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[2013] ZAGPPHC 17
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Breedt v P G Breedt Boorkontrakteurs CC and Others (10581 / 2012) [2013] ZAGPPHC 17 (4 February 2013)
NOT
REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT)
Case
Number: 10581 / 2012
DATE:04/02/2013
In
the matter between:
PIETER
GERHARDUS
BREEDT
..........................................................
APPELLANT
Vs
P
G BREEDT BOORKONTRAKTEURS CC
......................................
1st
RESPONDENT
ALTAS
COPCO SOUTH AFRICA (PTY) LTD
......................................
2nd
RESPONDENT
ATLAS
COPCO CUSTOMER FINANCE AB
.......................................
3rd
RESPONDENT
Coram:
HUGHES AJ
JUDGMENT
Delivered
on: 04 February 2013
Heard
on: 19 November 2012
HUGHES
AJ
1.
In this application the applicant seeks that P G BREEDT
BOORKONTRAKTEURS CC, the first respondent, be placed under
supervision
and that business rescue proceedings as envisaged in
terms of Section 131 of the Companies Act 71 of 2008 ("the Act")
commence as envisaged by Section 131 and 138 of the Act, Mr. Grant
Chittenden be appointed as the business rescue practitioner.
The
second and third respondents opposed the application.
2.
As this area of Company law is fairly new as the Act only came into
operation in 2008, there is not much case law on the topic
of
supervision and business rescue. It is therefor prudent that I set
out broadly when is a court permitted to place a company
under
supervision and commence business rescue proceeding in the absence of
a resolution adopted in terms of section 129. The requisites
are:
2.1.
a court must be satisfied that the company is in financial distress;
2.2.
the company must have failed in respect of employment- related
matters to pay over any amount in relation to its obligation
under or
in terms of any public regulation or contract; or
2.3.
if it is just and equitable to do so financially and there is a
reasonable prospect for rescuing the company. See Section
131(4)(a)(i-iii) of the Act.
3.
An applicant in rescue proceedings in terms of section 131(4) the
court in KOEN V WEDGEWOOD VILLAGE GOLF AND COUNTRY ESTATE 2012(2)
SA
378 WCC at Para [17], [19] and [20] on page 383-384 made the
following observations with which I align myself: "[17] ...
must
satisfy the court that there is a reasonabie prospect that the
subject company can be rescued in the relevant sense by being
placed
under supervision. The information or evidence that wiii suffice to
meet this requirement will depend on the object of the
proposed
business rescue, viz whether it is to achieve the continued existence
of the company on a solvent basis; alternatively,
to allow the
company's business to be managed for an interim period to allow for a
better return for the company's creditors or
shareholders than would
result from the immediate liquidation of the company. Whatever the
object of the proposed business rescue,
however; in order to succeed
in the application the applicant must be able to place before the
court a cogent evidential foundation
to support the existence of a
reasonable prospect that the desired object can be achieved. While it
is the function of the business
practitioner, if appointed, to draw
up a business rescue plan to be considered by the 'affected
persons'the founding papers in
a business rescue application must
nevertheless contain sufficient factual detail to enable the court to
determine whether the
business rescue practitioner will probably have
a viable basis to undertake the task, or, at the very least, make out
a case for
the court to hold that an investigation by a business
rescue practitioner to the end, in terms of sl41(l) of the Act, as
appears
justified...
[19]
In an application in which the object is to secure a better return
than would be obtained under immediate liquidation the applicant
would be required to set out in the founding papers a reasoned
factual basis for the alternative scenarios that the court will
have
to consider, and lay a cogent foundation to enable the court to
determine that there is a reasonable prospect that the better
return
evident on one of those scenarios can be achieved.
[20]
Vague and speculative averments in the founding papers will not
suffice to provide a proper basis for a court to make the required
determination that there is a reasonable prospect, if the company
were to be placed supervision, that the contemplated business
rescue
objective could be achieved."
4.
The applicant in the present matter launches this application as an
affected person as he holds a 70% membership in the first
respondent
and as a creditor. He alleges that, as at 31 January 2012 the first
respondent owed him an amount of R4.74 million.
5.
In the founding papers the applicant alleges, as at 20 February 2012,
that the business of the first respondent "is currently
in
financial distress" in that its not able to pay its debts as and
when they become due and payable and that the respondent
"will
become insolvent in the immediate ensuing six months or is trading
under insolvent circumstances". According to
the applicant the
second and third respondents instituted an application for the
winding-up of the first respondent on or about
October 2010, which
the applicant opposed. The snowball effect of that winding-up
application was that the applicant's major banker
First National Bank
Ltd ("FNB") called up its credit with immediate effect an
amount of R2.9 million had to be paid back
to FNB by the first
respondent.
6.
According to the applicant as at February 2011 financial year-end the
first respondent recorded an accumulated loss of R7.521
million. In
addition, in this period, the company had assets to the tune of R22,
89 million and liabilities of R22, 92 million.
The second and third
respondent's submit that as at 31 January 2012 the first respondent's
total liabilities including member's
loans exceeded its total assets
by R18, 94 million and as such the company was hopelessly insolvent.
7.
