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[2014] ZAGPPHC 276
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Optifeeds (Pty) Ltd v Business Depot 2 CC t/a GS Poultry and Others (6885/2014) [2014] ZAGPPHC 276 (13 May 2014)
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
Case
No: 6885/2014
Date’s
heard: 26 March 2014 and
11
April 2014
Date
judgment deliver: 13 May 2014
Not
Reportable
Not
of Interest to other judges
In
the matter between:
OPTIFEEDS
(PTY)
LTD
..............................................................................................................
Applicant
and
BUSINESS
DEPOT 2 CC t/a GS POULTRY
…...............................................................
First
Respondent
JEAN-PIERRE
JORDAAN N.O.
….............................................................................
Second
Respondent
THE
COMPANIES AND INTELLECTUAL
PROPERTY
COMMISSION
…........................................................................................
Third
Respondent
and
GEORGE
RAYMOND
SPEROPOULOS
...................................................
First
Intervening/ Affected Party
ROCK
FARM (PTY) LTD
…....................................................................
Second
Intervening/Affected Party
IMPICHICKS
(PTY) LTD
….........................................................................
Third
Intervening/Affected Party
JUDGMENT
JANSE
VAN NIEUWENHUIZEN J
[1]
This matter initially came before me in the urgent court. Save for
the prayer pertaining to urgency, the applicant prays for
the
following relief:
"2.
That it be declared that the business rescue proceedings of the First
Respondent
and the resolution by means of which it resolved to embark upon
business rescue proceedings have lapsed and that the
proceedings are
a nullity and of no force and effect;
3.
In the alternative to prayer 2 above, that the resolution by means of
which the First Respondent embarked upon business rescue
proceedings,
and the business rescue proceedings, be set aside and rescinded;
4.
That the necessary leave be granted to the Applicant to bring this
application as contemplated in Section 133(1)(b) of the Companies
Act;
5.
That the First Respondent be liquidated finally, alternatively that
an order for the provisional winding-up of the First Respondent
be
granted, with suitable directions regarding service of the rule
nisi
and
publication thereof;
6.
That the costs of this application be paid by the Second Respondent
in his personal capacity should he oppose the application;
7.
That as far as the winding-up is concerned, that costs of this
application would be costs in the winding-up;"
[2]
The
first and second respondents oppose the application. Prior to the
hearing of the urgent application, George Raymond Speropoulos
("
Mr Speropoulos") brought an application for leave to intervene
in the main application. Mr Speropoulos further claims
the following
relief:
"3.
In the event of the Court finding that the business rescue has
lapsed, that an order be granted placing the First Respondent
under
supervision and commencing business rescue proceedings in terms of
section 131 of the Companies Act, Act no. 71 of 2008;
4.
That the costs of this application be costs in the business rescue of
the First Respondent;"
[3]
During the hearing of the urgent application, it appeared that each
affected person, as envisaged in section 130(3)(b) of the
Companies
Act, No. 71 of 2008 ("the Act"), did not receive the
requisite notice of the application.
[4]
The matter was postponed to enable the applicant to give notice of
the application to all affected persons.
[5]
Prior to the further hearing of the matter, two affected persons, to
wit Rock Farm (Pty) Ltd and Impichicks (Pty) Ltd launched
applications for leave to intervene in the main application. Both
affected parties claimed the following further relief:
"2.
That the liquidation application be dismissed with costs;
3.
In the alternative and insofar it might be necessary that the counter
application to place the First Respondent in business rescue
proceedings be upheld;
4.
Costs of suit"
[6]
At the inception of the further hearing of the matter, I granted the
three intervening parties leave to intervene.
PARTIES
[7]
The first respondent is involved in the poultry industry. The
applicant and the second and third intervening parties are creditors
of the first respondent, whereas Speropoulos is the sole member of
the first respondent. The second respondent was cited in his
capacity
as the appointed business rescue practitioner of the first
respondent.
IS
THE FIRST RESPONDENT IN BUSINESS RESCUE ?
[8]
The first bone of contention between the parties is the exact date on
which the first respondent was placed in business rescue.
[9]
The applicant received a letter from Theron, Jordaan & Smit
Attorneys on 18 December 2013, in terms of which it was
advised as
follows:
"Our
client has initiated voluntary Business Rescue Proceedings in terms
of
Section
129
of the
Companies Act, 71 of 2008
. We will publish a notice of
resolution and its effective date in the prescribed manner to every
affected person in terms of
Section 129(3).
