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[2015] ZAFSHC 124
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Knipe and Others v Noordman NO and Others (4817/2014) [2015] ZAFSHC 124 (25 June 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION BLOEMFONTEIN
Case
no: 4817/2014
In the
matter between:
JDJ
KNIPE
First
Applicant
ABJ
KNIPE
Second
Applicant
JMD
VIGNE
Third
Applicant
and
OA
NOORDMAN NO
First
Respondent
CB
ST CLAIR COOPER NO
Second
Respondent
SM
RAMPORORO NO
Third
Respondent
(in their capacity as
provisional liquidators
of Kameelhoek (Pty) Ltd)
OA
NOORDMAN NO
Fourth
Respondent
CB
ST CLAIR COOPER
NO
Fifth
Respondent
SM
RAMPORORO
NO
Sixth
Respondent
(in their capacity as
provisional liquidators
of
Schaapplaatz 978 (Pty) Ltd)
CAROL
JESSIE KATHLEEN LOTZ
Seventh
Respondent
ROBERT
PETRUS JANSEN KNIPE
Eighth
Respondent
THE COMPANIES AND
INTELLECTUAL
PROPERTY
COMMISSION
Ninth
Respondent
JUDGMENT
BY
:
G.
J. M. WRIGHT, AJ
HEARD
ON:
19
MARCH 2015
DELIVERED
ON:
25
JUNE 2015
INTRODUCTION
[1] This is an
application for the business rescue of two companies, Kameelhoek
(Pty) Ltd and Schaapplaatz 978 (Pty) Ltd (“the
companies”).
The launching of such an application may present as an innocuous
fact. However, for these two companies the
application is just one
instalment in a long line of bitter and acrimonious litigation
between siblings.
[2] Mr Henry Bazzett
Louis John Knipe (now deceased) was a shrewd farmer and businessman.
His children (known throughout various
prior litigation as Johnny,
Andre, Jackie, Carol and Pieter) were the beneficiaries of trusts
administered by the deceased. After
his death the deceased’s
wife (the children’s mother) took over as trustee. Mrs Knipe
terminated the trusts during
2009 and allocated the assets of the
trusts amongst the siblings equally. These assets included the shares
in the two companies.
[3] During their
existence the trusts held shares in various companies, amongst others
the two companies that form the subject of
this application. Both
companies were finally liquidated by order of this court on 27 June
2013. The process of liquidating the
companies has not been finally
concluded. In order to better understand the reasons why the process
of liquidation has not been
proceeding at the pace one would expect,
it is necessary to shortly refer to some of the litigation leading up
to the present application
(i) Mrs
Knipe applied for the liquidation of the two companies. On 23 June
2011 Jordaan J dismissed the applications.
(ii)
Mrs Knipe appealed against the dismissal of the liquidation
applications. On 23 July 2012 a Full Bench of
this Court granted
orders for the provisional winding up of the two companies.
(iii) The
return date of the provisional orders was extended various times to
afford parties and shareholders the opportunity
to oppose and / or be
joined as intervening parties.
(iv) On 27
June 2013 the companies were placed in final liquidation after Daffue
J confirmed the provisional winding-up
orders.
(v) On 13
September 2013 an application for leave to appeal against the final
orders of liquidation was argued. Leave
was refused on 25 September
2013.
(vi) On 24
October 2013 some of the shareholders lodged a petition to the
Supreme Court of Appeal, which petition was
refused on 5 February
2014.
(vii) Some of the
shareholders of the companies brought an application for the review
and setting aside of the general meeting
of creditors and members of
the two companies that was held during June 2013. The review was
granted and the meeting set aside.
An application for leave to appeal
has since been lodged. The matter is to my knowledge still pending.
(viii) The provisional
liquidators of the companies applied for leave and authority to sell
the property belonging to the companies
as soon as possible. On 14
August 2014 relief was granted in favour of the provisional
liquidators. Leave was later granted to
appeal against that decision.
