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[2016] ZAECELLC 6
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Al Mayya International Limited (BVI) v Valley of the Kings Thaba Motswere and Others (926/2016, 2226/2016) [2016] ZAECELLC 6 (15 September 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION – EAST LONDON
Case
no EL : 926/2016
GHT:
2226/2016
In
the matter between:
AL
MAYYA INTERNATIONAL LIMITED (BVI)
APPLICANT
(Formerly
AL
MAYYA SOUTH AFRICA LTD (BVI)
AND
VALLEY
OF THE KINGS THABA MOTSWERE
1
ST
RESPONDENT
PROPRIETERY
LIMITED
(Reg
no: 2008/012149/7)
Carrying
on business at
THABA
MTSWERI, THABAZIMBI)
THABA
MOTSWERE GAME FARM (PTY) LTD
2
ND
RESPONDENT
THE
COMPANIES AND INTELLECTUAL PROPERTY
3
RD
RESPONDENT
COMMISSION
PHILLIPUS
JACOBUS MOSTERT
4
TH
RESPONDENT
THE
FIRST RESPONDENT’S EMPLOYEES
5
TH
RESPONDENT
FIRSTRAND
BANK LIMITED
6
TH
RESPONDENT
GOVERNMENT
OF FUJAIRAH 7
TH
RESPONDENT
SOUTH
AFRICAN REVENUE SERVICES
8
TH
RESPONDENT MINISTER OF TRADE AND INDUSTRY
9
TH
RESPONDENT
REASONS
FOR ORDER
SMITH
J:
[1]
The
applicant brought an urgent application on 31 August 2016 for an
order in terms of section 18 (3) of the Superior Courts Acts,
10 of
2013 (“the Act”), directing that paragraphs (a), (b) and
(c) of my order, delivered on 23 August 2016, are not
suspended
pending the decision of the application for leave to appeal filed by
the first and fourth respondents, or any subsequent
appeal.
[2]
The
application was, as a result of a directive issued by me, heard in
the Grahamstown High Court. The respondents were not represented
at
the hearing despite the fact that they had been given due notice.
[3]
After
hearing argument by Mr
Woodland
SC,
who
appeared for the applicant, I granted the order on 1 September 2016
and indicated that my reasons would follow. I now provide
the
following brief reasons for my decision.
[4]
The
applicant contended that if the business rescue order were not
carried into effect, it would in all probability result in the
winding up of the company at the instance of the Government of
Fujairah. Since there is no conceivable defence to such an
application,
and the moratorium provided for in Chapter 6 of the
Companies Act, 71 of 2008 (“the
Companies Act&rdquo
;) would not
avail the company any longer, the interests of all the stakeholders,
including shareholders and creditors, would be
undermined.
[5]
Section
18 of the Act provides as follows:
“
18.
Suspension
of decision pending appeal
“
(1)
Subject to subsections (2) and (3), and unless the court under
exceptional circumstances orders otherwise, the operation and
execution of a decision which is the subject of an application for
leave to appeal or of an appeal, is suspended pending the decision
of
the application or appeal.
(2)
Subject to subsection (3), unless the court under exceptional
circumstances orders otherwise, the operation and execution of
a
decision that is an interlocutory order not having the effect of a
final judgment, which is the subject of an application for
leave to
appeal or of an appeal, is not suspended pending the decision of the
application or appeal.
(3) A court may only
order otherwise as contemplated in subsection (1) or
(2),
if the party who applied to the court to order otherwise, in addition
proves on a balance of probabilities that he or she will
suffer
irreparable harm if the court does not so order and that the other
party will not suffer irreparable harm if the court so
orders.”
[6]
The
applicant was accordingly required to establish that:
(a)
there
were exceptional circumstances present; and
(b)
there
is no likelihood that the respondents will suffer irreparable harm if
the application is granted; and
(c)
there
is likelihood that the applicant will suffer irreparable harm if the
relief is not granted. (
Minister
of Social Development Western Cape and Others v Justice Alliance of
South Africa and Another
20806/2013
[2016] delivered on 1 April 2016)
[7]
During
business rescue proceedings a financially distressed company is
accorded wide-ranging protection. By way of example, in terms
of
section 133
of the
Companies Act no legal
proceedings (including
enforcement actions) in relation to any property belonging to the
company or in its lawful possession, may
be commenced or proceeded
with except,
inter
alia,
with
the written consent of the business rescue practitioner or the leave
of the court. In addition, any surety or guarantee in
favour of any
other person may not be enforced by any person against the company
except with the leave of the court. One of the
objectives of the
Companies Act is
“to provide for the efficient rescue and
recovery of financially distressed companies, in a manner that
balances the rights
and interests of all relevant stakeholders.”
