About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2015
>>
[2015] ZAGPPHC 59
|
|
Sulzer Pumps (South Africa) (Pty) Ltd v O & M Engineering CC (19740/2014) [2015] ZAGPPHC 59 (11 February 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case Number:
19740/2014
Date: 11 February
2015
Reportable
Not of interest to
other judges
In the matter
between:
SULZER PUMPS
(SOUTH AFRICA) (PTY) LTD
(Registration
number:
1922/007245/07)
...........................................................................................
Applicant
and
O
& M ENGINEERING
CC
.......................................................................................................
Respondent
JUDGMENT
POTTERILL J
[1] The applicant is
applying for the provisional winding up, liquidation, of the
respondent. The application is brought in terms
of respondent’s
inability to pay its debts and that it would be just and equitable to
liquidate the respondent. It is common
cause that all the procedural
requirements for a liquidation application were complied with.
[2]
This application was launched on 10 March 2014. This matter was on 16
May 2014 postponed
sine
die
and
the respondent was ordered to pay the wasted costs, the scale of the
costs to be determined by the trial court. The matter was
set down
again on 13 November 2014 and on that date the matter was by
agreement postponed to 2 February 2015. This was to afford
the
employees of the respondent (prospective intervening party(s)) an
opportunity to intervene.
[3] On 2 February
2015 the matter came before me. On the papers the matter was ripe for
hearing. There were heads of argument filed
on behalf of the
applicant but no heads of argument were received from the respondent
as required by the Practise Directives of
this Court. My registrar
enquired from the respondent why no heads were filed and a letter
from the respondent’s attorney
was received informing me that I
need not read the papers because it has come to their attention that
on 16 January 2015 the respondent
resolved to file for business
rescue and that a Mr Cawood was on 19 January 2015 appointed as
business rescue practitioner.
[4]
At
the hearing counsel for the respondent informed me that she was only
briefed to attend to the postponement of the matter and
since the
applicant persisted with the hearing of the matter she held no
instructions to argue the matter. A counsel appeared for
the employee
or employees without any application for intervention or opposing
papers. The court thus had no idea who or how many
employees the
counsel represented. Counsel for the employee/s was however heard on
legal issues raised on the papers.
THE APPLICANT’S
CAUSE OF ACTION.
[5] The applicant is
in the business of manufacturing industrial pumps. The respondent
manufactures parts of the pumps for the applicant.
The parties had an
agreement that if there was not timeous performance by the respondent
of its contracted obligations the applicant
was entitled to hold the
respondent liable for penalties for the standing period.
[6]
During 2010/2011 the applicant engaged the services of the respondent
for the Bambanani Project. The applicant held the respondent
liable
for standing time for the rotary pumps LLPS and extra labour costs.
The respondent acknowledged these costs by signing an
acknowledgement
of debt for the amount of
R747
904.00
00.
[7] In terms of the
acknowledgment of debt this amount was to be paid off in instalments
of R25 00.00 per month commencing on 1
June 2012. The acknowledgement
off debt contained an acceleration clause.
[8]
The respondent made certain payments but as on 19 November 2013 the
respondent still owed the amount of R 479 477.33.
A
letter of demand was served on the respondent.
[9] A notice in
terms of
Section 69
of the
Close Corporations Act 69 of 1984
was also
served on the respondent on 3 December 2013.
[10] Despite demand
no further payments were made. On behalf of the respondent e-mails
where sent to the applicant respectively
on 9 April 2013, 26 November
2013 and 3 December 2013, wherein it was acknowledged that payments
were not made, that for two months,
seemingly October and November
2013, it struggled to pay everybody and that monies owed to them were
coming in slowly.
[11] In terms of a
further agreement the respondent would construct five intermediate
strainers against payment of R1 000 720.15.
The applicant paid this
amount. The applicant never received the strainers.
[12]
Following a written demand the respondent informed the applicant that
the strainers were delivered directly to the applicant’s
client, Eco Logistics (Pty) (Ltd)[“Eco”] under delivery
note
7k
83
with a vehicle with registration number VJF359 GP. The applicant
ascertained that Eco had not received the strainers and no vehicle
with the registration number provided by the respondent entered Eco’s
premises.
