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[2016] ZAGPPHC 205
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Liu v Roering NO and Another (25713/2016) [2016] ZAGPPHC 205 (15 April 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION,
PRETORIA)
Case Number:
25713/2016
Not reportable
Not of interest to other
judges
Revised
15/4/2016
In the matter between:
SHUDONG
LIU
Applicant
and
LEIGH ROERING,
N.O.
First
respondent
TIMOTHY NDEBELE,
N.O.
Second
respondent
JUDGMENT
POTTERILL J
[1] The applicant is
urgently applying that the respondents be prevented from selling any
of the liquidated company’s, Xing
Xing Farming, assets pending
the rendering of a valuation report by a chartered accountant and an
order directing the respondents
to take the aforesaid report into
account when contemplating a sale of any, or all of, Xing Xing
Farming’s assets.
This chartered accountant should be
nominated and appointed by the Chairperson of the South African
Institute of its Chartered
Accountants and must do so by no later
than 7 court days after the expiration of the 10 days. The
chartered accountant is
to be granted access by the respondents to
all of Xing Xing Farming’s assets on portion 28 of the
Groenfontein Farm in the
Bronkhorstspruit district for a proper
valuation of the assets. The applicant is also further applying
that the respondents
be interdicted from selling any or all the
assets of Xing Xing’s pending finalisation of an application to
be brought within
30 days of an order being made to set aside the
ex
parte
order made on 9 February 2016 by Louw J under case number
8595/2016.
Background
[2] The Xing Xing Farming
operation is a close corporation; it was placed under voluntary
liquidation and the respondents
are the appointed liquidators.
[3] The close
corporation’s business comprises of the production and sale of
chicken eggs in batteries.
Applicant’s case
[4] The applicant in his
affidavit set out how he became involved in the business with his
brother. He averred that he was
unaware of the liquidation and
was very surprised as the business was from 2003 until 2015
(excluding the year 2002) making a substantial
profit each year.
He is a creditor due to his share of the profits never being paid out
to him.
[5] Despite his
back-breaking work in building the batteries and his contempt for not
receiving his share of the profits he is not
contesting the
liquidation i.e. applying for the rescission of the liquidation and
has not instituted action against his brother
for his fair share.
His aim is to claim his share of the profits as a creditor in the
liquidation. To achieve this,
this application is to ensure
that not only for his benefit, but also for the benefit of the other
creditors, the business is sold
as a going concern and not as a
forced sale. Although it is not put out in the papers that it
must be sold as a going concern
this was submitted from the bar.
The reason why it must be sold as a going concern is that “
simple
arithmetic indicates that the business is doing well and is very far
from being bankrupt or even in trouble”
. To this end
a chartered accountant’s valuation is necessary and the sale
must be stopped to facilitate a higher sale
value. Louw J’s
order must also be set aside.
Respondent’s
case
[6] In response to this
the respondents set out that the operation of this business comprise
of chickens consisting of productive
lay hens, chickens destined to
become lay hens and which are in the process of being reared and lay
hens past their production
stage. All of this requires
immediate and extensive management in order to avoid any loss in
numbers. As it was a fully
operational farmer operation that
was taken over it required immediate attention in the form of
insuring that the hens are properly
fed, water provided, eggs removed
and sold and all the other duties normally to be expected of an
operation of this nature.
To this extent they approached the
court to extend their power to effect the running of the business.
It was conceded that
this
ex parte
application contains the
standard or normal orders for an extension of the powers of
liquidators. From this order it is clear
that the respondents
were now empowered to defend or institute legal proceedings of a
civil nature, criminal proceedings, urgent
legal proceedings and the
recovering of outstanding accounts. To offer compensation made
to the company debtor and to accept
payment or to grant an extension
of any debtor. To compromise or admit any claim and to make
arrangements with creditors.
Furthermore the order entailed
that they could carry on or discontinue any part of the business of
the company insofar as it may
be necessary for the beneficial
winding-up thereof. They were also empowered to sell any
movable and immovable property of
the company by public auction,
public tender or private contract. Without this order being
extended they would not have been
entitled to continue trading the
business to engage services of the employees and pay their salaries
and similar practical requirements
which impact on the normal day to
day running of the business.
[7] At the end of January
2016 when the liquidators took control of Xing Xing Farming there
existed a major threat to the farming
operation in that there was
virtually no water on the farm as the borehole supplying water “
have
but dried up”
. It was common cause that there was a
serious drought during this period. Without this order being
granted the liquidators
would not have been entitled to procure water
from the neighbouring farms. A further three boreholes were
drilled on the
property. Chicken feed had to be procured to the
value of approximately R350 000 per week. This feed supply
could
be maintained only on arrangement for delayed payment of
accounts.
[8] There is no further
cash available to pay the outstanding amount of R847,218.60 due to
Satinsilk Investments (Pty) Ltd the supplier
of the feed. A
successful battery operation requires stringent disease control which
in turn means substantial amounts have
to be paid for medicine.
[9] The total outstanding
debts amount to R2,483,661.10. The amount of overdue debtors is
growing and becoming a major concern.
[10] A veterinarian
surgeon, Dr. P.W. Smith, attended to the farm and his report as
attached to the answering affidavit. It
is his opinion that the
pullets are to be transferred to laying houses as soon as possible.
