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2015
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[2015] ZAGPPHC 78
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LA Sport 4X4 Outdoor CC and Another v Broadsword Trading 20 (Pty) Limited and Others (A513/2013) [2015] ZAGPPHC 78 (26 February 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE NO:
A513/2013
DATE: 26 FEBRUARY
2015
REPORTABLE
OF INTEREST TO
OTHER JUDGES
In the matter
between:
LA
SPORT 4X4 OUTDOOR
CC
.............................................................................................
First
Appellant
TJM
PRODUCTS SA (PTY)
LIMITED
.............................................................................
Second
Appellant
and
BROADSWORD
TRADING 20 (PTY)
LIMITED
.............................................................
First
Respondent
JOHAN
CHRISTIAAN BEER
NO
..................................................................................
Second
Respondent
COMPANIES AND
INTELLECTUAL PROPERTY
COMMISSION
.....................................................................................................................
Third
Respondent
JUDGMENT
Tuchten
J
:
1.
On 11 April 2013, the board of the first respondent passed a
resolution pursuant to s 129(1) of the Companies Act, 71 of 2008
(the
new
Companies Act), voluntarily
beginning business rescue proceedings
and placing the first respondent (the Company) under supervision.
Supervision means, according
to
s 128(1
)(i),
1
the oversight imposed on a company during its business rescue
proceedings. Certain procedures for filing and publishing the
resolution
are required under
s 129
to bring the business rescue
process into operation. These were carried out. The second respondent
(the Practitioner) was appointed
as the Company’s business
rescue practitioner.
2. Under
s 130(1
)(a)(ii), any “affected person” may apply to court for an
order setting aside such a resolution on the ground that
there
appears to be no reasonable prospect for rescuing the company. Under
s 128(1)(a)
an affected person includes a creditor.
3. The appellants
applied to set aside the resolution and for certain consequential
relief. That application was dismissed with
costs in the court below
(Makgoba J). The present appeal, with the leave of the learned judge,
is against that order. The third
respondent abided in the court below
and did not participate in the appeal. I shall describe the first and
second respondents collectively
as the respondents.
4. The appellants
were the owners of a business called LA Sport. They concluded three
agreements with the Company during the period
19 to 26 February 2010.
These were a sale of business agreement, a trademark license
agreement and a dealership agreement. Taken
together, the agreements
enabled the Company to operate as an LA Sport outlet in Pretoria.
5. The appellants
are controlled by Mr and Mrs Lewis, who are husband and wife. The
business of LA Sport is to design, manufacture,
import and market a
comprehensive range of off-road, aftermarket accessories and
equipment, camping gear and the like directed
at those who seek to
participate in off-road experiences within Africa. To this end, the
applicants offer prospective dealers a
franchise to conduct business
underthe LA Sport brand. Between 2003 and 2013, seventeen new LA
Sport dealerships opened in South
Africa. The papers demonstrate the
LA Sport is a valuable brand and that Mr and Mrs Lewis spent much
time, energy and money in
building up their brand.
6. Mr and Mrs Lewis
represented the appellants in the negotiations toward the conclusion
of the three agreements. The Company was
represented in these
negotiations by Mr and Mrs Duvenhage. Mr and Mrs Lewis took
considerable pains before deciding that Mr and
Mrs Duvenhage were the
right persons to take over the Pretoria outlet which they regarded as
the flagship dealership of their operation.
7. The purpose of
the sale agreement was to sell to the Company the business of LA
Sport Pretoria which had previously been operated
by Mr and Mrs Lewis
themselves. The trade mark agreement embodied the terms on which the
first respondent was licensed to use certain
trade marks owned by the
appellants. The dealership embodied the terms on which the
respondents would buy the applicants’
products for resale to
the public.
8. On 11 April 2013,
as I have said, the directors of the first respondent resolved that
the Company begin business rescue proceedings.
Business rescue
proceedings in relation to the first respondent are deemed to have
commenced on 15 April 2013, the date upon which
the resolution was
filed with the third respondent.