[13]
Pursuant thereto the respondent delivered a new delivery note with
number 549
7
dated
2k
August
2012 explicitly stating that the strainers were delivered to the
applicant’s client on that date. The logbook of Eco
however did
not reflect that a vehicle with such a registration number entered
the premises. Mr Nel, the warehouse manager of Eco
denied that the
signature on the delivery note, purportedly his, was in fact his
signature. Mr Nel also denied that the stamp on
the delivery note was
their stamp. Mr Viljoen a forensic document Examiner concluded that
neither the signature of Mr Nel nor the
stamp was in fact authentic.
[14]
When confronted the respondent concluded a new agreement
acknowledging that he failed to deliver the strainers and that time
to do so was of the essence. Furthermore that it would re-
manufacture and deliver the missing strainers. If the respondent
failed
to deliver the missing strainers the applicant shall have the
strainers manufactured at a cost of R315 600.00 excluding VAT which
would be for the account of the Respondent. Respondent acknowledged
that should it fail to deliver the strainers within the date
of
delivery it would be responsible for 1
%
per
week of delay up to a maximum of 10% of the then current replacement
value of the strainers.
[15] The respondent
did not finish the strainers and Necsa completed the strainers. Necsa
charged the Respondent R 535 480.00, the
amount as agreed between the
applicant and the respondent; the respondent thus owes the applicant
this amount. The applicant is
also owed the amount of R1 950 000.00
constituting the delay penalties amount. The respondent is also
liable to pay a further amount
of R1 000 720.50 on the first contract
as delay penalties.
[16]
The applicant thus avers that the respondent is unable to pay its
debts and even resorted to fraudulent actions to side step
its
obligations due to its financial trouble. It would thus be just and
equitable to liquidate the respondent. In the replying
affidavit the
applicant attached an e-mail from the respondent’s attorney to
the applicant pursuant to the receipt of this
application. The
applicant is
inter
alia
informed
that
"Our
client also has other creditors where he signed as surety and if O
& M Engineering CC is liquidated creditors
will go for Mr
Ockert M. Fourie in his capacity as surety and he will not be able to
make payment of their claims....av\á...
“It is a fact
that should O & M Engineering be liquidated, concurrent
creditors are not going to be left with much
after preferential
creditors were paid... ”
THE RESPONDENT’S
OPPOSITION
[17]
The respondent filed an opposing affidavit wherein the only member
stated that he signed the acknowledgment of debt and has
paid an
amount of R380 000.00 in accordance therewith. He however signed the
acknowledgement of debt without taking legal advice
and the penalties
are all out of proportion to the prejudice suffered by the applicant.
In fact
“
..a
Court may well reduce the amount of the penalties to such an extent
as the Court may consider it equitable in the circumstances
in terms
of the provisions of Section 3 of the Conventional Penalties Act, Act
15 of J962. [par 6]"
[18]
I
say that the pumps
where delivered to Echo Logistics (Pty) Ltd to be kept on behalf of
the Applicant and I cannot say what happened
to the 5 intermediate
strainers whilst in the position [sic] of Echo Logistics (Pty) Ltd.
[par
8 .6.1.].” His staff delivered the pumps and bought back the
delivery note. He takes note of the opinion of the forensic
expert
but he does not share this opinion.
[19] He admits
signing the new agreement, but did not do so because the pumps where
never delivered, but because he did not want
to lose the applicant as
a client and therefor undertook to re-manufacture the missing
strainers. He denied that the replacement
costs amount to R315
600.00, but he was prepared to pay the replacement costs out of his
own pocket to retain the applicant as
a client.
[20] The respondent
did not complete the manufacturing of the strainers in time and it
agreed that Necsa collect the strainers to
complete the work. He
denied that the reasonable cost of finishing the work could amount to
R535 i+80.00.
[21] The respondent
denied that it is unable to pay its debts or that it is just and
equitable to be wound up. The respondent reiterated
that it conducts
a lucrative engineering business and its assets by far exceed its
liabilities. The unencumbered movable property
of the respondent
exceeds fifteen million rand. The respondent has no immovable
property. The respondent has no debt and its only
financial
obligations are the normal monthly expenses such as salaries of
staff, water, electricity and cash purchases from suppliers.