He is further of the opinion
that if the chickens are not placed out
soon there will be serious consequences, amongst which will be vices
such as egg-eating
and cannibalism. A buyer, Ascend Investment
Holding (Pty) Ltd, was identified who is willing to purchase the
movable assets,
vehicles and equipment, the hatcheries and livestock
for an amount of R4,1 million. In view of the dire consequences
of not
feeding the chickens the sale is thus necessary and must be
executed eminently.
[11] The respondents also
caused the valuation of the assets of Xing Xing Farming which was
also done by a duly appointed registered
appraiser which is also
attached to the answering affidavit. According to this
valuation report a value of R4 779,770.00
is established as a
forced sale value.
[12] It is accordingly
the respondents’ contention that the application to rescind
Louw J’s order is misconceived as
it will render it impossible
for the respondents to continue with the farming operation.
[13] It was also argued
that the legal duties and obligations of the liquidators and
specifically section 353 of the Companies Act,
61 of 1973, provides
that the effect of a voluntary winding-up on the status of a company
is that it shall from the commencement
of the winding-up cease to
carry-on its business except insofar as it may be required for the
beneficial winding-up thereof.
Reasons for decision
[14] In
Thorne v
The Master
1964 (3) SA 38
(N)
at 50 the role of the
liquidators is set out as being:
“
The essence of
a matter in relation to the realisation of the assets of an insolvent
estate is that the trustee takes the estate
as he finds it and
converts it into cash which he distributes to the creditors. It
is no function of his to speculate with
the assets in the hopes of
improving their value, whether by delaying realisation or by
expending money upon them.”
[15] According to the
liquidators the day to day running of the business is becoming
impossible. There are simply no funds
available to continue
further with the business. A buyer was identified who is
willing to purchase the movable assets, the
vehicles, equipment,
hatcheries and livestock for an amount of R4.1 million (exclusive of
VAT) plus an amount for the stock in
trade, which is still to be
determined but which will according to the answering affidavit amount
to approximately R650 000.
This excludes the total
outstanding debtors of R2,483,661.10 which is still to be collected.
I must accept the respondent’s
version.
[16] I find it pragmatic
to deal with the
ex parte
application and the period of 30
days within to set this aside first. There was nothing untoward
in obtaining this order
ex parte
. The applicant is not a
member of the close corporation or the owner of the business.
He is not a registered creditor
and accordingly no service on him was
required. The liquidators would not know of him, except as
being one of the employees
of the business. The order itself
was agreed to be within the norm. The only argument that was
put before this court
was that the applicant has not as required in
an
ex parte
application shown good faith because in that
ex
parte
application the following averment was made “
thus
it is apparent that the farm experiences a shortage of potable water
of approximately 15 000 to 30 000 litres per
day according
to the temperature
.
This shortfall is further
exasperated by the fact that the farm has no watering reserves as the
water pumped from the borehole is
used the very same day”
(paragraph 24). They also complained of a single borehole that
had dried up. However now in the answering affidavit
the
respondents said that at the time in question “
there was
virtually no water on the farms as the boreholes supplying water have
all dried up”
. This argument is a fallacy and
requires no further address. The moral of the story is that
there was a water problem.
The essence of the version is that
due to the drought the boreholes were drying up. I find it
disturbing that counsel has
to rely on such averred inconsistencies
as their only ground for setting aside this order. There is
accordingly no merit
to an application to stay the sale pending the
rescission of the
ex parte
application granted by Louw J.
Furthermore the fact that any setting aside of the order will hamper
any running of the day to day
business of the liquidated close
corporation speaks for itself.
[17] The applicant’s
application for the stay of the sale is also ill-conceived. I
cannot find that the liquidators
are not fulfilling their duties in
terms of the law. The whole nature of liquidation applications
call for forced sales.
This kind of operation that have to be run by
liquidators that do not have expert knowledge of chicken battery
farming has a huge
duty in terms of the law to keep the business
running but obtain a willing buyer as soon as possible. No valuation
by the applicant
is attached to his papers. No reasons are set
out why a chartered accountant would be in a position to give a
valuation of
the assets. It is conceivable that a chartered
accountant could give a total of the assets, but not of a forced sale
value.
In view of
Plascon-Evans Paints Ltd v Van Riebeeck
Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(AD)
at 634H there is
nothing to gainsay the valuation as attached to the answering
affidavit of the respondents and the court must accordingly
accept
the respondents’ version. If this test is applied to the
facts in this application it was submitted that the
applicant was not
entitled to any relief.
[18] This application is
fatally flawed, misconceived and does not pass muster of the
Plascon-Evans
principles and therefore I make the
following order:
The application is
dismissed with costs.
__________________
S. POTTERILL
JUDGE OF THE HIGH
COURT
CASE NO: 25713/2016
HEARD ON: 13 April 2016
FOR THE APPLICANT: ADV.
V. DE WITH
INSTRUCTED BY: Sun
Attorneys
FOR THE RESPONDENTS: ADV.
C. ACKER
INSTRUCTED BY: Malan
Nortje Attorneys
DATE OF JUDGMENT: 15
April 2016