"
[10]
During January 2014, the applicant received certain documents
pertaining to the business rescue of the first respondent. The
prescribed CoR123.1 document, being the Notice of Beginning of
Business Rescue Proceedings, contains the following information:
i)
the first respondent adopted a resolution to commence business rescue
proceedings on 12 December 2013;
ii)
in terms of section 132(1)(a) of the Act, business rescue proceedings
commenced on 18 December 2013, being the date on which
the resolution
was filed with the Commission;
iii)
the document bears a stamp of the third respondent dated 10 January
2014.
[11]
The CoR123.2 document, being the Notice of Appointment of Business
Rescue Practitioner, confirmed that the first respondent
commenced
business rescue proceedings on 18 December 2013. In terms of the
document, the second respondent was appointed as business
rescue
practitioner on 13 January 2014.
[12]
Prior to dealing with the respondents' version, it is apposite to
have regard to the relevant provisions of the Act.
[13]
Section 129(2)(b) provides that a resolution in terms of which a
company resolve to voluntarily begin business rescue proceedings,
will have no force and effect until it has been filed.
[14]
In terms of section 129(3), a company that has adopted and filed a
resolution, must, within 5 days, publish a notice of the
resolution
and its effective date in the prescribed manner to every affected
person and appoint a business rescue practitioner.
[15]
Should a company fail to comply with the provisions of section
129(3), the resolution to begin business rescue proceedings,
in terms
of section 129(5), lapses and is a nullity.
[16]
In the premises and on the facts averred by the applicant, the first
respondent has failed to comply with the provisions of
section
129(3)(b), in that the second respondent was only appointed on 13
January 2014, more than 5 days after the resolution was
filed.
[17]
The second respondent, however, contended that the first respondent
was not successful in filing the resolution during December
2013 with
the third respondent. According to the second respondent the
resolution could, due to the holiday period, only be filed
on 10
January 2014. Consequently, the effective date of the commencement of
the business rescue proceedings was 10 January 2014
and he was
accordingly appointed within the time period stipulated in section
129(3).
[18]
In contrast to the version of the second respondent, the second
intervening party filed an affidavit by Mr Jan Andries van
Aswegen,
the legal representative appointed by the first respondent.
[19]
According to Mr van Aswegen, the resolution and appointment of the
second respondent was filed on 18 December 2013. The filing
was done
via electronic transmission.
[20]
Mr van der Merwe, counsel for the applicant, draw my attention to
Annexure 3, Table CR 3 - Methods and Times for Delivery of
Documents,
which annexure was published in terms of regulation 7 of the
regulations promulgated in terms of the Act.
[21]
According to Annexure 3, a document may be delivered to the third
respondent by
"transmitting
the document as a separate file attached to an electronic mail
message addressed to the Commission".
According
to the documents attached to Mr. van Aswegen's affidavit, this is
exactly what the first respondent did on 18 December
2014.
[23]
Annexure 3 provides that the date and time of delivery of a document
transmitted in this manner is
"on
the date and at the time recorded by the Commission's system, unless,
within 1 business day after that date, the Commission
advises the
sender that the file is unreadable".
[24]
Section 129(3)(a), however, refers to the
"filing"
of
a resolution whereas annexure 3 provides for the
"delivery"
of
a document. The definition of
"file"
in
section 1 of the Act reads as follows:
"when
used as a verb, means to deliver a document to the Commission in the
manner and form, if any, prescribed for that document"
[25]
In the premises, the manner of delivery of a document stipulated in
Annexure 3, includes the filing of a resolution with the
third
respondent as contemplated in section 129(3)(a).
[26]
Although no evidence was tendered in respect of the date and time
recorded by the Commission's computer system, it is clear
that the
Commission, by affixing its official stamp on form CoR 123.1,
confirmed that the information contained therein is correct
and
accords with its records. This is the only inference to be drawn from
the official stamp affixed by the third respondent to
the Notice of
Beginning of Business Rescue Proceedings. In the premises, the
business rescue proceedings in respect of the first
respondent
commenced on 18 December 2013.
[27]
The version of Mr van Aswegen pertaining to the appointment of the
second respondent on 18 December 2013, is, however, not
confirmed by
the third respondent's records. The notice of appointment of the
second respondent clearly states that the second
respondent was
appointed on 13 January 2014. The third respondent's official stamp
also bears the date of 13 January 2014. This
is evidently more than 5
days after the filing of the resolution to commence business
proceedings.
