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[2013] ZAGPPHC 287
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Nel NO and Another v Panamo Properties (Pty) Ltd and Others (56399/2013) [2013] ZAGPPHC 287 (11 October 2013)
NOT
REPORTABLE
IN
THE GAUTENG HIGH COURT -
PRETORIA
(REPUBLIC OF SOUTH AFRICA)
Heard
on 26 September 2013
CASE
NO: 56399/2013
DATE:11/10/2013
In
the matter between:
JAN
HENDRIK NEL
N.O.
…....................................................................................
1st
APPLICANT
CHARMAINE
NEL N.O
.
…...................................................................................
2nd
APPLICANT
(as
the duly authorised appointed
trustees
of the JAN NEL TRUST (No IT660/86)
and
PANAMO
PROPERTIES (PTY)
LTD
...................................................................
1st
RESPONDENT
(In
business rescue)
LIEBENBERG
DAWID RYK VAN DER MERWE N.O
......................................
2nd
RESPONDENT
THE
COMPANY AND INTELLECTUAL PROPERTY
COMMISSION
OF THE
RSA
...............................................................................
3rd
RESPONDENT
TREVOR
PAYNE
....................................................................................................
4th
RESPONDENT
PINK
PARROT INVESTMENTS (PTY)
LIMITED
…............................................
5th
RESPONDENT
and
FIRSTRAND
BANK
LIMITED
.................................................................................
6th
RESPONDENT
JUDGMENT
KHUMALO
J
INTRODUCTION
[1]
The Applicants, duly authorised as trustees of the inter vivos Jan
Nel Trust ("the trust"), that is the sole shareholder
of
Panamo Holding (Pty) Ltd ("l5t Respondent") under business
rescue, launched an urgent Application seeking a final
declaratory
relief:-
[1.1]
declaring that the resolution to commence the business rescue
proceedings and place First Respondent under supervision of
a
business rescue practitioner lapsed and is a nullity;
[1.2]
declaring that the appointment of 2nd Respondent on 28 October 2011
as business rescue practitioner of the First Respondent
is void;
[1.3]
that the costs of the Application be paid by any person or party who
opposes this Application;
[1.4]
Further and/or alternative relief.
[2]
The relief is sought against the 1st Respondent, the business under
rescue, Mr Liebenberg Dawid Van der Merwe ("2nd Respondent")
the appointed business rescue practitioner and the Companies
Intellectual and Property Commission (3rd Respondent"). The 4th
and 5th Respondents, purchasers of the immovable property of the
business under rescue are cited as interested parties. The 1st,
2nd
and 5th Respondents are opposing the Application.
BACKGROUND FACTS
[3]
Pursuant a resolution in terms of s 129 (1) (a) of the Companies Act,
71 of 2008 ("the Act") taken by the Applicants
(trustees)
Jan Hendrik Nel and Charmaine Net on 19 August 2011 in their
capacities as 1st Respondent's sole directors and shareholders,
to
voluntarily begin business rescue proceedings, 1st Respondent was
placed under business rescue.
[4]
On 18 October 2011 the resolution together with a sworn statement
deposed to by the 1st Applicant was filed at the 3rd Respondent.
The
affected persons were sent a letter on 19 October 2011 with a notice
of the resolution to commence business rescue proceedings.
The 3rd
Respondent then issued a registration certificate on 26 October 2011
certifying that, can act as 1st Respondent's business
rescue
practitioner. On 28 October 2013, a Notice confirming the appointment
of 2nd Respondent as 1st Respondent's business rescue
practitioner
was filed with the 3rd Respondent.
[5]
2nd Respondent was to remain in control of the First Respondent.
Incidentally, on 24 April 2012, as part of the business rescue
proceedings and in pursuance of the approved business rescue plan, he
sold 1st Respondent's immovable property described as the
remaining
extent of Portion 502 of the farm Boschkop 199, Honeydew, situated at
168 Blueberry Street, Honeydew, Gauteng ("Blueberry
property"),
to the 4th Respondent who then nominated the 5th Respondent to take
transfer.