APPLICANT’S
ARGUMENT
[22] On behalf of
the applicant it was argued that on the papers before me the need for
business rescue could not arise as under
oath the deponent sets out
that he has no creditors and has a lucrative business. On the papers
before me he is thus solvent and
not at all financially distressed. A
company that is not financially distressed can never apply for
business rescue.
[23]
On the other hand the respondent’s own attorney and wife set
out that there are such financial problems rendering the
respondent
insolvent and thus the respondent is not amenable to business rescue
proceedings. This is so because a business plan
cannot be invoked if
the company is already insolvent -
Merchant
West Working Capital Solutions (Pty) Ltd v Advanced technologies and
Engineering Company Ltd 13/12406 10 May 2013 (GSJ)
[2013] ZAGPJHC 109
and
Redpath Mining
South Africa (Pty) Ltd v Marsden NO and Others 18486/2013 14 June
2013 (GSJ) [2013] ZAGPJHC 148.
From
the bar the court was informed that the respondent owes the receiver
of revenue R5 million. The respondent has no fixed property.
From his
own business rescue application the respondent is admitting that it
is not able to meet its commitments to certain creditors
as they
become due and payable. Despite many requests from the applicant they
have never received a list of assets indicative thereof
that there
are no assets. This business cannot be rescued.
[24]
A
business rescue application must be brought at the first available
opportunity and must not be brought as a knee-jerk reaction
to the
application for liquidation;
in
casu
the
facts clearly indicate that this is in fact what is happening. The
opposition of the liquidation is tainted with dishonesty
and the
court cannot come to the mercy of the applicant condoning such
dishonesty.
[25]
Furthermore a distinction must be drawn between section 129(2)(a) and
section 131(6) of the Companies Act
7
1
of 2008 [“the Act”]. Liquidation proceedings had
commenced and the applicant could not adopt a resolution to begin
business rescue proceedings in terms of s129(2)(a). No court
application has to be brought in terms of s129 whereas in si 31 such
an application is necessary.
[26] The applicant
accordingly requested the provisional or final liquidation of the
respondent.
ARGUMENT ON BEHALF
OF EMPLOYEE/S
[27]
It
was argued that there is not a distinction to be drawn between
s129(2)(a) and 131(6) of the Act. There is no application to proceed
with the liquidation proceedings before me and the general moratorium
[s133] against legal proceedings during business rescue proceedings
is applicable. The court has no discretion to proceed with the
liquidation and the application must be dismissed.
COURT’S
FINDINGS
[28] The
introduction of business rescue in chapter 6 of the Act places a duty
on a court to balance the sanctity of entities with
the interests of
creditors. Business rescue proceedings attempt to keep a company
alive by diverting serious consequences for its
members, creditors
and employees. In South Africa retaining jobs is most certainly a
priority. A court thus has a duty to judicially
favour business
rescue to liquidation. This must be the backdrop to liquidation
proceedings versus business rescue proceedings.
This being said, no
court can allow business rescue proceedings to be utilized as an
abuse of the court process. The court also
has a duty to ensure that
the entry into business rescue was not feigned. This is so because
the Act does not shun liquidation
proceedings within the business
rescue provisions. Express provision for this is to be found in
section 129 which reads as follows:
(1)
“
Subject to
subsection (2) (a) the board of a company may resolve that the
company voluntarily begin business rescue proceedings...
(2) A resolution
contemplated in subsection (1)-
(a) may not be
adopted if liquidation proceedings have been initiated by or against
the company; and
(b) has no
force and effect until it has been filed. ”
Henochsberg
on the Companies Act, Vol 1, p458 states that “
The
reason for this is to prevent the board from thwarting an application
to liquidate the company by adopting a business rescue
resolution. ”
I can without
hesitation find that the business rescue application was launched at
this late stage with the sole purpose to thwart
the application to
liquidate it. I can make this finding without the necessity of
entering into the merits of the business rescue
which of course I do
not have before me. The reasons for this finding follow.
