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[2013] ZAGPPHC 376
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Van Dyk v Adroit Communications (Pty) Ltd and Another (68048/2013) [2013] ZAGPPHC 376 (19 November 2013)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
NORTH GAUTENG HIGH COURT, PRETORIA
CASE NO: 68048/2013
DATE: 19 NOVEMBER 2013
In the matter between:
ANNA MARIA VAN
DYK
.......................................................................
APPLICANT
and
ADROIT COMMUNICATIONS (PTY)
LTD
.........................
FIRST
RESPONDENT
COMPANIES AND INTELLECTUAL
PROPERTY
........
SECOND RESPONDENT
COMMISSION
JUDGMENT
NKOSI AJ:
INTRODUCTION
[1] The applicant seeks an order that
the first respondent be placed under supervision and that business
rescue proceedings be commenced
with urgently in terms of section 131
(1) of the Companies Act, Act 71 of 2008 (“the Act”),
together with ancillary
relief. This application was vehemently
opposed by the first respondent. I had the benefit to peruse all
documents filed in the
court file by both parties before the
commencement of the hearing.
LOCUS STANDI
[2] An answering affidavit was
delivered on Thursday the 31st of October 2013.
[3] A replying affidavit was delivered
on the same day.
[4] The applicant disputes the validity
of the resolution in terms whereof it was resolved that the first
respondent oppose the
business rescue application, authorising Hall
to act on behalf of the first respondent and that first respondent’s
attorneys
be authorised to act on its behalf.
[5] The applicant further served a Rule
7 notice disputing the authority of first respondent’s
attorney’s to act in
these proceedings.
[6] There are other litigations
involving various parties associated with Adroit. These applications
include:
6.1 An application
to declare the CEO, FN Hall and chairman of the first respondent, JJ
Swart delinquent under the provisions of
section 162 read with
section 163 of the Act (“the delinquency application”).
6.2 An application
by Hall and Swart as applicants for the liquidation of the first
respondent on the ground of it being “just
and equitable”
pursuant to section 344 (h) of the 1973 Companies Act as a result of
a deadlock i.e. a breakdown in communication
between members as well
as directors.
[7] The above applications are to be
adjudicated in the normal course as they do not form part of this
application. It is, however,
clear that the seven directors of the
first respondent are divided into two camps. Van Dyk, the husband of
the applicant, Botha
and Sentso support the applicant in her
application for business rescue whilst Hall, Munnik, Swart and Steyn
are opposed to the
relief claimed.
[8] The resolution was adopted by the
executive directors of the first respondent, Hall and Munnik. The
aforementioned directors
of the first respondent are duty bound to
exercise their powers and perform their functions as directors of the
first respondent
and in adopting the resolution, had a rational basis
for believing and do believe that the decision is in the best
interest of
the first respondent.
[9] The first respondent is entitled to
oppose an application for its supervision and business rescue and
should not be barred from
doing so where it is clear that there is a
deadlock and/or breakdown in communication between members as well as
directors. It
is further submitted that directors of a company is
empowered to oppose the liquidation of a company and these powers of
directors
should be extended to applications for supervision and
business rescue, especially under circumstances where a Court may
dismiss
the application and grant an order placing the company under
liquidation.
[10] Hall, Munnik, Swart and Steyn, as
directors of the first respondent, oppose the relief claimed. It is
submitted that these
directors are properly before the Court and
their opposition should be considered alternatively leave should be
granted to them
to intervene and oppose the relief claimed on the
same papers.
[11] Affected persons for the purpose
of section 1311 of the Act include employees of the company. The
applicant seeks the relief
as an employee and affected person and
similarly it is alleged in the opposing affidavit that Hall and
Munnik are employees and
therefore affected persons that are entitled
to participate in the proceedings and oppose the relief claimed.
[12] Although it is disputed that Hall
is an employee of the first respondent, the applicant in her replying
affidavit does not
appear to dispute that Munnik is an affected
person in terms of the Act and entitled to participate in the
proceedings. The applicant
merely states that Munnik has not deposed
to the affidavit in his capacity as employee. It is submitted that
this contention is
without any merit and the affidavits can only be
construed in such a fashion that it clearly states that Munnik is an
affected
person entitled to participate in the proceedings, who
opposes the relief claimed on the grounds as stated in the
affidavits.