[6]
Through the initiative of the 2nd Respondent rates and taxes that
were owed on the property to the municipality that were hampering
the
transfer of the property were paid and the hold placed on the
transaction by the South African Revenue Services ("SARS")
for arrear taxes owed by 1st Respondent is to be uplifted soon. As a
result of the transfer of the property being imminent, Applicants
conceded that it prompted their launching of this Application on an
urgent basis.
APPLICATION
[7]
Applicants grounds for seeking the relief as prayed are that:
[7.1]
The resolution to begin business rescue proceedings and place First
Respondent under supervision lapsed and is a nullity for
the reasons
that:
[7.1.1]
the notice of the resolution that was sent to the affected persons
within 5 days of the adoption and filing of the resolution
was not
accompanied by a sworn statement; and also
[7.1.2]
not published as required in terms of s 129 (3) (b). The letter sent
by the 1st Respondent's attorneys on 19 October 2011
purporting to
give notice to the affected parties is not a publication as required
by the Act
[7.1.3]
the business rescue practitioner was not appointed within the
specified period as stipulated in the provisions of s 129
(3)
(b) Act.
[7.2]
When 2nd Respondent was issued with a registration certificate to act
as 1st Respondent's business rescue practitioner on
26 October 2011,
five (5) days had already expired by 25 October 2011, and his
appointment was formally signed and filed on 28
October 2011, eight
(8) days after the resolution was filed.
[8]
In opposition, 1st and 2nd Respondent raised as point in limine, the
statutory nonsuitability of the Applicant to bring
this
Application on the basis that;
[8.1]
the Applicants launched the Application in their representative
capacities as trustees of the Jan Nel Trust, which they allege
owns
100% of the shares in 1st Respondent, and as the sole shareholder of
1st Respondent they an affected party in terms of the
Act. The
Applicants have intentionally omitted to allege (their locus standi)
that they are affected parties.
[8.2]
If Applicants aliege that they do not bring this action in their
capacity as affected parties but in some other capacity,
they are
then prohibited to bring the Application under the Act as Chapter 6
does not permit persons unconnected with the company
to invoke any of
its provisions.
[8.3]
the requisite majority of the holders of voting interests on 27
January 2012 adopted the business rescue plan being eighteen
months
ago. Both Applicants in their personal as well as their capacity as
trustees, lodged claims against 1st Respondent in the
course of the
business rescue proceedings and as creditors voted in favour of the
plan. As set out in s 130 of the Act, it is no
longer open to any
affected person to apply to Court to set aside the resolution.
[8.4]
The Applicants should have sought their relief under s 130 instead of
disguising the relief to be some form of declaratory
order to avoid
the necessity of having to have launched the Application before the
adoption of the business rescue plan.
[8.5]
e Applicants being the directors of 1st Respondent passed the
resolution as such. They are therefore precluded by s 130 (2)
(a)
from applying for its setting aside. The section provides that an
affected person who as a director of the company voted in
favour of s
129 resolution, may not apply to court in terms of s 130 (1) {a} to
set such resolution aside, making the Applicants
non-suited to bring
this Application.
[8.6]
First Rand Bank ("FRB") is the holder of a mortgage bond
over the sold property and the sale will be halted if the
business
rescue plan is declared a nullity. Applicants had initiated the
business rescue proceedings preventing FNB that obtained
judgment on
21 September 2011 against the 1st Respondent, from selling the
property under execution, having caused a writ to be
issued on 11
October 2011. In all other Applications that Applicants brought to
set aside the business rescue, they have joined
FNB as having a
direct and substantial interest. Therefore this Application has got
to be dismissed for non-joinder of FNB.
FNB
[9]
The First Rand Bank Limited brought an Application to intervene
whilst launching a Counter- Application against the Applicants
and
Respondents which it qualified to be conditional on the court
granting the declaratory relief sought and not ordering the 1st
Respondent to be placed under final winding up, that it will seek an
order to be joined in the Application as the 6th Respondent
and for
1st Respondent to be placed under final winding up.
[10]
In its Answering Affidavit filed also in support of the Counter
Application FNB alleges that it is the 1st Respondent's major
creditor with the largest claim as holder of three mortgage bonds
registered against three immovable properties owned by 1st Respondent
and in the other three Applications that Applicants instituted
querying the business rescue proceedings, its interest was
acknowledged
and it was joined as a party in the Applications and
therefore raises non-joinder as well as allege to be an affected
party in
terms of s 128 (1)
(a)
(i) that is entitled to participate in terms of s 130 (4).
