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[2014] ZAFSHC 128
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Noordman N.O. and Others v Knipe and Another (1906/2014) [2014] ZAFSHC 128 (14 August 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.: 1906/2014
In
the
ex parte
application of:-
OTTLIE
ANTON NOORDMAN N.O.
…........................................................................
First
Applicant
CHAVONNES
BADENHORST ST CLAIR
…...........................................................
Second
Applicant
COOPER
N.O.
SIMON
MALEBO RAMPOPORO N.O.
…..................................................................
Third
Applicant
(for
the extension of their powers as provisional
liquidators
of
KAMEELHOEK
(PTY) LTD [IN LIQUIDATION]
and
SCHAAPPLAATS
978 (PTY) LTD [IN LIQUIDATION]
and
J
D J KNIPE
…...............................................................................................................
First
Respondent
A
B J KNIPE
…..........................................................................................................
Second
Respondent
HEARD
ON:
31 JULY 2014
JUDGMENT
BY:
G.J.M. WRIGHT, AJ
DELIVERED
ON:
14 AUGUST 2014
[1]
This application concerns the powers of provisional liquidators and
the possibility of the extension thereof by leave of the
court. Mr
Zietsman for the Applicants argued in Afrikaans whilst Mr Grobler for
the Respondents argued in English. As the Notice
of Motion and
Founding Affidavit are in English, I will proceed with this judgment
in that language.
[2]
The two companies Kameelhoek (Pty) Ltd and Schaapplaats 978 (Pty) Ltd
were placed under provisional liquidation on 30 August
2012. On 6
September 2012 the Master of the High Court appointed the Applicants
as provisional liquidators. The provisional order
was extended on
several occasions. On 27 June 2013 the two companies were finally
liquidated. Final liquidators could thus far
not be appointed due to
inter alia
litigation regarding a general meeting of creditors and shareholders
which were held on 16 April 2013 and 5 June 2013. Decisions
taken at the meetings regarding a claim by a certain Loftus Viljoen
were taken on review.
[3]
The Applicants have applied to the Master for the necessary
authorisation to sell the immovable properties of the two companies
in liquidation by public auction. This was done in terms of section
386(2A) of the Companies Act, 61 of 1973 (the parties are in
agreement that this is the Act applicable to the situation). The
Master refused to give the requested authorisation. As a result
the
Applicants have to approach the court for an extension of their
powers.
[4]
This application was initially launched on an urgent basis. After
arguments were heard in this regard by Mbhele AJ, the matter
was
struck from the roll and it was ordered that costs are to be costs in
the liquidation. The matter was thereafter enrolled again
and argued
before me on 31 July 2014. It is therefore not necessary to deal with
prayer 1 of the Notice of Motion.
[5]
Although the application was brought
ex parte
, it was served
on all interested parties, being:
(i)
the Master of the High Court,
(ii)
the shareholders of the two companies,
(iii)
Mr. LOFTUS VILJOEN (a creditor), and
(iv)
Standard Bank of South Africa (a secured creditor). Two of the
shareholders oppose the application, namely Mr J.D.J. Knipe
and Mr
A.B.J. Knipe. I will refer to them as the Respondents.
[6]
As provisional liquidators the Applicants do not have the powers as
set out in section 386(4) of the Companies Act, unless they
were so
authorised by a meeting of creditors and members in terms of section
386(3). Such a meeting can only take place after final
liquidators
have been appointed and after a first meeting of creditors was held.
A second meeting of creditors is then necessary
for such
authorisation to be dealt with. It is unknown how long it will be
before final liquidators are eventually appointed.
[7]
Section 386(4)(a) empowers a liquidator to bring or defend legal
proceedings on behalf of the company.
In
casu
, the Applicants submitted that
they need to request this court for the necessary leave in terms of
section 386(4)(a) of the Act.
