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[2013] ZAGPPHC 544
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Absa Bank Limited v Summer Lodge (Pty) Ltd (63188/2012 , 63189/2012, 63190/2012) [2013] ZAGPPHC 544 (23 May 2013)
IN
THE NORTH GAUTENG HIGH COURT. PRETORIA
/ES
(R
EPUBLIC
OF SOUTH AFRICA
)
DATE: 25 MAY 2013
CASE NO:
63188/2012
IN THE MATTER
BETWEEN
ABSA BANK
LIMITED
.................................................................................................................
APPLICANT
AND
SUMMER LODGE (PTY)
LTD
.................................................................................................
RESPONDENT
CASE NO:
63189/2012
IN THE MATTER
BETWEEN
ABSA BANK
LIMITED
.................................................................................................................
APPLICANT
AND
JVL BELEGGINGS (PTY)
LTD
................................................................................................
RESPONDENT
CASE NO:
63190/2012
IN THE MATTER
BETWEEN
ABSA BANK
LIMITED
.................................................................................................................
APPLICANT
AND
EARTHQUAKE
INVESTMENTS (PTY)
LTD
.........................................................................
RESPONDENT
JUDGMENT
MAKGOBA, J
[1]
The applicant launched three different applications under the above
case numbers for the winding-up of the respondents on the
grounds
that the respondents are insolvent and did not react to or comply
with notices served in terms of section 345 of the previous
Companies
Act no 61 of 1973
("the
previous Companies Act").
The
respondents are insolvent entities belonging to the same group of
companies, which group is indebted to the applicant in the
sum of R53
981 416,00.
[2] On 22 February
2013 VAN DER BYL AJ granted provisional winding-up orders in respect
of all three respondents, the return day
of the provisional orders
being 27 March 2013, which was extended to 13 May 2013. By
arrangements and agreement the matters were
heard simultaneously on
15 May 2013 as the legal issue raised for determination is the same
in each case.
[3]
The pivotal question before VAN DER BYL AJ was whether the launching
of the business rescue applications to place the respondents
under
supervision and to commence business rescue proceedings in respect of
each of them would suspend the applications for liquidation
ex
lege/automatically.
Thus, as
in casu,
VAN
DER BYL AJ was also requested to interpret
section 131(6)
of the
Companies Act no 71 of 2008
. VAN DER BYL AJ held that liquidation
proceedings only
"commence"
by
the granting of a liquidation order, whether provisional or final,
and therefore the mere issue and service of a business rescue
application would not suspend legal proceedings in order to obtain a
liquidation order. That essentially, because there is no liquidation
order in existence, there is still no
"liquidation
proceedings
"
and therefore nothing to
"suspend'.
Consequently,
VAN DER BYL AJ granted provisional winding-up orders in respect of
each of the respondents. The legal question was
kept open for
determination by this court on the return day of the
rule
nisi.
[4]
The legal question for determination by this court concerns the
construction of the words "
liquidation
proceedings
"
as
it appears in section 131(6) of the Companies Act, no 71 of 2008
("the Act").
Section
131(6) of the Act provides as follows:
" If
liquidation proceedings have already been commenced by or against the
Company at the time an application is made in terms
of subsection (1)
the application will suspend those liquidation proceedings until-
(a) the Court has
adjudicated upon the application; or
(b)
the business rescue proceedings end\ if the Court makes the order
applied for
."
[5]
With regard to the legal question posed to this court the parties are
at loggerheads as to the correct interpretation of the
words
“
liquidation
proceedings"
as
it appears in section 131(6) of the Act.
[6]
The respondents contend that by virtue of the three business rescue
applications launched by the affected parties, this court
is
precluded from granting a final liquidation order. This is because,
respondents contend, the applications for liquidation constitute
"liquidation
proceedings
"
as envisaged in section 131(6) of the Act. Thus the respondents
contend that the liquidation applications are therefore automatically
and/or
ex lege
suspended
and the court's jurisdiction is ousted to grant final winding-up
orders.
[7]
In the respondents' contention the words
"
liquidation
proceedings
"
refer
to the substantive application (ie legal process) to obtain a
winding-up order and also to the collective processes followed
by the
Master and the liquidator in the actual winding-up of the
respondents. On the other hand the applicant's interpretation
of the
words is that the words refer only to the collective proceedings in
the actual winding-up of the respondents followed by
the Master and
the liquidator. Thus, excluding the legal proceedings in order to
obtain a winding-up order.
[8]
For reasons that follow, I am inclined to align myself with the
applicant's interpretation or contention and I reject the
respondents'
contention. It needs be mentioned that VAN DER BYL AJ,
with reference to the decision in
Firstrand
Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd
2012 4 SA 266
(KZD),
found
that liquidation proceedings as referred to in section 131(6) of the
Act only commence by the granting of a liquidation order,
whether
provisional or final. That the provisions of section 131(6) of the
Act do not suspend any liquidation proceedings prior
to the granting
of a provisional or final order.
[9]
The ultimate decision of VAN DER BYL AJ is in line with the
applicant's contention that the words "
liquidation
proceedings
"
only
relate to the actual process of winding-up following an order of
winding-up and therefore excluding the legal proceedings and/or
substantive application and/or steps taken by a creditor to obtain a
winding-up order.