[29]
On the common cause facts before me I cannot find that the initiation
of the business rescue proceedings was
bona
fide
and
for the purpose it was designed for. The notice in terms of Section
69 of the Act was served on the respondent on 3 December
2013. The
respondent signed 2 acknowledgements of debts respectively dated 8
May 2012 and 29 July 2013. The application for the
liquidation of the
respondent was served on the respondent on 19 March 2014. Despite 2
postponements of the application for liquidation
no application for
business rescue was made. The respondent files no heads of argument
for the liquidation proceedings and then
10 working days before the
application is to be finally heard a resolution is taken by the
respondent to begin with business rescue
proceedings, taking for
granted that the liquidation application will be postponed. This
court can confidently find that this application
was lodged to
suspend the liquidation proceedings as an abuse of process. The
respondent has not put before the court that it was
not aware of
business rescue proceedings, or only 10 days before the hearing
became financially distressed. The respondent as far
back as May 2012
acknowledged that it could not comply with its liabilities, was aware
of the demand in terms of s69 and the liquidation
application. The
Act does not set out a time frame within in which an application for
business rescue must be launched, but it
must be done at a time when
the entity can still be rescued, not to thwart an application for
liquidation. This is an attempt to
use for ulterior purposes
machinery devised for the better administration of justice
constituting an abuse of process -
Hudson
v Hudson and Another
1927 AD 259
at
268. In
Price
Waterhouse Coopers Inc v National Potato Co-Operative Ltd
2004 (6) SA
66
(SCA)
the
court found that the mere application of a particular court process
for a purpose other than for which it is primarily intended
is
however not complete proof of
maia
fides.
An
improper motive is the factor to sustain
mala
fides
where
the abuse of court process is an issue. The respondent could not
address the court on why the business rescue application,
despite the
application of s129(2)(a) was initiated. The employees did not bring
the application as an affected party in terms
of section 131 or filed
an affidavit as intervening parties in the liquidation proceedings.
The only inference is that they cannot
on the facts set up by the
applicant oppose the application for liquidation. If a provisional
order is granted they can still launch
an application if they so
wanted. The only motive for the business rescue application on the
papers before me is
mala
fide.
The
deponent on behalf of the respondent declares that he has no
creditors. On his own papers he is thus mala fide in launching
the
application at the time that he does. In
Swart
v Beagles Run Investments 25 (Pty) Ltd
2011 (5) SA 422
(GNP)
a
business rescue application was dismissed because it boiled down to
an abuse of process.
[30]
It must also be noted that section 133 places a general moratorium on
legal proceedings
during
business rescue proceedings whereas Section 129(2)(a) and 133(6) both
refer to
liquidation
proceedings.
In
Absa Bank Ltd v
Summer Lodge (Pty) Ltd
2014 (3) SA 90
(GP)
paragraph
12 it was found that the legal proceedings, in contrast with the
liquidation proceedings, are not suspended and the granting
of the
final winding-up order is part of the legal proceedings. It is
therefore only the implementation of the final winding-up
order that
is suspended and not the order itself. This was also the court’s
finding in
Absa
Bank Ltd v Makuna Farms CC
2014 (3) SA 86
(GJ); ZAGPJHC (28 November
2013)
at
paragraph 10. In
Richter
v Bloem Pro CC and Others (69531/2012) [2014] ZAGPPHC 120 (14 March
2014)
the
court did not follow the
ratio
of
the
Summer Lodge
matter
supra
due
to the fact that the cases referred to in that case is authority for
the interpretation of section 348 of the 1973 Act. The
court also
reasoned that business rescue proceedings and a final liquidation
order are two different concepts and are incompatible
and cannot thus
co-exist. Without having to make a finding on whether “legal
proceedings” include “liquidation
proceedings”
before implementation of the liquidation, I am satisfied that section
129(2)(a) has application barring the
respondent from taking a
resolution in terms of section 129. In
Firstrand
Bank v Imperial Crown Trading
2012 (4) SA 266
(KZD)
the
court found in paragraph [16] as follows:
“
[16]
It is dear, however, that Act 71 of 2008 draws a distinction between
the inter-relationship of business rescue proceedings
and liquidation
proceedings depending upon whether the source of business rescue
proceedings lies in the resolution of the board
of a company to begin
such proceedings in terms of s 129( 1), or whether the source of such
proceedings lies in an application
brought by an ‘affected
person ’ in terms of s 131(1), for an order placing the company
under supervision and commencing
business rescue proceedings.
