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[2013] ZAGPPHC 195
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Beer NO v Fozsa Logistics CC (23039/2013) [2013] ZAGPPHC 195 (12 July 2013)
NOT
REPORTABLE
IN THE
NORTH GAUTENG HIGH COURT,
PRETORIA
[REPUBLIC OF SOUTH AFRICA]
CASE
NO: 23039/2013
DATE:12/07/2013
In the
matter between:
JOHAN
CHRISTIAAN BEER
N.O
...........................................................
APPLICANT
AND
FOZSA
LOGISTICS
CC
..........................................................................
RESPONDENT
REGISTRATION
NUMBER: 2005/074130/23
JUDGMENT
MAKUME J
[1] In
this application the Applicant seeks an order terminating the
business rescue process with regard to the Respondent and to
place
the Respondent under liquidation in terms of section 141(2)(a)(ii) of
the Companies Act number 71 of 2008("The Act”).
The facts
leading to the application are set out hereunder.
[2] On
the 27th day of September 2012 a notice in terms of section 132(i)(a)
of the Act was published effectively placing the Respondent
company
under business rescue in terms of section 129(3) of the Act.
[3] On
the 4th October 2012 the Applicant was duly appointed, the business
rescue practitioner of the Respondent in accordance with
section
129(3)(b) of the Act.
[4] The
appointment of the Applicant and the placing of the Respondent under
business rescue went unchallenged. If there was anything
amiss about
the appointment and the placing of the company under business rescue
any affected person could have utilised the provisions
of section 130
of the Act. This is despite the fact that all such affected persons
were notified of the proceedings.
[5] A
first meeting of the creditors was held on the 16th October 2012 at
which meeting the Applicant in his capacity as business
rescue
practitioner expressed a view that having had a look at the
preliminary situation of the Respondent that there was a chance
that
the company can be rescued. He indicated that he will soon publish
his business rescue plan in accordance with the Act which
business
plan he will present at the second meeting of the creditors for
consideration.
[6] It
would appear that this view was not well considered or was based on
incorrect information. I say this because in paragraph
145 of the
founding affidavit the Applicant says the following:
"From
approximately the beginning of September 2012 up until to the date
hereof I had no alternative but to conclude that there
no longer
existed any reasonable prospects for rescuing the Respondent”.
[7] It is
clear that this statement contradicts materially what the Applicant
told the body of creditors who attended the first
creditors meeting
on the 16th October 2012.
[8] It is
common knowledge and not disputed that the Respondent conducted a
logistic business specialising in transporting bulk
wholesale fuel
from the major petroleum companies in South Africa to end users or
retailers.
[9] To
conduct its business the Respondent owned large horse and trailer
fuel tankers. The Respondent’s major client who accounted
for
almost 90 percent of its income was Total South Africa Petroleum
(Pty) Limited.
[10] As a
result of theft and fraudulent activities involving deliveries of the
fuel Total South Africa terminated its agreement
with the Respondent
in August 2012. At that time it is said that Total owed the
Respondent an amount of R 1.3 million.
[11] The
Applicant says that he reached a conclusion that there no longer
existed any reasonable prospects of rescuing the Respondent
because
of the loss of that major contract with Total South Africa. The
Applicant further says that he attempted on numerous occasions
to
have the contract reinstated without success. He was also not
successful in obtaining new contracts from various other companies.
As a result of that state of affairs the Respondent was unable to
meet its reduced monthly obligations in terms of the proposed
business rescue plan.
[12] On
the 15th April 2013 the Applicant issued a notice terminating the
business rescue proceedings. The notice reads that it
is a
termination in the manner as contemplated in section 132(2)(b); read
with section 141 (2)(a)(ii) of the Companies Act.
[13]
Section 132(2) (b) reads as follows:
‘’
Business
rescue proceedings ends when;
(b) The
practitioner has filed with the commissioner a notice of termination
of business rescue proceedings.
[14]
Section 141 (2)(a)(i)(ii) reads as follows:
"If
at any time during business rescue proceedings the practitioner
concluded that
(a) There
is no reasonable prospect for the company to be rescued, the
practitioner must:
(i) So
inform the court, the company, and all affected persons in the
prescribed
manner and;
(ii)
Apply to court for an order discontinuing the business rescue
proceedings
and placing the company into liquidation”.
[15] Mr
Mohammmed Shabir Shaik Ebrahim the sole member of the Respondent has
filed an affidavit opposing the application. In his
affidavit
Mohammed raised the following:
15.1.
Firstly that the Applicant having filed a notice terminating business
rescue now lacks the necessary locus standi to bring
this
application.
15.2.
Secondly that the Applicant failed to carry out his statutory
obligation as a business rescue practitioner in that he failed
to
take reasonable steps to recover the amount due to the Respondent
from Total in the sum of R1.93 million.
15.3.
Thirdly, that the Applicant was guilty of a general dereliction of
duty as a business rescue practitioner and in various ways
failed to
take steps to save the company from liquidation. It is alleged that
amongst others he failed to extend the period of
business rescue
beyond three months, also that he failed to file a report to the body
of creditors.
15.4.