[10]
The ordinary grammatical meaning of the words "
liquidation
u
and
"
proceedings
"
needs
to be looked into. According to Webster’s
Third
New International Dictionaiy
the
words have the following meanings:
"
Liquidate
"
means:
to determine the liabilities and apportion assets towards discharging
the indebtedness of; to settle (a debt) by payment
or other
adjustment or settlement; to get rid of; dispose of; to convert
(assets) into cash; to liquidate debts or damages or accounts;
to
determine liabilities and to apportion assets towards discharging
indebtedness.
"
Proceeding
"
means:
the action of proceeding; a particular way of doing or accomplishing
something; a particular action or cause of action; a
particular step
or series of steps adopted for doing or accomplishing something.
[11]
Thus, in my view 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. This clearly suggests
that the words
"
liquidation
proceedings
"
in
section 131(6) of the Act is concerned with the actual process of
winding-up followed by the liquidator and the Master after
the
winding-up order has been granted. It therefore excludes the legal
action and/or process taken in order to obtain such a state
of
affairs.
[12]
Consequently, I agree with the submission made by MrMeintjies,
counsel for the applicant, that the words
"
liquidation
proceedings
"
refer
to a process that consists of the collection of the assets, realizing
and reducing them to money, dealing with proof of creditors
by
admitting or rejecting them, and distributing the net proceeds after
providing for costs and expenses by the liquidator to the
persons
entitled thereto. Thus, the words "
liquidation
proceedings
"
have
to do with the process that is overseen by the liquidator and the
Master in winding-up and not the legal proceedings before
a court of
law in order to obtain such order.
[13]
The interpretation ascribed to the words "
liquidation
proceedings
"
above, is fortified by the use of the word "
commenced
*
as it appears in section 131(6) of the Act. The legislature used the
word "
commenced
"
and not for instance the word "
launch
"
or
"
start
".
The
word "
commenced
"
has a particular meaning in company law. Thus, in South African law,
the word "
commenced
'
is
used in section 348 of the Companies Act no 61 of 1973 (which is
still applicable to date).
[14] Section 348 of
the previous Act provides as follows:
"A
winding-up of a company by the court shall be deemed to commence at
the time of the presentation to the court of the application
for the
winding-up
."
In
terms of section 348 of the previous Act a winding-up order by the
court is by way of a fiction
"deemed
to commence at the time of the presentation to the court of the
application for the winding-up
"
but this deeming clause only comes into operation after it has been
determined
ex post
facto
that
a winding-up order had been granted. If no such order has been
granted any liquidation proceedings cannot be deemed to have
commenced.
[15]
The Full Bench in
Vermeulen
& Another v CC Bauermeister (Edms) Bpk
1982 4 SA 159
(T)
considered
the meaning of section 348 and held as follows:
"Section
348 is a deeming provision, whereby a winding-up by the court is
deemed to have commenced when the application is
presented
...
in the case of
section 348, that which is deemed to take effect at an earlier date
is a winding-up by the court. Section 348 refers
expressly to a
winding-up by the court
,
and that is the
event which is deemed to commence at an earlier stage
.
Thus, before the
deeming provision can operate there must be a winding-up by the
court
.
By the deeming
provision, Parliament has antedated the operation of a winding-up by
the court, but without such a winding-up there
is nothing to
antedate. To hold the contrary would lead to manifest absurdity, in
that the mere filing of an application for a
winding-up order,
however ill-founded or even vexatious, would
ipso
jure
have the
effect of a winding-up order
."
This decision was
approved and applied in
Kalil v Decotex
1988 1 SA 943
(A).
[16]
In the context of the present case I am of the opinion that section
131 (6) of the Act means that once the liquidation proceedings
have
commenced by the granting of a liquidation order, whether provisional
or final, the mere issue and service of a business rescue
application
in terms of section 131(1) of the Act would suspend the liquidation
process. VAN DER BYL AJ was accordingly correct
in granting
provisional orders on 22 February 2013 since as at that time there
were no liquidation proceedings to be "
suspended'
by
the business rescue applications.
[17] It is common
cause that as matters stand now, the business rescue applications
have been duly launched and the matters are
pending. Furthermore the
provisional orders have been granted but remain suspended by the
pending business rescue applications.
Order
[18] 18.1 I
accordingly issue a declarator to the following effect:
"The
meaning of the words
liquidation
proceedings
'
in
section 131(6)
of the
Companies Act, no 71 of 2008
, is confined to the actual
process of winding-up a company consequent upon an order of
winding-up having been issued by a court
and is the actual process
followed in winding-up and overseen by the liquidators and the
Masters. The words
liquidation
proceedings
f
do not include the legal proceedings taken by a creditor for purposes
of obtaining an order that a company be wound-up
."
18.2 Consequent to
the above, the provisional orders granted on 22 February 2013 are
suspended and the return days are extended
until the court has
adjudicated upon the business rescue applications or the business
rescue proceedings end, if the court makes
the order applied for.
18.3 The costs of
the present proceedings shall be paid by the respondents.
E
M MAKGOBA
JUDGE
OF THE NORTH GAUTENG HIGH COURT
63188-2012
HEARD ON: 15 MAY
2013
FOR THE APPLICANTS:
L MEINTJIES
INSTRUCTED BY:
RORICH WOLMARANS & LUDERITZ
ATTORNEYS
FOR THE RESPONDENTS:
M M W VAN ZYL SC
INSTRUCTED BY:
DIEMONT INCORPORATED