9. The appellants
claim that at the time business rescue proceedings commenced the
Company was indebted to them in the sums firstly
of R300 000, being
the balance of the purchase price under the sale agreement and
secondly of R160 863,11 for product sold and
delivered by the
appellants to the Company pursuant to the dealership agreement.
Clause 6.1 of the dealership agreement obliged
the Company to pay for
product so sold and delivered to it within seven days of delivery.
Payment of the amount in question was
alleged to be overdue.
10. The answering
affidavit of the respondents was deposed to by the Practitioner.
Neither Mr nor Mrs Duvenhage made affidavits
on behalf of the
Company, although they and not the Practitioner manifestly had
personal knowledge of the management of the Company’s
business
before the inception of business rescue.
11. It is in this
context that the Practitioner, on behalf of the Company, placed in
issue the question whether the appellants were
creditors of the
Company. The respondents did not dispute that the debts in question
were incurred by the Company. There are two
grounds upon which the
respondents say the debts have been discharged. The first is that
they were extinguished by set off as allegedly
demonstrated by the
figures in a document described by the Practitioner as a statement
emanating from the appellants.
12. The appellants’
answer to this first defence is that the Practitioner has
misunderstood the nature of the document which
was, according to the
appellants, not a statement of account at all but an email sent back
and forth between the parties in an
attempt to reconcile their
respective records. The appellants, through Mrs Annalie Lewis in
particular, have explained why they
say that the document in
question, which reflects the Company’s calculations, is
inaccurate. The inferences drawn by the
Practitioner from this
document do not, in the face of the detailed evidence of Mrs Lewis,
raise a genuine dispute.
13. The second
defence is that as discovered by the Practitioner, certain of the
purchases made under the dealership agreement were
paid for by the
Company using a credit card issued by Absa; therefore, the
respondents say, Absa is liable to the appellants and
not the
Company. In answer to this, Mrs Lewis explained that this credit card
was only honoured by Absa in relation to the Company
as long as there
were funds in the account of the Company linked to this credit card
and that when the debt in question fell due,
there were no funds in
the linked account to pay for product bought by and delivered to the
Company. Once again, the inferences
drawn by the Practitioner in
relation to this second defence cannot stand in the face of the
evidence of Mrs Lewis.
14. The appellants
have thus, in my view, proven on the papers that the Company is
indebted to them as alleged and the evidence
of the Practitioner to
the contrary is rejected. The appellants have therefore established
that they are creditors of the Company
and thus affected persons for
purposes of
s 130(1).
The appellants accordingly had standing to
bring their application before the court below.
15. On 17 April
2013, the first appellant sent a letter to the first respondent in
which it demanded payment by the first respondent
of the sum of R300
000 outstanding under the sale agreement. The first respondent did
not pay the amount demanded and the first
appellant elected to cancel
the sale agreement. This election was communicated to the first
respondent on 25 April 2013.
16. Clause 16 of the
dealership agreement entitled the appellants summarily to terminate
the dealership agreement for breach by
the Company. They elected to
do so and communicated their election so to do to the first
respondent on 25 April 2013.
17. Clause 2 of the
dealership agreement and clause 3 of the license agreement entitled
the appellants to terminate the respective
agreements upon
termination of any one of them. So a termination of the dealership
agreement in principle entitled the appellants
to terminate the
license agreement. As a result of the termination of the dealership
agreement, the appellants contend, the license
agreement also
terminated on 25 April 2013.
18. One of the
issues before us is whether the appellants were entitled to approach
the court below to set aside the resolution
and for the other relief
they sought without obtaining the written consent of the Practitioner
or the leave of the court granted
under
s 133(1).
0i
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19. This question
was not raised in the answering affidavit but was raised in the court
below in counsel’s heads of argument.
It was not alluded to by
the court below in its judgment. The point was raised in the appeal
in supplementary heads of argument
filed by counsel for the
respondents. I consider that this question, one of law, is adequately
before us. Counsel for the appellants
were ready to deal with the
question.
20.