Fourthly Mohammed continues that there are reasonable prospects of
the company surviving and trading under solvent conditions
but for
the actions of the business rescue practitioner. In this regard Mr
Mohammed says that the applicant jettisoned his endeavours
to
finalise a prospective deal with BP one of the major oil companies.
Mr Mohammed seeks an order that an alternate business rescue
practitioner be appointed to replace the Applicant. To this end he
has nominated a Mr Tshepo Mofokeng an attorney of the law firm
Mafokeng Incorporated.
15.5.
Lastly it is argued that the Applicant has not made out any case for
liquidation.
LOCUS
STANDI
[16] In
his opposing affidavit Mohammed argues that since the Applicant filed
a notice to terminate business rescue it was not necessary
to still
approach court for an order. Mohammed has clearly misunderstood the
meaning and effect of section 132(2)(b) read with
section
141(2)(a)(i) and (ii). The two sections must always be read together
and not separately which is what Mohammed did.
[17] It
is common cause that at the second meeting of creditors held on the
6th December 2012 the Applicant still expressed a view
that there
seems to be reasonable prospects of rescuing the business of the
company. At that meeting which was attended by more
creditors a view
was expressed that the Applicant should hold on to the adjusted
business rescue plan and produce evidence of new
contracts. Voting on
the business plan was postponed to the next meeting.
[18] The
business rescue plan had been circulated for consideration in
November 2012 already. The deponent Mr Mohammed Shabir Shaik
Ebrahim
only holds 30 percent membership interest in the company whilst 70
percent interests is held by Mr Abdul Sheik Ebrahim.
In the business
recue plan the total claim filed by creditors amounts to the sum of
R10,523 344.99 (Ten million five hundred and
twenty three rands three
hundred and forty four rands and ninety nine cents only).
[19] In
the business plan the Applicant sets out proposal and strategy for
returning the company to solvency and liquidity one of
proposals was
to secure long term contracts with fuel and oil companies.
[20] On
the 25th January 2013 the Applicant in the Business Rescue status
report reports that on the 14th January 2013 there was
still hope
that Total South Africa would reinstate the Respondent’s
contract and for that reason he postponed the third creditors
meeting
to enable him to secure the reinstatement of the Total South Africa
contract.
[21] On
the 14th of February 2013 at the Third Creditors’ Meeting held
in terms of Section 142 of the Act it was reported
by a
representative of the member that Total South Africa will reinstate
the company as a preferred service provider, However there
were still
discussions to be held between the member and Total to discuss
certain issues. On the 7th or 12th March 2013 the Applicant
updated
the Business Rescue plan and sent same to all the creditors and
affected persons. It is significant to note that as at
that date
there was still hope that Total South Africa would reinstate the
contract.
[22]
However finally on the 4th April 2013 Total South Africa suspended
all contracts and dealings with the Respondent. This directly
translated to no income being generated by the company. The business
status report states that the Applicant then held a meeting
with the
members of the Respondent and informed them of his decision to
terminate the Business Rescue. It was clear that the company
would
not be able to meet its proposed creditors repayment plan. Total was
the major income source of the company.
[23] The
termination of the Total deal amongst others led to the member
resorting to unconventional tactics in an attempt to blackmail
Total
to reinstate the contract Mohammed sent an SMS to Total which reads
as follows:
"Good
day............. I think Total has pushed me over the cliff by
leaving me
and my
kids on the pavement. I have asked truth and justice. Which I will
not get from KHL and Total. I will be embarking on a hunger
strike
till I drop dead in full glare of the TV and print media, radio and
on You Tube on the 8th of April on the pavement outside
Total Head
Office. It is the only the only way to get someone with authority
from Total to talk to me. You can tell Zahir I say
he is a lying
bastard when he said I could talk to him anytime when we first met.
This is lie also that I was audited by mistake.
I have nothing to
lose anymore. With the stem that Total put me through, causing me to
get a heart failure, pushed my sugar levels
to skyrocket and cause my
kidney to start failing. I might as well die fighting on Total
sidewalk seeking truth and justice. Truth
will and must prevail. I
want to know when Total talks about ethics who does it apply to?”
[24] The
above is a clear message of desperation after losing the contract. It
accordingly makes a mockery of the members’
argument that there
are prospects that the company will survive the financial crises it
presently finds itself in.
[25] It
is disingenuous of the member Mr Mohammed to at this last stage seek
the removal of the Applicant as Business Rescue Practitioner.
In the
first place he is the one who signed the resolution calling for
business rescue. He was represented at all creditors’
meetings
and was kept abreast with developments since September 2012. Three
creditors’ meetings were held and in between
he received all
the updates on the business Rescue Status. He should if he had
noticed any dereliction of duties by the applicant
proceeded in terms
of section 130(1) (b) read with section 139(2)(a)(b)(c)(d)(e)(f).
[26]
Section 130(1)(b) reads as follows:
"Subject
to subsection(2), at any time after the adoption of a resolution in
terms of section 129 until the adoption of a business
rescue plan in
terms of section 152, an affected person may apply to a Court for an
order:
(b)
Setting aside the appointment of the practitioner on the grounds that
the practitioner
(i) Does
not satisfy the requirement of section 138.