The appeal itself is yet to be heard.
[4]
The Applicants in this application for business rescue are three of
the Knipe siblings, namely Johnny, Andre and Jackie. The
other two
siblings, Carol and Pieter, were cited as Seventh and Eighth
Respondents respectively. The provisional liquidators of
the two
companies in liquidation have been cited in their respective
representative capacities as First to Sixth Respondents. The
Companies and Intellectual Property Commission (“CIPRO”)
was cited as Ninth Respondent. The First to Eighth Respondents
are
opposing the application.
POWERS OF
PROVISIONAL LIQUIDATORS
[5] The provisional
liquidators of the companies (First to Sixth Respondents) requested
that they be authorised, to the extent necessary,
to oppose the
application on behalf of the two liquidated companies. Section
386(4)(a), read with section 386(5), of the Companies
Act, 61 of
1973, empowers a liquidator to bring or defend legal proceedings on
behalf of the company. None of the other parties
presented with oral
arguments against extending the powers of the provisional liquidators
to include the authority to oppose this
application. In their
replying affidavit the Applicants made it clear however that the
liquidators may be entitled to oppose this
application, but that
their powers may be extended for such limited purpose only.
[6]
In as far as it is necessary, the request by the First to Sixth
Respondents for leave to oppose this application is granted.
The
basis for the provisional liquidators opposing the application for
business rescue is twofold in essence. It is firstly submitted
that
business rescue proceedings are not competent as final orders of
liquidations have been granted. Secondly the liquidators
submit that
the Applicants had failed to make out a proper case for business
rescue.
SHAREHOLDING RATIO
[7] A serious dispute
developed between the siblings as to the exact ratio in which the
shares are held by the siblings. The present
application was argued
on the same date as the application relating to a determination of
the shareholding ratio. During argument
Mr Newton submitted on behalf
of the Applicants that, should the Applicants not be successful in
that application, this application
for business rescue will not serve
any purpose.
[8]
Following that submission the present application may be summarily
dismissed as the Applicants were indeed not successful in
the
shareholding application. In light of the manner in which all
litigation regarding these two companies and the liquidation
have so
far been driven by the siblings, I find it prudent however to deal
with the matter more comprehensively.
PURPOSE OF BUSINESS
RESCUE PROCEEDINGS
[9] Business recue in
general contemplates two goals. The primary goal is to facilitate the
continued existence of the company in
a state of solvency. The second
goal is provided for as an alternative in the event that achievement
of the primary goal proves
not to be viable and is directed at
facilitating a better return for creditors or shareholders than would
result from immediate
liquidation (See
Oakdene Square
Properties v Farm Bothasfontein (Kyalami)
2013 (4) SA
539
(SCA) at 549 G – H). In this regard the Applicants contend
that the companies are “comfortably” factually solvent
and should be able to continue with their business.
[10] If the Applicants
feel so strongly about rescuing the companies and proceeding with the
business of the companies, I find it
inexplicable that they waited
this long to launch an application for business rescue. The companies
have been in liquidation since
the provisional order was granted on
23 July 2012. Since then, the Applicants engaged in a variety of
litigation concerning the
companies. There was more than enough time
and opportunity to apply for business rescue, if indeed the
Applicants seriously considered
that to be a viable option.
[11]
In a recent SCA judgment it was stated that
“
a
court can dismiss any application for business rescue that is not
genuine and bona fide or which does not establish that the benefits
of a successful business rescue will be achieved
”
.
See:
Richter
v ABSA Bank Ltd
(20181/2014)
[2015] ZASCA 100
(1 June 2015).