[17] In the
former case, as pointed out, in terms of s 129 (2) (a) such a
resolution may not be adopted ‘‘if liquidation
proceedings have been initiated by or against the company’. The
reference to liquidation proceedings ‘by or against
the
company’, is clearly a reference to a voluntary winding-up of a
company in terms of s 352 of Act 61 of 1973, as well
as a reference
to a winding-up of a company by the court in terms of s 3U8 of Act 61
of 1973 ...”
The court proceeded
to grant the provisional liquidation finding that the respondent
would not be able to proceed to take a resolution
that the respondent
begin with business rescue proceedings but that it did not bar an
affected party to proceed with business rescue
proceedings despite
the provisional order being granted.
Thus even if my
finding that the resort to business rescue proceedings was an abuse
of process is wrong, then I am satisfied that
s 129(2)(a) is a bar to
the initiation of the business rescue proceedings due to the
liquidation proceedings before the court.
[31]
On the papers before me there is no bona fide dispute of fact. The
applicant set out that no vehicle with such registration
number
entered the premises of Eco to deliver the applicant’s pumps.
The respondent, within whose knowledge it lies, did
not traverse this
fact with who entered the premises and who delivered the pumps. As a
lay-man, without contradicting any of the
facts of the forensic
expert, he boldly disagrees with the opinion of the forensic expert;
clearly not a dispute of fact. He in
fact signs the agreement wherein
he acknowledged that he did not deliver the pumps, yet disputes in
the answering affidavit the
non-delivery of the pumps. The respondent
is accused of falsifying an invoice, a serious allegation against a
business, yet it
puts up no
bona
fide
defence.
The court accordingly has to accept the applicant’s averments.
The court has to find that the respondent committed
fraud in order to
escape its liabilities. No court can condone this action and choose
business rescue above liquidation where the
respondent is acting
maia
fide
and
abusing the process.
[32] The respondent
acknowledges that he owes the applicant the monies in the
acknowledgment of debt but now raises a defence that
he cannot raise
against the acknowledgment of debt, i.e. a reduction of the penalties
in terms of the Conventional Penalties Act.
[33] A court cannot
where the respondent insisted that he has no creditors afford the
respondent the opportunity to proceed with
business rescue
proceedings. On these papers the beginning of the business rescue
proceedings is a tactic, mala fide and the court
would be closing its
eyes to the untruths told by the respondent. A court is not a rubber
stamp.
[34] All the
defences raised by the respondent are spurious, do not set up a real
dispute of fact and are rejected.
[35] This court can
under these circumstances proceed to grant a provisional order for
liquidation. Accordingly draft order “X"
is made an order
of court.
S. POTTERILL
JUDGE OF THE HIGH
COURT
CASE NO: 31291/2012
HEARD ON: 5 February
2015
FOR THE APPLICANT:
ADV. S.G. MARITZ
INSTRUCTED BY: VFV
Attorneys
FOR THE RESPONDENT:
ADV. M. FABRICIUS
INSTRUCTED BY:
Rossouw & Rossouw Inc.
DATE OF JUDGMENT: 11
February 2015
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
Case Number:
19740/2014
On 11 February
2015 before the Honourable MS Justice Potterill
In the matter
between:
SULZER PUMPS
(SOUTH AFRICA) PTY LTD
(Registration
Number:
1922/007245/07)
.........................................................................
APPLICANT
and
O AND M
ENGINEERING CC
(Registration
Number:
1996/029953/23)
....................................................................
RESPONDENT
ORDER
HAVING HEARD counsel
for the applicant, and having considered the papers filed of record,
it is herewith ordered as follows:
1. That the
Respondent company be and is hereby placed under provisional
winding-up;
2. That all persons
who have a legitimate interest are called upon to put forward their
reasons why this Court should not order
the final winding-up of the
Respondent company on 6 March 2015 at 10h00;
3. That a copy of
this order be forthwith served on the Respondent company at its
registered office and be published in the Government
Gazette and in
the Beeld Newspaper;
4. That a copy of
this order be forthwith forwarded to each known creditor by prepaid
registered post.
By order
REGISTRAR