(ii) Is
not independent of the company or its management or;
(iii)
Lacks the necessary skills having regard to the company’s
circumstances’’.
[27]
Section 139(2) a-f almost mirrors section 130(1) referred to above.
What it does it elaborates and expands acts that will lead
to the
removal of a business rescue practitioner being the following:
(a)
Incompetence or failure to perform the duties of a business rescue
practitioner to the particular company.
(b)
Failure to exercise the proper degree of care in the in the
performance of the practitioner’s functions.
(c)
Engaging in illegal acts or conduct.
(d) If
the practitioner no longer satisfies the requirements set out in
section 138(1).
(e)
Conflict of interests or lack of independence or;
(f) the
practitioner is incapacitated and unable to perform the functions of
that office, and is unlikely to regain that capacity
within a
reasonable time.
[28]
Mohammed did not avail himself of the provisions of the section
referred to above and only brings up stories and incidents
of
incompetence and dereliction of duty when the Applicant is moving an
application for termination of business rescue and conversion
to
liquidation. After all section 132(2) of the Act grants each debtor
of a company during business rescue the duty to the company
to
exercise any management function within the company in accordance
with the express instruction or direction of the practitioner
to the
extent that it is reasonable to do so. That the members including
Mohammed were not cut off from the management activities
of the
company including how the business rescue was being managed by the
applicant.
[29]
Mohammed argues further that the Applicant failed to take steps to
recover the R1.93 million that he says Total owes to the
company.
This statement cannot be true. Conversation between Cawood Attorneys
and Knowles
Husain
Attorneys including the minutes of creditors as well as the business
status reports bear witness to the fact that everything
was done to
collect that money. In the end on the 12th April 2013 Attorneys
Knowles Hussain write as follows to Cawood Attorneys
who are the
Attorneys of the company:
"As
your clients are aware it is our client’s firm view that on a
proper analysis of the relevant transaction, your client
is in fact
indebted to our client in an amount of approximately R400, 000. In
the circumstances, our client does not accept your
client’s
proposal contained in your letter under reply.
Nonetheless
and in the interests of amicably resolving this matter our client is
prepared to settle this matter for R800, 000.00.
In this regard our
client is prepared to:
3.1. Pay
an amount of R400, 000-00 to your client and;
3.2.
Write off its claim against your client of R400, 000-00 in full and
final settlement of this matter.
4. We are
instructed that this offer is not open to further negotiation”.
[30]
There is evidence that all the vehicles of the company have been
surrendered to the financial institutions that financed their
purchasing as the company has not paid the loans in full. Without the
vehicles the company is unable to conduct its business of
transporting bulk fuel. The Applicant concluded correctly so that the
Respondent is an entity with little or no money, no revenue
sufficient to make repayments toward creditors and has more than Ten
million Rand liability towards creditors.
[31] Mr
Mohammed argues that the company was in a healthy financial position
and should not be liquidated basing his argument on
the year end
financials as at February 2012 which period falls outside the period
of business rescue. This argument is flawed for
the reason stated
above. The reality of the matter is that five months after year end
the company was in financial distress despite
the Accumulated profit
at year end in the sum of R3,778 490-00.
[32]
Mohammed further argues that the Applicant did not prepare or publish
a Business Rescue Plan and that none of the members ever
received a
Business Rescue Plan. It is correct that the plan was never published
Applicant’s explanation was because the
creditors at a duly
constituted meeting agreed that it should not be published yet. The
member was present at all those meetings
with his Attorney Mr Cawood.
Mohammed and the members cannot now be heard to plead ignorance.
[33]
Mohammed’s opposition to the present application is based in
the main on lack of locus standi, secondly the Total South
Africa
disputed debt of R1.93 million rands and recovery thereof. I have
come to the conclusion that Mohammed has completely misread
sections
132 and 141 to suit his argument, accordingly I find that the
Applicant never lost his locus standi. The Total debt is
a disputed
debt and would in any case lead to long litigation beyond the
lifespan of the business rescue.
[34] It
is trite law that the initial prognosis was that the company would
continue to run as a going concern and managed to financial
soundness, however, subsequent events mainly the suspension or
termination of the Total contract had an adverse effect on the
company’s operations and profitability which resulted in a
decision by the Applicant to wind up the company and cut down on
further losses.
[35] I
have come to the conclusion that the business rescue should be
terminated and that the company be placed under liquidation
in the
hands of the Master in terms of section 141(2) (a) (ii).
[36]
Accordingly the following order is hereby made:
(a) The
business rescue with regard to the Respondent is terminated.
(b) The
Respondent company is placed under liquidation in the hands of the
Master in terms of section 141(2) (a) (ii).
(c) Costs
of this application shall be costs in the liquidation.
(d) The
counter application by the member Mohammed to appoint Tshepo Mofukeng
as the new Business Rescue Practitioner is dismissed
with costs which
costs shall be paid by Mr Mohammed Shabir Sheik Ebrahim personally.
Dated at
Pretoria on the 18th of June 2013.
MAKUMEjflA
JUDGE OF
THE NORTH GAUTENG