[28]
Consequently, the first respondent did not comply with the provisions
of section 129(3)(b) and in terms of section 129(5)(a)
the resolution
has lapsed and is a nullity.
[29]
The applicant is, therefore, entitled to an order in terms of prayer
2 of its notice of motion.
APPLICATION
TO PLACE FIRST RESPONDENT IN BUSINESS RESCUE
[30]
As a result of the finding that the first respondent is not in
business rescue, the application by Mr Speropoulos to place
the first
respondent under supervision and commencing business rescue
proceedings as contemplated in section 131 of the Act, which
application is supported by the second and third intervening affected
parties, needs to be considered.
Background
[31]
A short overview of the background facts pertaining to the
application by Mr Speropoulos is apposite at this stage. The first
respondent, as alluded to earlier, is in the poultry industry and
grow day old chickens to an age when it is appropriate to slaughter
the chickens.
[32]
The applicant (previously known as Noordwes Voere (Pty) Ltd)
concluded an agreement with Mr Speropoulus on 30 August 2005 in
terms
of which the applicant would provide chicken feed to the first
respondent.
[33]
The first respondent had to pay for the chicken feed within a
stipulated time period. The first respondent fell in arrears
with its
payment obligations to the applicant and was indebted to applicant in
the amount of R 35 399 146, 06 on 21 January 2014.
[17]
In an endeavour to procure payment of the debt, meetings were held
between Mr Speropoulus and representatives of the applicant
during
November and December 2013.
[18]
During one of the meetings, Mr Speropoulus intimated that the Sate
might purchase the business of the first respondent for
an amount of
approximately R 60 million. No firm proof of the purported sale was
available and the applicant requested Mr Speropoulus
to urgently
supply information pertaining to the first respondent's financial
affairs.
[19]
The information was not forth coming and when threats of debt
collection steps, which might include an application for winding-up,
was made, the applicant received the email of 18 December 2013
informing it of the first respondent's decision to initiate business
rescue proceedings.
[20]
At the first creditors meeting, it became apparent that the first
respondent was indebted to various creditors in an amount
of at least
R 65 million.
[20]
The applicant alleges that it became apparent at the creditors
meeting, that all the suppliers of either chickens or feed
supplements, were no longer prepared to supply products to first
respondent on credit. All purchases of these items will be on a
cash
only basis.
[21]
The applicant further states that the first respondent will not be
able to trade itself out its financial difficulties without
a huge
capital injection.
[22]
In defending the viability of the business rescue of the first
respondent, the second respondent states that the first respondent
had been in business since 2003. According to the second respondent,
the first respondent's financial distress is caused by,
inter
alia,
the
elevation in feed costs, diesel costs, wages, illnesses of livestock,
quality of feed and day old chickens.
[22]
The second respondent added that the problems faced by the first
respondent are not unique, in that the poultry industry throughout
the entire country suffered huge losses during 2012 and 2013 as a
result of high input costs with increased maize, soya and sunflower
prices as well as souring electricity and diesel costs.
[23]
Various other factors resulting in the first respondent's financial
distress are also alluded to in the second respondent's
answering
affidavit.
[24]
The second respondent is of the view that the first respondent's
prospects to be rescued is premised squarely on the first
respondent
being sold as a going concern against the potential value of the
entity.
[25]
A valuation of the market value of the first respondent's business
had been obtained, which valuation indicates that the market
value of
the first respondent's business and assets is R 45 471 574, 15.
[26]
The second respondent refers to an
"offer"
from
Government to purchase the business of the first respondent for R 40
million. The offer is subject to conditions, which conditions
the
second respondent alleges, the first respondent has already met. No
firm offer was, however, attached to the second respondent's
affidavit.
[27]
The second respondent further elaborated on the urgent steps he had
taken to keep the business of the first respondent afloat
until a
final offer from Government has been received. As a result of his
efforts, the business of the first respondent continues,
according to
the second respondent, to run on a day-to-day basis.