BUSINESS RESCUE - THE LEGAL
POSITION
[13] The purpose and objectives of
business rescue proceedings are to be found in section 128 of the
Act. The purpose of rescuing
a company is to achieve the goal set out
in the definition of business rescue to facilitate the rehabilitation
of a company that
is financially distressed by providing for:
13.1 the temporary
supervision of the company (management of his affairs, business and
property);
13.2 a temporary
moratorium on claims against the company; and
13.3 the
development and implementation of a plan to rescue the company to
maximise the likelihood of the company continuing an
existence on a
solvent basis alternatively results in a better return for creditors
and shareholders than would result from immediate
liquidation.
[14] A Court may, after considering an
application, make an order placing the company under supervision and
commencing business
rescue proceedings, if the Court is satisfied
that a company is financially distressed or it is otherwise just and
equitable to
do so for financial reasons, and there is a reasonable
prospect for rescuing the company.
[15] “Financially distressed”
is also defined in section 128 (1) (f), to mean:
“...that -
(i) it appears to
be reasonable unlikely that the company will be able to pay all of
its debts as they become due and payable within
the immediately
ensuing 6 months; or
(ii) it appears to be reasonably
likely that the company will become insolvent within the immediately
ensuing 6 months.”
[16] The legal
position has been summarised by the Supreme Court of Appeal in the
matter of Oakdene Square Properties (Pty) Ltd
and Others v Farm
Bothasfontein (Kyalami) (Pty) Ltd and Others
2013 (4) SA 539
(SCA).
[17] The Supreme Court of Appeal in
Oakdene Square Properties (Pty) Ltd & Others v Farm Bothasfontein
(Kyalami) (Pty) Ltd &
Others supra, reaffirmed the
well-established test in motion proceedings, that where disputes of
fact arise on the papers, the
matter can only be decided on the
respondent’s version of the disputed facts, unless that version
is so far-fetched or clearly
untenable that it can justifiably be
rejected merely on the papers. It makes no difference to this
approach that motion proceedings
have been dictated by the
legislature.
The legal position has not changed and
there is no amendment to the Act for that purpose.
THE FIRST RESPONDENT’S
FINANCIAL POSITION
[18] The applicant alleges that the
first respondent is financially distressed and that the inference is
that the first respondent
is not able to pay its debts as they fall
due, therefore the first respondent is commercially insolvent.
[19] In the opposing affidavit it is
disputed that the first respondent is financially distressed or
commercially insolvent. Hall
states that:
19.1 All
shareholder loans (which were required to fund the replacement of old
motor vehicles, used for the ConnectNet business
and equipment for
new fibre business and projects) were repaid in five months.
19.2 The turnover
was increased from R6.4 million to R11.2 million.
19.3 The net profit
after tax (NPAT) was increased to R913 000.00 as opposed as to a loss
or R178 000.00 in the previous year.
19.4 A dividend of
R275 000.00 (including STC) was paid to its shareholders.
19.5 Vodacom was
secured as a new client for fibre orders or R2.5 million for the
2012/2013 financial year.
19.6 Adroit became
a contractor and supplier of Dark Fibre Africa (Pty) Limited.
19.7 In the
2012/2013 financial year, the first respondent achieved the
following:
19.7.1 turnover
increased to R15.9 million;
19.7.2 the NAV
(net asset value) increased to R1.8 million from R1.3 million;
19.7.3 it
successfully purchased a fixed property to the value of R2.1 million
with its cash reserves, from where business is now
conducted;
19.7.4 new assets
(fibre equipment and motor vehicles) in excess of R2 million were
acquired, again funded by cash reserves;
19.7.5 an average
annual salary increase of 18% was given to all its staff;
19.7.6 an order
book was secured with Dark Fibre Africa in excess of R15 million for
2012/2013 financial year;
19.7.7 for the
2013/2014 financial year, the following is relevant:
(a) budgeted an
annual turnover increased to R29.5 million;
(b) staff again
received an annual increase of 10%;
(c) to date as at
the end of May 2013, the profit is R1.1 million;
(d) all loans
acquired from the shareholders have been repaid, save for certain
loans.