TIMING OF
APPLICATION FOR BUSINESS RESCUE
[12] As final orders of
liquidation have already been granted, the question arose as to
whether it is still possible and / or permissible
to apply for
business rescue. At the time that the present application was argued,
different divisions of the high court dealt
with the issue in
different ways. For purposes of arguing the application, counsel for
the various parties in the present matter
found it relatively easy to
find one or more cases supporting their respective arguments in this
regard. So it was submitted on
behalf of the Applicants that the fact
that final winding up orders have already been granted in respect of
both companies is no
bar to the relief sought since final liquidators
have not yet been appointed. The Respondents on the other hand argued
that business
rescue proceedings are not competent after a final
liquidation order has been granted. I proceed to deal with the cases
used by
the parties initially used in their arguments.
[13]
In
Richter
v Bloempro CC and Others
2014 (6) SA 38
(GP) Bam J considered the question
“
w
hether
it is in law permissible, or possible, to grant business
rescue
procedure after a final liquidation order was granted
”
.
In paragraph 17 he comes to the conclusion that
“
business
rescue proceedings and a final liquidation order are two different
concepts that are incompatible and separate considerations
that
cannot coexist
”
.
He proceeds to find that –
“
It
also appears that, more specifically from the definition of ‘business
rescue’ and ‘financially distressed’
in ss 128(b)
and 128(f) respectively, that the legislature intended to provide for
business rescue proceedings before a final liquidation
order is
made
.”
[14] The matter was dealt
with from a different angle in other judgements such as
Absa
Bank Ltd v Summer Lodge (Pty) Ltd
2013 (5) SA 444
(GNP)
[judgment given by Makgoba J] and
Absa Bank Ltd v Summer Lodge
(Pty) Ltd
2014 (3) SA 90
(GP) [judgment given by Van Der Byl
AJ]. In the
Summer Lodge
cases an application to
provisionally liquidate the respondent company was still pending when
application was made for the business
rescue of the respondent
company. The courts had to adjudicate whether the subsequent business
rescue applications suspended the
liquidation proceedings and even
the mere application for a provisional winding-up order. The courts
therefore concerned themselves
with the interpretation of
section
131(6)
of the
Companies Act, 71 of 2008
. Van Der Byl AJ who initially
dealt with the application found that liquidation
proceedings
commence by the granting of a liquidation order, whether provisional
or final. This was in line with an argument that the words
“
liquidation proceedings
” only relate to the
actual process of winding-up, and that it excludes the process of
obtaining a winding-up order.
[15]
When Makgoba J later dealt with the
Summerwood
application, the learned judge found that the grammatical meaning of
the word ‘
liquidation’
“
is
the process of liquidating or of being liquidated which is again to
determine the liabilities and apportion the assets towards
discharging the indebtedness of the debtor
”
[2013
(5) SA 444
(GNP) at 446 F – G]. According to Makgoba J that
clearly suggests that the words “
liquidation
proceedings
”
are concerned with the actual process of winding-up after a
winding-up order has been granted. Both judges dealing with
the
Summerwood
cases in essence decided that an application for business rescue may
be launched after liquidation proceedings have commenced by
the
granting of a liquidation order, whether provisional or final.
[16]
The case of
Van
Staden v Angel Ozone Products
2013 (4) SA 630
(GNP) also dealt with a situation where an
application for the business rescue of a company was launched after a
liquidation order
had been issued. Legodi J considered the
distinctions between “
liquidation
proceedings
”
and “
winding-up
proceedings”.
He finds at 635 B that –
“
While
a distinction can be made between liquidation and winding-up
proceedings, for example, the former being legal proceedings
before a
court of law, and the latter being a process that is overseen by the
liquidators and the master, the winding-up proceedings
should in my
view be seen as a continuation of liquidation proceedings
.”
[17]
The learned judge then proceeds to explain at 635 D:
“
You
do not grant a final liquidation order and execute on it. You execute
on a confirmed liquidation and distribution account. Winding-up
proceedings are part and parcel of the liquidation proceedings.
”
Following
through on these
dicta
Legodi J converted the liquidation into business rescue proceedings,
thereby allowing the application for business rescue even
though a
final order of liquidation had already been granted.