Further questions of substance in this appeal as raised by the
respondents and the judgment of the court below are whether
s 133(3)
suspends the right of a creditor of a company in business rescue to
give notice to the company in business rescue to remedy a breach,
preparatory to proceeding against the company for enforcement of such
creditor’s claim; whether the notices sent by the appellants
constitute legal process as contemplated in
s 133(1)
; and whether the
rights which flowed from the three agreements constitute
property
in the lawful possession of
the
first respondent, in which case
s 134(1)(c)
would suspend any right
of the appellants in respect of such property.
21. In addition, the
Practitioner has stated that he intends to invoke the provisions of
s
136(2)(b)
to cancel the obligation of the company in relation to what
was called in argument a rouwkoop clause in the sale agreement.
22. I proceed to
deal with these questions.
23.
Sections 133(1)
and (3) respectively read as follows:
(1) During business
rescue proceedings, no legal proceeding, including enforcement
action, against the company, or in relation to
any property belonging
to the company, or lawfully in its possession, may be commenced or
proceeded with in any forum, except-
(a) with the written
consent of the practitioner;
(b) with the leave
of the court and in accordance with any terms the court considers
suitable;
(c) as a set-off
against any claim made by the company in any legal proceedings,
irrespective of whether those proceedings commenced
before or after
the business rescue proceedings began;
(d) criminal
proceedings against the company or any of its directors or officers;
(e) proceedings
concerning any property or right over which the company exercises the
powers of a trustee; or
(f) proceedings by a
regulatory authority in the execution of its duties after written
notification to the business rescue practitioner.
...
(3) If any right to
commence proceedings or otherwise assert a claim against a company is
subject to a time limit, the measurement
of that time must be
suspended during the company's business rescue proceedings.
24.
Section 130(1
)(a)(ii) reads:
Subject to
subsection (2), at any time after the adoption of a resolution in
terms of
section 129
, until the adoption of a business rescue plan in
terms of
section 152
, an affected person may apply to a court for an
order-
(a) setting aside
the resolution, on the grounds that-
(i)...
(ii) there is no
reasonable prospect for rescuing the company;
(iii)...
25. Subsections (3),
(4) and (5) of
s 130
provide:
(3) An applicant in
terms of subsection (1) must-
(a) serve a copy of
the application on the company and the Commission; and
(b) notify each
affected person of the application in the prescribed manner.
(4) Each affected
person has a right to participate in the hearing of an application in
terms of this section.
(5) When considering
an application in terms of subsection (1) (a) to set aside the
company's resolution, the court may-
(a) set aside the
resolution-
(i) on any grounds
set out in subsection (1); or
(ii) if, having
regard to all of the evidence, the court considers that it is
otherwise just and equitable to do so;
(b) afford the
practitioner sufficient time to form an opinion whether or not-
(i) the company
appears to be financially distressed; or
(ii) there is a
reasonable prospect of rescuing the company, and after receiving a
report from the practitioner, may set aside the
company's resolution
if the court concludes that the company is not financially
distressed, or there is no reasonable prospect
of rescuing the
company; and
(c) if it makes an
order under paragraph (a) or (b) setting aside the company's
resolution, may make any further necessary and appropriate
order,
including-
(i) an order placing
the company under liquidation; or
(ii) if the court
has found that there were no reasonable grounds for believing that
the company would be unlikely to pay all of
its debts as they became
due and payable, an order of costs against any director who voted in
favour of the resolution to commence
business rescue proceedings,
unless the court is satisfied that the director acted in good faith
and on the basis of information
that the director was entitled to
rely upon in terms of
section 76
(4) and (5).
0i
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26.
Counsel for the respondents submitted that the failure to obtain the
leave of the court below was fatally defective. Counsel
submitted
that the leave of the court under
s 133(1)
requires a formal
application to court. That was held to be the case in
Merchant
West Working Capital Solutions (Pty) Ltd v Advanced Technologies and
Engineering Company (Pty) Ltd and Another
(13/12406)
[2013] ZAGPJHC 109 para 67 where it was held:
“
Leave
of the court” as laid down in
section 133(1)(b)
cannot be a
simple one that can be advanced from the bar. Such leave in my view
and finding must be motivated in the same way,
just like, for
instance, as criteria for departure from the Rules of Court to
justify a prayer for urgency. A court being asked
for leave to
proceed against a company under business rescue, thus during a
moratorium, must receive a well motivated application
for that so
that it could apply its mind to the facts and the law if necessary
and then be in a position to make a ruling in accordance
with any
terms it may consider suitable in the peculiar circumstances,
[footnotes omitted]
27. I cannot agree
that in every case where a court is asked for leave to proceed
against a company under business rescue, a formal
application is
required. There is no such requirement in
s 133(1).