[11]
In addition, it also alleges that the Applicants are abusing the
business rescue proceedings that were launched to frustrate
the
intervening party so that they can continue not to pay rental.
Nevertheless deny that the appointment of the business rescue
practitioner was fatally defective resulting in the proceedings being
void, instead refers to the abusive conduct of the Applicants
in
their management of the 1st Respondent that they do not deserve to be
protected.
[12]
Moreover states that the Applicants are limited to the relief under
130 to which they are not entitled as with their support,
the plan
has been adopted and the Applicants themselves are the ones as
directors of the company who have failed to compiy with
the Act. Also
no prejudice has been alleged to have been suffered.
[13]
On the counter application alleges that 1st Respondent committed an
act of insolvency when it sent a letter dated 24 July 2013
to SARS,
relying on its own failure to pay tax dating back from 2009, stating
that:
"Notice
should be taken that the business rescue practitioner has sold (which
we deny) the only income producing asset of the
company on 24 April
2012 and that this action caused that the company immediately became
insolvent. In this regard the following
should be understood:
1.
SARS will not qualify as preferential creditor with business rescue.
2.
SARS will not receive any outstanding funds due to it with relation
to outstanding VAT201 and IT14 taxes dated back to 2009 if
the
property is transferred.
3.
SARS will however become preferential creditor if the company is
liquidated. We intend to file for liquidation as stated in the
attached letter from our lawyers once the time frame expired.
Documentation with relation to the liquidation will be drafted and
served to be heard on an urgent basis in the North Gauteng High Court
in Pretoria if the business rescue practitioner does not
respond
positively to the said letter addressed to its attorney.
on
that basis intend applying for the liquidation of 1st Respondent.
REPLY
[14]
In brief, Applicants replied as follows to the Answering affidavits
and Counter-
Application:
[14.1]
They do not oppose FRB's intervention in the proceedings but deny
that it should have been joined as a party. A copy of the
Application
was e- mailed to FNB notifying it of the Application. The non-joinder
issue is no longer relevant in the light of their
Application to
intervene.
[14.2]
They further do not oppose FRB's Application that the 1st Respondent
be placed under final liquidation if the relief they
are seeking is
granted, however, deny that the liquidation proceedings can be
brought under s 130 (5) © (i) of the Act as
they do not seek
setting aside the resolution to commence business rescue proceedings
in terms of s 130 but a declaratory order
based on the voidness of
the business rescue proceedings. FNB has anyway complied with the
provision of Chapter XIV of the Act
applicable to insolvent companies
like 1st Respondent.
[14.3]
The business rescue proceedings lapsed and are a nullity, therefore
cannot be attacked. If the resolution lapsed it became
legally
invalid and incapable of revival later.
[14.4]
They have been throughout advised that 2nd Respondent did not comply
with many of the provisions of the Act and as a result
dissatisfied
with the conduct of the 2nd Respondent but have never been advised
that the Act provides for nullity of the proceedings.
[14.5]
The imminent sale and transfer of the property will result in a sale
and transfer that is a legal nullity due to the voidness
of the
proceedings
[14.6]
They deny that they lack locus standi and or that they are by statute
barred from bringing the Application as they seek relief
in terms of
s 129 (5) (a) and s 130 (1) and 130 (2) do not apply, being the
reason why they do not rely on the latter sections
for their locus
standi.
[14.7]
They admit being affected persons and parties with a substantial
interest in the subject matter of the pending litigation
as the Trust
owns 100% of the issued share capital.
Application for intervention and
joinder
[15]
FRB established that it is the largest creditor with a substantial
and material
interest
in the outcome of this Application. As the affected party under the
definition
given in s 128 (1), FRB is entitled to service being effected upon
it, allowed to intervene at any time of the proceedings
therefore the
Application to intervene was not necessary. In Cape Point Vineyards
(Pty) Ltd v Pinnacle Point Group Ltd & others
no 12746/2011 of 11
August 2011 (WCC), the court also pointed out that as all affected
persons had the right to participate in
hearings, they did not have
to apply for leave to intervene. Indicating that "Procedures for
the filing of affidavits will
have to be developed in order to ensure
fairness to all parties/'’
[16]
As a result the issue of non-joinder that was referred to in the
Affidavits and heads of argument was not followed or further
canvassed during the hearing and FRB who confirmed to having been
properly served with the Application, was as a result allowed
to
intervene and joined as party to the Application as the 6th
Respondent.