The Respondents indicated that they do
not have an objection against any relief granted in terms of section
386(4)(a) of the Act
(see page 293 paragraph 12.2.2. of the Opposing
Affidavit). It needs to be mentioned that a later paragraph in the
Opposing Affidavit
reflect that the Respondents deem it unnecessary
for leave in terms of section 386(4)(a) to be granted (see page 305
paragraph
14.1.2).
[8]
This application is not brought on behalf of the companies in
liquidation and it seems unnecessary for the Applicants to request
an
order in terms of section 386(4)(a). This point was not argued by the
Respondents during the hearing of the matter. In the light
of the
circumstances of this case and the animosity between the parties, I
do however consider it prudent to grant relief in terms
of section
386(4)(a) even if it is done
ex abudanti
cautela
.
[9]
The Applicants further wish to have their powers extended so as to be
authorised to sell the immovable property of the companies
for the
specific reason of generating money to pay the administration costs.
This involves the provisions of sections 386(4)(h)
and 386(5) of the
Companies Act. Section 386(5) provides the following:
“
In
a winding up by the court, the court may, if it deems fit, grant
leave to a liquidator to raise money on the security of the
assets of
the company concerned or to do any other thing which the court may
consider necessary for the winding up of the affairs
of the company
in distributing its assets.”
[10]
In terms of this section a court has a discretion to grant leave to a
provisional liquidator to do anything which the court
may consider
necessary for the winding-up of the affairs of a company and
distributing its assets. In exercising that discretion
the court must
be satisfied that the acts for which the court’s sanction is
sought, are indeed necessary for winding-up the
affairs of the
company.
[11]
Section 386(4)(h) reads as follows:
“
to
sell any movable and immovable property of the company by public
auction, public tender or private contract and to give delivery
thereof”
[12]
It is common cause that the Applicants need to show exceptional
circumstances to justify the extension of their powers in terms
of
section 386(4)(h).
See:
Henochsberg on the Companies Act,
p 819;
Ex
Parte
Klopper NO:
In Re
Sogervin SA (Pty) Ltd
1971 (3) SA
791
(T) at 797;
Ex
Parte
Van Den Berg
and Others NNO:
In Re
Riviera International (Pty) Ltd (In Liquidation)
2003
(6) SA 727
(W) at 734 – 735.
[13]
It is the Respondents’ contention that no such exceptional
circumstances exist in the present matter. The main thrust
of their
arguments in this regard can be found in their Supplementary Opposing
Affidavit. The Respondents contend that the Applicants’
real
intention is to finally administer the estate of the companies before
final liquidators have even been appointed (p 535 paragraph
3.4). The
Respondents are also of the opinion that the Applicants are “wasting”
money on expenses that are unnecessary
and should not form part of
the administration costs. In this regard the Applicants are acting
recklessly (or so the argument goes).
See p 539 paragraph 3.17 of the
Supplementary Opposing Affidavit.
[14]
In the Founding Affidavit the Applicants explain why they find it
necessary to sell the immovable properties of the two companies
in
liquidation. At the moment the Applicants are obliged to cover the
administration costs from their own pockets. This fact is
not in
dispute. What is in dispute, however, is the amount of the
administration costs and the reason why the amounts are expended
each
month.
[15]
I will first deal with the amount. On behalf of the Applicants it is
argued that at least R1.5 million have already been expended,
the
amount escalating by approximately R125 000,00 a month.
The administration costs as calculated by the provisional
liquidators
are set out in annexure “OA7” to the Founding Affidavit
(pp 259 to 263 of the Indexed Papers).
[16]
In their Supplementary Opposing Affidavit, the Respondents attack the
amount already expended. They use various calculations
and aver for
example that it is not necessary to make use of a security company to
secure the property and allege that two farm
workers will be
sufficient to do the job. (see p 552 paragraphs 8.7 and 8.8) They
further aver that the premium for the security
bond is excessive and
should be much lower if regard is being had to the values of the
properties. (see p 551 paragraphs 8.4 to
8.6). They calculate the
administration costs to be in the region of R26 182,50 per month
and tender to pay R26 500,00
per month from here on further. I
pause here to mention that this “tender” by the two
Respondents rings hollow in the
light of their previous refusal to
adhere to the repeated requests by the provisional liquidators in the
past for assistance from
the Respondents. The tender also do not take
into account the expenses already incurred.