(Section 7(k)
of the
Companies Act)
[8
]
The
noting of the application for leave to appeal has, in terms of
section 18 of the Act, suspended the commencement of the business
rescue proceedings and the protections accorded to the company in
terms of Chapter 6 of the
Companies Act. The
company is thus left
vulnerable and at the mercy of the Government of Fujairah (and other
creditors), and its liquidation appears
imminent. This state of
affairs can by no stretch of the imagination be in any of the
stakeholders’ interests.
[9]
Mr
Woodland
has
correctly submitted that if the applicant had instead instituted
liquidation proceedings, a provisional order would not have
been
appealable and the noting of an application for leave to appeal
against a final order would not have suspended the operation
of the
order. (Section 339 of the 1973
Companies Act, read
with
section 150
(3) of the
Insolvency Act 24 of 1936
)
[10]
There
can be little doubt that the policy considerations which underpin the
abovementioned legal provisions in respect of a liquidation
order are
equally apposite to business recue proceedings. The fact that an
aggrieved party can, by virtue of the mere filing of
an application
for leave to appeal, suspend the implementation of business rescue
proceedings and thereby nullify the wide-ranging
protection accorded
to a financially distressed company, must self-evidently weigh
heavily with a court when considering whether
exceptional
circumstances as contemplated by
section 18
(1) of the Act exist in a
particular case. For the reasons that I have stated in my judgment in
the main application, there are
reasonable prospects that the
implementation of a business rescue plan will not only result in full
settlement of creditors’
claims, but will also ensure that the
company continues to trade profitably. It can thus hardly be
contended that to allow the
alternative, namely liquidation, can
conceivably benefit any of the stakeholders. I was accordingly
satisfied that exceptional
circumstances existed for the granting of
the order.
[11]
It
is also self-evident from the foregoing that the applicant, the
company and its creditors will suffer irreparable harm if the
relief
is not granted. It is manifest that the company is presently unable
to pay its debts. For the reasons that I have stated
in my main
judgment, it is thus commercially insolvent and liable to be wound up
should the Government of Fujairah proceed with
its declared intention
to institute liquidation proceedings. The latter has already
delivered a notice in terms section 345 of
the 1973
Companies Act,
and
I am constrained to accept that its threat to institute
liquidation proceedings is indeed a serious one. As I have mentioned
earlier,
the company will have no defence against such an
application. The resultant winding up of the company will no doubt
have deleterious
consequences for shareholders, creditors and
employees alike.
[12]
It
is also manifest, for the same reasons, that there is no likelihood
that the respondents will suffer irreparable harm if the
relief is
granted. The parties were
ad
idem
that there are reasonable prospects that the company can be rescued,
albeit that the respondents contended that the current management
are
quite capable of achieving those objectives themselves. There was
even substantial agreement as to how that can be achieved,
namely
through the responsible sale of selected animals, without
compromising the company’s core business.
[13]
For
the reasons which I have stated in my main judgment, I do not believe
that the objectives of the business rescue can be achieved
under the
present management. In addition, in terms of
section 137
of the
Companies Act, Mostert
will continue to exercise the functions of a
director, albeit subject to the authority of the business rescue
practitioner.
[14]
I
was accordingly satisfied that the applicant had made out a case for
the relief sought in terms of section 18 of the Act and consequently
granted the order.
_______________________
J.E SMITH
JUDGE OF THE
HIGH COURT
Appearances:
Counsel for the Applicant
: Mr. S Woodland SC
Assisted
by
: Mr C Cutler
Attorneys
for the Applicant
:
Gillian & Veldhuizen
Inc.
Suite B6,
Westlake Square
Westlake Drive
Cape Town
Micarle Van
Heerden
micarle@gvinc@law.co.za
C/O
Squires-Smith &
Laurie Inc.
67 Beach Road
Nahoon
East London
mandy@squires.co.za
Attorneys for the
Respondents
:
Gravett Schoeman Inc.
Bonza Road
Beacon Bay
East London
Ian Theophilus
(
ian@gslegal.co.za
)
Date
Heard
: 31 August 2016
Date Delivered
: 15 September 2016