ISSUES TO BE DETERMINED
[17]
The main issue is if there was non-compliance with the provisions of
s 129, if so, what is the implication of a resolution
that lapses and
is a nullity as a result of such non- compliance. Can the provisions
of s 130 (1) and (2) and (5) (a) be invoked?
If yes, are the
Applicants legible to bring up such proceedings, specifically as per
provisions of s 130 (2) of the Act?
[18]
Pertinent is also the question that if the court grants the
declaratory order of nullity, has a case been made for 1st Respondent
to be placed under final liquidation in terms of s 130 (5) or Chapter
XIV of the
Companies Act and
the Insolvency Act?
[19]
The main issue raised will also address and establish the points
relating to Applicants locus standi that have been raised
in limine.
APPLICABLE LAW
[20]
The provisions of the relevant sections of the Act are:
Section
129 - (1) Subject to subsection (2) (a), the board of a company may
resolve that the company voluntarily begin business
rescue
proceedings and place the company under supervision, if the board has
reasonable grounds to believe that -
(a)
the company is financially distressed; and
(b)
there appears to be a reasonable prospect of rescuing the company.
(2)
A resolution contemplated in subsection (1)-
(a)
and
(b)
has no force or effect until it has been filed.
(2)
Within five business days after a company has adopted and filed a
resolution, as contemplated in subsection (1), or such longer
time as
the commission, on application by the company, may allow, the company
must-
(a)
publish a notice of the resolution, and its effective date, in the
prescribed manner to every affected person, including with
the notice
a sworn statement of the facts relevant to the grounds on which the
board resolution was founded.
(b)
appoint a business rescue practitioner who satisfies the requirements
of section 138, and who has consented in writing to accept
the
appointment.
(3)
After appointing a practitioner as required by subsection (3) (b), a
company must-
(a)
file a notice of the appointment of a practitioner within two
business days after making the appointment; and
(b)
publish a copy of the notice of appointment to each affected person
within five business days after the notice was filed.
(4)
If a company fails to comply with any provision of subsection (3) or
(4)-
(a)
its resolution to begin business rescue proceedings and place the
company under provision lapses and is a nullity; and
(b)
the company may not file a further resolution contemplated in
subsection (1) for a period of three months after the date on
which
the lapsed resolution was adopted, unless a court, on good cause
shown on an ex parte application, approves the company filing
a
further resolution.
(5)
A company that has adopted a resolution contemplated in this section
may not adopt a resolution to begin liquidation proceedings,
unless
the resolution has lapsed in terms of subsection (5), or until the
business rescue proceedings have ended as determined
in accordance
with section 132 (2).
Section
130- (1) Subject to subsection (2), at any time after the adoption of
a resolution in terms of s 129, until the adoption
of a business
rescue plan in terms of s 152, an affected person may apply to a
court for an order-
(a)
setting aside the resolution, on the grounds that-
(i)
There is no reasonable basis for believing that the company is
financially distressed;
(ii)There
is no reasonable prospect from rescuing the company; or
(iii)
The company has failed to satisfy the procedural requirements set out
in s 129;
(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 the management; or
(iii)
lacks the necessary skills, having regard to the company's
circumstances; or
(c)
...;
(2)
An affected person who, as a director of a company, voted in favour
of a resolution contemplated in section 129 may not apply
to a court
in terms of-
(a)
subsection (1) (a) to set aside that resolution; or
(b)
subsection (1) (b) to set aside the appointment of the practitioner
appointed by the company,
unless
the person satisfies the court that the person, in supporting the
resolution, acted in good faith on the basis of information
that has
subsequently been found to be false or misleading,
(4)
Each affected person has a right to participate in the hearing of an
application in terms of this section.