Under s 173 of
the Constitution, the High Courts have the inherent power to protect
and regulate their own process. It must always
be remembered that the
primary role of the courts, which like all other organs of state must
promote and protect the rights and
values enshrined in the
Constitution, is to decide disputes brought before them on their
merits. Procedural mechanisms are not
ends in themselves but tools to
achieve justice. A court should be slow, in my view, to interpret a
statutory measure so as unnecessarily
to abridge its own power to do
justice.
28.
A whole spectrum of proceedings is possible against companies under
business rescue. In some instances, perhaps even many such
instances,
a court would not be able to judge whether or not to grant leave to
an applicant to proceed against the company without
having factual
material and sound legal contentions placed before it by way of a
formal application. In such a case, the “well
motivated
application” referred to in
Merchant
West
para
67 would be necessary so that the court could do justice to the issue
before it. At the far end of the spectrum, however, are
those cases
which, on the information before the court when the request for
relaxation is made, so self-evidently require that
the moratorium be
relaxed that no additional material is required.
29. Whenever
relaxation is sought, the rights of the company, affected persons and
the practitioner must be protected. It is for
the protection of the
interests of those persons that the moratorium regime was enacted.
This may require an adjournment of the
proceedings to enable these
persons to consider their positions or to place additional material
before the court. In other cases,
the opposition to the request for
relaxation will be self-evidently frivolous and lacking in substance,
an exercise in empty formalism,
designed cynically to perpetuate the
advantages of immunity from the normal processes of the law which a
company can secure for
itself under the business rescue regime in the
new
Companies Act by
a stroke of its own pen, and no more.
30. In such cases,
in my view, the discretion of the court to do justice should be
preserved. This is not an invitation to litigants
to approach the
question of relaxation in a casual manner. The approach I favour
seeks to strike a balance between the rights of
the competing
litigants and to ensure that the power of the court to do justice in
a deserving case is not impeded by a formalism
which serves no
purpose.
31.
This approach is consistent, I think, with what I wrote in
Balemi
Civils (Pty) Limited v Molefe Attorneys
(A308/14)
[2014] ZAGPPHC 704 (16 September 2014), a judgment of a court over
which my brother Msimeki J presided, at para 19:
At the other end of
that spectrum are those infractions of the rules which do not appear
to have caused any prejudice and are raised
for the most part for
entirely tactical reasons. In my view, a court ought to be slow to
lend its muscle to this kind of tactical
manoeuvring. The rules exist
for the court, not the court for the rules. Each instance of
non-compliance should be evaluated on
its own facts and a
determination made whether the case requires a formal application for
condonation or other procedural indulgence
or whether the
non-compliance should summarily be disposed of. [footnote omitted]
32. The present is
to my mind a case where the leave of the court to proceed with the
merits of the case should, assuming such leave
is required,
self-evidently be granted. The issues in relation to the relaxation
of the moratorium are the same as those in the
application itself
which served before the court below. When counsel for the respondents
was pressed to advance grounds for the
formulation of “such
terms” contemplated in
s 133(1)(b)
, all counsel could come up
with was that creditors should have been given notice of the
application. But this overlooks that in
the present case all affected
persons, a class which includes creditors, were notified of the
application pursuant to the provisions
of
s 131(2)(b).
Creditors were
thus notified. None of them elected to join in the application.
33. Moreover,
neitherthe Company northe Practitioner, forwhose benefit the
moratorium regime in
s 133(1)
was enacted, sought in their answering
affidavit the alleged benefits of the moratorium for which counsel
now contends. The point
is an afterthought, the product of counsel’s
ingenuity, and nothing more.