The applicant has attached to his application a "45- month cash
flow forecast" that amounts to a proposed business
rescue plan
drawn up by the applicant and considered by the proposed business
rescue practitioner. This plan illustrates the expected
cash to be
injected in the first respondent as a result of a new contract with
Tharisa Chrome Mine, managed by Mutual Construction
Co Pty Ltd (MCC).
The first respondent is alleged to have concluded a contract with MCC
and MCC has provided a drilling schedule.
8.
Of significance is the fact that the only assurance filed with
regards to this contract between MCC and the first respondent,
is a
letter of appointment date 24 January 2012 which states the
following:
"We
hereby confirm that MCC have awarded a drilling contract to P G
Breedt Boorkontrakteurs at the Tharisa Chrome Mine Contract
near
Marikana for an intended 72 month duration.
The
project will entail the total drilling of initially 12 500m of 165mm
diameter holes per month and will increase to 35 000m per
month by
November 2012 and will peak at 55 000m per month by September 2013."
9.
Though a glowing picture is painted by way of the founding affidavit,
what is lacking in my view is supporting papers indicating
the
progression on the work undertaken and the funds received from
January 2012 to November 2012, when this application was heard.
What
is of further concern is the fact that the second and third
respondents have requested sight of the contract entered into
by the
first respondent and MCC but up until the hearing of this matter the
information was not forthcoming. The lack of transparency
in respect
of this crucial contract that the applicant relies on leaves much to
be desired. This leads to the conclusion that the
contract as at the
time of this hearing had not been formalized. This application was a
delay tactic to stall the inevitable.
10.
The first respondent has in the past concluded contracts with MCC in
but they had not assisted the financial dilemma. How then
would this
contract, the terms and conditions of which are not know to the
court, the other affected parties, the creditors, (for
scrutiny)
assist the first respondent.
11.
One of the purposes of business rescue is to "provide for
efficient rescue and recovery of financially distressed companies,
in
a manner that balances the rights and interests of all relevant
stakeholders"- s7 (k) of the Act. Therefore it is safe
to say
that these proceedings are designed to facilitate the rescue and
rehabilitation of businesses in financial distress. This
procedure is
clearly available for businesses that are showing signs of pending
insolvency but not actual insolvency. It provides
temporary
supervision and management of the business and its affairs and also
places a temporary moratorium on the rights of the
creditors
enforcing their claims against the business concerned- sl28 (l)(b) of
the Act.
12.
The business rescue plan, its preparation by a business rescue
practitioner for consideration and adoption is at the heart and
soul
of these proceedings.
13.
The second and third respondent also take issue with the fact that
the applicant drew up the business rescue plan as opposed
to a
business rescue practitioner. - S 150(1) of the Act.
14.
S128 (l)(d) defines Business rescue practitioner as "a person
appointed jointly, in terms of this Chapter to oversee a
company
during business rescue proceedings and 'practitioner' has a
corresponding meaning
In
addition
Section
138 (1) goes a step further and sets out the qualifications of a
practitioner
"(1)
A person may be appointed as the business rescue practitioner of a
company only if the person-
(a)
is a member in good standing of a legal, accounting or business
management profession accredited by the Commission;
(b)
has been licensed as such by the Commission in terms of subsection
(2);
(c)
is not subject to an order of probation in terms of section 162(7);
(d)
would not be disqualified from acting as a director of the company in
terms of section 69(8);
(e)
does not have any other relationship with the company such as would
lead a reasonable and informed third party to conclude that
the
integrity, impartiality or objectivity of the person is compromised
by the relationship; and
(f)
is not related to a person who has a relationship contemplated in
paragraph (d)/'
15.
Thus in order to qualify as a business rescue practitioner one has to
comply with the requirements set out in sections 128 and
138 of the
Act. The applicant also states in his founding affidavit that "the
provisional plan was drafted by him and reviewed
by Mr. Chittenden".
Mr. Chittenden whom the applicant proposes be appointed is a
chartered accountant and accredited by the
Commission. On 8 February
2012 he was engaged as a business rescue practitioner in the rescue
proceedings of another business.
However, it would seem that he had
prior dealings with the provisional plan drafted by the applicant.
Section 138 (e) prohibits
the appointment of a practitioner who has
had prior dealings with the business.
16.
It should be borne in mind that a business rescue practitioner is
appointed to look into and investigate the affairs of the
business
and then express an opinion as to whether the business could still be
rescued- S 141(1). In this instance the business
rescue practitioner
is perceived to be conflicted. To a third party the actions of the
rescue practitioner may be justifiably indicative
of him serving the
interest of the company rather than the creditors as he approved a
provisional plan drafted by the director
of the company without
consultation with the other affected parties and the creditors.
17.
In the circumstances I can only conclude that this rescue application
is flawed for the stated reasons and is lacking in essential
averments or is vague as regards pertinent issue that might have
assisted me in reaching the conclusion sought by the applicant.
18. In the result the application is
dismissed with costs.
W.
Hughes
Acting
Judge of the High Court
Delivered
on: 04 February 2013
Heard
on: 19 November 2012
Attorney
for the Appellant:
Attorneys
Pretoria
Ref:
Tel:
012
Attorney
for the Respondent:
Attorneys
Pretoria
Ref:
Tel:
012