[17]
Mr Grobler referred to the case of
Ex
Parte
Klopper:
In
Re
: Sogervin SA (Pty) Ltd
1971 (3) SA 791
(T) where the issue of excessive spending was dealt
with. He submitted that the provisional liquidators in the present
matter are
indeed spending excessively and should therefore not be
rescued by the granting of the relief claimed.
[18]
The application papers before the court make it clear that the
parties also do not agree on the reasons for the amounts expended
as
administration costs. A large portion of time was also spent on this
issue during argument before this court, especially with
relation to
the amounts spent in securing the property of the two companies in
liquidation. In the Founding Affidavit the Applicants
list several
expenses (see paragraph 8.11 on page 15).
[19]
Special reference is made to costs for securing the “properties”
of the two companies payable to Tobie Myburgh
Auctioneers. Tobie
Myburgh Auctioneers had compiled a cost statement detailing costs of
R1 547 586,67. This has been annexed
to the founding papers as
annexure “OA7” (pages 259 to 262 of the Indexed Papers)
and deals with expenses from September
2012 to 25 February 2014. The
Respondents aver that these expenses were incurred without any
consideration of suggestions by the
Respondents. [See especially
paragraphs 14.3.7 to 14.3.12 of the Opposing Affidavit on pages 309
to 312.]
[20]
The amount of the security bond has been determined by the Master of
the High Court. This is an expense that has to be paid,
regardless of
what the Respondents think about it. In this instance the Master
determined that the security to be filed by the
provisional
liquidators must be at least the amount of R70 000 000,00. See
pp 629 and 630 at paragraph 8.2 of the Supplementary
Replying
Affidavit. The relevant debit notes from the insurers and the
determination as received from the Master are attached to
the
Supplementary Affidavit (pages 707, 709 and 711).
[21]
The Respondents themselves attached a document to their Opposing
Affidavit that is titled “Skikkingsooreenkoms”
(Annexure
“C” on page 346 of the Indexed Papers). This settlement
was reached by the three Applicants and the Respondents
(as well as a
Miss Vigne) during November 2013. Clause 3.2.1 of the settlement
refers to an amount of R1,672 863,18, being an amount
spent by the
provisional liquidators as administration costs up to 31 October
2013. Clause 3.2.2 makes provision for monthly expenses
to a maximum
amount of R120 000,00. Calculations of the arrear administration
costs as well as the monthly “budget”
were attached to
the settlement agreement by the Respondents.
[22]
In the light of this document it is incomprehensible how the
Respondents can now dispute the amounts spent by the Applicants.
It
is equally incomprehensible on what basis the Respondents can now
argue that the expenses incurred in securing the game and
cattle is
unnecessary and based on a decision by the Applicants themselves
(without the consent of the shareholders of the two
companies). This
seems to be only one of the instances where the Respondents attempted
to create factual disputes.
[23]
It is common cause between the parties that the only assets of the
two companies are two farms. The cattle and game on the
farm do not
belong to the companies. [The parties are now
ad
idem
about this fact, although various
of the annexures forming part of the application papers tell a
different story.] The companies
are keeping the animals as security
for any amounts due to them by the estate of the late Mr Knipe (the
father of the Respondents).
It is the Applicants’ case that it
is necessary to expend money securing the farms and the animals on it
in the light of
the various disputes between the children of the late
Mr Knipe (see page 457, paragraph 8.7). The Applicants indicate that,
should
the properties be sold, they will ensure to come to an
arrangement with the buyer(s) regarding possession of the animals
pending
the finalisation of the disputes.
[24]
In their opposing affidavits the Respondents submitted that, as the
animals are not the property of the two companies, there
is no need
to secure them. Expenses in this regard are therefore unnecessary.