34. Finally, on this
point: the judgment of the learned judge below granting leave to
appeal to this court is before us. There is
no suggestion in the
judgment granting leave to appeal that the respondents contended that
leave to appeal should be refused because
the application to the
court below had been doomed to failure for want of compliance with
s
133(1).
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35. There are two
other grounds upon which this point must be disposed of against the
respondents. Firstly, on the express wording
of
s 130(1)
, the right
to apply to court is conferred on affected persons. There is no
textual indication that this right is subject to the
moratorium
regime in
s 133(1).
There is good reason why the
s 130(1)
right
should not be so subject.
36. The power to
trigger the operation of the moratorium rests entirely with the board
of the company under
s 129.
It need consult no one before it does so.
The board will, in the vast majority of cases, consider only the
company’s own
interests when it does so. The potential for
abuse is manifest. The right to approach the court is an essential
counterweight to
the curtailment of affected persons’ rights
licensed by
s 129.
The purpose of the measures does not require
s
130(1)
to be read subject to
s 133(1).
Indeed, the contrary is
correct.
37.
Counsel for the respondents submitted that not only was the consent
of the practitioner or the leave of the court required before
an
application to set aside a
s 129(1)
resolution could be brought but
that an affected person aggrieved by a
s 129(1)
resolution was not
entitled to approach the court for leave to proceed under
s 133(1)
until the prospective applicant had obtained leave to bring its
application for leave. Counsel was even able to refer us to a case
where that procedure was adopted.
2
38.
But the logic of the literalism underlying counsel’s submission
is that the application for leave to bring an application
for leave
is itself, too, a legal proceeding, forthe bringing of which consent
of the practitioner or leave of the court would
be required; and so
on,
ad infinitum.
39.
These manifest absurdities are overcome if one applies the principle
that a court interpreting a statute must have regard to
the purpose
of the measure.
3
The purpose of the
s 133(1)
moratorium is, broadly, to advance the
business rescue process. The interests which the measure seeks to
protect are those of affected
persons as defined in
s 128(1
)(a), the
company itself and the practitioner. The purpose of the exception to
the moratorium created by the power vested in the
court to allow
legal proceedings to be instituted or to continue is to enable a
balance to be struck between the rights of the
individual affected
person on the one hand and the general body of those persons I have
mentioned on the other. This purpose is
achieved if the members of
this general body are afforded an opportunity of being heard on the
proposed relaxation of the moratorium.
They need only be heard once.
There is therefore no purpose served by an application for leave to
bring an application for relaxation.
An application for leave to
bring an application for relaxation is therefore not required by
s
131(1).
Indeed, such an application serves no purpose whatsoever.
40. Secondly, I have
mentioned that the point was argued before the court below. Although
the point must have been present to the
mind of the learned judge
below, he did not deal with it but proceeded to determine the
application on its merits. The court below
must therefore be taken to
have granted any
s 133(1)
permission which might, against my
reasoning, have been required.
41 I
therefore hold that no consent or leave is required under
s 133(1)
to
bring an application to set aside, under
s 130(1)
, a resolution taken
under
s 129(1)
and that if such leave or consent were against my
reasoning in fact required, it was impliedly granted.
42 I
turn to the question whether the rights of the appellants to give
notice under and cancel the three contracts
were suspended by the
provisions of
s 133(3).
In its judgment, the court below found in
favour of the respondents on this issue, reasoning that the notices
of termination given
by the appellants after the commencement of
business rescue proceedings were ineffectual by virtue of the
provisions of
s 13
3(3) and that the purported cancellations by the
appellants were similarly ineffectual because they constituted legal
process which
falls under the moratorium imposed on legal action
against the company.
43
I think the reasoning of the court below incorrectly equates a
juristic act with legal process.
Section 133(1)
, which imposes the
general moratorium which flows from the commencement of business
rescue proceedings, limits the right to commence
or proceed with
legal process, not the performance of juristic acts. My view is
fortified by the reasoning in
Van
Zyl v Evodia Trust (Edms) Bpk
1983
3 SA 394
T 399B, where the court was called upon to interpret the
meaning of legal proceedings in
s 13
of the old Companies Act, 61 of
1973, the predecessor to the new Companies Act and came to a similar
conclusion.