[28]
In order to boost the allegation that Government is on the verge of
making an offer to purchase the business of the first respondent,
Mr
Speropoulos attached a letter from the Department of Rural
Development and Land Reform to his replying affidavit. The letter
is
dated 27 June 2013 and the contents thereof did not support either Mr
Speropoulus' or the second respondent's version of an
imminent final
offer. The letter reads as follows:
ACKNOWLEDGEMNT
OF AN OFFER TO SELL
The
Department of Rural Development and Land Reform hereby acknowledges
your offer to sell to the Department. Two valuers have been
appointed
and the first valuer has already conducted the valuation, however we
are awaiting the second valuation to finalise the
offer.
The
Department is currently considering your offer and will be notified
of any developments in due course
..........."
[29]
Prior to the hearing of the urgent application and on 28 February
2014, the second respondent at the second creditors meeting
put the
business rescue plan to the vote. The applicant alleges that itself
and an overwhelming number of creditors voted against
the business
rescue plan.
[30]
The plan was rejected. The second respondent informed the meeting
that there was an offer from one of the first respondent's
creditors
to purchase the voting rights, with the exclusion of ABSA Bank, of
all the dissenting creditors.
[31]
The offer was made by a Close Corporation of which Mr Speropoulos is
the sole member. The plan was amended and with the voting
rights of
the dissenting creditors to the disposal of the Close Corporation,
accepted.
[32]
Prior to the second hearing of the application and on 9 April 2014,
the Department of Rural Development and Land Reform, addressed
a
letter, containing an offer to purchase the business of the first
respondent, to Mr Speropoulos.
[33]
The offer is for R 33 million and subject to:
i)
approval by the National Land Allocation and Recapitalisation Control
Committee; and
ii)
the conducting of a due diligence.
[34]
Against the aforesaid backdrop, the legal principles applicable to
the relief claimed by Mr Speropoulos needs to be examined.
Reasonable
prospect
[35]
Once an application to place a company under supervision and
commencing business rescue has been considered, section 131(4)
of the
Act provides for two scenarios. The section reads as follows:
"131(4)
After considering an application in terms of subsection (1), the
court
may-
(a)
make an order placing the company under supervision and
commencing
business rescue proceedings, if the court is satisfied that
-
(i)
the company is financially distressed;
(ii)
the company has failed to pay over any amount in terms of a public
regulation, or contract, with respect to employment related
matters;
or
(iii)it
is otherwise just and equitable to do so for financial reasons; and
there is a reasonable prospect for rescuing the company;
or
(b)
dismissing the application, together with any further necessary and
appropriate order, including an order placing the company
under
liquidation."
[36]
It is common cause on the papers that the first respondent is
financially distressed. The question to be answered is therefore,
whether the first respondent has a reasonable prospect of being
rescued.
[37] In
Oakdene
Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami)
(Pty) Ltd and Others
2013
(4) SA 539
SCA, Brand JA at 551 I - 552 A and after remarking that
the term
"reasonable
prospect"
is
a lesser requirement than the previous
"reasonable
probability"
test,
described the term as follows:
"On
the other hand, I believe it requires more than a mere prima facie
case or an arguable possibility. Of even greater significance,
I
think, is that it must be a reasonable prospect - with emphasis on
'reasonable'- which means that it must be a prospect based
on
reasonable grounds. A mere speculative suggestion is not enough.
Moreover, because it is the applicant who seeks to satisfy
the court
of the prospect, it must establish these reasonable grounds in
accordance with the rules of motion proceedings which,
generally
speaking, require that it must do so in its founding papers."
[38]
Brand JA at 552 C - F of the judgment, cited with approval the
following extracts from the judgment of Van der Merwe J in
Prospec
Investments (Pty) Ltd v Pacific Coast Investments 97 Ltd and Another
2013
(1) SA 542
(FB):
"I
agree that vague averments and mere speculative suggestions will not
suffice in this regard. There can be no doubt that,
in order to
succeed in an application for business rescue, the applicant must
place before the court a factual foundation for the
existence of a
reasonable prospect that the desired object can be achieved. But with
respect to my learned colleagues, I believe
that they place the bar
too high."
[para
11 ] and
"in
my judgment it is not appropriate to attempt to set out general
minimum particulars of what would constitute a reasonable
prospect in
this regard. It also seems to me that to require, as a minimum,
concrete and objectively ascertainable details of the
likely costs of
rendering the company able to commence or resume its business, and
the likely availability of the necessary cash
resource in order to
enable the company to meet its day-to-day expenditure, or concrete
factual details of the source, nature and
extent of the resources
that are likely to be available to the company, as well as the basis
and terms on which such resources
will be available, is tantamount to
requiring proof of a probability and unjustifiably limits the
availability of business rescue
proceedings."