(5)
When considering an Application in terms of subsection (1) (a) to set
aside the company's resolution, the court may-
(a)
set aside the resolution-
(i)
on any grounds set out in subsection (1); or
(ii)
if, having regard to all of the evidence, the court considers that it
is otherwise just and equitable to do so;
(b)
(b)
If it makes an order under (a) or (b) setting aside the company's
resolution, may make any further necessary and appropriate
order,
including-
(i)
An order placing the company under liquidation; or
(ii)
[21]
Business rescue proceedings are also governed by the following
regulations published in terms of the Act-
Regulation
123-(1) A Notice of Commencement of Business Rescue Proceedings
contemplated must be in form CoR 123.1, and filed in
accordance with
section 129, together with a copy of the board resolution to commence
business rescue proceedings.
(2)
After filing its Notice of Commencement of Business Rescue
Proceedings, the company must publish that Notice as required in
section 129 (3) (a), by-
la)
delivering a copy of the Notice and resolution to every affected
person in accordance with regulation 7; and
(b)
conspicuously displaying a copy of the Notice -
(i)
at the registered office of the company, the principal places of
conducting the business activities of the company and at any
work-place where employees are employed;
(ii)
or any website that is maintained by the company and intended to be
accessible by affected persons; and
(iii)
if it is listed company, on any electronic system maintained by the
relevant exchange for the communication and interchange
of
information by and among companies listed on that exchange.
(3)
(3)
After filing its Notice of Appointment of a Business Rescue
Practitioner, the company must publish a copy of that Notice as
required in section 129 (4) (b) by either-
(a)
by delivering a copy of the Notice to each affected person in
accordance with regulation 7; or
(b)
informing each affected person of the availability of a copy of the
Notice, in the manner contemplated in section 6 (11) (b)
(ii) and
regulation 6.
Regulation
7 - See s 6 (10) and (11) - (1) A notice or document to be delivered
for any purpose contemplated in the Act or these
regulations may be
delivered in any manner-
(a)
Contemplated in s 6 (10) or (11); or
(b)
Set out in Table CR.3
Section
6 (10) provides that- If, in terms of the Act, a notice is required
or permitted to be given or published to any person,
it is sufficient
if the notice is transmitted electronically directly to that person
in a manner and form such that the notice
can conveniently be printed
by the recipient within a reasonable time and cost.
Section
6 (11) (b) (ii) provides that if, in terms of this Act, a document,
record or statement, other than a notice contemplated
in subsection
(10), is required-
to
be published, provided or delivered, it is sufficient if-
a
notice of the availability of that document, record or statement,
summarising its content and satisfying any prescribed requirements,
is delivered to each intended recipient of the document, record or
statement, together with instructions for receiving the complete
document, record or statement.
[22]
It is not in contention that the resolution to commence business
rescue proceedings was adopted on 19 August 2011, and together
with a
sworn statement signed by the 1st Applicant as the director of the
1st Respondent on 15 September 2011, filed with the 3rd
Respondent on
18 October 2011. The sending of a registered letter by the attorneys
acting on behalf of 1st Respondent to the affected
parties the next
day on 19th October 2011 with a notice of the resolution to commence
business rescue proceedings sans a sworn
statement of the facts
relevant to the grounds on which the resolution was founded was
certainly in contravention of s 129 (3)
(a), the Act being very rigid
in that regard.
[23]
However Applicants' allegation that the Notice to affected persons
was not published in the manner required by s 129 (3) (a)
is not
quite accurate. In terms of the relevant and applicable regulation 7
and Sec 6 (10) and (11) referred to in Regulation 123
that outlines
the requirements of publishing as envisaged in the context of s 129
proceedings, delivery of a copy of the notice
to each affected person
includes any delivery of the notice of the availability of the
document with instruction for receiving
a complete document. Hence
sending the notice by a registered post suffices. In Ex parte: Van
Steen NO 2013 JDR 0364 (GSJ) Rautenbach
AJ with reference to s 6 (9)
that is not mentioned herein went further and indicated that
compliance with regard to publication
of notice to each affected
person required by the Act is in the context of s 6 (9) accommodative
to substantial compliance and
not as stringent as it is perceived to
be by s 129. The subsection affords deviation from the prescribed
manner unless such deviation
materially reduces the possibility that
the intended recipient will receive the document, record, statement
or notice; or is such
as would reasonably mislead a person to whom
the document, record, statement or notice is to be delivered then the
delivery would
be invalidated. However non-delivery is not condoned.