4
Moreover, s 133(1) limits the right of a creditor to commence or
proceed with legal proceedings
in
any forum.
This
is a further indication in support of the construction I favour. The
dispatch of letters of demand, the making of elections
to cancel a
contract and the communication of such elections do not take place
within a forum.
44. Viewed in that
light, it is in my view clear that notices and juristic acts such as
those at issue in this case do not fall
within the purview of s
133(3).
45.
As I see it, moreover, s 133(3) does not deal with the running of a
time period provided by contract to remedy a breach before
a right to
cancel accrues. It refers to the principle, which may broadly be
described as prescription, that in certain circumstances
the claim of
a creditor which does not institute proceedings against its debtor
within a certain time will lapse or become unenforceable.
5
46. The next
question to be considered is whether the rights of the appellants to
compel performance under and to cancel the three
contracts constitute
property in the possession of the Company as contemplated by s
134(1)(c). Section 134 provides, sv Protection
of property interests:
(1) Subject to
subsections (2) and (3), during a company's business rescue
proceedings-
(a) the company may
dispose, or agree to dispose, of property only-
(i) in the ordinary
course of its business;
(ii) in a bona fide
transaction at arm's length for fair value approved in advance and in
writing by the practitioner; or
(iii) in a
transaction contemplated within, and undertaken as part of the
implementation of, a business rescue plan that has been
approved in
terms of section 152;
(b) any person who,
as a result of an agreement made in the ordinary course of the
company's business before the business rescue
proceedings began, is
in lawful possession of any property owned by the company may
continue to exercise any right in respect of
that property as
contemplated in that agreement, subject to section 136; and
(c) despite any
provision of an agreement to the contrary, no person may exercise any
right in respect of any property in the lawful
possession of the
company, irrespective of whether the property is owned by the
company, except to the extent that the practitioner
consents in
writing.
(2) The practitioner
may not unreasonably withhold consent in terms of subsection (1) (c),
having regard to-
(a) the purposes of
this Chapter;
(b) the
circumstances of the company; and
(c) the nature of
the property, and the rights claimed in respect of it.
(3) If, during a
company's business rescue proceedings, the company wishes to dispose
of any property over which another person
has any security or title
interest, the company must-
(a) obtain the prior
consent of that other person, unless the proceeds of the disposal
would be sufficient to fully discharge the
indebtedness protected by
that person's security or title interest; and
(b) promptly-
(i) pay to that
other person the sale proceeds attributable to that property up to
the amount of the company's indebtedness to that
other person; or
(ii) provide
security for the amount of those proceeds, to the reasonable
satisfaction of that other person.
47.
The issue at this level is whether rights under a contract constitute
property in the
possession of the Company
for
the purposes of s 134(1)(c). The short answer is that they do not.
Even if the rights of the appellants under the three contracts
constitute property for the purposes of the subsection, which I
doubt, they are not property in the possession of the Company.
This
point, too, must be answered against the respondents.
48.
The court below found that the appellants’ application was
geared at taking over the Company and was thus not
bona
fide.
The
applicants were however not contemplating taking over the Company.
The appellants contemplated taking back the
business
of
the Company which it sold to the Company under the sale agreement.
The commercial reason the appellants were contemplating taking
proceedings for the return of the business was that the Company was
not able to pay its debts and Mr and Mrs Lewis feared that
the
parlous financial state of the Company impacted adversely on their
brand. The appellants have a right in contract to take back
the
business. Clause 19.2 of the sale agreement confers upon the
appellants the right, at its election,
... to cancel the
agreement... and to claim retransfer of the Business, and to retain
all monies paid thusfar in respect of the
purchase price as agreed
damages.
49. I cannot agree
that a desire to get their business back and an application to put an
end to business rescue proceedings to achieve
that end demonstrates a
lack of good faith on the part of the appellants. Whetherthe
appellants should succeed in enforcing those
rights is another
matter, one which does not arise for consideration in this appeal.