And should the expenses relating to securing the
property fall away,
it will not be necessary to sell the farms in order to provide for
administration costs. The Respondents point
out that most of the
administration costs was incurred in order to specifically secure the
cattle and game on the two farms (paragraph
14.2.2 of the Opposing
Affidavit). But the Respondents themselves remarked that the
liquidators have a responsibility to the upkeep
of all assets and to
prevent damages and financial loss. (See page 699 paragraph 25).
[25]
Again the Respondents conveniently forgot that they signed a written
agreement that detailed the property that is to be secured
by the
provisional liquidators. Paragraph 2 of the settlement agreement
(page 348 of the Indexed Papers) expressly provides that
the game and
cattle on the farms should be protected and maintained (“alle
wild en beeste op die eiendomme van die maatskappye”).
[26]
Interestingly enough, Mr Grobler at the very beginning of his
argument submitted that the personal right to the cattle and
game
that is relevant here are indeed an asset. He made this submission in
posing the question whether the companies indeed only
have the two
immovable assets. The Respondents themselves have calculated the
right to be worth R6 117 757,00 (see paragraph
6.1 of the
Opposing Affidavit, page 286 of the Indexed Papers).
[27]
Despite the alleged factual disputes detailed above, I am satisfied
that the matter can be dealt with and adjudicated on the
papers
before court. Neither party suggested otherwise. And the contents of
the settlement agreement of November 2013 are accepted
in as far as
it is necessary to refer to amounts of, and the reasons for, expenses
forming part of the administration costs. I
do not find it necessary
to further resolve the alleged factual disputes between the parties.
[28]
During argument Mr Zietsman for the Applicants submitted that the
following circumstances are exceptional, and sufficiently
so, as to
justify an extension of the powers of the provisional liquidators to
allow for the selling of its immovable property:
(i) It has already
been two years since the companies were placed in provisional
liquidation and since the Applicants were appointed
as provisional
liquidators;
(ii) There is no
indication when the final liquidators will be appointed;
(iii) The Applicants
were obliged to take control of the assets of the two companies and
secure it (necessary actions that costs
money);
(iv) The liquidation
application in itself was not a simple process; (the return date was
extended several times to afford some
of the shareholders the
opportunity to oppose the provisional order for liquidation; on the
return the matter was still opposed;
after a final order of
liquidation was handed down, the Respondents attempted to appeal that
order)
(v)
The companies were liquidated on the basis of it being just and
equitable to do so and especially because of the growing animosity
between the shareholders (the children of the late Mr Knipe) amongst
themselves and with their mother. It is now clear that there
is even
a dispute as to the shareholding in the two companies.
[29]
It was repeatedly pointed out by the Applicants that they are only
acting in consequence of their fiduciary duty and their
duty to
realise the assets of the companies. The effect of section 391 of the
Companies Act, read with section 342, is that liquidators
are obliged
to recover and realise all the assets of the company being wound up,
and to apply the proceeds of such realisation,
first in discharge of
the costs of liquidation, and thereafter in payment of the claims of
creditors. A liquidator must act with
reasonable care in discharging
his duties.
See:
Concorde Leasing Corporation
(Rhodesia) Ltd v Pingle-Wood NO
1975 (4) SA 231
(R) at 234 – 235.
[30]
The two companies in liquidation hold some form of lien or retention
right over the cattle and game. The exact nature and extent
of that
right still need to be investigated and or adjudicated. The
liquidators are under a duty to protect that right.
In
casu
it seems to indicate protection of
the animals themselves (as has been agreed to by the Respondents in
the aforementioned settlement
agreement). Mr Zietsman specifically
referred to section 82 of the Insolvency Act to emphasize this point.
He dealt with the different
views established through the cases
regarding the question whether the provisions of section 82 is
peremptory or not. Older cases
deemed the provisions to be
peremptory. In
Jacobs v Hessels
1984 (3) SA 601
(T) the provisions were interpreted not to be
peremptory, depending on the circumstances.