There still have to be delivery to each of the affected persons to
make sure
that the rights and interest of ail stakeholders are
protected. Rautenbach AJ concluded by stating that:
"the
subsection enabled the court to find that there was substantial
compliance with giving notice to all affected parties
if it is
established that all affected parties had full knowledge of its
contents", within the prescribed time limits, (my
emphasis).
[24]
On the requirement to conspicuously display the Notice at any
workplace where employees of the company are employed, Applicants
themselves indicated that the company does not have employees so
publication in that sense was not a requirement. Therefore compliance
in terms of s 129 (3) (a) was deficient only because of non-inclusion
of the sworn statement on the notice to the affected persons.
[25] The appointment of 2nd Respondent
as business rescue practitioner of the 1st Respondent that was filed
with the 3rd Respondent
on 28 October 2011 following the issuing of
his licence or registration certificate on 26 October 2013, was
delayed by eight days
from the date the resolution was filed. In the
letter sent to affected persons, on 19 October 2011, 1st Respondent's
attorneys
stated that the company has appointed Professor Marius
Maritz as a business rescue practitioner which was not true as this
could
only happen if 3rd Respondent had issued a certificate or
licence for Maritz to act as such and the company has filed the
appointment
with the 3rd Respondent. 1st Applicant had proposed in
the sworn affidavit that was not sent to the affected persons that
Maritz
be appointed confirming that Maritz has accepted and is
registered in terms of the Act. As those facts were not true, it
resulted
in the delayed appointment of 2nd Respondent. The delay
resulted in non-compliance with the provisions of s 129 (3) (b).
[26]
Accordingly as provided in s 129 (5), the resolution to begin
business rescue proceedings and place the company under supervision
lapsed and was a nullity. The meaning of "lapse" and
"nullity" in relation to the resolution should be
interpreted
from the context of the Act itself that provides in s 129
(2) that the resolution has no force or effect until it has been
filed
and in s 132 (1) (a) where it provides that business rescue
proceedings begin when the company files a resolution to place itself
under supervision in terms of s 129 (3). These two provisions are
very important and the reference to compliance with s 129 (3)
to mark
or denote the commencement of business rescue proceedings is highly
significant for understanding the implication of the
use of the two
words “lapse" and "nullity" in s 129 (5). The
words at first glance might sound repetitious
but are distinctive in
their context. In terms of s 129 (2), the resolution comes into force
and effect on its filing and lapses
when subsection ("ss")
3 is not complied with. The resolution's effectiveness to trigger or
cause the business rescue
proceedings to begin becomes a nullity, in
other words it wilt not cause the commencement of the business rescue
proceedings, in
that sense become a nullity. The end result being
that the business rescue proceedings did not commence (did not come
into existence).
[27]
It is therefore deliberate that s 132 would refer to s 129 (3) and
not to 129 (2) for the proceedings to begin. The nullity
of the
resolution is therefore with reference to its effectiveness in
bringing about the business rescue proceedings. A context
inferred
from the definition of the word in The Shorter Oxford English
Dictionary that refers to "nullity" as coming
from the
Latin word "nullus" meaning "no", "none",
and as a noun described as:
(1)
A fact or circumstances causing invalidity;
(2)
The condition of being non-existent; nothingness;
(3)
A mere nothing; nonentity
[28]
The lapsed resolution caused an invalidity that prevented the coming
into existence of the business rescue proceedings. And
so ex lege
there was no business rescue proceedings. The conclusion has serious
implications on the invocation of the other provisions
of the Act.
There cannot be an Application in terms of s 130 to set aside a
non-existent situation or a resolution that amounts
to nothing.