[20] The person best suited to adduce
evidence as to whether or not the first respondent is financially
distressed, is the first
respondent’s auditor. The auditor is
objective, independent and duty bound to disclose the correct facts
to assist the Honourable
Court to come to a finding. The auditor
confirmed the facts stated by Hall and further confirmed that:
20.1 His firm of
auditors have been a duly appointed auditor of the first respondent
from at least 2007.
20.2 He has been
involved in the auditing of the financial records of the first
respondent and prepared and audited the financial
statements for the
company for the financial year ending 28th of February 2013.
20.3 He has
audited the bank statements of the first respondent and the first
respondent has a current positive cash flow balance
of R612 017.00.
20.4 The current
unaudited creditors’ balance amount to R2 107 689.00.
20.5 The current
unaudited debtors’ balance amount to R3 949 740.00.
That according to him:
(i) the first
respondent is both factually and commercially solvent;
(ii) the first
respondent is able to pay its creditors as and when the debts become
due, conditional on the quality of the debtor’s
book;
(iii) the first
respondent is not in financial distress; and
(iv) based on the
information received and the historic performance, there are no
indications that the first respondent will become
distressed or
insolvent with the ensuing six months.
These submissions
were not contradicted by any evidence.
[21] It is submitted that, applying the
test referred to supra, the question whether or not the first
respondent is financially
distressed should be determined on the
facts as stated in the opposing affidavit. It therefore cannot be
found that the first respondent
is financially distressed and it was
submitted that in the absence of such a finding the application
should fail.
I could not find any merit on the
submission that the first respondent is both factually and
commercially insolvent in the absence
of proof of the inability to
pay its creditors.
THE BUSINESS RESCUE PLAN
[22] A potential business rescue plan
should contemplate two objects or goals:
22.1 the primary
goal to facilitate the continued existence of the company in a state
of insolvency; and
22.2 a secondary
goal, as an alternative, to facilitate a better return for creditors
or shareholders of the company than would
result from the immediate
liquidation.
[23] The applicant must provide a
substantial measure of detail to satisfy the requirements of a
reasonable prospect. Vague averments
and speculative suggestions will
not suffice.
[24] The application contains no
allegations as to the proposed business rescue plan and it is
submitted that the only purpose for
which the applicant seeks a
business rescue practitioner to be appointed is to resolve the
on-going disputes between members and
directors in favour of certain
directors. Though a business rescue plan can be prepared later, this
matter is not one for the business
rescue at this stage.
URGENCY
[25] It was submitted that no grounds
for urgency exist. The urgency was a self-created one by the
applicant. There are no facts
to indicate that the insolvency of the
first respondent is imminent that requires an order on an urgent
basis for the first respondent
to be placed under supervision and
that business rescue proceedings be commenced with.
[26] Although it was disputed that the
application should be dealt with on an urgent basis, the first
respondent and affected parties
would abide by the decision of the
Honourable Court in this regard.
CONCLUSION
[27] It was submitted that the
applicant has failed to make out a case that the first respondent is
financially distressed and that
an order should not be granted as
prayed for in the notice of motion.
[28] It was submitted that under the
circumstances, an appropriate order would be to dismiss the
application with costs for which
I am inclined to do as supported by
the submissions by the defendant’s counsel. The applicant’s
submissions are therefore
rejected as baseless but an attempt to
settle a score between the warring directors one of whom is
applicant’s spouse. This
also concerned applicant being removed
from doing accounts for the first respondent for which she could have
a remedy in terms
of the Labour Laws of the country than to apply for
a business rescue to solve Labour related matters.
[29] Having considered all submissions,
it is ordered as follows:
(a) That the application is dismissed
with costs.
….....................................................................................................................
VRSN
NKOSI
…........................................................................
ACTING
JUDGE OF THE HIGH COURT
APPEARANCES:
COUNSEL FOR
APPLICANT
.......................................
ADV.
JG SMIT
APPLICANT’S
ATTORNEYS
.......................................
NATALIE
LUBBE & ASSOCIATES INC
COUNSEL FOR
RESPONDENT
...................................
ADV.
MT SHEPHERD
RESPONDENTS’ A
TTORNEYS
...................................
CILLIERS
& REYNDERS A TTORNEYS
DA TE OF
HEARING
.....................................................
6
NOVEMBER 2013
DA TE OF
JUDGMENT
.................................................
19
NOVEMBER 2013