[31]
Mr Grobler reacted to this argument by submitting that section 82
deals with estates unable to pay its debts, unlike the present
matter
where the liquidation was found to be just and equitable. [It was
indeed never argued that the estates of the two companies
are unable
to pay its debts.]
[32]
The facts in the present matter differ from that in the
Jacobs
matter. In
Jacobs
the creditors had been paid in full after the realisation of some of
the assets of the estate. The court then found that it was
not
necessary to realise the balance of the assets and that therefore the
provisions of section 82 were not peremptory.
[33]
In casu
each company only has one asset, namely a farm property over which a
bond in favour of Standard Bank is registered. Standard Bank
needs to
be paid, as well as the claim of the one creditor who already proved
his claim. And there still remains the administration
costs which is
already astronomical. It appears clear (at least
prima
facie
) that the immovable properties of
the companies will have to be sold in any event in order to finalise
the process of winding-up
the companies. To keep on spending a
substantial amount of money for the upkeep of the properties indeed
seem illogical.
[34]
Ex Parte
Van Der Berg and Others NNO:
In
Re
Riviera International
(Pty) Ltd (In Liquidation)
2003 (6)
SA 727
(W) is another matter where the court decided against an order
in terms of section 386(4)(h). Again the facts in that case differed
from what we are dealing with here. There the business and activities
of the company was continued; there were several assets in
the
company; and most importantly, the time that elapsed since the
provisional liquidation was significantly shorter.
[35]
I pause here to comment on the time that has elapsed since the
provisional liquidation and appointment of the Applicants as
provisional liquidators and the launching of this application. Much
of the time that has elapsed may be attributed to the actions
of the
Respondents in causing the return date to be extended on several
occasions and in appealing against the final order of liquidation.
There after followed the review application regarding the meeting
where Loftus Viljoen proved his claim as creditor. The time that
has
passed since the companies were placed in liquidation of necessity
caused the administration costs to increase exponentially.
[36]
The Respondents also argued that there are other remedies available
to the provisional liquidators. In paragraphs 7.13 and
7.14 of their
Opposing Affidavit (pages 290 and 291 of the Indexed Papers) the
Respondents set out one possible solution to the
problem, namely that
the outstanding rent owing to the companies should be collected and
the farms then leased so as to secure
an income for the companies. Mr
Zietsman correctly pointed out that this is not a viable option.
Renting out the farms will entail
a continuing of the business
activities of the two companies. That also need authorisation from
the court in terms of section 386(4)(f)
of the Companies Act.
Furthermore, the cattle and game on the farms will have to be
relocated in order to provide occupation of
the properties to any
lessee.
[37]
Mr Grobler posed the question during argument as to why the
Applicants have not yet investigated the claim to the cattle and
game. According to him the Applicants fail to explain why they are
protecting a right without knowing exactly what right they are
protecting. Mr Grobler pointed out that it is not clear what the
position is of the estate of the later Mr Knipe.
[38]
Mr Zietsman argued that the claims of the companies against the
owners of the cattle and game are in dispute and must be investigated
before summons can be issued to collect any outstanding indebtedness.
This will of course cost money, money which the provisional
liquidators will again have to front from their own pockets. This
appears to be a sensible argument, one which had not successfully
been refuted by the Respondents.
[39]
It was furthermore suggested that the liquidators should arrange an
interrogation. The provisional liquidators have not been
in a
position to arrange an interrogation because of the pending review
application and also due to a lack of funds. It is clear
that the
process by which final liquidators (with the necessary powers) are
appointed will not be completed in the foreseeable
future. Mr Grobler
argues that this in itself does not constitute exceptional
circumstances as the Applicants can easily wait out
the time till the
final liquidators are appointed. This argument of Mr Grobler loses
sight of the administration costs that is
a reality and need to be
paid till such time as an interrogation can properly be held.