[para
15]
[39]
Applying the aforesaid principles to the facts herein, it appears
that the recent offer received from the State, provides at
least a
reasonable ground for the prospect that the first respondent can be
rescued.
[40]
Although the applicant has certain other problems with the rescue
plan that was tabled by the second respondent, its biggest
concern
was the absence of a firm offer from the State.
[41]
The fact that the second respondent's interim measures have
ensured that the first respondent remains a going concern,
was not
denied by the applicant. The applicant, however, states that the
costs involved in the on-going business operations of
the first
respondent is prejudicial to its creditors.
[42]
I am not called upon to decide at this stage whether the first
respondent will be successfully rescued. As appears from the
principles
supra,
the
only test at this stage is whether there is a reasonable prospect of
the first respondent being rescued.
[43]
On the available information, I am so satisfied.
APPOINTMENT
OF INTERIM BUSINESS RESCUE PRACTITIONER
[44]
Section 131(5) stipulates that a court may appoint an interim
business rescue practitioner, if such person satisfies the
requirements
of section 138.
[45]
The second respondent evidently satisfies the requirements of section
138. This much appears from the Notice of Appointment
of Business
Rescue Practitioner, referred to earlier in this judgment.
[46]
The second respondent must, furthermore, have been nominated by the
affected person who brought the application in terms of
section
131(1). Mr Speropoulos, in his capacity as sole shareholder of the
first respondent, nominated the second respondent as
business rescue
practitioner in the previous attempt at business rescue proceedings.
[47]
I am of the view that, having regard to the second respondent's
knowledge of and involvement in the affairs of the business
of the
first respondent thus far, it will be appropriate to appoint him as
interim business rescue practitioner. The appointment
is subject to
ratification by the holders of a majority of the independent
creditors' voting interests at the first meeting of
creditors, as
contemplated in section 147.
COSTS
[48]
The applicant succeeded in obtaining the relief claimed in prayer 2
of its notice of motion and in the normal course should
be entitled
to cists. The applicant, however, requested that the costs of the
application in respect of prayer 2 be paid by the
second respondent
in his personal capacity. The second respondent was cited and opposed
the application in his official capacity
as business rescue
practitioner and no grounds exist to burden him with the costs of the
application in his personal capacity.
[49]
The second and third intervening / affected parties only became part
of the proceedings on 11 April 2014. The relief claimed
by the
applicant was opposed by them and the applicant requests that they be
ordered, jointly and severally, to pay the costs of
the appearance on
11 April 2014.
[50]
Mr Speropoulus requested that the costs of the application to place
the first respondent under supervision and commencing business
rescue
proceedings, be costs in the business rescue of the first respondent.
I am of the view that it is the correct order in the
circumstances.
ORDER
1.
It is declared that the business rescue proceedings of the first
respondent and the resolution by means of which it resolved
to embark
upon business rescue proceedings have lapsed and that the proceedings
are a nullity and of no force and effect.
2.
The second and third intervening / affected parties are ordered,
jointly and severally, to pay the costs of the applicant relating
to
the appearance on 11 April 2014.
3.
The first respondent is placed under supervision and herewith,
commences with business rescue proceedings.
4.
The second respondent is appointed as interim business rescue
practitioner of the first respondent, which appointment is subject
to
ratification by the holders of a majority of the independent
creditors' voting interests at the first meeting of creditors,
as
contemplated in
section 147
of the
Companies Act, 71 of 2008
.
5.
The costs of the first intervening / affected party's application
dated 12 February 2014 is costs in the business rescue of the
first
respondent.
JANSE
VAN NIEUWENHUIZEN
JUDGE
OF THE NORTH GAUTENG HIGH COURT, PRETORIA
Applicants
attorneys: Van Rooyen Tlhape
Wessels
Attorneys p/a
Tim
du Toit Attorneys
Mnr
Moolman Wessels
Applicant
counsel: Adv M.P van der Merwe
Respondents
attorneys for 1
st
intervening party:
Theron,
Jordaan & Smit Attorneys
Respondent
counsel: Adv Badernhorst SC
Adv
J Klopper
2
nd
and 3
rd
Intervening party: Adv C Harms
Attorneys
for the 2
nd
and 3
rd
intervening party:
Grundling
McCabe Attorneys