50. Allied to this
question is whether the right to retain all monies paid toward the
purchase price imposes a corresponding obligation
of the Company
which, under s 136(2), the Practitioner might suspend for the
duration of the business rescue proceedings or which
a court might be
persuaded to cancel. Perhaps it is. I express no opinion on the
point. But whether it is or not is similarly irrelevant
to the issues
before us on appeal.
51. The respondents
were permitted to put up to us evidence to show that a business plan
has been adopted with the support of most
of the creditors, that the
Company is meeting its commitments under the plan and that within a
short period, the Company might
well be rescued, which would lead to
the termination of the business rescue process. It was argued by
counsel for the respondents
that in these circumstances the business
rescue process should be allowed to proceed to a successful
conclusion. But as I have
found, the Company is not presently
carrying on business legitimately. Because the three agreements have
been lawfully cancelled,
the Company may not trade under the
appellants’ brand. There is no suggestion in the evidence
before us that if the Company
stops using the appellants’
brand, it can trade profitably.
52. Section 130(1
)(a)(ii) requires that an applicant who applies to set aside a s
129(1) resolution must establish that there is
no reasonable prospect
of rescuing the company. Where, as in the present case, the only way
the Company can be rescued is by trading
unlawfully, it cannot be
said that such a reasonable prospect exists.
53. Section
130(5)(c) empowers a court which decides to set aside the resolution
taken under s 129(1) to make any further and appropriate
orders. In
my view the orders sought by the appellants in their notice of motion
before the court below are all, in substance,
both necessary and
appropriate.
54. The appeal
should therefore in my view succeed and costs should follow the
result. I would propose the following order:
1 The appeal
succeeds. The order of the court below is set aside and replaced with
the following:
A The resolution
passed under s 129 of the Companies Act, 71 of 2008 (the new
Companies Act) by
the board of the first respondent on 11 April 2013
voluntarily to begin business rescue proceedings is hereby set aside
under
s 130(1
)(a)(ii) of the new
Companies Act;
B
The appointment of
the second respondent as the business rescue practitioner of the
first respondent is, hereby set aside;
C It is declared
that the following contracts have been lawfully cancelled by the
appellants: the sale agreement, annexure LA6 to
the founding
affidavit; the trademark licensing agreement, annexure LA8 to the
founding affidavit; and the dealership agreement,
annexure LA9 to the
founding affidavit.
2 The first
respondent must pay the costs of the appellants both in relation to
the proceedings in the court below and to the appeal,
on the basis
that the employment of both senior and junior counsel was justified.
NB Tuchten
Judge of the High
Court
26 February 2015
I agree. It is so
ordered.
C Pretorius
Judge of the High
Court
26 February 2015
I agree.
MW Msimeki
Judge of the High
Court
26 February 20l5
For the appellants:
Adv BH Swart SC and
Adv JL Myburgh
Instructed by
Prinsloo Bekker Attorneys,
Pretoria
For the first and
second respondents: Adv LK van der Men/ve
Instructed by Cawood
Attorneys,
Pretoria
1
All
references to statutory provisions are to the new
Companies Act,
unless
otherwise stated.
2
Niemand
v Smith’s Dairy CC and Another
NWHC
case no. 593/2012
3
Dexgroup
(Pty) Ltd v Trustco Group International (Pty) Ltd and Others
2013
6 SA 520
SCA para 16, referring to the cases of
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
2009
4 SA 399
SCA and
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
4 SA 593
SCA which preceded it
4
The
reasoning in
Van
Zyl'
s
case was adopted in
Lister
Garment Corporation (Pty) Ltd
v
Wallace
NO
1992
2 SA 722
D 723G-H and
Merchant
West, supra,
paras
63-64.
Henochsberg
on
the new
Companies Act (looseleaf
ed, commentary on
s 133)
questions
whetherthe phrase
legal
proceedings
includes
quasi-judicial proceedings such as arbitrations and proceedings
before statutory tribunals but does not argue that the
phrase should
include letters of demand or juristic acts such as elections to
cancel and the communication of such elections.
5
This
view is shared by Henochsberg,
op
cit,
in
the note to
s 133(3).