[18] There is one
relevant reported case that has already been decided in this
Division. In the matter of
Van Zyl v Engelbrecht
2014
(5) SA 312
(FB) Lekale J associated himself with the reasoning in
Absa Bank Ltd v Summer Lodge (Pty) Ltd
2013 (5) SA 444
(GNP). At 315 D of his judgment Lekale J found that a company already
placed in liquidation by means of a winding-up order may
be placed
under business rescue proceedings.
[19]
The
Bloempro
matter dealt with above met with one more chapter in the courts, this
time in the Supreme Court of Appeal. The judgment in this
regard
followed after the present application has been argued and judgment
reserved. Legal representatives for the Applicants and
First to Sixth
Respondents acted responsibly by alerting me to the judgment. In the
matter of
Richter
v ABSA Bank Ltd
(20181/2014)
[2015] ZASCA 100
(1 June 2015) the Supreme Court of
Appeal had the opportunity to consider the question whether it is
competent to apply for business
recue in terms of
section 131(6)
of
the
Companies Act after
a final liquidation order has been granted
against a company. In the judgment Dambuza AJA notes that generally
“
liquidation
is the exhaustive process by which a company is brought to an end
”
(in
paragraph [9]). After analyzing the various stages in the
liquidation of a company, and the purpose and effect of each
relevant
stage, the Court concluded that an application for business rescue is
indeed competent after a final order of liquidation
has been granted.
This judgment brings an end to the different approaches in the
various divisions and I am bound by this decision.
[20]
In the premises, the Applicants were entitled to launch an
application for business rescue even though final orders of
liquidation
have been granted against both companies. This however
does not mean that the Applicants could ever have succeeded with the
relief
they claim.
BASIS FOR
LIQUIDATIONS
[21] Kameelhoek and
Schaapplaatz were liquidated on a just and equitable basis. When
granting the final winding-up orders Daffue
J dissected the status of
the relationship between the siblings and made the following
findings:
“
It
is apparent that members of the Knipe Family are at loggerheads with
each other and that a family feud of tremendous proportions
exists
which will not be terminated, whether or not final orders are granted
herein
.”
(at 57
C – D)
“
No
meaningful dialogue between the parties is possible. They cannot
approach any issue with open minds and in good faith
.”
(at 57
E – F).
[22]
Daffue J proceeded to came to the conclusion that
“
no
working relationship can ever be restored in such circumstances”
.
(at 69
G)
[23] The present
application for business rescue is premised on the assumption that
the First and Second Applicants (Johnny and
Andre) each hold 42% of
the shares in each company. The Applicants contended that, should the
shareholding ratio have been decided
in their favour, the companies
were imminently capable of restoration to full functionality. The
reason for this would have been
that they were then controlled by
directors and shareholders holding a clear majority of 92% of the
shares. Furthermore, the Applicants
shall then be in a position to
raise sufficient finance to (i) purchase Carol’
s 8%
shareholding and (ii) discharge all of the companies’
liabilities.
[24] The Applicants’
application for an order declaring their version of the shareholding
ratio to be the correct one, has
failed. The counter-application
which was brought in that matter was granted and it was in essence
ordered that the registers of
members of the two companies be
rectified so as to show an equal shareholding ratio amongst all the
siblings. In the scenario where
the siblings hold equal shares,
business rescue proceedings were always doomed to fail as the
shareholders will be unable to work
together towards a successful
running of the businesses of the companies. In at least two previous
judgments it had been found
that there is an irreparable breakdown in
the relationship between the shareholders. The contents of the
various affidavits filed
in this business rescue application, as well
as in the related shareholding application, are further proof of the
irreconcilable
differences between the siblings. Even before the
present applicant had been launched, courts have considered whether
business
rescue should not be ordered for both companies. Daffue J
dealt with the question, but came to the conclusions that are too
many
factual disputes, especially relating to the shareholding issue.
See
Knipe and Others v Kameelhoek (Pty) Ltd and Another
2014 (1) SA 52
(FB) at paragraph 47.