[29]
Mr Gilbert, Counsel for the 1st, 2nd and 5th Respondents' argument
and Mr that the Applicants should have sought their relief
under s
130 instead of disguising the relief to be some form of declaratory
order to avoid the necessity of having to launch the
Application
before the adoption of the business rescue plan, carries no weight if
the resolution is of no force or effect. As much
also is the
allegation that Applicants lack locus standi being non-suited by the
provisions of s 130, since legally there are no
business rescue
proceedings that have come into existence that Applicants are barred
from challenging. Fabricius J in Advanced
Technologies &
Engineering Company (Pty) Ltd v Aeronautique Et Technologies &
Others, unreported case number 72522/2011
(NGHC) in par 27 concluded
in respect of this section that:
"The
purpose of s 129 (5), is plain and blunt. There cannot be an argument
that substantial compliance can ever be sufficient
in the given
context, if there is non- compliance with s 129 (3) or (4) the
relevant resolution lapses and is a nullity. There
is no other way
out, and no question of any condonation or argument pertaining to
"substantial compliance". The requirements
contained in the
relevant sub-sections were either complied with or they were not. In
this case they were not, for the reasons
stated herein above."
[30]
It was also raised on behalf of the Respondents that Applicants as
directors of the 1st Respondent were abusive in their conduct
of the
company affairs and should not be protected against the effect of the
proceedings. All the Respondents held the sentiment
that it is the
Applicants themselves that passed and adopted the resolution and for
that reason they are precluded by s 130 (2)
from setting the
resolution aside. Fundamentally, one can only set aside what exists
and not a nonentity. Unfortunately it would
seem that the consequence
of s 129 (3) and (4) were not well thought out or fully appreciated
by the legislator in the quest to
force swiftness in the handling of
the process. Fabricius J confirms the sentiment in Advance
Technologies stating that:
"
It is clear from the relevant sections contained in Chapter 6 that a
substantial degree of urgency is envisaged once a company
has decided
to adopt the relevant resolution beginning business rescue
proceedings"
with
unintended results that may frustrate the same stakeholders that the
act was seeking to protect.
[31]
The barring of any challenge to the proceedings after the approval
and adoption of the business rescue plan has been adopted
does not,
under the circumstance, apply, since the effect of s 129 (5) is to
invalidate the business rescue proceedings that were
purportedly
brought by the lapsed resolution. The business rescue proceedings are
considered never to have existed since the lapsed
resolution has a
retroactive effect.
[32]
In that case, FRB's counter application that was conditional upon the
declaration sought by the Applicants being granted merits
consideration. The parties are agreed that the 1st Respondent was
commercially insolvent at the start of the business rescue and
that
without realising its major asset, the blueberry property, it was
unable to pay its debts and since then the situation has
gone worse
as it is not generating an income. The Applicants, directors of the
company are utilising the property for accommodation
without paying
rental. They have themselves, admitted that the company is insolvent
and in a letter to the South African Revenue
Services ("SARS")
indicated that even with the selling of the available major asset
that is of substantial value the
1st Respondent will still not be
able to meet its debts and that only through insolvency will the
creditors be protected. Now with
due regard also of the manner in
which the Applicants as directors have conducted the affairs of the
1st Respondent, including
the delay by the Applicant in resolving the
and dealing with the financial distress of the company, it is
reasonable, just and
equitable that the court considers the placing
of the 1st Respondent under final winding up.
[33]
FNB has complied with the requirements of s 346 (3) of the Companies
Act 61 of 1973 and obtained from the Master the required
certificate
for the tendered security. The necessary affidavits by an attorney
confirming proper services upon the Master, South
African Revenue
Services, and other interested or affected parties Applicant has also
been filed. It is not disputed that 1st Respondent
does not have
employees however FNB has taken satisfactory measures, in case
thereof. Basically, FNB , the major creditor has complied
with the
requirements for the final winding up of the 1st Respondent.
[34]
Mr Gilbert for the Respondents argued that for the reason that the
Applicants in their capacity as owner trustees, sole shareholders
and
directors of the 1st Respondent initiated the proceedings and are
responsible for the non- compliance with section 129 (3)
and (4) that
rendered the resolution they adopted a nullity, invalidating the
business rescue proceedings, the costs incurred in
the course of
obtaining an order declaring such resolution a nullity and the
proceedings invalid should be borne by the Applicants,
notwithstanding the results. He submitted that it would be unfair for
the 1st and 2nd Respondent to be saddled with any costs and
therefore
the order should be made against the Applicants in their personal
capacities de bonis propiis, jointly and severally,
even though they
have brought the action as trustee representative.
