commencement’ in s 131
(6) of the Companies Act 61 of 1973.
[2]
Knox
N.O v Mofokeng
2013
(4) SA 46 (GSJ).
[3]
Legal
Aid South Africa v Magidiwana and Others
[2014] ZASCA 141
;
2015 (2) SA 568
(SCA) paras 2 – 4; 18.