[25]
It is against this background that the Applicants quite correctly
conceded that, should they fail to obtain the necessary relief
regarding the shareholding issue in their favour, the application for
business rescue is not feasible. What raises an eyebrow though,
is
the fact that the Applicants (with full knowledge of the many hurdles
that they have to overcome in order to succeed with any
application
for business rescue) still chose to (i) wait this long to apply for
business rescue and (ii) then launch this application
before
ascertaining the shareholding ratio.
REQUIREMENTS FOR
BUSINESS RESCUE
[26]
In light of my findings above it is not necessary to consider whether
the prescribed requirements for an application for business
rescue
have been met.
COSTS
[27] The Applicants as
the losing party should pay the costs of the application, including
the costs of opposition. The Respondents
were entitled to oppose the
application and in doing so, they acted reasonably and responsibly. I
proceed to consider the appropriate
scale for this cost order.
[28] Considering (i) how
strongly the Applicants feel about their version regarding the
shareholding ratio, and (ii) that their
contentions in this regard
form the very basis for the business rescue application, it is odd
that the Applicants chose to first
launch the application for
business rescue and only thereafter the application for a declaratory
order regarding the shareholding
ratio. They were quite rightly aware
of the importance of an order in their favour in the application
concerning the shareholding
issue. And it is for this very reason
that they conceded that, should they fail with that application, the
present application
for business rescue should also fail.
[29] But then again, the
Applicants waited for an inexplicably long time to even approach this
Court for business rescue. It has
been documented in previous
judgments concerning the companies and the Knipe siblings that Johnny
and Andre especially are vehemently
opposed to the winding-up of the
two companies. They want to continue with the business of the
companies as before. This gives
even more colour and perspective to
the timing of the application for business rescue. The Respondents
appear to be correct in
their contention that the application for
business rescue was merely a way of further frustrating the
liquidation process.
[30] The Respondents,
with special reference to Carol and Pieter, had no choice other than
to oppose both applications simultaneously.
The applications are
intertwined, with the present application dependent on (amongst other
factors) the outcome of the
lis
regarding the shareholding
issue. The provisional liquidators (First to Sixth Respondents) act
in their official capacities. No
reasons have been provided as to why
they and the estates of the liquidated companies should be burdened
with even the smallest
of items on a taxed bill of costs, especially
as they are succeeding in their opposition.
[31] Taking all these
factors and circumstances into account, I am of the view that the
Applicants should be held liable for more
than just party and party
costs. The punitive scale of attorney and client costs will be
appropriate in the circumstances.
[32]
The Seventh Respondent employed the services of two counsel. No
arguments were advanced as to why she should not be entitled
to the
costs of two counsel.
ORDER
[33]
In the premises I make the following orders:
1.
Leave
is granted to the First to Sixth Respondents in terms of section
386(4)(a) of the Companies Act, 61 of 1973, to oppose this
application;
2.
The
application for business rescue is dismissed;
3.
The
Applicants, jointly and severally, are to pay the costs of the
application, including the costs of opposition, on the scale
as
between attorney and client;
4.
In
as far as the costs order relates to the Seventh Respondent, such
order shall include the costs occasioned by the employment
of two
counsel.
_________________
G.J.M.
WRIGHT AJ
On behalf of the
applicants:
Adv. AR Newton
Instructed
by:
Horn &
Van Rensburg Attorneys
BLOEMFONTEIN
On behalf of first to
sixth respondents: Adv. PF Rossouw SC
Instructed
by:
Matsepes
Inc.
BLOEMFONTEIN
On behalf of the seventh
respondent: Adv. L Halgryn SC
Adv. T
Halgryn
Instructed
by:
Symington
& De Kok
BLOEMFONTEIN
On behalf of the eighth
respondent: Adv. D Grewar
Instructed
by:
De
Lange & Du Plessis Attorneys
BLOEMFONTEIN