[35]
In view of the Applicants catastrophic bearing towards the business
and the business rescue practitioner appointed to oversee
the
defective process, who as an officer of the court was striving to
make the process work. Also that not only did Applicants
bring about
the defective proceedings but followed that with a litany of legal
proceedings in a bid to stop the 2nd Respondent
from implementing the
business rescue plan and the sale of the blueberry property, and
their delay in bringing this Application,
the court would be
justified to consider an order that deviates from the norm and not
only award an order for forfeiture of costs
but the de bonis propiis
award as sought by the Respondents.
[36]
In these matters the question of costs rarely is a problem because a
party who would normally seek such a declaration order
would be an
affected person other than the directors that were responsible for
the adoption of the resolution and its nullification
through
non-compliance. Under the circumstances a fair question to ask would
be whether it would be just to make the Applicants
pay. Wessels J in
Scheepers and Nolte v Pate
1909 T.H. 353
explained the test as
follows:
"The
point is not whether the litigant has been oppressive in the way he
waged his suit or prosecuted his defence, but whether
it would be
just to make the other side pay. We can get no nearer to a perfect
test than the inquiry whether it would be more fair
as between the
parties that some exception should be made in the special instance to
the rule that the costs should follow upon
success”.
[37]
The Applicants carry the responsible as the directors for the proper
management of the business making sure that an appropriate
assessment
is made on the viability of the company and proper measures are
correctly taken in time to deal with the situation.
Applicants well
aware of what is expected of them by the Act as deduced from their
letter and sworn statement made on 15 September
2011 that spells out
the exact process to be followed, nevertheless failed to comply with
the process, prejudicing the innocent
parties that were strung along
in the defective process, that they believed to be genuine.
Thereafter Applicants deiayed to launch
this Application and now are
doing so, as conceded, only for selfish reasons when they realised
that it will not be possible to
stop the imminent transfer of the
property to the 5th Respondent. They even went further than placing
the business under business
rescue and voted in favour of the
business plan that included the sale of the immovable property, that
now prompted the present
application to nullify the process. It would
consequently be ludicrous for either the 2nd Respondent or 1st
Respondent to be placed
in this precarious position and then be
saddled with costs. Especially the 2nd Respondent, his opposition of
the Application was
bona fide, believing that s 130
(2)
might be applicable, labouring under the mistaken believe that he is
acting in the best interest of the creditors. The Applicants
have
acted to the company's detriment with a disastrous outcome. At the
end of the day any costs against 1st, 2nd Respondent or
Applicants
would be at the expense of the general body of creditors. See Gulmin
and Another
1982 (2) SA 4785
(W), where the headnote reads:
"Where
there is litigation in the name of a company but the persons
effectively litigating are the directors or co-owners of
the company,
it is competent for the Court to order one or other of them to pay
costs de bonis propiis."
[38]
Under the circumstances 1 hereby make the following order:-
[38.1]
6th Respondent is granted leave to intervene in the main Application
for a declaratory order;
[38.2]
Declaring that 1st Respondent's resolution to commence business
rescue proceedings and place First Respondent under supervision
of a
business rescue practitioner lapsed and is a nullity;
[38.3]
declaring that the purported appointment of 2nd Respondent on 28
October 2011 as business rescue practitioner of the First
Respondent
is void.
[38.4]
Applicants are ordered to pay the costs of the Application for a
declaratory order de bonis propiis, (in their personal capacity)
jointly and severally.
COUNTER
APPLICATION
[38.5]
The 1st Respondent is placed under final winding up
[38.6]
The costs of the winding up Application to be costs in liquidation.
N
V KHUMALO
JUDGE
OF THE GAUTENG HIGH COURT -PRETORIA
Delivered
on 11 October 2013
Counsel
for 1st & 2nd Resp: B M Gilbert
Instructed
by: Routledge Modise Inc
Oil
523 6080
Counsel
for Applicants: M A Badenhorst SC & J Vorster
Instructed
by: Magda Kets Inc, Pretoria
012
329 4518
Counsel
for Intervening Party: N de Villiers
Instructed
by: A Hertzberg Attorneys
011
447-6488