[40]
I pause here to mention that it was never argued that the three
provisional liquidators are indeed in a position to indefinitely
carry the costs of the administration process out of their own
pockets.
[41]
It is currently also not possible for the liquidators to hold further
meetings with creditors and shareholders. It is the Respondents
who
requested the Master of the High Court to keep the convening of the
first meeting of creditors in abeyance pending the finalisation
of
the review application. See pp 617 and 657. And the Master is
adhering to that request.
[42]
Before this application was launched, the Applicants did attempt to
raise money on the security of the assets of the companies.
However,
neither Standard Bank nor Absa was willing to assist. See pages 15,
264 and 272 of the Indexed Papers. The shareholders
(including the
two Respondents) were requested at various instances to provide the
necessary funds to accommodate the administration
costs. The
Respondents did not react in a cooperative manner.
[43]
I am satisfied that the Applicants request an extension of their
powers for a specific and legitimate reason, namely to realise
funds
for payment of the administration costs. The administration costs are
necessarily incurred by the provisional liquidators
by properly
taking care of their various duties in winding-up the affairs of the
two companies.
[44]
I am satisfied that the facts and circumstances relevant to this
case, taken in its totality, are such so as to constitute
exceptional
circumstances justifying an order whereby the Applicants as
provisional liquidators are authorised to sell the immovable
properties of the two liquidated companies. The most compelling
circumstances are:
(i) the extent of
the expenses that the provisional liquidators have been obliged to
incur; and
(ii)
the fact that it is clear that the animosity and quarrelling between
the shareholders will continue until such point that
the winding-up
process have been completed (and this necessarily involve a realising
of the assets). It is clearly not in the interests
of the creditors
of the two companies or of its shareholders that the administration
costs should escalate on a monthly basis.
[45]
The Applicants had no choice other than to approach this court for
the relief claimed. There is no reason why the costs
that they
so incurred, should not form part of the costs in liquidation.
[46]
In his Heads of Argument, Mr Zietsman indicated that the opposition
to the application caused further and unnecessary commitments
for the
estates and that this justifies an order that the costs of the
application should be borne by the Respondents. In the alternative,
that costs should be costs in the two liquidated estates. Mr Grobler
requested for costs to be costs in the course of the liquidation
process.
[47]
The contents of the affidavits filed by the Respondents are evidence
of the manner in which these two gentlemen have been approaching
the
whole situation. It is apparent that they are not in any way
satisfied with the liquidation of the two companies. They seem
bent
on creating as many obstacles as possible to prevent the process of
winding up from running smoothly. Particularly worrisome
is their
insistence on attacking the amounts of the administration costs and
the reasons why it is being incurred. They do this
despite the fact
that they had agreed to the amounts and to the safeguarding of the
properties as far back as November 2013. Mr
Zietsman was correct in
pointing out that the Respondents adapted their version as the filing
of the various affidavits proceeded.
Their attitude justifies at
least an order whereby they are to be held responsible for the costs
of opposition.
[48]
In the result I make the following orders:
1.
Leave is granted to the Applicants to approach this court in terms of
section 386(5) of the Companies Act, 61 of 1973, for purposes
of
bringing this application;
2.
The powers of the Applicants as provisional liquidators of Kameelhoek
(Pty) Ltd [in liquidation] and Schaapplaats 978 (Pty) Ltd
[in
liquidation] are extended to include the powers as set out in
sections 386(4)(a) and 386(4)(h) of Act 61 of 1973 respectively;
3.
The costs incurred by the Applicants in bringing this application are
to be costs in the liquidation of the aforementioned companies;
4.
The Respondents are to pay the cost of opposition.
_________________
G.J.M.
WRIGHT, AJ
On
behalf of applicant: Adv P. Zietsman
Instructed
by:
Matsepes
Inc
BLOEMFONTEIN
On
behalf of respondent: Adv S. Grobler
Instructed
by:
Phatshoane
Henney Attorneys
BLOEMFONTEIN